10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2014

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-35064

IMPERIAL HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Florida	30-0663473
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

5355 Town Center Road—Suite 701

Boca Raton, Florida 33486

(Address of principal executive offices, including zip code)

(561) 995-4200

(Registrant’s telephone number, including area code)

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.    Yes  x    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  x    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):

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of November 3, 2014, the Registrant had 21,402,990 shares of common stock outstanding.

IMPERIAL HOLDINGS, INC.

FORM 10-Q REPORT FOR THE QUARTER ENDED SEPTEMBER 30, 2014

TABLE OF CONTENTS

	Page No.
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)		5
Consolidated Balance Sheets as of September 30, 2014 and December 31, 2013		5
Consolidated Statements of Operations for the three months and nine months ended September 30, 2014 and 2013		6
Consolidated Statements of Comprehensive Income (Loss) for the three months and nine months ended September  30, 2014 and 2013		7
Consolidated Statement of Stockholders’ Equity for the nine months ended September 30, 2014		8
Consolidated Statements of Cash Flows for the nine months ended September 30, 2014 and 2013		9
Notes to Consolidated Financial Statements		10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		33
Item 3. Quantitative and Qualitative Disclosures About Market Risk		42
Item 4. Controls and Procedures		43
PART II — OTHER INFORMATION
Item 1. Litigation		44
Item 1A. Risk Factors		44
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		45
Item 3. Defaults Upon Senior Securities		45
Item 4. Mine Safety Disclosures		45
Item 5. Other Information		45
Item 6. Exhibits		45

2

“Forward Looking” Statements

This Quarterly Report on Form 10-Q contains forward-looking statements that are subject to risks and uncertainties. All statements other than statements of historical fact included in this Quarterly Report on Form 10-Q are forward-looking statements. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “may,” “will,” “should,” “can have,” “likely” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about the Company’s industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond the Company’s control. Accordingly, readers are cautioned that any such forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable as of the date made, results may prove to be materially different. Unless otherwise required by law, the Company disclaims any obligation to update its view of any such risks or uncertainties or to announce publicly the result of any revisions to the forward-looking statements made in this report.

Factors that could cause our actual results to differ materially from those indicated in our forward-looking statements include, but are not limited to, the following:

• our results of operations;

• continuing costs associated with indemnification and continuing cooperation obligations related to the investigation into our legacy premium finance business by the United States Attorneys’ Office for the District of New Hampshire (“USAO”) (the “USAO Investigation”), an investigation by the U.S. Securities and Exchange Commission (“SEC”) (the “SEC Investigation”) and an investigation by the Internal Revenue Services (“IRS”) (the “IRS Investigation”);

• adverse developments, including financial ones, associated with the USAO Investigation, the SEC Investigation and the IRS Investigation, other litigation and judicial actions or similar matters;

• our ability to continue to comply with the covenants and other obligations, including the conditions precedent for additional fundings, under our revolving credit facility;

• our ability to receive distributions from policy proceeds from life insurance policies pledged as collateral under our revolving credit facility;

• our ability to meet our debt service obligations;

• our ability to continue to make premium payments on the life insurance policies that we own;

• loss of business due to negative press from the non-prosecution agreement executed in connection with the USAO Investigation, the SEC Investigation, the IRS Investigation, litigation or otherwise;

• increases to the discount rates used to value the life insurance policies that we own;

• inaccurate estimates regarding the likelihood and magnitude of death benefits related to life insurance policies that we own;

• changes in mortality rates and inaccurate assumptions about life expectancies;

• changes in life expectancy calculation methodologies by third party medical underwriters;

• changes to actuarial life expectancy tables;

• lack of mortalities of insureds of the life insurance policies that we own;

• increased carrier challenges to the validity of our owned life insurance policies;

• delays in the receipt of death benefits from our portfolio of life insurance policies;

• challenges to the ownership of the policies in our portfolio;

• costs related to obtaining death benefits from our portfolio of life insurance policies;

• the effect on our financial condition as a result of any lapse of life insurance policies;

• deterioration of the market for life insurance policies and life settlements;

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• our ability to sell the life insurance policies we own at favorable prices, if at all;

• adverse developments associated with uncooperative co-trustees;

• loss of the services of any of our executive officers;

• adverse court decisions regarding insurable interest and the obligation of a life insurance carrier to pay death benefits or return premiums upon a successful rescission or contest;

• our inability to grow our businesses;

• liabilities associated with our legacy structured settlement business;

• changes in laws and regulations;

• adverse developments in capital markets;

• disruption of our information technology systems;

• our failure to maintain the security of personally identifiable information pertaining to insureds, customers and counterparties;

• regulation of life settlement transactions as securities;

• our limited operating experience and our ability to successfully implement our acquisition and lending strategies;

• deterioration in the credit worthiness of the life insurance companies that issue the policies included in our portfolio;

• increases in premiums on life insurance policies that we own;

• the effects of United States involvement in hostilities with other countries and large-scale acts of terrorism, or the threat of hostilities or terrorist acts; and

• changes in general economic conditions, including inflation, changes in interest or tax rates and other factors.

All written and oral forward-looking statements attributable to the Company, or persons acting on its behalf, are expressly qualified in their entirety by these cautionary statements. See “Risk Factors” below and in our Annual Report on Form 10-K for the year ended December 31, 2013. You should evaluate all forward-looking statements made in this Form 10-Q in the context of these risks and uncertainties. The Company cautions you that the important factors referenced above may not contain all of the factors that are important to you.

All statements in this Form 10-Q to “Imperial,” “Company,” “we,” “us,” or “our” refer to Imperial Holdings, Inc. and its consolidated subsidiaries unless the context suggests otherwise.

4

Item 1 Financial Statements.

Imperial Holdings, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

	September 30, 2014			December 31, 2013*
	(Unaudited)
	(In thousands except share data)
ASSETS
Assets
Cash and cash equivalents	$	53,745		$	14,722
Cash and cash equivalents (VIE Note 4)		4,647			7,977
Restricted cash		—			13,506
Prepaid expenses and other assets		1,717			1,331
Deposits - other		1,353			1,597
Deposits on purchase of life settlements		50			—
Structured settlement receivables, at estimated fair value		383			660
Structured settlement receivables at cost, net		599			797
Investment in life settlements, at estimated fair value		54,914			48,442
Investment in life settlements, at estimated fair value (VIE Note 4)		295,469			254,519
Receivable for maturity of life settlements (VIE Note 4)		—			2,100
Fixed assets, net		202			74
Investment in affiliates		2,385			2,378
Deferred debt costs, net		2,295			—
Total assets	$	417,759		$	348,103
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Accounts payable and accrued expenses	$	5,209		$	2,977
Accounts payable and accrued expenses (VIE Note 4)		337			341
Other liabilities		1,039			21,221
Interest payable - senior unsecured convertible notes (Note 10)		768			—
Revolving Credit Facility debt, at estimated fair value (VIE Note 4)		142,661			123,847
Senior unsecured convertible notes, net of discount (Note 10)		55,250			—
Income taxes payable		—			6,295
Deferred tax liability		6,383			—
Total liabilities		211,647			154,681
Commitments and Contingencies (Note 13)
Stockholders’ Equity
Common stock (par value $0.01 per share, 80,000,000 authorized; 21,402,990 and 21,237,166 issued and outstanding as of September 30, 2014 and December 31, 2013, respectively)		214			212
Additional paid-in-capital		266,511			239,506
Accumulated deficit		(60,613	)		(46,296	)
Total stockholders’ equity		206,112			193,422
Total liabilities and stockholders’ equity	$	417,759		$	348,103

* Derived from audited consolidated financial statements.

The accompanying notes are an integral part of these financial statements.

5

Imperial Holdings, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2014			2013			2014			2013
	(in thousands, except share and per share data)
Income
Interest income	$	9		$	—		$	22		$	28
Interest and dividends on investment securities available for sale		—			—			—			14
Loss on life settlements, net		—			(461	)		(426	)		(1,708	)
Change in fair value of life settlements (Notes 8 & 11)		(3,643	)		15,262			19,313			81,948
Servicing fee income		—			—			—			310
Other income		17			8			72			2,015
Total (loss) income		(3,617	)		14,809			18,981			82,607
Expenses
Interest expense		4,303			1,158			11,165			12,020
Loss on extinguishment of Bridge Facility		—			—			—			3,991
Change in fair value of Revolving Credit Facility debt (Notes 9 & 11)		(8,375	)		66			(4,556	)		(5,295	)
Change in fair value of conversion derivative liability (Notes 10 & 11)		—			—			6,759			—
Gain on loan payoffs and settlements, net		—			—			—			(65	)
Amortization of deferred costs		—			—			—			7
Personnel costs		1,910			1,924			6,627			6,216
Legal fees		2,943			3,271			9,121			11,254
Professional fees		1,143			1,503			3,562			3,564
Insurance		414			478			1,253			1,475
Other selling, general and administrative expenses		544			303			1,365			1,476
Total expenses		2,882			8,703			35,296			34,643
(Loss) income from continuing operations before income taxes		(6,499	)		6,106			(16,315	)		47,964
Benefit (provision) for income taxes		2,235			—			2,452			(40	)
Net (loss) income from continuing operations	$	(4,264	)	$	6,106		$	(13,863	)	$	47,924
Discontinued Operations:
(Loss) income from discontinued operations, net of income taxes	$	(249	)	$	55		$	(454	)	$	1,627
Net (loss) income	$	(4,513	)	$	6,161		$	(14,317	)	$	49,551
Earnings per share:
Basic and diluted earnings per common share
Continuing operations	$	(0.20	)	$	0.29		$	(0.65	)	$	2.26
Discontinued operations	$	(0.01	)		—		$	(0.02	)	$	0.08
Net (loss) income	$	(0.21	)	$	0.29		$	(0.67	)	$	2.34
Weighted average shares outstanding:
Basic weighted average common shares outstanding		21,361,930			21,219,880			21,352,086			21,215,344
Diluted weighted average common shares outstanding		21,361,930			21,223,027			21,352,086			21,215,392

The accompanying notes are an integral part of these financial statements.

6

Imperial Holdings, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
	2014			2013		2014			2013
	(In thousands)					(In thousands)
Net (loss) income	$	(4,513	)	$	6,161	$	(14,317	)	$	49,551
Other comprehensive income (loss), net of tax		—			—		—			3
Comprehensive (loss) income	$	(4,513	)	$	6,161	$	(14,317	)	$	49,554

The accompanying notes are an integral part of these financial statements.

7

Imperial Holdings, Inc. and Subsidiaries

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (UNAUDITED)

For the Nine Months Ended September 30, 2014

	Common Stock					Additional Paid-in Capital		Accumulated Deficit			Total
	Shares			Amount
	(in thousands, except share data)
Balance, January 1, 2014		21,237,166		$	212	$	239,506	$	(46,296	)	$	193,422
Comprehensive loss		—			—		—		(14,317	)		(14,317	)
Stock-based compensation		41,060			1		761		—			762
Issuance of common stock		125,628			1		499		—			500
Issuance of warrants		—			—		5,381		—			5,381
Pre-conversion tax adjustment		—			—		6,295		—			6,295
Retirement of common stock		(864	)		—		—		—			—
Reclassification of conversion derivative liability, net of tax		—			—		14,069		—			14,069
Balance, September 30, 2014		21,402,990		$	214	$	266,511	$	(60,613	)	$	206,112

The accompanying notes are an integral part of these financial statements.

8

Imperial Holdings, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	For the Nine Months Ended September 30,
	2014			2013
	(In thousands)
Cash flows from operating activities
Net (loss) income	$	(14,317	)	$	49,551
Adjustments to reconcile net (loss) income to net cash used in operating activates:
Depreciation and amortization		59			142
Revolving Credit Facility origination cost		—			10,340
Revolving Credit Facility financing cost		4,238			995
Amortization of discount and deferred costs for senior unsecured convertible notes		1,648			—
Amortization of premiums and accretion of discounts on available for sale securities		—			21
Stock-based compensation expense		762			1,203
Gain on loan payoffs and settlements, net		—			(65	)
Change in fair value of life settlements		(19,313	)		(81,948	)
Unrealized change in fair value of structured settlements		(24	)		(1,211	)
Change in fair value of Revolving Credit Facility debt		(4,556	)		(5,295	)
Loss on life settlements, net		426			1,708
Interest income		(102	)		(220	)
Amortization of deferred costs		—			7
Loss on extinguishment of Bridge Facility		—			3,991
Gain on sale and prepayment of investment securities available for sale		—			(22	)
Change in fair value of warrants to be issued		—			2,478
Change in fair value of conversion derivative liability		6,759			—
Change in assets and liabilities:
Restricted cash		13,506			(13,502	)
Deposits - other		243			1,258
Investment in affiliates		(7	)		(148	)
Structured settlement receivables		578			1,687
Prepaid expenses and other assets		(413	)		12,461
Accounts payable and accrued expenses		2,512			2,453
Other liabilities		(14,301	)		(664	)
Interest receivable		—			95
Interest payable		768			—
Deferred income tax		(2,452	)		40
Net cash used in operating activities		(23,986	)		(14,645	)
Cash flows from investing activities
Purchase of fixed assets, net of disposals		(178	)		(4	)
Purchase of investments in life settlements		(3,488	)		(7,000	)
Proceeds from sale and prepayments of investment securities available for sale		—			12,111
Proceeds from maturity of investment in life settlements		13,641			6,039
Premiums paid on investments in life settlements		(40,578	)		(50,984	)
Proceeds from surrender of investments in life settlements		—			1,049
Proceeds from sale of investments in life settlements, net		4,031			1,764
Deposit on purchase of investment in life settlement		(50	)		—
Proceeds from loan payoffs and lender protection insurance claims received in advance		—			691
Net cash used in investing activities		(26,622	)		(36,334	)
Cash flows from financing activities
Revolving Credit and Bridge Facility origination cost		—			(6,731	)
Borrowings from Revolving Credit Facility		36,004			66,584
Repayment of borrowings under Revolving Credit Facility		(17,595	)		—
Restricted cash		—			1,162
Borrowings from Bridge Facility		—			41,400
Repayment of borrowings under Bridge Facility		—			(45,000	)
Proceeds from senior unsecured convertible notes, net		67,892			—
Net cash provided by financing activities		86,301			57,415
Net increase in cash and cash equivalents		35,693			6,436
Cash and cash equivalents, at beginning of the period		22,699			7,001
Cash and cash equivalents, at end of the period	$	58,392		$	13,437
Supplemental disclosures of cash flow information:
Cash paid for interest during the period	$	4,496		$	825
Supplemental disclosures of non-cash investing activities:
Investment in life settlements acquired in foreclosure	$	—		$	3,168
Supplemental disclosures of non-cash financing activities:
Interest payment and fees withheld from borrowings by lender	$	4,962		$	995
Credit facility origination costs paid to lender	$	—		$	4,000
Purchase of policies through release of subrogation claim paid by lender	$	—		$	48,500
Reclassification of derivative liability	$	14,069		$	—

The accompanying notes are an integral part of these financial statements.

9

Imperial Holdings, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

September 30, 2014

(1) Description of Business

Founded in December 2006 as a Florida limited liability company, Imperial Holdings, LLC, converted into Imperial Holdings, Inc. (with its subsidiaries, the “Company” or “Imperial”) on February 3, 2011, in connection with the Company’s initial public offering.

Incorporated in Florida, Imperial owns a portfolio of 595 life insurance policies, also referred to as life settlements, with a fair value of $350.4 million and an aggregate death benefit of approximately $2.9 billion at September 30, 2014. The Company primarily earns income on these policies from changes in their fair value and through death benefits. 452 of these policies, with an aggregate death benefit of approximately $2.3 billion, are pledged under a 15-year revolving credit agreement (the “Revolving Credit Facility”) entered into by the Company’s indirect subsidiary, White Eagle Asset Portfolio, LP (“White Eagle”).

(2) Principles of Consolidation and Basis of Presentation

The accompanying consolidated financial statements include the accounts of the Company, all of its wholly-owned subsidiary companies and its special purpose entities, with the exception of Imperial Settlements Financing 2010, LLC (“ISF 2010”), an unconsolidated special purpose entity. The special purpose entity has been created to fulfill specific objectives. All significant intercompany balances and transactions have been eliminated in consolidation, including income from services performed by subsidiaries in connection with the Revolving Credit Facility. Notwithstanding consolidation, White Eagle is the owner of 452 policies, with an aggregate death benefit of approximately $2.3 billion and an estimated fair value of approximately $295.5 million at September 30, 2014.

The unaudited consolidated financial statements have been prepared in conformity with the rules and regulations of the SEC for Form 10-Q and therefore do not include certain information, accounting policies, and footnote disclosures information or footnotes necessary for a complete presentation of financial position, results of operations and cash flows in conformity with generally accepted accounting principles. However, all adjustments (consisting of normal recurring accruals), which, in the opinion of management, are necessary for a fair presentation of the financial statements, have been included. Operating results for the three months and nine months ended September 30, 2014 are not necessarily indicative of the results that may be expected for future periods or for the year ended December 31, 2014. These interim financial statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in Imperial’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013.

Derivative Instruments

The Company issued and sold $70.7 million in aggregate principal amount of 8.50% senior unsecured convertible notes due 2019 (the “Notes”). Prior to shareholder approval on June 5, 2014 to issue shares of common stock upon conversion of the Notes in excess of New York Stock Exchange limits for share issuances without shareholder approval, the Notes contained an embedded derivative feature. In accordance with Accounting Standards Codification (“ASC”) 815, Derivatives and Hedging, derivative instruments are recognized as either assets or liabilities on the Company’s balance sheet and are measured at fair value with gains or losses recognized in earnings. Embedded derivatives that are not clearly and closely related to the host contract, such as the Notes, are bifurcated and recognized at fair value with changes in fair value recognized as either a gain or loss in earnings if they can be reliably measured. The Company determined the fair value of its embedded derivative based upon available market data and unobservable inputs using a Black Scholes pricing model. In accordance with ASC 815, upon receipt of shareholder approval on June 5, 2014, the Company reclassified the embedded derivative to equity along with unamortized transaction costs proportionate to the allocation of the initial debt discount and the principal amount of the Notes. The Notes are recorded at accreted value and will continue to be accreted up to the par value of the Notes at maturity. See Note 10, 8.50% Senior Unsecured Convertible Notes.

Foreign Currency

The Company’s foreign subsidiaries are considered to be extensions of the U.S. Company and the U.S. dollar is utilized as the functional currency. The foreign subsidiaries’ financial statements are denominated in U.S. dollars and therefore, there are no translation gains and losses resulting from converting the financial statements at exchange rates other than the functional currency. Any gains and losses resulting from foreign currency transactions (transactions denominated in a currency other than the subsidiaries’ functional currency) are included in income. At this time, these gains and losses are immaterial to the Company’s financial statements.

10

Use of Estimates

The preparation of these consolidated financial statements, in conformity with generally accepted accounting principles in the United States of America (“GAAP”), requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from these estimates and such differences could be material. Significant estimates made by management include income taxes, the valuation of investments in life settlements, the valuation of the debt owing under the Revolving Credit Facility, the valuation of equity awards and the valuation of the conversion derivative liability formerly embedded within the Company’s Notes.

(3) Recent Accounting Pronouncements

In July 2013, the FASB issued ASU No. 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU 2013-11”). ASU 2013-11 requires, unless certain conditions exist, an unrecognized tax benefit, or a portion of an unrecognized tax benefit, to be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, similar tax loss, or a tax credit carryforward. ASU 2013-11 is effective prospectively for reporting periods beginning after December 15, 2013. Retrospective application is permitted. The Company adopted ASU 2013-11 effective on January 1, 2014, which required the Company to reclassify a $6.3 million current liability for unrecognized tax benefits to deferred taxes. Adoption of this guidance resulted in the recognition of a $3.7 million tax expense in the Company’s consolidated financial statement of operations for the nine months ended September 30, 2014, a $2.6 million reduction in the valuation allowance and an increase to additional paid-in-capital of $6.3 million on the Company’s consolidated balance sheet and consolidated statement of stockholders’ equity as of September 30, 2014.

In April 2014, the FASB issued ASU 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. The amendments in the ASU change the criteria for reporting discontinued operations while enhancing disclosures in this area. The new guidance requires expanded disclosures about discontinued operations that will provide financial statement users with more information about the assets, liabilities, income, and expenses of discontinued operations. The new guidance also requires disclosure of the pre-tax income attributable to a disposal of a significant part of an organization that does not qualify for discontinued operations reporting. The amendments in the ASU are effective in the first quarter of 2015 for public business entities with calendar year ends. Early adoption is permitted. The Company is currently in the process of evaluating the impact, if any, of the adoption on its consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which converges the FASB and the International Accounting Standards Board standard on revenue recognition. Areas of revenue recognition that will be affected include, but are not limited to, transfer of control, variable consideration, allocation of transfer pricing, licenses, time value of money, contract costs and disclosures. This is effective for the fiscal years and interim reporting periods beginning after December 15, 2016. We are currently evaluating the impact that the adoption of ASU 2014-09 will have on our consolidated financial statements or related disclosures.

(4) Consolidation of Variable Interest Entities

The Company evaluates its interests in variable interest entities (“VIEs”) on an ongoing basis and consolidates those VIEs in which it has a controlling financial interest and is thus deemed to be the primary beneficiary. A controlling financial interest has both of the following characteristics: (i) the power to direct the activities of the VIE that most significantly impact its economic performance; and (ii) the obligation to absorb losses of the VIE that could potentially be significant to it or the right to receive benefits from the VIE that could be significant to the VIE.

11

The following table presents the consolidated assets and consolidated liabilities of VIEs for which the Company has concluded that it is the primary beneficiary and which are consolidated in the Company’s consolidated financial statements as of September 30, 2014 as well as non-consolidated VIEs for which the Company has determined it is not the primary beneficiary (in thousands):

	Primary Beneficiary				Not Primary Beneficiary
	Consolidated VIEs				Non-consolidated VIEs
	Assets		Liabilities		Total Assets		Maximum Exposure To Loss
September 30, 2014	$	300,116	$	142,998	$	2,385		$2,385
December 31, 2013	$	264,596	$	124,188	$	2,378		$2,378

As of September 30, 2014, 452 life insurance policies owned by White Eagle with an aggregate death benefit of approximately $2.3 billion and an estimated fair value of approximately $295.5 million were pledged as collateral under the Revolving Credit Facility. Effective May 16, 2014, a foreign subsidiary acts as portfolio manager for life insurance policies owned by White Eagle and it was determined that the Company will continue to be the primary beneficiary of White Eagle as it has a controlling financial interest and the Company’s subsidiaries have the power to direct the activities that most significantly impacted White Eagle’s economic performance and the obligation to absorb economic gains and losses. In accordance with Accounting Standards Codification (“ASC”) 810, Consolidation, the Company consolidated White Eagle in its financial statements for the three months and nine months ended September 30, 2014 and the year ended December 31, 2013.

(5) Earnings Per Share

Basic net income per share is computed by dividing the net earnings attributable to common shareholders by the weighted average number of common shares outstanding during the period.

Diluted earnings per share is computed by dividing net income attributable to common shareholders by the weighted average number of common shares outstanding, increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued. Conversion or exercise of the potential common shares is not reflected in diluted earnings per share unless the effect is dilutive. The dilutive effect, if any, of outstanding common share equivalents is reflected in diluted earnings per share by application of the treasury stock method, as applicable. In determining whether outstanding stock options, restricted stock, warrants and Notes should be considered for their dilutive effect, the average market price of the common stock for the period has to exceed the exercise price of the outstanding common share equivalent.

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The following tables reconcile actual basic and diluted earnings per share for the three months and nine months ended September 30, 2014 and 2013 (in thousands except share and per share data).

	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
	2014(1)			2013(2)		2014(1)			2013(2)
Earnings per share:
Numerator:
Net (loss) income from continuing operations	$	(4,264	)	$	6,106	$	(13,863	)	$	47,924
Net (loss) income income from discontinued operations	$	(249	)	$	55	$	(454	)	$	1,627
Net (loss) income	$	(4,513	)	$	6,161	$	(14,317	)	$	49,551
Basic earnings per common share:
Basic (loss) income from continuing operations	$	(0.20	)	$	0.29	$	(0.65	)	$	2.26
Basic (loss )income from discontinued operations	$	(0.01	)		—	$	(0.02	)	$	0.08
Basic (loss) income per share available to common shareholders	$	(0.21	)	$	0.29	$	(0.67	)	$	2.34
Denominator:
Basic weighted average common shares outstanding		21,361,930			21,219,880		21,352,086			21,215,344
Diluted earnings per per common share:
Diluted (loss) income from continuing operations.	$	(0.20	)	$	0.29	$	(0.65	)	$	2.26
Diluted (loss) income from discontinued operations	$	(0.01	)	$	—	$	(0.02	)	$	0.08
Diluted (loss) income per share available to common shareholders	$	(0.21	)	$	0.29	$	(0.67	)	$	2.34
Denominator:
Weighted average common shares outstanding		21,361,930			21,219,880		21,352,086			21,215,344
Add: Restricted Stock		—			3,147		—			48
Diluted weighted average shares outstanding		21,361,930			21,223,027		21,352,086			21,215,392

(1) The computation of diluted EPS does not include 815,448 options, 6,240,521 warrants, 41,060 shares of restricted stock, up to 10,464,941 shares of underlying common stock issuable upon conversion of the Notes and 299,500 performance shares for the three months and nine months ended September 30, 2014, as the effect of their inclusion would have been anti-dilutive.

(2) The computation of diluted EPS did not include 899,472 options, and 4,240,521 warrants for the three months and nine months ended September 30, 2013, as the effect of their inclusion would have been anti-dilutive.

(6) Stock-based Compensation

In 2011, the Company established the Imperial Holdings 2011 Omnibus Incentive Plan (the “Omnibus Plan”) to attract, retain and motivate participating employees and to attract and retain well-qualified individuals to serve as members of the board of directors, consultants and advisors through the use of incentives based upon the value of our common stock. Awards under the Omnibus Plan may consist of incentive awards, stock options, stock appreciation rights, performance shares, performance units, and shares of common stock, restricted stock, restricted stock units or other stock-based awards as determined by the compensation committee. The Omnibus Plan provides that an aggregate of 1,200,000 shares of common stock are reserved for issuance under the Omnibus Plan, subject to adjustment as provided in the Omnibus Plan. The outstanding options issued in 2011 expire seven years after the date of grant and were granted with a strike price of $10.75, which was the offering price of our initial public offering or fair market value (closing price) of the stock on the date of grant and vest over three years.

On April 1, 2013, the Company granted 13,759 shares of unrestricted common stock to its outside directors with an aggregate grant date fair value of approximately $57,000 computed in accordance with ASC 718, Compensation-Stock Compensation. During the year ended December 31, 2013, the Company issued 545,000 options to employees at a strike price of $6.94. The Company recognized approximately $140,000 and $118,000 in stock-based compensation expense relating to stock options it granted under the Omnibus Plan during the three months ended September 30, 2014 and 2013, respectively and $632,000 and $1.1 million during the nine months ended September 30, 2014 and 2013, respectively. The Company incurred additional stock-based compensation expense of approximately $61,000 and $30,000 relating to restricted stock granted to its board of directors during the three months ended September 30, 2014 and 2013, respectively and $130,000 and $39,000 during the nine months ended September 30, 2014 and 2013, respectively. During the nine months ended September 30, 2014, the Company awarded 299,500 target performance shares for restricted common stock to its directors and certain employees, of which 150,000 shares are subject to shareholder approval of an amendment to the Omnibus Plan at the Company’s 2015 annual meeting. The issuance of the performance shares is contingent on the Company’s financial performance, as well as the performance of the Company’s common stock through June 30, 2016, with the actual

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shares to be issued ranging between 0 – 150% of the target performance shares. The Company will evaluate on a quarterly basis whether it is probable that the Company’s financial performance conditions will be achieved. At September 30, 2014, the Company determined that it was not probable that the performance conditions would be achieved and as a result, no related expense was recognized for the three and nine months ended September 30, 2014. Once issued, the performance shares will be subject to a one year vesting period from the date of issuance.

Options

As of September 30, 2014, options to purchase 815,448 shares of common stock were outstanding and unexercised under the Omnibus Plan at a weighted average exercise price of $8.49 per share.

The following table presents the activity of the Company’s outstanding stock options of common stock for the nine months ended September 30, 2014:

Common Stock Options	Number of Shares			Weighted Average Price per Share		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Options outstanding, January 1, 2014		831,282		$	8.46		5.51		—
Options granted		—			—		—		—
Options exercised		—			—		—		—
Options forfeited		(15,834	)	$	6.94		5.68		—
Options expired		—			—		—		—
Options outstanding, September 30, 2014		815,448		$	8.49		4.74		—
Exercisable at September 30, 2014		654,740		$	8.87		4.51		—
Unvested at September 30, 2014		160,708		$	6.94		5.68		—

As of September 30, 2014, all outstanding stock options had an exercise price above the average fair market value of the common stock during the nine months ended September 30, 2014.

During the three months and nine months ended September 30, 2014, the Company recognized expense of $140,000 and $632,000, respectively related to these options. The remaining unamortized amounts in respect of the June 5, 2013 option grants of approximately $140,000 and $239,000 will be expensed during the remainder of 2014 and 2015, respectively.

Restricted Stock

17,286 shares of restricted stock granted to our directors under the Omnibus Plan vested during the nine months ended September 30, 2014. The fair value of the vested restricted stock was valued at $120,138 based on the closing price of the Company’s shares on the grant date. The Company expensed approximately $0 and $52,000 in stock based compensation related to the 17,286 shares of restricted stock during the three months and nine months ended September 30, 2014, respectively.

During the nine months ended September 30, 2014, the Company granted 41,060 shares of restricted stock to its directors under the Omnibus Plan subject to a one year vesting schedule that commenced on the date of grant. The fair value of the unvested restricted stock was valued at $254,983 based on the closing price of the Company’s shares on the day prior to the grant date. The Company incurred additional stock-based compensation expense of approximately $61,000 and $78,000 related to these 41,060 shares of restricted stock during the three months and nine months ended September 30, 2014, respectively.

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The following table presents the activity of the Company’s restricted stock for the nine months ended September 30, 2014:

Common Unvested Shares	Number of Shares
Outstanding January 1, 2014		17,286
Granted		41,060
Vested		(17,286	)
Forfeited		—
Outstanding September 30, 2014		41,060

The aggregate intrinsic value of unvested restricted stock awards is approximately $265,000 and the stock will vest in June 2015.

Performance Shares

During the nine months ended September 30, 2014, the Company awarded 299,500 target performance shares for restricted common stock to its directors and certain employees, of which 150,000 shares are subject to shareholder approval of an amendment to the Omnibus Plan at the Company’s 2015 annual meeting. The issuance of the performance shares is contingent on the Company’s financial performance, as well as the performance of the Company’s common stock through June 30, 2016, with the actual shares to be issued ranging between 0 – 150% of the target performance shares. At September 30, 2014, the Company determined that it was not probable that the performance conditions would be achieved and no related expense was recognized for the quarter or nine months ended September 30, 2014. Once issued, the performance shares will be subject to a one year vesting period from the date of issuance.

The following table presents the activity of the Company’s performance share awards for the nine months ended September 30, 2014:

Performance Shares	Number of Shares
Outstanding January 1, 2014		—
Awarded		299,500
Vested		—
Forfeited		—
Outstanding September 30, 2014		299,500

Warrants

On February 11, 2011, three shareholders received ownership of warrants that may be exercised for up to a total of 4,240,521 shares of the Company’s common stock at a weighted average exercise price of $14.51 per share. The warrants will expire seven years after the date of issuance and the exercisability of the warrant will vest ratably over four years. At September 30, 2014, 3,180,391 warrants were exercisable with a weighted average exercise price of $14.51.

In connection with the class action settlement described in Note 13, Commitments and Contingencies, the Company issued warrants to purchase two million shares of the Company’s stock into an escrow account in April of 2014. The estimated fair value as of the measurement date of such warrants was $5.4 million, which is included in stockholders’ equity. The warrants were distributed in October 2014 and have a five-year term from the date they are distributed to the class participants with an exercise price of $10.75. The Company is obligated to file a registration statement to register the shares underlying the warrants with the SEC if shares of the Company’s common stock have an average daily trading closing price of at least $8.50 per share for a 45 day period. The warrants will be exercisable upon effectiveness of the registration statement.

(7) Discontinued Operations

On October 25, 2013, the Company sold substantially all of the operating assets comprising its structured settlement business for gross proceeds of $12.0 million. The Company’s decision to sell the division was to focus on the life settlements business. No structured settlement receivables were sold and no on-balance sheet liabilities were transferred in connection with the sale. This sale resulted in the recognition of a gain of $11.3 million in the fourth quarter of 2013.

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As a result of the sale, the Company retrospectively reclassified its structured settlement business operating results as discontinued operations, net of income taxes, in the accompanying Consolidated Statements of Operations for all periods presented and the Company has discontinued segment reporting. All other footnotes in these financial statements that were affected by this reclassification of discontinued operations have been updated accordingly.

Operating results related to the Company’s discontinued structured settlement business are as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
Total income	$	38		$	2,698		$	150		$	10,366
Total expenses		(287	)		(2,643	)		(604	)		(8,739	)
(Loss) income before income taxes		(249	)		55			(454	)		1,627
Income tax expense		—			—			—			—
Net (loss) income from discontinued operations	$	(249	)	$	55		$	(454	)	$	1,627

(8) Investment in Life Settlements (Life Insurance Policies)

The Company accounts for policies it acquires using the fair value method in accordance with ASC 325-30-50 Investments—Other—Investment in Insurance Contracts. Under the fair value method, the Company recognizes the initial investment at the purchase price. For policies that were relinquished in satisfaction of premium finance loans at maturity, the initial investment is the loan carrying value. For policies purchased in the secondary or tertiary markets, the initial investment is the amount of cash outlay at the time of purchase. At each reporting period, the Company re-measures the investment at fair value in its entirety and recognizes changes in fair value in earnings in the period in which the changes occur.

As of September 30, 2014 and December 31, 2013, the Company owned 595 and 612 policies, respectively, with an aggregate estimated fair value of investments in life settlements of $350.4 million and $303.0 million, respectively.

The weighted average life expectancy calculated based on death benefit of insureds in the policies owned by the Company at September 30, 2014 was 11.0 years. The following table describes the Company’s investments in life settlements as of September 30, 2014 (dollars in thousands):

Remaining Life Expectancy (In Years)	Number of Life Settlement Contracts		Fair Value		Face Value
0 - 1		—	$	—	$	—
1 - 2		2		3,727		5,377
2 - 3		11		26,135		46,957
3 - 4		9		11,642		29,800
4 - 5		15		21,145		63,854
Thereafter		558		287,734		2,742,301
Total		595	$	350,383	$	2,888,289

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The weighted average life expectancy calculated based on death benefit of insureds in the policies owned by the Company at December 31, 2013 was 11.6 years. The following table describes the Company’s investments in life settlements as of December 31, 2013 (dollars in thousands):

Remaining Life Expectancy (In Years)	Number of Life Settlement Contracts		Fair Value		Face Value
0 - 1		—	$	—	$	—
1 - 2		—		—		—
2 - 3		6		8,489		16,875
3 - 4		10		14,171		38,100
4 - 5		8		13,529		40,250
Thereafter		588		266,772		2,859,665
Total		612	$	302,961	$	2,954,890

This table is not intended to reflect the cash flow pattern expected over the life of the policies; the Company projects its cash flows using a probabilistic approach. The life expectancies represent the average number of years of life remaining on individuals with similar characteristics including age and gender.

Estimated premiums to be paid for the remainder of fiscal year 2014, the four succeeding fiscal years, and thereafter to keep the life insurance policies in force as of September 30, 2014, are as follows (in thousands):

Remainder of 2014	$	13,436
2015		53,625
2016		57,116
2017		63,683
2018		67,945
Thereafter		1,145,526
	$	1,401,331

The amount of $1.4 billion noted above represents the estimated total future premium payments required to keep the life insurance policies in force utilizing the Company’s probabilistic approach and does not give effect to projected receipt of death benefits. The estimated total future premium payments could increase or decrease significantly to the extent that actual mortalities of insureds differs from the estimated life expectancies.

(9) Revolving Credit Facility

On May 16, 2014, White Eagle Asset Portfolio, LLC converted from a Delaware limited liability company to White Eagle Asset Portfolio, LP, a Delaware limited partnership (the “Conversion”) and all of its ownership interests were transferred to an indirect, wholly-owned Irish subsidiary of the Company. In connection with the Conversion, White Eagle entered into an Amended and Restated Loan and Security Agreement (the “Revolving Credit Facility”) among White Eagle, as borrower, Imperial Finance and Trading, LLC, as the initial servicer, the initial portfolio manager and guarantor, Lamington Road Bermuda Ltd., as portfolio manager, LNV Corporation, as initial lender, the other financial institutions party thereto as lenders, and CLMG Corp., as administrative agent for the lenders. The Revolving Credit Facility amended and restated the revolving credit facility previously entered into by White Eagle on April 29, 2013.

In connection with the entry into the amended and restated Revolving Credit Facility, a new servicing agreement with respect to the policies pledged under the facility has been entered into with a third party. Prior to the amendment and restatement, a corporate subsidiary acted as servicer.

As of September 30, 2014, 452 life insurance policies owned by White Eagle with an aggregate death benefit of approximately $2.3 billion and an estimated fair value of approximately $295.5 million are pledged as collateral under the Revolving Credit Facility.

General & Security. The Revolving Credit Facility provides for an asset-based revolving credit facility backed by White Eagle’s portfolio of life insurance policies with an initial aggregate lender commitment of up to $300.0 million, subject to borrowing base availability. 452 life insurance policies with an aggregate death benefit of approximately $2.3 billion and an estimated fair value of approximately $295.5 million are pledged as collateral under the Revolving Credit Facility at September 30, 2014. In addition, the equity interests in White Eagle have been pledged under the Revolving Credit Facility.

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Borrowing Base. Borrowing availability under the Revolving Credit Facility is subject to a borrowing base, which at any time is equal to the lesser of (A) the sum of all of the following amounts that have been funded or are to be funded through the next distribution date (i) the initial advance and all additional advances to acquire additional pledged policies or that are not for ongoing maintenance advances, plus (ii) 100% of the sum of the ongoing maintenance costs, plus (iii) 100% of accrued and unpaid interest on borrowings (excluding the rate floor portion described below), plus (iv) 100% of any other fees and expenses funded and to be funded as approved by the required lenders, less (v) any required payments of principal and interest previously distributed and to be distributed through the next distribution date; (B) 75% of the valuation of the policies pledged as collateral as determined by the lenders; (C) 50% of the aggregate face amount of the policies pledged as collateral (excluding certain specified life insurance policies); and (D) the then applicable facility limit. At September 30, 2014, $143.4 million was undrawn and $2.6 million was available to borrow under the Revolving Credit Facility.

Amortization & Distributions. Proceeds from the policies pledged as collateral under the Revolving Credit Facility will be distributed pursuant to a waterfall. Absent an event of default, after premium payments and fees to service providers, 100% of the remaining proceeds will be directed to pay outstanding interest and principal on the loan, unless the lenders determine otherwise. Generally, after payment of interest and principal, collections from policy proceeds are to be paid to White Eagle up to $76.1 million, then 50% of the remaining proceeds are to be directed to the lenders with the remainder paid to White Eagle and for any unpaid fees to service providers. With respect to approximately 25% of the face amount of policies pledged as collateral under the Revolving Credit Facility, White Eagle has agreed that if policy proceeds that are otherwise due are not paid by an insurance carrier, the foregoing distributions will be altered such that the lenders will receive any “catch-up” payments in respect of amounts that they would have received in the waterfall prior to distributions being made to White Eagle. During the continuance of events of default or unmatured events of default, the amounts from collections of policy proceeds that might otherwise be paid to White Eagle will instead be held in a designated account controlled by the lenders and may be applied to fund operating and third party expenses, interest and principal, “catch-up” payments or percentage payments that would go to the lenders as described above.

Use of Proceeds. Generally, ongoing advances may be made for paying premiums on the life insurance policies pledged as collateral, to pay debt service (other than a “rate floor” component equal to the greater of LIBOR (or the applicable base rate) and 1.5%), and to pay the fees of service providers. Subsequent advances in respect of newly pledged policies are at the discretion of the lenders and the use of proceeds from those advances are at the discretion of the lenders.

Interest. Borrowings under the Revolving Credit Facility bear interest at a rate equal to LIBOR or, if LIBOR is unavailable, the base rate, in each case plus an applicable margin of 4.00% and subject to the rate floor described above. The base rate under the Revolving Credit Facility equals the sum of (i) the weighted average of the interest rates on overnight federal funds transactions or, if unavailable, the average of three federal funds quotations received by the Agent plus 0.75% and (ii) 0.5%. The effective rate at September 30, 2014 is 5.5%.

Interest expense for the cash portion of interest paid during the period is recorded in the Company’s consolidated financial statements. Accrued interest is reflected as a component of the estimated fair value of the Revolving Credit Facility debt. Total interest expense on the facility was $2.1 million, which includes $1.5 million withheld from borrowings by the lender and $573,000 paid by White Eagle, for the three months ended September 30, 2014 and $5.8 million, which includes $4.2 million withheld from borrowings by the lender and $1.6 million paid by White Eagle, for the nine months ended September 30, 2014.

Maturity. The term of the Revolving Credit Facility expires April 28, 2028, which is also the scheduled commitment termination date (though the lenders’ commitments to fund borrowings may terminate earlier in an event of default). The lenders’ interests in and rights to a portion of the proceeds of the policies does not terminate with the repayment of the principal borrowed and interest accrued thereon, the termination of the Revolving Credit Facility or expiration of the lenders’ commitments.

Covenants/Events of Defaults. The Revolving Credit Facility contains covenants and events of default that are customary for asset-based credit agreements of this type, but also include cross defaults under the servicing, account control, contribution and pledge agreements entered into in connection with the Revolving Credit Facility (including in relation to breached by third parties thereunder), certain changes in law, changes in control of or insolvency or bankruptcy of the Company and relevant subsidiaries and performance of certain obligations by certain relevant subsidiaries, White Eagle and third parties. The Revolving Credit Facility does not contain any financial covenants, but does contain certain tests relating to asset maintenance, performance and valuation the satisfaction of which will be determined by the lenders with a high degree of discretion.

Remedies. The Revolving Credit Facility and ancillary transaction documents afford the lenders a high degree of discretion in their selection of and implementation of remedies in relation to any event of default, including a high degree of discretion in determining whether to foreclose upon and liquidate all or any pledged policies, the interests in White Eagle, and the manner of any such liquidation. White Eagle has limited ability to cure events of default through the sale of policies or the procurement of replacement financing.

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We have elected to account for the debt under the Revolving Credit Facility, which includes the 50% interest in policy proceeds to the lender, using the fair value method. The fair value of the debt is the amount the Company would have to pay to transfer the debt to a market participant in an orderly transaction. We calculated the fair value of the debt using a discounted cash flow model taking into account the stated interest rate of the credit facility and probabilistic cash flows from the pledged policies. Considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, our estimates are not necessarily indicative of the amounts that we, or holders of the instruments, could realize in a current market exchange. The most significant assumptions are the estimates of life expectancy of the insured and the discount rate. The use of different assumptions and/or estimation methodologies could have a material effect on the estimated fair values.

At September 30, 2014, the fair value of the outstanding debt was $142.7 million and the borrowing base was approximately $159.1 million, including $156.6 million in outstanding principal.

There are no scheduled repayments of principal prior to maturity. Payments are due upon receipt of death benefits and distributed pursuant to the waterfall as described above.

(10) 8.50% Senior Unsecured Convertible Notes

In February 2014, the Company issued $70.7 million in an aggregate principal amount of 8.50% senior unsecured convertible notes due 2019. The Notes were sold, in part, to certain accredited investors pursuant to Regulation D under the Securities Act of 1933 and, in part, to an initial purchaser who then resold such Notes to qualified institutional buyers pursuant to Rule 144A of the Securities Act of 1933. The Notes were issued pursuant to an indenture dated February 21, 2014, between the Company and U.S. Bank National Association, as trustee (the “Indenture”). Two members of our Board of Directors, Messrs. Dakos and Goldstein, are affiliated with Bulldog Investors, LLC, who purchased Notes in the aggregate principal amount of $9.2 million in the offering.

The Notes are general senior unsecured obligations and rank equally in right of payment with all of our other existing and future senior unsecured indebtedness. The Notes are effectively subordinate to all of our secured indebtedness to the extent of the value of the assets collateralizing such indebtedness. The Notes are not guaranteed by our subsidiaries.

The maturity date of the Notes is February 15, 2019. The Notes accrue interest at the rate of 8.50% per annum on the principal amount of the Notes, payable semi-annually in arrears on August 15 and February 15 of each year with the first interest payment on August 15, 2014.

The Notes are convertible into shares of common stock at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date. The Notes may be converted into shares of common stock initially at a conversion rate of 147.9290 shares of common stock per $1,000 principal amount of Notes (equivalent to a conversion price of $6.76 per share of common stock), subject to adjustment.

The Company may not redeem the Notes prior to February 15, 2017. On and after February 15, 2017, and prior to the maturity date, the Company may redeem for cash all, but not less than all, of the Notes if the last reported sale price of the Company’s common stock equals or exceeds 130% of the applicable conversion price for at least 20 trading days during the 30 consecutive trading day period ending on the trading day immediately prior to the date the Company delivers notice of the redemption. The redemption price will be equal to 100% of the principal amount of the Notes, plus any accrued and unpaid interest to, but excluding, the redemption date. In addition, if we call the Notes for redemption, a make-whole fundamental charge will be deemed to occur. As a result, we will, in certain circumstances, increase the conversion rate by a number of additional shares of common stock for holders who convert their notes prior to the redemption date.

The Company determined that an embedded conversion option existed in the Notes, prior to June 5, 2014, that was required to be separately accounted for as a derivative under ASC 815 which required the Company to bifurcate the embedded conversion option and record it as a liability at fair value and record a debt discount by an equal amount with changes in the fair value of the conversion derivative liability recorded in earnings and the discount on the debt liability, together with the stated interest on the instrument, amortized to interest expense over the life of the debt using the effective interest method.

On June 5, 2014, the Company obtained shareholder approval to issue shares of common stock upon conversion of the Notes in an amount that exceeded applicable New York Stock Exchange limits for issuances without shareholder approval. In accordance with ASC 815, the Company reclassified the embedded conversion derivative liability to equity along with unamortized transaction costs proportionate to the allocation of the initial debt discount and the principal amount of the Notes. The Notes are recorded at accreted value and will continue to be accreted up to the par value of the Notes at maturity.

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The fair value of the conversion derivative liability was estimated at June 5, 2014 using a Black Scholes pricing model with the following assumptions:

	As of June 5, 2014
Expected Volatility		40.0	%
Expected Term in Years		4.7
Risk Free Rate		1.5	%

At June 5, 2014, the fair value of the conversion derivative liability was $23.7 million. In accordance with ASC 815, the Company reclassified this amount along with $756,000 of unamortized transaction costs offset by deferred taxes of $8.8 million to stockholders’ equity. As of September 30, 2014, the carrying value of the Notes was $55.3 million. The unamortized debt discount and origination cost of $15.5 million and $2.3 million, respectively, will be amortized over the remaining life of the Notes, using the effective interest method.

The Company recorded $2.2 million of interest expense, including $1.5 million, $605,000 and $90,000 from interest, amortizing debt discounts and issuance costs, during the three months ended September 30, 2014 and $5.3 million of interest expense, including $3.7 million, $1.4 million and $239,000 from interest, amortizing debt discounts and issuance costs, during the nine months ended September 30, 2014.

During the nine months ended September 30, 2014, the Company recorded a loss on the change in fair value of the conversion derivative liability of $6.8 million.

(11) Fair Value Measurements

We carry investments in life settlements, certain structured settlements, and our Revolving Credit Facility debt at fair value in the consolidated balance sheets. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. Fair value measurements are classified based on the following fair value hierarchy:

Level 1—Valuation is based on unadjusted quoted prices in active markets for identical assets and liabilities that are accessible at the reporting date. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment.

Level 2 —Valuation is determined from pricing inputs that are other than quoted prices in active markets that are either directly or indirectly observable as of the reporting date. Observable inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and interest rates and yield curves that are observable at commonly quoted intervals.

Level 3—Valuation is based on inputs that are both significant to the fair value measurement and unobservable. Level 3 inputs include situations where there is little, if any, market activity for the financial instrument. The inputs into the determination of fair value generally require significant management judgment or estimation.

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Assets and liabilities measured at fair value on a recurring basis

The balances of the Company’s assets and liabilities measured at fair value on a recurring basis as of September 30, 2014, are as follows (in thousands):

	Level 1		Level 2		Level 3		Total Fair Value
Assets:
Investment in life settlements	$	—	$	—	$	350,383	$	350,383
Structured settlement receivables		—		—		383		383
	$	—	$	—	$	350,766	$	350,766

	Level 1		Level 2		Level 3		Total Fair Value
Liabilities:
Revolving Credit Facility debt	$	—	$	—	$	142,661	$	142,661
	$	—	$	—	$	142,661	$	142,661

The balances of the Company’s assets and liabilities measured at fair value on a recurring basis as of December 31, 2013, are as follows (in thousands):

	Level 1		Level 2		Level 3		Total Fair Value
Assets:
Investment in life settlements	$	—	$	—	$	302,961	$	302,961
Structured settlement receivables		—		—		660		660
	$	—	$	—	$	303,621	$	303,621

	Level 1		Level 2		Level 3		Total Fair Value
Liabilities:
Revolving Credit Facility debt	$	—	$	—	$	123,847	$	123,847
	$	—	$	—	$	123,847	$	123,847

The Company values its investment in life settlement portfolio in two classes, non-premium financed and premium financed. In considering the categories, it is generally believed that market participants would require a lower risk premium for policies that were non-premium financed, while a higher risk premium would be required for policies that were premium financed.

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($ in thousands)	Quantitative Information about Level 3 Fair Value Measurements
	Fair Value at 9/30/14		Aggregate death benefit at 9/30/14		Valuation Technique (s)	Unobservable Input	Range (Weighted Average)
Non-premium financed	$	52,909	$	220,802	Discounted cash flow	Discount rate Life expectancy evaluation	14.80% - 20.80% (8.1 years)
Premium financed	$	297,474	$	2,667,487	Discounted cash flow	Discount rate Life expectancy evaluation	16.55% - 26.55% (11.2 years)
Investment in life settlements	$	350,383	$	2,888,289	Discounted cash flow	Discount rate Life expectancy evaluation	(18.56)% (11.0 years)
Structured settlements receivables	$	383		N/A	Discounted cash flow	Facility sales discount rates	8.66%
Revolving Credit Facility debt	$	142,661		N/A	Discounted cash flow	Discount rate Life expectancy evaluation	24.01% * (10.5 years)

* Actual

Following is a description of the methodologies used to estimate the fair values of assets and liabilities measured at fair value on a recurring basis and within the fair value hierarchy.

Investment in life settlements—The Company has elected to account for the life settlement policies it acquires using the fair value method. The Company uses a present value technique to estimate the fair value of our investments in life settlements, which is a Level 3 fair value measurement as the significant inputs are unobservable and require significant management judgment or estimation. The Company currently uses a probabilistic method of valuing life insurance policies, which we believe to be the preferred valuation method in the industry. The most significant assumptions are the estimates of life expectancy of the insured and the discount rate.

The Company provides medical records for each insured to independent secondary market life expectancy providers (each, an “LE provider”). Each LE provider reviews and analyzes the medical records and identifies all medical conditions it feels are relevant to the life expectancy determination of the insured. Debits and credits are assigned by each LE provider to the individual’s health based on identified medical conditions. The debit or credit that an LE provider assigns to a medical condition is derived from the experience of mortality attributed to this condition in the portfolio of lives that the LE provider monitors. The health of the insured is summarized by the LE provider into a life assessment of the individual’s life expectancy expressed both in terms of months and in mortality factor. The mortality factor represents the degree to which the given life can be considered more or less impaired than a life having similar characteristics (e.g. gender, age, smoking, etc.). For example, a standard insured (the average life for the given mortality table) would carry a mortality rating of 100%. A similar but impaired life bearing a mortality rating of 200% would be considered to have twice the chance of dying earlier than the standard life relative to the LE provider’s population. Since each provider’s mortality factor is based on its own mortality table, the Company calculates its own factors to apply to the table selected by the Company.

Beginning in the quarter ended September 30, 2012, the Company began using the 2008 Valuation Basic Table (“2008 VBT”), a mortality table developed by the U.S. Society of Actuaries. The mortality table is created based on the expected rates of death among groups categorized by gender, age, and smoking status. Since the Company uses the 2008 VBT, the Company calculates its own mortality factor that, when applied to the 2008 VBT, produces the same life expectancy provided by each LE providers. The resulting mortality factors are then blended to determine a factor for each insured.

To generate best estimate probabilistic cash flow stream, a mortality curve is generated by calculating the probability of mortality for each period based on the calculated mortality factors and the death rates from the 2008 VBT. The company modifies the table by incorporating future mortality improvements to better reflect the curves used by the LE providers.

A discounted present value calculation is then used to determine the value of the policy. If the insured dies earlier than expected, the return will be higher than if the insured dies when expected or later than expected.

The calculation allows for the possibility that if the insured dies earlier than expected, the premiums needed to keep the policy in force will not have to be paid. Conversely, the calculation also considers the possibility that if the insured lives longer than expected, more premium payments will be necessary. Based on these considerations, each possible outcome is assigned a probability and the range of possible outcomes is then used to create a value for the policy.

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The Company currently obtains its life expectancy reports from two life expectancy report providers, AVS Underwriting LLC (“AVS”) and 21st Services, LLC (“21st Services”).

In the first quarter of 2013, 21st Services announced revisions to its underwriting methodology. According to 21st Services, these revisions have generally been understood to lengthen the average reported life expectancy furnished by this life expectancy provider by 19%. As of September 30, 2014, the Company received 370 updated life expectancy reports from 21st Services, of which 332 were used to calculate life expectancy extension. These life expectancies reported an average lengthening of life expectancies of 15.80% and, based on this sample, for the nine months ended September 30, 2014, the Company increased the life expectancies furnished by 21st Services by 15.80% on the rest of its portfolio of life settlements prior to blending them with the life expectancy reports furnished by AVS. The Company expects to continue to lengthen life expectancies furnished by 21st Services that have not been re-underwritten using their updated methodology. Since the Revolving Credit Facility necessitates that the Company procure updated life expectancies on a periodic basis, the number of policies that are lengthened by the Company in this manner will decrease over time and the fair value calculations in future periods will, accordingly, reflect the actual impact of the revised 21st Services methodology on a policy by policy basis as updated life expectancy reports are procured.

Life expectancy sensitivity analysis

If all of the insured lives in the Company’s life settlement portfolio live six months shorter or longer than the life expectancies provided by these third parties, the change in estimated fair value would be as follows (dollars in thousands):

Life Expectancy Months Adjustment	Value		Change in Value
+6	$	294,789	$	(55,594	)
-		350,383	$	—
-6	$	411,117	$	60,734

Future changes in life expectancies could have a material effect on the fair value of our investment in life settlements, which could have a material adverse effect on our business, financial condition and results of operations.

Discount rate

The discount rate incorporates current information about market interest rates, the credit exposure to the insurance company that issued the life insurance policy and our estimate of the risk premium an investor in the policy would require.

The Company re-evaluates its discount rates at the end of every reporting period in order to reflect the estimated discount rates that could reasonably be used in a market transaction involving the Company’s portfolio of life insurance policies. In doing so, the Company relies on management insight, engages third party consultants to corroborate its assessment, engages in discussions with other market participants and potential financing sources and extrapolates the discount rate underlying actual sales of policies.

Due to the Company’s association with the USAO Investigation and certain civil litigation involving the Company, the Company believes that, when given the choice to invest in a policy that was associated with the Company’s premium finance business and a similar policy without such an association, all else being equal, an investor would have generally opted to invest in the policy that was not associated with the Company’s premium finance business. However, since the Company entered into a non-prosecution agreement, investors have required less of a risk premium to transact in policies associated with the Company’s legacy premium finance business. In general, the Company believes that the risk premium an investor would require to transact in a policy that has been premium financed versus a policy without premium financing is lessening in the current market environment and further expects that, with the passage of time, investors will continue to require less of a risk premium to transact in policies associated with its legacy premium finance business.

Credit exposure of insurance company

The Company considers the financial standing of the issuer of each life insurance policy. Typically, we seek to hold policies issued by insurance companies that are rated investment grade by the top three credit rating agencies. At September 30, 2014, the Company had nineteen life insurance policies issued by two carriers that were rated non-investment grade as of that date. In order to compensate a market participant for the perceived credit and challenge risks associated with these policies, the Company applied an additional 300 basis point risk premium.

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The following table provides information about the life insurance issuer concentrations that exceed 10% of total death benefit and 10% of total fair value of our investments in life settlements as of September 30, 2014:

Carrier	Percentage of Total Fair Value			Percentage of Total Death Benefit			Moody’s Rating			S&P Rating
Transamerica Occidental Life Insurance Company		24.1	%		20.6	%		A1			AA-
Lincoln National Life Insurance Company		22.5	%		20.3	%		A1			AA-
Lincoln Benefit Life Company		10.7	%		10.0	%		NR	*		BBB+

* Not Rated

Estimated risk premium

As of September 30, 2014, the Company owned 595 policies with an aggregate investment in life settlements of $350.4 million. Of these 595 policies, 550 were premium financed and are valued using discount rates that range from 16.55% to 26.55%. The remaining 45 policies, which are non-premium financed, are valued using discount rates that range from 14.80% to 20.80%. As of September 30, 2014, the weighted average discount rate calculated based on death benefit used in valuing the policies in our life settlement portfolio was 18.56%.

The discount rate incorporates current information about market interest rates, the credit exposure to the insurance company that issued the life insurance policy and our estimate of the risk premium an investor in the policy would require. The extent to which the fair value could vary in the near term has been quantified by evaluating the effect of changes in the weighted average discount rate on the death benefit used to estimate the fair value. If the weighted average discount rate were increased or decreased by 1/2 of 1% and the other assumptions used to estimate fair value remained the same, the change in estimated fair value would be as follows (dollars in thousands):

Market interest rate sensitivity analysis

Weighted Average Rate Calculated Based on Death Benefit	Rate Adjustment			Value		Change in Value
18.06%		-0.50	%	$	360,030	$	9,647
18.56%		—		$	350,383	$	—
19.06%		+0.50	%	$	341,171	$	(9,212	)

Future changes in the discount rates we use to value life insurance policies could have a material effect on our yield on life settlement transactions, which could have a material adverse effect on our business, financial condition and results of our operations.

At the end of each reporting period we re-value the life insurance policies using our valuation model in order to update our estimate of fair value for investments in policies held on our balance sheet. This includes reviewing our assumptions for discount rates and life expectancies as well as incorporating current information for premium payments and the passage of time.

Structured settlement receivables—All structured settlements that were acquired subsequent to July 1, 2010 were marked to fair value. We made this election because it was our intention to sell these assets within twelve months of acquisition. Structured settlements are purchased at effective yields that are fixed. Purchase discounts are accreted into interest income using the effective-interest method for those structured settlements marked to fair value. As of September 30, 2014, the Company had 17 structured settlements with an estimated fair value of $383,000 and an average sales discount rate of 8.66%.

Revolving Credit Facility debt—In connection with the Revolving Credit Facility, 452 policies are pledged by White Eagle to serve as collateral for its obligations under the facility. Absent an event of default under the Revolving Credit Facility, ongoing borrowings will be used to pay the premiums on these policies and certain approved third party expenses. Proceeds from the policies pledged as collateral will be distributed pursuant to a waterfall. After premium payments and fees to service providers, 100% of the remaining proceeds will be directed to pay outstanding principal and interest on the loan. Generally, after payment of principal and interest, collections from policy proceeds are to be paid to White Eagle up to $76.1 million, then 50% of the remaining proceeds are to

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be directed to the lenders with the remainder paid to White Eagle. We have elected to account for this long-term debt, which includes the lender’s interest in policy proceeds, using the fair value method. The fair value of the debt is the amount the Company would have to pay to transfer the debt to a market participant in an orderly transaction. We calculated the fair value of the debt using a discounted cash flow model taking into account the stated interest rate of the Revolving Credit Facility and probabilistic cash flows from the pledged policies. Accordingly, our estimates are not necessarily indicative of the amounts that we, or holders of the instruments, could realize in a current market exchange. The most significant assumptions are the estimates of life expectancy of the insured and the discount rate. The use of different assumptions and/or estimation methodologies could have a material effect on the estimated fair values.

Life expectancy sensitivity analysis of Revolving Credit Facility debt

A considerable portion of the fair value of the Revolving Credit Facility debt is determined by the timing of receipt of future policy proceeds. Should life expectancies lengthen such that policy proceeds are collected further into the future, the fair value of this debt will decline. Conversely, should life expectancies shorten, the fair value of this debt will increase. Considerable judgment is required in interpreting market data to develop the estimates of fair value.

If all of the insured lives in the life settlement portfolio pledged under the Revolving Credit Facility live six months shorter or longer than the life expectancies used to calculate the estimated fair value of the Revolving Credit Facility debt, the change in estimated fair value would be as follows (dollars in thousands):

Life Expectancy Months Adjustment	Fair Value of Revolving Credit Facility Debt		Change in Value
+6	$	121,547	$	(21,114	)
-	$	142,661	$	—
-6	$	165,172	$	22,511

Future changes in the life expectancies could have a material effect on the fair value of our Revolving Credit Facility debt, which could have a material adverse effect on our business, financial condition and results of operations.

Discount rate of Revolving Credit Facility debt

The discount rate incorporates current information about market interest rates, credit exposure to insurance companies and our estimate of the return a lender lending against the policies would require.

Market interest rate sensitivity analysis of Revolving Credit Facility debt

The extent to which the fair value of the Revolving Credit Facility debt could vary in the near term has been quantified by evaluating the effect of changes in the weighted average discount. If the weighted average discount rate were increased or decreased by ^1/₂ of 1% and the other assumptions used to estimate fair value remained the same, the change in estimated fair value of the Revolving Credit Facility debt as of September 30, 2014 would be as follows (dollars in thousands):

Discount Rate	Rate Adjustment			Fair Value of Revolving Credit Facility Debt		Change in Value
23.51%		-0.50	%	$	145,394	$	2,733
24.01%		—		$	142,661	$	—
24.51%		+0.50	%	$	140,020	$	(2,641	)

Future changes in the discount rates could have a material effect on the fair value of our Revolving Credit Facility debt, which could have a material adverse effect on our business, financial condition and results of our operations.

At September 30, 2014, the fair value of the debt was $142.7 million and the outstanding principal was approximately $156.6 million.

Senior Unsecured Convertible Notes- The Company determined that an embedded conversion option in the Notes was required to be separately accounted for as a derivative under Accounting Standards Codification 815, Derivatives and Hedging (“ASC 815”). ASC 815 required the Company to bifurcate the embedded conversion option and record it as a liability at fair value and reduce the debt liability by a corresponding discount of an equivalent amount. The Company used a Black Scholes pricing model that

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incorporates present valuation techniques and reflect both the time value and the intrinsic value of the embedded conversion option to approximate the fair value of the conversion derivative liability at the end of each reporting period. This model required assumptions as to expected volatility, dividends, terms, and risk free rates.

In accordance with ASC 815, upon receipt of shareholder approval on June 5, 2014, the Company reclassified the embedded derivative to stockholders’ equity along with unamortized transaction costs proportionate to the allocation of the initial debt discount and the principal amount of the Notes. The Notes continue to be recorded at accreted value up to the par value of the Notes at maturity. See Note 10, “8.50% Senior Unsecured Convertible Notes.” Although we believe our valuation method is appropriate, the use of different methodologies or assumptions to determine the fair value could result in different fair values.

Changes in Fair Value

The following table provides a roll-forward in the changes in fair value for the nine months ended September 30, 2014, for assets for which the Company determines fair value using a material level of unobservable (Level 3) inputs (in thousands):

Life Settlements:
Balance, January 1, 2014	$	302,961
Purchase of policies	$	3,488
Change in fair value		19,313
Matured/lapsed/sold policies		(15,957	)
Premiums paid		40,578
Transfers into level 3
Transfer out of level 3		—
Balance, September 30, 2014	$	350,383
Changes in fair value included in earnings for the period relating to assets held at September 30, 2014	$	8,627

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The following tables provide a roll-forward in the changes in fair value for nine months ended September 30, 2014, for all liabilities for which the Company determines fair value using a material level of unobservable (Level 3) inputs (in thousands):

Revolving Credit Facility debt:
Balance, January 1, 2014	$	123,847
Subsequent Draws under the revolving credit facility		40,965
Payments on credit facility		(17,595	)
Unrealized change in fair value		(4,556	)
Transfers into level 3		—
Transfer out of level 3		—
Balance, September 30, 2014	$	142,661
Changes in fair value included in earnings for the period relating to liabilities held at September 30, 2014	$	(4,556	)
Conversion derivative liability:
Balance, at inception		16,901
Change in fair value		6,759
Reclassified to equity		(23,660	)
Transfers into level 3		—
Transfer out of level 3		—
Balance, September 30, 2014	$	—
Changes in fair value included in earnings for the period relating to liabilities held at September 30, 2014	$	—

The following table provides a roll-forward in the changes in fair value for nine months ended September 30, 2013, for all assets for which the Company determines fair value using a material level of unobservable (Level 3) inputs (in thousands):

Life Settlements:
Balance, January 1, 2013	$	113,441
Purchase of policies	$	55,500
Acquired in foreclosure		3,168
Change in fair value		81,948
Matured/lapsed/sold policies		(12,658	)
Premiums paid		50,984
Transfers into level 3		—
Transfer out of level 3		—
Balance, September 30, 2013		292,383
Changes in fair value included in earnings for the period relating to assets held at September 30, 2013	$	74,655

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The following table provides a roll-forward in the changes in fair value for nine months ended September 30, 2013, for all liabilities for which the Company determines fair value using a material level of unobservable (Level 3) inputs (in thousands):

Revolving Credit Facility debt:
Balance, January 1, 2013	$	—
Initial advance under the revolving credit facility	$	83,020
Subsequent Draws under the revolving credit facility		37,059
Unrealized change in fair value		(5,295	)
Transfers into level 3		—
Transfer out of level 3		—
Balance, September 30, 2013	$	114,784
Changes in fair value included in earnings for the period relating to liabilities held at September 30, 2013	$	(5,295	)

There were no transfers of financial assets or liabilities between levels of the fair value hierarchy during the nine months ended September 30, 2014 or 2013.

(12) Segment Information

On October 25, 2013, the Company sold its structured settlement business, which was previously reported as an operating segment. The operating results related to the Company’s structured settlement business have been included in discontinued operations in the Company’s Consolidated Statements of Operations for all periods presented and the Company has discontinued segment reporting.

(13) Commitments and Contingencies

Lease Agreements

The Company leases office space under a new lease that commenced on October 1, 2014. The lease expires on September 30, 2020. The annual base rent is $225,100, with a provision for a 3% increase on each anniversary of the rent commencement date. Rent expense under the prior lease was approximately $126,000 for the three months ended September 30, 2014 and 2013 and $377,000 for the nine months ended September 30, 2014 and 2013.

Future minimum lease payments for the remainder of 2014 are approximately $49,000.

Employment Agreements

We have entered into employment agreements with certain of our officers, including with our chief executive officer, whose agreement provides for substantial payments in the event that the executive terminates his employment with us due to a material change in the geographic location where the chief executive officer performs his duties or upon a material diminution of his base salary or responsibilities, with or without cause. These payments are equal to three times the sum of our chief executive officer’s base salary and the average of the three years’ annual cash bonus.

On April 26, 2012, the Company entered into a Separation Agreement and General Release of Claims (the “Separation Agreement”) with its former chief operating officer, Jonathan Neuman. The Separation Agreement obligates the Company to indemnify Mr. Neuman for his legal expenses. The Company recognized indemnification expenses of $500,000 and $880,000 during the three months ended September 30, 2014 and 2013, respectively and $1.5 million and $2.3 million during the nine months ended September 30, 2014 and 2013, respectively.

We do not have any general policies regarding the use of employment agreements, but may, from time to time, enter into such a written agreement to reflect the terms and conditions of employment of a particular named executive officer, whether at the time of hire or thereafter.

Litigation

In accordance with applicable accounting guidance, the Company establishes an accrued liability for litigation and regulatory matters when those matters present loss contingencies that are both probable and estimable. In such cases, there may be an exposure to loss in excess of any amounts accrued. When a loss contingency is not both probable and estimable, the Company does not establish an accrued liability. As a litigation or regulatory matter develops, the Company, in conjunction with any outside counsel handling the

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matter, evaluates on an ongoing basis whether such matter presents a loss contingency that is probable and estimable. If, at the time of evaluation, the loss contingency related to a litigation or regulatory matter is not both probable and estimable, the matter will continue to be monitored for further developments that would make such loss contingency both probable and estimable. When a loss contingency related to a litigation or regulatory matter is deemed to be both probable and estimable, the Company will establish an accrued liability with respect to such loss contingency and record a corresponding amount of litigation-related expense. The Company will then continue to monitor the matter for further developments that could affect the amount of any such accrued liability.

Non-Prosecution Agreement

On September 27, 2011, the Company was informed that it was being investigated by the U.S. Attorney’s Office for the District of New Hampshire (the “USAO Investigation”). At that time, the Company was informed that, among other individuals, its former president and chief operating officer and, three former life finance sales executives were considered “targets” of the USAO Investigation. The USAO Investigation focused on the Company’s premium finance loan business.

On April 30, 2012, the Company entered into a Non-Prosecution Agreement (the “Non-Prosecution Agreement”) with the USAO, which agreed not to prosecute the Company for its involvement in the making of misrepresentations on life insurance applications in connection with its premium finance business or any potential securities fraud claims related to its premium finance business. In the Non-Prosecution Agreement, the USAO and the Company agreed among other things, that the following facts are true and correct: (i) at all relevant times (x) certain insurance companies required that the prospective insured applying for a life insurance policy, and sometimes the agent, disclose information relating to premium financing on applications for life insurance policies, and (y) the questions typically required the prospective insured to disclose if he or she intended to seek premium financing in connection with the policy and sometimes required the agent to disclose if he or she was aware of any such intent on the part of the applicant; (ii) in connection with a portion of the Company’s retail operation known as “retail non-seminar” that began in December 2006 and was discontinued in January 2009, Imperial had a practice of disclosing on applications that the prospective insured was seeking premium financing when the life insurance company allowed premium financing from Imperial; however, in certain circumstances, Imperial internal life agents facilitated and/or made misrepresentations on applications that the prospective insured was not seeking premium financing when the insurance carrier was likely to deny the policy on the basis of premium financing; and (iii) to the extent that external agents, brokers and insureds caused other misrepresentations to be made in life insurance applications in connection with the retail non-seminar business, Imperial failed to appropriately tailor controls to prevent potential fraudulent practices in that business. As of September 30, 2014, the Company had 39 policies in its portfolio that once served as collateral for premium finance loans derived through the retail non-seminar business.

In connection with the Non-Prosecution Agreement, Imperial voluntarily agreed to terminate its premium finance business, which historically accounted for the majority of the Company’s income and terminated certain senior sales staff associated with the premium finance business. Additionally, the Company paid the United States Government $8.0 million, and agreed to cooperate fully with the USAO’s ongoing investigation and to refrain from and self-report any criminal conduct. The Non-Prosecution Agreement has a term of three years until April 30, 2015, but the Company may petition the USAO to forego the remaining term of the Non-Prosecution Agreement, if the Company otherwise complies with all of its obligations under the Non-Prosecution Agreement. Should the USAO conclude that Imperial has not abided by its obligations under the Non-Prosecution Agreement, the USAO could choose to terminate the Non-Prosecution Agreement, resume its investigation of the Company, or bring charges against Imperial. While the Non-Prosecution Agreement effectively resolved the USAO Investigation as it pertains to the Company (subject to the Company’s continuing compliance with its terms), the USAO is continuing to investigate certain individuals formerly employed by the Company and the Company is continuing to incur expenses regarding its indemnification obligations with respect to such individuals.

In addition, settlements of certain civil litigation with the Company’s director and officer liability insurance carriers related to the USAO Investigation require Imperial to advance legal fees to and indemnify certain individuals. The obligation to advance and indemnify on behalf of these individuals, while currently unquantifiable, may be substantial and could have a material adverse effect on the Company’s financial position and results of operations. Excluding expenses of general external legal service providers, USAO litigation-related fees (inclusive of indemnification and advancement expenses) of $1.2 million and $1.6 million were recognized for the three months ended September 30, 2014 and 2013, respectively and $3.2 million and $4.6 million were recognized for the nine months ended September 30, 2014 and 2013, respectively.

Class Action Litigation

On December 16, 2013, final approval of the settlement to the class action designated Fuller v. Imperial Holdings et al. was granted by the United States District Court for the Southern District of Florida. The terms of the class action settlement included a cash payment of $12.0 million, with $11.0 million contributed by the Company’s primary and excess director and officer liability insurance carriers, with such amounts paid during the nine months ended September 30, 2014. The terms of the settlement also include the issuance of warrants to purchase two million shares of the Company’s stock. The warrants, which were issued into an escrow account in April 2014 and distributed in October 2014 have a five-year term from the date of their distribution and have an exercise price of $10.75.

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SEC Investigation

On February 17, 2012, the Company first received a subpoena issued by the staff of the SEC seeking documents from 2007 through the date of the subpoena, generally related to the Company’s premium finance business and corresponding financial reporting. The SEC is investigating whether any violations of federal securities laws have occurred and the Company has been cooperating with the SEC regarding this matter. The Company is unable to predict what action, if any, might be taken in the future by the SEC or its staff as a result of the investigation or what impact, if any, the cost of responding to the SEC might have on the Company’s financial position, results of operations, or cash flows. The Company has not established any provision for losses in respect of this matter.

Sun Life

On April 18, 2013, Sun Life Assurance Company of Canada (“Sun Life”) filed a complaint against the Company and several of its affiliates in the United States District Court for the Southern District of Florida, entitled Sun Life Assurance Company of Canada v. Imperial Holdings, Inc., et al. (“Sun Life Case”). The complaint seeks to contest the validity of at least twenty-nine policies issued by Sun Life. The complaint also asserts the following claims: (1) violations of the federal Racketeer Influenced and Corrupt Organizations Act, (2) common law fraud, (3) civil conspiracy, (4) tortious interference with contractual obligations, and (5) an equitable accounting. In response to a motion to dismiss filed by the Company, Sun Life filed an amended complaint on June 13, 2013. The Company believes that the amended complaint is without merit and filed another motion to dismiss on July 8, 2013. Sun Life responded to the second motion to dismiss on August 1, 2013 and the Company filed its reply on August 19, 2013. On June 26, 2014, the District Court entered an order granting the Company’s motion to dismiss and dismissed Sun Life’s amended complaint, without prejudice. On July 28, 2014, Sun Life filed its second amended complaint. The Company believes the second amended complaint suffers from similar deficiencies as the previous complaints and filed another motion to dismiss on September 5, 2014. Sun Life filed its response on October 10, 2014 and the Company filed its reply on November 3, 2014. No reserve has been established for this litigation.

On July 29, 2013, the Company filed a complaint against Sun Life in United States District Court for the Southern District of Florida, entitled Imperial Premium Finance, LLC (“IPF”) v. Sun Life Assurance Company of Canada (“IPF Case”). The complaint asserts claims against Sun Life for breach of contract, breach of the covenant of good faith and fair dealing, and fraud, and seeks a judgment declaring that Sun Life is obligated to comply with the promises made by it in certain insurance policies. The complaint also seeks compensatory damages of no less than $30 million in addition to an award of punitive damages. On August 23, 2013, Sun Life moved to dismiss the complaint. IPF filed its response on September 9, 2013, and Sun Life filed its reply on September 19, 2013. The IPF Case has been consolidated with the Sun Life Case for all purposes, including trial.

Sanctions Order

On April 27, 2012, after the conclusion of a jury trial in the matter styled Steven A. Sciaretta, as Trustee of the Barton Cotton Irrevocable Trust a/k/a the Amended and Restated Barton Cotton Irrevocable Trust v. The Lincoln National Life Insurance Company (“Lincoln”), the defendant, Lincoln, filed a motion seeking sanctions against the Company’s subsidiary, Imperial Premium Finance (“IPF”), a non-party to the litigation, relating to its corporate representative deposition and trial testimony. On May 6, 2013, the Court issued an order sanctioning IPF and ordering it to pay $850,000. On June 4, 2013, IPF filed a Notice of Appeal and oral argument was held before the Eleventh Circuit Court of Appeals on October 7, 2014. The Company recorded a reserve of $850,000 that is included in other liabilities as of September 30, 2014.

IRS Investigation

As previously disclosed, the Internal Revenue Service (“IRS”) Criminal Investigation Division is conducting an investigation related to the Company and its legacy structured settlements business. The Company believes that it has been cooperating with the investigation and is unable, at this time, to predict what action, if any, might be taken in the future by the IRS or what impact, if any, the cost of providing information and documents might have on the Company’s financial condition, results of operations, or cash flows. If the investigation results in a determination by the IRS that the Company has failed to comply with any of its obligations under the Internal Revenue Code or regulations thereunder, the Company could incur additional tax liability, restitution payment obligations, penalties, fines or other liabilities, including criminal penalties and fines and a reduction in the Company’s net operating losses, that could have a material adverse effect on the Company, its personnel, its financial condition, its results of operations, or its cash flows. The Company has not established any provision for losses in respect to this matter.

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Other Litigation

The Company is party to various other legal proceedings that arise in the ordinary course of business. Due to the inherent difficulty of predicting the outcome of litigation and other legal proceedings, the Company cannot predict the eventual outcome of these matters, and it is reasonably possible that some of them could be resolved unfavorably to the Company. As a result, it is possible that the Company’s results of operations or cash flows in a particular fiscal period could be materially affected by an unfavorable resolution of pending litigation or contingencies. However, the Company believes that the resolution of these other proceedings will not, based on information currently available, have a material adverse effect on the Company’s financial position or results of operations.

(14) Stockholders’ Equity

The Company has reserved an aggregate of 1,200,000 shares of common stock under its Omnibus Plan, of which 815,448 options to purchase shares of common stock granted to existing employees were outstanding as of September 30, 2014, and an additional 61,853 shares of restricted stock, and 13,759 shares of unrestricted stock had been granted to directors under the plan subject to vesting.

On June 5, 2014, upon receipt of shareholder approval, the Company reclassified the embedded derivative contained in its Notes to stockholders’ equity along with unamortized transaction costs proportionate to the allocation of the initial debt discount and the principal amount of the Notes. This resulted in an increase to additional paid-in-capital of $14.1 million, net of taxes on the Company’s consolidated balance sheet and consolidated statement of stockholders’ equity as of September 30, 2014. See Note 10, 8.50% Senior Unsecured Convertible Notes.

In connection with the settlement of derivative litigation, the Company issued 125,628 shares of the Company’s stock, which were issued in the first quarter of 2014 and are included in stockholders’ equity.

In connection with the class action settlement described in Note 13, Contingencies and Commitments, the Company issued warrants to purchase two million shares of the Company’s stock into an escrow account in April 2014 and were distributed in October 2014. The estimated fair value at the measurement date of such warrants was $5.4 million, which is included in stockholder’s equity. The warrants have a five-year term from the date of their distribution with an exercise price of $10.75. The Company is obligated to file a registration statement to register the shares underlying the warrants with the SEC if shares of the Company’s common stock have an average daily trading closing price of at least $8.50 per share for a 45 day period. The warrants will be exercisable upon effectiveness of the registration statement.

During the nine months ended September 30, 2014, the Company awarded 299,500 target performance shares for restricted common stock to its directors and certain employees, of which 150,000 shares are subject to shareholder approval of an amendment to the Omnibus Plan at the Company’s 2015 annual meeting. The issuance of the performance shares is contingent on the Company’s financial performance as well as the performance of the Company’s common stock through June 30, 2016, with the actual shares to be issued ranging between 0 – 150% of the target performance shares. As a result, the Company determined that it is not probable that the performance conditions will be achieved and no related expense was recognized for the three and nine months ended September 30, 2014. The performance shares will be subject to a one year vesting period from the date of issuance.

Exclusive of those performance shares awarded to our named executive officers that are not subject to shareholder approval of an amendment to the Plan at the Company’s 2015 annual meeting, there were 308,940 securities remaining for future issuance under the Omnibus Plan as of September 30, 2014.

During the nine months ended September 30, 2014, the Company adopted ASU No. 2013-11, resulting in an increase to additional paid-in-capital of $6.3 million on the Company’s consolidated balance sheet and consolidated statement of stockholders’ equity as of September 30, 2014. See Note 3, Recent Accounting Pronouncements

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(15) Income Taxes

Our provision for income taxes, excluding the income tax expense of $3.7 million recorded as a result of the adoption of the new accounting pronouncement as discussed below, is estimated to result in an annual effective tax rate of 36.9% in 2014. For periods prior to 2014 our provision for income taxes was an annual effective tax rate of 0.0%. The 0.0% effective tax rate was the result of our recording of a valuation allowance for those deferred tax assets that were not expected to be recovered in the future.

Included in our provision for income taxes for the nine months ended September 30, 2014, is a $3.7 million provision attributed to the adoption of guidance provided in ASU No. 2013-11, that was effective on January 1, 2014. In addition, as a result of the adoption of this standard, the Company recorded a $6.3 million increase to additional paid-in-capital.

In March of 2014, the Company was notified by the IRS of its intention to examine the Company’s tax returns for the years ended December 31, 2011 and 2012. See also “IRS Investigation” in Note 13 regarding the IRS Criminal Investigation Division’s investigation related to the Company’s former structured settlement business.

The Company and its subsidiaries are subject to U.S. federal income tax as well as to income tax in Florida and other states and foreign jurisdictions in which it operates.

At the time the Company recorded a liability for the conversion derivative liability attributed to the issuance of the Notes, the Company recorded a deferred tax asset of $6.5 million for the conversion derivative liability and a deferred tax liability of $6.5 million for the corresponding debt discount. As the changes in the fair value of the conversion derivative liability are included in earnings, the Company recorded additions to the deferred tax asset. At June 5, 2014 when the Company received shareholder approval to issue shares of common stock upon conversion of the Notes, the deferred tax attributed to the conversion derivative liability (net of allocated unamortized transaction costs) was $8.8 million. In accordance with ASC 815, the Company reclassified the deferred tax asset attributed to the conversion derivative liability (net of allocated unamortized transaction costs) to equity. See Note 10, 8.50% Senior Unsecured Convertible Notes. As of September 30, 2014, the Company has a deferred tax liability of $6.2 million related to unamortized debt discount.

(16) Subsequent Events

On November 10, 2014 (the “Initial Closing Date”), Imperial, as issuer, entered into an indenture with certain of its subsidiaries, Harbordale, LLC, Imperial Finance & Trading, LLC, Imperial Life and Annuity Services, LLC, Imperial Litigation Funding, LLC, Imperial Premium Finance, LLC, Red Reef Alternative Investments, LLC and Washington Square Financial, LLC, as guarantors (the “Guarantors”), and Wilmington Trust Company, as indenture trustee. The indenture provides for the issuance of up to $100 million in senior secured notes (the “Secured Notes”), of which $25 million was issued by Imperial on the Initial Closing Date. The Secured Notes issued on the Initial Closing Date were issued at 96% of their face amount and were purchased under a note purchase agreement (the “Note Purchase Agreement”) with Imperial and the Guarantors by an affiliate of Indaba Capital Management, L.P. (the “Purchaser”) in a private transaction pursuant to exemptions from the registration requirements of the Securities Act of 1933, as amended. The Note Purchase Agreement gives the Purchaser the right, subject to applicable law, to appoint one director to Imperial’s board of directors so long as it maintains a voting percentage of at least 5% of Imperial’s common stock and holds at least $25 million in principal amount or market value of Imperial’s debt.

Interest on issued Secured Notes accrues at 12.875% per annum and all Secured Notes issued under the indenture will mature 36 months from the Initial Closing Date (the “Initial Maturity”) although Imperial may elect to extend the maturity date by an additional 12 months (the “Extended Term”) and, if elected, interest on the Secured Notes will accrue at 14.5% during the Extended Term. The Secured Notes may not be optionally redeemed by Imperial for one year from the Initial Closing Date. Between the first and second anniversary of the Initial Closing Date, Imperial may optionally redeem the Secured Notes at 106% of the principal amount redeemed and thereafter at 104%, in each case, plus accrued and unpaid interest on the Secured Notes to the date of redemption. If Imperial does not elect the Extended Term, Secured Notes may be optionally redeemed within 60 days of the Initial Maturity at par plus accrued and unpaid interest up to the Initial Maturity. The Senior Notes are subject to mandatory prepayment provisions upon the issuance of additional debt and asset sales. In addition to usual and customary affirmative and negative covenants restricting additional debt, creation of liens, transactions with affiliates, and restrictions on certain payments and investments, the indenture governing the Secured Notes requires the Company to maintain a net worth of no less than $100 million and cash and cash equivalents of at least $20 million.

The Secured Notes may be used for general corporate purposes, are guaranteed by the Guarantors and are secured by substantially all of the Company’s and Guarantors’ assets, other than those securing the Revolving Credit Facility, including cash on account as well as the Company’s life insurance policies that are not pledged as collateral under the Revolving Credit Facility. The Secured Notes are also secured by pledges of the equity interests of the Guarantors and by pledges of 65% of their first tier foreign subsidiaries.

                The Company may issue, and the Purchaser will be obligated to purchase, up to an additional $75 million in aggregate principal amount of Secured Notes in $25 million increments during the period ending on the 12-month anniversary of the Initial Closing Date provided certain performance conditions are met (in addition to usual and customary conditions precedent). The Company must deploy $25 million in investments following the Initial Closing Date to be eligible to issue the next $25 million of Secured Notes. Thereafter, the remaining $50 million in aggregate principal amount of Secured Notes may only be issued if the Company satisfies certain book and market value targets. Estimated fees and expenses payable by the Company at closing were approximately $1.9 million. Additionally, the Company will pay a draw-down fee of 1% of the amount of any subsequent issuance of Secured Notes and will pay a monthly unused fee on the unissued Secured Notes at a per annum rate of 1%.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion summarizes the significant factors affecting the consolidated operating results, financial condition, liquidity, and cash flows of our Company as of and for the periods presented below and should be read in conjunction with the financial statements and accompanying notes included with this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements that are based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors. See “Forward-Looking Statements.”

Overview

We were founded in December 2006 as a Florida limited liability company and in connection with our initial public offering, in February 2011, Imperial Holdings, Inc. succeeded to the business of Imperial Holdings, LLC and its assets and liabilities. Through our subsidiaries, we own a portfolio of 595 life insurance policies, also referred to as life settlements, with a fair value of $350.4 million and an aggregate death benefit of approximately $2.9 billion at September 30, 2014. The Company primarily earns income on these policies from changes in their fair value and through death benefits.

During the third quarter of 2014, we began to deploy a portion of the proceeds from our issuance of 8.50% senior unsecured convertible notes due 2019 (the “Notes”). We purchased two policies during the quarter, which contributed $2.4 million in income from changes in the fair value of life settlements. We believe that there are accretive opportunities to grow our existing portfolio of life settlements and intend to continue to deploy capital in both the secondary and tertiary life settlement markets into 2015. We also continue to seek opportunities to lend against portfolios of life settlements owned by institutional investors that satisfy our underwriting and return criteria.

Portfolio Update

At September 30, 2014, we owned 595 life insurance policies with a fair value of $350.4 million and an aggregate death benefit of approximately $2.9 billion. Our indirect subsidiary, White Eagle Asset Portfolio, LP, (“White Eagle”), is the owner of 452 of these life insurance policies with an aggregate death benefit of approximately $2.3 billion and an estimated fair value of approximately $295.5 million at September 30, 2014. White Eagle pledged its policies as collateral to secure borrowings made under a 15-year revolving credit agreement (the “Revolving Credit Facility”), which will be used, among other things, to pay premiums on the life insurance policies owned by White Eagle. In addition, on November 10, 2014, we issued $25 million in aggregate principal amount of 12.875% senior secured notes, which are secured, in part, by the Company’s policies that are not pledged as collateral under the Revolving Credit Facility. For a description of the secured notes, see Note 16, “Subsequent Events,” of the notes to Consolidated Financial Statements.

No policies matured during the three months ended September 30, 2014 and five with an aggregate death benefit of $11.5 million matured during the nine months ended September 30, 2014. The Company did not sell any policies in the three months ended September 30, 2014 and sold 14 policies during the nine months ended September 30, 2014 that were not pledged as collateral under the Revolving Credit Facility for gross proceeds of $4.3 million.

In August 2014, the U.S. Society of Actuaries released draft tables for the 2014 Valuation Basic Table (“2014 VBT”), which show a lengthening of average life expectancies. We currently use a modified version of the 2008 Valuation Basic Table (“2008 VBT”), the predecessor to the 2014 VBT, as an input to the estimation of fair value of our life settlements. The 2014 VBT is expected to be released some time in 2015 and we will continue to monitor the market reaction to the draft tables and to the 2014 VBT once it is released. Future changes in life expectancies could have a material adverse effect on the fair value of our investment in life settlements, which could have a material adverse effect on our business, financial condition and results of operations.

Critical Accounting Policies

Critical Accounting Estimates

The preparation of the financial statements requires us to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. We base our judgments, estimates and assumptions on historical experience and on various other factors that are believed to be reasonable under the circumstances. Actual results could differ materially from these estimates under different assumptions and conditions. We evaluate our judgments, estimates and assumptions on a regular basis and make changes accordingly. We believe that the judgments, estimates and assumptions involved in the accounting for income taxes, the valuation of investments in life settlements, the valuation of the debt owing under the Revolving Credit Facility and the valuation of our conversion derivative liability formerly embedded within the Notes have the greatest potential impact on our financial statements and accordingly believe these to be our critical accounting estimates.

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Fair Value Option

We have elected to account for the debt under the Revolving Credit Facility, which includes its interest in policy proceeds to the lender, using the fair value method. The fair value of the debt is the estimated amount that would have to be paid to transfer the debt to a market participant in an orderly transaction. We calculated the fair value of the debt using a discounted cash flow model taking into account the stated interest rate of the credit facility and probabilistic cash flows from the pledged policies. Considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, our estimates are not necessarily indicative of the amounts that we, or holders of the instruments, could realize in a current market exchange. The most significant assumptions are the estimates of life expectancy of the insured and the discount rate. The use of different assumptions and/or estimation methodologies could have a material effect on the estimated fair values.

The Company determined that an embedded conversion option existed in the Notes, prior to June 5, 2014, that was required to be separately accounted for as a derivative under Accounting Standards Codification (“ASC”) 815, Derivatives and Hedging. On June 5, 2014, the Company obtained shareholder approval to issue shares of common stock upon conversion of the Notes in an amount that exceeded the New York Stock Exchange limits for issuances without shareholder approval. In accordance with ASC 815, the Company reclassified the conversion derivative liability to stockholders’ equity along with unamortized transaction costs proportionate to the allocation of the initial debt discount and the principal amount of the Notes. In subsequent reporting periods, the Notes will continue to be recorded at accreted value up to the par value of the Notes at maturity. The debt discount will be amortized into interest expense using the interest method, in an aggregate amount equal to the amount of the conversion derivative liability reclassified into equity along with any unamortized transaction costs. See Note 10, “8.50% Senior Unsecured Convertible Notes.”

Fair Value Measurement Guidance

We follow ASC 820, Fair Value Measurements and Disclosures, which defines fair value as an exit price representing the amount that would be received if an asset were sold or that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the guidance establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. Level 1 relates to quoted prices in active markets for identical assets or liabilities. Level 2 relates to observable inputs other than quoted prices included in Level 1. Level 3 relates to unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Our investments in life insurance policies, structured settlements and Revolving Credit Facility debt are considered Level 3 as there is currently no active market where we are able to observe quoted prices for identical assets/liabilities and our valuation model incorporates significant inputs that are not observable. See Note 11, “Fair Value Measurements” of the notes to Consolidated Financial Statements for a discussion of our fair value measurement.

Income Recognition from Continuing Operations

Our primary source of income from continuing operations are in the form of changes in fair value of life settlements and gains on life settlements, net. Our income recognition policies for this source of income is as follows:

• Changes in Fair Value of Life Settlements—When the Company acquires certain life insurance policies we initially record these investments at the transaction price, which is the fair value of the policy for those acquired upon relinquishment or the amount paid for policies acquired for cash. The fair value of the investment in insurance policies is evaluated at the end of each reporting period. Changes in the fair value of the investment based on evaluations are recorded as changes in fair value of life settlements in our consolidated statement of operations. The fair value is determined on a discounted cash flow basis that incorporates current life expectancy assumptions. The discount rate incorporates current information about market interest rates, the credit exposure to the insurance company that issued the life insurance policy and our estimate of the risk premium an investor in the policy would require. The Company recognizes income from life settlement maturities upon receipt of death notice or verified obituary of insured. This income is the difference between the death benefits and fair values of the policy at the time of maturity.

• Gains on Life Settlements, Net—The Company recognizes gains from life settlement contracts that the Company owns upon the signed sale agreement and/or filing of ownership forms and funds transferred to escrow.

Deferred Costs

Deferred costs include costs incurred in connection with acquiring and maintaining credit facilities. These costs are amortized over the life of the related loan using the effective interest method and are classified as interest expense in the accompanying consolidated statement of operations. These deferred costs are related to the Company’s Notes. The Company did not recognize any deferred cost on its Revolving Credit Facility given all costs were expensed due to electing the fair value option in valuing the Revolving Credit Facility.

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Income Taxes

Prior to our initial public offering in 2011, we converted from a Florida limited liability company to a Florida corporation (the “Conversion”). Prior to the Conversion we were treated as a partnership for federal and state income tax purposes. As a partnership our taxable income and losses were attributed to our members, and accordingly, no provision or liability for income taxes was reflected in the accompanying consolidated financial statements for periods prior to the Conversion.

We account for income taxes in accordance with ASC 740, Income Taxes. Under ASC 740, deferred income taxes are determined based on the estimated future tax effects of differences between the financial statement and tax basis of assets and liabilities given the provisions of enacted tax laws. Deferred income tax provisions and benefits are based on changes to the assets or liabilities from year to year. In providing for deferred taxes, we consider tax regulations of the jurisdictions in which we operate, estimates of future taxable income and available tax planning strategies. If tax regulations, operating results or the ability to implement tax-planning strategies varies adjustments to the carrying value of the deferred tax assets and liabilities may be required. Valuation allowances are based on the “more likely than not” criteria of ASC 740.

Our provision for income taxes is estimated to result in an annual effective tax rate of 36.9% in 2014, except as noted below. For periods prior to 2014 our provision for income taxes is estimated to result in an annual effective tax rate of 0.0%. At September 30, 2013, due to the large losses and the uncertainties that resulted from the USAO Investigation, SEC investigation, Non-Prosecution Agreement and class action lawsuits, we recorded a full valuation allowance against our net deferred tax asset as it was more likely than not that the net deferred tax asset is not realizable. As a result of these increases in the valuation allowance, we recorded no income tax benefit for 2013.

The accounting for uncertain tax positions guidance under ASC 740 requires that we recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. We recognize interest and penalties (if any) on uncertain tax positions as a component of income tax expense.

In March of 2014, the Company was notified by the IRS of its intention to examine the Company’s tax returns for the years ended December 31, 2011 and 2012. See also “IRS Investigation” in Note 13, Contingencies and Commitments regarding the IRS Criminal Investigation Division’s investigation related to the Company’s former structured settlement business.

At the time the Company recorded a liability for the conversion derivative liability attributed to the issuance of the Notes, the Company recorded a deferred tax asset of $6.5 million for the conversion derivative liability and a deferred tax liability of $6.5 million for the corresponding debt discount. As the changes in the fair value of the conversion derivative liability were included in earnings, the Company recorded additions to the deferred tax asset. At June 5, 2014, when the Company received shareholder approval to issue shares of common stock upon conversion of the Notes, the deferred tax asset attributed to the conversion derivative liability (net of allocated unamortized transaction costs) was $8.8 million. In accordance with ASC 815, the Company reclassified the deferred tax asset attributed to the conversion derivative liability (net of allocated unamortized transaction costs) to shareholders’ equity. See Note 10, 8.50% Senior Unsecured Convertible Notes.

Stock-Based Compensation

We have adopted ASC 718, Compensation—Stock Compensation. ASC 718 addresses accounting for share-based awards, including stock options, restricted stock, performance shares and warrants, with compensation expense measured using fair value and recorded over the requisite service or performance period of the award. The fair value of equity instruments awarded upon or after the closing of our initial public offering will be determined based on a valuation using an option pricing model that takes into account various assumptions that are subjective. Key assumptions used in the valuation will include the expected term of the equity award taking into account both the contractual term of the award, the effects of expected exercise and post-vesting termination behavior, expected volatility, expected dividends and the risk-free interest rate for the expected term of the award.

Held-for-sale and discontinued operations

The Company reports a business as held-for-sale when management has approved or received approval to sell the business and is committed to a formal plan, the business is available for immediate sale, the business is being actively marketed, the sale is anticipated to occur during the ensuing year and certain other specified criteria are met. A business classified as held-for-sale is recorded at the lower of its carrying amount or estimated fair value less cost to sell. If the carrying amount of the business exceeds its estimated fair value, a loss is recognized. Depreciation is not recorded on assets of a business classified as held-for-sale. Assets and liabilities related to a business classified as held-for-sale are segregated in the Consolidated Balance Sheet and major classes are separately disclosed in the notes to the Consolidated Financial Statements commencing in the period in which the business is classified as held-for-sale. The Company reports the results of operations of a business as discontinued operations if the business is classified as held-for-sale, the operations and cash flows of the business have been or will be eliminated from the ongoing operations

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of the Company as a result of a disposal transaction and the Company will not have any significant continuing involvement in the operations of the business after the disposal transaction. The results of discontinued operations are reported in Discontinued Operations in the Consolidated Statement of Operations for current and prior periods commencing in the period in which the business meets the criteria of a discontinued operation, and include any gain or loss recognized on closing or adjustment of the carrying amount to fair value less cost to sell.

Foreign Currency

The Company’s foreign subsidiaries are considered to be extensions of the U.S. Company and the U.S. dollar is utilized as the functional currency. The foreign subsidiaries’ financial statements are denominated in U.S. dollars and therefore, there are no translation gains and losses resulting from converting the financial statements at exchange rates other than the functional currency. Any gains and losses resulting from foreign currency transactions (transactions denominated in a currency other than the subsidiaries’ functional currency) are included in income. These gains and losses are immaterial to the Company’s financial statements.

Recent Accounting Pronouncements

Note 2, Principles of Consolidation and Basis of Presentation of the Notes to Consolidated Financial Statements discusses accounting standards adopted during the nine months ended September 30, 2014.

Results of Operations

The following is our analysis of the results of operations for the periods indicated below. This analysis should be read in conjunction with our financial statements, including the related notes to the financial statements. Our results of operations are discussed below in two parts: (i) our consolidated results of continuing operations and (ii) our results of discontinued operations.

Results of Continuing Operations

Three Months Ended September 30, 2014 Compared to Three Months Ended September 30, 2013

Net loss from continuing operations for the quarter ended September 30, 2014 was $4.3 million as compared to net income of $6.1 million for the quarter ended September 30, 2013, a decrease of $10.4 million. Total loss from continuing operations was $3.6 million for the quarter ended September 30, 2014, a decrease of $18.4 million over total income from continuing operations of $14.8 million during the same period in 2013. This reduction is primarily driven by the change in fair value of investment in life settlements loss that resulted from the lengthening of life expectancies for certain insureds that were updated during the three months ended September 30, 2014. Total expenses from continuing operations were $2.9 million for the quarter ended September 30, 2014 compared to total expenses from continuing operations of $8.7 million incurred during the same period in 2013, a decrease of $5.8 million, or 67%.

Change in Fair Value of Life Settlements. Change in fair value of life settlements was a loss of $3.6 million for the quarter ended September 30, 2014 compared to a gain of $15.3 million for the quarter ended September 30, 2013, a decrease of $18.9 million. The loss for 2014 is primarily driven by the fair value loss associated with the lengthening of life expectancies for certain insureds that were updated during the three months ended September 30, 2014.

As of September 30, 2014, the Company owned 595 policies with an estimated fair value of $350.4 million compared to 622 policies with a fair value of $292.4 million at September 30, 2013, an increase of $58.0 million or 20%. Of the 595 policies, 452 policies were pledged to the Revolving Credit Facility and 143 policies were not pledged. During the three months ended September 30, 2014, the Company acquired two life insurance policies compared to two policies during the same period in 2013. The two policies acquired during 2013 were as a result of certain of the Company’s borrowers defaulting on premium finance loans and relinquishing the underlying policies to the Company. As of September 30, 2014, the aggregate death benefit of the Company’s investment in life settlements is $2.9 billion.

Of the 595 policies owned as of September 30, 2014, 550 were premium financed and are valued using discount rates that range from 16.55% – 26.55%. The remaining 45 policies are valued using discount rates that range from 14.80% – 20.80%. See Note 11, “Fair Value Measurements,” to the accompanying consolidated financial statements.

Gain/(Loss) on life settlements, net. Loss on life settlements, net was zero for the quarter ended September 30, 2014 compared to $461,000 as of September 30, 2013. During the quarter ended September 30, 2013, two policies were sold resulting in a loss of $461,000 with net proceeds received of $1.8 million and lapsed four policies resulting in no loss as they were carried with no value. There were no policies sales, surrendered or lapsed for the three months ended September 30, 2014.

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Expenses

Interest expense. Interest expense increased to $4.3 million during the quarter ended September 30, 2014, compared to $1.2 million during the same period in 2013, an increase of $3.1 million as the principal on the Company’s outstanding debt increased to $227.3 million as of September 30, 2014. Outstanding debt includes $156.6 million of outstanding principal on the Revolving Credit Facility and $70.7 million of Notes. Of the interest expense of $4.3 million, approximately $2.1 million represents interest paid on the Revolving Credit Facility compared to $1.2 million for 2013. Interest expense also includes $1.5 million, $605,000 and $90,000 representing interest, amortization of debt discount and issuance costs, respectively, on the Notes. We expect interest expense on the Revolving Credit Facility to continue to increase in 2014 as we continue to borrow funds under this facility. See Notes 9, Revolving Credit Facility and 10, 8.50% Senior Unsecured Convertible Notes to the accompanying consolidated financial statements.

Change in fair value of Revolving Credit Facility. Change in fair value of Revolving Credit Facility was a gain of $8.4 million for the quarter ended September 30, 2014 compared to a loss of $66,000 for the quarter ended September 30, 2013. This change is associated with the lengthening of life expectancies of certain insureds underlying policies pledged as collateral in the Revolving Credit Facility and an increase in the discount rate. The Revolving Credit Facility is valued at September 30, 2014 using a discount rate of 24.01%. See Note 11, “Fair Value Measurements,” to the accompanying consolidated financial statements.

Selling, General and Administrative Expenses. SG&A expenses were $7.0 million for the quarter ended September 30, 2014 compared to $7.5 million for the same period in 2013. This was primarily a result of a $328,000 reduction in legal fees and $360,000 reduction in professional fees, offset by a $241,000 increase in other SG&A expenses during the period.

Legal expenses for the quarter ended September 30, 2014 were $2.9 million compared to $3.3 million for the same period in 2013. Approximately $1.2 million are expenses related to indemnification and continuing cooperation obligations with the USAO Investigation for 2014, compared to $1.6 million for the quarter ended September 30, 2013. Legal expense was reduced by approximately $848,000 associated with change in fair value of the warrants for the class action litigation for the quarter ended September 30, 2013. See Note 13, “Commitments and Contingencies,” to the accompanying consolidated financial statements.

Results of Discontinued Operations

Three Months Ended September 30, 2014 Compared to Three Months Ended September 30, 2013

Net loss from our discontinued structured settlement operations for the quarter ended September 30, 2014 was $249,000 as compared to income of $55,000 for the quarter ended September 30, 2013. Total income from our discontinued structured settlement operations was $38,000 for the quarter ended September 30, 2014 compared to $2.7 million in 2013. This reduction is mainly associated with the sale of the structured settlement operations in October 2013. During the quarter ended September 30, 2014, there were no sales for our discontinued structured settlement operations, compared to the sale of 127 structured settlements for a gain of $2.1 million for the quarter ended September 30, 2013. Unrealized change in fair value of structured settlements receivable was $8,000 for the quarter ended September 30, 2014 compared to $430,000 for the quarter ended September 30, 2013.

Total expenses from our discontinued structured settlement operations were $287,000 for the quarter ended September 30, 2014 compared to $2.6 million incurred during the same period in 2013. This reduction is mainly associated with the sale of the structured settlement operations in October 2013, including a $1.3 million decrease in personnel cost, $461,000 decrease in marketing cost, $301,000 decrease in professional fees and $357,000 decrease in other SG&A expenses.

Results of Continuing Operations

Nine Months Ended September 30, 2014 Compared to Nine Months Ended September 30, 2013

Net loss from continuing operations for the nine months ended September 30, 2014 was $13.9 million as compared to net income of $47.9 million for the nine months ended September 30, 2013, a reduction of $61.8 million. Total income from continuing operations was $19.0 million for the nine months ended September 30, 2014, a reduction of $63.6 million over total income from continuing operations of $82.6 million during the same period in 2013, which was primarily driven by the change in fair value of the additional 430 life insurance policies acquired during that period. Total expenses from continuing operations were $35.3 million for the nine months ended September 30, 2014 compared to total expenses from continuing operations of $34.6 million incurred during the same period in 2013, an increase of $654,000, or 2%.

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Our net loss for the nine months ended September 30, 2014 includes an income tax provision of approximately $4.0 million which resulted from the adoption of ASU No. 2013-11. See Note 15 “Income Taxes,” to the accompanying consolidated financial statements. This expense was then offset by an income tax benefit of $6.5 million related to the Company’s pretax loss of $16.3 million for the nine months ended September 30, 2014.

Change in Fair Value of Life Settlements. Change in fair value of life settlements was a gain of approximately $19.3 million for the nine months ended September 30, 2014 compared to a gain of $81.9 million for the nine months ended September 30, 2013, a reduction of $62.6 million. The gain for 2013 was primarily driven by the fair value associated with the acquisition of 432 life insurance policies during the nine months ended September 30, 2013. Two life settlements were acquired during the nine months ended September 30, 2014 which resulted in a gain of $2.4 million.

During the nine months ended September 30, 2014, five life insurance policies with face amounts totaling $11.5 million matured compared to three policies with face amount of $8.1 million for the same period in 2013. The net gain on these maturities was $10.6 million and $5.3 million for 2014 and 2013, respectively, and is recorded as a change in fair value of life settlements in the consolidated statements of operations for the nine months ended September 30, 2014 and 2013, respectively. All five maturities for 2014 occurred with respect to policies that served as collateral under the Revolving Credit Facility. Amounts totaling $13.6 million were received during the nine months ended September 30, 2014 including $2.1 million collected during the quarter ended September 30, 2014 for maturity related to 2013.

As of September 30, 2014, the Company owned 595 policies with an estimated fair value of $350.4 million compared to 622 policies with a fair value of $292.4 million at September 30, 2013, an increase of $58.0 million or 20%. Of the 595 policies, 452 policies were pledged to the Revolving Credit Facility and 143 policies were not pledged. During the nine months ended September 30, 2013, the Company acquired 432 life insurance policies, 16 of which were a result of certain of the Company’s borrowers defaulting on premium finance loans and relinquishing the underlying policies to the Company. Of the remaining 416 policies, 323 policies were previously kept off-balance sheet as contingent assets and known as life settlements with subrogation rights, net with the remaining 93 acquired through the Company’s acquisition of CTL Holdings, LLC. As of September 30, 2014, the aggregate death benefit of the Company’s investment in life settlements is $2.9 billion.

Of these 595 policies owned as of September 30, 2014, 550 were premium financed and are valued using discount rates that range from 16.55% – 26.55%. The remaining 45 policies are valued using discount rates that range from 14.80% – 20.80%. See Note 11, “Fair Value Measurements,” to the accompanying consolidated financial statements.

Gain/(Loss) on life settlements, net. Loss on life settlements, net was approximately $426,000 for the nine months ended September 30, 2014 compared to $1.7 million as of September 30, 2013 a reduction of $1.3 million. During the nine months ended September 30, 2014, 14 policies were sold resulting in a loss of approximately $426,000 on net proceeds received of $4.0 million. During the nine months ended September 30, 2013, the Company sold two policies resulting in a loss of approximately 461,000 and received proceeds of $1.8 million.

During the nine months ended September 30, 2013, the Company surrendered two policies resulting in a gain of approximately $255,000 and received proceeds of $1.1 million and lapsed 17 policies resulting in a loss of $1.5 million. The net effect of these surrenders and lapses was a loss of $1.2 million. There were no policies surrendered or lapsed for the nine months ended September 30, 2014.

Servicing Fee Income. Servicing income was zero for the nine months ended September 30, 2014 compared to $310,000 in 2013. Servicing fee income was earned in providing asset servicing for third parties, which we began providing during 2010. This decrease was due to the Company ceasing servicing assets for unaffiliated third parties on April 30, 2013.

Other Income. Other income was $72,000 for the nine months ended September 30, 2014 compared to $2.0 million in 2013, a decrease of $1.9 million. The amount for 2013 is attributable to a write off of liabilities which were payable to a third party.

Expenses

Interest expense. Interest expense decreased to $11.2 million during the nine months ended September 30, 2014, compared to $12.0 during the same period in 2013, a decrease of $855,000, as the principal on the Company’s outstanding debt increased to $227.3 million as of September 30, 2014. Outstanding debt includes $156.6 million of outstanding principal on the Revolving Credit Facility and $70.7 million of Notes.

Of the interest expense of $11.2 million, approximately $5.8 million represents interest paid on the Revolving Credit Facility. We expect interest expense on the Revolving Credit Facility to continue to increase in 2014 as we continue to borrow funds under this facility. Interest expense also includes $3.7 million, $1.4 million and $239,000 representing interest and amortization of

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debt discount and issuance costs, respectively, on the Notes. Of the interest expense of $12.0 million for 2013, approximately $10.3 million represents loan origination cost incurred under the Revolving Credit Facility, which was not capitalized as a result of electing the fair value option for valuing this Revolving Credit Facility and interest paid of $1.2 million. The Company borrowed $45.0 million under a Bridge Facility in March 2013 and fully prepaid this facility in the subsequent quarter ended September 30, 2013. Interest expense of $550,000 is associated with this facility for the nine months ended September 30, 2013. See Notes 9, Revolving Credit Facility and 10, 8.50% Senior Unsecured Convertible Notes to the accompanying consolidated financial statements.

Change in fair value of Revolving Credit Facility. Change in fair value of Revolving Credit Facility was a gain of approximately $4.6 million for the nine months ended September 30, 2014 compared to a gain of approximately $5.3 million for the nine months ended September 30, 2013. This change is associated with the lengthening of life expectancy estimates of certain insureds underlying policies pledged as collateral in the policies in the Revolving Credit Facility and an increase in the discount rate during the quarter ended September 30, 2014. The Revolving Credit Facility is valued at September 30, 2014 using a discount rate of 24.01%. See Note 11, “Fair Value Measurements,” to the accompanying consolidated financial statements.

Loss on extinguishment of Bridge Facility. Loss on extinguishment of Bridge Facility was approximately $4.0 million for the nine months ended September 30, 2013. This amount is related to the Bridge Facility issued during the quarter ended March 31, 2013 and was fully repaid during the quarter ended September 30, 2013. The Bridge Facility had a face value of $45.0 million, with a funding discount of $3.6 million and deferred financing cost of approximately $400,000. All amounts were expensed during the nine months ended September 30, 2013 as a result of repayment of the facility.

Change in fair value of conversion derivative liability. Change in fair value of conversion derivative liability embedded in the Notes was approximately $6.8 million for the nine months ended September 30, 2014 compared to zero for the nine months ended September 30, 2013. ASC 815, Derivatives and Hedging, required the Company to bifurcate the embedded conversion option that was valued on February 21, 2014 and June 5, 2014 which resulted in a fair value loss of approximately $6.8 million for the nine months ended September 30, 2014. In the nine months September 30, 2014, the conversion derivative liability was reclassified to additional-paid-in-capital, so there will be no further adjustment to the fair value of this derivative liability reflected in the Company’s financial statements. See Note 10, 8.50% Senior Unsecured Convertible Notes to the accompanying consolidated financial statements.

Selling, General and Administrative Expenses. SG&A expenses were $21.9 million for the nine months ended September 30, 2014 compared to $24.0 million in 2013, a reduction of approximately $2.0 million. This reduction was primarily a result of a $2.1 million reduction in legal fees, $222,000 reduction in insurance and $110,000 reduction in other SG&A expenses. These reductions were offset by an increase in personnel cost of $411,000 which is mainly attributable to bonus payment of $800,000 during the nine months ended September 30, 2014.

Legal expenses for the nine months ended September 30, 2014 were $9.1 million compared to $11.3 million for 2013. Of the legal expense, approximately $3.2 million is mainly associated with the USAO Investigation for 2014, compared to $4.6 million for the nine months ended September 30, 2013. Legal expense also includes approximately $2.5 million associated with the warrants for the class action litigation for the nine months ended September 30, 2013. See Note 13, “Commitments and Contingencies,” to the accompanying consolidated financial statements.

Results of Discontinued Operations

Nine months Ended September 30, 2014 Compared to Nine months Ended September 30, 2013

Net loss from our discontinued structured settlement operations for the nine months ended September 30, 2014 was $454,000 as compared to income of $1.6 million for the nine months ended September 30, 2013. Total income from our discontinued structured settlement operations was $150,000 for the nine months ended September 30, 2014 compared to $10.4 million in 2013. This reduction is mainly associated with the sale of the structured settlement operations in October 2013. During the nine months ended September 30, 2014, our discontinued structured settlement operations sold 8 structured settlements for a gain of $18,000, compared to the sale of 440 structured settlements for a gain of $8.8 million. Unrealized change in fair value of structured settlements receivable was $24,000 for the nine months ended September 30, 2014 compared to $1.2 million for the nine months ended September 30, 2013.

Total expenses from our discontinued structured settlement operations were $604,000 for the nine months ended September 30, 2014 compared to $8.7 million incurred during the same period in 2013. This reduction is mainly associated with the sale of the structured settlement operations in October 2013; including a $4.0 million decrease in personnel cost, $1.9 million decrease in marketing cost, $947,000 decrease in professional fees, $882,000 decrease in other SG&A expenses and $465,000 decrease in legal fees.

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Continuing Operations—Selected Operating Data (dollars in thousands):

Life Finance

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2014		2013		2014		2013
Period Acquisitions — Policies Owned
Number of policies acquired		2		2		2		432
Average age of insured at acquisition		84.5		72.7		84.5		77.7
Average life expectancy - Calculated LE (Years)		5.6		15.9		5.6		12.7
Average death benefit	$	7,176	$	6,000	$	7,176	$	4,749
Aggregate purchase price	$	3,488	$	245	$	3,488	$	58,645
End of Period — Policies Owned
Number of policies owned		595		622		595		622
Average Life Expectancy - Calculated LE (Years)		11.0		11.9		11.0		11.9
Aggregate Death Benefit	$	2,888,289	$	2,999,040	$	2,888,289	$	2,999,040
Aggregate fair value	$	350,383	$	292,383	$	350,383	$	292,383
Monthly premium — average per policy	$	7.6	$	7.5	$	7.6	$	7.5

Liquidity and Capital Resources

Our consolidated financial statements have been prepared assuming the realization of assets and the satisfaction of liabilities in the normal course, as well as continued compliance with the covenants contained in the Revolving Credit Facility, the indenture governing the Notes and other financing arrangements. In addition, on November 10, 2014, we issued $25 million in aggregate principal amount of 12.875% senior secured notes. For a description of the secured notes, see Note 16, “Subsequent Events,” of the notes to Consolidated Financial Statements.

As of September 30, 2014, the Company’s cumulative legal and related fees in respect of the USAO Investigation (including indemnification obligations), the SEC Investigation, the IRS Investigation and related matters were $38.6 million, including $1.4 million and $1.6 million incurred during the three months ended September 30, 2014 and 2013, respectively and $3.9 million and $4.6 million incurred during the nine months ended September 30, 2014 and 2013, respectively. We believe we may continue to spend significant amounts on these matters as well as for general litigation and judicial proceedings over the next year, and possibly beyond. In addition, as part of the framework for the class action settlement described in Note 13, “Contingency and Commitments” to our consolidated financial statements, the Company has undertaken to advance legal fees and indemnify certain individuals covered under the director and officer liability insurance policies. The remaining obligation to advance and indemnify on behalf of these individuals, while currently unquantifiable, may be substantial and could have an adverse effect on the Company’s financial position and results of operations.

We expect to meet our liquidity needs for the next year primarily through the receipt of death benefits from life insurance policy maturities and cash on hand.

While the liquidity risk associated with the policies that have been pledged as collateral under the Revolving Credit Facility has been mitigated, any available proceeds under the facility’s waterfall provisions will generally be directed to pay outstanding interest and principal on the loan unless the lenders determine otherwise. Accordingly, there can be no assurance as to when the proceeds from maturities of the policies pledged as collateral under the Revolving Credit Facility will be distributed to the Company. The Company must proactively manage its cash in order to effectively run its businesses, Service its debt and opportunistically grow its assets. Accordingly, the Company may in the future determine to sell or, under certain circumstances, lapse certain of its policies as its portfolio management strategy and liquidity needs dictate. The lapsing of policies, if any, would create losses as such assets would be written down to zero.

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Financing Arrangements Summary

Revolving Credit Facility

Effective April 29, 2013, White Eagle, as borrower, entered into a 15-year Revolving Credit Facility, which was amended and restated on May 16, 2014 in connection with the conversion of White Eagle from a Delaware limited liability company to a Delaware limited partnership, with Imperial Finance and Trading, LLC, as the initial servicer, the initial portfolio manager and guarantor, Lamington Road Bermuda Ltd., as portfolio manager, LNV Corporation, as initial lender, the other financial institutions party thereto as lenders, and CLMG Corp., as administrative agent for the lenders.

For a description of the facility see Note 9, “Revolving Credit Facility,” of the notes to Consolidated Financial Statements.

At September 30, 2014, the fair value of the debt was $142.7 million. As of September 30, 2014, the borrowing base was approximately $159.1 million including $156.6 million in outstanding principal. See Note 11, “Fair Value Measurements,” of the notes to Consolidated Financial Statements. There are no scheduled repayments of principal. Payments are due upon receipt of death benefits and distributed pursuant to the waterfall as described above.

8.50% Senior Unsecured Convertible Notes

In February 2014, we issued $70.7 million in aggregate principal amount of 8.50% senior unsecured convertible notes due 2019. For a description of the Notes see Note 10, “8.50% Senior Unsecured Convertible Notes,” of the notes to Consolidated Financial Statements.

12.875% Senior Secured Notes

On November 10, 2014, we issued $25 million in aggregate principal amount of 12.875% senior secured notes due 2017. For a description of the secured notes, see Note 16, “Subsequent Events,” of the notes to Consolidated Financial Statements.

Cash Flows

The following table summarizes our cash flows from operating, investing and financing activities for the nine months ended September 30, 2014 and 2013 (in thousands):

	For the Nine Months Ended
	September 30,
	2014			2013
Statement of Cash Flows Data:
Total cash provided by (used in) :
Operating activities	$	(23,986	)	$	(14,645	)
Investing activities		(26,622	)		(36,334	)
Financing activities		86,301			57,415
Increase in cash and cash equivalents	$	35,693		$	6,436

Operating Activities

During the nine months ended September 30, 2014, operating activities used cash of $24.0 million. Our net loss of $14.3 million was adjusted for non-cash Revolving Credit Facility financing costs of $4.2 million, which represent interest expense associated with the Revolving Credit Facility, the amount is a non-cash item and was withheld by the lender and added to the outstanding loan balance; change in fair value of life settlement gains of $19.3 million that is mainly attributable to the maturities of five policies; change in fair value of Revolving Credit Facility gain of $4.6 million that resulted from increased borrowings and increase in the discount rate used to value the facility; change in fair value of conversion derivative liability loss of $6.8 million resulted from an increase in the fair value of the embedded derivative included in the Notes issued during the period and, a net positive change in the components of operating assets and liabilities of $434,000. This $434,000 change in operating assets and liabilities is partially attributable to a $14.3 million decrease in other liabilities and a $13.5 million decrease in restricted cash, both associated with the settlement of the class action and derivative litigation. These reductions were offset by a $2.5 million increase in deferred income tax and $2.5 million increase in accounts payable and accrued expenses.

During the nine months ended September 30, 2013, operating activities used cash of $14.6 million. Our net income of $49.6 million was adjusted for Revolving Credit Facility origination cost of $10.3 million which was not capitalized as a result of electing the fair value option for valuing the facility; change in fair value of life settlement gains of $81.9 million that is mainly attributable to the acquisition of 432 policies; change in fair value of Revolving Credit Facility gain of $5.3 million that resulted from electing the fair value option to value the new Revolving Credit Facility; extinguishment of Bridge Facility of $4.0 million that is mainly attributable to early repayment of the bridge facility which was received during the first quarter of 2013; change in value of warrants

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to be issued of $2.5 million that is mainly attributable to an increase in its fair value; and a net positive change in the components of operating assets and liabilities of $3.7 million. This positive change in operating assets and liabilities is partially attributable to a $12.5 million decrease in prepaid and other assets and a $13.5 million increase in restricted cash, both associated with the settlement of the class action and derivative litigation; a $1.7 million decrease in structured settlements receivables; $1.3 million decrease in deposits and a $664,000 million decrease in other liabilities. These reductions were offset by a $2.5 million increase in accounts payable.

Investing Activities

Net cash used in investing activities for the nine months ended September 30, 2014 was $26.6 million and includes $4.0 million from sale of investments in life settlements that were associated with the sale of 14 policies during the period and proceeds of $13.6 million from maturity of six life settlements. This was offset by $40.6 million for premiums paid on investments in life settlements and $3.5 million for purchase of investment in life settlement.

During the nine months ended September 30, 2013, cash flows used in investing activities was $36.3 million and includes $12.1 million in proceeds received from sale of investment securities available for sale; $6.0 million proceeds from maturity of two life settlements, $1.0 million proceeds from surrender of two investment in life settlements, $1.8 million from sale of investments in life settlements that were associated with the sale of two policies during the period and $691,000 from loan payoffs. These were offset by $51.0 million for premiums paid on investments in life settlements and $7.0 million for purchase of investment in life settlement.

Financing Activities

Net cash provided by financing activities for the nine months ended September 30, 2014 was $86.3 million and includes $67.9 million in net proceeds from the Notes and $36.0 million of borrowings from our Revolving Credit Facility. These were offset by $17.6 million in repayment of borrowings under the Revolving Credit Facility.

During the nine months ended September 30, 2013, cash provided by financing activities was $57.4 million and included $41.4 million in proceeds from the Bridge Facility; $1.2 million in restricted cash for indemnification deposits received and $66.6 million from the Revolving Credit Facility. These were offset by repayment of the Bridge Facility of $45.0 million and revolving credit facility origination cost of $6.7 million.

Off-Balance Sheet Arrangements

At September 30, 2014, there are no off-balance sheet arrangements between us and any other entity that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of potential economic loss principally arising from adverse changes in the fair value of financial instruments. The major components of market risk are credit risk, interest rate risk and foreign currency risk. As of September 30, 2014 we did not hold material amount of financial instruments for trading purposes.

Credit Risk

Credit risk consists primarily of the potential loss arising from adverse changes in the financial condition of the issuers of the life insurance policies that we own. Historically, we managed our credit risk related to these life insurance policy issuers by generally only funding premium finance loans for policies issued by companies that had a credit rating of at least “A” by Standard & Poor’s, at least “A2” by Moody’s, at least “A” by A.M. Best Company or at least “A-” by Fitch. At September 30, 2014, we had no outstanding loans. To limit our credit risk, when purchasing life settlements, we generally only purchase life settlements from companies that are investment grade.

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The following table provides information about the life insurance issuer concentration that exceed 10% of total death benefit and 10% of total fair value of our investment in life settlements as of September 30, 2014:

	Percentage of			Percentage of
	Total			Total Death			Moody’s			S&P
Carrier	Fair Value			Benefit			Rating			Rating
Transamerica Occidental Life Insurance Company		24.1	%		20.6	%		A1			AA-
Lincoln National Life Insurance Company		22.5	%		20.3	%		A1			AA-
Lincoln Benefit Life Company		10.7	%		10.0	%		NR	*		BBB+

* Not Rated

Interest Rate Risk

At September 30, 2014, fluctuations in interest rates did not impact interest expense in the life finance business. As discussed above in Liquidity and Capital Resources in Management’s Discussion and Analysis of Financial Condition and Results of Operations, the Revolving Credit Facility accrues interest at LIBOR plus an applicable margin. LIBOR under the facility is subject to a floor of 1.5% and the Company does not expect a fluctuation in interest rates to have a meaningful impact on the Company’s interest expense in the short term. Increases in LIBOR above the 1.5% floor provided in the Revolving Credit Facility, however, would likely affect the calculation of the fair value of the debt under the Revolving Credit Facility. Additional increases in interest rates may impact the rates at which we are able to obtain financing in the future. Holding other variables constant, a hypothetical 1% increase in LIBOR would not be expected to have a material impact for fiscal year 2014.

We earn income on the changes in fair value of the life insurance policies we own. However, if the fair value of the life insurance policies we own decreases, we record this reduction as a loss.

As of September 30, 2014, we owned investments in life settlements with a fair value of $350.4 million. A rise in interest rates could potentially have an adverse impact on the sale price if we were to sell some or all of these assets. There are several factors that affect the market value of life settlements, including the age and health of the insured, investors’ demand, available liquidity in the marketplace, duration and longevity of the policy, and interest rates. We currently do not view the risk of a decline in the sale price of life settlements due to normal changes in interest rates as a material risk.

Foreign Currency Exchange Rate Risk

Changes in the exchange rate between transactions denominated in a currency other than our foreign subsidiaries’ functional currency are immaterial to our operating results. Exposure to foreign currency exchange rate risk may increase over time as our business evolves.

Item 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report on Form 10-Q.

Limitations on Controls

Our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives as specified above. Management does not expect, however, that our disclosure controls and procedures or our internal controls over financial reporting will prevent or detect all error and fraud. Any control system, no matter how well designed and operated, is based on certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.

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Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Litigation

For a description of legal proceedings, see “Litigation” under Note 13, “Commitments and Contingencies” to our consolidated financial statements.

Item 1A. Risk Factors

Updates to our risk factors are discussed below. Other than the risk factors set forth below, our risk factors have not changed materially from those disclosed in our Annual Report on Form 10-K filed for the year ended December 31, 2013.

Our substantial leverage and significant debt service obligations could adversely affect our ability to fulfill our obligations and make it more difficult for us to fund our operations.

As of September 30, 2014, we had $227.3 million in outstanding long-term debt (without giving effect to the fair value of such indebtedness) and on November 10, 2014, we borrowed an additional $25 million through the issuance of 12.875% senior secured notes. Our substantial level of indebtedness could have important negative consequences to you and us, including:

• we may have difficulty satisfying our debt obligations;

• we may have difficulty refinancing our existing indebtedness or obtaining financing in the future for working capital, portfolio lending, acquisitions or other purposes;

• we will need to use a substantial portion of our available cash flow to pay interest and principal on our debt, which will reduce the amount of money available to finance our operations and other business activities;

• our debt level increases our vulnerability to general economic downturns and adverse industry conditions;

• our debt level could limit our flexibility in planning for, or reacting to, changes in our business and in our industry in general; and

• our leverage could place us at a competitive disadvantage compared to our competitors that have less debt.

While the terms of the financing arrangements governing our debt contain restrictions on our ability to incur additional indebtedness, these restrictions are subject to a number of important qualifications and exceptions, and the indebtedness incurred in compliance with these restrictions could be substantial. Accordingly, we could incur significant additional indebtedness in the future; the more we become leveraged, the more we become exposed to the risks described above.

We are subject to a number of restrictive covenants which, if breached, may restrict our business and financing activities.

The indenture governing the 12.875% senior secured notes contains a number of restrictive covenants that impose significant operating and other restrictions on us. Such restrictions affect, and in many respects limit or prohibit, among other things, our ability to:

• incur additional debt;

• pay dividends and make distributions;

• issue stock of subsidiaries;

• make certain investments;

• repurchase stock;

• create liens;

• enter into affiliate transactions;

• merge or consolidate; and

• transfer and sell assets.

Such restrictions could have a material adverse effect on our business and operations. In addition, the indenture governing the 12.875% senior secured notes also requires us to maintain a minimum cash balance of $20 million and meet a net worth requirement of at least $100 million. Our ability to comply with these requirements may be affected by events beyond our control.

A failure to comply with these and other covenants contained in the financing arrangements governing our indebtedness could result in an event of default, which, if not cured or waived, could have a material adverse effect on our business, financial condition and results of operations.

We may have exposure to greater than anticipated tax liabilities.

Our income tax obligations are based in part on our corporate operating structure and intercompany arrangements, including the manner in which we own our life settlements and the valuations of our intercompany transactions. The tax laws applicable to our business, including the laws of the United States, Ireland and other jurisdictions, are subject to interpretation and certain jurisdictions are aggressively interpreting their laws in new ways in an effort to raise additional tax proceeds from companies. The taxing authorities of the jurisdictions in which we operate may challenge our methodologies for intercompany arrangements and ownership of life settlements, which could increase our effective tax rate and harm our financial position and results of operations. We are subject to regular review and audit by U.S. federal and state authorities and beginning in 2014, foreign tax authorities. Tax authorities may disagree with certain positions we have taken and any adverse outcome of such a review or audit could have a negative effect on our financial position and results of operations. In addition, the determination of our provision for income taxes and other tax liabilities requires significant judgment by management, and there are many transactions where the ultimate tax determination is uncertain. Although we believe that our estimates are reasonable, the ultimate tax outcome may differ from the amounts recorded in our financial statements and may materially affect our financial results in the period or periods for which such determination is made. In addition, our future income taxes could be adversely affected by changes in tax laws, regulations, or accounting principles.

Changes in tax laws or tax rulings could materially affect our financial position and results of operations.

Changes in tax laws or tax rulings could materially affect our financial position and results of operations. The U.S. and many countries in the European Union, are actively considering changes to existing tax laws. Certain proposals, including proposals with retroactive effect, could include recommendations that would significantly increase our tax obligations where we do business. Any changes in the taxation of either international business activities or ownership of life settlements may increase our effective tax rate and harm our financial position and results of operations and, under certain circumstances, may constitute an event of default under the Revolving Credit Facility.

If we are unable to maintain effective internal control over financial reporting in the future, investors may lose confidence in the accuracy and completeness of our financial reports and the trading price of our common stock may be negatively affected.

We are subject to Section 404 of the Sarbanes-Oxley Act (SOX), which requires us to maintain internal controls over financial reporting and to report any material weaknesses in such internal controls. We have consumed and will continue to consume management resources and incur expenses for SOX compliance on an ongoing basis. In addition, as we have reduced the number of our employees and moved certain of our operations to foreign subsidiaries, we have increased our reliance on third parties for various aspects of our internal controls. If we identify material weaknesses in our internal control over financial reporting, or if we are unable to comply with the requirements of Section 404 in a timely manner or are unable to assert that our internal control over financial reporting is effective, investors may lose confidence in the accuracy and completeness of our financial reports and the trading price of our common stock could be negatively affected, and we could become subject to investigations by the SEC, or other regulatory authorities, which could require additional financial and management resources.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

There are no recent sales of unregistered securities that have not been previously included in an Annual Report on Form 10-K, a Quarterly Report on Form 10-Q or in a Current Report on Form 8-K.

Item 3. Default Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

Entry into a Material Definitive Agreement.

On November 10, 2014, we issued $25 million in aggregate principal amount of 12.875% senior secured notes due 2017. Please see Note 16, “Subsequent Events,” of the notes to Consolidated Financial Statements, which is incorporated herein by reference. The forgoing summary does not purport to be complete and is qualified in its entirety by the note purchase agreement and the indenture for the notes, which are filed as an Exhibits to this Quarterly Report on Form 10-Q and incorporated herein by reference.

Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

The information set forth above under “Entry into a Material Definitive Agreement” is incorporated herein by reference.

Item 6. Exhibits

See the Exhibit Index following the Signatures page of this Quarterly Report on Form 10-Q.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	IMPERIAL HOLDINGS, INC.
/s/ Richard S. O’Connell, Jr.
Richard S. O’Connell, Jr. Date November 10, 2014	Chief Financial Officer and Chief Credit Officer
	(Principal Financial Officer)

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EXHIBIT INDEX

In reviewing the agreements included as exhibits to this report, please remember they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about the Company, its subsidiaries or other parties to the agreements. The Agreements contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the other parties to the applicable agreement and:

• should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;

• have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;

• may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and

• were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.

Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. The Company acknowledges that, notwithstanding the inclusion of the foregoing cautionary statements, it is responsible for considering whether additional specific disclosures of material information regarding material contractual provisions are required to make the statements in this report not misleading. Additional information about the Company may be found elsewhere in this report and the Company’s other public files, which are available without charge through the SEC’s website at http://www.sec.gov.

Exhibit No.	Description
Exhibit 4.1	Indenture, dated as of November 10, 2014, by and among the Registrant, as issuer, the subsidiary guarantors named therein and Wilmington Trust, National Association, as trustee.
Exhibit 10.1	Note Purchase Agreement, dated as of November 10, 2014, by and among the Registrant, as issuer, the subsidiary guarantors named therein and Indaba Capital Fund, L.P., as purchaser.
Exhibit 31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 101.	Interactive Data Files
Exhibit 101.INS +	XBRL Instance Document
Exhibit 101.SCH +	XBRL Taxonomy Extension Schema Document
Exhibit 101.CAL +	XBRL Taxonomy Extension Calculation Linkbase Document
Exhibit 101.DEF +	XBRL Taxonomy Definition Linkbase Document
Exhibit 101.LAB +	XBRL Taxonomy Extension Label Linkbase Document 10.1 & 10.2
Exhibit 101.PRE +	XBRL Taxonomy Extension Presentation Linkbase Document

+ Submitted electronically with this Quarterly Report

47

EX-4.1

Exhibit 4.1

EXECUTION VERSION

IMPERIAL HOLDINGS, INC.,

as Issuer,

and the Guarantors named herein

12.875% Senior Secured Notes

INDENTURE

Dated as of November 10, 2014

WILMINGTON TRUST, NATIONAL ASSOCIATION,

as Indenture Trustee

TABLE OF CONTENTS

		Page
ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE			5
SECTION 1.01.	Definitions		5
SECTION 1.02.	Other Definitions		23
SECTION 1.03.	Rules of Construction		23
ARTICLE 2 THE SECURITIES			24
SECTION 2.01.	Forms; Denominations		24
SECTION 2.02.	Execution, Authentication, Delivery and Dating		25
SECTION 2.03.	Interest, Payment of Note Balance of Outstanding Notes		26
SECTION 2.04.	Registration of Transfer and Exchange of Notes		26
SECTION 2.05.	Mutilated, Destroyed, Lost or Stolen Notes		29
SECTION 2.06.	Holder Lists		29
SECTION 2.07.	Persons Deemed Owners		30
SECTION 2.08.	Payments on the Notes		30
SECTION 2.09.	Compliance with Withholding and Other Requirements		31
SECTION 2.10.	Cancellation		31
SECTION 2.11.	Lien of the Indenture		32
SECTION 2.12.	Uniform Commercial Code Matters		32
SECTION 2.13.	CUSIP Numbers; Bloomberg Listing		32
SECTION 2.14.	Issuance of New Notes		33
SECTION 2.15.	Extended Maturity Date		33
ARTICLE 3 REDEMPTION			34
SECTION 3.01.	Applicability of Article		34
SECTION 3.02.	Optional Redemption; Notices to Indenture Trustee		34

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TABLE OF CONTENTS

(continued)

		Page
SECTION 3.03.	Effect of Notice of Redemption		35
SECTION 3.04.	Payment of Redemption Price		35
SECTION 3.05.	Notes Redeemed in Part		35
SECTION 3.06.	Mandatory Redemption of Notes		35
SECTION 3.07.	Change of Control		36
ARTICLE 4 COVENANTS			36
SECTION 4.01.	Deposit and Payment of Notes		36
SECTION 4.02.	Reports and Other Information		36
SECTION 4.03.	Limitation on Incurrence of Indebtedness		38
SECTION 4.04.	Limitation on Restricted Payments		40
SECTION 4.05.	Dividend and Other Payment Restrictions Affecting Subsidiaries		40
SECTION 4.06.	Asset Sales		42
SECTION 4.07.	Transactions with Affiliates		43
SECTION 4.08.	Further Instruments and Acts		44
SECTION 4.09.	Liens		44
SECTION 4.10.	Maintenance of Office or Agency		45
SECTION 4.11.	Amendment of Security Documents		45
SECTION 4.12.	Limited Purpose		45
SECTION 4.13.	Maintenance of Existence; Compliance		45
SECTION 4.14.	Maintenance of Property; Insurance		45
SECTION 4.15.	Inspection of Property; Books and Records; Discussions		46
SECTION 4.16.	Reserved		46
SECTION 4.17.	Minimum Net Worth; Cash Balance		46

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TABLE OF CONTENTS

(continued)

		Page
SECTION 4.18.	Designation of Subsidiaries; Covenant to Guarantee Obligations and Give Security		46
SECTION 4.19.	Additional Investments		47
SECTION 4.20.	Post-Closing Obligations		47
SECTION 4.21.	Restrictions on Shinola		47
SECTION 4.22.	White Eagle Credit Facility Savings Clause		47
SECTION 4.23.	Issuance of Equity Interests		48
ARTICLE 5 DEFAULTS AND REMEDIES			48
SECTION 5.01.	Events of Default		48
SECTION 5.02.	Acceleration		50
SECTION 5.03.	Other Remedies		50
SECTION 5.04.	Waiver of Past Defaults		51
SECTION 5.05.	Control by Majority		51
SECTION 5.06.	Limitation on Suits		52
SECTION 5.07.	Rights of the Holders to Receive Payment		52
SECTION 5.08.	Collection Suit by Indenture Trustee		52
SECTION 5.09.	Indenture Trustee May File Proofs of Claim		52
SECTION 5.10.	Priorities		53
SECTION 5.11.	Waiver of Stay or Extension Laws		53
ARTICLE 6 TRUSTEE			53
SECTION 6.01.	Duties of Indenture Trustee		53
SECTION 6.02.	Rights of Indenture Trustee		55
SECTION 6.03.	Individual Rights of Indenture Trustee		58
SECTION 6.04.	Indenture Trustee’s Disclaimer		58

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TABLE OF CONTENTS

(continued)

		Page
SECTION 6.05.	Reserved		59
SECTION 6.06.	Compensation and Indemnity		59
SECTION 6.07.	Replacement of Indenture Trustee		60
SECTION 6.08.	Successor Indenture Trustee by Merger		61
SECTION 6.09.	Eligibility; Disqualification		62
SECTION 6.10.	Confidential Information		62
ARTICLE 7 SATISFACTION AND DISCHARGE			63
SECTION 7.01.	Satisfaction and Discharge of Indenture		63
SECTION 7.02.	Application of Trust Money		64
ARTICLE 8 AMENDMENTS AND WAIVERS			64
SECTION 8.01.	Without Consent of the Holders		64
SECTION 8.02.	With Consent of the Holders		64
SECTION 8.03.	Revocation and Effect of Consents and Waivers		65
SECTION 8.04.	Notation on or Exchange of Notes		66
SECTION 8.05.	Indenture Trustee to Sign Amendments		66
SECTION 8.06.	Payment for Consent		66
SECTION 8.07.	Additional Voting Terms; Calculation of Principal Amount		67
ARTICLE 9 GUARANTEES			67
SECTION 9.01.	Guarantees		67
SECTION 9.02.	Limitation on Liability		69
SECTION 9.03.	Successors and Assigns		70
SECTION 9.04.	No Waiver		70
SECTION 9.05.	Modification		70
SECTION 9.06.	Non Impairment		70

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TABLE OF CONTENTS

(continued)

		Page
ARTICLE 10 SECURITY DOCUMENTS			70
SECTION 10.01.	Collateral and Security Documents		70
SECTION 10.02.	Release of Collateral		71
SECTION 10.03.	Permitted Releases Not To Impair Lien		71
SECTION 10.04.	Suits To Protect the Collateral		72
SECTION 10.05.	Authorization of Receipt of Funds by the Indenture Trustee Under the Security Documents		72
SECTION 10.06.	Purchaser Protected		72
SECTION 10.07.	Powers Exercisable by Receiver or Indenture Trustee		72
SECTION 10.08.	Release Upon Termination of the Issuer’s Obligations		73
ARTICLE 11 MISCELLANEOUS			73
SECTION 11.01.	Notices		73
SECTION 11.02.	Certificate and Opinion as to Conditions Precedent		74
SECTION 11.03.	Statements Required in Certificate or Opinion		74
SECTION 11.04.	When Notes Disregarded		74
SECTION 11.05.	Rules by Indenture Trustee and Note Registrar		75
SECTION 11.06.	Legal Holidays		75
SECTION 11.07.	GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF IMMUNITY		75
SECTION 11.08.	Successors		75
SECTION 11.09.	Multiple Originals		75
SECTION 11.10.	Table of Contents; Headings		75
SECTION 11.11.	Indenture Controls		76
SECTION 11.12.	Severability		76

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TABLE OF CONTENTS

Page

EXHIBIT INDEX

Exhibit A	-	Form of Note and Indenture Trustee’s Certificate of Authentication	A
Exhibit B	-	Form of Transferor Certificate	B-1
		Form of Transferee Certificate	B-2
Exhibit C	-	Indenture Trustee Signature Page Legend	C

SCHEDULE INDEX

Schedule 1.01(a)	Deposit Accounts	S-1
Schedule 1.01(b)	Pledged Subsidiaries	S-2
Schedule 4.03	Existing Indebtedness	S-3
Schedule 4.07	Equityholders / Stockholders Agreements	S-4

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INDENTURE dated as of November 10, 2014 among Imperial Holdings, Inc., a Florida corporation (the “Issuer”), the Guarantors identified on the signature pages hereto and from time to time a party hereto, and Wilmington Trust, National Association, as indenture trustee (as more fully defined in Section 1.01, the “Indenture Trustee”).

PRELIMINARY STATEMENT

The Issuer has duly authorized the execution and delivery of this Indenture to provide for the issuance of its senior secured notes (the “Notes” (such term including the Additional Notes, as defined below)) to be issued pursuant to this Indenture in an aggregate amount not to exceed $100,000,000. All covenants and agreements made by the Issuer herein are for the benefit and security of the Holders and the Indenture Trustee (collectively, the “Secured Parties”). The Issuer has entered into this Indenture, and the Indenture Trustee has accepted the trust created hereby, for good and valuable consideration, the receipt and sufficiency of which have been and are hereby acknowledged by the parties hereto.

All things necessary to make the Notes, whenever the Notes are (or have been) executed by the Issuer and authenticated and delivered by the Indenture Trustee hereunder and duly issued by the Issuer, the valid and legally binding obligations of the Issuer enforceable in accordance with their terms, and to make this Indenture a valid and legally binding agreement of the Issuer enforceable in accordance with its terms, have been done.

GRANTING CLAUSE

The Issuer hereby Grants to the Indenture Trustee, for the benefit and security of the Secured Parties, all of its right, title and interest, whether now owned or hereafter acquired in, to and under the following property (collectively, the “Trust Estate”):

(i) Accounts (as defined in the UCC), including Health-Care-Insurance Receivables (as defined in the UCC).

(ii) Certificated Securities (as defined in the UCC).

(iii) Chattel Paper (as defined in the UCC).

(iv) All of the Issuer’s rights (including rights as licensee and lessee) with respect to (A) computer and other electronic data processing units, memory units, display terminals, printers, computer elements, card readers, tape drives, hard and soft disk drives, cables, electrical supply hardware, generators, power equalizers, accessories, peripheral devices and other related computer hardware; (B) all Software (as defined in the UCC), and all software programs designed for use on the computers and electronic data processing hardware described in clause (A) above, including all operating system software, utilities and application programs in any form (source code and object code in magnetic tape, disk or hard copy format or any other listings whatsoever); (C) any firmware associated with any of the foregoing; and (D) any documentation for hardware, Software and firmware described in clauses (A), (B), and (C) above, including flow charts, logic diagrams, manuals, specifications, training materials, charts and pseudo codes (the “Computer Hardware and Software”) and all rights with respect to the Computer Hardware and Software, including any and all licenses, options, warranties, service

contracts, program services, test rights, maintenance rights, support rights, improvement rights, renewal rights and indemnifications, and any substitutions, replacements, additions or model conversions of any of the foregoing.

(v) Any right of the Issuer to payment under a contract for the sale or lease of goods or the rendering of services, which right is at the time not yet earned by performance.

(vi) Deposit Accounts (as defined in the UCC), including, without limitation, the accounts listed on Schedule 1.01(a).

(vii) Documents (as defined in the UCC).

(viii) Equipment (as defined in the UCC).

(ix) Financial Assets (as defined in the UCC).

(x) General Intangibles (as defined in the UCC), including Payment Intangibles (as defined in the UCC) and Software, including, without limitation, all dividends and distributions from the Issuer’s first-tier Subsidiaries that are not Excluded Subsidiaries.

(xi) Goods (as defined in the UCC) (including all of its Equipment, Fixtures and Inventory, all as defined in the UCC), and all accessions, additions, attachments, improvements, substitutions and replacements thereto and therefor.

(xii) Instruments (as defined in the UCC).

(xiii) All past, present and future: trade secrets, know-how and other proprietary information; trademarks, internet domain names, service marks, trade dress, trade names, business names, designs, logos, slogans (and all translations, adaptations, derivations and combinations of the foregoing) indicia and other source and/or business identifiers, and the goodwill of the business relating thereto and all registrations which have heretofore been or may hereafter be issued thereon throughout the world; copyrights (including copyrights for computer programs) and copyright registrations or applications for registrations which have heretofore been or may hereafter be issued throughout the world and all tangible property embodying the copyrights, unpatented inventions (whether or not patentable); patent applications and patents; industrial design applications and registered industrial designs; license agreements related to any of the foregoing and income therefrom; books, records, writings, computer tapes or disks, flow diagrams, specification sheets, computer software, source codes, object codes, executable code, data, databases and other physical manifestations, embodiments or incorporations of any of the foregoing; the right to sue for all past, present and future infringements of any of the foregoing; all other intellectual property; and all common law and other rights throughout the world in and to all of the foregoing (the “Intellectual Property”).

(xiv) Inventory (as defined in the UCC).

(xv) Investment Property (as defined in the UCC), including, without limitation, all dividends and distributions from the Issuer’s first-tier Subsidiaries that are not Excluded Subsidiaries.

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(xvi) Money (of every jurisdiction whatsoever) (as defined in the UCC).

(xvii) Letter-of-Credit Rights (as defined in the UCC).

(xviii) Payment Intangibles (as defined in the UCC).

(xix) Security Entitlements (as defined in the UCC).

(xx) Software (as defined in the UCC).

(xxi) Uncertificated Securities (as defined in the UCC).

(xxii) (a) 100% of the issued and outstanding Equity Interests of the Guarantors and (b) 65% of the issued and outstanding Equity Interests directly owned by the Issuer of Shinola and any other owned or acquired first-tier Foreign Subsidiaries (the “Pledged Collateral”), including but not limited to (A) any Equity Interests which are described on Schedule 1.01(b) hereto and (B) all shares, securities, membership interests or other equity interests representing a dividend on any of the Pledged Collateral, or representing a distribution or return of capital upon or in respect of the Pledged Collateral, or resulting from a stock split, revision, reclassification or other exchange therefor, and any subscriptions, warrants, rights or options issued to the holder of, or otherwise in respect of, the Pledged Collateral.

(xxiii) To the extent not included in the foregoing, all other personal property of the Issuer of any kind or description; together with all books, records, writings, data bases, information and other property relating to, used or useful in connection with, or evidencing, embodying, incorporating or referring to any of the foregoing, and all Proceeds (as defined in the UCC), products, offspring, rents, issues, profits and returns of and from any of the foregoing; provided that to the extent that the provision of any lease or license of Computer Hardware or Software or Intellectual Property expressly prohibit (which prohibition is enforceable under applicable law) any assignment thereof, and the grant of a security interest therein, the Secured Parties will not enforce its security interest in the Issuer’s rights under such lease or license (other than in respect of the Proceeds thereof) for so long as such prohibition continues, it being understood that upon the request of the Indenture Trustee, the Issuer will in good faith use reasonable efforts to obtain consent for the creation of a security interest in favor of Secured Parties (and to the Secured Parties’ or the Indenture Trustee’s enforcement of such security interest) in such Secured Parties’ rights under such lease or license.

Notwithstanding the foregoing, for the avoidance of doubt, the Trust Estate shall not include any Excluded Property and the Grant by the Issuer of its right, title and interest to the Trust Estate and Collateral hereunder shall not include a Grant of any interest in the Excluded Property.

Such Grant is made, however, in trust, to secure the Notes equally and ratably without prejudice, priority or distinction between any Note and any other Note by reason of difference in time of issuance or otherwise, except as expressly provided in this Indenture, and to secure, subject to and in accordance with the priorities set forth herein, (i) the payment of all amounts due on the Notes in accordance with their respective terms, and (ii) the payment of all other sums payable under this Indenture and the other Transaction Documents (collectively, the “Secured Obligations”).

3

Until payment in full of the Secured Obligations and except to the extent otherwise provided in this Indenture, the Issuer does hereby constitute and irrevocably appoint the Indenture Trustee the true and lawful attorney of the Issuer, with full power (in the name of the Issuer or otherwise), to exercise all rights of the Issuer with respect to the Trust Estate, and to ask, require, demand, receive, settle, compromise, compound and give acquittance for any and all moneys and claims for moneys due and to become due under or arising out of any of the Trust Estate, to indorse any checks or other instruments or orders in connection therewith and to file any claims or take any action or institute any proceedings which the Indenture Trustee may deem to be necessary or advisable. The power of attorney granted pursuant to this Indenture and all authority hereby conferred are granted and conferred solely to protect the Indenture Trustee’s interest in the Trust Estate, and shall not impose any duty upon the Indenture Trustee to exercise any power. This power of attorney shall be irrevocable as one coupled with an interest prior to the payment in full of all the Secured Obligations.

This Indenture shall constitute a security agreement under the laws of the State of New York. In addition to any other rights available under this Indenture or any property included in the Trust Estate, or otherwise available at law or in equity, the Indenture Trustee shall have all rights and remedies of a secured party under the laws of the State of New York and other applicable law to enforce the security interest granted herein in the manner and at the times specified herein and, in addition, shall have the right, subject to compliance with any mandatory requirements of applicable law, to sell or apply any item of the Trust Estate in accordance with the terms hereof at public or private sale.

It is expressly agreed that anything therein contained to the contrary notwithstanding, the Issuer shall remain liable under any instruments or other agreements included in the Trust Estate to perform all the obligations assumed by it thereunder, all in accordance with and pursuant to the terms and provisions thereof, and except as otherwise expressly provided herein, the Indenture Trustee shall not have any obligations or liabilities under such instruments or other agreements by reason of or arising out of this Indenture, nor shall the Indenture Trustee be required or obligated in any manner to perform or fulfill any obligations of the Issuer under or pursuant to such instruments or other agreements or to make any payment, to make any inquiry as to the nature or sufficiency of any payment received by it, to present or file any claim, or to take any action to collect or enforce the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times.

The Indenture Trustee acknowledges such Grant, accepts the trusts hereunder in accordance with the express provisions hereof, and agrees to perform its duties herein pursuant to the express terms hereof.

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GENERAL COVENANT

AND IT IS HEREBY COVENANTED AND DECLARED that the Notes are to be authenticated and delivered by the Indenture Trustee, that the Trust Estate is to be held by or on behalf of the Indenture Trustee and that monies in the Trust Estate are to be applied by the Indenture Trustee for the benefit of the Holders, subject to the further covenants, conditions and trusts hereinafter set forth, and each of the Issuer and each of the Guarantors does hereby represent and warrant, and covenant and agree, to and with the Indenture Trustee, for the equal and proportionate benefit and security of each Holder, as follows:

ARTICLE 1

DEFINITIONS AND INCORPORATION BY REFERENCE

SECTION 1.01. Definitions.

“Account Control Agreement” means an agreement, in form and substance reasonably satisfactory to the Required Holders, among any Obligor, a banking institution holding such Obligor’s funds, and the Indenture Trustee with respect to collection and control of all deposits and balances held in an account maintained by any Obligor with such banking institution.

“Additional Issue Date” means the date of an Additional Issuance.

“Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise.

“Asset Sale” means the sale, conveyance, transfer or other disposition (whether in a single transaction or a series of related transactions) of property or assets of any Group Company (including of any Life Policy owned by any Group Company and including Capital Stock owned by such Group Company in any Subsidiary) (each referred to in this definition as a “disposition”), other than:

(a) a disposition of Cash Equivalents or obsolete, damaged or worn out property or equipment, in each case in the Ordinary Course of Business;

(b) any Restricted Payment or Permitted Investment that is permitted to be made, and is made, under Section 4.04;

(c) the lease, assignment or sublease of any real or personal property in the Ordinary Course of Business;

(d) dispositions consisting of Permitted Liens;

(e) dispositions of receivables in connection with the compromise, settlement or collection thereof in the Ordinary Course of Business or in bankruptcy or similar proceedings and exclusive of factoring or similar arrangements;

5

(f) any surrender or waiver of contract rights or the settlement of, release of, recovery on or surrender of contract, tort or other claims of any kind;

(g) dispositions of assets comprising first-priority collateral in respect of the White Eagle Credit Facility or other assets owned by Excluded Subsidiaries;

(h) the sale of structured settlements in the Ordinary Course of Business by Washington Square Financial, LLC and its Wholly Owned Subsidiaries;

(i) the sale of Life Policies by a Group Company (other than Red Reef) to a Group Company;

(j) the sale of Life Policies in the Ordinary Course of Business (other than by Red Reef); and

(k) the disposition of Life Policies that are pledged as collateral under the White Eagle Credit Facility in accordance with Section 2.7 thereof.

“Board of Directors” means, as to any Person, the Board of Directors or Board of Managers, as applicable, of such Person (or, if such Person is a partnership, the board of directors or other governing body of the general partner of such Person) or any duly authorized committee thereof. References in this Indenture to directors (on a Board of Directors) shall also be deemed to refer to managers (on a Board of Managers).

“Business Day” means a day other than a Saturday, Sunday or other day on which banking institutions are authorized or required by law to close in New York City or the city in which the Indenture Trustee’s Corporate Trust Office is located.

“Capital Stock” means:

(1) in the case of a corporation, corporate stock or shares;

(2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock;

(3) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and

(4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person;

in each case to the extent treated as equity in accordance with GAAP.

“Cash Equivalents” means:

(1) U.S. Dollars;

6

(2) securities issued or directly and fully guaranteed or insured by the U.S. government maturing not more than two years from the date of acquisition;

(3) certificates of deposit, time deposits and eurodollar time deposits with maturities of one year or less from the date of acquisition, bankers’ acceptances, with maturities not exceeding one year and with any commercial bank having capital and surplus in excess of $500,000,000 and whose long-term debt is rated “A” or the equivalent thereof by Moody’s or S&P;

(4) repurchase obligations for underlying securities of the types described in clauses (2) and (3) above entered into with any financial institution meeting the qualifications specified in clause (3) above;

(5) commercial paper issued by a corporation (other than an Affiliate of the Issuer) rated at least “A-1” or the equivalent thereof by Moody’s or S&P, and maturing within one year after the date of acquisition;

(6) readily marketable direct obligations issued by any state of the United States of America or any political subdivision thereof having one of the two highest rating categories obtainable from either Moody’s or S&P, with maturities not exceeding two years from the date of acquisition;

(7) Indebtedness issued by Persons (other than an Affiliate of the Issuer) with a rating of “A” or higher from S&P or “A-2” or higher from Moody’s, with maturities not exceeding two years from the date of acquisition; and

(8) investment funds investing at least 95% of their assets in securities of the types described in clauses (1) through (7) above.

“Change of Control” means the occurrence of any of the following events:

(i) other than to the Investor, the sale, lease or transfer, in one or a series of related transactions, of all or substantially all the assets of the Issuer; or

(ii) the Issuer becomes aware (by way of a report or any other filing pursuant to Section 13(d) of the Exchange Act, proxy, vote, written notice or otherwise) of the acquisition by any Person or group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision), including any group acting for the purpose of acquiring, holding or disposing of securities (within the meaning of Rule 13d-5(b)(1) under the Exchange Act or any successor provision), but not including the Investor, in a single transaction or in a related series of transactions, by way of merger, consolidation or other business combination or purchase of beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act, or any successor provision), of more than 50% of the total voting power of the Voting Stock of the Issuer; or

(iii) individuals who on the Initial Issue Date constituted the Board of Directors of the Issuer (together with any new directors whose election by the Board of

7

Directors of the Issuer, or whose nomination for election by the shareholders of the Issuer, was approved or ratified by a vote of a majority of the directors of the Issuer, then still in office who were either directors on the Initial Issue Date or whose election or nomination was previously so approved or ratified) cease for any reason (other than due to the exercise of a right by the Investor to appoint a member of the Board of Directors) to constitute a majority of the Board of Directors of the Issuer, then in office.

“CFC” means a “controlled foreign corporation” within the meaning of Section 957 of the Code.

“CFC Holdco” means any direct or indirect Domestic Subsidiary that has no material assets other than the Capital Stock or Indebtedness of one or more CFCs or CFC Holdcos.

“Code” means the United States Internal Revenue Code of 1986, as amended.

“Collateral” means the Trust Estate and all other property subject, or purported to be subject from time to time, to a Lien under any Security Documents.

“Collateral Policies” means all Life Policies now owned (beneficially or otherwise) or hereafter acquired by Red Reef or Harbordale (other than any interest in such Life Policies constituting Excluded Property).

“Contingent Obligations” means, with respect to any Person, any obligation of such Person guaranteeing any leases, dividends or other obligations that do not constitute Indebtedness (“primary obligations”) of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, including, without limitation, any obligation of such Person, whether or not contingent:

(1) to purchase any such primary obligation or any property constituting direct or indirect security therefor,

(2) to advance or supply funds:

(a) for the purchase or payment of any such primary obligation; or

(b) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor; or

(3) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation against loss in respect thereof.

“Convertible Notes” means the Issuer’s 8.50% Convertible Notes due 2019.

“Corporate Trust Office” with respect to the Indenture Trustee, means the office of the Indenture Trustee at which at any particular time its corporate trust business shall be administered, which office on the date of this Indenture is located at 300 Park Street, Suite 390 Birmingham, Michigan 48009 (Attention: Capital Markets Insurance Services, Facsimile: (248)

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723-5424, Telephone: (248) 723-5422) or at such other address as the Indenture Trustee may designate from time to time by notice to the Holders and the Issuer, or the principal corporate trust office of any successor Indenture Trustee (the address of which the successor Indenture Trustee will notify the Holders and the Issuer).

“Default” means any event which is, or after notice or passage of time or both would be, an Event of Default.

“Domestic Subsidiary” means a Subsidiary that is organized under the laws of any jurisdiction in the United States, any state thereof or the District of Columbia.

“Equity Interests” means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock).

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time.

“ERISA Affiliate” means any trade or business (whether or not incorporated) that, together with any Obligor, is treated as a single employer under Section 414 of the Code.

“ERISA Event” means (a) any Reportable Event; (b) the existence with respect to any Plan of a Prohibited Transaction; (c) any failure by any Pension Plan to satisfy the minimum funding standards (within the meaning of Section 412 of the Code or Section 302 of ERISA) applicable to such Pension Plan, including any “accumulated funding deficiency” (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (d) the filing pursuant to Section 412 of the Code or Section 303 of ERISA of an application for a waiver of the minimum funding standard with respect to any Pension Plan, the failure to make by its due date a required installment under Section 412(m) of the Code with respect to any Pension Plan or the failure by any Obligor or any ERISA Affiliate to make any required contribution to a Multiemployer Plan; (d) the incurrence by any Obligor or any ERISA Affiliate of any liability under Title IV of ERISA with respect to the termination of any Pension Plan, including but not limited to the imposition of any Lien in favor of the PBGC or any Pension Plan; (f) a determination that any Pension Plan is, or is expected to be, in “at risk” status (within the meaning of Title IV of ERISA); (g) the receipt by any Obligor or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Pension Plan or to appoint a trustee to administer any Pension Plan under Section 4042 of ERISA; (h) the incurrence by any Obligor or any ERISA Affiliate of any liability with respect to the withdrawal or partial withdrawal from any Pension Plan or Multiemployer Plan; or (i) the receipt by any Obligor or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from a Obligor or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, Insolvent, in Reorganization or in endangered or critical status, within the meaning of Section 432 of the Code or Section 305 or Title IV of ERISA.

“Exchange Act” means the United States Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder.

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“Excluded Property” means:

(a) any Equity Interests of, or any profit participating or other notes issued by, any Foreign Subsidiary in excess of 65% of the Equity Interests of, or any profit participating or other notes issued by, such Foreign Subsidiary or any property or assets of any Foreign Subsidiary;

(b) any permit or license or any contractual obligation entered into by the Issuer or any Guarantor (A) that prohibits or requires the consent of any Person other than the Issuer or any of its Affiliates as a condition to the creation by the Issuer or such Guarantor of a Lien on any right, title or interest in such permit, license or contractual agreement or any Equity Interests or equivalent related thereto or (B) to the extent that any Requirement of Law applicable thereto prohibits the creation of a Lien thereon, but only, with respect to the prohibition in (A) and (B), to the extent, and for as long as, such prohibition is not terminated or rendered unenforceable or otherwise deemed ineffective by the Uniform Commercial Code or any other Requirement of Law applicable to the Issuer or the Guarantors;

(c) fixed or capital assets owned by the Issuer or any Guarantor that are subject to a purchase money Lien or a capital lease if the contractual obligation pursuant to which such Lien is granted (or in the document providing for such capital lease) prohibits or requires the consent of any Person other than the Issuer or any of its Affiliates as a condition to the creation of any other Lien on such equipment;

(d) Excluded Subsidiaries;

(e) assets and property owned by Excluded Subsidiaries;

(f) any distributions from a CFC Holdco or CFC in excess of 65% of such distribution; and

(g) any interest (whether beneficial, contractual or ownership) in a Life Policy possessed or retained by one or more third parties upon such policy’s acquisition by an Affiliate of the Issuer where such retention was contemplated in connection with the acquisition of such policy.

“Excluded Subsidiaries” means

(a) any Subsidiary that is not a Wholly Owned Subsidiary,

(b) any Subsidiary:

(i) that (i) is prohibited by (A) any Requirement of Law or (B) any contractual obligation that, in the case of this clause (B), exists on the Initial Issue Date or at the time such Person becomes a Subsidiary (which contractual obligation was not entered into in contemplation of such Person becoming a Subsidiary) from providing a Guarantee,

(ii) that would require a governmental consent, approval, license or authorization (including any regulatory consent, approval, license or authorization) to provide a Guarantee (including any regulatory consent, approval, license or authorization) unless such consent, approval, license or authorization has been obtained,

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(c) any CFC Holdco and/or (ii) any Domestic Subsidiary that is a direct or indirect subsidiary of any Foreign Subsidiary that is a CFC; and

(d) OLIPP IV, LLC and any Subsidiary of OLIPP IV, LLC so long as the White Eagle Credit Facility is outstanding; and

(e) Imperial Life Settlements, LLC, so long as such Subsidiary primarily acts as a licensed life settlement provider.

Notwithstanding the foregoing, at no time shall Harbordale or Red Reef be an Excluded Subsidiary.

“Extended Maturity Date” means the date that is four years after the Initial Issue Date.

“Fair Market Value” means, with respect to any asset or property, the price which could be negotiated in an arm’s-length transaction, for cash, between a willing seller and a willing and able buyer, neither of whom is under undue pressure or compulsion to complete the transaction.

“FATCA” means Sections 1471 through 1474 of the Code and any current or future regulations promulgated thereunder or official interpretations thereof, and including any agreements entered into pursuant to Section 1471(b) of the Code or applicable intergovernmental agreements.

“FATCA Withholding Tax” means any withholding taxes imposed on or in respect of any Note pursuant to FATCA.

“Fee Letter” means that certain letter agreement dated as of the date hereof between the Issuer and the Investor.

“Financial Officer” of any Person shall mean the Chief Financial Officer, principal accounting officer, Treasurer, Assistant Treasurer or Controller of such Person.

“Final Maturity Date” means the later of the Initial Maturity Date or, if exercised in accordance with Section 2.15, the Extended Maturity Date.

“Foreign Subsidiary” means any Subsidiary that is not a Domestic Subsidiary.

“GAAP” means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession. For the purposes of this Indenture, the term “consolidated” with respect to any Person shall mean such Person consolidated with its Subsidiaries.

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“Governmental Authority” means the government of the United States or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

“Grant” means to mortgage, pledge, bargain, sell, warrant, alienate, demise, convey, assign, transfer, grant a security interest in, create a right of setoff against, deposit, set over and confirm. A Grant of any item of Collateral shall include all rights, powers and options (but none of the obligations) of the granting party thereunder, including without limitation the immediate and continuing right to claim for, collect, receive and give receipt for principal and interest payments in respect of such item of Collateral and all other monies and proceeds payable thereunder, to give and receive notices and other communications, to make waivers or other agreements, to exercise all rights and options, to bring proceedings in the name of the granting party or otherwise, and generally to do and receive anything which the granting party is or may be entitled to do or receive thereunder or with respect thereto.

“Group Companies” means the Issuer and its Subsidiaries.

“guarantee” means a guarantee (other than by endorsement of negotiable instruments for collection in the Ordinary Course of Business), direct or indirect, in any manner (including, without limitation, letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness or other obligations.

“Guarantee” means any guarantee of the obligations of the Issuer under this Indenture and the Notes by any Person in accordance with the provisions of this Indenture.

“Guarantors” means each of Harbordale, LLC, Imperial Premium Finance, LLC, Imperial Finance & Trading, LLC, Imperial Life and Annuity Services, LLC, Imperial Litigation Funding, LLC, Red Reef Alternative Investments, LLC and Washington Square Financial and any direct Domestic Subsidiaries of the Issuer (other than the Excluded Subsidiaries) that are required to become Guarantors pursuant to Section 4.18.

“Harbordale” means Harbordale, LLC.

“Harbordale Securities Account Control Agreement” means the amended and restated securities account control and custodian agreement, entered into by Harbordale, the Indenture Trustee, the Securities Intermediary, and the Custodian (as defined therein) as the same may be amended from time to time in accordance with the terms thereof, in form and substance reasonably satisfactory to the Required Holders.

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“Hedging Obligations” means, with respect to any Person, the obligations of such Person under:

(1) currency exchange, interest rate or commodity swap agreements, currency exchange, interest rate or commodity cap agreements and currency exchange, interest rate or commodity collar agreements; and

(2) other agreements or arrangements designed to protect such Person against fluctuations in currency exchange, interest rates or asset prices.

“Holder” means the Person in whose name a Note is registered on the Note Registrar’s books.

“Increase Date” shall mean the Initial Maturity Date only if the Extension Notice has been delivered in accordance with Section 2.15 or if the Notes are not repaid in full on the Initial Maturity Date.

“Incur” means issue, assume, guarantee, incur or otherwise become liable for; provided, however, that any Indebtedness or Capital Stock of a Person existing at the time such Person becomes a Subsidiary (whether by merger, amalgamation, consolidation, acquisition or otherwise) shall be deemed to be Incurred by such Person at the time it becomes a Subsidiary.

“Indebtedness” means, with respect to any Person:

(1) the principal and premium (if any) of any indebtedness of such Person, whether or not contingent, (a) in respect of borrowed money, (b) evidenced by bonds, notes, debentures or similar instruments or letters of credit or bankers’ acceptances (or, without duplication, reimbursement agreements in respect thereof), (c) representing the deferred and unpaid purchase price of any property (except (i) any such balance that constitutes a trade payable or similar obligation to a trade creditor Incurred in the Ordinary Course of Business and (ii) any liabilities accrued in the Ordinary Course of Business), which purchase price is due more than six months after the date of placing the property in service or taking delivery and title thereto, (d) in respect of capitalized lease obligations, or (e) representing any Hedging Obligations, if and to the extent that any of the foregoing indebtedness (other than letters of credit and Hedging Obligations) would appear as a liability on a balance sheet (excluding the footnotes thereto) of such Person prepared in accordance with GAAP;

(2) to the extent not otherwise included, any obligation of such Person to be liable for, or to pay, as obligor, guarantor or otherwise, on the Indebtedness of another Person (other than by endorsement of negotiable instruments for collection in the Ordinary Course of Business); and

(3) to the extent not otherwise included, Indebtedness of another Person secured by a Lien on any asset owned by such Person (whether or not such Indebtedness is assumed by such Person); provided, however, that the amount of such Indebtedness will be the lesser of: (a) the Fair Market Value (as determined in good faith by the Issuer) of such asset at such date of determination, and (b) the amount of such Indebtedness of such other Person;

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provided, however, that notwithstanding the foregoing, Indebtedness shall be deemed not to include (1) Contingent Obligations incurred in the Ordinary Course of Business and not in respect of borrowed money; (2) deferred or prepaid revenues; (3) purchase price holdbacks in respect of a portion of the purchase price of an asset to satisfy warranty or other unperformed obligations of the respective seller; or (4) any earn-out obligations, purchase price adjustments, deferred purchase money amounts, milestone and/or bonus payments (whether performance or time-based), and royalty, licensing, revenue and/or profit sharing arrangements, in each case, characterized as such and arising expressly out of purchase and sale contracts, development arrangements or licensing arrangements.

“Indenture” means this Indenture as amended or supplemented from time to time.

“Indenture Trustee” means the party named as such in this Indenture until a successor replaces it in accordance with the applicable provisions of this Indenture and, thereafter, means such successor.

“Independent Financial Advisor” means an accounting, appraisal or investment banking firm or consultant, in each case of nationally recognized standing, that is, in the good faith determination of the Issuer, qualified to perform the task for which it has been engaged.

“Initial Issue Date” means November 10, 2014.

“Initial Maturity Date” means the date that is three years after the Initial Issue Date.

“Initial Note Balance” means, for any Note, the principal amount stated on the face of such Note at the time it is issued.

“Interest Period” means the period from and including, with respect to the Notes other than the Additional Notes, the Initial Issue Date to but excluding the initial Payment Date, and with respect to the Additional Notes, the applicable Additional Issue Date to but excluding the next scheduled Payment Date, and thereafter for all Notes each period from and including a Payment Date to but excluding the following Payment Date (or the Final Maturity Date, in the case of the last Interest Period).

“Investment Company Act” shall mean the Investment Company Act of 1940, together with the rules and regulations promulgated thereunder, as amended from time to time.

“Investments” means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the form of loans (including guarantees), advances or capital contributions (excluding accounts receivable, trade credit and advances to customers and commission, travel and similar advances to officers, employees and consultants made in the Ordinary Course of Business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities issued by any other Person and investments that are required by GAAP to be classified on the balance sheet of such Person in the same manner as the other investments included in this definition to the extent such transactions involve the transfer of cash or other property.

“Investor” means Indaba Capital Fund, L.P. or any of its Affiliates.

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“Irish Share Charge” means the share charge to be entered into by and between the Issuer and the Indenture Trustee with respect to the charge by the Issuer of the Equity Interests of Shinola, in form and substance reasonably satisfactory to the Required Holders.

“Issuer Order” means a written request or order signed in the name of the Issuer by an Officer of the Issuer.

“Lien” means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction); provided that in no event shall an operating lease be deemed to constitute a Lien.

“Life Policy” means any life insurance policy.

“Material Adverse Effect” means a material adverse effect on (a) the business, property, operations, condition (financial or otherwise) or prospects of (i) the Issuer, or (ii) the Issuer and its Subsidiaries taken as a whole, (b) the validity or enforceability of this Indenture or any of the other Transaction Documents or the rights or remedies of the Indenture Trustee or the Holders hereunder or thereunder or of the Liens created by any of the Security Documents, (c) the value of the Collateral Policies, taken as a whole, or (d) the ability of any Obligor to perform its obligations under the Transaction Documents.

“Minimum Net Worth” means $100,000,000.

“Moody’s” means Moody’s Investors Service, Inc. or any successor to the rating agency business thereof.

“Multiemployer Plan” means a Plan that is a multiemployer plan as defined in Section 4001(a)(3) of ERISA.

“Net Proceeds” means (i) the aggregate cash proceeds received by the Issuer or any Group Company in respect of any Asset Sale or the maturity of any Life Policy excluding the assumption by the acquiring Person of Indebtedness relating to the disposed assets, net of the direct costs relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees, and brokerage and sales commissions), and any taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements to the extent related thereto), amounts required to be applied to the repayment of principal, premium (if any) and interest on Indebtedness (other than the Secured Obligations) required to be paid as a result of such transaction, and any deduction of appropriate amounts to be provided by such Group Company as a reserve in accordance with GAAP against any liabilities associated with the asset disposed of in such transaction and retained by such Group Company after such sale or other disposition thereof, including, without limitation, pension and other post-employment benefit liabilities and liabilities against any indemnification obligations associated with such transaction, or (ii) the aggregate cash proceeds received by the Issuer or any other Group Company in respect of the issue of any Capital Stock or the incurrence of Indebtedness, net of the direct costs relating thereto (including, without limitation, legal, accounting and investment banking fees, discount, and brokerage and sales commissions).

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“Net Worth” means, with respect to any Person as of any date, the amount by which total assets on a balance sheet of such Person exceed total liabilities (such liabilities to include, without limitation, all contingent liabilities) on a balance sheet of such Person on such date, as determined in accordance with the accounting principles used to prepare the financial statements referred to in Section 4.02.

“Note Balance” means, with respect to any Note, as of any date, the Initial Note Balance of such Note less any principal previously paid on such Note.

“Noteholder FATCA Information” means information sufficient to eliminate the imposition of, or determine the amount of, U.S. withholding tax under FATCA.

“Noteholder Tax Identification Information” means properly completed and signed tax certifications (generally, in the case of U.S. Federal Income Tax, IRS Form W-9 (or applicable successor form) in the case of a person that is a “United States Person” within the meaning of Section 7701(a)(30) of the Code or the appropriate IRS Form W-8 (or applicable successor form) in the case of a person that is not a “United States Person” within the meaning of Section 7701(a)(30) of the Code).

“Note Interest Rate” means 12.875% per annum; provided that for any Note outstanding after the Increase Date, the Note Interest Rate thereon shall be 14.50% per annum on and after the Increase Date.

“Note Purchase Agreement” means the Note Purchase Agreement, dated as of November 10, among the Issuer, the Guarantors, and the Investor as purchaser.

“Obligations” means any principal, interest, penalties, fees, indemnifications, reimbursements (including, without limitation, reimbursement obligations with respect to letters of credit and bankers’ acceptances), damages and other liabilities payable under the documentation governing any Indebtedness.

“Obligors” means the Issuer and Guarantors.

“Officer” of an Obligor means the Chairman of the Board, Chief Executive Officer, Chief Financial Officer, President, any Executive Vice President, Senior Vice President or Vice President, the Treasurer or the Secretary of such Obligor or of the Issuer, as managing member of such Obligor; provided, however, that as it pertains to any Issuer Order issued in connection with the regularly scheduled payment of interest, “Officer” shall also include the Director of Accounting of the Issuer.

“Officers’ Certificate” means a certificate signed on behalf of the Issuer by two Officers of the Issuer, one of whom must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Issuer that meets the requirements set forth in this Indenture.

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“OLIPP Entities” means OLIPP IV, LLC and its Subsidiaries.

“Opinion of Counsel” means a written opinion from legal counsel who is acceptable to the Indenture Trustee. If such counsel is otherwise acceptable to the Indenture Trustee, such counsel may be an employee of or counsel to an Obligor or the Indenture Trustee.

“Ordinary Course of Business” means an action taken by a Person will be deemed to have been taken in the Ordinary Course of Business only if that action: (i) is consistent in nature, scope and magnitude with the past practices of such Person and is taken in the ordinary course of the normal, day-to-day operations of such Person; (ii) does not require authorization by the board of directors or shareholders of such Person (or by any Person or group of Persons exercising similar authority) and does not require any other separate or special authorization of any nature (other than as specifically required by this Indenture); and (iii) is similar in nature, scope and magnitude to actions customarily taken, without any separate or special authorization, in the ordinary course of the normal, day-to-day operations of other Persons that are in the same line of business as such Person.

“Payment Date” means the 10^th day of each calendar month, with the initial Payment Date being December 10, 2014.

“PBGC” means the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA (or any successor).

“Pension Plan” means any Plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which any Obligor or any ERISA Affiliate is (or, if such Plan were terminated, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in section 3(5) of ERISA.

“Permitted Investments” means:

(1) any Investment by any Group Company (other than Red Reef) in (i) the Issuer, (ii) any Foreign Subsidiary with 65% of its Equity Interests pledged as Collateral (including Shinola) or (iii) any Guarantor, provided that in the case of the preceding clause (ii) any such Investment (other than an investment-in-kind in the form of Life Policies) (A) is necessary in order for such Foreign Subsidiary to comply with capitalization requirements under applicable law in the jurisdiction of such Foreign Subsidiary, (B) and with respect to a Foreign Subsidiary with a majority of its directors resident outside the United States, covers the reasonable costs and expenses of such Foreign Subsidiary incident to operating its business as determined by such directors in good faith or (C) is reasonably expected by management of the Issuer to be necessary for such Foreign Subsidiary to apply towards acquiring Life Policies or paying premiums on Life Policies within 90 days of such Investment;

(2) any Investment in Cash Equivalents;

(3) any Investment acquired by any Group Company (a) in exchange for any other Investment or accounts receivable held by any such Group Company in connection with or as a result of a bankruptcy, workout, reorganization or recapitalization of the issuer of such other Investment or accounts receivable, or (b) as a result of a foreclosure by any Group Company with respect to any secured Investment or other transfer of title with respect to any secured Investment in default;

(4) any transaction to the extent it constitutes an Investment that is permitted by and made in accordance with the provisions of Section 4.07(b) (after giving effect to Section 4.07(c) and except transactions described in clauses (ii), (iv), (vii) and (xi) of such Section);

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(5) guarantees issued in accordance with Section 4.03;

(6) any loan made by any Issuer or Guarantor against a Life Policy or portfolio of Life Policies;

(7) any purchase of a Life Policy or portfolio of Life Policies;

(8) joint ventures by any Group Company (other than Red Reef) with lead generators;

(9) any payment of premiums on Life Policies;

(10) any purchase of structured settlements by Washington Square Financial, LLC or its Wholly Owned Subsidiaries up to an aggregate amount not to exceed $500,000;

(11) any Investments in assets useful in the business of the Issuer and the Guarantors made by the Issuer or any of the Guarantors with the proceeds of any Reinvestment Deferred Amount;

(12) any loan made by the Issuer or any Guarantor (other than Red Reef) to an Excluded Subsidiary; provided, that (i) such loan is repaid within 60 days and (ii) the aggregate principal amount at any one time outstanding under this clause (12) may not exceed $2,000,000;

(13) any Investments made by OLIPP Entities that are permitted under the White Eagle Credit Facility; and

(14) Investments made to an OLIPP Entity in an amount necessary and used solely to satisfy such OLIPP Entity’s requirement to satisfy the “Rate Floor” (as defined in the White Eagle Credit Facility) payment requirement in Section 2.8(c) of the White Eagle Credit Facility.

“Permitted Liens” means, with respect to any Person:

(1) pledges or deposits by such Person under workmen’s compensation laws, unemployment insurance laws or similar legislation, or good faith deposits in connection with bids, tenders, contracts (other than for the payment of Indebtedness) or leases to which such Person is a party, or deposits to secure public or statutory obligations of such Person or deposits of cash or U.S. government bonds to secure surety or appeal bonds to which such Person is a party, or deposits as security for contested taxes or import duties or for the payment of rent, in each case Incurred in the ordinary course of business;

(2) Liens imposed by law, such as carriers’, warehousemen’s and mechanics’ Liens, in each case for sums not yet due or being contested in good faith by appropriate proceedings or other Liens arising out of judgments or awards against such Person with respect to which such Person shall then be proceeding with an appeal or other proceedings for review;

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(3) Liens for taxes, assessments or other governmental charges not yet due or payable or subject to penalties for nonpayment or which are being contested in good faith by appropriate proceedings;

(4) Liens in favor of issuers of performance and surety bonds or bid bonds or with respect to other regulatory requirements or letters of credit issued pursuant to the request of and for the account of such Person in the ordinary course of its business;

(5) minor survey exceptions, minor encumbrances, easements or reservations of, or rights of others for, licenses, rights-of-way, sewers, electric lines, telegraph and telephone lines and other similar purposes, or zoning or other restrictions as to the use of real properties or Liens incidental to the conduct of the business of such Person or to the ownership of its properties which were not Incurred in connection with Indebtedness and which do not in the aggregate materially adversely affect the value of said properties or materially impair their use in the operation of the business of such Person;

(6) leases and subleases of real property which do not materially interfere with the ordinary conduct of the business of any Group Company;

(7) Liens arising from Uniform Commercial Code financing statement filings regarding operating leases entered into by any Group Company in the ordinary course of business;

(8) Liens in favor of any Guarantor;

(9) deposits made in the ordinary course of business to secure liability to insurance carriers;

(10) Liens arising by virtue of any statutory or common law provisions relating to banker’s Liens, rights of set-off or similar rights and remedies as to deposit accounts or other funds maintained with a depository or financial institution;

(11) Liens granted by any Group Company in respect of an interest (whether beneficial, contractual or ownership) in a Life Policy possessed or retained by one or more third parties upon such policy’s acquisition by a Group Company where such retention was contemplated in connection with the acquisition of such policy (it being understood that Red Reef may grant such Liens only with respect to Life Policies it acquires);

(12) Liens arising in connection with the White Eagle Credit Facility;

(13) Liens arising from Uniform Commercial Code financing statement filings filed prior to the Initial Issue Date that have been separately disclosed to the Investor; and

(14) Liens on Excluded Property.

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“Person” means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity.

“Plan” means any employee benefit plan as defined in Section 3(3) of ERISA, including any employee welfare benefit plan (as defined in Section 3(1) of ERISA), any employee pension benefit plan (as defined in Section 3(2) of ERISA), and any plan which is both an employee welfare benefit plan and an employee pension benefit plan, and in respect of which any Obligor or any ERISA Affiliate is an “employer” as defined in Section 3(5) of ERISA and any other employee benefit plan program or arrangement sponsored, maintained or contributed to by any Obligor or any ERISA Affiliate.

“Pledge Agreement” means the security agreement, dated as of the date hereof, entered into by the Guarantors in favor of the Indenture Trustee as secured party.

“Preferred Stock” means any Equity Interest with preferential right of payment of dividends or upon liquidation, dissolution or winding up.

“Protected Purchaser” has the meaning specified in Section 8-303 of the Uniform Commercial Code.

“Record Date” means, with respect to any Payment Date and any Note, the fifth (5^th) Business Day preceding the related Payment Date.

“Red Reef” means Red Reef Alternative Investments, LLC.

“Red Reef Securities Account Control Agreement” means the amended and restated securities account control agreement, entered into by Red Reef, the Indenture Trustee and the Securities Intermediary, as the same may be amended from time to time in accordance with the terms thereof, in form and substance reasonably satisfactory to the Required Holders.

“Reinvestment Deferred Amount” means the aggregate Net Proceeds received by any Group Company in connection with an Asset Sale that are not applied to redeem the Notes but are applied as a permitted reinvestment in accordance with Section 4.06(b).

“Reportable Event” means any of the events set forth in Section 4043(c) of ERISA, other than those events as to which the thirty day notice period is waived under subsections .27, .28, .29, .30, .31, .32, .34 or .35 of PBGC Reg. § 4043, with respect to a Pension Plan.

“Required Holders” means the Holders of more than 50% in principal amount of Notes then outstanding, voting as a single class.

“Requirements of Law” means, as to any Person, the certificate of incorporation and bylaws or other organizational or governing documents of such Person, and any 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.

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“Restricted Investment” means an Investment other than a Permitted Investment.

“S&P” means Standard & Poor’s Ratings Services or any successor to the rating agency business thereof.

“SEC” means the United States Securities and Exchange Commission.

“Secured Indebtedness” means any Indebtedness secured by a Lien.

“Securities Account Control Agreements” means the Harbordale Securities Account Control Agreement and the Red Reef Securities Account Control Agreement.

“Securities Accounts” means each “Account” as defined in the Securities Account Control Agreements.

“Securities Act” means the United States Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder.

“Security Documents” means this Indenture, the Pledge Agreement, the Irish Share Charge, any Account Control Agreements, the Securities Account Control Agreements, and any other security agreement of any kind, as amended, supplemented, restated, renewed, refunded, replaced, restructured, repaid, refinanced or otherwise modified from time to time, creating the security interests in the Collateral as contemplated by this Indenture.

“Shinola” means Shinola Cove Limited, a company incorporated in Ireland under company registration number 548361 and having its registered office at Grand Canal House, 1 Upper Grand Canal Street, Dublin 4.

“Significant Subsidiary” means (i) each Guarantor and any Subsidiary of a Guarantor, (ii) any Subsidiary conducting the structured settlements business, (iii) any Subsidiary owning any Life Policies or holding a license as a life settlements provider in any state, and (iv) any other Subsidiary, if any, that would be a “Significant Subsidiary” of the Issuer within the meaning of Rule 1-02 under Regulation S-X promulgated by the SEC (or any successor provision).

“Similar Business” means a business, the majority of whose revenues are derived from the activities of the Group Companies as of the Initial Issue Date or any business or activity that is reasonably similar or complementary thereto or a reasonable extension, development or expansion thereof or ancillary thereto.

“Subsidiary” means, with respect to any Person, (1) any corporation, association or other business entity (other than a partnership, joint venture or limited liability company) of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time of determination owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination thereof, and (2) any partnership, joint venture or limited liability company of which (x) more than 50% of the capital accounts, distribution rights, total equity and voting interests or general and limited partnership interests, as applicable, are owned or controlled, directly or indirectly, by such Person or one or

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more of the other Subsidiaries of that Person or a combination thereof, whether in the form of membership, general, special or limited partnership interests or otherwise, and (y) such Person or any Subsidiary of such Person is a controlling general partner or otherwise controls such entity. For purposes of clarity, a Subsidiary of a Person shall not include any Person that is under common control with the first Person solely by virtue of having directors, managers or trustees in common and shall not include any Person that is solely under common control with the first Person (i.e., a sister company with a common parent). Unless the context otherwise requires, each reference to Subsidiaries herein shall be a reference to Subsidiaries of the Issuer.

“Transaction Documents” means, collectively, this Indenture, the Notes, the Note Purchase Agreement, the Security Documents, the Fee Letter, and the other documents related hereto and thereto.

“Trust Officer” means any officer within the corporate trust department of the Indenture Trustee, including any vice president, assistant vice president, assistant secretary, assistant treasurer, trust officer or any other officer of the Indenture Trustee (a) who customarily performs functions similar to those performed by the Persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such Person’s knowledge of and familiarity with the particular subject, and (b) who shall have direct responsibility for the administration of this Indenture.

“Uniform Commercial Code” means the New York Uniform Commercial Code as in effect from time to time.

“Voting Stock” of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person.

“Withdrawal Liability” means any liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Title IV of ERISA.

“White Eagle Credit Facility” means the Amended and Restated Loan and Security Agreement, dated as of May 16, 2014, by and between White Eagle Asset Portfolio, LP, as borrower, the financial institutions party thereto as lenders, the other loan parties party thereto, and CLMG Corp., as administrative agent, together with (i) the “Transaction Documents” as defined in such Amended and Restated Loan and Security Agreement and (ii) the documents related to the conversion of White Eagle Asset Portfolio, LLC to White Eagle Asset Portfolio, LP on May 16, 2014, in each case under this definition as in effect as of the date hereof.

“Wholly Owned Subsidiary” of any Person means a Subsidiary of such Person 100% of the outstanding Capital Stock or other ownership interests of which are at the time owned by such Person or by one or more Wholly Owned Subsidiaries of such Person.

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SECTION 1.02. Other Definitions.

Term	Defined in Section
“Additional Investments”	4.19
“Additional Issuance”	2.14(a)
“Additional Issuance Notice”	2.14(b)
“Additional Notes”	2.14(a)
“Affiliate Transaction”	4.07(a)
“Applicable Regulations”	2.10
“Authenticating Agent”	2.02(b)
“Bankruptcy Law”	5.01
“Change of Control Offer”	3.07
“Claim Notice”	6.06
“consolidated”	“GAAP” definition
“custodian”	5.01
“Event of Default”	5.01
“Extension Notice”	2.15
“Guaranteed Obligations”	9.01(a)
“Indemnified Person”	6.06
“Issuer”	Preamble
“Note Registrar”	2.04(a)
“Note Register”	2.04(a)
“Notes”	Preamble
“Offer Period”	3.07
“Payment Account”	2.08(e)
“primary obligations”	“Contingent Obligations” definition
“primary obligor”	“Contingent Obligations” definition
“Private Investor Information”	4.02(h)
“Public Investor Information”	4.02(h)
“Purchase Failure Event”	3.02(c)
“Restricted Payments”	4.04(a)
“Retained Counsel”	6.06
“Secured Obligations”	Granting Clause
“Secured Parties”	Preamble
“Securities Intermediary”	6.11
“Selection Notice”	6.06
“Site”	6.02(y)
“Trust Estate”	Granting Clause

SECTION 1.03. Rules of Construction. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires:

(a) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular;

(b) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles in the United States and, except as otherwise herein expressly provided, the term “generally accepted accounting principles” with respect to any computation required or permitted hereunder means such accounting principles as are generally accepted in the United States;

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(c) the word “including” shall be construed to be followed by the words “without limitation”; the word “or” shall not be deemed to be exclusive;

(d) article and section headings are for the convenience of the reader and shall not be considered in interpreting this Indenture or the intent of the parties hereto;

(e) the words “herein,” “hereof” and “hereunder” and other words of similar import refer to this Indenture as a whole and not to any particular article, section or other subdivision;

(f) the pronouns used herein are used in the masculine and neuter genders but shall be construed as feminine, masculine or neuter, as the context requires;

(g) a reference herein to any Person shall be construed to include such Person’s successors and permitted assigns;

(h) a reference to any statute, regulation, proclamation, ordinance or law includes all statutes, regulations, proclamations, ordinances or laws varying, consolidating or replacing the same from time to time, and a reference to a statute includes all regulations, policies, protocols, codes, proclamations and ordinances issued or otherwise applicable under that statute unless, in any such case, otherwise expressly provided in any such statute;

(i) a definition of or reference to any document, instrument or agreement includes an amendment or supplement to, or restatement, replacement, modification or novation of, any such document, instrument or agreement unless otherwise specified in such definition or in the context in which such reference is used;

(j) terms used herein that are defined in the New York Uniform Commercial Code and not otherwise defined herein shall have the meanings set forth in the New York Uniform Commercial Code, unless the context requires otherwise; and

(k) to the extent any provision of this Indenture conflicts with the express provisions of any other Transaction Documents, the provisions of this Indenture shall govern and be controlling.

ARTICLE 2

THE SECURITIES

SECTION 2.01. Forms; Denominations.

Each Note shall be issued in physical, registered form only in initial denominations of not less than $250,000 and in integral multiples of $1,000 in excess thereof. The Notes will be substantially in the form attached hereto as Exhibit A; provided that any of the

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Notes may be issued with appropriate insertions, omissions, substitutions and variations as are required or permitted by this Indenture, and may have imprinted or otherwise reproduced thereon such legend or legends, not inconsistent with the provisions of this Indenture, as may be required to comply with any Requirements of Law or any other applicable law or with rules or regulations pursuant thereto, or with the rules of any securities market in which the Notes are admitted to trading, or to conform to general usage. The maximum principal amount of Notes to be issued hereunder is $100,000,000.

SECTION 2.02. Execution, Authentication, Delivery and Dating.

(a) The Notes shall be executed by manual or facsimile signature on behalf of the Issuer by any Officer of the Issuer. Notes bearing the manual or facsimile signatures of individuals who were at any time the Officers of the Issuer shall be entitled to all benefits under this Indenture, subject to the following sentence, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Notes or did not hold such offices at the date of such Notes. No Note shall be entitled to any benefit under this Indenture, or be valid for any purpose, however, unless there appears on such Note a certificate of authentication substantially in the form provided for herein executed by the Indenture Trustee by manual signature, and such certificate of authentication upon any Note shall be conclusive evidence, and the only evidence, that such Note has been duly authenticated and delivered hereunder. All Notes shall be dated the date of their authentication. Upon the initial issuance of any Note, such Note shall be authenticated by the Indenture Trustee pursuant to, and upon the Indenture Trustee’s receipt of, an Issuer Order.

(b) The Indenture Trustee may appoint one or more agents (each an “Authenticating Agent”) with power to act on its behalf and subject to its direction in the authentication of Notes in connection with transfers and exchanges under Sections 2.04 and 2.05, as fully to all intents and purposes as though each such Authenticating Agent had been expressly authorized by those Sections to authenticate the Notes. For all purposes of this Indenture, the authentication of Notes by an Authenticating Agent shall be deemed to be the authentication of Notes “by the Indenture Trustee”.

Any corporation, bank, trust company or association into which any Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation, bank, trust company or association resulting from any merger, consolidation or conversion to which any Authenticating Agent shall be a party, or any corporation, bank, trust company or association succeeding to the corporate trust business of an Authenticating Agent, shall be the successor of such Authenticating Agent hereunder, without the execution or filing of any further act on the part of the parties hereto or such Authenticating Agent or such successor corporation, bank, trust company or association.

Any Authenticating Agent may at any time resign by giving written notice of resignation to the Indenture Trustee and the Issuer. The Indenture Trustee may at any time terminate the agency of any Authenticating Agent by giving written notice of termination to such Authenticating Agent and the Issuer. Upon receiving such notice of resignation or upon such a termination, the Indenture Trustee may but shall not be obligated to appoint a successor

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Authenticating Agent, and, upon such appointment, the Indenture Trustee will give written notice of such appointment to the Issuer and the Holders. In the event such a successor is not appointed by the Indenture Trustee, the role of Authenticating Agent will revert to the Indenture Trustee.

Each Authenticating Agent shall be entitled to all of the protections, privileges, limitations on liability, rights of reimbursement and indemnities that the Indenture Trustee is entitled to hereunder as fully as if it were the Indenture Trustee.

SECTION 2.03. Interest, Payment of Note Balance of Outstanding Notes.

(a) Each Note will accrue interest during each Interest Period on its Note Balance at the Note Interest Rate calculated based on the actual number of days elapsed and a 360-day year.

(b) Accrued interest will be due and payable in cash on each Payment Date, or following declaration of acceleration pursuant to Section 5.02, on demand, and such accrued interest will accrue at the then applicable Note Interest Rate to the extent permitted by applicable law.

(c) The Note Balance of each Note plus any accrued interest is due and payable on the Final Maturity Date, unless the Note Balance and accrued interest of the Note becomes due and payable at an earlier date by declaration of acceleration, voluntary or mandatory redemption or otherwise.

(d) The Notes may be prepaid in whole, or in part, together with all accrued interest as set forth in Section 3.02, and are subject to mandatory redemption in whole, or in part, as set forth in Section 3.06, and are subject to mandatory redemption in whole, but not in part (at the election of each Holder), as set forth in Section 3.07.

SECTION 2.04. Registration of Transfer and Exchange of Notes.

(a) At all times during the term of this Indenture, there shall be maintained at the office of a registrar appointed by the Issuer (the “Note Registrar”) a register (the “Note Register”) in which, subject to such reasonable regulations as the Note Registrar may prescribe, the Note Registrar shall provide for the registration of Notes and of transfers and exchanges of Notes as herein provided. The Indenture Trustee is hereby initially appointed (and hereby agrees to act in accordance with the terms hereof) as Note Registrar for the purpose of registering Notes and transfers and exchanges of Notes as herein provided. If the Indenture Trustee resigns or is removed in accordance with the terms hereof, the successor indenture trustee shall immediately succeed to its predecessor’s duties as Note Registrar, absent appointment of any other bank or trust company to act as Note Registrar.

(b) No transfer, sale, pledge or other disposition of any Note or interest therein shall be made unless that transfer, sale, pledge or other disposition is exempt from the registration and/or qualification requirements of the Securities Act, regulations

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promulgated thereunder and any applicable state securities laws, or is otherwise made in accordance with the Securities Act, regulations promulgated thereunder and such state securities laws. None of the Issuer, the Indenture Trustee or the Note Registrar is obligated to register or qualify any Notes under the Securities Act, regulations promulgated thereunder or any other securities law or to take any action not otherwise required under this Indenture to permit the transfer of any Note or interest therein without registration or qualification. Any Holder desiring to effect a transfer of Notes or interests therein shall, and is hereby deemed to have agreed to, indemnify and hold harmless the Issuer, the Indenture Trustee and the Note Registrar against costs, damages, or any other liability that may result if the transfer is not so exempt or is not made in accordance with such federal and state laws.

(c) The Note Registrar shall refuse to register any requested transfer unless it receives (and upon receipt, may conclusively rely upon) a certification from the transferring Holder in substantially the form of Exhibit B-1 hereto, and a representation letter from the transferee, in substantially the form of Exhibit B-2 hereto, and shall have no duty to determine whether such transfer is so exempt or complies with such federal and state laws. If the Holder requesting such transfer is the Investor, the certification in substantially the form of Exhibit B-1 hereto shall include a certification by the Investor that following such transfer, the Investor will still be the holder of at least 50.1% of the principal amount of Notes outstanding, and the Note Registrar shall refuse to register any such requested transfer by the Investor unless such certification is so included.

(d) Any purported transfer of a Note to a Person that does not comply with the requirements set forth above will be null and void ab initio and the transferor (or the last preceding Holder of such Note (or interest therein)) that was not so disqualified shall be restored to all rights as a Holder thereof retroactively to the date of transfer of such Note by such disqualified transferee. None of the Indenture Trustee, the Note Registrar or any other Person shall be obligated to register or otherwise recognize such purported transfer of a Note. Nothing herein shall impose an affirmative duty on the Note Registrar or Indenture Trustee to investigate or make other inquiries as to whether a purported transferee has complied with the requirements set forth above.

(e) If a Person is acquiring any Note or interest therein as a fiduciary or agent for one or more accounts, such Person shall be required to deliver to the Note Registrar a certification to the effect that it has (i) sole investment discretion with respect to each such account and (ii) full power to make the foregoing acknowledgments, representations, warranties, certifications and agreements with respect to each such account as set forth in this Section 2.04 (and upon receipt, the Note Registrar may conclusively rely upon such certification) and shall have no duty to determine whether the Person acquiring such Note or interest therein is such a fiduciary or agent, or has such discretion or power, as the case may be.

(f) Subject to the preceding provisions of this Section 2.04, upon surrender for registration of transfer of any Note at the offices of the Note Registrar maintained for such purpose, the Issuer shall execute and the Indenture Trustee shall authenticate and deliver, in the name of the designated transferee or transferees (and, to the extent that only a portion of the transferring Holder’s Note Balance is being transferred, to the transferring Holder), one or more new Notes, of a like Note Balance.

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(g) At the option of any Holder, its Notes may be exchanged for other Notes of a like Note Balance upon surrender of the Notes to be exchanged at the offices of the Note Registrar maintained for such purpose. Whenever any Notes are so surrendered for exchange, the Issuer shall execute and the Indenture Trustee shall authenticate and deliver the Notes which the Holder making the exchange is entitled to receive.

(h) Every Note presented or surrendered for transfer or exchange shall (if so required by the Note Registrar) be duly endorsed by, or be accompanied by a written instrument of transfer in form satisfactory to the Note Registrar duly executed by, the Holder thereof or its attorney duly authorized in writing. The Note Registrar may require any Holder, among other things, to furnish any appropriate endorsements and transfer documents, and to have signatures guaranteed by an “eligible guarantor institution” that is a member or participant in a recognized “signature guarantee program” (e.g., the securities Transfer Agents Medallion Program, the Stock Exchange Medallion Program or the New York Stock Exchange, Inc. Medallion signature Program).

(i) No service charge shall be imposed for any transfer or exchange of Notes, but the Indenture Trustee or the Note Registrar may require payment from the Holder of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Notes.

(j) All Notes surrendered for transfer and exchange shall be physically canceled by the Note Registrar, and the Note Registrar shall dispose of such canceled Notes in accordance with its standard procedures.

(k) The Note Registrar shall provide to the Issuer or the Indenture Trustee, upon reasonable prior written request, and at the expense of the Issuer, an updated copy of the Note Register. The Issuer and the Indenture Trustee shall have the right to obtain a copy thereof within a reasonable amount of time after receipt of notice by the Note Registrar, and to rely conclusively upon a certificate of the Note Registrar as to the information set forth in the Note Register.

(l) Neither the Note Registrar nor the Indenture Trustee shall be under any duty to monitor or determine compliance with any federal, state or other securities or tax laws that may be applicable; provided, however, that the Note Registrar or the Indenture Trustee, as the case may be, shall be under a duty to receive and to examine to determine whether it substantially appears on its face to conform with such exhibit as attached to this Indenture, the certificate in substantially the form of Exhibit B-1 or the representation letter in substantially the form of Exhibit B-2 specifically required by the express terms of this Section 2.04 to be delivered to the Note Registrar or the Indenture Trustee as a requirement of the registration of a transfer of a Note.

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(m) The Note Registrar shall be entitled to all of the protections, privileges, limitations on liability, rights of reimbursement and indemnities that the Indenture Trustee is entitled to hereunder as fully as if it were the Indenture Trustee.

SECTION 2.05. Mutilated, Destroyed, Lost or Stolen Notes.

If any mutilated Note is surrendered to the Note Registrar, the Issuer shall execute and the Indenture Trustee shall authenticate and deliver, in exchange therefor, a new Note of the same tenor and denomination, registered in the same manner, dated the date of its authentication and bearing a number not contemporaneously outstanding.

If there shall be delivered to the Issuer, the Indenture Trustee and the Note Registrar (i) evidence to their satisfaction of the destruction (including mutilation tantamount to destruction), loss or theft of any Note and the ownership thereof and (ii) such security or indemnity as may be reasonably required by them to hold each of them, and any agent of any of them harmless, then, in the absence of notice received by the Issuer or a Trust Officer that such Note has been acquired by a Protected Purchaser, the Issuer shall execute and the Indenture Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Note, a new Note of the same tenor and denomination registered in the same manner, dated the date of its authentication and bearing a number not contemporaneously outstanding.

Upon the issuance of any new Note under this Section 2.05, the Indenture Trustee and the Note Registrar may require the payment by the Holder of an amount sufficient to pay or discharge any tax or other governmental charge that may be imposed in relation thereto and any other reasonable expenses, but no service charge.

Every new Note issued pursuant to this Section 2.05 in lieu of any destroyed, mutilated, lost or stolen Note shall constitute an original additional contractual obligation of the Issuer, whether or not the destroyed, mutilated, lost or stolen Note shall be at any time enforceable by any Person, and such new Note shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Notes duly issued hereunder.

The provisions of this Section 2.05 are exclusive and shall preclude (to the extent permitted by applicable law) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes.

SECTION 2.06. Holder Lists.

The Note Registrar shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Holders, which list, upon request, will be made available to the Indenture Trustee insofar as the Indenture Trustee is no longer the Note Registrar. Upon written request of any Holder made for purposes of communicating with other Holders with respect to their rights under this Indenture (which purpose the Note Registrar shall have no duty to determine or inquire about), the Note Registrar shall within five (5) Business Days after its receipt of such written request furnish such Holder with a list of the other Holders of record identified in the Note Register at the time of the request. Every Holder, by receiving such access, agrees with the Note Registrar that the Note Registrar will not have any liability or be held accountable in any way by reason of the disclosure of any information as to the names and addresses of any Holder regardless of the source from which such information was derived.

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SECTION 2.07. Persons Deemed Owners.

The Issuer, the Indenture Trustee, the Note Registrar and any agents of any of them, may treat the Person in whose name a Note is registered as the owner of such Note on the applicable Record Date for the purpose of receiving payments of principal, interest and other amounts in respect of such Note and on any other date for all other purposes whatsoever, whether or not such Note shall be overdue, and none of the Issuer, the Indenture Trustee, the Note Registrar or any agents of any of them, shall be affected by notice to the contrary.

SECTION 2.08. Payments on the Notes.

(a) With respect to each Payment Date, any interest, principal and other amounts payable on the Notes shall be paid to the Person that is the registered Holder thereof at the close of business on the related Record Date. Payments of interest, principal and other amounts on the Notes shall be made by wire transfer to such account as such Holder shall designate by written instruction received by the Indenture Trustee not later than five Business Days prior to the Record Date related to the applicable Payment Date.

(b) If a Note is issued in exchange for any other Note during the period commencing at the close of business at the office of the Note Registrar where such exchange occurs on any Record Date and ending before the opening of business at such office of the Note Registrar on the related Payment Date, no interest, principal or other amounts will be payable on such Payment Date in respect of such new Note, but will be payable on such Payment Date only in respect of the prior Note to the Person that is the registered Holder thereof at the close of business on the related Record Date.

(c) The Issuer shall pay to the Indenture Trustee funds in an amount sufficient to pay in full all amounts of interest, principal, and if any, premium due on any Payment Date, redemption date, the Final Maturity Date, or otherwise prior to 11.00 a.m. Eastern time on such date.

(d) The Indenture Trustee shall pay each Note in full as provided herein on the Final Maturity Date, in immediately available funds, no later than 3:00 p.m., New York City time, on such Final Maturity Date (to the extent such amounts are received from the Issuer in accordance with Section 2.08(c)). Such payment to the Holder of each Note shall be made on the Final Maturity Date of such Note and such Holder shall present the Note promptly thereafter.

(e) The Indenture Trustee is hereby directed to establish and maintain pursuant to the terms of this Section 2.08, a non-interest bearing account in the name of the Issuer (such account and any successor account, even if renumbered, the “Payment Account”). All payments to be made on the Notes to or by the Indenture Trustee pursuant to this Indenture shall, as applicable, be made into, or out of, the Payment Account. Funds on deposit in the Payment Account will be disbursed by the Indenture

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Trustee pursuant to Issuer Order to make payments to the Holders in respect of principal or interest or redemption price or other amounts in respect of the Secured Obligations. The Issuer shall deliver such Issuer Orders to the Indenture Trustee at least one (1) Business Day prior to any payment date. For purposes of causing the application of funds in accordance with this Section 2.08(e), the Indenture Trustee shall be entitled to rely exclusively upon any Issuer Order provided by the Issuer with respect to any payments to be made pursuant to this Section, and shall have no duty to independently determine, verify or calculate any information therein, including with respect to the amounts or recipients set forth in or delivered together with any such Issuer Order, except as expressly required hereby. Cash held in the Payment Account shall not be invested.

SECTION 2.09. Compliance with Withholding and Other Requirements.

The Indenture Trustee shall comply with all backup withholding tax and information reporting requirements that it is required to comply with under applicable law (including the Code and the Treasury regulations issued thereunder) in respect of any payment on, or in respect of, the Notes.

By acceptance of any Note issued hereunder, unless otherwise prohibited by law, each Holder is deemed to agree to provide to the Issuer or Indenture Trustee any information or certification that may be required under applicable law with respect to withholding, backup withholding or information reporting (including the Noteholder Tax Identification Information, and, to the extent any FATCA Withholding Tax is applicable, the Noteholder FATCA Information), and update or replace such form, information or certification in accordance with its terms or its subsequent amendments to the extent necessary. Failure of a Holder to provide the Indenture Trustee and the Issuer with required tax certificates and information may result in amounts of tax being withheld from the payment to such Holder (without any corresponding gross-up). If the Issuer has knowledge that FATCA Withholding Tax applies, the Issuer will notify the Indenture Trustee thereof.

In order to comply with the laws, rules, regulations and executive orders in effect from time to time applicable to banking institutions, including those relating to the funding of terrorist activities and money laundering (collectively, “Applicable Regulations”), the Indenture Trustee, is required to obtain, verify and record certain information relating to individuals and entities which maintain a business relationship with the Indenture Trustee. Accordingly, each of the parties hereto and each Holder agrees to provide the Indenture Trustee, upon its request from time to time, such identifying information and documentation as may be necessary in order to enable the Indenture Trustee to comply with such Applicable Regulations. It is expressly agreed that the Indenture Trustee shall have no duty to perform any services hereunder for, on behalf of or for the benefit of, any Person not having furnished such information as the Indenture, in its sole discretion, determines to be necessary to comply with the Applicable Regulations.

SECTION 2.10. Cancellation.

The Issuer may at any time deliver to the Note Registrar for cancellation any Notes previously authenticated and delivered hereunder which the Issuer may have acquired in any manner whatsoever, and all Notes so delivered shall, in accordance with an Issuer Order, be promptly canceled by the Note Registrar.

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All Notes delivered to the Indenture Trustee for payment shall be forwarded by the Indenture Trustee to the Note Registrar. All such Notes and all Notes surrendered for transfer and exchange in accordance with the terms hereof shall be canceled and disposed of by the Note Registrar in accordance with its customary procedures.

SECTION 2.11. Lien of the Indenture.

This Indenture shall evidence a continuing Lien on and security interest in the Trust Estate to secure the full payment of the principal, interest and other amounts on all the Notes, which shall in all respects be equally and ratably secured hereby without preference, priority or distinction on account of the actual time or times of the authentication and delivery of the Notes.

SECTION 2.12. Uniform Commercial Code Matters.

(a) The Issuer shall take all actions, including the authorization and filing of all financing statements and amendments thereto, as are necessary to perfect and maintain the perfection and priority under the laws of all relevant jurisdictions of the security interest Granted by the Issuer to the Indenture Trustee hereunder. The Issuer hereby irrevocably authorizes the filing of financing statements (and amendments of financing statements and continuation statements) that name the Issuer as debtor and the Indenture Trustee as secured party and that cover all personal property of the Issuer. The Issuer also hereby ratifies its authorization of the filing of any such financing statements (or amendments of financing statements or continuation statements) that were filed prior to the execution hereof. The Indenture Trustee shall have no obligation to file or monitor any financing statements (or amendments of financing statements or continuation statements). If the Indenture Trustee notifies the Issuer that it intends to file any financing statements, continuation statements or amendments thereto but fails to do so, and does not in connection therewith timely instruct the Issuer to file such item or items, then the Issuer shall not be and shall not be deemed to be in breach of any covenant, representation or warranty concerning the perfection of related or affected security interests.

(b) The Indenture Trustee acknowledges and agrees that it holds each item of Collateral within its possession or control on behalf of and for the benefit of the Secured Parties. Notwithstanding any other provision of this Indenture, the Indenture Trustee shall not hold any item of Collateral through an agent or nominee except as expressly permitted by the Transaction Documents to which it is a party.

SECTION 2.13. CUSIP Numbers; Bloomberg Listing.

(a) The Issuer in issuing the Notes may, and at the request of a Holder shall, use CUSIP numbers, ISINs and “Common Code” numbers (if then generally in use) and, if so, the Indenture Trustee shall use CUSIP numbers, ISINs and “Common Code” numbers in notices (including notices of redemption) as a convenience to Holders;

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provided, however, that any such notice may state that no representation is made as to the correctness of such numbers, either as printed on the Notes or as contained in any notice that reliance may be placed only on the other identification numbers printed on the Notes and that any such notice shall not be affected by any defect in or omission of such numbers. The Issuer shall advise the Indenture Trustee of any change in the CUSIP numbers, ISINs and “Common Code” numbers, on which notice the Indenture Trustee may conclusively rely without investigation.

(b) The Issuer shall provide the terms of the Notes, at its cost, to Bloomberg for listing under the Issuer’s ticker on that service.

SECTION 2.14. Issuance of New Notes.

(a) The Issuer may, from time to time after the Initial Issue Date, direct the Indenture Trustee, on behalf of the Issuer, to issue new Notes (an “Additional Issuance”), subject to the terms and conditions of this Section 2.14. The Issuer shall execute the Notes of such Additional Issuance and the Notes of such Additional Issuance (the “Additional Notes”) shall be delivered to the Indenture Trustee for authentication and delivery. The Issuer shall issue any Additional Notes in accordance with the terms and procedures set forth in this Indenture and the Indenture Trustee shall authenticate such Additional Notes pursuant to, and upon the Indenture Trustee’s receipt of, an Issuer Order.

(b) The Issuer shall not cause any Additional Issuance to occur unless the following terms and conditions shall have been satisfied:

(i) no later than seven (7) Business Days before the date of the proposed Additional Issuance, the Issuer shall deliver to the Indenture Trustee and the Investor, notice of such new issuance (the “Additional Issuance Notice”);

(ii) the conditions in the Note Purchase Agreement with respect to the purchase of such Notes shall have been satisfied;

(iii) no Additional Issuance shall have been consummated after the date that is one year after the Initial Issue Date;

(iv) at the time of any Additional Issuance no more than two prior Additional Issuances shall have been made; and

(v) each Additional Issuance shall be in increments of $25,000,000 in aggregate principal amount of Additional Notes and no greater than $75,000,000 in aggregate principal amount of Additional Notes in respect of all such Additional Issuances.

SECTION 2.15. Extended Maturity Date.

The Initial Maturity Date of the Notes may be extended at the option of the Issuer up to the Extended Maturity Date, subject to the terms and conditions of this Section 2.15. So long as

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no Default or Event of Default has occurred and is continuing, the Issuer may exercise such option by notifying in writing the Indenture Trustee of such exercise at least 65 calendar days and no more than one year prior to the Initial Maturity Date. If the Issuer exercises such option and delivers such written notice to the Indenture Trustee, the Indenture Trustee shall transmit to the Holders not later than 60 calendar days prior to the Initial Maturity Date a notice (the “Extension Notice”), prepared by the Issuer, indicating (i) the election of the Issuer to extend the Initial Maturity Date, (ii) the new Final Maturity Date and (iii) the new Note Interest Rate. The effectiveness of the Extended Maturity Date beyond the Initial Maturity Date is subject to there being no Default or Event of Default continuing at the time of the Initial Maturity Date.

ARTICLE 3

REDEMPTION

SECTION 3.01. Applicability of Article. Redemption of Notes at the election of the Issuer or otherwise, as permitted or required by any provision of this Indenture, shall be made in accordance with such provision and this Article 3.

SECTION 3.02. Optional Redemption; Notices to Indenture Trustee.

(a) The Issuer may elect to redeem the Notes at any time on or after but not before November 10, 2015 and prior to the Final Maturity Date, in whole or in part, at a price equal to (i) if the Notes are redeemed on or after November 10, 2015 and before November 10, 2016, 106% of the principal amount thereof plus accrued and unpaid interest to the date of redemption and (ii) if the Notes are redeemed on or after November 10, 2016 and before the Final Maturity Date, 104% of the principal amount thereof plus accrued interest to the date of repayment; provided, however, that if no Extension Notice has been delivered, the Notes may be redeemed within 60 days of the Initial Maturity Date at a price equal to 100% of the principal amount redeemed plus (A) accrued and unpaid interest on the Notes redeemed up to the date of redemption, plus (B) an amount equal to the remaining scheduled payments of interest of the Notes redeemed from the date of redemption through the Initial Maturity Date. For the avoidance of doubt, the Notes must be redeemed, in whole, on the Final Maturity Date at a price equal to 100% of the principal amount plus accrued and unpaid interest on the Notes redeemed.

(b) If the Issuer redeems the Notes pursuant to this Article 3 (whether such redemption is optional or mandatory), it shall notify the Indenture Trustee and the Holders in writing of (i) the Section of this Indenture pursuant to which the redemption shall occur, (ii) the redemption date, (iii) the principal amount of Notes to be redeemed and (iv) the redemption price. Selection of the Notes for redemption will be made by the Indenture Trustee on a pro rata basis to the extent practicable. The Issuer shall mail notice to the Indenture Trustee and the Holders provided for in this Section 3.02(b) at least 30 days before a redemption date unless a shorter period is acceptable to the Holders. Such notice shall be accompanied by an Officers’ Certificate to the effect that such redemption will comply with the conditions herein. If fewer than all the Notes are to be redeemed, the record date relating to such redemption shall be selected by the Issuer and given to the Indenture Trustee and the Holders. Any such notice may be canceled at any time prior to notice of such redemption being mailed to any Holder and shall thereby be void and of no effect.

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(c) Notwithstanding any other provision in this Section 3.02 to the contrary, the Holders agree that if the Issuer has satisfied all of the conditions under the Note Purchase Agreement in respect of an Additional Issuance and the Investor fails to purchase additional Notes within 10 Business Days after satisfaction of such conditions (a “Purchase Failure Event”), the Issuer may redeem the outstanding Notes at its option at any time up to the Initial Maturity Date at a price equal to 100% of the principal amount of Notes plus accrued and unpaid interest on the Notes redeemed up to the date of redemption, which, for the avoidance of doubt, shall be the sole remedy of the Issuer in respect of a Purchase Failure Event. Such redemption shall comply with the notification procedure described in Section 3.02(b). Any notice of redemption provided by the Issuer pursuant to this Section 3.02(c) shall be accompanied by an Officers’ Certificate to the effect that such redemption will comply with the conditions herein.

SECTION 3.03. Effect of Notice of Redemption. Once notice of redemption is mailed in accordance with Section 3.02(b), Notes called for redemption become due and payable on the redemption date and at the redemption price stated in the notice, subject to the satisfaction or waiver of any conditions precedent in the notice of redemption. Such Notes shall be paid at the redemption price stated in the notice, plus accrued interest, to, but not including, the redemption date; provided, however, that if the redemption date is after a Record Date and on or prior to the related Payment Date, the accrued interest shall be payable to the Holder of the redeemed Notes registered on such Record Date. Failure to give notice or any defect in the notice to any Holder shall not affect the validity of the notice to any other Holder.

SECTION 3.04. Payment of Redemption Price. Pursuant to Section 2.08(c), the Issuer shall pay to the Indenture Trustee by deposit to the Payment Account money sufficient to pay the redemption price of and accrued interest on all Notes or portions thereof to be redeemed on the redemption date other than Notes or portions of Notes called for redemption that have been delivered by the Issuer to the Indenture Trustee for cancellation.

SECTION 3.05. Notes Redeemed in Part. Upon surrender of a Note that is redeemed in part and at the request of the Holder, the Issuer shall execute and the Indenture Trustee shall authenticate for the Holder (at the Issuer’s expense) a new Note equal in principal amount to the unredeemed portion of the Note surrendered.

SECTION 3.06. Mandatory Redemption of Notes.

(a) On the date of receipt by any Group Company of any amount described below, the Issuer shall cause the principal of the Notes to be redeemed in the amounts described below at the redemption price described in Section 3.06(b) and subject to the notice provisions in Section 3.02(b):

(i) 100% of any Net Proceeds of any Indebtedness of any Group Company issued or incurred after the Initial Issue Date (other than Indebtedness that is otherwise expressly permitted pursuant to Section 4.03(b)) and

(ii) 100% of any Net Proceeds from any Asset Sale (subject to Section 4.06).

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(b) With respect to any mandatory redemption pursuant to Section 3.06(a), the Issuer shall cause the Notes to be redeemed at a price equal to (i) if the event giving rise to such redemption occurs on or after November 10, 2015, the amounts specified in Section 3.02(a) as if such redemption were an optional redemption and (ii) if the event giving rise to such redemption occurs before November 10, 2015, an amount equal to 106% of the principal amount thereof plus accrued and unpaid interest to the date of redemption plus an amount equal to the remaining scheduled payments of interest on the Notes redeemed through the Payment Date occurring in November 2015.

SECTION 3.07. Change of Control. Within three Business Days of a Change of Control and subject to the notice provision in Section 3.02(b), the Issuer shall make an offer (a “Change of Control Offer”) to each Holder to redeem such Holder’s Notes in full at a redemption price in cash equal to 100% of such Note Balance thereof, plus accrued and unpaid interest to the date of redemption plus an amount equal to the remaining scheduled payments of interest on the Notes redeemed through the earlier of (i) the date that is one year after the date of redemption and (ii) the Final Maturity Date. The Change of Control Offer will remain open for a period of at least 15 days following its commencement and not more than 30 days, except to the extent that a longer period is required by applicable law (the “Offer Period”). No later than three Business Days after the termination of the Offer Period, the Issuer will purchase all Notes tendered in response to the Change of Control Offer. The notice in respect of the Change of Control Offer shall comply with the notice provision of Section 3.02(b).

ARTICLE 4

COVENANTS

SECTION 4.01. Deposit and Payment of Notes. The Issuer shall promptly pay the principal of and interest on the Notes on the dates and in the manner provided in the Notes and in this Indenture.

SECTION 4.02. Reports and Other Information.

(a) Annual Financials. The Issuer shall post on the SEC EDGAR website, as soon as available, but in any event within 120 days (or such earlier date on which the Issuer is required to file a Form 10-K under the Exchange Act, if applicable) after the end of each fiscal year of the Issuer, beginning with the fiscal year ending December 31, 2013, a consolidated and consolidating balance sheet of the Issuer and its Subsidiaries as of the end of such fiscal year, and the related consolidated and consolidating statements of income, cash flows and stockholder’s equity for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all prepared in accordance with GAAP, with such consolidated and consolidating financial statements to be audited and accompanied by (i) a report and opinion of the Issuer’s independent certified public accounting firm of recognized national standing (which report and opinion shall be prepared in accordance with GAAP), stating that such financial

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statements fairly present, in all material respects, the consolidated financial condition, results of operations and cash flows of the Issuer as of the dates and for the periods specified in accordance with GAAP, and (ii) (if and only if the Issuer is required to comply with the internal control provisions pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 requiring an attestation report of such independent certified public accounting firm) an attestation report of such independent certified public accounting firm as to the Issuer’s internal controls pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 attesting that such internal controls meet the requirements of the Sarbanes-Oxley Act of 2002. Such consolidated and consolidating financial statements shall be certified by a Financial Officer as fairly presenting the consolidated and consolidating financial condition, results of operations and cash flows of the Issuer and its Subsidiaries as of the dates and for the periods specified in accordance with GAAP consistently applied.

(b) Quarterly Financials. The Issuer shall post on the SEC EDGAR website, as soon as available, but in any event within 60 days (or such earlier date on which the Issuer is required to file a Form 10-Q under the Exchange Act, if applicable) after the end of each of the first three fiscal quarters of each fiscal year of the Issuer, beginning with the fiscal quarter ending December 31, 2014, a consolidated and consolidating balance sheet of the Issuer and its Subsidiaries as of the end of such fiscal quarter, and the related consolidated and consolidating statements of income, cash flows and stockholder’s equity for such fiscal quarter and (in respect of the second and third fiscal quarters of such fiscal year) for the then-elapsed portion of the Issuer’s fiscal year, setting forth in each case in comparative form the figures for the comparable period or periods in the previous fiscal year, all prepared in accordance with GAAP, with such consolidated and consolidating financial statements to be certified by a Financial Officer as fairly presenting the consolidated and consolidating financial condition, results of operations and cash flows of the Issuer and its Subsidiaries as of the dates and for the periods specified in accordance with GAAP consistently applied, and on a basis consistent with the audited consolidated financial statements referred to under Section 4.02(a), subject to normal year-end audit adjustments and the absence of footnotes.

(c) Information During Event of Default. The Issuer shall deliver to the Indenture Trustee, promptly, such additional information regarding the business or financial affairs of the Issuer or any of its Subsidiaries, or compliance with the terms of this Indenture, as the Indenture Trustee, any Holder or any holder of beneficial interests in the Notes may from time to time reasonably request during the existence of any Event of Default (subject to reasonable requirement of confidentiality, including requirements imposed by law or contract; and provided that the Issuer shall not be obligated to disclose any information that is reasonably subject to the assertion of attorney-client privilege). The Issuer shall further inform the Indenture Trustee that such additional information is being delivered pursuant to this Section 4.02(c). The Indenture Trustee will within three (3) Business Days of receipt notify the Holders by electronic mail of receipt of such information (subject to the provisions of Section 4.02(h)).

(d) Rule 144A Information. The Issuer shall deliver to the Holders and any prospective purchaser of the Notes designated by a Holder, promptly upon the request of any such Person, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.

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(e) Notice of Default. The Issuer shall deliver to the Indenture Trustee promptly and in any event within three Business Days after the occurrence thereof, notice of any Default or Event of Default and specifying the nature thereof in reasonable detail. The Indenture Trustee will promptly (and, in any event, within three (3) Business Days of receipt) notify the Holders by electronic mail of receipt of any such notice of Default or Event of Default.

(f) [Reserved].

(g) Communication of Information. The applicable Obligor, shall identify all reports and other documents delivered to the Indenture Trustee under paragraph (c) above as being (i) of a type that would be publicly available if the Obligors were public reporting companies or (ii) not material with respect to the Obligors or their respective Subsidiaries or any of their respective securities for purposes of foreign, United States federal and state securities laws (all such information and documentation referred to in (i) and (ii) being “Public Investor Information”). Any information and documentation that is identified as not Public Investor Information by an Obligor is referred to herein as “Private Investor Information.” The applicable Obligor shall further clearly label or stamp any such report or document as either (x) containing Private Investor Information (which documents will be disseminated by the Issuer or Indenture Trustee by electronic mail, as applicable, only to Holders that request Private Investor Information) or (y) containing solely Public Investor Information. The Indenture Trustee will deliver by electronic mail reports, documents and other information containing Private Investor Information only to those Holders that request receipt of such information.

SECTION 4.03. Limitation on Incurrence of Indebtedness. (a) None of the Obligors shall, and the Issuer shall not permit any Group Company to, directly or indirectly, Incur any Indebtedness.

(b) The limitations set forth in Section 4.03(a) shall not apply to:

(i) the Incurrence by the Issuer and the Guarantors of Indebtedness represented by the Notes and the Guarantees;

(ii) Indebtedness of Washington Square Financial, LLC and its Wholly Owned Subsidiaries to finance the purchase of structured settlement receivables in the Ordinary Course of Business;

(iii) Indebtedness of the Issuer to a Guarantor; provided, that any subsequent issuance or transfer of any Capital Stock or any other event that results in any such Guarantor ceasing to be a Guarantor of the Issuer or any other subsequent transfer of any such Indebtedness (except to the Issuer or another Guarantor) shall be deemed, in each case, to be an Incurrence of such Indebtedness not permitted by this clause (iii);

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(iv) Indebtedness of a Guarantor (other than Red Reef) to the Issuer or another Guarantor; provided, that any subsequent issuance or transfer of any Capital Stock or any other event that results in any Guarantor holding such Indebtedness ceasing to be a Guarantor or any other subsequent transfer of any such Indebtedness (except to the Issuer or another Guarantor) shall be deemed, in each case, to be an Incurrence of such Indebtedness not permitted by this clause (iv);

(v) Indebtedness of any Group Company not otherwise permitted hereunder and set forth on Schedule 4.03;

(vi) any guarantee by a Guarantor (other than Red Reef) of Indebtedness or other obligations of any Group Company so long as the Incurrence of such Indebtedness is otherwise permitted under the terms of this Indenture;

(vii) Indebtedness of any Group Company in respect of surety bonds in the Ordinary Course of Business;

(viii) Indebtedness arising in connection with endorsement of instruments for deposit in the Ordinary Course of Business;

(ix) profit participating notes and other notes issued by Lamington Road Limited and Shinola Cove Limited and other subsidiaries formed under Section 110 of the Irish Taxes Consolidation Act to a Group Company;

(x) the Convertible Notes and any refinancing thereof so long as the Indebtedness raised to refinance the Convertible Notes (i) has an interest rate (inclusive of original issue discount) that is less than the interest rate (inclusive of original issue discount) on the Convertible Notes, (ii) matures following the maturity date on the Convertible Notes and (iii) is incurred in an aggregate amount (or if issued with original issue discount, an aggregate issue price) that is equal to or less than the aggregate amount (or if issued with original issue discount, the aggregate accreted value) then outstanding on the Convertible Notes;

(xi) Indebtedness incurred pursuant to the White Eagle Credit Facility;

(xii) unsecured Indebtedness by any Group Company in an aggregate principal amount at any one time outstanding not to exceed $5,000,000; and

(xiii) Indebtedness incurred by any Group Company in connection with Investments made pursuant to clauses (12) and (14) of the definition of Permitted Investments.

(c) Notwithstanding Section 4.03(a), Indebtedness not permitted by Section 4.03(b) may be incurred or issued by (i) any Group Company (other than the Issuer) provided that an amount equal to the proceeds thereof is applied to redeem the Notes in

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accordance with and to the extent required by Section 3.06, and (ii) the Issuer provided that an amount equal to the proceeds thereof is applied to redeem the Notes in full in accordance with Section 3.06.

SECTION 4.04. Limitation on Restricted Payments. (a) None of the Obligors shall, and the Issuer shall not permit any Group Company to, directly or indirectly:

(i) declare or pay any dividend or make any distribution on account of its Equity Interests, including any payment made in connection with any merger, amalgamation or consolidation (other than dividends or distributions by a Subsidiary (other than Red Reef) so long as, in the case of any dividend or distribution payable on or in respect of any class or series of securities issued by a Subsidiary other than a Wholly Owned Subsidiary, the Issuer or a Subsidiary receives at least its pro rata share of such dividend or distribution in accordance with its Equity Interests in such class or series of securities);

(ii) purchase or otherwise acquire or retire for value any Equity Interests of the Issuer (other than Equity Interests granted pursuant to incentive plans that are surrendered to satisfy tax withholdings);

(iii) make any principal payment on, or redeem, repurchase, defease or otherwise acquire or retire for value, in each case prior to any scheduled repayment or scheduled maturity, any Indebtedness (other than the payment, redemption, repurchase, defeasance, acquisition or retirement of (A) the Notes, (B) Indebtedness incurred under the White Eagle Credit Facility, (C) profit participating or other notes issued by a subsidiary formed pursuant to Section 110 of the Irish Taxes Consolidation Act and paid by such subsidiary to the holder of such note and (D) the Convertible Notes but only if such Convertible Notes are satisfied through conversion to Equity Interests in the Issuer); or

(iv) make any Restricted Investment ((i) – (iv), “Restricted Payment”).

(b) The provisions of Section 4.04(a) shall not prohibit (i) any distribution of subscription rights to purchase securities of the Issuer pursuant to a rights offering that is registered under the Securities Act, (ii) any Restricted Payment by or to one of the OLIPP Entities that are permitted under the White Eagle Credit Facility and (iii) any Restricted Payments in connection with transactions permitted by Section 4.07 (after giving effect to Section 4.07(c) and other than clauses (b)(ii), (b)(iv), (b)(vii) and (b) (xi)).

SECTION 4.05. Dividend and Other Payment Restrictions Affecting Subsidiaries. None of the Obligors shall, and the Issuer shall not permit any Group Company to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or consensual restriction on the ability of any Group Company to:

(a) (i) pay dividends or make any other distributions to the Issuer or any of its Subsidiaries (1) on its Capital Stock; or (2) with respect to any other interest or participation in, or measured by, its profits; or (ii) pay any Indebtedness owed to the Issuer or any of its Subsidiaries;

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(b) make loans or advances to the Issuer or any of its Subsidiaries; or

(c) sell, lease or transfer any of its properties or assets to the Issuer or any of its Subsidiaries,

except in each case for such encumbrances or restrictions existing under or by reason of:

(1) contractual encumbrances or restrictions in effect on the Initial Issue Date (and not described in clauses (2) through (9) below);

(2) the Transaction Documents;

(3) Requirements of Law;

(4) contracts or agreements for the sale of assets, including any restriction with respect to a Subsidiary imposed pursuant to an agreement entered into for the sale or disposition of the Capital Stock or assets of such Subsidiary pending the closing of such sale or disposition;

(5) Indebtedness otherwise permitted to be Incurred pursuant to Sections 4.03 that limit the rights of the debtor to dispose of the assets securing such Indebtedness or to pay dividends or distributions or pay any Indebtedness owed to the Issuer or any Subsidiary;

(6) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the Ordinary Course of Business;

(7) customary provisions contained in leases, licenses and other similar agreements entered into in the Ordinary Course of Business;

(8) any Restricted Investment not prohibited by Section 4.04 and any Permitted Investment;

(9) customary provisions in partnership agreements, limited liability company organizational governance documents, joint venture agreements and other similar agreements entered into in the ordinary course of business that (i) restrict the transfer of ownership interests in such partnership, limited liability company, joint venture or similar Person or (ii) restrict funds for distributions where such funds are used to pay premiums on Life Policies;

(10) any encumbrances or restrictions of the type referred to in clauses (a), (b) and (c) above imposed by any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of the contracts, instruments or obligations referred to in clauses (1) through (9) above; provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings,

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replacements or refinancings are, in the good faith judgment of the Issuer, no more restrictive with respect to such dividend and other payment restrictions than those contained in the dividend or other payment restrictions prior to such amendment, modification, restatement, renewal, increase, supplement, refunding, replacement or refinancing; or

(11) any encumbrances or restrictions contemplated by the White Eagle Credit Facility.

For purposes of determining compliance with this Section 4.05, (i) the priority of any Preferred Stock in receiving dividends or liquidating distributions prior to dividends or liquidating distributions being paid on common stock shall not be deemed a restriction on the ability to make distributions on Capital Stock and (ii) the subordination of loans or advances made to the Issuer or a Subsidiary of the Issuer to other Indebtedness Incurred by the Issuer or any such Subsidiary shall not be deemed a restriction on the ability to make loans or advances.

SECTION 4.06. Asset Sales.

(a) None of the Obligors shall, and the Issuer shall not permit any Group Company to, cause or make an Asset Sale unless:

(i) such Group Company receives consideration at the time of the Asset Sale at least equal to the Fair Market Value of the assets sold or otherwise disposed of;

(ii) for any Asset Sale that generates Net Proceeds in excess of $10,000,000, such Group Company’s Board of Directors have authorized such transaction and such authorization is evidenced by a resolution of the Board of Directors set forth in an Officers’ Certificate delivered to the Indenture Trustee; and

(iii) at least 75% of the consideration received by any such Group Company from all Asset Sales since the Initial Issue Date, in the aggregate, is in the form of cash.

(b) So long as no Event of Default has occurred and is continuing, within 180 days after the receipt of any Net Proceeds from an Asset Sale, the Group Company selling or disposing of such asset may apply the Reinvestment Deferred Amount at its option to acquire Life Policies constituting Collateral.

(c) Any Net Proceeds from Asset Sales that are not applied or invested as provided in the preceding paragraph will constitute “Excess Proceeds.” On the 181st day after the Asset Sale (or, at the Issuer’s option, any earlier date), if the aggregate amount of Excess Proceeds then exceeds $10,000,000 over the previous 12-month period, the Issuer will apply such Excess Proceeds in excess of $10,000,000 to redeem the Notes in accordance with Section 3.06(a)(iv).

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SECTION 4.07. Transactions with Affiliates. (a) None of the Obligors shall, and the Issuer shall not permit any Group Company to, directly or indirectly, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction or series of transactions, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate of the Issuer (each of the foregoing, an “Affiliate Transaction”), unless:

(i) such Affiliate Transaction is on terms that are not materially less favorable to such Obligor or the relevant Subsidiary than those that could have been obtained in a comparable transaction by such Obligor or such Subsidiary with an unrelated Person; and

(ii) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $5,000,000, such Obligor or such Subsidiary delivers to the Indenture Trustee a resolution adopted in good faith by the majority of the Board of Directors of such Obligor or such Subsidiary, approving such Affiliate Transaction and set forth in an Officers’ Certificate certifying that such Affiliate Transaction complies with clause (i) above. The Indenture Trustee shall have no duty or obligation with respect to any such resolution.

(b) The provisions of Section 4.07(a) shall not apply to the following:

(i) (A) transactions between or among the Issuer and/or any Obligor and (B) any merger, consolidation or amalgamation of a Group Company with its direct parent; provided that such parent shall have no material liabilities and no material assets other than cash, Cash Equivalents and the Capital Stock of the Subsidiary and such merger, consolidation or amalgamation is otherwise in compliance with the terms of this Indenture and effected for a bona fide business purpose;

(ii) Restricted Payments permitted by Section 4.04 and Permitted Investments;

(iii) the payment of reasonable and customary compensation (including bonuses), fees and reimbursement of expenses paid to, and indemnity provided on behalf of, officers, directors, employees or consultants of such Obligor or any other Group Company;

(iv) transactions in which such Obligor or such other Group Company, as the case may be, delivers to the Indenture Trustee a letter from an Independent Financial Advisor stating that such transaction is fair to such Obligor or such other Group Company from a financial point of view or meets the requirements of clause (i) of Section 4.07(a); provided, that the Indenture Trustee shall have no duty or obligation with respect to any such letter;

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(v) the existence of, or the performance by such Obligor or such other Group Company of its obligations under the terms of any stockholders or equityholders agreement (including any registration rights agreement or purchase agreement related thereto) to which it is a party as of the Initial Issue Date and that is set forth on Schedule 4.07;

(vi) any contribution to the capital of the Issuer;

(vii) transactions between the Issuer and any Person (other than Red Reef), a director of which is also a director of the Issuer; provided, however, that such director abstains from voting as a director of the Issuer on any matter involving such other Person;

(viii) any employment agreements entered into by such Obligor or such other Group Company in the Ordinary Course of Business;

(ix) the payment of allocated expenses under any shared services agreement;

(x) any Affiliate Transaction in existence on the Initial Issue Date and publicly disclosed in a filing posted on the SEC EDGAR website;

(xi) any transaction between a Group Company and Foreign Subsidiary with a majority of its directors resident outside of the United States;

(xii) any Affiliate Transaction among the OLIPP Entities that is contemplated under the White Eagle Credit Facility; and

(xiii) any Affiliate Transaction in connection with Indebtedness permitted under Section 4.03(b)(xiii).

(c) Notwithstanding anything in Section 4.07(a) or Section 4.07(b) to the contrary, Red Reef may not, directly or indirectly, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction or series of transactions, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate of the Issuer.

SECTION 4.08. Further Instruments and Acts. Upon request of the Indenture Trustee, each Obligor shall execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture.

SECTION 4.09. Liens. None of the Obligors shall, and the Issuer shall not permit any Group Company to, directly or indirectly, create, Incur or suffer to exist any Lien on any asset or property of such Obligor or such Subsidiary, other than (i) Permitted Liens on any asset or property not comprising Collateral, or (ii) Liens securing the Notes or the Guarantees.

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SECTION 4.10. Maintenance of Office or Agency. (a) The Issuer shall maintain an office or agency (which may be an office of the Indenture Trustee or an affiliate of the Indenture Trustee or Note Registrar) where Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Issuer in respect of the Notes and this Indenture may be served. The Issuer shall give prompt written notice to the Indenture Trustee of the location, and any change in the location, of such office or agency. If at any time the Issuer shall fail to maintain any such required office or agency or shall fail to furnish the Indenture Trustee with the address thereof, such presentations and surrenders may be made at the corporate trust place of payment and notices and demands may be made or served at the Corporate Trust Office of the Indenture Trustee as set forth in Section 11.01.

(b) The Issuer may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Issuer of its obligation to maintain an office or agency for such purposes. The Issuer shall give prompt written notice to the Indenture Trustee of any such designation or rescission and of any change in the location of any such other office or agency.

(c) The Issuer hereby designates the Corporate Trust Office of the Indenture Trustee or its agent as such office or agency of the Issuer in accordance with Section 2.04.

SECTION 4.11. Amendment of Security Documents. The Issuer shall not amend, modify or supplement, or permit or consent to any amendment, modification or supplement of, the Security Documents in any way that would be adverse to the Holders of the Notes in any material respect, except as described in Article 10 or as permitted in Article 8.

SECTION 4.12. Limited Purpose.

The Issuer shall not and shall not permit any of the Group Companies to engage in any business other than the business engaged in by the Issuer and the Group Companies on the Initial Issue Date and any Similar Business.

SECTION 4.13. Maintenance of Existence; Compliance. (a) Each of the Obligors shall, and the Issuer shall cause each Group Company to, (i) preserve, renew and keep in full force and effect its organizational existence and (ii) take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its business, except, in the case of clause (ii) above, to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect; and (b) comply with all contractual obligations and Requirements of Law except to the extent that failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect.

SECTION 4.14. Maintenance of Property; Insurance. Each of the Obligors shall, and the Issuer shall cause each Group Company to, (i) keep all property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted and (ii) maintain with financially sound and reputable insurance companies insurance

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on all its property in at least such amounts and against at least such risks (but including in any event public liability, product liability and business interruption) as are usually insured against in the same general area by companies engaged in the same or a Similar Business.

SECTION 4.15. Inspection of Property; Books and Records; Discussions. Each of the Obligors shall, and the Issuer shall cause each Group Company to, (i) keep proper books of records and account in which full, true and correct entries in conformity with GAAP and all Requirements of Law shall be made of all dealings and transactions in relation to its business and activities and (ii) following the occurrence and during the continuation of an Event of Default, permit representatives of the Indenture Trustee or any Holder to visit and inspect any of its properties and examine and make abstracts from any of its books and records at any reasonable time and as often as may reasonably be desired and to discuss the business, operations, properties and financial and other condition of the Group Companies with officers and employees of the Group Companies and with their independent certified public accountants.

SECTION 4.16. Reserved.

SECTION 4.17. Minimum Net Worth; Cash Balance.

(a) The Issuer and Guarantors on a consolidated basis shall maintain a Net Worth of no less than the Minimum Net Worth.

(b) The Issuer and the Guarantors shall maintain in the aggregate cash and Cash Equivalents of at least $20,000,000 in deposit accounts subject to Account Control Agreements (subject to Section 4.20).

SECTION 4.18. Designation of Subsidiaries; Covenant to Guarantee Obligations and Give Security.

(a) The Issuer shall at any time after the Initial Issue Date notify the Indenture Trustee if any Excluded Subsidiary no longer meets the criteria described in the definition of “Excluded Subsidiary,” and the Indenture Trustee will within three (3) Business Days of receipt notify the Holders by electronic mail of receipt of such notice.

(b) Upon (i) the formation or acquisition after the Initial Issue Date of any first-tier Domestic Subsidiary of the Issuer or (ii) any first-tier Domestic Subsidiary that was an Excluded Subsidiary ceasing to be an Excluded Subsidiary, the Issuer shall (A) cause such Subsidiary (other than any Excluded Subsidiary) to execute (x) a joinder to the Guarantee by the Guarantors set forth in Article 9 of this Indenture, in form and substance reasonably satisfactory to the Required Holders and (y) a supplement to the Security Documents as requested by the Indenture Trustee pursuant to the written direction of the Required Holders, and (B) upon the reasonable request of the Indenture Trustee (which request shall be given and made pursuant to the written direction of the Required Holders), cause the relevant Subsidiary to deliver to the Indenture Trustee a signed copy of an Opinion of Counsel, addressed to the Indenture Trustee, which Opinion of Counsel shall, with respect to such Subsidiary, cover good standing and existence, corporate authorization, enforceability, non-contravention of material agreements, Lien perfection, non-contravention of law, no required approvals, no registration, the Investment Company Act and absence of material litigation.

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(c) After the Initial Issue Date, the Issuer will deliver, or cause any respective Obligor to deliver, Account Control Agreements in respect of, and at the time of opening, any other Deposit Account maintained by any Obligor that is not subject to an effective Account Control Agreement.

SECTION 4.19. Additional Investments. The Issuer shall, or shall cause the Group Companies to, use commercially reasonable efforts to make at least $25,000,000 in Investments (the “Additional Investments”) after the Initial Issue Date in Life Policies reasonably similar to the assets held by the Issuer and the Group Companies on the Initial Issue Date. Promptly upon making the Additional Investments, the Issuer shall deliver an Additional Issuance Notice to the Indenture Trustee in accordance with Section 2.14.

SECTION 4.20. Post-Closing Obligations.

(a) Within 30 days after the Initial Issue Date (unless such time period is extended by the Required Holders in their sole discretion), the Issuer shall cause each Obligor to deliver (i) Account Control Agreements in respect of such Obligor’s Deposit Accounts (including, without limitation, the Deposit Accounts listed in Schedule 1.01(a)) and (ii) an Opinion of Counsel, addressed to the Indenture Trustee, which Opinion of Counsel shall cover enforceability, Lien perfection, non-contravention of law and no required approvals with respect to such Account Control Agreements.

(b) Within 30 days after the Initial Issue Date (unless such time period is extended by the Required Holders in their sole discretion), the Issuer shall deliver (i) the Irish Share Charge, which shall create in favor of the Indenture Trustee, for the benefit of the Holders, a legal, valid and enforceable security interest in the Collateral described therein and proceeds thereof and (ii) an Opinion of Counsel, addressed to the Indenture Trustee, which Opinion of Counsel shall cover enforceability, Lien perfection, non-contravention of law and no required approvals with respect to the Irish Share Charge.

(c) Within 10 days after the Initial Issue Date (unless such time period is extended by the Required Holders in their sole discretion), the Issuer shall fulfill its obligations under Section 2.13(b).

SECTION 4.21. Restrictions on Shinola. Notwithstanding any other provision herein to the contrary, Shinola may issue additional shares solely to effectuate the Irish Share Charge in satisfying the condition described in Section 4.20(b). Except as contemplated in the foregoing sentence, until the condition described in Section 4.20(b) is satisfied, and notwithstanding any other provision herein to the contrary, the Issuer shall not and shall not permit any of the Group Companies to make any Investment in, Restricted Payment or Asset Sale to or to sell, convey, transfer or make any other disposition of any asset to Shinola.

SECTION 4.22. White Eagle Credit Facility Savings Clause. Notwithstanding any other provision herein to the contrary, so long as the OLIPP Entities are Excluded Subsidiaries, any obligation or restriction herein applicable to a Group Company shall not be applicable to the OLIPP Entities to the extent compliance with such obligation or restriction would cause a breach of the White Eagle Credit Facility. Upon its knowledge of an

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exercise of this savings clause, the Issuer shall promptly deliver to the Indenture Trustee an Officers’ Certificate certifying as to and describing the contravention requiring the exception allowed in this Section 4.22, as advised by external counsel of the Issuer, in form and substance reasonably satisfactory to the Required Holders.

SECTION 4.23. Issuance of Equity Interests. None of the Obligors shall, and the Issuer shall not permit any Group Company to, allow Shinola or any CFC or CFC Holdco created after the Initial Issue Date to issue non-voting Equity Interests. For the avoidance of doubt, such issuance does not include profit participating notes to the extent not prohibited hereunder.

ARTICLE 5

DEFAULTS AND REMEDIES

SECTION 5.01. Events of Default. An “Event of Default” occurs if:

(a) the Issuer fails to pay (i) principal or premium, if any, of any Note when due, whether at its Final Maturity Date, upon optional or mandatory redemption, upon declaration of acceleration or otherwise or (ii) interest and other amounts due under the Transaction Documents (other than principal or premium) when due and, with respect to clause (ii), such failure continues for three Business Days,

(b) any Obligor fails to comply with any of its agreements (other than those referred to elsewhere in this Section 5.01) set forth in (i) Section 4.02(e), Section 4.03, Section 4.06, Section 4.09, Section 4.12, Section 4.13, Section 4.17, Section 4.18, Section 4.19 or Section 4.20, or (ii) other clauses of Section 4.02, Section 4.04, Section 4.05, Section 4.07, Section 4.08, Section 4.10, Section 4.11, Section 4.14 or Section 4.15 and in the case of this clause (ii) such failure continues for 20 days,

(c) any Obligor fails to comply with any of its agreements in the Notes or this Indenture (other than those referred to elsewhere in this Section 5.01) and such failure continues for 35 days,

(d) a representation or warranty of an Obligor set forth in the Note Purchase Agreement or any other Transaction Document is shown to be false in any material respect when made, and if capable of cure, such breach remains uncured for 20 days,

(e) any Obligor or any Subsidiary fails to pay any Indebtedness (other than Indebtedness owing to a Group Company) within any applicable grace period after final maturity or the acceleration of any such Indebtedness by the holders thereof because of a default, in each case, if the total amount of such Indebtedness unpaid or accelerated exceeds $1,000,000 or its foreign currency equivalent,

(f) any Obligor or any Significant Subsidiary pursuant to or within the meaning of any Bankruptcy Law:

(i) commences a voluntary case;

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(ii) consents to the entry of an order for relief against it in an involuntary case;

(iii) consents to the appointment of a custodian of it or for any substantial part of its property; or

(iv) makes a general assignment for the benefit of its creditors or takes any comparable action under any foreign laws relating to insolvency,

(g) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:

(i) is for relief against any Obligor or any Significant Subsidiary in an involuntary case;

(ii) appoints a custodian of any Obligor or any Significant Subsidiary or for any substantial part of its property; or

(iii) orders the winding up or liquidation of any Obligor or any Significant Subsidiary;

and the order or decree remains unstayed and in effect for 60 days,

(h) any Obligor or any Significant Subsidiary fails to pay final judgments aggregating in excess of $1,000,000 or its foreign currency equivalent (net of any amounts which are covered by enforceable insurance policies issued by solvent carriers), which judgments are not discharged, waived or stayed for a period of 60 days following the entry thereof,

(i) any Guarantee ceases to be in full force and effect (except as contemplated by the terms thereof) or any Guarantor denies or disaffirms its obligations under this Indenture or any Guarantee,

(j) any Obligor shall assert, in any pleading in any court of competent jurisdiction, that any Lien created under any Security Document is invalid or unenforceable,

(k) any Obligor fails to comply for 30 days after notice with its other agreements contained in the Security Documents except for a failure that would not be material to the Holders of the Notes and would not materially affect the value of the Collateral taken as a whole,

(l) there is a lapse of any Collateral Policy, excluding lapses of one or more of such policies as long as the aggregate Policy Valuation for all such lapsed policies described in this clause (b) shall be no more than $4,000,000,

(m) an ERISA Event shall have occurred, (ii) a trustee shall be appointed by a United States district court to administer any Pension Plan, (iii) the PBGC shall institute

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proceedings to terminate any Pension Plan(s), (iv) any Obligor or any of their respective ERISA Affiliates shall have been notified by the sponsor of a Multiemployer Plan that it has incurred or will be assessed Withdrawal Liability to such Multiemployer Plan and such entity does not have reasonable grounds for contesting such Withdrawal Liability or is not contesting such Withdrawal Liability in a timely and appropriate manner; or (v) any other event or condition shall occur or exist with respect to a Plan; and in each case in clauses (i) through (v) above, such event or condition, together with all other such events or conditions, if any, could, in the sole judgment of the Required Holders reasonably be expected to result in a Material Adverse Effect;

(n) any Obligor becomes an investment company required to be registered under the Investment Company Act of 1940, as amended, and such event has an adverse effect on the interests of the Holders (in the sole discretion of the Required Holders); or

(o) the Issuer commits a material breach of the Non-Prosecution Agreement dated April 30, 2012 between the Issuer and the United States Department of Justice (U.S. Attorney for the District of New Hampshire).

The foregoing shall constitute Events of Default whatever the reason for any such Event of Default and whether it is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body.

The term “Bankruptcy Law” means Title 11, United States Code, or any similar U.S. federal or state law for the relief of debtors (or their foreign equivalents). The term “custodian” means any receiver, trustee, assignee, liquidator, custodian or similar official under any Bankruptcy Law.

SECTION 5.02. Acceleration. If an Event of Default (other than an Event of Default specified in Section 5.01(f) or (g) with respect to the Issuer) occurs and is continuing, the Indenture Trustee or the Required Holders by notice to the Issuer may, and if such notice is given by the Required Holders such notice shall be given to the Issuer and the Indenture Trustee, declare that the principal of, and the premium, if any, and accrued but unpaid interest on, all Notes is due and payable. Upon such a declaration, such principal and interest shall be due and payable immediately. If an Event of Default specified in Section 5.01(f) or (g) with respect to the Issuer occurs, the principal of, and the premium, if any, and accrued but unpaid interest on, all the Notes shall ipso facto become and be immediately due and payable, without any declaration or other act on the part of the Indenture Trustee or any Holders. The Required Holders by notice to the Indenture Trustee may rescind an acceleration and its consequences if such Required Holders determine that the rescission would not conflict with any judgment or decree and if all existing Events of Default (except nonpayment of principal, interest or premium that has become due solely because of the acceleration) have been cured or waived.

SECTION 5.03. Other Remedies. If an Event of Default occurs and is continuing, the Indenture Trustee, after notice to the Holders and receipt of specific written direction from the Required Holders as to how to proceed, may pursue any available remedy at law or in equity to collect the payment of principal of or interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture.

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The Indenture Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Indenture Trustee or any Holder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. To the extent required by law, all available remedies are cumulative.

Following an Event of Default, the Required Holders may instruct the Indenture Trustee to deliver a notice (including a “Notice of Exclusive Control”) giving the Indenture Trustee exclusive control over any securities account or deposit account covered by a Securities Account Control Agreement or Account Control Agreement. The Indenture Trustee may give such notice only upon an Event of Default.

SECTION 5.04. Waiver of Past Defaults. Provided the Notes are not then due and payable by reason of a declaration of acceleration, the Required Holders by written notice to the Indenture Trustee may waive an existing Default or an Event of Default and its consequences except (a) a Default or an Event of Default in the payment of the principal of or interest on a Note, (b) a Default or an Event of Default arising from the failure to redeem or purchase any Note when required pursuant to the terms of this Indenture or (c) a Default or an Event of Default in respect of a provision that under Section 8.02 cannot be amended without the consent of each Holder affected. When a Default or an Event of Default is waived, it is deemed cured and the Issuer, the Indenture Trustee and the Holders will be restored to their former positions and rights under this Indenture, but no such waiver shall extend to any subsequent or other Default or an Event of Default or impair any consequent right. Any past Default or an Event of Default or compliance with any provisions may be waived with the consent of the Required Holders.

SECTION 5.05. Control by Majority. The Required Holders may direct the time, method and place of conducting any proceeding for any remedy available to the Indenture Trustee or of exercising any trust or power conferred on the Indenture Trustee. However, the Indenture Trustee may refuse to follow any direction that conflicts with law or this Indenture or that the Indenture Trustee determines is unduly prejudicial to the rights of any other Holder or that would involve the Indenture Trustee in personal liability. Prior to taking any action under this Indenture, the Indenture Trustee shall be entitled to indemnification satisfactory to it in its sole discretion against all losses and expenses caused by taking or not taking such action. The Holders understand and agree that in fulfilling its role as Indenture Trustee under the Securities Account Control Agreements, the Indenture Trustee shall act solely in accordance with the written direction of the Required Holders. Without limiting the generality of the foregoing, the Holders hereby authorize and direct the Indenture Trustee to hold any notices received from the Securities Intermediary for the benefit of the Holders, it being understood and agreed that the Indenture Trustee shall have no other duties or obligations with respect to such notices, except as expressly set forth in this Indenture.

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SECTION 5.06. Limitation on Suits. (a) Except to enforce the right to receive payment of principal, premium (if any) or interest when due, no Holder may pursue any remedy with respect to this Indenture or the Notes unless:

(i) the Holder gives the Indenture Trustee written notice stating that an Event of Default is continuing;

(ii) the Required Holders make a written request to the Indenture Trustee to pursue the remedy;

(iii) such Holder or Holders offer to the Indenture Trustee security or indemnity satisfactory to it against any loss, liability or expense; and

(iv) the Indenture Trustee does not comply with the request within 30 days after receipt of the request and the offer of security or indemnity.

(b) A Holder may not use this Indenture to prejudice the rights of another Holder or to obtain a preference or priority over another Holder.

SECTION 5.07. Rights of the Holders to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of principal of and interest on the Notes held by such Holder, on or after the respective due dates expressed or provided for in this Indenture or in the Notes, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder.

SECTION 5.08. Collection Suit by Indenture Trustee. If an Event of Default specified in Section 5.01(a) occurs and is continuing, the Indenture Trustee may recover judgment in its own name and as trustee of an express trust against the Issuer or any other obligor on the Notes for the whole amount then due and owing (together with interest on overdue principal and (to the extent lawful) on any unpaid interest at the rate provided for in the Notes) and the amounts provided for in Section 6.06.

SECTION 5.09. Indenture Trustee May File Proofs of Claim. The Indenture Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Indenture Trustee (including any claim for reasonable compensation, expenses disbursements and advances of the Indenture Trustee (including counsel, accountants, experts or such other professionals as the Indenture Trustee deems necessary, advisable or appropriate)) and the Holders allowed in any judicial proceedings relative to the Issuer or any Guarantor, their creditors or their property, shall be entitled to participate as a member, voting or otherwise, of any official committee of creditors appointed in such matters and, unless prohibited by law or applicable regulations, may vote on behalf of the Holders in any election of a trustee in bankruptcy or other Person performing similar functions and be a member of a creditors’ or other similar committee, and any custodian in any such judicial proceeding is hereby authorized by each Holder to make payments to the Indenture Trustee and, in the event that the Indenture Trustee shall consent to the making of such payments directly to the Holders, to pay to the Indenture Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee, its agents and its counsel, and any other amounts due the Indenture Trustee under Section 6.06.

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SECTION 5.10. Priorities. If the Indenture Trustee collects any money or property pursuant to this Article 5, it shall pay out such money or property in the following order:

FIRST: to the Indenture Trustee for amounts due under Section 6.06;

SECOND: to the Holders for amounts due and unpaid on the Notes for interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for interest;

THIRD: to the Holders for amounts due and unpaid on the Notes for principal, and premium, if any, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal and, if any, premium; and

FOURTH: to the Issuer.

The Indenture Trustee may fix a record date and payment date for any payment to the Holders pursuant to this Section 5.10. At least 15 days before such record date, the Indenture Trustee shall mail to each Holder and the Issuer a notice that states the record date, the payment date and amount to be paid.

SECTION 5.11. Waiver of Stay or Extension Laws. Neither the Issuer nor any Guarantor (to the extent it may lawfully do so) shall at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Issuer and each Guarantor (to the extent that it may lawfully do so) hereby expressly waive all benefit or advantage of any such law, and shall not hinder, delay or impede the execution of any power herein granted to the Indenture Trustee, but shall suffer and permit the execution of every such power as though no such law had been enacted.

ARTICLE 6

TRUSTEE

SECTION 6.01. Duties of Indenture Trustee. (a) Each Holder and each of the Obligors authorizes and directs the Indenture Trustee to enter into the Transaction Documents to which it is a party and to perform its obligations and exercise its rights thereunder in accordance therewith.

(b) Notwithstanding any provision of this Indenture or any other Transaction Document to the contrary:

(i) the Indenture Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and each Transaction

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Document to which it is a party and no implied duties, covenants or obligations shall be read into this Indenture or such Transaction Document against the Indenture Trustee (it being agreed that the permissive right of the Indenture Trustee to do things enumerated in this Indenture or any Transaction Document shall not be construed as a duty); and

(ii) in the absence of bad faith on its part, the Indenture Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Indenture Trustee and conforming to the requirements of this Indenture. The Indenture Trustee shall be under no duty to make any investigation as to any statement contained in any such instance, but may accept the same as conclusive evidence of the truth and accuracy of such statement or the correctness of such opinions. However, in the case of certificates or opinions required by any provision hereof to be provided to it, the Indenture Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture.

(c) The Indenture Trustee may not be relieved from liability for its own grossly negligent action, its own grossly negligent failure to act or its own willful misconduct, except that:

(i) this paragraph does not limit the effect of paragraph (b) of this Section 6.01;

(ii) the Indenture Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer unless it is proved that the Indenture Trustee was grossly negligent in ascertaining the pertinent facts;

(iii) the Indenture Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 5.05; and

(iv) no provision of this Indenture or any other Transaction Document shall require the Indenture Trustee to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers.

(d) Every provision of this Indenture or any other Transaction Document that in any way relates to the Indenture Trustee is subject to this Section 6.01.

(e) The Indenture Trustee shall not be liable for interest on any money received by it except as the Indenture Trustee may agree in writing with the Issuer.

(f) Money held in trust by the Indenture Trustee need not be segregated from other funds except to the extent required by law.

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(g) Every provision of this Indenture or any other Transaction Document relating to the conduct or affecting the liability of or affording protection to the Indenture Trustee shall be subject to the provisions of this Section.

SECTION 6.02. Rights of Indenture Trustee. (a) The Indenture Trustee may conclusively rely on any document believed by it to be genuine and to have been signed or presented by the proper person. The Indenture Trustee need not investigate any fact or matter stated in the document. Without limiting the generality of the foregoing, the following provisions of this Section 6.02 shall apply notwithstanding any provision of this Indenture or any other Transaction Document to the contrary.

(b) Before the Indenture Trustee acts or refrains from acting, it may require, at the expense of the Issuer, an Officers’ Certificate or an Opinion of Counsel or both. The Indenture Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on any Officers’ Certificate or Opinion of Counsel.

(c) The Indenture Trustee may act through agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care.

(d) The Indenture Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers; provided, however, that the Indenture Trustee’s conduct does not constitute willful misconduct or gross negligence.

(e) The Indenture Trustee may, at the expense of Issuer, consult with counsel of its own selection and the advice or opinion of counsel with respect to legal matters relating to this Indenture, the Notes, or any other Transaction Documents or any Opinion of Counsel shall be full and complete authorization and protection from liability in respect of any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel or Opinion of Counsel.

(f) The Indenture Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond, debenture, note or other paper or document unless requested in writing to do so by the Required Holders, but the Indenture Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Indenture Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Issuer, personally or by agent or attorney, at the expense of the Issuer and shall incur no liability of any kind by reason of such inquiry or investigation.

(g) The Indenture Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture or any other Transaction Document at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Indenture Trustee security or indemnity satisfactory to the Indenture Trustee in its sole discretion against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction.

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(h) The rights, privileges, protections, immunities and benefits given to the Indenture Trustee, including its right to be compensated, reimbursed and indemnified as provided in Section 6.06, are extended to, and shall be enforceable by, the Indenture Trustee in each of its capacities hereunder, and each agent, custodian and other Person employed to act hereunder.

(i) The Indenture Trustee shall not be liable for any action taken or omitted by it in good faith at the direction of the Required Holders or the Holders of a majority in principal amount of the Notes, including, without limitation, any action with respect to the time, method and place of conducting any proceedings for any remedy available to the Indenture Trustee or the exercising of any power conferred by this Indenture or any other Transaction Document.

(j) Any action taken, or omitted to be taken, by the Indenture Trustee in good faith pursuant to this Indenture or any other Transaction Document upon the request or authority or consent of any Person who, at the time of making such request or giving such authority or consent, is the Holder of any Note shall be conclusive and binding upon future Holders of Notes and upon Notes executed and delivered in exchange therefor or in place thereof.

(k) In no event shall the Indenture Trustee be responsible or liable for any failure or delay in the performance of its obligations hereunder arising out of or caused by, directly or indirectly, forces beyond its control, including, without limitation, any force majeure event, or strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, and interruptions, loss or malfunctions of utilities, communications or computer (software and hardware) services; it being understood that the Indenture Trustee shall use commercially reasonable efforts which are consistent with accepted practices in the banking industry to resume performance as soon as practicable under the circumstances.

(l) In the event the signature of the Indenture Trustee is required in connection with any sale of any portion of the Collateral, the Issuer, or if during or after an Event of Default, the Holders, shall ensure that the language set forth in Exhibit C shall be included in any document where such signature(s) may be required. The failure of such language to be so included shall excuse the Indenture Trustee from being required to join in the execution of such documents, without regard to any consequences that may result therefrom.

(m) Any request or direction of the Issuer mentioned herein shall be sufficiently evidenced by an Issuer Order.

(n) As a condition to the taking or omitting of any action by it hereunder, the Indenture Trustee may at the expense of the Issuer consult with counsel and the advice of such counsel or any opinion of counsel shall be full and complete authorization and protection in respect of any action taken or omitted by it hereunder in good faith and in reliance thereon. The Indenture Trustee shall not be required to take any action hereunder or otherwise if it shall have reasonably determined, on the advice of counsel,

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that such action is likely to result in liability on the part of the Indenture Trustee for which it has not received adequate indemnity or is contrary to the terms hereof or is otherwise contrary to law.

(o) Whenever this Indenture or any other Transaction Document provides that an action may be taken or not taken at the option, election or in the discretion of the Indenture Trustee, the Indenture Trustee shall have no obligation or duty to exercise such option, make such election, or exercise such discretion except upon the reasonable written instructions of the Issuer or the Required Holders. The Indenture Trustee shall have no liability to any party for carrying out any such direction.

(p) The permissive rights of the Indenture Trustee to take or refrain from taking any action enumerated in this Indenture or any other Transaction Document shall not be treated as a duty.

(q) Notwithstanding anything contained herein or in any other Transaction Document to the contrary, the Indenture Trustee (as such and in its individual capacity) shall have no duty or responsibility to perform any calculations for, or make any determinations as to the amounts, times, recipients, or other particulars of, any payments and/or transfers to be made by the Indenture Trustee or any other Person under this Indenture or any other Transaction Document, except as expressly required by the terms of this Indenture.

(r) The Indenture Trustee shall not be responsible for or in respect of and makes no representation as to the validity or sufficiency of any provision of this Indenture or for the due execution hereof by the Issuer or any other Obligor or for the form, character, genuineness, sufficiency, value or validity of any of the Collateral, and the Indenture Trustee shall in no event assume or incur any liability, duty or obligation to the Issuer, to any Holders, or to any other Person other than as expressly provided for herein.

(s) The Indenture Trustee shall not be required to give any bond or surety in respect of the execution of this Indenture or any other Transaction Document or otherwise.

(t) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct, rights, powers, duties obligations or affecting the liability of or affording protection to the Indenture Trustee shall be subject to the provisions of this Section 6.02.

(u) The Issuer hereby agrees and, as evidenced by its acceptance of any benefits hereunder, each Holder agrees that the Indenture Trustee in any capacity has not provided and will not provide in the future, any advice, counsel or opinion regarding the tax, financial, investment or insurance implications and consequences of the preservation, funding, ongoing administration or otherwise with respect to the Collateral.

(v) The Indenture Trustee shall be under no obligation to institute, conduct or defend any litigation under this Indenture or in relation to this Indenture or any other

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Transaction Document, at the request, order or direction of any of the Holders, pursuant to the provisions of this Indenture or any other Transaction Document, unless such Holders shall have offered to the Indenture Trustee reasonable security or indemnity against the costs, expenses and liabilities that may be incurred therein or thereby.

(w) If the Indenture Trustee believes inconsistent alternative courses of action are permitted or required by the terms of this Indenture or any of the Transaction Documents, to which the Indenture Trustee is a party, believes that the terms of the Indenture or any of the Transaction Documents, to which the Indenture Trustee is a party are ambiguous, or is unsure as to the application, intent, interpretation or meaning of any provision of this Indenture or any other Transaction Document to which it is a party, the Indenture Trustee after reasonable diligence and consultation with counsel, shall take such action which, in its view, is in the best interest of the Holders and consistent with this Indenture unless it otherwise receives written direction from the Required Holders prior to such action, and notwithstanding any provision of this Indenture or any Transaction Document, or otherwise, the Indenture Trustee shall have no liability to any Person for any such action or following such direction.

(x) The receipt by the Indenture Trustee of any reports, information or other documents that are provided to the Indenture Trustee for purposes of enabling the sending party to comply with its document delivery requirements hereunder shall not constitute constructive or actual notice of any information contained therein or determinable from any information contained therein, including any other Person’s compliance with any of its covenants, representations or warranties hereunder, unless otherwise specifically set forth in this Indenture.

(y) The parties hereto hereby agree that to the extent that any security or instrument issued by the Issuer is rated by a nationally recognized statistical rating organization, Wilmington Trust, National Association, whether in its capacity as Indenture Trustee or any other capacity hereunder, shall have no duty or obligation to (i) maintain any password-protected web site within the meaning of 17 CFR 240.17g-5 (a “Site”), or (ii) upload any information required to be maintained on such Site.

SECTION 6.03. Individual Rights of Indenture Trustee. The Indenture Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Issuer or its Affiliates with the same rights it would have if it were not Indenture Trustee. The Indenture Trustee and its affiliates have engaged, currently are engaged and may in the future engage in financial or other transactions with the Issuer and its affiliates in the Ordinary Course of Business. Any Note Registrar may do the same with like rights. However, the Indenture Trustee must comply with Section 6.10.

SECTION 6.04. Indenture Trustee’s Disclaimer. The Indenture Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture, any Guarantee, the Notes, any Security Documents or any other Transaction Documents, it shall not be accountable for the Issuer’s use of the proceeds from the Notes, and it shall not be responsible for any statement of the Issuer or any Guarantor in this Indenture or in any document issued in connection with the sale of the Notes or in the Notes other than the

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Indenture Trustee’s certificate of authentication. The Indenture Trustee shall not be charged with knowledge of any Default or Event of Default or of the identity of any Significant Subsidiary unless either (a) a Trust Officer shall have actual knowledge thereof or (b) a Trust Officer shall have received written notice thereof in accordance with Section 11.01 hereof from the Issuer, any Guarantor or any Holder.

SECTION 6.05. Reserved.

SECTION 6.06. Compensation and Indemnity. The Issuer shall pay to the Indenture Trustee from time to time reasonable compensation for its services as set forth in a separate instrument. The Indenture Trustee’s compensation shall not be limited by any law on compensation of a trustee of an express trust. The Issuer shall reimburse the Indenture Trustee upon request for all reasonable out-of-pocket expenses incurred or made by it, including costs of collection, in addition to the compensation for its services. Such expenses shall include the reasonable compensation and expenses, disbursements and advances of the Indenture Trustee’s agents, counsel, accountants and experts. The Issuer and each Guarantor, jointly and severally, shall indemnify, protect, defend and hold harmless the Indenture Trustee, and each of its officers, directors, shareholders, employees and agents (collectively, the “Indemnified Persons”) against any and all loss, liability, claim, damage or expense (including reasonable attorneys’ fees and expenses) incurred by such Person or in connection with the acceptance or administration of this trust and the performance of its duties hereunder and under any other Transaction Document, including, without limitation, the costs and expenses of (i) enforcing this Indenture or any other Transaction Document or a Guarantee against the Issuer or a Guarantor (including this Section 6.06), (ii) indemnifying, defending, holding harmless or otherwise reimbursing any party to any Account Control Agreement pursuant to the terms thereof and (iii) defending itself against or investigating any claim (whether asserted by the Issuer, any Guarantor, any Holder or any other Person). The obligation to pay such amounts shall survive the payment in full or defeasance of the Notes or the removal or resignation of the Indenture Trustee. The Indenture Trustee shall notify the Issuer of any claim for which it may seek indemnity promptly upon obtaining actual knowledge thereof (such notice, the “Claim Notice”); provided, however, that any failure so to notify the Issuer shall not relieve the Issuer or any Guarantor of its indemnity obligations hereunder. The Issuer need not reimburse any expense or indemnify against any loss, liability or expense incurred by an indemnified party through such party’s own willful misconduct, gross negligence or bad faith.

To secure the Issuer’s and the Guarantors’ payment obligations in this Section 6.06, the Indenture Trustee shall have a Lien prior to the Notes on all money or property held or collected by the Indenture Trustee other than money or property held in trust to pay principal of and interest on particular Notes.

The Issuer’s and the Guarantors’ payment obligations pursuant to this Section 6.06 shall survive the satisfaction or discharge of this Indenture, any rejection or termination of this Indenture under any bankruptcy law or the resignation or removal of the Indenture Trustee. Without prejudice to any other rights available to the Indenture Trustee under applicable law, when the Indenture Trustee incurs expenses after the occurrence of a Default specified in Section 5.01(f) or Section 5.01(g) with respect to the Issuer, the expenses are intended to constitute expenses of administration under the Bankruptcy Law.

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No provision of this Indenture shall require the Indenture Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if repayment of such funds or adequate indemnity against such risk or liability is not assured to its satisfaction.

The Issuer may assume the defense of such proceeding, with a nationally recognized (or regionally recognized, if local counsel is necessary in such jurisdiction) counsel of its choosing, by delivering written notice of the Issuer’s election to do so to the Indemnified Person (the “Selection Notice”); provided, that, without limiting the generality of subsections (i)-(iii) of this paragraph, such counsel shall not assume the defense of any Indemnified Person if such Indemnified Person objects to the appointment of such counsel within a commercially reasonable time period after its receipt of the Selection Notice. The parties hereto hereby agree that for purposes of the proviso immediately preceding this sentence, a “commercially reasonable time period” shall include a minimum of fifteen (15) business days after the Indenture Trustee’s receipt of the Selection Notice. After delivery of the Selection Notice and the retention of such counsel by the Issuer without objection by the Indenture Trustee as provided in this Section 6.06 (the “Retained Counsel”), the Issuer shall not be liable to the Indemnified Person under this Indenture for any fees or expenses of counsel subsequently incurred by the Indemnified Person with respect to the same proceeding, provided that if (i) the employment of counsel other than the Retained Counsel has been previously authorized by the Issuer in writing with respect to the loss, liability or expense described in the Claim Notice, (ii) the Indemnified Person shall have reasonably concluded that there may be a conflict of interest between the Issuer and the Indemnified Person in the conduct of any such defense after providing prior written notice to the Issuer of the Indemnified Person’s reasonable conclusion of a conflict of interest and providing the Issuer a reasonable opportunity, and the Indemnified Person’s reasonable cooperation, to cure such conflict, if practicable, or (iii) the Issuer shall not, in fact, within a commercially reasonable amount of time after its receipt of the Claim Notice, have employed counsel to assume the defense of such proceeding, then the reasonable fees and expenses of the Indemnified Person’s counsel shall be borne by the Issuer in accordance with this Section 6.06. For the avoidance of doubt, the Indemnified Person shall have the right to employ their own counsel in any proceeding for which a Claim Notice has been received by the Issuer, at the Indemnified Person’s sole cost and expense, in which event the Issuer shall have no further obligation or liability to the Indemnified Person under this Indenture for any fees or expenses of counsel subsequently incurred by the Indemnified Person with respect to such proceeding. Neither the Issuer nor the Indemnified Person will unreasonably withhold its or their consent to any proposed settlement of a Claim, provided, however, that any such consent will be without prejudice to the right of the Indemnified Person to receive indemnification hereunder.

SECTION 6.07. Replacement of Indenture Trustee. (a) The Indenture Trustee may resign at any time by so notifying the Issuer. The Required Holders may remove the Indenture Trustee by so notifying the Indenture Trustee and may appoint a successor Indenture Trustee. The Issuer shall remove the Indenture Trustee if:

(i) the Indenture Trustee fails to comply with Section 6.09;

(ii) the Indenture Trustee is adjudged bankrupt or insolvent;

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(iii) a receiver or other public officer takes charge of the Indenture Trustee or its property; or

(iv) the Indenture Trustee otherwise becomes incapable of acting.

(b) If the Indenture Trustee resigns or is removed by the Issuer or by the Required Holders and such Required Holders do not reasonably promptly appoint a successor Indenture Trustee, or if a vacancy exists in the office of Indenture Trustee for any reason (the Indenture Trustee in such event being referred to herein as the retiring Indenture Trustee), the Issuer shall promptly appoint a successor Indenture Trustee.

(c) A successor Indenture Trustee shall deliver a written acceptance of its appointment to the retiring Indenture Trustee and to the Issuer. Thereupon the resignation or removal of the retiring Indenture Trustee shall become effective, and the successor Indenture Trustee shall have all the rights, powers and duties of the Indenture Trustee under this Indenture. The successor Indenture Trustee shall mail a notice of its succession to the Holders. The retiring Indenture Trustee shall promptly transfer all property held by it as Indenture Trustee to the successor Indenture Trustee, subject to the Lien provided for in Section 6.06.

(d) If a successor Indenture Trustee does not take office within 60 days after the retiring Indenture Trustee resigns or is removed, the retiring Indenture Trustee or the Holders of 10% in principal amount of the Notes may petition at the expense of the Issuer any court of competent jurisdiction for the appointment of a successor Indenture Trustee.

(e) Notwithstanding the replacement of the Indenture Trustee pursuant to this Section 6.07, the Issuer’s and each Guarantor’s obligations under Section 6.06 shall continue for the benefit of the retiring Indenture Trustee.

(f) With respect to the role of the Securities Intermediary under the Securities Account Control Agreements, the Securities Intermediary may also be removed at any time by written notice from the Indenture Trustee, at the request of the Required Holders. In the case of resignation or removal of the Securities Intermediary under the Securities Account Control Agreements, the Indenture Trustee shall appoint a successor that satisfies the provisions of the Securities Account Control Agreements.

SECTION 6.08. Successor Indenture Trustee by Merger. If the Indenture Trustee consolidates with, merges with or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation or banking association without any further act shall be the successor Indenture Trustee.

In case at the time such successor or successors by merger, conversion or consolidation to the Indenture Trustee shall succeed to the trusts created by this Indenture any of the Notes shall have been authenticated but not delivered, any such successor to the Indenture Trustee may adopt the certificate of authentication of any predecessor trustee, and deliver such Notes so authenticated; and in case at that time any of the Notes shall not have been authenticated, any successor to the Indenture Trustee may authenticate such Notes either in the

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name of any predecessor hereunder or in the name of the successor to the Indenture Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Notes or in this Indenture provided that the certificate of the Indenture Trustee shall have.

SECTION 6.09. Eligibility; Disqualification. The Indenture Trustee shall have a combined capital and surplus of at least $100,000,000 as set forth in its most recent published annual report of condition.

SECTION 6.10. Confidential Information. The Indenture Trustee, in its individual capacity and as Indenture Trustee, agrees and acknowledges that all information provided to the Indenture Trustee by the Issuer or any Group Company (or any direct or indirect equityholder of the Issuer or such Group Company) or any Holder may be considered to be proprietary and confidential information. The Indenture Trustee agrees to take all reasonable precautions necessary to keep such information confidential, which precautions shall be no less stringent than those that the Indenture Trustee employs to protect its own confidential information. The Indenture Trustee shall not disclose to any third party other than as set forth herein or in any other Transaction Document, and shall not use for any purpose other than the exercise of the Indenture Trustee’s rights and the performance of its obligations under this Indenture or any other Transaction Document, any such information without the prior written consent of the Issuer or such Holder (or such holder of a beneficial interest in the Notes), as applicable. The Indenture Trustee shall limit access to such information received hereunder, and shall have the right to disclose any and all such information, to (a) its directors, officers, managers, employees and agents and (b) its legal advisors, inside and outside auditors, accountants, and other advisors, to each of whom disclosure of such information is necessary for the purposes described above; provided, however, that in each case such party has expressly agreed to maintain such information in confidence under terms and conditions substantially identical to the terms of this Section 6.10.

In the event the Indenture Trustee is required to disclose any such information received hereunder in order to comply with any Requirements of Law, it may disclose such information only to the extent necessary for such compliance; provided, however, that it shall give the Issuer or any Holder (or any holder of a beneficial interest in the Notes), as applicable, reasonable advance written notice of any court proceeding in which such disclosure may be required pursuant to a court order so as to afford the Issuer or any Holder (or any holder of a beneficial interest in the Notes), as applicable, full and fair opportunity to oppose the issuance of such order and to appeal therefrom and shall cooperate reasonably with the Issuer or any Holder (or any holder of a beneficial interest in the Notes), as applicable, in opposing such court order and in securing confidential treatment of any such information to be disclosed and/or obtaining a protective order narrowing the scope of such disclosure.

The Note Registrar agrees to be bound by this Section 6.10 to the same extent as the Indenture Trustee.

Notwithstanding anything herein to the contrary, the foregoing shall not be construed to prohibit (i) disclosure of any and all information that is or becomes publicly known, (ii) disclosure of any and all information (A) if required to do so by any Requirements of Law, (B) to any government agency or regulatory body having or claiming authority to regulate or

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oversee any respects of the Indenture Trustee’s business or that of its affiliates, or (C) pursuant to any subpoena, civil investigative demand or similar demand or request of any court, regulatory authority, arbitrator or arbitration to which the Indenture Trustee, or an officer, director, employer, shareholder or affiliate of any of the foregoing is a party.

ARTICLE 7

SATISFACTION AND DISCHARGE

SECTION 7.01. Satisfaction and Discharge of Indenture.

(a) This Indenture, the Notes, the Guarantee and the other Security Documents shall cease to be of further effect except as to (i) any surviving rights herein expressly provided for and (ii) in the case of clause (1)(B) below, the rights of the Holders hereunder to receive payment of the Note Balance of and interest on the Notes and any other rights of the Holders hereunder, when

(1) either (A) all Notes theretofore authenticated and delivered to Holders (other than (i) Notes which have been mutilated, destroyed, lost or stolen and which have been replaced or paid as provided in Section 2.05, and (ii) Notes for which payment of money has theretofore been paid to the Indenture Trustee and thereafter repaid to the Issuer, as provided in Section 5.10) have been delivered to the Note Registrar for cancellation; or (B) all such Notes not theretofore delivered to the Note Registrar for cancellation have been paid in full;

(2) the Issuer has paid or caused to be paid all other sums payable hereunder or reasonably expected to become payable hereunder and the other Transaction Documents (including amounts associated with the termination thereof) by the Issuer to the Indenture Trustee, the Note Registrar, and each of the Holders (in each case, if any); and

(3) the Issuer has delivered to the Indenture Trustee an Officers’ Certificate stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with.

Notwithstanding the foregoing, the rights, privileges, protection and immunities afforded the Indenture Trustee under Article 6, the obligations of the Issuer and the Guarantors to the Indenture Trustee under Section 6.06 shall survive satisfaction and discharge of this Indenture.

(b) Upon payment of all the outstanding Notes in full, the Indenture Trustee shall (i) deliver or cause to be delivered to the Issuer any releases or termination statements prepared by the Issuer which the Issuer reasonably requests to evidence discharge of the lien hereof as to the Trust Estate; and (ii) deliver or cause to be delivered all other items reasonably requested by the Issuer, and take all other actions reasonably requested by the Issuer, in order to cause transfer of any portion of the Collateral to the relevant Obligor or its designee.

(c) Upon the satisfaction and discharge of this Indenture pursuant to the foregoing, the Indenture Trustee shall pay, in accordance with an Issuer Order all amounts, if any, previously received from the Issuer and not otherwise disbursed.

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SECTION 7.02. Application of Trust Money.

All cash paid to the Indenture Trustee pursuant to this Indenture shall be applied by the Indenture Trustee in accordance with Section 2.08 or Section 5.10, as applicable, to pay the Persons entitled thereto, the interest, principal and other amounts payable on the Notes and to pay or reimburse the Indenture Trustee pursuant to Section 6.06.

ARTICLE 8

AMENDMENTS AND WAIVERS

SECTION 8.01. Without Consent of the Holders. The Issuer, the Guarantors and the Indenture Trustee may amend this Indenture, the Notes or the Security Documents without notice to or consent of any Holder:

(i) to cure any ambiguity, omission, mistake, defect or inconsistency;

(ii) to add additional Guarantees with respect to the Notes;

(iii) to add to the covenants of the Issuer for the benefit of the Holders or to surrender any right or power herein conferred upon any Obligor;

(iv) to make any change that does not adversely affect the rights of any Holder; or

(v) to add additional assets as Collateral to secure the Notes; or

(vi) to release Collateral from the Lien pursuant to this Indenture and the Security Documents when permitted or required by this Indenture or the Security Documents.

After an amendment under this Section 8.01 becomes effective, the Issuer shall mail to the Holders a notice briefly describing such amendment. The failure to give such notice to all Holders, or any defect therein, shall not impair or affect the validity of an amendment under this Section 8.01.

SECTION 8.02. With Consent of the Holders. (a) The Issuer, the Guarantors and the Indenture Trustee may amend this Indenture, the Notes and the Security Documents with the written consent of the Required Holders. However, without the consent of each Holder of an outstanding Note affected, an amendment may not:

(i) reduce the amount of Notes whose Holders must consent to an amendment,

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(ii) reduce the rate of or extend the time for payment of interest on any Note,

(iii) reduce the principal of or change the Final Maturity Date of any Note,

(iv) reduce the premium payable upon the redemption of any Note or change the time at which any Note may be redeemed in accordance with Article 3,

(v) make any Note payable in money other than that stated in such Note,

(vi) expressly subordinate the Notes or any Guarantees to any other Indebtedness of the Issuer or any Guarantor,

(vii) impair the right of any Holder to receive payment of principal of or premium, if any, and interest on such Holder’s Notes on or after the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such Holder’s Notes,

(viii) make any change in this Section 8.02,

(ix) modify any Guarantees in any manner adverse to the Holders,

(x) release all or substantially all of the Collateral from the Lien of this Indenture and the Security Documents, or

(xi) make any change in the provisions in this Indenture dealing with the application of proceeds of Collateral that would adversely affect the Holders of the Notes.

It shall not be necessary for the consent of the Holders under this Section 8.02 to approve the particular form of any proposed amendment, but it shall be sufficient if such consent approves the substance thereof.

(b) After an amendment under this Section 8.02 becomes effective, the Issuer shall mail to the Holders a notice briefly describing such amendment. The failure to give such notice to all Holders, or any defect therein, shall not impair or affect the validity of an amendment under this Section 8.02.

SECTION 8.03. Revocation and Effect of Consents and Waivers. (a) A consent to an amendment or a waiver by a Holder of a Note shall bind the Holder and every subsequent Holder of that Note or portion of the Note that evidences the same debt as the consenting Holder’s Note, even if notation of the consent or waiver is not made on the Note. However, any such Holder or subsequent Holder may revoke the consent or waiver as to such Holder’s Note or portion of the Note if the Indenture Trustee receives the notice of revocation before the date on which the Indenture Trustee receives an Officers’ Certificate from the Issuer

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certifying that the requisite principal amount of Notes have consented. After an amendment or waiver becomes effective, it shall bind every Holder. An amendment or waiver becomes effective upon the (i) receipt by the Issuer or the Indenture Trustee of consents by the Holders of the requisite principal amount of Notes, (ii) satisfaction of conditions to effectiveness as set forth in this Indenture and any indenture supplemental hereto containing such amendment or waiver, (iii) execution of such amendment or waiver (or supplemental indenture) by the Issuer, the Guarantors and the Indenture Trustee and (iv) delivery to the Indenture Trustee of each Officers’ Certificate and Opinion of Counsel required under Section 8.05 and Article 11 hereof.

(b) The Issuer may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to give their consent or take any other action described above or required or permitted to be taken pursuant to this Indenture. If a record date is fixed, then notwithstanding Section 8.03(a), those Persons who were Holders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to give such consent or to revoke any consent previously given or to take any such action, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 120 days after such record date.

SECTION 8.04. Notation on or Exchange of Notes. If an amendment, supplement or waiver changes the terms of a Note, the Issuer may require the Holder of the Note to deliver it to the Indenture Trustee. The Indenture Trustee may place an appropriate notation on the Note regarding the changed terms and return it to the Holder. Alternatively, if the Issuer or the Indenture Trustee so determines, the Issuer in exchange for the Note shall issue and the Indenture Trustee, in accordance with an Issuer Order, shall authenticate a new Note that reflects the changed terms. Failure to make the appropriate notation or to issue a new Note shall not affect the validity of such amendment, supplement or waiver.

SECTION 8.05. Indenture Trustee to Sign Amendments. The Indenture Trustee shall sign any amendment, supplement or waiver authorized pursuant to this Article 8 if the amendment does not adversely affect the rights, duties, liabilities or immunities of the Indenture Trustee. If it does, the Indenture Trustee may but need not sign it. In signing any amendment, the Indenture Trustee shall be entitled to receive indemnity reasonably satisfactory to it and shall be provided with, and shall be fully protected in relying upon, an Officers’ Certificate and an Opinion of Counsel stating that such amendment, supplement or waiver (i) is authorized or permitted by this Indenture, (ii) is the legal, valid and binding obligation of the Issuer and the Guarantors, enforceable against them in accordance with its terms, subject to customary exceptions, (iii) has been authorized by the requisite principal amount of Notes, (iv) complies with the provisions hereof (including Section 8.03), and (v) will not adversely affect the interests of any Holder.

SECTION 8.06. Payment for Consent. Neither the Issuer nor any Affiliate of the Issuer shall, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Notes unless such consideration is offered to be paid to all Holders that so consent, waive or agree to amend in the time frame set forth in solicitation documents relating to such consent, waiver or agreement.

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SECTION 8.07. Additional Voting Terms; Calculation of Principal Amount. All Notes issued under this Indenture shall vote and consent together on all matters (as to which any of such Notes may vote) as one class. Determinations as to whether Holders of the requisite aggregate principal amount of Notes have concurred in any direction, waiver or consent shall be made in accordance with this Article 8.

ARTICLE 9

GUARANTEES

SECTION 9.01. Guarantees. (a) Each Guarantor hereby jointly and severally irrevocably and unconditionally guarantees as a primary obligor and not merely as a surety on a senior basis to each Holder and to the Indenture Trustee and its successors and assigns (i) the full and punctual payment when due, whether at the Final Maturity Date, by acceleration, by redemption or otherwise, of all obligations of the Issuer under this Indenture (including obligations to the Indenture Trustee and the Notes, whether for payment of principal of, or premium, if any, or interest on, the Notes and all other monetary obligations of the Issuer under this Indenture and the Notes, and (ii) the full and punctual performance within applicable grace periods of all other obligations of the Issuer, whether for fees, expenses, indemnification or otherwise under this Indenture and the Notes (all the foregoing being hereinafter collectively called the “Guaranteed Obligations”). Each Guarantor further agrees that the Guaranteed Obligations may be extended or renewed, in whole or in part, without notice or further assent from each such Guarantor, and that each such Guarantor shall remain bound under this Article 9 notwithstanding any extension or renewal of any Guaranteed Obligation. The Guaranteed Obligations of a Guarantor will be secured by security interests (subject to Permitted Liens) in the Collateral owned by such Guarantor to the extent provided for in the Security Documents and as required pursuant to Sections 4.08, 4.09 and 4.18.

(b) Each Guarantor waives presentation to, demand of payment from and protest to the Issuer of any of the Guaranteed Obligations and also waives notice of protest for nonpayment. Each Guarantor waives notice of any default under the Notes or the Guaranteed Obligations. The obligations of each Guarantor hereunder shall not be affected by (i) the failure of any Holder or the Indenture Trustee to assert any claim or demand or to enforce any right or remedy against the Issuer or any other Person under this Indenture, the Notes, any Security Document, or any other agreement or otherwise; (ii) any extension or renewal of this Indenture, the Notes, any Security Document or any other agreement; (iii) any rescission, waiver, amendment or modification of any of the terms or provisions of this Indenture, the Notes, any Security Document or any other agreement; (iv) the release of any security held by any Holder or the Indenture Trustee for the Guaranteed Obligations or any Guarantor; (v) the failure of any Holder or the Indenture Trustee to exercise any right or remedy against any other guarantor of the Guaranteed Obligations; or (vi) any change in the ownership of such Guarantor, except as provided in Section 9.02(b).

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(c) Each Guarantor hereby waives any right to which it may be entitled to have its obligations hereunder divided among the Guarantors, such that such Guarantor’s obligations would be less than the full amount claimed. Each Guarantor hereby waives any right to which it may be entitled to have the assets of the Issuer or any other Guarantor first be used and depleted as payment of the Issuer’s or such Guarantor’s obligations hereunder prior to any amounts being claimed from or paid by such Guarantor hereunder. Each Guarantor hereby waives any right to which it may be entitled to require that the Issuer be sued prior to an action being initiated against such Guarantor.

(d) Each Guarantor further agrees that its Guarantee herein constitutes a guarantee of payment, performance and compliance when due (and not a guarantee of collection) and waives any right to require that any resort be had by any Holder or the Indenture Trustee to any security held for payment of the Guaranteed Obligations.

(e) Except as expressly set forth in Sections 7.01 and 9.02, the obligations of each Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense of setoff, counterclaim, recoupment or termination whatsoever or by reason of the invalidity, illegality or unenforceability of the Guaranteed Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of each Guarantor herein shall not be discharged or impaired or otherwise affected by the failure of any Holder or the Indenture Trustee to assert any claim or demand or to enforce any remedy under this Indenture, the Notes, any Security Document or any other agreement, by any waiver or modification of any thereof, by any default, failure or delay, willful or otherwise, in the performance of the obligations, or by any other act or thing or omission or delay to do any other act or thing which may or might in any manner or to any extent vary the risk of any Guarantor or would otherwise operate as a discharge of any Guarantor as a matter of law or equity.

(f) Except as expressly set forth in Sections 7.01 and 9.02, each Guarantor agrees that its Guarantee shall remain in full force and effect until payment in full of all the Guaranteed Obligations. Except as expressly set forth in Sections 7.01 and 9.02, each Guarantor further agrees that its Guarantee herein shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of principal of or interest on any Guaranteed Obligation is rescinded or must otherwise be restored by any Holder or the Indenture Trustee upon the bankruptcy or reorganization of the Issuer or otherwise.

(g) In furtherance of the foregoing and not in limitation of any other right which any Holder or the Indenture Trustee has at law or in equity against any Guarantor by virtue hereof, upon the failure of the Issuer to pay the principal of or interest on any Guaranteed Obligation when and as the same shall become due, whether at maturity, by acceleration, by redemption or otherwise, or to perform or comply with any other Guaranteed Obligation, each Guarantor hereby promises to and shall, upon receipt of written demand by the Indenture Trustee in accordance with this Indenture, forthwith pay, or cause to be paid, in cash, to the Holders or the Indenture Trustee an amount equal

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to the sum of (i) the unpaid principal amount of such Guaranteed Obligations, (ii) accrued and unpaid interest on such Guaranteed Obligations (but only to the extent not prohibited by applicable law) and (iii) all other monetary obligations of the Issuer then due to the Holders or the Indenture Trustee in respect of the Guaranteed Obligations.

(h) Each Guarantor agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any Guaranteed Obligations guaranteed hereby until payment in full of all Guaranteed Obligations. Each Guarantor further agrees that, as between it, on the one hand, and the Holders and the Indenture Trustee, on the other hand, (i) the maturity of the Guaranteed Obligations guaranteed hereby may be accelerated as provided in Article 5 for the purposes of any Guarantee herein, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Guaranteed Obligations guaranteed hereby, and (ii) in the event of any declaration of acceleration of such Guaranteed Obligations as provided in Article 5, such Guaranteed Obligations (whether or not due and payable) shall forthwith become due and payable by such Guarantor for the purposes of this Section 9.01.

(i) Each Guarantor also agrees to pay any and all costs and expenses (including reasonable attorneys’ fees and expenses) incurred by the Indenture Trustee or any Holder in enforcing any rights under this Section 9.01.

(j) Upon request of the Indenture Trustee, each Guarantor shall execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture.

SECTION 9.02. Limitation on Liability. (a) Any term or provision of this Indenture to the contrary notwithstanding, the maximum aggregate amount of the Guaranteed Obligations guaranteed hereunder by any Guarantor shall not exceed the maximum amount that can be hereby guaranteed without rendering the Guarantee, as it relates to such Guarantor, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally.

(b) Except for such Guaranteed Obligation that shall survive pursuant to the express terms of this Indenture, a Guarantee as to any Guarantor shall terminate and be of no further force or effect and such Guarantor shall be deemed to be automatically released from all obligations under this Article 9 upon:

(i) the sale, disposition, exchange or other transfer (including through merger, consolidation, amalgamation or otherwise) of the Capital Stock (including any sale, disposition or other transfer following which the applicable Guarantor is no longer a Subsidiary), or all or substantially all the assets, of the applicable Guarantor if such sale, disposition, exchange or other transfer is made in a manner not in violation of this Indenture;

(ii) the Issuer’s exercise of the Issuer’s legal defeasance option or covenant defeasance option in accordance with Section 7.01 or if the obligations of the Issuer and such Guarantor under this Indenture are discharged in accordance with the terms of this Indenture.

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SECTION 9.03. Successors and Assigns. This Article 9 shall be binding upon each Guarantor and its successors and assigns and shall inure to the benefit of the Indenture Trustee and the Holders and their successors and assigns and, in the event of any transfer or assignment of rights by any Holder or the Indenture Trustee, the rights and privileges conferred upon that party in this Indenture and in the Notes shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions of this Indenture.

SECTION 9.04. No Waiver. Neither a failure nor a delay on the part of the Indenture Trustee or the Holders in exercising any right, power or privilege under this Article 9 shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or further exercise of any right, power or privilege. The rights, remedies and benefits of the Indenture Trustee and the Holders herein expressly specified are cumulative and not exclusive of any other rights, remedies or benefits which any of them may have under this Article 9 at law, in equity, by statute or otherwise.

SECTION 9.05. Modification. No modification, amendment or waiver of any provision of this Article 9, nor the consent to any departure by any Guarantor therefrom, shall in any event be effective unless the same shall be in writing and signed by the Indenture Trustee, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice to or demand on any Guarantor in any case shall entitle such Guarantor to any other or further notice or demand in the same, similar or other circumstances.

SECTION 9.06. Non Impairment. The failure to endorse a Guarantee on any Note shall not affect or impair the validity thereof.

ARTICLE 10

SECURITY DOCUMENTS

SECTION 10.01. Collateral and Security Documents. The due and punctual payment of the principal of and interest on the Notes when and as the same shall be due and payable, whether on a Payment Date, at the Final Maturity Date, or by acceleration, repurchase, redemption or otherwise, and interest on the overdue principal of and interest on the Notes and performance of all other Guaranteed Obligations of the Issuer and the Guarantors to the Holders or the Indenture Trustee under this Indenture, the Notes and the other Security Documents, according to the terms hereunder or thereunder, shall be secured as provided in the Security Documents, which define the terms of the Liens that secure the Guaranteed Obligations. The Obligors hereby acknowledge and agree that the Indenture Trustee holds the Collateral in trust for the benefit of the Holders, pursuant to the terms of the Security Documents. Each Holder, by accepting a Note, consents and agrees to the terms of the Security Documents (including the provisions providing for the possession, use, release and foreclosure of Collateral) as the same may be in effect or may be amended from time to time in accordance with their respective terms and this Indenture, and authorizes and directs the Indenture Trustee to enter into

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the Security Documents and to perform its obligations and exercise its rights thereunder in accordance therewith. The Issuer shall take, and shall cause the Guarantors to take, any and all actions reasonably required to cause the Security Documents to create and maintain at all times, as security for the Obligations of the Issuer and the Guarantors hereunder, a valid and enforceable perfected Lien on all of the Collateral, in favor of the Indenture Trustee for the benefit of the Holders under the Security Documents.

SECTION 10.02. Release of Collateral. (a) Subject to Sections 8.01 and 8.02 hereof, the Collateral may be released from the Lien and security interest created by the Security Documents at any time or from time to time in accordance with the provisions of the Security Documents or as provided hereby. The Issuer and the Guarantors will be entitled to a release of assets included in the Collateral from the Liens securing the Notes, and the Indenture Trustee shall release the same from such Liens at the Issuer’s sole cost and expense, under one or more of the following circumstances:

(1) to enable the Issuer or any Subsidiary to sell, exchange or otherwise dispose of any of the Collateral to the extent not prohibited under Section 4.06 or to the extent such transaction complies with Section 3.06;

(2) in the case of a Guarantor that is released from its Guarantee with respect to the Notes in accordance with this Indenture, the release of the property and assets of such Guarantor; or

(3) pursuant to an amendment or waiver in accordance with Article 8 of this Indenture.

Upon receipt of an Officers’ Certificate (and upon receipt, the Indenture Trustee may conclusively rely upon such Officers’ Certificate and shall have no duty to make any determination or investigation with respect to the contents thereof) certifying that all conditions precedent under this Indenture and the Security Documents, if any, to such release have been met and any necessary or proper instruments of termination, satisfaction or release have been prepared by the Issuer, the Indenture Trustee shall execute, deliver or acknowledge (at the Issuer’s expense) such instruments or releases to evidence the release of any Collateral permitted to be released pursuant to this Indenture or the Security Documents

(b) At any time when an Event of Default has occurred and is continuing and the maturity of the Notes has been accelerated (whether by declaration or otherwise), no release of Collateral pursuant to the provisions of this Indenture or the Security Documents will be effective as against the Holders.

SECTION 10.03. Permitted Releases Not To Impair Lien. The release of any Collateral from the terms hereof and of the Security Documents or the release of, in whole or in part, the Liens created by the Security Documents, will not be deemed to impair the security under this Indenture in contravention of the provisions hereof if and to the extent the Collateral or Liens are released pursuant to the applicable Security Documents and the terms of this Article 10. Each of the Holders acknowledges that a release of Collateral or a Lien in accordance with the terms of the Security Documents and of this Article 10 will not be deemed for any purpose to be in contravention of the terms of this Indenture.

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SECTION 10.04. Suits To Protect the Collateral. Subject to the provisions of Article 6 hereof, the Indenture Trustee in its sole discretion and without the consent of the Holders, on behalf of the Holders, may take all actions it deems necessary or appropriate in order to:

(a) enforce any of the terms of the Security Documents; and

(b) collect and receive any and all amounts payable in respect of the Guaranteed Obligations of the Issuer hereunder.

Subject to the provisions of the Security Documents, the Indenture Trustee shall have power (but not the obligation) to institute and to maintain such suits and proceedings as it may deem expedient to prevent any impairment of the Collateral by any acts which may be unlawful or in violation of any of the Security Documents or this Indenture, and such suits and proceedings as the Indenture Trustee, in its sole discretion, may deem expedient to preserve or protect its interests and the interests of the Holders in the Collateral (including power to institute and maintain suits or proceedings to restrain the enforcement of or compliance with any legislative or other governmental enactment, rule or order that may be unconstitutional or otherwise invalid if the enforcement of, or compliance with, such enactment, rule or order would impair the Lien on the Collateral or be prejudicial to the interests of the Holders or the Indenture Trustee).

SECTION 10.05. Authorization of Receipt of Funds by the Indenture Trustee Under the Security Documents. The Indenture Trustee is authorized to receive any funds for the benefit of the Holders distributed under the Security Documents, and to make further distributions of such funds to the Holders according to the provisions of this Indenture.

SECTION 10.06. Purchaser Protected. In no event shall any purchaser in good faith of any property purported to be released hereunder be bound to ascertain the authority of the Indenture Trustee to execute the release or to inquire as to the satisfaction of any conditions required by the provisions hereof for the exercise of such authority or to see to the application of any consideration given by such purchaser or other transferee; nor shall any purchaser or other transferee of any property or rights permitted by this Article 10 to be sold be under any obligation to ascertain or inquire into the authority of the Issuer or the applicable Guarantor to make any such sale or other transfer.

SECTION 10.07. Powers Exercisable by Receiver or Indenture Trustee. In case the Collateral shall be in the possession of a receiver or trustee, lawfully appointed, the powers conferred in this Article 10 upon the Issuer or a Guarantor with respect to the release, sale or other disposition of such property may be exercised by such receiver or trustee, and an instrument signed by such receiver or trustee shall be deemed the equivalent of any similar instrument of the Issuer or a Guarantor or of any officer or officers thereof required by the provisions of this Article 10; and if the Indenture Trustee shall be in the possession of the Collateral under any provision of this Indenture, then such powers may be exercised by the Indenture Trustee.

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SECTION 10.08. Release Upon Termination of the Issuer’s Obligations. In the event that the Issuer delivers to the Indenture Trustee, in form and substance reasonably acceptable to the Indenture Trustee, an Officers’ Certificate (and upon receipt, the Indenture Trustee may conclusively rely upon such Officers’ Certificate and shall have no duty to make any determination or investigation with respect to the contents thereof) certifying that (i) payment in full of the principal of, together with accrued and unpaid interest on, the Notes and all other Obligations under this Indenture, the Guarantees and the Security Documents that are due and payable at or prior to the time such principal, together with accrued and unpaid interest (including additional interest, if any), are paid, or (ii) all the obligations under this Indenture, the Notes and the Security Documents have been satisfied and discharged by complying with the provisions of Article 7, the Indenture Trustee shall deliver to the Issuer a notice stating that the Indenture Trustee, on behalf of the Holders, disclaims and gives up any and all rights it has in or to the Collateral, and any rights it has under the Security Documents, and upon delivery of such notice, the Indenture Trustee shall be deemed not to hold a Lien in the Collateral on behalf of the Holders and shall do or cause to be done all acts reasonably necessary to release such Lien as soon as is reasonably practicable.

ARTICLE 11

MISCELLANEOUS

SECTION 11.01. Notices. (a) Any notice or communication required or permitted hereunder shall be in writing and delivered in person, via facsimile, via overnight courier or via first-class mail addressed as follows:

if to the Issuer:

Imperial Holdings, Inc.

5355 Town Center Road, Suite 701

Boca Raton, FL 33486

Attention of: Office of the General Counsel

Facsimile:

if to the Indenture Trustee:

Wilmington Trust, N.A., as Indenture Trustee

300 Park Street, Suite 390

Birmingham, Michigan 48009

Attention: Capital Markets Insurance Services

Facsimile: (248) 723-5424

Telephone: (248) 723-5422

E-mail: SpecializedInsurance@wilmingtontrust.com

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The Issuer or the Indenture Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications.

(b) Any notice or communication mailed to a Holder shall be mailed, first class mail, to the Holder at the Holder’s address as it appears on the registration books of the Note Registrar and shall be sufficiently given if so mailed within the time prescribed.

(c) Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it, except that notices to the Indenture Trustee are effective only if received.

SECTION 11.02. Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Issuer to the Indenture Trustee to take or refrain from taking any action under this Indenture, the Issuer shall furnish to the Indenture Trustee at the request of the Indenture Trustee (which request shall not be made unreasonably):

(a) an Officers’ Certificate in form reasonably satisfactory to the Indenture Trustee stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and

(b) an Opinion of Counsel in form reasonably satisfactory to the Indenture Trustee stating that, in the opinion of such counsel, all such conditions precedent have been complied with.

SECTION 11.03. Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a covenant or condition provided for in this Indenture shall include:

(a) a statement that the individual making such certificate or opinion has read such covenant or condition;

(b) a statement that, in the opinion of such individual, he or she has made such examination or investigation as is necessary to enable him or her to express an informed opinion as to whether or not such covenant or condition has been complied with; and

(c) a statement as to whether or not, in the opinion of such individual, such covenant or condition has been complied with; provided, however, that with respect to matters of fact an Opinion of Counsel may rely on an Officers’ Certificate or certificates of public officials.

SECTION 11.04. When Notes Disregarded. In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by or on behalf of any Group Companies shall be disregarded and deemed not to be outstanding, except that, for the purpose of determining whether the Indenture Trustee shall be protected in relying on any such direction, waiver or consent, only Notes with respect to

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which the Indenture Trustee has actual knowledge are so owned shall be so disregarded. Subject to the foregoing, only Notes outstanding at the time shall be considered in any such determination. Notwithstanding the foregoing, if any such Person or Persons owns 100% of all the Notes outstanding, such Notes shall not be so disregarded as aforesaid. On the Initial Issue Date and any Additional Issue Date the Issuer shall identify in writing to the Indenture Trustee which, if any, Notes are owned by or on behalf of Group Companies.

SECTION 11.05. Rules by Indenture Trustee and Note Registrar. The Indenture Trustee may make reasonable rules for action by or a meeting of the Holders. The Note Registrar may make reasonable rules for their functions.

SECTION 11.06. Legal Holidays. If a Payment Date is not a Business Day, payment shall be made on the next succeeding day that is a Business Day, and no interest shall accrue on any amount that would have been otherwise payable on such Payment Date if it were a Business Day for the intervening period. If a Record Date is not a Business Day, the Record Date shall not be affected.

SECTION 11.07. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF IMMUNITY. THIS INDENTURE, THE SECURITIES, THE SECURITY DOCUMENTS, OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, THE RELATIONSHIP OF THE PARTIES HERETO AND THE INTERPRETATION AND ENFORCEMENT OF THE RIGHTS AND DUTIES OF THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW (OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW) EXCEPT TO THE EXTENT THAT LOCAL LAW GOVERNS THE CREATION, PERFECTION, PRIORITY OR ENFORCEMENT OF SECURITY INTERESTS. The Issuer, the Guarantors, the Indenture Trustee, and, by its acceptance of a Note, each Holder (and holder of beneficial interests in a Note) hereby submit to the non-exclusive jurisdiction of the federal and state courts of competent jurisdiction in the Borough of Manhattan in The City of New York in any suit or proceeding arising out of or relating to this Indenture or the transactions contemplated hereby.

SECTION 11.08. Successors. All agreements of the Issuer and each Guarantor in this Indenture and the Notes shall bind its successors. All agreements of the Indenture Trustee in this Indenture shall bind its successors.

SECTION 11.09. Multiple Originals. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Indenture.

SECTION 11.10. Table of Contents; Headings. The table of contents and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not intended to be considered a part hereof and shall not modify or restrict any of the terms or provisions hereof.

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SECTION 11.11. Indenture Controls. If and to the extent that any provision of the Notes limits, qualifies or conflicts with a provision of this Indenture, such provision of this Indenture shall control.

SECTION 11.12. Severability. In case any provision in this Indenture shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby and such provision shall be ineffective only to the extent of such invalidity, illegality or unenforceability.

[Remainder of page intentionally left blank]

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IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed as of the date first written above.

IMPERIAL HOLDINGS, INC.
By:	/s/ Antony Mitchell
	Name:	Antony Mitchell
	Title:	Chief Executive Officer

[Indenture Signature Page]

GUARANTOR
HARBORDALE, LLC
	By:	/s/ Antony Mitchell
	Name:	Antony Mitchell
	Title:	Chief Executive Officer

[Indenture Signature Page]

GUARANTOR
IMPERIAL LIFE AND ANNUITY SERVICES, LLC
By: Imperial Holdings, Inc., its sole member
	By:	/s/ Antony Mitchell
	Name:	Antony Mitchell
	Title:	Chief Executive Officer

[Indenture Signature Page]

GUARANTOR
IMPERIAL PREMIUM FINANCE, LLC
	By:	/s/ Antony Mitchell
	Name:	Antony Mitchell
	Title:	Chief Executive Officer

[Indenture Signature Page]

GUARANTOR
RED REEF ALTERNATIVE INVESTMENTS, LLC
	By:	/s/ Antony Mitchell
	Name:	Antony Mitchell
	Title:	Chief Executive Officer

[Indenture Signature Page]

GUARANTOR
WASHINGTON SQUARE FINANCIAL, LLC
	By:	/s/ Antony Mitchell
	Name:	Antony Mitchell
	Title:	Chief Executive Officer

[Indenture Signature Page]

GUARANTOR
IMPERIAL FINANCING & TRADING, LLC
	By:	/s/ Antony Mitchell
	Name:	Antony Mitchell
	Title:	Chief Executive Officer

[Indenture Signature Page]

GUARANTOR
IMPERIAL LITIGATION FUNDING, LLC
	By:	/s/ Antony Mitchell
	Name:	Antony Mitchell
	Title	Chief Executive Officer:

[Indenture Signature Page]

WILMINGTON TRUST, NATIONAL ASSOCIATION, as Indenture Trustee
	By:	/s/ Robert Donaldson
	Name:	Robert Donaldson
	Title:	Vice President

[Indenture Signature Page – Wilmington Trust, National Association]

Schedule 1.01(a)

Deposit Accounts

Type of Account	Account Number	Name, Address and Telephone Number of Financial Institution	Contact Person
Investment/Operating		The Bank of New York Mellon Global Corporate Trust, 10161 Centurion Parkway, Jacksonville, FL 32256,	Bank of New York, Robert Lechner, Vice President

S-1

Schedule 1.01(b)

Pledged Subsidiaries

Company Name	Jurisdiction of Organization	Organizational Identification Number	Federal Identification Number
Harbordale, LLC	Delaware		45-2491400
Imperial Life and Annuity Services, LLC	Florida		20-5983054
Imperial Premium Finance, LLC	Florida		20-8044007
Red Reef Alternative Investments, LLC	Delaware		46-4120302
Washington Square Financial, LLC	Georgia		26-0207198
Imperial Finance & Trading, LLC	Florida		20-5328534
Imperial Litigation Funding, LLC	Florida		32-0187612

S-2

Schedule 4.03

Existing Indebtedness

None.

S-3

Schedule 4.07

Equityholders / Stockholders Agreements

None.

S-4

EXHIBIT A

FORM OF NOTE

IMPERIAL HOLDINGS, INC.

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR THE SECURITIES LAWS OR “BLUE SKY” LAWS OF ANY STATE AND HAS BEEN SOLD IN RELIANCE ON AN EXEMPTION PROVIDED IN THE SECURITIES ACT AND APPLICABLE STATE SECURITIES OR “BLUE SKY” LAWS; THEREFORE, THIS NOTE MAY NOT BE RESOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT IN A TRANSACTION EXEMPTED FROM REGISTRATION UNDER THE SECURITIES ACT, APPLICABLE STATE SECURITIES OR “BLUE SKY” LAWS AND UNTIL ANY ADDITIONAL TRANSFER RESTRICTIONS IN THE INDENTURE ARE SATISFIED.

Note No.: [        ]
CUSIP No: [        ]
Initial Note Balance: [        ]
	Dated: [                    ]

[Name of Purchaser]

Registered Holder

This Note (this “Note”) has been issued by Imperial Holdings, Inc., a Florida corporation (the “Issuer”) in the Initial Note Balance of [        ] (US$[        ]) to [Name of Purchaser] or its registered assigns. This Note is being issued pursuant to that certain Indenture (as amended, modified or otherwise supplemented from time to time in accordance with the terms thereof, the “Indenture”) dated as of November 10, 2014, by and among the Issuer, the Guarantors party thereto, and Wilmington Trust, National Association, a national banking association] as indenture trustee (the “Indenture Trustee”). Capitalized terms used but not defined herein shall have their respective meanings as set forth in the Indenture. This Note is entitled to the benefits of the Indenture. Reference is hereby made to the Indenture for a statement of the rights thereunder of the Issuer, the Indenture Trustee (in each capacity thereunder) and the Holders of the Notes, and the terms upon which the Notes are authenticated and delivered.

This Note shall accrue interest on the Note Balance of this Note at the Note Interest Rate calculated based on the actual number of days elapsed and a 360-day year. Except as set forth in the Indenture, interest on this Note shall be payable in cash in arrears on the Payment Date.

The Note Balance of this Note plus any accrued interest shall be due and payable on the Final Maturity Date, unless the Note Balance and accrued interest of this Note becomes due and payable at an earlier date by declaration of acceleration, call for redemption, or otherwise pursuant to the Indenture.

A-1

The Issuer shall have the option to prepay principal of this Note in accordance with the Indenture.

Subject to the terms of the Indenture, any interest, principal and other amounts payable on this Note shall be paid to the Person who, as of the close of business on the related Record Date, is the registered Holder of this Note. Payments of interest, principal and other amounts on this Note shall be made by check mailed on or before the related Payment Date to such Person at such Person’s address appearing on the Note Register or by wire transfer to such account as such Holder shall designate by written instruction received by the Indenture Trustee not later than five Business Days prior to the Record Date related to the applicable Payment Date.

As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Note may be registered on the Note Register of the Note Registrar, upon surrender of this Note for registration of transfer at the offices of the Note Registrar maintained for such purpose, pursuant to the Indenture, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Note Registrar and in substance as specified in the Indenture duly executed by the Holder of this Note or such Holder’s attorney duly authorized in writing, and thereupon one or more new Notes of authorized denominations and of the same class and Note Balance as the surrendered Note will be issued to the designated transferee or transferees.

The Indenture Trustee and any agent of the Indenture Trustee may treat the Person in whose name this Note is registered as the Holder hereof for all purposes, whether or not this Note be overdue, and neither the Indenture Trustee nor any such agent shall be affected by notice to the contrary.

The Indenture permits, with certain exceptions as therein provided, the amendment thereof for the purpose of adding to, changing or eliminating certain provisions of the Indenture or of modifying the rights of the Holders thereunder with the consent of Holders as specified in the Indenture. Any such consent or waiver thereof shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent or waiver is made upon this Note.

It is understood and agreed by the Holder of this Note that (a) this Note is being authenticated and delivered by the Indenture Trustee in the exercise of the powers and authority conferred and vested in it, (b) each of the representations, undertakings and agreements herein made on the part of the Issuer is made and intended not as a personal representation, undertaking or agreement by the Indenture Trustee but is made and intended for the purpose of binding only the Issuer, (c) nothing herein contained shall be construed as creating any liability on Wilmington Trust, National Association, individually or personally, to perform any covenant either expressed or implied contained herein, all such liability, if any, being expressly waived by the Holder hereof and by any person claiming by, through or under the Holder hereof, and (d) under no circumstances shall Wilmington Trust, National Association, be personally liable for

A-2

the payment of any indebtedness or expense of the Issuer or any other Person or be liable for the breach or failure of any warranty or covenant made or undertaken by the Issuer or any other Person under this Note or the Indenture.

This Note and the Indenture shall be construed in accordance with, and governed by, the laws of the State of New York, without regard to the conflict of law provisions thereof, other than 5-1401 and 5-1402 of the General Obligations Law of the State of New York.

Unless the certificate of authentication hereon has been executed by the Indenture Trustee (or the Indenture Trustee’s Authenticating Agent designated pursuant to the terms of the Indenture) whose name appears below by manual signature, this Note shall not be entitled to any benefit under the Indenture, or be valid or obligatory for any purpose.

[Signature follows on next page.]

A-3

IN WITNESS WHEREOF, Imperial Holdings, Inc. has caused this Note to be duly executed.

IMPERIAL HOLDINGS, INC.
By:
	Name:
	Title:

A-4

CERTIFICATE OF AUTHENTICATION

This is one of the Notes referred to in the within-mentioned Indenture.

WILMINGTON TRUST, NATIONAL ASSOCIATION
as Indenture Trustee
By:
	Name:
	Title:

Dated: [                    ]

A-5

EXHIBIT B-1

FORM OF TRANSFEROR CERTIFICATE

[Date]

[NOTE REGISTRAR]

Re: IMPERIAL HOLDINGS, INC.

12.875% Senior Secured Increasing Rate Notes (the “Notes”)

Ladies and Gentlemen:

This letter relates to the sale by the undersigned transferor[s] (the “Transferor[s]”) to the transferee(s) identified in Annex A hereto (the “Transferee(s)”) of the Note Balance(s) of Notes identified in Annex A hereto (the “Transferred Notes”). The Transferred Notes were issued pursuant to that certain Indenture (as amended, modified or otherwise supplemented from time to time in accordance with the terms thereof, the “Indenture”) dated as of November 10, 2014, by and among the Issuer, the Guarantors party thereto, Wilmington Trust, National Association, a national banking association as indenture trustee (the “Indenture Trustee”). All capitalized terms used but not otherwise defined herein shall have the respective meanings set forth in the Indenture.

The Transferor[s] hereby certif[y][ies], represent[s] and warrant[s] to you, as Note Registrar, and for the benefit of the Issuer, the Indenture Trustee and the Transferee(s), that (X) the Transferred Notes are being transferred (i) in accordance with the transfer restrictions set forth in the Indenture and (ii) in reliance upon and in compliance with an exemption from the registration requirements of the Securities Act and the regulations promulgated thereunder and (Y) if the Transferor is the Investor, upon the transfer of the Transferred Notes to the Transferee[s], the Transferor shall still hold at least 50.1% of the aggregate principal amount of then outstanding Notes.

B-1

TRANSFEROR[S]

[Name of Transferor]

By:

Name:

Title:

cc:

B-1

ANNEX A

DESCRIPTION OF NOTES

Transferor[s] Transferee(s) Note Balance of Notes Transferred

B-1

EXHIBIT B-2

FORM OF TRANSFEREE CERTIFICATE

[Date]

[NOTE REGISTRAR]

Re: IMPERIAL HOLDINGS, INC.

12.875% Senior Secured Increasing Rate Notes (the “Notes”)

Ladies and Gentlemen:

This letter relates to the sale by the holder(s) of the Notes described in Annex A hereto (the “Transferor(s)”) to the undersigned transferee[s] (the “Transferee[s]”) of the Note Balance(s) of Notes identified in Annex A hereto (the “Transferred Notes”). The Transferred Notes were issued pursuant to that certain Indenture (as amended, modified or otherwise supplemented from time to time in accordance with the terms thereof, the “Indenture”) dated as of November 10, 2014, by and among the Issuer, the Guarantors party thereto, Wilmington Trust, National Association, a national banking association as indenture trustee (the “Indenture Trustee”). All capitalized terms used but not otherwise defined herein shall have the respective meanings set forth in the Indenture.

In connection with our proposed purchase of $         aggregate Note Balance of Transferred Notes, we confirm that:

1. We understand that any subsequent transfer of the Transferred Notes or any interest therein is subject to certain restrictions and conditions set forth in the Indenture and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Transferred Notes or any interest therein except in compliance with, such restrictions and conditions and the United States Securities Act of 1933, as amended (the “Securities Act”).

2. We understand that the offer and sale of the Transferred Notes have not been registered under the Securities Act, and that the Transferred Notes and any interest therein may not be offered or sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell the Transferred Notes or any interest therein, we will do so only in accordance with the Securities Act and the regulations promulgated thereunder, and that prior to such transfer the applicable purchaser shall furnish (or have furnished on its behalf by a U.S. broker dealer) to you and to the Issuer a signed letter substantially in the form of this letter.

3. We understand that, on any proposed resale of the Transferred Notes or beneficial interest therein, we will be required to furnish to you and the Issuer such certifications, legal opinions and other information as you and the Issuer may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Transferred Notes purchased by us will bear a legend to the foregoing effect.

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4. We are an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Transferred Notes, and we and any accounts for which we are acting are each able to bear the economic risk of our or its investment.

5. We are acquiring the Transferred Notes or beneficial interest therein purchased by us for our own account or for one or more accounts (each of which is an institutional “accredited investor”) as to each of which we exercise sole investment discretion.

You and the Issuer are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby.

TRANSFEREE[S]

[Insert Name of Acquiring Investor]

By:

Name:

Title:

B-2

ANNEX A

DESCRIPTION OF NOTES

Transferor(s) Transferee[s] Note Balance of Notes Transferred

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EXHIBIT C

INDENTURE TRUSTEE SIGNATURE PAGE LEGEND

It is expressly understood and agreed by the parties hereto that (i) this [specify name of agreement] is executed by Wilmington Trust, National Association, not in its individual capacity but solely as Indenture Trustee under that certain Indenture, dated as of                      , 2014 (in such capacity, the “Trustee”), (ii) in no event shall Wilmington Trust, National Association, in its individual capacity have any liability for the representations, warranties, covenants, agreements or other obligations of the seller hereunder, as to all of which recourse shall be had solely to the assets of such seller, (iii) in no event shall the Trustee have any obligation to perform any of the obligations and covenants of the seller under this [specify name of agreement], and (iv) under no circumstances shall the Trustee be personally liable for the payment of any indebtedness or expenses of the seller under this [specify name of agreement].

EX-10.1

Exhibit 10.1

IMPERIAL HOLDINGS, INC.,

as Issuer,

THE GUARANTORS NAMED HEREIN

and

INDABA CAPITAL FUND, L.P.,

as Purchaser

12.875% Senior Secured Notes

NOTE PURCHASE AGREEMENT

Dated as of November 10, 2014

Table of Contents

			Page
SECTION I.     PURCHASE AND SALE; ISSUE DATE				1
	Section 1.1	Purchase and Sale		1
	Section 1.2	Issue Date		2
SECTION II.     CONDITIONS PRECEDENT				2
	Section 2.1	Conditions to Purchase		2
	Section 2.2	Conditions to Additional Issuances		3
	Section 2.3	Purchaser’s Waiver of Compliance		5
SECTION III.     REPRESENTATIONS AND WARRANTIES				5
	Section 3.1	Representations and Warranties of the Obligors		5
	Section 3.2	Representations and Warranties of the Purchaser		10
	Section 3.3	Survival of Representations and Warranties		10
SECTION IV.     INDEMNIFICATION				11
SECTION V.     MISCELLANEOUS				12
	Section 5.1	Amendments and Waivers		12
	Section 5.2	Board Designation		12
	Section 5.3	Notices		13
	Section 5.4	No Waiver; Cumulative Remedies		13
	Section 5.5	Successors and Assigns		13
	Section 5.6	Counterparts		13
	Section 5.7	Severability		13
	Section 5.8	Governing Law		13
	Section 5.9	Termination		14
	Section 5.10	Limited Recourse; No Proceedings		14
	Section 5.11	Survival of Representations and Warranties and Indemnification		14
	Section 5.12	Submission to Jurisdiction; Waivers		14
	Section 5.13	WAIVERS OF JURY TRIAL		15

NOTE PURCHASE AGREEMENT (this “Agreement”), dated as of November 10, 2014, by and among IMPERIAL HOLDINGS, INC., a Florida corporation (the “Issuer”), the direct subsidiaries of the Issuer named on the signature pages hereto (the “Guarantors” and, together with the Issuer, the “Obligors”), and INDABA CAPITAL FUND, L.P., a Cayman Islands exempted limited partnership (the “Purchaser”).

W I T N E S S E T H:

WHEREAS, the Issuer proposes to sell to the Purchaser senior secured notes (the “Notes”) with an aggregate Initial Note Balance (as defined in the Indenture described below) of up to $100,000,000;

WHEREAS, the Notes will be issued pursuant to the Indenture, dated November 10, 2014, among the Issuer, the Guarantors, and Wilmington Trust, National Association, as indenture trustee (capitalized terms used in this Agreement and not defined have the meanings specified in the Indenture; rules of construction set forth in Section 1.03 of the Indenture apply equally to this Agreement); and

WHEREAS, the Notes are being offered and sold to the Purchaser without being registered under the Securities Act, in reliance on an exemption therefrom;

NOW, THEREFORE, in consideration of the mutual covenants herein contained, and other good and valuable consideration, the receipt and adequacy of which are hereby expressly acknowledged, the parties hereto agree as follows:

SECTION I. PURCHASE AND SALE; ISSUE DATE

Section 1.1 Purchase and Sale.

(a) On and subject to the terms and conditions of this Agreement and the Indenture, on the Initial Issue Date, the Issuer agrees to issue, sell and deliver to the Purchaser the Note with an Initial Note Balance set forth opposite the Purchaser’s name on Schedule 1, and on the basis of the representations and warranties of the Obligors set forth in this Agreement and the other Transaction Documents, and subject to the terms and conditions set forth herein and therein, the Purchaser hereby agrees to purchase such Note on the Initial Issue Date from the Issuer in accordance with the terms set forth herein. On and subject to the terms and conditions of this Agreement and the Indenture, on each Additional Issue Date, the Issuer agrees to issue, sell and deliver to the Purchaser an Additional Note with a Note Balance equal to $25,000,000, and on the basis of the representations and warranties of the Obligors set forth in this Agreement and the other Transaction Documents, and subject to the terms and conditions set forth herein and therein, the Purchaser hereby agrees to purchase such Note on such date from the Issuer in accordance with the terms set forth herein.

(b) The purchase price for each Note, whether issued on the Initial Issue Date or on an Additional Issue Date, is 96% of its Initial Note Balance (the “Purchase Price”).

Section 1.2 Issue Date.

(a) Prior to 1:00 p.m. on the Initial Issue Date or Additional Issue Date, as applicable, the Purchaser shall transfer in immediately available funds the Purchase Price (at the Purchaser’s discretion, less any fees set forth in Sections 2.1(e), 2.1(f), 2.2(b) or 2.2(c)) for its Note to the Deposit Account of the Issuer identified on Schedule 2 hereto.

SECTION II. CONDITIONS PRECEDENT

Section 2.1 Conditions to Purchase. The following shall be conditions precedent to the purchase of the Note on the Initial Issue Date:

(a) The Notes shall have been duly authorized, executed, authenticated, delivered and issued and, upon payment of the Purchase Price, shall be entitled to the benefits of the Indenture. This Agreement and each of the other Transaction Documents shall have been duly authorized, executed and delivered by the respective parties thereto and shall be in full force and effect, and all conditions precedent contained in the Transaction Documents shall have been satisfied.

(b) The Purchaser shall have received a written legal opinion under United States and New York State law, in form and substance satisfactory to the Purchaser, from each of (i) Foley & Lardner LLP, covering corporate authorization, enforceability, non-contravention of material agreements, Lien perfection, non-contravention of law, no required approvals, no registration, Investment Company Act and such other matters as the Purchaser may reasonably request and (ii) general counsel of the Obligors, covering absence of material litigation.

(c) The Purchaser and the Indenture Trustee shall have each received signature and incumbency certificates executed by the authorized officers of each of the Guarantors and the Issuer, to enable each of them to enter into the Transaction Documents to which such entity is a party.

(d) The Purchaser and the Indenture Trustee shall have received a closing certificate from each Obligor, including (i) the certificate of incorporation or articles of organization of such Obligor, as applicable, certified by the relevant authority of the jurisdiction of organization of such Obligor, (ii) certified bylaws or other operating agreement, as applicable, of such Obligor, (iii) a good standing certificate for such Obligor from its jurisdiction of organization and (iv) resolutions of the board of directors (or similar governing body) and where required its general meeting of shareholders (or similar body) authorizing and approving such Obligor’s execution, delivery and performance of the Transaction Documents to which it is a party and the transactions contemplated thereby.

(e) The costs and expenses incurred by the Purchaser and the Indenture Trustee on or prior to the Initial Issue Date (and in the case of the Purchaser, as described in the Fee Letter) shall have been paid in full. Such costs and expenses shall be set forth on a “closing schedule of fees and expenses” approved by the Purchaser and the Issuer.

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(f) All other amounts due and owing under the Fee Letter, including the Facility Fee described therein, shall have been paid to the Purchaser.

(g) The representations and warranties of the Obligors set forth or referred to in Section 3.1 hereof and in the other Transaction Documents shall be true and correct on the Initial Issue Date.

(h) No Default or Event of Default has occurred and is continuing.

(i) All corporate and other proceedings in connection with the transactions contemplated hereby and the other Transaction Documents, and all documents, opinions and certificates incident thereto shall be satisfactory in form and in substance to the Purchaser.

(j) All governmental and third party approvals necessary in connection with the continuing operations of the Group Companies and the transactions contemplated hereby shall have been obtained and be in full force and effect.

(k) The Purchaser and the Indenture Trustee shall have received the results of a recent Lien search with respect to each Obligor, and such search shall reveal no Liens on any of the assets of the Obligors except for Permitted Liens, to the extent such Permitted Liens may be present on such assets under the Indenture.

(l) The Indenture Trustee shall have received the certificates representing the Pledged Collateral as defined in and pledged pursuant to the Pledge Agreement and the Indenture, together with an undated stock power for each such certificate executed in blank by a duly authorized officer of the pledgor thereof. UCC financing statements contemplated by the Security Documents shall have been recorded in the appropriate filing office.

(m) The Issuer shall have obtained, and provided to the Purchaser, a CUSIP number for the Notes.

(n) The Issuer shall have provided the Securities Intermediary with certified tax identification numbers by furnishing appropriate forms W-9 or W-8 and such other forms and documents that the Securities Intermediary may request.

(o) Unless a waiver shall have been obtained in accordance with Section 2.3, the Issuer’s acceptance of the proceeds of the Note issued on the Initial Issue Date shall be deemed its acknowledgement that the conditions to closing set forth herein have been complied with or otherwise waived as of such date.

Section 2.2 Conditions to Additional Issuances. The following shall be conditions precedent to any purchase of Additional Notes by the Purchaser:

(a) Any Additional Notes shall have been duly authorized, executed, authenticated, delivered and issued and, upon payment of the Purchase Price, shall be

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entitled to the benefits of the Indenture. This Agreement and each of the other Transaction Documents shall be in full force and effect, and all conditions precedent contained in the Transaction Documents shall have been satisfied.

(b) The costs and expenses incurred by the Purchaser and the Indenture Trustee on or prior to the Additional Issue Date (and in the case of the Purchaser, as described in the Fee Letter) shall have been paid in full. Such costs and expenses shall be set forth on a “closing schedule of fees and expenses” approved by the Purchaser and the Issuer.

(c) All other amounts due and owing under the Fee Letter, including the Drawdown Fee described therein, shall have been paid to the Purchaser.

(d) The representations and warranties of the Obligors set forth or referred to in Section 3.1 hereof and in the other Transaction Documents shall be true and correct on the Additional Issue Date.

(e) No Default or Event of Default has occurred and is continuing.

(f) Unless a waiver shall have been obtained in accordance with Section 2.3, the Issuer’s acceptance of the proceeds of any Additional Note issued on any Additional Issue Date shall be deemed its acknowledgement that the conditions to closing set forth herein have been complied with or otherwise waived as of such date.

(g) The purchase of any Additional Note shall be consummated on or before the twelve-month anniversary of the Initial Issue Date.

(h) The Issuer and/or its Subsidiaries shall have consummated the Additional Investments.

(i) Prior to delivery of a second Additional Issuance Notice, (i) the Issuer shall have attained a volume weighted average trading price of its Capital Stock equal to at least $9.00 per share over the 20 consecutive trading days immediately prior to the date such Additional Issuance Notice was delivered, and (ii) the Net Worth of the Issuer and the Guarantors on a consolidated basis shall be at least $11.25 per share of the Issuer’s Capital Stock over the 20 consecutive trading days immediately prior to the date such Additional Issuance Notice was delivered.

(j) Prior to delivery of a third Additional Issuance Notice, (i) the Issuer shall have attained a volume weighted average trading price of its Capital Stock equal to at least $10.00 per share over the 20 consecutive trading days immediately prior to the date such Additional Issuance Notice was delivered, (ii) the Net Worth of the Issuer and the Guarantors on a consolidated basis shall be at least $12.00 per share of the Issuer’s Capital Stock over the 20 consecutive trading days immediately prior to the date such Additional Issuance Notice was delivered, and (iii) the Issuer shall have received $35,000,000 in connection with the issuance of new Equity Interests after the date the Purchaser purchased Additional Notes pursuant to the second Additional Issuance Notice delivered by the Issuer.

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Section 2.3 Purchaser’s Waiver of Compliance. The Purchaser may in its sole discretion waive compliance with any conditions to the obligations of the Purchaser set forth in Sections 2.1 and 2.2 hereof.

SECTION III. REPRESENTATIONS AND WARRANTIES

Section 3.1 Representations and Warranties of the Obligors. Each Obligor hereby represents and warrants to the Indenture Trustee and the Purchaser that as of the Initial Issue Date or Additional Issue Date, as applicable:

(a) Organization and Good Standing. Such Obligor has been duly formed and is validly existing and in good standing under the laws of its state of organization or incorporation, as applicable, with power and authority to own its properties and to conduct its business as presently conducted and has the power and authority to own and convey all of its properties and to execute and deliver this Agreement and the Transaction Documents to which it is a party and to perform the transactions contemplated hereby and thereby.

(b) Binding Obligation. This Agreement and the other Transaction Documents to which it is a party have each been duly executed and delivered on behalf of such Obligor and this Agreement and each other Transaction Document to which it is a party constitutes a legal, valid and binding obligation of such Obligor enforceable in accordance with its terms except as may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting creditors’ rights and by general principles of equity.

(c) No Consent Required. No consent of, or other action by, and no notice to or filing with, any Governmental Authority or any other party, is required for the due execution, delivery and performance by such Obligor of this Agreement or any of the other Transaction Documents or for the perfection of or the exercise by the Indenture Trustee or the Purchaser of any of their rights or remedies thereunder which have not been duly obtained.

(d) No Violation. The consummation of the transaction contemplated by this Agreement and the Indenture and the fulfillment of the terms hereof do not conflict with, result in any material breach of any of the terms and provisions of, nor constitute (with or without notice or lapse of time) a default under, the organizational documents of such Obligor, or any indenture, agreement or other instrument to which such Obligor is a party or by which it is bound; nor violate any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority; nor result in the creation or imposition of any Lien upon any of its properties pursuant to the terms of any such indenture, agreement or other instrument (other than pursuant to the Security Documents).

(e) No Proceedings. There is no pending or, to such Obligor’s knowledge, threatened action, suit or proceeding, nor any injunction, writ, restraining order or other order of any nature (each, a “Proceeding”) against or affecting such Obligor, its officers or directors, or the property of such Obligor, in any court or tribunal, or before any arbitrator of any kind or before or by any Governmental Authority (i) asserting the invalidity of this Agreement or any of the Transaction Documents, (ii) seeking to prevent the pledge of any of

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the Collateral or the consummation of any of the transactions contemplated thereby, (iii) seeking any determination or ruling that might materially and adversely affect (A) the performance by any Obligor of this Agreement or any of the Transaction Documents or the interests of the Purchaser in the Portfolio Policies or any other part of the Collateral or (B) the validity or enforceability of this Agreement or any of the Transaction Documents or (iv) asserting a claim for payment of money adverse to such Obligor or the conduct of its business or which is inconsistent with the due consummation of the transactions contemplated by this Agreement or any of the Transaction Documents, in each case, other than any Proceeding that is disclosed in the litigation disclosed in the Issuer’s filings posted on the SEC Edgar website, in the draft 10-Q for the quarter ended September 30, 2014 that has been furnished to counsel for the Purchaser (the “Draft 10-Q”), or that would not reasonably be expected to have a Material Adverse Effect.

(f) Obligor Not Insolvent. Such Obligor is solvent and will not become insolvent after giving effect to the transactions contemplated by this Agreement and each of the other Transaction Documents.

(g) Name. The legal name of such Obligor is as set forth in the signature page of this Agreement and the Issuer does not have any tradenames, fictitious names, assumed names or “doing business as” names.

(h) Financial Statements. The audited consolidated balance sheets of the Issuer as at December 31, 2013 and December 31 2012, and the related consolidated statements of income and of cash flows for the fiscal years ended on such dates, reported on by and accompanied by an unqualified report from Grant Thornton LLP, present fairly the consolidated financial condition of the Issuer as at such date, and the consolidated results of its operations and its consolidated cash flows for the respective fiscal years then ended. The unaudited consolidated balance sheet of the Issuer as at September 30, 2014, and the related unaudited consolidated statements of income and cash flows for the nine-month period ended on such date in the Draft 10-Q, present fairly the consolidated financial condition of the Issuer as at such date, and the consolidated results of its operations and its consolidated cash flows for the nine-month period then ended (subject to normal year end audit adjustments). All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP applied consistently throughout the periods involved (except as approved by the aforementioned firm of accountants and disclosed therein).

(i) No Change. Except as disclosed in the Issuer’s filings posted on the SEC Edgar website or in the Draft 10-Q, since December 31, 2013, there has been no development or event that has had or could reasonably be expected to have a Material Adverse Effect.

(j) Ownership of Properties; Liens. Each Obligor has good title to, or a valid leasehold interest in, (i) all Collateral owned by it and (ii) all of its property that is essential to its business as conducted on the Initial Issue Date or any Additional Issue Date, as applicable, and none of such Collateral or other property is subject to any Lien except as permitted by Section 4.09 of the Indenture.

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(k) Taxes. Each Obligor has filed or caused to be filed all Federal, state and other material tax returns that are required to be filed and has paid all taxes that have become due and payable on said returns or on any tax assessments made against it or any of its property and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority (other than any the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of the relevant Obligor); no tax Lien has been filed, and, to the knowledge of the applicable Obligor, no claim is being asserted, with respect to any such tax, fee or other charge, except as disclosed in the Issuer’s filings posted on the SEC Edgar website or in the Draft 10-Q.

(l) Federal Regulations. No part of the proceeds of the sale of any Notes, will be used for “buying” or “carrying” any “margin stock” within the respective meanings of each of the quoted terms under Regulation U as now and from time to time hereafter in effect for any purpose that violates the provisions of the regulations of the Board of Governors of the Federal Reserve System of the United States (or any successor) (the “Board”). If requested by the Purchaser or the Indenture Trustee, the Issuer will furnish to the Indenture Trustee and each Holder a statement to the foregoing effect in conformity with the requirements of FR Form G-3 or FR Form U 1, as applicable, referred to in Regulation U.

(m) Labor Matters. Except as, in the aggregate, could not reasonably be expected to have a Material Adverse Effect: (a) there are no strikes or other labor disputes against any Obligor pending or, to the knowledge of such Obligor, threatened; (b) hours worked by and payment made to employees of each Obligor have not been in violation of the Fair Labor Standards Act or any other applicable Requirements of Law dealing with such matters; and (c) all payments due from any Obligor on account of employee health and welfare insurance have been paid or accrued as a liability on the books of the relevant Obligor.

(n) Employee Benefit Plans. Except as could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect: (i) with respect to each Plan, each Obligor and each of their respective ERISA Affiliates is in compliance with all applicable law, including, without limitation, the applicable provisions of ERISA and the provisions of the Code relating to Plans and the regulations and published interpretations thereunder; (ii) no ERISA Event has occurred or is reasonably expected to occur; and (iii) all amounts required by applicable law with respect to, or by the terms of, any retiree welfare benefit arrangement maintained by any Obligor or any ERISA Affiliate or to which any Obligor or any ERISA Affiliate has an obligation to contribute have been accrued in accordance with Statement of Financial Accounting Standards No. 106. The present value of all accumulated benefit obligations under each Pension Plan (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed by more than $100,000 the fair market value of the assets of such Pension Plan allocable to such accrued benefits, and the present value of all accumulated benefit obligations of all underfunded Pension Plans (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed by more than $100,000 the fair market value of the assets of all such underfunded Pension Plans.

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(o) Investment Company Act; Other Regulations. No Obligor is an “investment company”, or a company “controlled” by an “investment company”, within the meaning of the Investment Company Act of 1940, as amended. No Obligor is subject to regulation under any Requirement of Law (other than Regulation X of the Board) that limits its ability to incur Indebtedness.

(p) Accuracy of Information. No statement or information contained in this Agreement, any other Transaction Document or any other document, certificate or statement furnished by or on behalf of any Obligor to the Indenture Trustee or the Purchaser, or any of them, for use in connection with the transactions contemplated by this Agreement or the other Transaction Documents, contained as of the date such statement, information, document or certificate was so furnished, any untrue statement of a material fact or omitted to state a material fact necessary to make the statements contained herein or therein not misleading.

(q) Security Documents. Each of the Indenture and each Security Document is effective to create in favor of the Indenture Trustee, for the benefit of the Purchaser, a legal, valid and enforceable security interest in the Collateral described therein and proceeds thereof. In the case of the Pledged Collateral described in the Pledge Agreement and the Indenture, when certificates representing such Collateral are delivered to the Indenture Trustee (together with a properly completed and signed power or endorsement), and in the case of the other Collateral described herein and the Security Documents, when financing statements and other filings in appropriate form are filed, the Indenture and each Security Document shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Obligors in such Collateral and the proceeds thereof, as security for the Secured Obligations (in the case of the Issuer) or the Obligations (as defined in the Pledge Agreement, in the case of the Guarantors), in each case prior and superior in right to any other Person.

(r) Subsidiaries. Each Subsidiary designated as an Excluded Subsidiary meets the criteria thereof as described in the Indenture. The total assets of Lagoon Court Limited and any of its Subsidiaries, on a consolidated basis, are less than $10,000.

(s) Portfolio Policy Representations. The Issuer represents and warrants to the Indenture Trustee and the Purchaser as of the Initial Issue Date or any Additional Issue Date, as applicable, with respect to each Collateral Policy, and Red Reef and Harbordale each represent and warrant to the Indenture Trustee and the Purchaser as of the Initial Issue Date or Additional Issue Date, as applicable, with respect to each Collateral Policy owned by it as follows:

(i) The contestability period and suicide period have expired.

(ii) Subject to any issue relating to insurable interest and except with respect to any interest in the death benefit associated with such Collateral Policy

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possessed or retained by one or more third parties upon its acquisition by an Affiliate of the Issuer where such retention was contemplated in connection with the acquisition of such policy, such Collateral Policy and the legal and beneficial interests in the death benefit are capable of being sold, transferred and conveyed to a purchaser in a manner such that the purchaser will acquire 100% of the legal and beneficial interests in such Collateral Policy, that to the knowledge of the Issuer will be free and clear of any Liens, claims or encumbrances of any nature whatsoever.

(iii) To the knowledge of the Issuer, there is no dispute, claim, action or proceeding pending or, threatened, which alleges that a person other than the Issuer has a beneficial or ownership interest in, to or under such Collateral Policy or that the Issuer does not have a valid and enforceable claim to collect the death benefits on such Collateral Policy.

(iv) Applicable Requirements of Law do not prohibit the transfer of legal or beneficial ownership of such Collateral Policy.

(v) The original owners of each Collateral Policy were: the insured, the insured’s spouse, child or children, other individuals or business relations with insurable interests in the life of the insured or an irrevocable life insurance trust, partnership, corporation or limited liability company where the beneficiaries of such trust or the beneficial owners of such entity, as applicable, were one or more of the foregoing.

(t) No Solicitation. No form of general solicitation or general advertising was used by any Obligor or its representatives in connection with the offer and sale of the Notes. No investors were solicited or otherwise approached by such Obligor or any representative of such Obligor for the purpose of offering the Notes for sale who were not institutional investors. Such Obligor has not issued or sold any Notes within the six-month period immediately preceding the date hereof or securities that could be integrated with the Notes. Neither such Obligor nor any representative on its behalf has offered or sold, nor will any of them offer or sell, any Notes in any manner that would render the issuance and sale of the Notes a violation of the Securities Act or any state securities or “Blue Sky” laws, or require registration pursuant thereto, nor has any of them authorized, nor will any authorize, any Person to act in such manner.

(u) Registration Exemption. The offer and sale of the Notes to the Purchaser in the manner contemplated by this Agreement will be exempt from the registration requirements of the Securities Act and it is not necessary to qualify an indenture in respect of the Notes. The Indenture is not required to be qualified under the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date of this Agreement.

(v) No Other Sales Contracts. Such Obligor has not entered and will not enter into any contractual arrangement with respect to the distribution or sale of the Notes except for this Agreement.

(w) Third Party Beneficiary. The Obligors acknowledge and agree that the Indenture Trustee is a third-party beneficiary of this Section 3.1 and the other provisions of this Agreement related hereto (including, without limitation, Section IV).

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Section 3.2 Representations and Warranties of the Purchaser. The Purchaser hereby represents and warrants to the Issuer that as of the date hereof:

(a) Due Authorization. This Agreement has been duly authorized by the Purchaser and, on the Initial Issue Date, will have been duly executed and delivered by the Purchaser.

(b) Binding Obligation. Assuming the due authorization, execution and delivery thereof by the other parties thereto, this Agreement constitutes a valid and legally binding obligation of the Purchaser, enforceable in accordance with its respective terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles.

(c) No Violation. The execution, delivery and performance of this Agreement by the Purchaser and compliance with the terms and provisions hereof will not result in a breach or violation of any of the terms and provisions of, or constitute a default under or conflict with, (i) any statute, rule, regulation or order of any governmental agency or body or any court, domestic or foreign, having jurisdiction over the Purchaser or any of its properties, (ii) any agreement or instrument to which the Purchaser is a party or by which the Purchaser is bound or to which any of the properties of the Purchaser is subject, or (iii) the organizational documents of the Purchaser.

(d) Purchaser Letter. The Purchaser hereby delivers a letter in the form of Exhibit A hereto (a “Purchaser Letter”) to the Issuer and makes the representations and warranties set forth in the Purchaser Letter to the Issuer.

(e) Securities Act. The Purchaser represents and warranty that it is an “accredited investor”, as defined in Rule 501(a) of Regulation D under the Securities Act, that it will transfer interests in any Note only in accordance with the Indenture.

Section 3.3 Survival of Representations and Warranties. All representations and warranties contained herein shall survive the execution and delivery of this Agreement and the other Transaction Documents, the purchase or transfer by the Purchaser of any Note or portion thereof or interest therein, the payment of any Note and the termination of this Agreement, and may be relied upon by any subsequent Holder of a Note, regardless of any investigation made at any time by or on behalf of the Purchaser or any other Holder of a Note. All statements contained in any certificate or other instrument delivered by or on behalf of any Obligor pursuant to this Agreement shall be deemed representations and warranties of such Obligor under this Agreement.

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SECTION IV. INDEMNIFICATION

Each Obligor jointly and severally agrees to indemnify and hold harmless each of the Purchaser and its affiliates (including, without limitation, controlling persons) and each member, partner, director, officer, employee, advisor, agent, affiliate, successor, partner, representative and assign of each of the forgoing (each an “Indemnified Person”) from and against any and all actions, suits, investigation, inquiry, claims, losses, damages, liabilities, expenses or proceedings of any kind or nature whatsoever which may be incurred by or asserted against or involve any such Indemnified Person as a result of or arising out of or in any way related to or resulting from the Transaction Documents, the use of proceeds thereof or the other transactions contemplated thereby (regardless of whether any such Indemnified Person is a party thereto and regardless of whether such matter is initiated by a third party or otherwise) (any of the foregoing, a “Proceeding”), and each such Obligor jointly and severally agrees to reimburse each Indemnified Person upon demand for any legal or other out-of-pocket expenses incurred in connection with investigating, defending, preparing to defend or participating in any such Proceeding; provided, however, that no Indemnified Person will be indemnified for any such cost, expense or liability to the extent determined by a final, nonappealable judgment of a court of competent jurisdiction to have resulted solely from the gross negligence, bad faith or willful misconduct of such Indemnified Person. In the case of any Proceeding to which the indemnity in this paragraph applies, such indemnity and reimbursement obligations shall be effective, whether or not such Proceeding is brought by any of the Obligors or their respective securityholders or creditors, an Indemnified Person or any other person, or an Indemnified Person is otherwise a party thereto and whether or not any aspect of the Transaction Documents or the transactions thereunder are consummated. Notwithstanding any other provision of the Transaction Documents, (i) no Indemnified Person shall be responsible or liable for damages arising from the unauthorized use by others of information or other materials obtained through internet, electronic, telecommunications or other information transmission and (ii) no Indemnified Person shall have any liability (whether direct or indirect, in contract, tort or otherwise) to the Obligors, or any of your or their respective securityholders or creditors arising out of, related to or in connection with the Transaction Documents or the other transactions contemplated thereby, except to the extent of direct (as opposed to special, indirect, consequential or punitive) damages determined in a final, nonappealable judgment by a court of competent jurisdiction to have resulted solely from such Indemnified Person’s gross negligence, bad faith or willful misconduct, and it is further agreed that the Purchaser shall have liability (if any) only to the Obligors (as opposed to any other Person) and that the Purchaser shall be liable solely in respect of its own commitment under the Transaction Documents on a several, and not joint, basis with any other Purchaser.

No Obligor will, without the prior written consent of the Indemnified Person, settle, compromise, consent to the entry of any judgment in or otherwise seek to terminate any Proceeding in respect of which indemnification may be sought hereunder (whether or not any Indemnified Person is a party thereto) unless such settlement, compromise, consent or termination (i) includes an unconditional release of each Indemnified Person from all liability arising out of such Proceeding and (ii) does not include a statement as to, or an admission of, fault, culpability, or a failure to act by or on behalf of such Indemnified Person.

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SECTION V. MISCELLANEOUS

Section 5.1 Amendments and Waivers. This Agreement may only be amended in writing by all of the parties hereto (other than as expressly set forth in Section 2.3 hereof).

Section 5.2 Board Designation.

(a) From and after the Initial Issue Date, and for as long as the Purchaser is both the Holder of at least $25 million in aggregate principal amount or market value of outstanding Indebtedness of the Issuer and maintains a voting percentage equal to or greater than 5% of the Issuer’s total shares of Capital Stock outstanding and no Purchase Failure Event occurs (collectively, the “Investment Threshold”), the Purchaser shall, subject to applicable law, have the right to designate one (1) member to the Issuer’s Board of Directors (the “Purchaser Director”); provided that such designee meets the criteria that are reasonably acceptable to the corporate governance and nominating committee (or equivalent committee or the full board, as applicable) of the Board of Directors of the Issuer. The Issuer shall use its best efforts, in accordance with its bylaws and corporate governance guidelines as then in effect, to cause the Purchaser Director to be promptly appointed to the Issuer’s Board of Directors. So long as the Purchaser maintains the Investment Threshold, if the Purchaser Director resigns or is removed from the Board of Directors, the Purchaser shall maintain the right to designate a successor Purchaser Director and the Issuer shall use its best efforts, in accordance with its bylaws and corporate governance guidelines as then in effect, to cause the Purchaser Director to be promptly appointed to the Issuer’s Board of Directors to fill such vacancy; provided that such nominee meets the criteria that are reasonably acceptable to the corporate governance and nominating committee of the Board of Directors of the Issuer. So long as the Purchaser maintains the Investment Threshold, it can recommend to the nominating committee of the Issuer’s Board of Directors one director to be voted on by shareholders at each annual meeting. Subject to any limitations imposed by applicable law, the Purchaser Director shall be entitled to the same perquisites, including stock options, reimbursement of expenses and other similar rights and shall be obligated to the same director policies, in each case, in connection with such person’s membership on the Board of Directors of the Issuer, as every other non-employee member of the Board of Directors of the Issuer.

(b) The Issuer shall have the right to block a Purchaser Director designated by the Purchaser if such designation would contravene applicable law, regulation, its bylaws or corporate governance guidelines as then in effect or if such designee holds, or is nominated to hold, a management position or board seat at a company that the Board of Directors of the Issuer reasonably determines directly competes with the Issuer. If, following the time when any person designated by the Purchaser is appointed to the Board of Directors of the Issuer, such person is appointed or elected to any such position or seat at a company that the Board of Directors of the Issuer reasonably determines directly competes with the Issuer, the Purchaser shall, so long as the Purchaser maintains the Investment Threshold, be entitled to designate a director to fill the vacancy resulting from such person’s resignation from the Board of Directors of the Issuer; provided that such designee meets the criteria that are reasonably acceptable to the corporate governance and nominating committee of the Board of Directors of the Issuer.

(c) Notwithstanding the foregoing, the rights of the Purchaser to designate the Purchaser Director shall at all times be subject to applicable rules and published guidance of The New York Stock Exchange.

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Section 5.3 Notices. All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by telecopy), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered by hand, or, in the case of mail or telecopy notice, when received, addressed as follows in the case of the Issuer and the Guarantors and as set forth on Exhibit B in the case of the Purchaser, or, to such other address as may be hereafter notified to the Indenture Trustee by the respective parties hereto:

The Issuer:	Imperial Holdings, Inc.
	5355 Town Center Road, Suite 701
	Boca Raton, FL 33486
	Attention of: Office of the General Counsel
	Facsimile:

Section 5.4 No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of any party hereto, any right, remedy, power or privilege under any of the Transaction Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege under any of the Transaction Documents preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges provided in the Transaction Documents are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.

Section 5.5 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Issuer and the Purchaser, and their respective successors and assigns, provided that the Issuer may not assign its rights hereunder without prior written consent from the Purchaser.

Section 5.6 Counterparts. This Agreement may be executed by the parties to this Agreement on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument.

Section 5.7 Severability. Any provisions of this Agreement which are prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provisions in any other jurisdiction.

Section 5.8 Governing Law. THIS AGREEMENT, OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, THE RELATIONSHIP OF THE PARTIES HERETO AND THE INTERPRETATION AND ENFORCEMENT OF THE RIGHTS AND DUTIES OF THE PARTIES HERETO SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF

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THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK.

Section 5.9 Termination. This Agreement shall remain in full force and effect until the payment in full of the principal of and interest on the Notes and all other amounts payable to the Purchaser or the Indenture Trustee under the Transaction Documents.

Section 5.10 Limited Recourse; No Proceedings. The obligations of the Obligors under this Agreement are solely the obligations of the Obligors. No recourse shall be had for the payment of any fee or other obligation or claim arising out of or relating to this Agreement or any other agreement, instrument, document or certificate executed and delivered or issued by the Obligors, or any officer of it in connection therewith, against any partner, member, stockholder, employee, officer, director or incorporator of the Obligors.

Section 5.11 Survival of Representations and Warranties and Indemnification. All representations and warranties made and indemnification provided hereunder and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the other Transaction Documents, the purchase or transfer by the Purchaser of any Note or portion thereof or interest therein, the payment of any Note and the termination of this Agreement and shall survive until the termination as provided under the Indenture.

Section 5.12 Submission to Jurisdiction; Waivers. EACH OBLIGOR AND THE PURCHASER HEREBY IRREVOCABLY AND UNCONDITIONALLY:

(1) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT TO WHICH IT IS A PARTY, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK LOCATED IN NEW YORK COUNTY, AND APPELLATE COURTS FROM ANY THEREOF;

(2) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH COURTS AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME;

(3) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING A

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COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO SUCH PARTY AT ITS ADDRESS SET FORTH IN SECTION 5.2 OR AT SUCH OTHER ADDRESS OF WHICH THE INDENTURE TRUSTEE SHALL HAVE BEEN NOTIFIED PURSUANT THERETO; AND

(4) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE IN ANY OTHER JURISDICTION.

Section 5.13 WAIVERS OF JURY TRIAL. EACH OBLIGOR AND THE PURCHASER HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING DIRECTLY OR INDIRECTLY TO THIS AGREEMENT OR ANY OTHER DOCUMENT OR INSTRUMENT RELATED HERETO AND FOR ANY COUNTERCLAIM THEREIN.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective officers as of the day and year first above written.

IMPERIAL HOLDINGS, INC., as Issuer
By:	/s/ Antony Mitchell
	Name:	Antony Mitchell
	Title:	Chief Executive Officer
HARBORDALE, LLC, as Guarantor
By:	/s/ Antony Mitchell
	Name:	Antony Mitchell
	Title:	Chief Executive Officer
IMPERIAL LIFE AND ANNUITY SERVICES, LLC, as Guarantor
By:	Imperial Holdings, Inc., its sole member
By:	/s/ Antony Mitchell
	Name:	Antony Mitchell
	Title:	Chief Executive Officer
IMPERIAL PREMIUM FINANCE, LLC, as Guarantor
By:	/s/ Antony Mitchell
	Name:	Antony Mitchell
	Title:	Chief Executive Officer
RED REEF ALTERNATIVE INVESTMENTS, LLC, as Guarantor
By:	/s/ Antony Mitchell
	Name:	Antony Mitchell
	Title:	Chief Executive Officer

[Note Purchase Agreement Signature Page]

WASHINGTON SQUARE FINANCIAL, LLC, as Guarantor
By	/s/ Antony Mitchell
	Name:	Antony Mitchell
	Title:	Chief Executive Officer
IMPERIAL FINANCING & TRADING, LLC, as Guarantor
By:	/s/ Antony Mitchell
	Name:	Antony Mitchell
	Title:	Chief Executive Officer
IMPERIAL LITIGATION FUNDING, LLC, as Guarantor
By:	/s/ Antony Mitchell
	Name:	Antony Mitchell
	Title:	Chief Executive Officer

[Note Purchase Agreement Signature Page]

PURCHASER:
INDABA CAPITAL FUND, L.P.
By:	Indaba Partners, LLC
	Its general partner
By:	/s/ Derek C. Schrier
	Name:	Derek C. Schrier
	Title:	Senior Managing Member, Managing Partner and Chief Investment Officer

[Note Purchase Agreement Signature Page – Indaba Capital Fund, L.P]

SCHEDULE 1

PURCHASER AND INITIAL NOTE BALANCES

Purchaser	Initial Note Balance
Indaba Capital Fund, L.P.	$	25,000,000

SCHEDULE 2

ISSUER WIRE INSTRUCTIONS

The Bank of New York

ABA

GLA

TAS #

Re:

Attn:

Phone:

EXHIBIT A

FORM OF PURCHASER LETTER

[Date]    

IMPERIAL HOLDINGS, INC.

5355 Town Center Road, Suite 701

Boca Raton, FL 33486

Re Imperial Holdings, Inc. Notes

Ladies and Gentlemen:

This letter (the “Investor Letter”) is delivered by the undersigned (the “Purchaser”) pursuant to that certain Note Purchase Agreement dated as of [                    ] (as in effect, the “Note Purchase Agreement”), between Imperial Holdings, Inc. as Issuer, certain of the Issuer’s affiliates as guarantors, and the Purchaser. Capitalized terms used herein without definition shall have the meanings set forth in the Note Purchase Agreement. The Purchaser represents to and agrees with the Issuer as follows:

(a) The Purchaser is authorized to enter into the Note Purchase Agreement and to perform its obligations thereunder and to consummate the transactions contemplated thereby.

(b) The Purchaser has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of its investment in the Notes, is experienced in investing in the capital markets and is able to bear the economic risk of such investment. The Purchaser is aware that investment in the Notes involves a high degree of risk, and the Notes are, therefore, a speculative investment.

(c) The Purchaser has been afforded the opportunity to ask such questions as it deems necessary to make an investment decision, and has received all information it has requested and deemed necessary in connection with making such investment decision. The Purchaser has, independently and without reliance upon any other Purchaser, and based on such documents and information as it has deemed appropriate and adequate for such purpose, made its own appraisal of an investigation into the business, operations, property, financial and other condition, prospects and creditworthiness of the Issuer, and made its own decision to purchase its interest in the Notes (including, without limitation, having considered the income tax consequences of purchasing, owning or disposing of the Notes in light of the Purchaser’s particular situation and tax residence as well as any consequences arising under the laws of any taxing jurisdiction), and will, independently and without reliance upon any other Purchaser, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis, appraisals and decisions in taking or not taking action under the Note Purchase Agreement, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition, prospects and creditworthiness of the Issuer.

(d) The Purchaser is an “accredited investor”, as defined in Rule 501, promulgated by the Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended (the “Securities Act”) or is a “qualified institutional buyer” (within the meaning of Rule 144A thereunder) and is acquiring the Notes (or an interest in the Notes) for its own account for investment purposes. The Purchaser understands that the offering and sale of the Notes (or any interest in therein) has not been and will not be registered under the Securities Act and has not and will not be registered or qualified under any applicable “Blue Sky” law, and that the offering and sale of the Notes (or any interests therein) have not been reviewed by, passed on or submitted to any federal or state agency or commission, securities exchange or other regulatory body.

(d) The Purchaser is not an employee benefit plan subject to Title I of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), or section 4975 of the Internal Revenue Code of 1986, as amended (the “Code”) (each such plan, an “Employee Plan”), an entity whose underlying assets include the assets of any Employee Plan, or a governmental plan that is subject to any federal, state or local law which is substantially similar to the provisions of Section 406 of ERISA or Section 4975 of the Code or the Purchaser’s purchase, holding and disposition of the Notes does not result in a prohibited transaction under Section 406 of ERISA or Section 4975 of the Code (or, in the case of a governmental plan, any substantially similar federal, state or local law) for which an exemption is not available.

(e) The Purchaser is acquiring an interest in the Notes without a view to any distribution, resale or other transfer except as contemplated in the following sentence. The Purchaser will not resell or otherwise transfer the Notes, or any interest or participation in the Notes, except in a transaction exempt from the registration requirements of the Securities Act, and applicable state securities or “blue sky” laws. The Purchaser understands and acknowledges that no Obligor has made or will be making any representation as to the availability of Rule 144A, Regulation S or Rule 144 under the Securities Act for the reoffer, resale, pledge or transfer of the Notes.

(f) This Investor Letter has been duly executed and delivered and constitutes the legal, valid and binding obligation of the Purchaser, enforceable against the Purchaser in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles affecting the enforcement of creditors’ rights generally and general principles of equity.

Very truly yours,
[NAME OF PURCHASER]
By:
	Name:
	Title:

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EXHIBIT B

PURCHASER NOTICE INFORMATION

Indaba Capital Fund, L.P.

c/o Indaba Capital Management, L.P.

Attn:

One Letterman Drive, Building D, Suite DM700

San Francisco, CA 94129

Email:

Phone:

-1-

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Antony Mitchell, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Imperial Holdings, 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 registrant’s other certifying officer(s) 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 registrant’s 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 registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s 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 registrant’s 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 registrant’s internal control over financial reporting.

/s/ Antony Mitchell

Antony Mitchell

Chief Executive Officer and Director

(Principal Executive Officer)

November 10, 2014

48

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Richard S. O’Connell, Jr., certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Imperial Holdings, 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 registrant’s other certifying officer(s) 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 registrant’s 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 registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s 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 registrant’s 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 registrant’s internal control over financial reporting.

/s/ Richard S. O’Connell, Jr.

Richard S. O’Connell, Jr.

Chief Financial Officer and Chief Credit Officer

(Principal Financial Officer)

November 10, 2014

49

EX-32.1

Exhibit 32.1

Certification of the Chief Executive Officer

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 of Imperial Holdings, Inc. (the Registrant) on Form 10-Q for the period ended September 30, 2014 as filed with the U.S. Securities and Exchange Commission on the date hereof (the Report), I, Antony Mitchell, Chief Executive Officer of the Registrant, certify to the best of my knowledge, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 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 Registrant.

/s/ Antony Mitchell

Antony Mitchell

Chief Executive Officer and Director

November 10, 2014

50

EX-32.2

Exhibit 32.2

Certification of the Chief Executive Officer

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 of Imperial Holdings, Inc. (the Registrant) on Form 10-Q for the period ended September 30, 2014 as filed with the U.S. Securities and Exchange Commission on the date hereof (the Report), I, Richard S. O’Connell, Jr., Chief Financial Officer and Chief Credit Officer of the Registrant, certify to the best of my knowledge, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 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 Registrant.

/s/ Richard S. O’Connell, Jr.

Richard S. O’Connell, Jr.

Chief Financial Officer and Chief Credit Officer

November 10, 2014

51

XML

Common Stock Options Activity (Detail) (USD $)	6 Months Ended	9 Months Ended
	Jun. 30, 2014	Sep. 30, 2014
Number of Shares
Options outstanding, Beginning Balance	831,282	831,282
Options granted
Options exercised
Options forfeited		(15,834)
Options expired
Options outstanding, Ending Balance		815,448
Exercisable at end of period		654,740
Unvested at end of period		160,708
Weighted Average Price per Share
Options outstanding, Beginning Balance	$ 8.46	$ 8.46
Options granted
Options exercised
Options forfeited		$ 6.94
Options expired
Options outstanding, Ending Balance		$ 8.49
Exercisable at end of period		$ 8.87
Unvested at end of period		$ 6.94
Weighted Average Remaining Contractual Term
Options forfeited		5 years 8 months 5 days
Options outstanding, Beginning Balance	5 years 6 months 4 days	4 years 8 months 27 days
Exercisable at end of period		4 years 6 months 4 days
Unvested at end of period		5 years 8 months 5 days
Aggregate Intrinsic Value
Options outstanding, Beginning Balance
Options granted
Options exercised
Options forfeited
Options expired
Options outstanding, Ending Balance
Exercisable at end of period
Unvested at end of period

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Life Insurance Issuer concentrations (Detail)	9 Months Ended
	Sep. 30, 2014
10% of total fair value of our investments in life settlements | Transamerica Occidental Life Insurance Company | Moody's, A1 Rating | Standard & Poor's, AA- Rating
Concentration Risk [Line Items]
Concentrations risk percentage	24.10%
10% of total fair value of our investments in life settlements | Lincoln National Life Insurance Company | Moody's, A1 Rating | Standard & Poor's, AA- Rating
Concentration Risk [Line Items]
Concentrations risk percentage	22.50%
10% of total fair value of our investments in life settlements | Lincoln Benefit Life Company | Moodys Credit Rating, NR | Standard & Poor's, BBB+ Rating
Concentration Risk [Line Items]
Concentrations risk percentage	10.70%
Life insurance issuer concentrations that exceed 10% of total death benefit | Transamerica Occidental Life Insurance Company | Moody's, A1 Rating | Standard & Poor's, AA- Rating
Concentration Risk [Line Items]
Concentrations risk percentage	20.60%
Life insurance issuer concentrations that exceed 10% of total death benefit | Lincoln National Life Insurance Company | Moody's, A1 Rating | Standard & Poor's, AA- Rating
Concentration Risk [Line Items]
Concentrations risk percentage	20.30%
Life insurance issuer concentrations that exceed 10% of total death benefit | Lincoln Benefit Life Company | Moodys Credit Rating, NR | Standard & Poor's, BBB+ Rating
Concentration Risk [Line Items]
Concentrations risk percentage	10.00%

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8.50% Senior Unsecured Convertible Notes - Additional Information (Detail) (USD $)	3 Months Ended		9 Months Ended				1 Months Ended	3 Months Ended	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013	Dec. 31, 2013		Feb. 28, 2014 8.50% Senior Unsecured Convertible Notes Due 2019 D Director	Sep. 30, 2014 8.50% Senior Unsecured Convertible Notes Due 2019	Sep. 30, 2014 8.50% Senior Unsecured Convertible Notes Due 2019	Jun. 05, 2014 8.50% Senior Unsecured Convertible Notes Due 2019	Sep. 30, 2014 8.50% Senior Unsecured Convertible Notes Due 2019 Period One	Sep. 30, 2014 8.50% Senior Unsecured Convertible Notes Due 2019 Period Two	Feb. 28, 2014 8.50% Senior Unsecured Convertible Notes Due 2019 Bulldog Investors Llc	Jun. 05, 2014 8.50% Senior Unsecured Convertible Notes Due 2019 Reclassifications To Additional Paid In Capital
Debt Instrument [Line Items]
Debt instrument issued							$ 70,700,000	$ 70,700,000	$ 70,700,000				$ 9,200,000
Debt instrument, interest rate							8.50%	8.50%	8.50%
Debt instrument, due date									2019
Debt instrument, issuance date							Feb. 21, 2014
Number of board of directors							2
Debt instrument, maturity date									Feb. 15, 2019
Debt instrument, frequency of periodic payment									Semi-annually in arrears on August 15 and February 15 of each year
Debt instrument, date of first required payment									Aug. 15, 2014
Debt instrument, convertible, conversion rate							147.9290
Debt Instrument, Convertible, Conversion Price							$ 6.76
Debt instrument, redemption start date									Feb. 15, 2017
Debt instrument, convertible, minimum percentage of common stock price							130.00%
Debt instrument, convertible, threshold trading days							20
Debt instrument, convertible, threshold consecutive trading days							30 days
Debt instrument, redemption price, percentage							100.00%
Conversion derivative liability, at estimated fair value										23,700,000
Unamortized transaction costs														756,000
Deferred tax asset, conversion derivative liability	6,500,000		6,500,000											8,800,000
Senior unsecured convertible notes, net of discount	55,250,000		55,250,000		0	[1]		55,300,000	55,300,000
Unamortized debt discount								15,500,000	15,500,000
Debt instrument origination cost	2,295,000		2,295,000		0	[1]		2,300,000	2,300,000
Interest expense of notes								2,200,000	5,300,000
Interest payable	768,000		768,000		0	[1]					1,500,000	3,700,000
Amortizing debt discounts								605,000	1,400,000
Debt issuance cost			0	10,340,000				90,000	239,000
Change in fair value of conversion derivative liability	$ 0	$ 0	$ (6,759,000)	$ 0					$ (6,800,000)

[1] Derived from audited consolidated financial statements.

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Changes in Weighted Average Discount Rate Used to Estimate Fair Value (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013	Dec. 31, 2013
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Weighted Average Rate			18.56%
Value	$ 350,383		$ 350,383		$ 302,961
Change in Value	0	(461)	(426)	(1,708)
.50% Decrease in Discount Rate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Weighted Average Rate			18.06%
Value	360,030		360,030
Change in Value			9,647
.50% Increase in Discount Rate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Weighted Average Rate			19.06%
Value	341,171		341,171
Change in Value			$ (9,212)

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Estimated Premiums to be Paid (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014
Life Insurance Premiums and Related Investment Income [Line Items]
Remainder of 2014	$ 13,436
2015	53,625
2016	57,116
2017	63,683
2018	67,945
Thereafter	1,145,526
Estimated future premium payments	$ 1,401,331

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Recent Accounting pronouncements - Additional Information (Detail) (USD $)	3 Months Ended		9 Months Ended		0 Months Ended	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013	Jan. 01, 2014 ASU No. 2013-11	Sep. 30, 2014 ASU No. 2013-11
Accounting Policies [Line Items]
Provision for income taxes	$ (2,235,000)	$ 0	$ (2,452,000)	$ 40,000		$ 3,700,000
Reduction in valuation allowance						2,600,000
Increase to additional paid-in-capital						6,300,000
Reclassification of current liability for unrecognized tax benefits to deferred taxes					$ 6,300,000

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Changes in Weighted Average Discount Rate Used to Estimate Fair Value of Revolving Credit Facility (Detail) (USD $) In Thousands, unless otherwise specified			9 Months Ended
	Sep. 30, 2014	Dec. 31, 2013	Sep. 30, 2014 Revolving Credit Facility	Sep. 30, 2014 .50% Decrease in Discount Rate Revolving Credit Facility	Sep. 30, 2014 .50% Increase in Discount Rate Revolving Credit Facility
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Discount rate			24.01%	23.51%	24.51%
Value	$ 142,661	$ 123,847	$ 142,661	$ 145,394	$ 140,020
Change in Value				$ 2,733	$ (2,641)

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Earnings Per Share (Tables)

9 Months Ended

Sep. 30, 2014

Reconciliation of Actual Basic and Diluted Earnings Per Share

The following tables reconcile actual basic and diluted earnings per share for the three months and nine months ended September 30, 2014 and 2013 (in thousands except share and per share data).

	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
	2014(1)			2013(2)		2014(1)			2013(2)
Earnings per share:
Numerator:
Net (loss) income from continuing operations	$	(4,264	)	$	6,106	$	(13,863	)	$	47,924
Net (loss) income income from discontinued operations	$	(249	)	$	55	$	(454	)	$	1,627
Net (loss) income	$	(4,513	)	$	6,161	$	(14,317	)	$	49,551
Basic earnings per common share:
Basic (loss) income from continuing operations	$	(0.20	)	$	0.29	$	(0.65	)	$	2.26
Basic (loss )income from discontinued operations	$	(0.01	)		—	$	(0.02	)	$	0.08
Basic (loss) income per share available to common shareholders	$	(0.21	)	$	0.29	$	(0.67	)	$	2.34
Denominator:
Basic weighted average common shares outstanding		21,361,930			21,219,880		21,352,086			21,215,344
Diluted earnings per per common share:
Diluted (loss) income from continuing operations.	$	(0.20	)	$	0.29	$	(0.65	)	$	2.26
Diluted (loss) income from discontinued operations	$	(0.01	)	$	—	$	(0.02	)	$	0.08
Diluted (loss) income per share available to common shareholders	$	(0.21	)	$	0.29	$	(0.67	)	$	2.34
Denominator:
Weighted average common shares outstanding		21,361,930			21,219,880		21,352,086			21,215,344
Add: Restricted Stock		—			3,147		—			48
Diluted weighted average shares outstanding		21,361,930			21,223,027		21,352,086			21,215,392

(1) The computation of diluted EPS does not include 815,448 options, 6,240,521 warrants, 41,060 shares of restricted stock, up to 10,464,941 shares of underlying common stock issuable upon conversion of the Notes and 299,500 performance shares for the three months and nine months ended September 30, 2014, as the effect of their inclusion would have been anti-dilutive.

(2) The computation of diluted EPS did not include 899,472 options, and 4,240,521 warrants for the three months and nine months ended September 30, 2013, as the effect of their inclusion would have been anti-dilutive.

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Assets And Liabilities Measured at Fair Value on Recurring Basis (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of life insurance policies held	$ 350,383	$ 302,961
Structured settlement receivables	383	660	[1]
Assets, Fair Value Disclosure, Total	350,766	303,621
Revolving Credit Facility debt	142,661	123,847
Financial and Nonfinancial Liabilities, Fair Value Disclosure	142,661	123,847
Fair Value, Inputs, Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of life insurance policies held	350,383	302,961
Structured settlement receivables	383	660
Assets, Fair Value Disclosure, Total	350,766	303,621
Revolving Credit Facility debt	142,661	123,847
Financial and Nonfinancial Liabilities, Fair Value Disclosure	$ 142,661	$ 123,847

[1] Derived from audited consolidated financial statements.

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Discontinued Operations - Additional Information (Detail) (Structured settlements, USD $) In Millions, unless otherwise specified	1 Months Ended	3 Months Ended
	Oct. 25, 2013	Dec. 31, 2013
Structured settlements
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Sale of structured settlement business	$ 12.0
Recognized a gain on structured settlement assets		$ 11.3

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Reconciliation of Actual Basic and Diluted Earnings Per Share (Parenthetical) (Detail)	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Stock Option
Schedule of Earnings Per Share, Basic and Diluted, by Common Class [Line Items]
Antidilutive securities excluded from computation of diluted earnings per share	815,448	899,472	815,448	899,472
Warrant
Schedule of Earnings Per Share, Basic and Diluted, by Common Class [Line Items]
Antidilutive securities excluded from computation of diluted earnings per share	6,240,521	4,240,521	6,240,521	4,240,521
Restricted Stock
Schedule of Earnings Per Share, Basic and Diluted, by Common Class [Line Items]
Antidilutive securities excluded from computation of diluted earnings per share	41,060		41,060
Performance Shares
Schedule of Earnings Per Share, Basic and Diluted, by Common Class [Line Items]
Antidilutive securities excluded from computation of diluted earnings per share	299,500		299,500
Maximum | Convertible Debt Securities
Schedule of Earnings Per Share, Basic and Diluted, by Common Class [Line Items]
Antidilutive securities excluded from computation of diluted earnings per share	10,464,941		10,464,941

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Fair Value Measurements - Additional Information (Detail) (USD $)	9 Months Ended				9 Months Ended		9 Months Ended			9 Months Ended			9 Months Ended		0 Months Ended	1 Months Ended	9 Months Ended	0 Months Ended	1 Months Ended
	Sep. 30, 2014 Contract	Dec. 31, 2013 Contract		Sep. 30, 2013	Sep. 30, 2014 Structured settlements Contract	Sep. 30, 2014 Previously Premium Financed Contract	Sep. 30, 2014 Previously Premium Financed Minimum	Sep. 30, 2014 Previously Premium Financed Maximum	Sep. 30, 2014 Non-Premium Financed Contract	Sep. 30, 2014 Non-Premium Financed Minimum	Sep. 30, 2014 Non-Premium Financed Maximum	Mar. 31, 2013 21st Services	Sep. 30, 2014 Noninvestment grade Contract	Sep. 30, 2013 Impaired life bearing	May 16, 2014 Revolving Credit Facility	Apr. 29, 2013 Revolving Credit Facility Securities	Sep. 30, 2014 Revolving Credit Facility	May 16, 2014 Revolving Credit Facility White Eagle Asset Portfolio, LLC	Apr. 29, 2013 Revolving Credit Facility White Eagle Asset Portfolio, LLC
Fair Value, Instruments Classified in Shareholders' Equity Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Mortality rate				100.00%										200.00%
Life expectancy, percentage	15.80%											19.00%
Number of life insurance policies	595	612			17	550			45				19			452
Additional basis point risk premium													3.00%
Life insurance estimated fair value	$ 350,383,000	$ 302,961,000
Discount rates							16.55%	26.55%		14.80%	20.80%						24.01%
Weighted average discount rate	18.56%				8.66%
Settlements with estimated fair value	383,000	660,000	[1]		383,000
Percentage of remaining proceeds															100.00%	100.00%		50.00%	50.00%
Proceeds to be paid to White Eagle after payment of loan																		76,100,000	76,100,000
Revolving Credit facility debt, at estimated fair value	142,661,000	123,847,000															142,661,000
Revolving Credit Facility debt, outstanding																	$ 156,600,000

[1] Derived from audited consolidated financial statements.

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Income Taxes - Additional Information (Detail) (USD $)	3 Months Ended		9 Months Ended				9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013	Jun. 05, 2014 8.50% Senior Unsecured Convertible Notes Due 2019	Jun. 05, 2014 8.50% Senior Unsecured Convertible Notes Due 2019 Reclassifications To Additional Paid In Capital	Sep. 30, 2014 ASU No. 2013-11
Income Taxes [Line Items]
Annual effective tax rate			36.90%
Effective income tax rate reconciliation, prior year income taxes, percent			0.00%
Effective tax rate, valuation allowance for deferred tax assets			0.00%
Provision for income taxes	$ (2,235,000)	$ 0	$ (2,452,000)	$ 40,000			$ 3,700,000
Increase to additional paid-in-capital							6,300,000
Deferred tax asset, conversion derivative liability	6,500,000		6,500,000			8,800,000
Deferred tax liability	$ 6,500,000		$ 6,500,000		$ 6,200,000

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Revolving Credit Facility - Additional Information (Detail) (USD $)	3 Months Ended		9 Months Ended			0 Months Ended	1 Months Ended	3 Months Ended	9 Months Ended								0 Months Ended				1 Months Ended
	Sep. 30, 2014 Contract	Sep. 30, 2013	Sep. 30, 2014 Contract	Sep. 30, 2013	Dec. 31, 2013 Contract	May 16, 2014 Revolving Credit Facility	Apr. 29, 2013 Revolving Credit Facility Securities	Sep. 30, 2014 Revolving Credit Facility	Sep. 30, 2014 Revolving Credit Facility	May 16, 2014 Revolving Credit Facility	May 16, 2014 Revolving Credit Facility Maintenance Costs	May 16, 2014 Revolving Credit Facility Accrued and Unpaid Interest	May 16, 2014 Revolving Credit Facility Other fees and expense	May 16, 2014 Revolving Credit Facility Policies pledged as collateral as determined by the lenders	May 16, 2014 Revolving Credit Facility Policies pledged as collateral excluding certain specified life insurance policies	Sep. 30, 2014 Revolving Credit Facility Securities Pledged as Collateral Contract	May 16, 2014 Revolving Credit Facility Floor Rate	May 16, 2014 Revolving Credit Facility Applicable Margin	May 16, 2014 Revolving Credit Facility Federal Funds Rate	May 16, 2014 Revolving Credit Facility White Eagle Asset Portfolio, LLC	Apr. 29, 2013 Revolving Credit Facility White Eagle Asset Portfolio, LLC	May 16, 2014 Revolving Credit Facility White Eagle Asset Portfolio, LLC
Debt Instrument [Line Items]
Revolving credit facility effective date																				Apr. 29, 2013
Number of policies owned	595		595		612		452									452
Life insurance policies with aggregate death benefit	$ 2,888,289,000		$ 2,888,289,000		$ 2,954,890,000											$ 2,300,000,000
Life insurance estimated fair value	350,383,000		350,383,000		302,961,000											295,500,000
Revolving Credit facility, current borrowing capacity								159,100,000	159,100,000													300,000,000
Line of credit borrowing base percentage											100.00%	100.00%	100.00%	75.00%	50.00%
Line of credit facility, maximum borrowing capacity								143,400,000	143,400,000
Line of credit facility, remaining borrowing capacity								2,600,000	2,600,000
Percentage of remaining proceeds						100.00%	100.00%													50.00%	50.00%
Proceeds to be paid to White Eagle after payment of loan																				76,100,000	76,100,000
Collateral pledge percentage for distributions to be altered										25.00%
Basis spread on variable rate																	1.50%	4.00%	0.75%
Base rate										0.50%
Debt instrument effective rate								5.50%	5.50%
Interest expense on the facility	4,303,000	1,158,000	11,165,000	12,020,000				2,100,000	5,800,000
Interest expense withheld from borrowings by lender			4,962,000	995,000				1,500,000	4,200,000
Interest paid			4,496,000	825,000				573,000	1,600,000
Credit agreement expiration date						Apr. 28, 2028
Revolving Credit facility debt, at estimated fair value	142,661,000		142,661,000		123,847,000			142,661,000	142,661,000
Revolving Credit Facility debt, outstanding								$ 156,600,000	$ 156,600,000

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Principles of Consolidation and Basis of Presentation

9 Months Ended

Sep. 30, 2014

Principles of Consolidation and Basis of Presentation

(2) Principles of Consolidation and Basis of Presentation

The accompanying consolidated financial statements include the accounts of the Company, all of its wholly-owned subsidiary companies and its special purpose entities, with the exception of Imperial Settlements Financing 2010, LLC (“ISF 2010”), an unconsolidated special purpose entity. The special purpose entity has been created to fulfill specific objectives. All significant intercompany balances and transactions have been eliminated in consolidation, including income from services performed by subsidiaries in connection with the Revolving Credit Facility. Notwithstanding consolidation, White Eagle is the owner of 452 policies, with an aggregate death benefit of approximately $2.3 billion and an estimated fair value of approximately $295.5 million at September 30, 2014.

The unaudited consolidated financial statements have been prepared in conformity with the rules and regulations of the SEC for Form 10-Q and therefore do not include certain information, accounting policies, and footnote disclosures information or footnotes necessary for a complete presentation of financial position, results of operations and cash flows in conformity with generally accepted accounting principles. However, all adjustments (consisting of normal recurring accruals), which, in the opinion of management, are necessary for a fair presentation of the financial statements, have been included. Operating results for the three months and nine months ended September 30, 2014 are not necessarily indicative of the results that may be expected for future periods or for the year ended December 31, 2014. These interim financial statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in Imperial’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013.

Derivative Instruments

The Company issued and sold $70.7 million in aggregate principal amount of 8.50% senior unsecured convertible notes due 2019 (the “Notes”). Prior to shareholder approval on June 5, 2014 to issue shares of common stock upon conversion of the Notes in excess of New York Stock Exchange limits for share issuances without shareholder approval, the Notes contained an embedded derivative feature. In accordance with Accounting Standards Codification (“ASC”) 815, Derivatives and Hedging, derivative instruments are recognized as either assets or liabilities on the Company’s balance sheet and are measured at fair value with gains or losses recognized in earnings. Embedded derivatives that are not clearly and closely related to the host contract, such as the Notes, are bifurcated and recognized at fair value with changes in fair value recognized as either a gain or loss in earnings if they can be reliably measured. The Company determined the fair value of its embedded derivative based upon available market data and unobservable inputs using a Black Scholes pricing model. In accordance with ASC 815, upon receipt of shareholder approval on June 5, 2014, the Company reclassified the embedded derivative to equity along with unamortized transaction costs proportionate to the allocation of the initial debt discount and the principal amount of the Notes. The Notes are recorded at accreted value and will continue to be accreted up to the par value of the Notes at maturity. See Note 10, 8.50% Senior Unsecured Convertible Notes.

Foreign Currency

The Company’s foreign subsidiaries are considered to be extensions of the U.S. Company and the U.S. dollar is utilized as the functional currency. The foreign subsidiaries’ financial statements are denominated in U.S. dollars and therefore, there are no translation gains and losses resulting from converting the financial statements at exchange rates other than the functional currency. Any gains and losses resulting from foreign currency transactions (transactions denominated in a currency other than the subsidiaries’ functional currency) are included in income. At this time, these gains and losses are immaterial to the Company’s financial statements.

Use of Estimates

The preparation of these consolidated financial statements, in conformity with generally accepted accounting principles in the United States of America (“GAAP”), requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from these estimates and such differences could be material. Significant estimates made by management include income taxes, the valuation of investments in life settlements, the valuation of the debt owing under the Revolving Credit Facility, the valuation of equity awards and the valuation of the conversion derivative liability formerly embedded within the Company’s Notes.

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Subsequent Events - Additional Information (Detail) (USD $)	9 Months Ended				0 Months Ended		0 Months Ended									0 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Dec. 31, 2013		Nov. 10, 2014 Subsequent Event Secured Debt	Nov. 10, 2014 Subsequent Event Secured Debt	Nov. 10, 2014 Subsequent Event Secured Debt Debt Instrument, Redemption, Period One	Nov. 10, 2014 Subsequent Event Secured Debt Debt Instrument, Redemption, Period Two	Nov. 10, 2014 Subsequent Event Secured Debt Extended Term	Nov. 10, 2014 Subsequent Event Secured Debt Extended Term	Nov. 10, 2014 Subsequent Event Secured Debt May be issued if the Company deploy $25 million in investments following the Initial Closing Date	Nov. 10, 2014 Subsequent Event Secured Debt May be issued if the Company satisfies certain book and market value targets	Nov. 10, 2014 Subsequent Event Secured Debt Maximum	Nov. 10, 2014 Subsequent Event Secured Debt Maximum May be issued during the period ending on the 12-month anniversary of the Initial Closing Date	Nov. 10, 2014 Subsequent Event Secured Debt Debt Covenant	Nov. 10, 2014 Subsequent Event Secured Debt Indaba Capital Management, L.P.	Nov. 10, 2014 Subsequent Event Secured Debt Indaba Capital Management, L.P. Director
Subsequent Event [Line Items]
Debt instrument, face amount											$ 25,000,000	$ 50,000,000	$ 100,000,000	$ 75,000,000			$ 25,000,000
Secured notes issuance price as percentage of face amount																	96.00%
Number of directors that might be appointed in the board																	1
Percentage of voting interest that might be acquired by the appointed director																5.00%
Debt instrument, interest rate						12.875%				14.50%
Debt instrument, maturity term					36 months				12 months
Debt instrument fee as a percentage of outstanding principal amount										3.50%
Debt instrument, redemption description					The Secured Notes may not be optionally redeemed by Imperial for one year from the Initial Closing Date.
Debt instrument, early redemption period					1 year
Percentage of principal amount of debt redemption							106.00%	104.00%
Debt instrument, redemption notice period					60 days
Minimum net worth															100,000,000
Cash and cash equivalents	53,745,000		14,722,000	[1]											20,000,000
Percentage of first tier foreign subsidiaries equity interests pledge to secure debt					65.00%
Debt instrument, increments					25,000,000
Debt issue fees and expenses	$ 0	$ 10,340,000			$ 1,900,000
Debt instrument, draw down fee percentage					1.00%
Debt instrument, percentage of monthly unused fee on unissued notes						1.00%

[1] Derived from audited consolidated financial statements.

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Operating Results of Structured Settlement Business (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended				9 Months Ended
	Sep. 30, 2014		Sep. 30, 2013		Sep. 30, 2014		Sep. 30, 2013
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Total income	$ 38		$ 2,698		$ 150		$ 10,366
Total expenses	(287)		(2,643)		(604)		(8,739)
(Loss) income before income taxes	(249)		55		(454)		1,627
Income tax expense
Net (loss) income from discontinued operations	$ (249)	[1]	$ 55	[2]	$ (454)	[1]	$ 1,627	[2]

[1] The computation of diluted EPS does not include 815,448 options, 6,240,521 warrants, 41,060 shares of restricted stock, up to 10,464,941 shares of underlying common stock issuable upon conversion of the Notes and 299,500 performance shares for the three months and nine months ended September 30, 2014, as the effect of their inclusion would have been anti-dilutive.

[2] The computation of diluted EPS did not include 899,472 options, and 4,240,521 warrants for the three months and nine months ended September 30, 2013, as the effect of their inclusion would have been anti-dilutive.

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Debt Disclosure (Tables)

9 Months Ended

Sep. 30, 2014

Fair Value of Conversion Derivative Liability

The fair value of the conversion derivative liability was estimated at June 5, 2014 using a Black Scholes pricing model with the following assumptions:

	As of June 5, 2014
Expected Volatility		40.0	%
Expected Term in Years		4.7
Risk Free Rate		1.5	%

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Investment in Life Settlements (Life Insurance Policies) (Tables)

9 Months Ended

Sep. 30, 2014

Investments in Life Settlements

The weighted average life expectancy calculated based on death benefit of insureds in the policies owned by the Company at September 30, 2014 was 11.0 years. The following table describes the Company’s investments in life settlements as of September 30, 2014 (dollars in thousands):

Remaining Life Expectancy (In Years)	Number of Life Settlement Contracts		Fair Value		Face Value
0 - 1		—	$	—	$	—
1 - 2		2		3,727		5,377
2 - 3		11		26,135		46,957
3 - 4		9		11,642		29,800
4 - 5		15		21,145		63,854
Thereafter		558		287,734		2,742,301
Total		595	$	350,383	$	2,888,289

The weighted average life expectancy calculated based on death benefit of insureds in the policies owned by the Company at December 31, 2013 was 11.6 years. The following table describes the Company’s investments in life settlements as of December 31, 2013 (dollars in thousands):

Remaining Life Expectancy (In Years)	Number of Life Settlement Contracts		Fair Value		Face Value
0 - 1		—	$	—	$	—
1 - 2		—		—		—
2 - 3		6		8,489		16,875
3 - 4		10		14,171		38,100
4 - 5		8		13,529		40,250
Thereafter		588		266,772		2,859,665
Total		612	$	302,961	$	2,954,890

Estimated Premiums To Be Paid

Estimated premiums to be paid for the remainder of fiscal year 2014, the four succeeding fiscal years, and thereafter to keep the life insurance policies in force as of September 30, 2014, are as follows (in thousands):

Remainder of 2014	$	13,436
2015		53,625
2016		57,116
2017		63,683
2018		67,945
Thereafter		1,145,526
	$	1,401,331

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Changes in Life Expectancy Used to Estimate Fair Value of Revolving Credit Facility (Detail) (USD $) In Thousands, unless otherwise specified				9 Months Ended
	Sep. 30, 2014	Dec. 31, 2013	Sep. 30, 2014 Revolving Credit Facility	Sep. 30, 2014 +6 Life Expectancy Months Adjustment Revolving Credit Facility	Sep. 30, 2014 -6 Life Expectancy Months Adjustment Revolving Credit Facility
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Value	$ 142,661	$ 123,847	$ 142,661	$ 121,547	$ 165,172
Change in Value				$ (21,114)	$ 22,511

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Investment in Life Settlements (Life Insurance Policies) - Additional Information (Detail) (USD $) In Thousands, unless otherwise specified	9 Months Ended	12 Months Ended
	Sep. 30, 2014 Contract	Dec. 31, 2013 Contract
Life Insurance Premiums and Related Investment Income [Line Items]
Number of policies owned	595	612
Life insurance estimated fair value	$ 350,383	$ 302,961
Average life expectancy of insured	11 years	11 years 7 months 6 days
Estimated future premium payments	$ 1,401,331

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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2014

Assets And Liabilities Measured at Fair Value on Recurring Basis

The balances of the Company’s assets and liabilities measured at fair value on a recurring basis as of September 30, 2014, are as follows (in thousands):

	Level 1		Level 2		Level 3		Total Fair Value
Assets:
Investment in life settlements	$	—	$	—	$	350,383	$	350,383
Structured settlement receivables		—		—		383		383
	$	—	$	—	$	350,766	$	350,766

	Level 1		Level 2		Level 3		Total Fair Value
Liabilities:
Revolving Credit Facility debt	$	—	$	—	$	142,661	$	142,661
	$	—	$	—	$	142,661	$	142,661

The balances of the Company’s assets and liabilities measured at fair value on a recurring basis as of December 31, 2013, are as follows (in thousands):

	Level 1		Level 2		Level 3		Total Fair Value
Assets:
Investment in life settlements	$	—	$	—	$	302,961	$	302,961
Structured settlement receivables		—		—		660		660
	$	—	$	—	$	303,621	$	303,621

	Level 1		Level 2		Level 3		Total Fair Value
Liabilities:
Revolving Credit Facility debt	$	—	$	—	$	123,847	$	123,847
	$	—	$	—	$	123,847	$	123,847

Quantitative Information about Level 3 Fair Value Measurements

($ in thousands)	Quantitative Information about Level 3 Fair Value Measurements
	Fair Value at 9/30/14		Aggregate death benefit at 9/30/14		Valuation Technique (s)	Unobservable Input	Range (Weighted Average)
Non-premium financed	$	52,909	$	220,802	Discounted cash flow	Discount rate Life expectancy evaluation	14.80% - 20.80% (8.1 years)
Premium financed	$	297,474	$	2,667,487	Discounted cash flow	Discount rate Life expectancy evaluation	16.55% - 26.55% (11.2 years)
Investment in life settlements	$	350,383	$	2,888,289	Discounted cash flow	Discount rate Life expectancy evaluation	(18.56)% (11.0 years)
Structured settlements receivables	$	383		N/A	Discounted cash flow	Facility sales discount rates	8.66%
Revolving Credit Facility debt	$	142,661		N/A	Discounted cash flow	Discount rate Life expectancy evaluation	24.01% * (10.5 years)

* Actual

Life Insurance Issuer concentrations

The following table provides information about the life insurance issuer concentrations that exceed 10% of total death benefit and 10% of total fair value of our investments in life settlements as of September 30, 2014:

Carrier	Percentage of Total Fair Value			Percentage of Total Death Benefit			Moody’s Rating			S&P Rating
Transamerica Occidental Life Insurance Company		24.1	%		20.6	%		A1			AA-
Lincoln National Life Insurance Company		22.5	%		20.3	%		A1			AA-
Lincoln Benefit Life Company		10.7	%		10.0	%		NR	*		BBB+

* Not Rated

Changes in Fair Value for All Assets Using Material Level of Unobservable (Level 3) Inputs

The following table provides a roll-forward in the changes in fair value for the nine months ended September 30, 2014, for assets for which the Company determines fair value using a material level of unobservable (Level 3) inputs (in thousands):

Life Settlements:
Balance, January 1, 2014	$	302,961
Purchase of policies	$	3,488
Change in fair value		19,313
Matured/lapsed/sold policies		(15,957	)
Premiums paid		40,578
Transfers into level 3
Transfer out of level 3		—
Balance, September 30, 2014	$	350,383
Changes in fair value included in earnings for the period relating to assets held at September 30, 2014	$	8,627

The following table provides a roll-forward in the changes in fair value for nine months ended September 30, 2013, for all assets for which the Company determines fair value using a material level of unobservable (Level 3) inputs (in thousands):

Life Settlements:
Balance, January 1, 2013	$	113,441
Purchase of policies	$	55,500
Acquired in foreclosure		3,168
Change in fair value		81,948
Matured/lapsed/sold policies		(12,658	)
Premiums paid		50,984
Transfers into level 3		—
Transfer out of level 3		—
Balance, September 30, 2013		292,383
Changes in fair value included in earnings for the period relating to assets held at September 30, 2013	$	74,655

Changes in Fair Value for All Liabilities Using Material Level of Unobservable (Level 3) Inputs

The following tables provide a roll-forward in the changes in fair value for nine months ended September 30, 2014, for all liabilities for which the Company determines fair value using a material level of unobservable (Level 3) inputs (in thousands):

Revolving Credit Facility debt:
Balance, January 1, 2014	$	123,847
Subsequent Draws under the revolving credit facility		40,965
Payments on credit facility		(17,595	)
Unrealized change in fair value		(4,556	)
Transfers into level 3		—
Transfer out of level 3		—
Balance, September 30, 2014	$	142,661
Changes in fair value included in earnings for the period relating to liabilities held at September 30, 2014	$	(4,556	)
Conversion derivative liability:
Balance, at inception		16,901
Change in fair value		6,759
Reclassified to equity		(23,660	)
Transfers into level 3		—
Transfer out of level 3		—
Balance, September 30, 2014	$	—
Changes in fair value included in earnings for the period relating to liabilities held at September 30, 2014	$	—

The following table provides a roll-forward in the changes in fair value for nine months ended September 30, 2013, for all liabilities for which the Company determines fair value using a material level of unobservable (Level 3) inputs (in thousands):

Revolving Credit Facility debt:
Balance, January 1, 2013	$	—
Initial advance under the revolving credit facility	$	83,020
Subsequent Draws under the revolving credit facility		37,059
Unrealized change in fair value		(5,295	)
Transfers into level 3		—
Transfer out of level 3		—
Balance, September 30, 2013	$	114,784
Changes in fair value included in earnings for the period relating to liabilities held at September 30, 2013	$	(5,295	)

Market Approach Valuation Technique

Market Interest Rate Sensitivity Analysis

Market interest rate sensitivity analysis

Weighted Average Rate Calculated Based on Death Benefit	Rate Adjustment			Value		Change in Value
18.06%		-0.50	%	$	360,030	$	9,647
18.56%		—		$	350,383	$	—
19.06%		+0.50	%	$	341,171	$	(9,212	)

Changes in estimated fair value, If all of the insured lives in the Company's life settlement portfolio live six months longer than the life expectancies provided by third parties.

Life Expectancies

If all of the insured lives in the Company’s life settlement portfolio live six months shorter or longer than the life expectancies provided by these third parties, the change in estimated fair value would be as follows (dollars in thousands):

Life Expectancy Months Adjustment	Value		Change in Value
+6	$	294,789	$	(55,594	)
-		350,383	$	—
-6	$	411,117	$	60,734

Revolving Credit Facility | Market Approach Valuation Technique

Market Interest Rate Sensitivity Analysis

If the weighted average discount rate were increased or decreased by ^1/₂ of 1% and the other assumptions used to estimate fair value remained the same, the change in estimated fair value of the Revolving Credit Facility debt as of September 30, 2014 would be as follows (dollars in thousands):

Discount Rate	Rate Adjustment			Fair Value of Revolving Credit Facility Debt		Change in Value
23.51%		-0.50	%	$	145,394	$	2,733
24.01%		—		$	142,661	$	—
24.51%		+0.50	%	$	140,020	$	(2,641	)

Revolving Credit Facility | Changes in estimated fair value, If all of the insured lives in the Company's life settlement portfolio live six months longer than the life expectancies provided by third parties.

Life Expectancies

If all of the insured lives in the life settlement portfolio pledged under the Revolving Credit Facility live six months shorter or longer than the life expectancies used to calculate the estimated fair value of the Revolving Credit Facility debt, the change in estimated fair value would be as follows (dollars in thousands):

Life Expectancy Months Adjustment	Fair Value of Revolving Credit Facility Debt		Change in Value
+6	$	121,547	$	(21,114	)
-	$	142,661	$	—
-6	$	165,172	$	22,511

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Description of Business - Additional Information (Detail) (USD $) In Thousands, unless otherwise specified				9 Months Ended
	Sep. 30, 2014 Contract	Dec. 31, 2013 Contract	Apr. 29, 2013 Revolving Credit Facility Securities	Sep. 30, 2014 Revolving Credit Facility Securities Pledged as Collateral Contract
Organization and Nature of Operations [Line Items]
Number of policies owned	595	612	452	452
Life insurance estimated fair value	$ 350,383	$ 302,961		$ 295,500
Life insurance policies with aggregate death benefit	$ 2,888,289	$ 2,954,890		$ 2,300,000
Revolving credit facility period				15 years

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Description of Business

9 Months Ended

Sep. 30, 2014

Description of Business

(1) Description of Business

Founded in December 2006 as a Florida limited liability company, Imperial Holdings, LLC, converted into Imperial Holdings, Inc. (with its subsidiaries, the “Company” or “Imperial”) on February 3, 2011, in connection with the Company’s initial public offering.

Incorporated in Florida, Imperial owns a portfolio of 595 life insurance policies, also referred to as life settlements, with a fair value of $350.4 million and an aggregate death benefit of approximately $2.9 billion at September 30, 2014. The Company primarily earns income on these policies from changes in their fair value and through death benefits. 452 of these policies, with an aggregate death benefit of approximately $2.3 billion, are pledged under a 15-year revolving credit agreement (the “Revolving Credit Facility”) entered into by the Company’s indirect subsidiary, White Eagle Asset Portfolio, LP (“White Eagle”).

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Principles of Consolidation and Basis of Presentation - Additional Information (Detail) (USD $)	Sep. 30, 2014 Contract	Dec. 31, 2013 Contract	Sep. 30, 2014 8.50% Senior Unsecured Convertible Notes Due 2019	Feb. 28, 2014 8.50% Senior Unsecured Convertible Notes Due 2019	Apr. 29, 2013 Revolving Credit Facility Securities	Sep. 30, 2014 Revolving Credit Facility Securities Pledged as Collateral Contract
Organization, Consolidation and Presentation of Financial Statements Disclosure [Line Items]
Number of policies owned	595	612			452	452
Life insurance policies with aggregate death benefit	$ 2,888,289,000	$ 2,954,890,000				$ 2,300,000,000
Life insurance estimated fair value	350,383,000	302,961,000				295,500,000
Debt instrument issued			$ 70,700,000	$ 70,700,000
Debt instrument, stated interest rate			8.50%	8.50%

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Activity of Unvested Restricted Stock (Detail)	9 Months Ended
	Sep. 30, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Beginning balance	17,286
Granted	41,060
Vested	(17,286)
Forfeited
Common Unvested Shares outstanding, Ending Balance	41,060

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Changes in Life Expectancy Used to Estimate Fair Value (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013	Dec. 31, 2013
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Value	$ 350,383		$ 350,383		$ 302,961
Change in Value	0	(461)	(426)	(1,708)
+6 Life Expectancy Months Adjustment
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Value	294,789		294,789
Change in Value			(55,594)
-6 Life Expectancy Months Adjustment
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Value	411,117		411,117
Change in Value			$ 60,734

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Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Assets
Cash and cash equivalents	$ 53,745	$ 14,722	[1]
Restricted cash	0	13,506	[1]
Prepaid expenses and other assets	1,717	1,331	[1]
Deposits - other	1,353	1,597	[1]
Deposits on purchase of life settlements	50	0	[1]
Structured settlement receivables, at estimated fair value	383	660	[1]
Structured settlement receivables at cost, net	599	797	[1]
Investment in life settlements, at estimated fair value	54,914	48,442	[1]
Fixed assets, net	202	74	[1]
Investment in affiliates	2,385	2,378	[1]
Deferred debt costs, net	2,295	0	[1]
Total assets	417,759	348,103	[1]
Liabilities
Accounts payable and accrued expenses	5,209	2,977	[1]
Other liabilities	1,039	21,221	[1]
Interest payable - senior unsecured convertible notes (Note 10)	768	0	[1]
Revolving Credit facility debt, at estimated fair value	142,661	123,847
Senior unsecured convertible notes, net of discount (Note 10)	55,250	0	[1]
Income taxes payable	0	6,295	[1]
Deferred tax liability	6,383	0	[1]
Total liabilities	211,647	154,681	[1]
Commitments and Contingencies (Note 13)			[1]
Stockholders' Equity
Common stock (par value $0.01 per share, 80,000,000 authorized; 21,402,990 and 21,237,166 issued and outstanding as of September 30, 2014 and December 31, 2013, respectively)	214	212	[1]
Additional paid-in-capital	266,511	239,506	[1]
Accumulated deficit	(60,613)	(46,296)	[1]
Total stockholders' equity	206,112	193,422	[1]
Total liabilities and stockholders' equity	417,759	348,103	[1]
Primary Beneficiary Variable Interest Entity
Assets
Cash and cash equivalents	4,647	7,977	[1]
Investment in life settlements, at estimated fair value	295,469	254,519	[1]
Receivable for maturity of life settlements	0	2,100	[1]
Liabilities
Accounts payable and accrued expenses	337	341	[1]
Revolving Credit facility debt, at estimated fair value	$ 142,661	$ 123,847	[1]

[1] Derived from audited consolidated financial statements.

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Investments in Life Settlements (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014 Contract	Dec. 31, 2013 Contract
Number of Life Settlement Contracts
0 - 1
1 - 2	2
2 - 3	11	6
3 - 4	9	10
4 - 5	15	8
Thereafter	558	588
Total	595	612
Fair Value
0 - 1
1 - 2	3,727
2 - 3	26,135	8,489
3 - 4	11,642	14,171
4 - 5	21,145	13,529
Thereafter	287,734	266,772
Total	350,383	302,961
Face Value
0 - 1
1 - 2	5,377
2 - 3	46,957	16,875
3 - 4	29,800	38,100
4 - 5	63,854	40,250
Thereafter	2,742,301	2,859,665
Total	$ 2,888,289	$ 2,954,890

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Consolidated Statements of Stockholders' Equity (USD $) In Thousands, except Share data	Total		Common Stock	Additional Paid-in Capital	(Accumulated Deficit)
Beginning Balance at Dec. 31, 2013	$ 193,422	[1]	$ 212	$ 239,506	$ (46,296)
Beginning Balance (in shares) at Dec. 31, 2013			21,237,166
Comprehensive loss	(14,317)				(14,317)
Stock-based compensation (in shares)			41,060
Stock-based compensation	762		1	761
Issuance of common stock (in shares)			125,628
Issuance of common stock	500		1	499
Issuance of warrants	5,381			5,381
Pre-conversion tax adjustment	6,295			6,295
Retirement of common stock			(864)
Reclassification of conversion derivative liability, net of tax	14,069			14,069
Ending Balance at Sep. 30, 2014	$ 206,112		$ 214	$ 266,511	$ (60,613)
Ending Balance (in shares) at Sep. 30, 2014			21,402,990

[1] Derived from audited consolidated financial statements.

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Commitments and Contingencies - Additional Information (Detail) (USD $)	1 Months Ended	3 Months Ended		9 Months Ended			9 Months Ended	3 Months Ended		9 Months Ended			0 Months Ended
	Apr. 30, 2014	Sep. 30, 2014 Contract	Sep. 30, 2013	Sep. 30, 2014 Contract	Sep. 30, 2013	Feb. 11, 2011	Sep. 30, 2014 Class Action	Sep. 30, 2014 Pending Litigation	Sep. 30, 2013 Pending Litigation	Sep. 30, 2014 Pending Litigation	Sep. 30, 2013 Pending Litigation	Apr. 18, 2013 Pending Litigation Contract	Jul. 29, 2013 Pending Litigation Minimum
Commitments and Contingencies [Line Items]
Percentage of annual increase of base rent				3.00%
Annual base rent				$ 225,100
Lease expiration date				Sep. 30, 2020
Rent expense under operating lease		126,000	126,000	377,000	377,000
Operating leases, remainder of year ended December 31, 2014		49,000		49,000
Indemnification expenses		500,000	880,000	1,500,000	2,300,000
Number of policies		39		39								29
US Government ongoing investigation for criminal conduct		8,000,000		8,000,000
Non-Prosecution Agreement terms description				The Non-Prosecution Agreement has a term of three years until April 30, 2015, but the Company may petition the USAO to forego the remaining term of the Non-Prosecution Agreement, if the Company otherwise complies with all of its obligations under the Non-Prosecution Agreement.
Non-Prosecution Agreement terms				3 years
Litigation-related fees								1,200,000	1,600,000	3,200,000	4,600,000
Payments for class action settlements							12,000,000
Insurance recoverable from the Company's D&O Carrier							11,000,000
Expected issuance of warrants for shares	2,000,000						2,000,000
Common stock warrants term				5 years			5 years
Exercise price of warrants		10.75		10.75		14.51	10.75
Compensatory damages sought in addition to an award of punitive damages													30,000,000
Litigation expense sanctioned by court on subsidiary Imperial Premium Finance (IPF)				$ 850,000

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Consolidation of Variable Interest Entities - Additional Information (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014 Contract	Dec. 31, 2013 Contract	Apr. 29, 2013 Revolving Credit Facility Securities	Sep. 30, 2014 Revolving Credit Facility Securities Pledged as Collateral Contract
Variable Interest Entity [Line Items]
Number of policies owned	595	612	452	452
Life insurance policies with aggregate death benefit	$ 2,888,289	$ 2,954,890		$ 2,300,000
Life insurance estimated fair value	$ 350,383	$ 302,961		$ 295,500

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Subsequent Events

9 Months Ended

Sep. 30, 2014

Subsequent Events

(16) Subsequent Events

On November 10, 2014 (the “Initial Closing Date”), Imperial, as issuer, entered into an indenture with certain of its subsidiaries, Harbordale, LLC, Imperial Finance & Trading, LLC, Imperial Life and Annuity Services, LLC, Imperial Litigation Funding, LLC, Imperial Premium Finance, LLC, Red Reef Alternative Investments, LLC and Washington Square Financial, LLC, as guarantors (the “Guarantors”), and Wilmington Trust Company, as indenture trustee. The indenture provides for the issuance of up to $100 million in senior secured notes (the “Secured Notes”), of which $25 million was issued by Imperial on the Initial Closing Date. The Secured Notes issued on the Initial Closing Date were issued at 96% of their face amount and were purchased under a note purchase agreement (the “Note Purchase Agreement”) with Imperial and the Guarantors by an affiliate of Indaba Capital Management, L.P. (the “Purchaser”) in a private transaction pursuant to exemptions from the registration requirements of the Securities Act of 1933, as amended. The Note Purchase Agreement gives the Purchaser the right, subject to applicable law, to appoint one director to Imperial’s board of directors so long as it maintains a voting percentage of at least 5% of Imperial’s common stock and holds at least $25 million in principal amount or market value of Imperial’s debt.

Interest on issued Secured Notes accrues at 12.875% per annum and all Secured Notes issued under the indenture will mature 36 months from the Initial Closing Date (the “Initial Maturity”) although Imperial may elect to extend the maturity date by an additional 12 months (the “Extended Term”) and, if elected, interest on the Secured Notes will accrue at 14.5% during the Extended Term. The Secured Notes may not be optionally redeemed by Imperial for one year from the Initial Closing Date. Between the first and second anniversary of the Initial Closing Date, Imperial may optionally redeem the Secured Notes at 106% of the principal amount redeemed and thereafter at 104%, in each case, plus accrued and unpaid interest on the Secured Notes to the date of redemption. If Imperial does not elect the Extended Term, Secured Notes may be optionally redeemed within 60 days of the Initial Maturity at par plus accrued and unpaid interest up to the Initial Maturity. The Senior Notes are subject to mandatory prepayment provisions upon the issuance of additional debt and asset sales. In addition to usual and customary affirmative and negative covenants restricting additional debt, creation of liens, transactions with affiliates, and restrictions on certain payments and investments, the indenture governing the Secured Notes requires the Company to maintain a net worth of no less than $100 million and cash and cash equivalents of at least $20 million.

The Secured Notes may be used for general corporate purposes, are guaranteed by the Guarantors and are secured by substantially all of the Company’s and Guarantors’ assets, other than those securing the Revolving Credit Facility, including cash on account as well as the Company’s life insurance policies that are not pledged as collateral under the Revolving Credit Facility. The Secured Notes are also secured by pledges of the equity interests of the Guarantors and by pledges of 65% of their first tier foreign subsidiaries.

                The Company may issue, and the Purchaser will be obligated to purchase, up to an additional $75 million in aggregate principal amount of Secured Notes in $25 million increments during the period ending on the 12-month anniversary of the Initial Closing Date provided certain performance conditions are met (in addition to usual and customary conditions precedent). The Company must deploy $25 million in investments following the Initial Closing Date to be eligible to issue the next $25 million of Secured Notes. Thereafter, the remaining $50 million in aggregate principal amount of Secured Notes may only be issued if the Company satisfies certain book and market value targets. Estimated fees and expenses payable by the Company at closing were approximately $1.9 million. Additionally, the Company will pay a draw-down fee of 1% of the amount of any subsequent issuance of Secured Notes and will pay a monthly unused fee on the unissued Secured Notes at a per annum rate of 1%.

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Reconciliation of Actual Basic and Diluted Earnings Per Share (Detail) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended				9 Months Ended
	Sep. 30, 2014		Sep. 30, 2013		Sep. 30, 2014		Sep. 30, 2013
Numerator:
Net (loss) income from continuing operations	$ (4,264)	[1]	$ 6,106	[2]	$ (13,863)	[1]	$ 47,924	[2]
Net (loss) income income from discontinued operations	(249)	[1]	55	[2]	(454)	[1]	1,627	[2]
Net (loss) income	$ (4,513)	[1]	$ 6,161	[2]	$ (14,317)	[1]	$ 49,551	[2]
Basic earnings per common share:
Basic (loss) income from continuing operations	$ (0.20)	[1]	$ 0.29	[2]	$ (0.65)	[1]	$ 2.26	[2]
Basic (loss )income from discontinued operations	$ (0.01)	[1]	$ 0.00	[2]	$ (0.02)	[1]	$ 0.08	[2]
Basic (loss) income per share available to common shareholders	$ (0.21)	[1]	$ 0.29	[2]	$ (0.67)	[1]	$ 2.34	[2]
Diluted earnings per per common share:
Diluted (loss) income from continuing operations.	$ (0.20)	[1]	$ 0.29	[2]	$ (0.65)	[1]	$ 2.26	[2]
Diluted (loss) income from discontinued operations	$ (0.01)	[1]	$ 0.00	[2]	$ (0.02)	[1]	$ 0.08	[2]
Diluted (loss) income per share available to common shareholders	$ (0.21)	[1]	$ 0.29	[2]	$ (0.67)	[1]	$ 2.34	[2]
Denominator:
Weighted average common shares outstanding	21,361,930	[1]	21,219,880	[2]	21,352,086	[1]	21,215,344	[2]
Add: Restricted Stock			3,147	[2]			48	[2]
Diluted weighted average shares outstanding	21,361,930	[1]	21,223,027	[2]	21,352,086	[1]	21,215,392	[2]

[1] The computation of diluted EPS does not include 815,448 options, 6,240,521 warrants, 41,060 shares of restricted stock, up to 10,464,941 shares of underlying common stock issuable upon conversion of the Notes and 299,500 performance shares for the three months and nine months ended September 30, 2014, as the effect of their inclusion would have been anti-dilutive.

[2] The computation of diluted EPS did not include 899,472 options, and 4,240,521 warrants for the three months and nine months ended September 30, 2013, as the effect of their inclusion would have been anti-dilutive.

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Consolidation of Variable Interest Entities (Tables)

9 Months Ended

Sep. 30, 2014

Consolidated Assets and Consolidated Liabilities of VIEs

The following table presents the consolidated assets and consolidated liabilities of VIEs for which the Company has concluded that it is the primary beneficiary and which are consolidated in the Company’s consolidated financial statements as of September 30, 2014 as well as non-consolidated VIEs for which the Company has determined it is not the primary beneficiary (in thousands):

	Primary Beneficiary				Not Primary Beneficiary
	Consolidated VIEs				Non-consolidated VIEs
	Assets		Liabilities		Total Assets		Maximum Exposure To Loss
September 30, 2014	$	300,116	$	142,998	$	2,385		$2,385
December 31, 2013	$	264,596	$	124,188	$	2,378		$2,378

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Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2014		Sep. 30, 2013
Cash flows from operating activities
Net (loss) income	$ (14,317)	[1]	$ 49,551	[2]
Adjustments to reconcile net (loss) income to net cash used in operating activates:
Depreciation and amortization	59		142
Revolving Credit Facility origination cost	0		10,340
Revolving Credit Facility financing cost	4,238		995
Amortization of discount and deferred costs for senior unsecured convertible notes	1,648		0
Amortization of premiums and accretion of discounts on available for sale securities	0		21
Stock-based compensation expense	762		1,203
Gain on loan payoffs and settlements, net	0		(65)
Change in fair value of life settlements	(19,313)		(81,948)
Unrealized change in fair value of structured settlements	(24)		(1,211)
Change in fair value of Revolving Credit Facility debt	(4,556)		(5,295)
Loss on life settlements, net	426		1,708
Interest income	(102)		(220)
Amortization of deferred costs	0		7
Loss on extinguishment of Bridge Facility	0		3,991
Gain on sale and prepayment of investment securities available for sale	0		(22)
Change in fair value of warrants to be issued	0		2,478
Change in fair value of conversion derivative liability	6,759		0
Change in assets and liabilities:
Restricted cash	13,506		(13,502)
Deposits - other	243		1,258
Investment in affiliates	(7)		(148)
Structured settlement receivables	578		1,687
Prepaid expenses and other assets	(413)		12,461
Accounts payable and accrued expenses	2,512		2,453
Other liabilities	(14,301)		(664)
Interest receivable	0		95
Interest payable	768		0
Deferred income tax	(2,452)		40
Net cash used in operating activities	(23,986)		(14,645)
Cash flows from investing activities
Purchase of fixed assets, net of disposals	(178)		(4)
Purchase of investments in life settlements	(3,488)		(7,000)
Proceeds from sale and prepayments of investment securities available for sale	0		12,111
Proceeds from maturity of investment in life settlements	13,641		6,039
Premiums paid on investments in life settlements	(40,578)		(50,984)
Proceeds from surrender of investments in life settlements	0		1,049
Proceeds from sale of investments in life settlements, net	4,031		1,764
Deposit on purchase of investment in life settlement	(50)		0
Proceeds from loan payoffs and lender protection insurance claims received in advance	0		691
Net cash used in investing activities	(26,622)		(36,334)
Cash flows from financing activities
Revolving Credit and Bridge Facility origination cost	0		(6,731)
Borrowings from Revolving Credit Facility	36,004		66,584
Repayment of borrowings under Revolving Credit Facility	(17,595)		0
Restricted cash	0		1,162
Borrowings from Bridge Facility	0		41,400
Repayment of borrowings under Bridge Facility	0		(45,000)
Proceeds from senior unsecured convertible notes, net	67,892		0
Net cash provided by financing activities	86,301		57,415
Net increase in cash and cash equivalents	35,693		6,436
Cash and cash equivalents, at beginning of the period	22,699		7,001
Cash and cash equivalents, at end of the period	58,392		13,437
Supplemental disclosures of cash flow information:
Cash paid for interest during the period	4,496		825
Supplemental disclosures of non-cash investing activities:
Investment in life settlements acquired in foreclosure	0		3,168
Supplemental disclosures of non-cash financing activities:
Interest payment and fees withheld from borrowings by lender	4,962		995
Credit facility origination costs paid to lender	0		4,000
Purchase of policies through release of subrogation claim paid by lender	0		48,500
Reclassification of derivative liability	$ 14,069		$ 0

[1] The computation of diluted EPS does not include 815,448 options, 6,240,521 warrants, 41,060 shares of restricted stock, up to 10,464,941 shares of underlying common stock issuable upon conversion of the Notes and 299,500 performance shares for the three months and nine months ended September 30, 2014, as the effect of their inclusion would have been anti-dilutive.

[2] The computation of diluted EPS did not include 899,472 options, and 4,240,521 warrants for the three months and nine months ended September 30, 2013, as the effect of their inclusion would have been anti-dilutive.

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Consolidated Balance Sheets (Parenthetical) (USD $)	Sep. 30, 2014	Dec. 31, 2013
Common stock, par value	$ 0.01	$ 0.01	[1]
Common stock, shares authorized	80,000,000	80,000,000	[1]
Common stock, shares issued	21,402,990	21,237,166	[1]
Common stock, shares outstanding	21,402,990	21,237,166	[1]

[1] Derived from audited consolidated financial statements.

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Fair Value Measurements

9 Months Ended

Sep. 30, 2014

Fair Value Measurements

(11) Fair Value Measurements

We carry investments in life settlements, certain structured settlements, and our Revolving Credit Facility debt at fair value in the consolidated balance sheets. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. Fair value measurements are classified based on the following fair value hierarchy:

Level 1—Valuation is based on unadjusted quoted prices in active markets for identical assets and liabilities that are accessible at the reporting date. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment.

Level 2 —Valuation is determined from pricing inputs that are other than quoted prices in active markets that are either directly or indirectly observable as of the reporting date. Observable inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and interest rates and yield curves that are observable at commonly quoted intervals.

Level 3—Valuation is based on inputs that are both significant to the fair value measurement and unobservable. Level 3 inputs include situations where there is little, if any, market activity for the financial instrument. The inputs into the determination of fair value generally require significant management judgment or estimation.

Assets and liabilities measured at fair value on a recurring basis

The balances of the Company’s assets and liabilities measured at fair value on a recurring basis as of September 30, 2014, are as follows (in thousands):

	Level 1		Level 2		Level 3		Total Fair Value
Assets:
Investment in life settlements	$	—	$	—	$	350,383	$	350,383
Structured settlement receivables		—		—		383		383
	$	—	$	—	$	350,766	$	350,766

	Level 1		Level 2		Level 3		Total Fair Value
Liabilities:
Revolving Credit Facility debt	$	—	$	—	$	142,661	$	142,661
	$	—	$	—	$	142,661	$	142,661

The balances of the Company’s assets and liabilities measured at fair value on a recurring basis as of December 31, 2013, are as follows (in thousands):

	Level 1		Level 2		Level 3		Total Fair Value
Assets:
Investment in life settlements	$	—	$	—	$	302,961	$	302,961
Structured settlement receivables		—		—		660		660
	$	—	$	—	$	303,621	$	303,621

	Level 1		Level 2		Level 3		Total Fair Value
Liabilities:
Revolving Credit Facility debt	$	—	$	—	$	123,847	$	123,847
	$	—	$	—	$	123,847	$	123,847

The Company values its investment in life settlement portfolio in two classes, non-premium financed and premium financed. In considering the categories, it is generally believed that market participants would require a lower risk premium for policies that were non-premium financed, while a higher risk premium would be required for policies that were premium financed.

($ in thousands)	Quantitative Information about Level 3 Fair Value Measurements
	Fair Value at 9/30/14		Aggregate death benefit at 9/30/14		Valuation Technique (s)	Unobservable Input	Range (Weighted Average)
Non-premium financed	$	52,909	$	220,802	Discounted cash flow	Discount rate Life expectancy evaluation	14.80% - 20.80% (8.1 years)
Premium financed	$	297,474	$	2,667,487	Discounted cash flow	Discount rate Life expectancy evaluation	16.55% - 26.55% (11.2 years)
Investment in life settlements	$	350,383	$	2,888,289	Discounted cash flow	Discount rate Life expectancy evaluation	(18.56)% (11.0 years)
Structured settlements receivables	$	383		N/A	Discounted cash flow	Facility sales discount rates	8.66%
Revolving Credit Facility debt	$	142,661		N/A	Discounted cash flow	Discount rate Life expectancy evaluation	24.01% * (10.5 years)

* Actual

Following is a description of the methodologies used to estimate the fair values of assets and liabilities measured at fair value on a recurring basis and within the fair value hierarchy.

Investment in life settlements—The Company has elected to account for the life settlement policies it acquires using the fair value method. The Company uses a present value technique to estimate the fair value of our investments in life settlements, which is a Level 3 fair value measurement as the significant inputs are unobservable and require significant management judgment or estimation. The Company currently uses a probabilistic method of valuing life insurance policies, which we believe to be the preferred valuation method in the industry. The most significant assumptions are the estimates of life expectancy of the insured and the discount rate.

The Company provides medical records for each insured to independent secondary market life expectancy providers (each, an “LE provider”). Each LE provider reviews and analyzes the medical records and identifies all medical conditions it feels are relevant to the life expectancy determination of the insured. Debits and credits are assigned by each LE provider to the individual’s health based on identified medical conditions. The debit or credit that an LE provider assigns to a medical condition is derived from the experience of mortality attributed to this condition in the portfolio of lives that the LE provider monitors. The health of the insured is summarized by the LE provider into a life assessment of the individual’s life expectancy expressed both in terms of months and in mortality factor. The mortality factor represents the degree to which the given life can be considered more or less impaired than a life having similar characteristics (e.g. gender, age, smoking, etc.). For example, a standard insured (the average life for the given mortality table) would carry a mortality rating of 100%. A similar but impaired life bearing a mortality rating of 200% would be considered to have twice the chance of dying earlier than the standard life relative to the LE provider’s population. Since each provider’s mortality factor is based on its own mortality table, the Company calculates its own factors to apply to the table selected by the Company.

Beginning in the quarter ended September 30, 2012, the Company began using the 2008 Valuation Basic Table (“2008 VBT”), a mortality table developed by the U.S. Society of Actuaries. The mortality table is created based on the expected rates of death among groups categorized by gender, age, and smoking status. Since the Company uses the 2008 VBT, the Company calculates its own mortality factor that, when applied to the 2008 VBT, produces the same life expectancy provided by each LE providers. The resulting mortality factors are then blended to determine a factor for each insured.

To generate best estimate probabilistic cash flow stream, a mortality curve is generated by calculating the probability of mortality for each period based on the calculated mortality factors and the death rates from the 2008 VBT. The company modifies the table by incorporating future mortality improvements to better reflect the curves used by the LE providers.

A discounted present value calculation is then used to determine the value of the policy. If the insured dies earlier than expected, the return will be higher than if the insured dies when expected or later than expected.

The calculation allows for the possibility that if the insured dies earlier than expected, the premiums needed to keep the policy in force will not have to be paid. Conversely, the calculation also considers the possibility that if the insured lives longer than expected, more premium payments will be necessary. Based on these considerations, each possible outcome is assigned a probability and the range of possible outcomes is then used to create a value for the policy.

The Company currently obtains its life expectancy reports from two life expectancy report providers, AVS Underwriting LLC (“AVS”) and 21st Services, LLC (“21st Services”).

In the first quarter of 2013, 21st Services announced revisions to its underwriting methodology. According to 21st Services, these revisions have generally been understood to lengthen the average reported life expectancy furnished by this life expectancy provider by 19%. As of September 30, 2014, the Company received 370 updated life expectancy reports from 21st Services, of which 332 were used to calculate life expectancy extension. These life expectancies reported an average lengthening of life expectancies of 15.80% and, based on this sample, for the nine months ended September 30, 2014, the Company increased the life expectancies furnished by 21st Services by 15.80% on the rest of its portfolio of life settlements prior to blending them with the life expectancy reports furnished by AVS. The Company expects to continue to lengthen life expectancies furnished by 21st Services that have not been re-underwritten using their updated methodology. Since the Revolving Credit Facility necessitates that the Company procure updated life expectancies on a periodic basis, the number of policies that are lengthened by the Company in this manner will decrease over time and the fair value calculations in future periods will, accordingly, reflect the actual impact of the revised 21st Services methodology on a policy by policy basis as updated life expectancy reports are procured.

Life expectancy sensitivity analysis

If all of the insured lives in the Company’s life settlement portfolio live six months shorter or longer than the life expectancies provided by these third parties, the change in estimated fair value would be as follows (dollars in thousands):

Life Expectancy Months Adjustment	Value		Change in Value
+6	$	294,789	$	(55,594	)
-		350,383	$	—
-6	$	411,117	$	60,734

Future changes in life expectancies could have a material effect on the fair value of our investment in life settlements, which could have a material adverse effect on our business, financial condition and results of operations.

Discount rate

The discount rate incorporates current information about market interest rates, the credit exposure to the insurance company that issued the life insurance policy and our estimate of the risk premium an investor in the policy would require.

The Company re-evaluates its discount rates at the end of every reporting period in order to reflect the estimated discount rates that could reasonably be used in a market transaction involving the Company’s portfolio of life insurance policies. In doing so, the Company relies on management insight, engages third party consultants to corroborate its assessment, engages in discussions with other market participants and potential financing sources and extrapolates the discount rate underlying actual sales of policies.

Due to the Company’s association with the USAO Investigation and certain civil litigation involving the Company, the Company believes that, when given the choice to invest in a policy that was associated with the Company’s premium finance business and a similar policy without such an association, all else being equal, an investor would have generally opted to invest in the policy that was not associated with the Company’s premium finance business. However, since the Company entered into a non-prosecution agreement, investors have required less of a risk premium to transact in policies associated with the Company’s legacy premium finance business. In general, the Company believes that the risk premium an investor would require to transact in a policy that has been premium financed versus a policy without premium financing is lessening in the current market environment and further expects that, with the passage of time, investors will continue to require less of a risk premium to transact in policies associated with its legacy premium finance business.

Credit exposure of insurance company

The Company considers the financial standing of the issuer of each life insurance policy. Typically, we seek to hold policies issued by insurance companies that are rated investment grade by the top three credit rating agencies. At September 30, 2014, the Company had nineteen life insurance policies issued by two carriers that were rated non-investment grade as of that date. In order to compensate a market participant for the perceived credit and challenge risks associated with these policies, the Company applied an additional 300 basis point risk premium.

The following table provides information about the life insurance issuer concentrations that exceed 10% of total death benefit and 10% of total fair value of our investments in life settlements as of September 30, 2014:

Carrier	Percentage of Total Fair Value			Percentage of Total Death Benefit			Moody’s Rating			S&P Rating
Transamerica Occidental Life Insurance Company		24.1	%		20.6	%		A1			AA-
Lincoln National Life Insurance Company		22.5	%		20.3	%		A1			AA-
Lincoln Benefit Life Company		10.7	%		10.0	%		NR	*		BBB+

* Not Rated

Estimated risk premium

As of September 30, 2014, the Company owned 595 policies with an aggregate investment in life settlements of $350.4 million. Of these 595 policies, 550 were premium financed and are valued using discount rates that range from 16.55% to 26.55%. The remaining 45 policies, which are non-premium financed, are valued using discount rates that range from 14.80% to 20.80%. As of September 30, 2014, the weighted average discount rate calculated based on death benefit used in valuing the policies in our life settlement portfolio was 18.56%.

The discount rate incorporates current information about market interest rates, the credit exposure to the insurance company that issued the life insurance policy and our estimate of the risk premium an investor in the policy would require. The extent to which the fair value could vary in the near term has been quantified by evaluating the effect of changes in the weighted average discount rate on the death benefit used to estimate the fair value. If the weighted average discount rate were increased or decreased by 1/2 of 1% and the other assumptions used to estimate fair value remained the same, the change in estimated fair value would be as follows (dollars in thousands):

Market interest rate sensitivity analysis

Weighted Average Rate Calculated Based on Death Benefit	Rate Adjustment			Value		Change in Value
18.06%		-0.50	%	$	360,030	$	9,647
18.56%		—		$	350,383	$	—
19.06%		+0.50	%	$	341,171	$	(9,212	)

Future changes in the discount rates we use to value life insurance policies could have a material effect on our yield on life settlement transactions, which could have a material adverse effect on our business, financial condition and results of our operations.

At the end of each reporting period we re-value the life insurance policies using our valuation model in order to update our estimate of fair value for investments in policies held on our balance sheet. This includes reviewing our assumptions for discount rates and life expectancies as well as incorporating current information for premium payments and the passage of time.

Structured settlement receivables—All structured settlements that were acquired subsequent to July 1, 2010 were marked to fair value. We made this election because it was our intention to sell these assets within twelve months of acquisition. Structured settlements are purchased at effective yields that are fixed. Purchase discounts are accreted into interest income using the effective-interest method for those structured settlements marked to fair value. As of September 30, 2014, the Company had 17 structured settlements with an estimated fair value of $383,000 and an average sales discount rate of 8.66%.

Revolving Credit Facility debt—In connection with the Revolving Credit Facility, 452 policies are pledged by White Eagle to serve as collateral for its obligations under the facility. Absent an event of default under the Revolving Credit Facility, ongoing borrowings will be used to pay the premiums on these policies and certain approved third party expenses. Proceeds from the policies pledged as collateral will be distributed pursuant to a waterfall. After premium payments and fees to service providers, 100% of the remaining proceeds will be directed to pay outstanding principal and interest on the loan. Generally, after payment of principal and interest, collections from policy proceeds are to be paid to White Eagle up to $76.1 million, then 50% of the remaining proceeds are to be directed to the lenders with the remainder paid to White Eagle. We have elected to account for this long-term debt, which includes the lender’s interest in policy proceeds, using the fair value method. The fair value of the debt is the amount the Company would have to pay to transfer the debt to a market participant in an orderly transaction. We calculated the fair value of the debt using a discounted cash flow model taking into account the stated interest rate of the Revolving Credit Facility and probabilistic cash flows from the pledged policies. Accordingly, our estimates are not necessarily indicative of the amounts that we, or holders of the instruments, could realize in a current market exchange. The most significant assumptions are the estimates of life expectancy of the insured and the discount rate. The use of different assumptions and/or estimation methodologies could have a material effect on the estimated fair values.

Life expectancy sensitivity analysis of Revolving Credit Facility debt

A considerable portion of the fair value of the Revolving Credit Facility debt is determined by the timing of receipt of future policy proceeds. Should life expectancies lengthen such that policy proceeds are collected further into the future, the fair value of this debt will decline. Conversely, should life expectancies shorten, the fair value of this debt will increase. Considerable judgment is required in interpreting market data to develop the estimates of fair value.

If all of the insured lives in the life settlement portfolio pledged under the Revolving Credit Facility live six months shorter or longer than the life expectancies used to calculate the estimated fair value of the Revolving Credit Facility debt, the change in estimated fair value would be as follows (dollars in thousands):

Life Expectancy Months Adjustment	Fair Value of Revolving Credit Facility Debt		Change in Value
+6	$	121,547	$	(21,114	)
-	$	142,661	$	—
-6	$	165,172	$	22,511

Future changes in the life expectancies could have a material effect on the fair value of our Revolving Credit Facility debt, which could have a material adverse effect on our business, financial condition and results of operations.

Discount rate of Revolving Credit Facility debt

The discount rate incorporates current information about market interest rates, credit exposure to insurance companies and our estimate of the return a lender lending against the policies would require.

Market interest rate sensitivity analysis of Revolving Credit Facility debt

The extent to which the fair value of the Revolving Credit Facility debt could vary in the near term has been quantified by evaluating the effect of changes in the weighted average discount. If the weighted average discount rate were increased or decreased by ^1/₂ of 1% and the other assumptions used to estimate fair value remained the same, the change in estimated fair value of the Revolving Credit Facility debt as of September 30, 2014 would be as follows (dollars in thousands):

Discount Rate	Rate Adjustment			Fair Value of Revolving Credit Facility Debt		Change in Value
23.51%		-0.50	%	$	145,394	$	2,733
24.01%		—		$	142,661	$	—
24.51%		+0.50	%	$	140,020	$	(2,641	)

Future changes in the discount rates could have a material effect on the fair value of our Revolving Credit Facility debt, which could have a material adverse effect on our business, financial condition and results of our operations.

At September 30, 2014, the fair value of the debt was $142.7 million and the outstanding principal was approximately $156.6 million.

Senior Unsecured Convertible Notes- The Company determined that an embedded conversion option in the Notes was required to be separately accounted for as a derivative under Accounting Standards Codification 815, Derivatives and Hedging (“ASC 815”). ASC 815 required the Company to bifurcate the embedded conversion option and record it as a liability at fair value and reduce the debt liability by a corresponding discount of an equivalent amount. The Company used a Black Scholes pricing model that incorporates present valuation techniques and reflect both the time value and the intrinsic value of the embedded conversion option to approximate the fair value of the conversion derivative liability at the end of each reporting period. This model required assumptions as to expected volatility, dividends, terms, and risk free rates.

In accordance with ASC 815, upon receipt of shareholder approval on June 5, 2014, the Company reclassified the embedded derivative to stockholders’ equity along with unamortized transaction costs proportionate to the allocation of the initial debt discount and the principal amount of the Notes. The Notes continue to be recorded at accreted value up to the par value of the Notes at maturity. See Note 10, “8.50% Senior Unsecured Convertible Notes.” Although we believe our valuation method is appropriate, the use of different methodologies or assumptions to determine the fair value could result in different fair values.

Changes in Fair Value

The following table provides a roll-forward in the changes in fair value for the nine months ended September 30, 2014, for assets for which the Company determines fair value using a material level of unobservable (Level 3) inputs (in thousands):

Life Settlements:
Balance, January 1, 2014	$	302,961
Purchase of policies	$	3,488
Change in fair value		19,313
Matured/lapsed/sold policies		(15,957	)
Premiums paid		40,578
Transfers into level 3
Transfer out of level 3		—
Balance, September 30, 2014	$	350,383
Changes in fair value included in earnings for the period relating to assets held at September 30, 2014	$	8,627

The following tables provide a roll-forward in the changes in fair value for nine months ended September 30, 2014, for all liabilities for which the Company determines fair value using a material level of unobservable (Level 3) inputs (in thousands):

Revolving Credit Facility debt:
Balance, January 1, 2014	$	123,847
Subsequent Draws under the revolving credit facility		40,965
Payments on credit facility		(17,595	)
Unrealized change in fair value		(4,556	)
Transfers into level 3		—
Transfer out of level 3		—
Balance, September 30, 2014	$	142,661
Changes in fair value included in earnings for the period relating to liabilities held at September 30, 2014	$	(4,556	)
Conversion derivative liability:
Balance, at inception		16,901
Change in fair value		6,759
Reclassified to equity		(23,660	)
Transfers into level 3		—
Transfer out of level 3		—
Balance, September 30, 2014	$	—
Changes in fair value included in earnings for the period relating to liabilities held at September 30, 2014	$	—

The following table provides a roll-forward in the changes in fair value for nine months ended September 30, 2013, for all assets for which the Company determines fair value using a material level of unobservable (Level 3) inputs (in thousands):

Life Settlements:
Balance, January 1, 2013	$	113,441
Purchase of policies	$	55,500
Acquired in foreclosure		3,168
Change in fair value		81,948
Matured/lapsed/sold policies		(12,658	)
Premiums paid		50,984
Transfers into level 3		—
Transfer out of level 3		—
Balance, September 30, 2013		292,383
Changes in fair value included in earnings for the period relating to assets held at September 30, 2013	$	74,655

The following table provides a roll-forward in the changes in fair value for nine months ended September 30, 2013, for all liabilities for which the Company determines fair value using a material level of unobservable (Level 3) inputs (in thousands):

Revolving Credit Facility debt:
Balance, January 1, 2013	$	—
Initial advance under the revolving credit facility	$	83,020
Subsequent Draws under the revolving credit facility		37,059
Unrealized change in fair value		(5,295	)
Transfers into level 3		—
Transfer out of level 3		—
Balance, September 30, 2013	$	114,784
Changes in fair value included in earnings for the period relating to liabilities held at September 30, 2013	$	(5,295	)

There were no transfers of financial assets or liabilities between levels of the fair value hierarchy during the nine months ended September 30, 2014 or 2013.

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Document and Entity Information	9 Months Ended
	Sep. 30, 2014	Nov. 03, 2014
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q3
Trading Symbol	IFT
Entity Registrant Name	Imperial Holdings, Inc.
Entity Central Index Key	0001494448
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		21,402,990

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Segment Information

9 Months Ended

Sep. 30, 2014

Segment Information

(12) Segment Information

On October 25, 2013, the Company sold its structured settlement business, which was previously reported as an operating segment. The operating results related to the Company’s structured settlement business have been included in discontinued operations in the Company’s Consolidated Statements of Operations for all periods presented and the Company has discontinued segment reporting.

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Consolidated Statements of Operations (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended				9 Months Ended
	Sep. 30, 2014		Sep. 30, 2013		Sep. 30, 2014		Sep. 30, 2013
Income
Interest income					$ 102		$ 220
Interest and dividends on investment securities available for sale	0		0		0		14
Loss on life settlements, net	0		(461)		(426)		(1,708)
Change in fair value of life settlements (Notes 8 & 11)	(3,643)		15,262		19,313		81,948
Servicing fee income	0		0		0		310
Other income	17		8		72		2,015
Total (loss) income	(3,617)		14,809		18,981		82,607
Expenses
Interest expense	4,303		1,158		11,165		12,020
Loss on extinguishment of Bridge Facility	0		0		0		3,991
Change in fair value of Revolving Credit Facility debt (Notes 9 & 11)	(8,375)		66		(4,556)		(5,295)
Change in fair value of conversion derivative liability (Notes 10 & 11)	0		0		6,759		0
Gain on loan payoffs and settlements, net	0		0		0		(65)
Amortization of deferred costs	0		0		0		7
Personnel costs	1,910		1,924		6,627		6,216
Legal fees	2,943		3,271		9,121		11,254
Professional fees	1,143		1,503		3,562		3,564
Insurance	414		478		1,253		1,475
Other selling, general and administrative expenses	544		303		1,365		1,476
Total expenses	2,882		8,703		35,296		34,643
(Loss) income from continuing operations before income taxes	(6,499)		6,106		(16,315)		47,964
Benefit (provision) for income taxes	2,235		0		2,452		(40)
Net (loss) income from continuing operations	(4,264)	[1]	6,106	[2]	(13,863)	[1]	47,924	[2]
Discontinued Operations:
(Loss) income from discontinued operations, net of income taxes	(249)	[1]	55	[2]	(454)	[1]	1,627	[2]
Net (loss) income	(4,513)	[1]	6,161	[2]	(14,317)	[1]	49,551	[2]
Basic and diluted earnings per common share
Continuing operations	$ (0.20)	[1]	$ 0.29	[2]	$ (0.65)	[1]	$ 2.26	[2]
Discontinued operations	$ (0.01)	[1]	$ 0.00	[2]	$ (0.02)	[1]	$ 0.08	[2]
Net (loss) income	$ (0.21)		$ 0.29		$ (0.67)		$ 2.34
Weighted average shares outstanding:
Basic weighted average common shares outstanding	21,361,930	[1]	21,219,880	[2]	21,352,086	[1]	21,215,344	[2]
Diluted weighted average common shares outstanding	21,361,930	[1]	21,223,027	[2]	21,352,086	[1]	21,215,392	[2]
Continuing Operations
Income
Interest income	$ 9		$ 0		$ 22		$ 28

[1] The computation of diluted EPS does not include 815,448 options, 6,240,521 warrants, 41,060 shares of restricted stock, up to 10,464,941 shares of underlying common stock issuable upon conversion of the Notes and 299,500 performance shares for the three months and nine months ended September 30, 2014, as the effect of their inclusion would have been anti-dilutive.

[2] The computation of diluted EPS did not include 899,472 options, and 4,240,521 warrants for the three months and nine months ended September 30, 2013, as the effect of their inclusion would have been anti-dilutive.

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Earnings Per Share

9 Months Ended

Sep. 30, 2014

Earnings Per Share

(5) Earnings Per Share

Basic net income per share is computed by dividing the net earnings attributable to common shareholders by the weighted average number of common shares outstanding during the period.

Diluted earnings per share is computed by dividing net income attributable to common shareholders by the weighted average number of common shares outstanding, increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued. Conversion or exercise of the potential common shares is not reflected in diluted earnings per share unless the effect is dilutive. The dilutive effect, if any, of outstanding common share equivalents is reflected in diluted earnings per share by application of the treasury stock method, as applicable. In determining whether outstanding stock options, restricted stock, warrants and Notes should be considered for their dilutive effect, the average market price of the common stock for the period has to exceed the exercise price of the outstanding common share equivalent.

The following tables reconcile actual basic and diluted earnings per share for the three months and nine months ended September 30, 2014 and 2013 (in thousands except share and per share data).

	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
	2014(1)			2013(2)		2014(1)			2013(2)
Earnings per share:
Numerator:
Net (loss) income from continuing operations	$	(4,264	)	$	6,106	$	(13,863	)	$	47,924
Net (loss) income income from discontinued operations	$	(249	)	$	55	$	(454	)	$	1,627
Net (loss) income	$	(4,513	)	$	6,161	$	(14,317	)	$	49,551
Basic earnings per common share:
Basic (loss) income from continuing operations	$	(0.20	)	$	0.29	$	(0.65	)	$	2.26
Basic (loss )income from discontinued operations	$	(0.01	)		—	$	(0.02	)	$	0.08
Basic (loss) income per share available to common shareholders	$	(0.21	)	$	0.29	$	(0.67	)	$	2.34
Denominator:
Basic weighted average common shares outstanding		21,361,930			21,219,880		21,352,086			21,215,344
Diluted earnings per per common share:
Diluted (loss) income from continuing operations.	$	(0.20	)	$	0.29	$	(0.65	)	$	2.26
Diluted (loss) income from discontinued operations	$	(0.01	)	$	—	$	(0.02	)	$	0.08
Diluted (loss) income per share available to common shareholders	$	(0.21	)	$	0.29	$	(0.67	)	$	2.34
Denominator:
Weighted average common shares outstanding		21,361,930			21,219,880		21,352,086			21,215,344
Add: Restricted Stock		—			3,147		—			48
Diluted weighted average shares outstanding		21,361,930			21,223,027		21,352,086			21,215,392

(1) The computation of diluted EPS does not include 815,448 options, 6,240,521 warrants, 41,060 shares of restricted stock, up to 10,464,941 shares of underlying common stock issuable upon conversion of the Notes and 299,500 performance shares for the three months and nine months ended September 30, 2014, as the effect of their inclusion would have been anti-dilutive.

(2) The computation of diluted EPS did not include 899,472 options, and 4,240,521 warrants for the three months and nine months ended September 30, 2013, as the effect of their inclusion would have been anti-dilutive.

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Consolidation of Variable Interest Entities

9 Months Ended

Sep. 30, 2014

Consolidation of Variable Interest Entities

(4) Consolidation of Variable Interest Entities

The Company evaluates its interests in variable interest entities (“VIEs”) on an ongoing basis and consolidates those VIEs in which it has a controlling financial interest and is thus deemed to be the primary beneficiary. A controlling financial interest has both of the following characteristics: (i) the power to direct the activities of the VIE that most significantly impact its economic performance; and (ii) the obligation to absorb losses of the VIE that could potentially be significant to it or the right to receive benefits from the VIE that could be significant to the VIE.

The following table presents the consolidated assets and consolidated liabilities of VIEs for which the Company has concluded that it is the primary beneficiary and which are consolidated in the Company’s consolidated financial statements as of September 30, 2014 as well as non-consolidated VIEs for which the Company has determined it is not the primary beneficiary (in thousands):

	Primary Beneficiary				Not Primary Beneficiary
	Consolidated VIEs				Non-consolidated VIEs
	Assets		Liabilities		Total Assets		Maximum Exposure To Loss
September 30, 2014	$	300,116	$	142,998	$	2,385		$2,385
December 31, 2013	$	264,596	$	124,188	$	2,378		$2,378

As of September 30, 2014, 452 life insurance policies owned by White Eagle with an aggregate death benefit of approximately $2.3 billion and an estimated fair value of approximately $295.5 million were pledged as collateral under the Revolving Credit Facility. Effective May 16, 2014, a foreign subsidiary acts as portfolio manager for life insurance policies owned by White Eagle and it was determined that the Company will continue to be the primary beneficiary of White Eagle as it has a controlling financial interest and the Company’s subsidiaries have the power to direct the activities that most significantly impacted White Eagle’s economic performance and the obligation to absorb economic gains and losses. In accordance with Accounting Standards Codification (“ASC”) 810, Consolidation, the Company consolidated White Eagle in its financial statements for the three months and nine months ended September 30, 2014 and the year ended December 31, 2013.

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Principles of Consolidation and Basis of Presentation (Policies)

9 Months Ended

Sep. 30, 2014

Derivative Instruments

Derivative Instruments

The Company issued and sold $70.7 million in aggregate principal amount of 8.50% senior unsecured convertible notes due 2019 (the “Notes”). Prior to shareholder approval on June 5, 2014 to issue shares of common stock upon conversion of the Notes in excess of New York Stock Exchange limits for share issuances without shareholder approval, the Notes contained an embedded derivative feature. In accordance with Accounting Standards Codification (“ASC”) 815, Derivatives and Hedging, derivative instruments are recognized as either assets or liabilities on the Company’s balance sheet and are measured at fair value with gains or losses recognized in earnings. Embedded derivatives that are not clearly and closely related to the host contract, such as the Notes, are bifurcated and recognized at fair value with changes in fair value recognized as either a gain or loss in earnings if they can be reliably measured. The Company determined the fair value of its embedded derivative based upon available market data and unobservable inputs using a Black Scholes pricing model. In accordance with ASC 815, upon receipt of shareholder approval on June 5, 2014, the Company reclassified the embedded derivative to equity along with unamortized transaction costs proportionate to the allocation of the initial debt discount and the principal amount of the Notes. The Notes are recorded at accreted value and will continue to be accreted up to the par value of the Notes at maturity. See Note 10, 8.50% Senior Unsecured Convertible Notes.

Foreign Currency

Foreign Currency

The Company’s foreign subsidiaries are considered to be extensions of the U.S. Company and the U.S. dollar is utilized as the functional currency. The foreign subsidiaries’ financial statements are denominated in U.S. dollars and therefore, there are no translation gains and losses resulting from converting the financial statements at exchange rates other than the functional currency. Any gains and losses resulting from foreign currency transactions (transactions denominated in a currency other than the subsidiaries’ functional currency) are included in income. At this time, these gains and losses are immaterial to the Company’s financial statements.

Use of Estimates

Use of Estimates

The preparation of these consolidated financial statements, in conformity with generally accepted accounting principles in the United States of America (“GAAP”), requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from these estimates and such differences could be material. Significant estimates made by management include income taxes, the valuation of investments in life settlements, the valuation of the debt owing under the Revolving Credit Facility, the valuation of equity awards and the valuation of the conversion derivative liability formerly embedded within the Company’s Notes.

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2014

Commitments and Contingencies

(13) Commitments and Contingencies

Lease Agreements

The Company leases office space under a new lease that commenced on October 1, 2014. The lease expires on September 30, 2020. The annual base rent is $225,100, with a provision for a 3% increase on each anniversary of the rent commencement date. Rent expense under the prior lease was approximately $126,000 for the three months ended September 30, 2014 and 2013 and $377,000 for the nine months ended September 30, 2014 and 2013.

Future minimum lease payments for the remainder of 2014 are approximately $49,000.

Employment Agreements

We have entered into employment agreements with certain of our officers, including with our chief executive officer, whose agreement provides for substantial payments in the event that the executive terminates his employment with us due to a material change in the geographic location where the chief executive officer performs his duties or upon a material diminution of his base salary or responsibilities, with or without cause. These payments are equal to three times the sum of our chief executive officer’s base salary and the average of the three years’ annual cash bonus.

On April 26, 2012, the Company entered into a Separation Agreement and General Release of Claims (the “Separation Agreement”) with its former chief operating officer, Jonathan Neuman. The Separation Agreement obligates the Company to indemnify Mr. Neuman for his legal expenses. The Company recognized indemnification expenses of $500,000 and $880,000 during the three months ended September 30, 2014 and 2013, respectively and $1.5 million and $2.3 million during the nine months ended September 30, 2014 and 2013, respectively.

We do not have any general policies regarding the use of employment agreements, but may, from time to time, enter into such a written agreement to reflect the terms and conditions of employment of a particular named executive officer, whether at the time of hire or thereafter.

Litigation

In accordance with applicable accounting guidance, the Company establishes an accrued liability for litigation and regulatory matters when those matters present loss contingencies that are both probable and estimable. In such cases, there may be an exposure to loss in excess of any amounts accrued. When a loss contingency is not both probable and estimable, the Company does not establish an accrued liability. As a litigation or regulatory matter develops, the Company, in conjunction with any outside counsel handling the matter, evaluates on an ongoing basis whether such matter presents a loss contingency that is probable and estimable. If, at the time of evaluation, the loss contingency related to a litigation or regulatory matter is not both probable and estimable, the matter will continue to be monitored for further developments that would make such loss contingency both probable and estimable. When a loss contingency related to a litigation or regulatory matter is deemed to be both probable and estimable, the Company will establish an accrued liability with respect to such loss contingency and record a corresponding amount of litigation-related expense. The Company will then continue to monitor the matter for further developments that could affect the amount of any such accrued liability.

Non-Prosecution Agreement

On September 27, 2011, the Company was informed that it was being investigated by the U.S. Attorney’s Office for the District of New Hampshire (the “USAO Investigation”). At that time, the Company was informed that, among other individuals, its former president and chief operating officer and, three former life finance sales executives were considered “targets” of the USAO Investigation. The USAO Investigation focused on the Company’s premium finance loan business.

On April 30, 2012, the Company entered into a Non-Prosecution Agreement (the “Non-Prosecution Agreement”) with the USAO, which agreed not to prosecute the Company for its involvement in the making of misrepresentations on life insurance applications in connection with its premium finance business or any potential securities fraud claims related to its premium finance business. In the Non-Prosecution Agreement, the USAO and the Company agreed among other things, that the following facts are true and correct: (i) at all relevant times (x) certain insurance companies required that the prospective insured applying for a life insurance policy, and sometimes the agent, disclose information relating to premium financing on applications for life insurance policies, and (y) the questions typically required the prospective insured to disclose if he or she intended to seek premium financing in connection with the policy and sometimes required the agent to disclose if he or she was aware of any such intent on the part of the applicant; (ii) in connection with a portion of the Company’s retail operation known as “retail non-seminar” that began in December 2006 and was discontinued in January 2009, Imperial had a practice of disclosing on applications that the prospective insured was seeking premium financing when the life insurance company allowed premium financing from Imperial; however, in certain circumstances, Imperial internal life agents facilitated and/or made misrepresentations on applications that the prospective insured was not seeking premium financing when the insurance carrier was likely to deny the policy on the basis of premium financing; and (iii) to the extent that external agents, brokers and insureds caused other misrepresentations to be made in life insurance applications in connection with the retail non-seminar business, Imperial failed to appropriately tailor controls to prevent potential fraudulent practices in that business. As of September 30, 2014, the Company had 39 policies in its portfolio that once served as collateral for premium finance loans derived through the retail non-seminar business.

In connection with the Non-Prosecution Agreement, Imperial voluntarily agreed to terminate its premium finance business, which historically accounted for the majority of the Company’s income and terminated certain senior sales staff associated with the premium finance business. Additionally, the Company paid the United States Government $8.0 million, and agreed to cooperate fully with the USAO’s ongoing investigation and to refrain from and self-report any criminal conduct. The Non-Prosecution Agreement has a term of three years until April 30, 2015, but the Company may petition the USAO to forego the remaining term of the Non-Prosecution Agreement, if the Company otherwise complies with all of its obligations under the Non-Prosecution Agreement. Should the USAO conclude that Imperial has not abided by its obligations under the Non-Prosecution Agreement, the USAO could choose to terminate the Non-Prosecution Agreement, resume its investigation of the Company, or bring charges against Imperial. While the Non-Prosecution Agreement effectively resolved the USAO Investigation as it pertains to the Company (subject to the Company’s continuing compliance with its terms), the USAO is continuing to investigate certain individuals formerly employed by the Company and the Company is continuing to incur expenses regarding its indemnification obligations with respect to such individuals.

In addition, settlements of certain civil litigation with the Company’s director and officer liability insurance carriers related to the USAO Investigation require Imperial to advance legal fees to and indemnify certain individuals. The obligation to advance and indemnify on behalf of these individuals, while currently unquantifiable, may be substantial and could have a material adverse effect on the Company’s financial position and results of operations. Excluding expenses of general external legal service providers, USAO litigation-related fees (inclusive of indemnification and advancement expenses) of $1.2 million and $1.6 million were recognized for the three months ended September 30, 2014 and 2013, respectively and $3.2 million and $4.6 million were recognized for the nine months ended September 30, 2014 and 2013, respectively.

Class Action Litigation

On December 16, 2013, final approval of the settlement to the class action designated Fuller v. Imperial Holdings et al. was granted by the United States District Court for the Southern District of Florida. The terms of the class action settlement included a cash payment of $12.0 million, with $11.0 million contributed by the Company’s primary and excess director and officer liability insurance carriers, with such amounts paid during the nine months ended September 30, 2014. The terms of the settlement also include the issuance of warrants to purchase two million shares of the Company’s stock. The warrants, which were issued into an escrow account in April 2014 and distributed in October 2014 have a five-year term from the date of their distribution and have an exercise price of $10.75.

SEC Investigation

On February 17, 2012, the Company first received a subpoena issued by the staff of the SEC seeking documents from 2007 through the date of the subpoena, generally related to the Company’s premium finance business and corresponding financial reporting. The SEC is investigating whether any violations of federal securities laws have occurred and the Company has been cooperating with the SEC regarding this matter. The Company is unable to predict what action, if any, might be taken in the future by the SEC or its staff as a result of the investigation or what impact, if any, the cost of responding to the SEC might have on the Company’s financial position, results of operations, or cash flows. The Company has not established any provision for losses in respect of this matter.

Sun Life

On April 18, 2013, Sun Life Assurance Company of Canada (“Sun Life”) filed a complaint against the Company and several of its affiliates in the United States District Court for the Southern District of Florida, entitled Sun Life Assurance Company of Canada v. Imperial Holdings, Inc., et al. (“Sun Life Case”). The complaint seeks to contest the validity of at least twenty-nine policies issued by Sun Life. The complaint also asserts the following claims: (1) violations of the federal Racketeer Influenced and Corrupt Organizations Act, (2) common law fraud, (3) civil conspiracy, (4) tortious interference with contractual obligations, and (5) an equitable accounting. In response to a motion to dismiss filed by the Company, Sun Life filed an amended complaint on June 13, 2013. The Company believes that the amended complaint is without merit and filed another motion to dismiss on July 8, 2013. Sun Life responded to the second motion to dismiss on August 1, 2013 and the Company filed its reply on August 19, 2013. On June 26, 2014, the District Court entered an order granting the Company’s motion to dismiss and dismissed Sun Life’s amended complaint, without prejudice. On July 28, 2014, Sun Life filed its second amended complaint. The Company believes the second amended complaint suffers from similar deficiencies as the previous complaints and filed another motion to dismiss on September 5, 2014. Sun Life filed its response on October 10, 2014 and the Company filed its reply on November 3, 2014. No reserve has been established for this litigation.

On July 29, 2013, the Company filed a complaint against Sun Life in United States District Court for the Southern District of Florida, entitled Imperial Premium Finance, LLC (“IPF”) v. Sun Life Assurance Company of Canada (“IPF Case”). The complaint asserts claims against Sun Life for breach of contract, breach of the covenant of good faith and fair dealing, and fraud, and seeks a judgment declaring that Sun Life is obligated to comply with the promises made by it in certain insurance policies. The complaint also seeks compensatory damages of no less than $30 million in addition to an award of punitive damages. On August 23, 2013, Sun Life moved to dismiss the complaint. IPF filed its response on September 9, 2013, and Sun Life filed its reply on September 19, 2013. The IPF Case has been consolidated with the Sun Life Case for all purposes, including trial.

Sanctions Order

On April 27, 2012, after the conclusion of a jury trial in the matter styled Steven A. Sciaretta, as Trustee of the Barton Cotton Irrevocable Trust a/k/a the Amended and Restated Barton Cotton Irrevocable Trust v. The Lincoln National Life Insurance Company (“Lincoln”), the defendant, Lincoln, filed a motion seeking sanctions against the Company’s subsidiary, Imperial Premium Finance (“IPF”), a non-party to the litigation, relating to its corporate representative deposition and trial testimony. On May 6, 2013, the Court issued an order sanctioning IPF and ordering it to pay $850,000. On June 4, 2013, IPF filed a Notice of Appeal and oral argument was held before the Eleventh Circuit Court of Appeals on October 7, 2014. The Company recorded a reserve of $850,000 that is included in other liabilities as of September 30, 2014.

IRS Investigation

As previously disclosed, the Internal Revenue Service (“IRS”) Criminal Investigation Division is conducting an investigation related to the Company and its legacy structured settlements business. The Company believes that it has been cooperating with the investigation and is unable, at this time, to predict what action, if any, might be taken in the future by the IRS or what impact, if any, the cost of providing information and documents might have on the Company’s financial condition, results of operations, or cash flows. If the investigation results in a determination by the IRS that the Company has failed to comply with any of its obligations under the Internal Revenue Code or regulations thereunder, the Company could incur additional tax liability, restitution payment obligations, penalties, fines or other liabilities, including criminal penalties and fines and a reduction in the Company’s net operating losses, that could have a material adverse effect on the Company, its personnel, its financial condition, its results of operations, or its cash flows. The Company has not established any provision for losses in respect to this matter.

Other Litigation

The Company is party to various other legal proceedings that arise in the ordinary course of business. Due to the inherent difficulty of predicting the outcome of litigation and other legal proceedings, the Company cannot predict the eventual outcome of these matters, and it is reasonably possible that some of them could be resolved unfavorably to the Company. As a result, it is possible that the Company’s results of operations or cash flows in a particular fiscal period could be materially affected by an unfavorable resolution of pending litigation or contingencies. However, the Company believes that the resolution of these other proceedings will not, based on information currently available, have a material adverse effect on the Company’s financial position or results of operations.

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Investment in Life Settlements (Life Insurance Policies)

9 Months Ended

Sep. 30, 2014

Investment in Life Settlements (Life Insurance Policies)

(8) Investment in Life Settlements (Life Insurance Policies)

The Company accounts for policies it acquires using the fair value method in accordance with ASC 325-30-50 Investments—Other—Investment in Insurance Contracts. Under the fair value method, the Company recognizes the initial investment at the purchase price. For policies that were relinquished in satisfaction of premium finance loans at maturity, the initial investment is the loan carrying value. For policies purchased in the secondary or tertiary markets, the initial investment is the amount of cash outlay at the time of purchase. At each reporting period, the Company re-measures the investment at fair value in its entirety and recognizes changes in fair value in earnings in the period in which the changes occur.

As of September 30, 2014 and December 31, 2013, the Company owned 595 and 612 policies, respectively, with an aggregate estimated fair value of investments in life settlements of $350.4 million and $303.0 million, respectively.

The weighted average life expectancy calculated based on death benefit of insureds in the policies owned by the Company at September 30, 2014 was 11.0 years. The following table describes the Company’s investments in life settlements as of September 30, 2014 (dollars in thousands):

Remaining Life Expectancy (In Years)	Number of Life Settlement Contracts		Fair Value		Face Value
0 - 1		—	$	—	$	—
1 - 2		2		3,727		5,377
2 - 3		11		26,135		46,957
3 - 4		9		11,642		29,800
4 - 5		15		21,145		63,854
Thereafter		558		287,734		2,742,301
Total		595	$	350,383	$	2,888,289

The weighted average life expectancy calculated based on death benefit of insureds in the policies owned by the Company at December 31, 2013 was 11.6 years. The following table describes the Company’s investments in life settlements as of December 31, 2013 (dollars in thousands):

Remaining Life Expectancy (In Years)	Number of Life Settlement Contracts		Fair Value		Face Value
0 - 1		—	$	—	$	—
1 - 2		—		—		—
2 - 3		6		8,489		16,875
3 - 4		10		14,171		38,100
4 - 5		8		13,529		40,250
Thereafter		588		266,772		2,859,665
Total		612	$	302,961	$	2,954,890

This table is not intended to reflect the cash flow pattern expected over the life of the policies; the Company projects its cash flows using a probabilistic approach. The life expectancies represent the average number of years of life remaining on individuals with similar characteristics including age and gender.

Estimated premiums to be paid for the remainder of fiscal year 2014, the four succeeding fiscal years, and thereafter to keep the life insurance policies in force as of September 30, 2014, are as follows (in thousands):

Remainder of 2014	$	13,436
2015		53,625
2016		57,116
2017		63,683
2018		67,945
Thereafter		1,145,526
	$	1,401,331

The amount of $1.4 billion noted above represents the estimated total future premium payments required to keep the life insurance policies in force utilizing the Company’s probabilistic approach and does not give effect to projected receipt of death benefits. The estimated total future premium payments could increase or decrease significantly to the extent that actual mortalities of insureds differs from the estimated life expectancies.

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Stockholders' Equity - Additional Information (Detail) (USD $)	1 Months Ended	9 Months Ended			9 Months Ended		3 Months Ended	9 Months Ended	12 Months Ended		0 Months Ended	9 Months Ended	0 Months Ended	12 Months Ended	9 Months Ended
	Apr. 30, 2014	Sep. 30, 2014	Dec. 31, 2013	Feb. 11, 2011	Sep. 30, 2014 ASU No. 2013-11	Sep. 30, 2014 Minimum	Mar. 31, 2014 Derivative Actions Common Stock	Sep. 30, 2014 Performance Shares	Dec. 31, 2011 Omnibus Plan	Sep. 30, 2014 Omnibus Plan	Feb. 11, 2011 Omnibus Plan Restricted Stock	Sep. 30, 2014 Omnibus Plan Restricted Stock	Apr. 01, 2013 Omnibus Plan Unrestricted Stock	Dec. 31, 2013 Omnibus Plan Unrestricted Stock	Sep. 30, 2014 Omnibus Plan Performance Shares	Sep. 30, 2014 Omnibus Plan Performance Shares Minimum	Sep. 30, 2014 Omnibus Plan Performance Shares Maximum
Stockholders Equity [Line Items]
Shares of common stock reserved for future grant										1,200,000
Options Outstanding		815,448	831,282							815,448
Stock granted		41,060						299,500			61,853	41,060	13,759	13,759	299,500
Increase in additional paid-in-capital due to reclassification of embedded derivative		$ 14,069,000
Common stock issued for legal settlement							125,628
Expected issuance of warrants for shares	2,000,000
Estimated Fair Value Of Warrants		5,400,000
Common stock warrants term		5 years
Exercise price of warrants		10.75		14.51
Average daily trading closing price						$ 8.50
Average daily trading closing price, period						45 days
Stock granted, subject to shareholders' approval of an amendment and restatement															150,000
Actual shares to be issued																0.00%	150.00%
Stock vesting period									3 years			1 year			1 year
Securities remaining for future issuance										308,940
Increase to additional paid-in-capital					$ 6,300,000

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Stock-based Compensation

9 Months Ended

Sep. 30, 2014

Stock-based Compensation

(6) Stock-based Compensation

In 2011, the Company established the Imperial Holdings 2011 Omnibus Incentive Plan (the “Omnibus Plan”) to attract, retain and motivate participating employees and to attract and retain well-qualified individuals to serve as members of the board of directors, consultants and advisors through the use of incentives based upon the value of our common stock. Awards under the Omnibus Plan may consist of incentive awards, stock options, stock appreciation rights, performance shares, performance units, and shares of common stock, restricted stock, restricted stock units or other stock-based awards as determined by the compensation committee. The Omnibus Plan provides that an aggregate of 1,200,000 shares of common stock are reserved for issuance under the Omnibus Plan, subject to adjustment as provided in the Omnibus Plan. The outstanding options issued in 2011 expire seven years after the date of grant and were granted with a strike price of $10.75, which was the offering price of our initial public offering or fair market value (closing price) of the stock on the date of grant and vest over three years.

On April 1, 2013, the Company granted 13,759 shares of unrestricted common stock to its outside directors with an aggregate grant date fair value of approximately $57,000 computed in accordance with ASC 718, Compensation-Stock Compensation. During the year ended December 31, 2013, the Company issued 545,000 options to employees at a strike price of $6.94. The Company recognized approximately $140,000 and $118,000 in stock-based compensation expense relating to stock options it granted under the Omnibus Plan during the three months ended September 30, 2014 and 2013, respectively and $632,000 and $1.1 million during the nine months ended September 30, 2014 and 2013, respectively. The Company incurred additional stock-based compensation expense of approximately $61,000 and $30,000 relating to restricted stock granted to its board of directors during the three months ended September 30, 2014 and 2013, respectively and $130,000 and $39,000 during the nine months ended September 30, 2014 and 2013, respectively. During the nine months ended September 30, 2014, the Company awarded 299,500 target performance shares for restricted common stock to its directors and certain employees, of which 150,000 shares are subject to shareholder approval of an amendment to the Omnibus Plan at the Company’s 2015 annual meeting. The issuance of the performance shares is contingent on the Company’s financial performance, as well as the performance of the Company’s common stock through June 30, 2016, with the actual shares to be issued ranging between 0 – 150% of the target performance shares. The Company will evaluate on a quarterly basis whether it is probable that the Company’s financial performance conditions will be achieved. At September 30, 2014, the Company determined that it was not probable that the performance conditions would be achieved and as a result, no related expense was recognized for the three and nine months ended September 30, 2014. Once issued, the performance shares will be subject to a one year vesting period from the date of issuance.

Options

As of September 30, 2014, options to purchase 815,448 shares of common stock were outstanding and unexercised under the Omnibus Plan at a weighted average exercise price of $8.49 per share.

The following table presents the activity of the Company’s outstanding stock options of common stock for the nine months ended September 30, 2014:

Common Stock Options	Number of Shares			Weighted Average Price per Share		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Options outstanding, January 1, 2014		831,282		$	8.46		5.51		—
Options granted		—			—		—		—
Options exercised		—			—		—		—
Options forfeited		(15,834	)	$	6.94		5.68		—
Options expired		—			—		—		—
Options outstanding, September 30, 2014		815,448		$	8.49		4.74		—
Exercisable at September 30, 2014		654,740		$	8.87		4.51		—
Unvested at September 30, 2014		160,708		$	6.94		5.68		—

As of September 30, 2014, all outstanding stock options had an exercise price above the average fair market value of the common stock during the nine months ended September 30, 2014.

During the three months and nine months ended September 30, 2014, the Company recognized expense of $140,000 and $632,000, respectively related to these options. The remaining unamortized amounts in respect of the June 5, 2013 option grants of approximately $140,000 and $239,000 will be expensed during the remainder of 2014 and 2015, respectively.

Restricted Stock

17,286 shares of restricted stock granted to our directors under the Omnibus Plan vested during the nine months ended September 30, 2014. The fair value of the vested restricted stock was valued at $120,138 based on the closing price of the Company’s shares on the grant date. The Company expensed approximately $0 and $52,000 in stock based compensation related to the 17,286 shares of restricted stock during the three months and nine months ended September 30, 2014, respectively.

During the nine months ended September 30, 2014, the Company granted 41,060 shares of restricted stock to its directors under the Omnibus Plan subject to a one year vesting schedule that commenced on the date of grant. The fair value of the unvested restricted stock was valued at $254,983 based on the closing price of the Company’s shares on the day prior to the grant date. The Company incurred additional stock-based compensation expense of approximately $61,000 and $78,000 related to these 41,060 shares of restricted stock during the three months and nine months ended September 30, 2014, respectively.

The following table presents the activity of the Company’s restricted stock for the nine months ended September 30, 2014:

Common Unvested Shares	Number of Shares
Outstanding January 1, 2014		17,286
Granted		41,060
Vested		(17,286	)
Forfeited		—
Outstanding September 30, 2014		41,060

The aggregate intrinsic value of unvested restricted stock awards is approximately $265,000 and the stock will vest in June 2015.

Performance Shares

During the nine months ended September 30, 2014, the Company awarded 299,500 target performance shares for restricted common stock to its directors and certain employees, of which 150,000 shares are subject to shareholder approval of an amendment to the Omnibus Plan at the Company’s 2015 annual meeting. The issuance of the performance shares is contingent on the Company’s financial performance, as well as the performance of the Company’s common stock through June 30, 2016, with the actual shares to be issued ranging between 0 – 150% of the target performance shares. At September 30, 2014, the Company determined that it was not probable that the performance conditions would be achieved and no related expense was recognized for the quarter or nine months ended September 30, 2014. Once issued, the performance shares will be subject to a one year vesting period from the date of issuance.

The following table presents the activity of the Company’s performance share awards for the nine months ended September 30, 2014:

Performance Shares	Number of Shares
Outstanding January 1, 2014		—
Awarded		299,500
Vested		—
Forfeited		—
Outstanding September 30, 2014		299,500

Warrants

On February 11, 2011, three shareholders received ownership of warrants that may be exercised for up to a total of 4,240,521 shares of the Company’s common stock at a weighted average exercise price of $14.51 per share. The warrants will expire seven years after the date of issuance and the exercisability of the warrant will vest ratably over four years. At September 30, 2014, 3,180,391 warrants were exercisable with a weighted average exercise price of $14.51.

In connection with the class action settlement described in Note 13, Commitments and Contingencies, the Company issued warrants to purchase two million shares of the Company’s stock into an escrow account in April of 2014. The estimated fair value as of the measurement date of such warrants was $5.4 million, which is included in stockholders’ equity. The warrants were distributed in October 2014 and have a five-year term from the date they are distributed to the class participants with an exercise price of $10.75. The Company is obligated to file a registration statement to register the shares underlying the warrants with the SEC if shares of the Company’s common stock have an average daily trading closing price of at least $8.50 per share for a 45 day period. The warrants will be exercisable upon effectiveness of the registration statement.

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Discontinued Operations

9 Months Ended

Sep. 30, 2014

Discontinued Operations

(7) Discontinued Operations

On October 25, 2013, the Company sold substantially all of the operating assets comprising its structured settlement business for gross proceeds of $12.0 million. The Company’s decision to sell the division was to focus on the life settlements business. No structured settlement receivables were sold and no on-balance sheet liabilities were transferred in connection with the sale. This sale resulted in the recognition of a gain of $11.3 million in the fourth quarter of 2013.

As a result of the sale, the Company retrospectively reclassified its structured settlement business operating results as discontinued operations, net of income taxes, in the accompanying Consolidated Statements of Operations for all periods presented and the Company has discontinued segment reporting. All other footnotes in these financial statements that were affected by this reclassification of discontinued operations have been updated accordingly.

Operating results related to the Company’s discontinued structured settlement business are as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
Total income	$	38		$	2,698		$	150		$	10,366
Total expenses		(287	)		(2,643	)		(604	)		(8,739	)
(Loss) income before income taxes		(249	)		55			(454	)		1,627
Income tax expense		—			—			—			—
Net (loss) income from discontinued operations	$	(249	)	$	55		$	(454	)	$	1,627

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Debt Disclosure

9 Months Ended

Sep. 30, 2014

8.50% Senior Unsecured Convertible Notes Due 2019

Debt Disclosure

(10) 8.50% Senior Unsecured Convertible Notes

In February 2014, the Company issued $70.7 million in an aggregate principal amount of 8.50% senior unsecured convertible notes due 2019. The Notes were sold, in part, to certain accredited investors pursuant to Regulation D under the Securities Act of 1933 and, in part, to an initial purchaser who then resold such Notes to qualified institutional buyers pursuant to Rule 144A of the Securities Act of 1933. The Notes were issued pursuant to an indenture dated February 21, 2014, between the Company and U.S. Bank National Association, as trustee (the “Indenture”). Two members of our Board of Directors, Messrs. Dakos and Goldstein, are affiliated with Bulldog Investors, LLC, who purchased Notes in the aggregate principal amount of $9.2 million in the offering.

The Notes are general senior unsecured obligations and rank equally in right of payment with all of our other existing and future senior unsecured indebtedness. The Notes are effectively subordinate to all of our secured indebtedness to the extent of the value of the assets collateralizing such indebtedness. The Notes are not guaranteed by our subsidiaries.

The maturity date of the Notes is February 15, 2019. The Notes accrue interest at the rate of 8.50% per annum on the principal amount of the Notes, payable semi-annually in arrears on August 15 and February 15 of each year with the first interest payment on August 15, 2014.

The Notes are convertible into shares of common stock at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date. The Notes may be converted into shares of common stock initially at a conversion rate of 147.9290 shares of common stock per $1,000 principal amount of Notes (equivalent to a conversion price of $6.76 per share of common stock), subject to adjustment.

The Company may not redeem the Notes prior to February 15, 2017. On and after February 15, 2017, and prior to the maturity date, the Company may redeem for cash all, but not less than all, of the Notes if the last reported sale price of the Company’s common stock equals or exceeds 130% of the applicable conversion price for at least 20 trading days during the 30 consecutive trading day period ending on the trading day immediately prior to the date the Company delivers notice of the redemption. The redemption price will be equal to 100% of the principal amount of the Notes, plus any accrued and unpaid interest to, but excluding, the redemption date. In addition, if we call the Notes for redemption, a make-whole fundamental charge will be deemed to occur. As a result, we will, in certain circumstances, increase the conversion rate by a number of additional shares of common stock for holders who convert their notes prior to the redemption date.

The Company determined that an embedded conversion option existed in the Notes, prior to June 5, 2014, that was required to be separately accounted for as a derivative under ASC 815 which required the Company to bifurcate the embedded conversion option and record it as a liability at fair value and record a debt discount by an equal amount with changes in the fair value of the conversion derivative liability recorded in earnings and the discount on the debt liability, together with the stated interest on the instrument, amortized to interest expense over the life of the debt using the effective interest method.

On June 5, 2014, the Company obtained shareholder approval to issue shares of common stock upon conversion of the Notes in an amount that exceeded applicable New York Stock Exchange limits for issuances without shareholder approval. In accordance with ASC 815, the Company reclassified the embedded conversion derivative liability to equity along with unamortized transaction costs proportionate to the allocation of the initial debt discount and the principal amount of the Notes. The Notes are recorded at accreted value and will continue to be accreted up to the par value of the Notes at maturity.

The fair value of the conversion derivative liability was estimated at June 5, 2014 using a Black Scholes pricing model with the following assumptions:

	As of June 5, 2014
Expected Volatility		40.0	%
Expected Term in Years		4.7
Risk Free Rate		1.5	%

At June 5, 2014, the fair value of the conversion derivative liability was $23.7 million. In accordance with ASC 815, the Company reclassified this amount along with $756,000 of unamortized transaction costs offset by deferred taxes of $8.8 million to stockholders’ equity. As of September 30, 2014, the carrying value of the Notes was $55.3 million. The unamortized debt discount and origination cost of $15.5 million and $2.3 million, respectively, will be amortized over the remaining life of the Notes, using the effective interest method.

The Company recorded $2.2 million of interest expense, including $1.5 million, $605,000 and $90,000 from interest, amortizing debt discounts and issuance costs, during the three months ended September 30, 2014 and $5.3 million of interest expense, including $3.7 million, $1.4 million and $239,000 from interest, amortizing debt discounts and issuance costs, during the nine months ended September 30, 2014.

During the nine months ended September 30, 2014, the Company recorded a loss on the change in fair value of the conversion derivative liability of $6.8 million.

Revolving Credit Facility

Debt Disclosure

(9) Revolving Credit Facility

On May 16, 2014, White Eagle Asset Portfolio, LLC converted from a Delaware limited liability company to White Eagle Asset Portfolio, LP, a Delaware limited partnership (the “Conversion”) and all of its ownership interests were transferred to an indirect, wholly-owned Irish subsidiary of the Company. In connection with the Conversion, White Eagle entered into an Amended and Restated Loan and Security Agreement (the “Revolving Credit Facility”) among White Eagle, as borrower, Imperial Finance and Trading, LLC, as the initial servicer, the initial portfolio manager and guarantor, Lamington Road Bermuda Ltd., as portfolio manager, LNV Corporation, as initial lender, the other financial institutions party thereto as lenders, and CLMG Corp., as administrative agent for the lenders. The Revolving Credit Facility amended and restated the revolving credit facility previously entered into by White Eagle on April 29, 2013.

In connection with the entry into the amended and restated Revolving Credit Facility, a new servicing agreement with respect to the policies pledged under the facility has been entered into with a third party. Prior to the amendment and restatement, a corporate subsidiary acted as servicer.

As of September 30, 2014, 452 life insurance policies owned by White Eagle with an aggregate death benefit of approximately $2.3 billion and an estimated fair value of approximately $295.5 million are pledged as collateral under the Revolving Credit Facility.

General & Security. The Revolving Credit Facility provides for an asset-based revolving credit facility backed by White Eagle’s portfolio of life insurance policies with an initial aggregate lender commitment of up to $300.0 million, subject to borrowing base availability. 452 life insurance policies with an aggregate death benefit of approximately $2.3 billion and an estimated fair value of approximately $295.5 million are pledged as collateral under the Revolving Credit Facility at September 30, 2014. In addition, the equity interests in White Eagle have been pledged under the Revolving Credit Facility.

Borrowing Base. Borrowing availability under the Revolving Credit Facility is subject to a borrowing base, which at any time is equal to the lesser of (A) the sum of all of the following amounts that have been funded or are to be funded through the next distribution date (i) the initial advance and all additional advances to acquire additional pledged policies or that are not for ongoing maintenance advances, plus (ii) 100% of the sum of the ongoing maintenance costs, plus (iii) 100% of accrued and unpaid interest on borrowings (excluding the rate floor portion described below), plus (iv) 100% of any other fees and expenses funded and to be funded as approved by the required lenders, less (v) any required payments of principal and interest previously distributed and to be distributed through the next distribution date; (B) 75% of the valuation of the policies pledged as collateral as determined by the lenders; (C) 50% of the aggregate face amount of the policies pledged as collateral (excluding certain specified life insurance policies); and (D) the then applicable facility limit. At September 30, 2014, $143.4 million was undrawn and $2.6 million was available to borrow under the Revolving Credit Facility.

Amortization & Distributions. Proceeds from the policies pledged as collateral under the Revolving Credit Facility will be distributed pursuant to a waterfall. Absent an event of default, after premium payments and fees to service providers, 100% of the remaining proceeds will be directed to pay outstanding interest and principal on the loan, unless the lenders determine otherwise. Generally, after payment of interest and principal, collections from policy proceeds are to be paid to White Eagle up to $76.1 million, then 50% of the remaining proceeds are to be directed to the lenders with the remainder paid to White Eagle and for any unpaid fees to service providers. With respect to approximately 25% of the face amount of policies pledged as collateral under the Revolving Credit Facility, White Eagle has agreed that if policy proceeds that are otherwise due are not paid by an insurance carrier, the foregoing distributions will be altered such that the lenders will receive any “catch-up” payments in respect of amounts that they would have received in the waterfall prior to distributions being made to White Eagle. During the continuance of events of default or unmatured events of default, the amounts from collections of policy proceeds that might otherwise be paid to White Eagle will instead be held in a designated account controlled by the lenders and may be applied to fund operating and third party expenses, interest and principal, “catch-up” payments or percentage payments that would go to the lenders as described above.

Use of Proceeds. Generally, ongoing advances may be made for paying premiums on the life insurance policies pledged as collateral, to pay debt service (other than a “rate floor” component equal to the greater of LIBOR (or the applicable base rate) and 1.5%), and to pay the fees of service providers. Subsequent advances in respect of newly pledged policies are at the discretion of the lenders and the use of proceeds from those advances are at the discretion of the lenders.

Interest. Borrowings under the Revolving Credit Facility bear interest at a rate equal to LIBOR or, if LIBOR is unavailable, the base rate, in each case plus an applicable margin of 4.00% and subject to the rate floor described above. The base rate under the Revolving Credit Facility equals the sum of (i) the weighted average of the interest rates on overnight federal funds transactions or, if unavailable, the average of three federal funds quotations received by the Agent plus 0.75% and (ii) 0.5%. The effective rate at September 30, 2014 is 5.5%.

Interest expense for the cash portion of interest paid during the period is recorded in the Company’s consolidated financial statements. Accrued interest is reflected as a component of the estimated fair value of the Revolving Credit Facility debt. Total interest expense on the facility was $2.1 million, which includes $1.5 million withheld from borrowings by the lender and $573,000 paid by White Eagle, for the three months ended September 30, 2014 and $5.8 million, which includes $4.2 million withheld from borrowings by the lender and $1.6 million paid by White Eagle, for the nine months ended September 30, 2014.

Maturity. The term of the Revolving Credit Facility expires April 28, 2028, which is also the scheduled commitment termination date (though the lenders’ commitments to fund borrowings may terminate earlier in an event of default). The lenders’ interests in and rights to a portion of the proceeds of the policies does not terminate with the repayment of the principal borrowed and interest accrued thereon, the termination of the Revolving Credit Facility or expiration of the lenders’ commitments.

Covenants/Events of Defaults. The Revolving Credit Facility contains covenants and events of default that are customary for asset-based credit agreements of this type, but also include cross defaults under the servicing, account control, contribution and pledge agreements entered into in connection with the Revolving Credit Facility (including in relation to breached by third parties thereunder), certain changes in law, changes in control of or insolvency or bankruptcy of the Company and relevant subsidiaries and performance of certain obligations by certain relevant subsidiaries, White Eagle and third parties. The Revolving Credit Facility does not contain any financial covenants, but does contain certain tests relating to asset maintenance, performance and valuation the satisfaction of which will be determined by the lenders with a high degree of discretion.

Remedies. The Revolving Credit Facility and ancillary transaction documents afford the lenders a high degree of discretion in their selection of and implementation of remedies in relation to any event of default, including a high degree of discretion in determining whether to foreclose upon and liquidate all or any pledged policies, the interests in White Eagle, and the manner of any such liquidation. White Eagle has limited ability to cure events of default through the sale of policies or the procurement of replacement financing.

We have elected to account for the debt under the Revolving Credit Facility, which includes the 50% interest in policy proceeds to the lender, using the fair value method. The fair value of the debt is the amount the Company would have to pay to transfer the debt to a market participant in an orderly transaction. We calculated the fair value of the debt using a discounted cash flow model taking into account the stated interest rate of the credit facility and probabilistic cash flows from the pledged policies. Considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, our estimates are not necessarily indicative of the amounts that we, or holders of the instruments, could realize in a current market exchange. The most significant assumptions are the estimates of life expectancy of the insured and the discount rate. The use of different assumptions and/or estimation methodologies could have a material effect on the estimated fair values.

At September 30, 2014, the fair value of the outstanding debt was $142.7 million and the borrowing base was approximately $159.1 million, including $156.6 million in outstanding principal.

There are no scheduled repayments of principal prior to maturity. Payments are due upon receipt of death benefits and distributed pursuant to the waterfall as described above.

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Consolidated Assets and Consolidated Liabilities of VIEs (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Primary Beneficiary Variable Interest Entity
Variable Interest Entity [Line Items]
Primary Beneficiary Consolidated VIEs, assets	$ 300,116	$ 264,596
Primary Beneficiary Consolidated VIEs, liabilities	142,998	124,188
Not Primary Beneficiary Variable Interest Entity
Variable Interest Entity [Line Items]
Not Primary Beneficiary Non-consolidated VIEs, total assets	2,385	2,378
Not Primary Beneficiary Non-consolidated VIEs, Maximum Exposure to Loss	$ 2,385	$ 2,378

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Quantitative Information about Level 3 Fair Value Measurements (Detail) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2014		Dec. 31, 2013
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Investment in life settlements	$ 350,383		$ 302,961
Structured settlements receivables	383		660	[1]
Investment in life settlements	2,888,289		2,954,890
Revolving Credit Facility debt	142,661		123,847
Weighted average discount rate	18.56%
Structured settlements
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Structured settlements receivables	383
Weighted average discount rate	8.66%
Revolving Credit Facility
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Revolving Credit Facility debt	142,661
Discount rate	24.01%
Fair Value, Inputs, Level 3
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Investment in life settlements	350,383		302,961
Structured settlements receivables	383		660
Investment in life settlements	2,888,289
Revolving Credit Facility debt	142,661		123,847
Fair Value, Inputs, Level 3 | Non Premium Financed
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Investment in life settlements	52,909
Investment in life settlements	220,802
Fair Value, Inputs, Level 3 | Premium Financed
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Investment in life settlements	297,474
Investment in life settlements	$ 2,667,487
Fair Value, Inputs, Level 3 | Life Finance
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Valuation Technique	Discounted cash flow
Weighted average life expectancy valuation period	11 years
Weighted average discount rate	18.56%
Fair Value, Inputs, Level 3 | Life Finance | Non Premium Financed
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Valuation Technique	Discounted cash flow
Weighted average life expectancy valuation period	8 years 1 month 6 days
Fair Value, Inputs, Level 3 | Life Finance | Premium Financed
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Valuation Technique	Discounted cash flow
Weighted average life expectancy valuation period	11 years 2 months 12 days
Fair Value, Inputs, Level 3 | Structured settlements
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Valuation Technique	Discounted cash flow
Weighted average discount rate	8.66%
Fair Value, Inputs, Level 3 | Revolving Credit Facility
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Valuation Technique	Discounted cash flow
Weighted average life expectancy valuation period	10 years 6 months
Weighted average discount rate	24.01%	[2]
Fair Value, Inputs, Level 3 | Minimum | Life Finance | Non Premium Financed
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Discount rate	14.80%
Fair Value, Inputs, Level 3 | Minimum | Life Finance | Premium Financed
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Discount rate	16.55%
Fair Value, Inputs, Level 3 | Maximum | Life Finance | Non Premium Financed
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Discount rate	20.80%
Fair Value, Inputs, Level 3 | Maximum | Life Finance | Premium Financed
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Discount rate	26.55%

[1] Derived from audited consolidated financial statements.

[2] Actual

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Income Taxes

9 Months Ended

Sep. 30, 2014

Income Taxes

(15) Income Taxes

Our provision for income taxes, excluding the income tax expense of $3.7 million recorded as a result of the adoption of the new accounting pronouncement as discussed below, is estimated to result in an annual effective tax rate of 36.9% in 2014. For periods prior to 2014 our provision for income taxes was an annual effective tax rate of 0.0%. The 0.0% effective tax rate was the result of our recording of a valuation allowance for those deferred tax assets that were not expected to be recovered in the future.

Included in our provision for income taxes for the nine months ended September 30, 2014, is a $3.7 million provision attributed to the adoption of guidance provided in ASU No. 2013-11, that was effective on January 1, 2014. In addition, as a result of the adoption of this standard, the Company recorded a $6.3 million increase to additional paid-in-capital.

In March of 2014, the Company was notified by the IRS of its intention to examine the Company’s tax returns for the years ended December 31, 2011 and 2012. See also “IRS Investigation” in Note 13 regarding the IRS Criminal Investigation Division’s investigation related to the Company’s former structured settlement business.

The Company and its subsidiaries are subject to U.S. federal income tax as well as to income tax in Florida and other states and foreign jurisdictions in which it operates.

At the time the Company recorded a liability for the conversion derivative liability attributed to the issuance of the Notes, the Company recorded a deferred tax asset of $6.5 million for the conversion derivative liability and a deferred tax liability of $6.5 million for the corresponding debt discount. As the changes in the fair value of the conversion derivative liability are included in earnings, the Company recorded additions to the deferred tax asset. At June 5, 2014 when the Company received shareholder approval to issue shares of common stock upon conversion of the Notes, the deferred tax attributed to the conversion derivative liability (net of allocated unamortized transaction costs) was $8.8 million. In accordance with ASC 815, the Company reclassified the deferred tax asset attributed to the conversion derivative liability (net of allocated unamortized transaction costs) to equity. See Note 10, 8.50% Senior Unsecured Convertible Notes. As of September 30, 2014, the Company has a deferred tax liability of $6.2 million related to unamortized debt discount.

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Stock-based Compensation (Tables)

9 Months Ended

Sep. 30, 2014

Common Stock Option Activity

The following table presents the activity of the Company’s outstanding stock options of common stock for the nine months ended September 30, 2014:

Common Stock Options	Number of Shares			Weighted Average Price per Share		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Options outstanding, January 1, 2014		831,282		$	8.46		5.51		—
Options granted		—			—		—		—
Options exercised		—			—		—		—
Options forfeited		(15,834	)	$	6.94		5.68		—
Options expired		—			—		—		—
Options outstanding, September 30, 2014		815,448		$	8.49		4.74		—
Exercisable at September 30, 2014		654,740		$	8.87		4.51		—
Unvested at September 30, 2014		160,708		$	6.94		5.68		—

Activity of Unvested Restricted Stock

The following table presents the activity of the Company’s restricted stock for the nine months ended September 30, 2014:

Common Unvested Shares	Number of Shares
Outstanding January 1, 2014		17,286
Granted		41,060
Vested		(17,286	)
Forfeited		—
Outstanding September 30, 2014		41,060

Activity of Performance Share Awards

The following table presents the activity of the Company’s performance share awards for the nine months ended September 30, 2014:

Performance Shares	Number of Shares
Outstanding January 1, 2014		—
Awarded		299,500
Vested		—
Forfeited		—
Outstanding September 30, 2014		299,500

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Fair Value of Conversion Derivative Liability (Detail) (8.50% Senior Unsecured Convertible Notes Due 2019, Conversion derivative liability)	0 Months Ended
	Jun. 05, 2014
8.50% Senior Unsecured Convertible Notes Due 2019 | Conversion derivative liability
Fair Value Inputs, Liabilities, Quantitative Information [Line Items]
Expected Volatility	40.00%
Expected Term in Years	4 years 8 months 12 days
Risk Free Rate	1.50%

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Activity of Performance Share Awards (Detail)	9 Months Ended
	Sep. 30, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Beginning balance	17,286
Awarded	41,060
Vested	17,286
Forfeited
Common Unvested Shares outstanding, Ending Balance	41,060
Performance Shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Awarded	299,500
Vested
Forfeited
Common Unvested Shares outstanding, Ending Balance	299,500

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Consolidated Statements of Comprehensive Income (Loss) (USD $) In Thousands, unless otherwise specified	3 Months Ended				9 Months Ended
	Sep. 30, 2014		Sep. 30, 2013		Sep. 30, 2014		Sep. 30, 2013
Net (loss) income	$ (4,513)	[1]	$ 6,161	[2]	$ (14,317)	[1]	$ 49,551	[2]
Other comprehensive income (loss), net of tax	0		0		0		3
Comprehensive (loss) income	$ (4,513)		$ 6,161		$ (14,317)		$ 49,554

[1] The computation of diluted EPS does not include 815,448 options, 6,240,521 warrants, 41,060 shares of restricted stock, up to 10,464,941 shares of underlying common stock issuable upon conversion of the Notes and 299,500 performance shares for the three months and nine months ended September 30, 2014, as the effect of their inclusion would have been anti-dilutive.

[2] The computation of diluted EPS did not include 899,472 options, and 4,240,521 warrants for the three months and nine months ended September 30, 2013, as the effect of their inclusion would have been anti-dilutive.

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Recent Accounting Pronouncements

9 Months Ended

Sep. 30, 2014

Recent Accounting Pronouncements

(3) Recent Accounting Pronouncements

In July 2013, the FASB issued ASU No. 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU 2013-11”). ASU 2013-11 requires, unless certain conditions exist, an unrecognized tax benefit, or a portion of an unrecognized tax benefit, to be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, similar tax loss, or a tax credit carryforward. ASU 2013-11 is effective prospectively for reporting periods beginning after December 15, 2013. Retrospective application is permitted. The Company adopted ASU 2013-11 effective on January 1, 2014, which required the Company to reclassify a $6.3 million current liability for unrecognized tax benefits to deferred taxes. Adoption of this guidance resulted in the recognition of a $3.7 million tax expense in the Company’s consolidated financial statement of operations for the nine months ended September 30, 2014, a $2.6 million reduction in the valuation allowance and an increase to additional paid-in-capital of $6.3 million on the Company’s consolidated balance sheet and consolidated statement of stockholders’ equity as of September 30, 2014.

In April 2014, the FASB issued ASU 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. The amendments in the ASU change the criteria for reporting discontinued operations while enhancing disclosures in this area. The new guidance requires expanded disclosures about discontinued operations that will provide financial statement users with more information about the assets, liabilities, income, and expenses of discontinued operations. The new guidance also requires disclosure of the pre-tax income attributable to a disposal of a significant part of an organization that does not qualify for discontinued operations reporting. The amendments in the ASU are effective in the first quarter of 2015 for public business entities with calendar year ends. Early adoption is permitted. The Company is currently in the process of evaluating the impact, if any, of the adoption on its consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which converges the FASB and the International Accounting Standards Board standard on revenue recognition. Areas of revenue recognition that will be affected include, but are not limited to, transfer of control, variable consideration, allocation of transfer pricing, licenses, time value of money, contract costs and disclosures. This is effective for the fiscal years and interim reporting periods beginning after December 15, 2016. We are currently evaluating the impact that the adoption of ASU 2014-09 will have on our consolidated financial statements or related disclosures.

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Changes in Fair Value for All Assets and Liabilities Using Material Level of Unobservable (Level 3) Inputs (Detail) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
Life Finance
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Beginning Balance	$ 302,961	$ 113,441
Purchase of policies	3,488	55,500
Acquired in foreclosure		3,168
Change in fair value	19,313	81,948
Matured/sold policies		(12,658)
Matured/lapsed/sold policies	(15,957)
Premiums paid	40,578	50,984
Transfers into level 3
Transfer out of level 3
Ending Balance	350,383	292,383
Changes in fair value included in earnings for the period relating to assets held	8,627	74,655
Revolving Credit Facility
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Beginning balance	123,847
Initial advance under the revolving credit facility		83,020
Subsequent Draws under the revolving credit facility	40,965	37,059
Payments on credit facility	(17,595)
Change in fair value	(4,556)	(5,295)
Transfers into level 3
Transfer out of level 3
Ending balance	142,661	114,784
Conversion derivative liability
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Beginning balance	16,901
Change in fair value	6,759
Reclassified to equity	(23,660)
Transfers into level 3
Transfer out of level 3
Ending balance	$ 0

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Discontinued Operations (Tables)

9 Months Ended

Sep. 30, 2014

Operating Results of Discontinued Structured Settlement Business

Operating results related to the Company’s discontinued structured settlement business are as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
Total income	$	38		$	2,698		$	150		$	10,366
Total expenses		(287	)		(2,643	)		(604	)		(8,739	)
(Loss) income before income taxes		(249	)		55			(454	)		1,627
Income tax expense		—			—			—			—
Net (loss) income from discontinued operations	$	(249	)	$	55		$	(454	)	$	1,627

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Stock-Based Compensation - Additional Information (Detail) (USD $)	0 Months Ended	1 Months Ended	9 Months Ended					0 Months Ended	9 Months Ended			12 Months Ended			3 Months Ended		9 Months Ended			0 Months Ended	3 Months Ended		9 Months Ended		3 Months Ended	9 Months Ended	3 Months Ended	9 Months Ended	0 Months Ended	12 Months Ended		9 Months Ended
	Feb. 11, 2011	Apr. 30, 2014	Sep. 30, 2014	Sep. 30, 2013	Dec. 31, 2013	Feb. 11, 2011	Sep. 30, 2014 Including Overallotment Option	Feb. 11, 2011 Maximum Including Overallotment Option	Sep. 30, 2014 Minimum	Sep. 30, 2014 2014	Sep. 30, 2014 2015	Dec. 31, 2013 Omnibus Plan	Dec. 31, 2011 Omnibus Plan	Sep. 30, 2014 Omnibus Plan	Sep. 30, 2014 Stock Options Omnibus Plan	Sep. 30, 2013 Stock Options Omnibus Plan	Sep. 30, 2014 Stock Options Omnibus Plan	Sep. 30, 2013 Stock Options Omnibus Plan	Sep. 30, 2014 Restricted Stock	Feb. 11, 2011 Restricted Stock Omnibus Plan	Sep. 30, 2014 Restricted Stock Omnibus Plan	Sep. 30, 2013 Restricted Stock Omnibus Plan	Sep. 30, 2014 Restricted Stock Omnibus Plan	Sep. 30, 2013 Restricted Stock Omnibus Plan	Sep. 30, 2014 Restricted Stock Omnibus Plan Restricted Stock One	Sep. 30, 2014 Restricted Stock Omnibus Plan Restricted Stock One	Sep. 30, 2014 Restricted Stock Omnibus Plan Restricted Stock Two	Sep. 30, 2014 Restricted Stock Omnibus Plan Restricted Stock Two	Apr. 01, 2013 Unrestricted Stock Omnibus Plan	Dec. 31, 2013 Unrestricted Stock Omnibus Plan	Apr. 01, 2013 Unrestricted Stock Omnibus Plan	Sep. 30, 2014 Performance Shares	Sep. 30, 2014 Performance Shares Omnibus Plan	Sep. 30, 2014 Performance Shares Omnibus Plan Maximum	Sep. 30, 2014 Performance Shares Omnibus Plan Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of common stock reserved for future grant														1,200,000
Options outstanding and unexercised, weighted average price			$ 8.49		$ 8.46								$ 10.75	$ 8.49
Options outstanding and unexercised, expiry period													7 years
Options outstanding and unexercised, vesting period													3 years										1 year										1 year
Stock granted			41,060																	61,853			41,060						13,759	13,759		299,500	299,500
Fair value of stock granted																					$ 254,983		$ 254,983								$ 57,000
Options granted												545,000
Options granted strike price												$ 6.94
Stock-based compensation expense			762,000	1,203,000											140,000	118,000	632,000	1,100,000			61,000	30,000	130,000	39,000	0	52,000	61,000	78,000
Stock granted, subject to shareholders' approval of an amendment and restatement																																	150,000
Actual shares to be issued																																		150.00%	0.00%
Options outstanding and unexercised			815,448		831,282									815,448
Remaining unamortized amounts										140,000	239,000
Stock vested			17,286																		17,286
Fair value of stock vested																					120,138
Restricted stock, aggregate intrinsic value																			265,000
Restricted stock, vesting period																			2015-06
Expected issuance of warrants for shares		2,000,000						4,240,521
Exercise price of warrants			10.75			14.51	14.51
Warrant expiration period	7 years
Warrant vesting period	4 years
Warrants issued							3,180,391
Estimated Fair Value Of Warrants			$ 5,400,000
Common stock warrants term			5 years
Average daily trading closing price									$ 8.50
Average daily trading closing price, period									45 days

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Stockholders' Equity

9 Months Ended

Sep. 30, 2014

Stockholders' Equity

(14) Stockholders’ Equity

The Company has reserved an aggregate of 1,200,000 shares of common stock under its Omnibus Plan, of which 815,448 options to purchase shares of common stock granted to existing employees were outstanding as of September 30, 2014, and an additional 61,853 shares of restricted stock, and 13,759 shares of unrestricted stock had been granted to directors under the plan subject to vesting.

On June 5, 2014, upon receipt of shareholder approval, the Company reclassified the embedded derivative contained in its Notes to stockholders’ equity along with unamortized transaction costs proportionate to the allocation of the initial debt discount and the principal amount of the Notes. This resulted in an increase to additional paid-in-capital of $14.1 million, net of taxes on the Company’s consolidated balance sheet and consolidated statement of stockholders’ equity as of September 30, 2014. See Note 10, 8.50% Senior Unsecured Convertible Notes.

In connection with the settlement of derivative litigation, the Company issued 125,628 shares of the Company’s stock, which were issued in the first quarter of 2014 and are included in stockholders’ equity.

In connection with the class action settlement described in Note 13, Contingencies and Commitments, the Company issued warrants to purchase two million shares of the Company’s stock into an escrow account in April 2014 and were distributed in October 2014. The estimated fair value at the measurement date of such warrants was $5.4 million, which is included in stockholder’s equity. The warrants have a five-year term from the date of their distribution with an exercise price of $10.75. The Company is obligated to file a registration statement to register the shares underlying the warrants with the SEC if shares of the Company’s common stock have an average daily trading closing price of at least $8.50 per share for a 45 day period. The warrants will be exercisable upon effectiveness of the registration statement.

During the nine months ended September 30, 2014, the Company awarded 299,500 target performance shares for restricted common stock to its directors and certain employees, of which 150,000 shares are subject to shareholder approval of an amendment to the Omnibus Plan at the Company’s 2015 annual meeting. The issuance of the performance shares is contingent on the Company’s financial performance as well as the performance of the Company’s common stock through June 30, 2016, with the actual shares to be issued ranging between 0 – 150% of the target performance shares. As a result, the Company determined that it is not probable that the performance conditions will be achieved and no related expense was recognized for the three and nine months ended September 30, 2014. The performance shares will be subject to a one year vesting period from the date of issuance.

Exclusive of those performance shares awarded to our named executive officers that are not subject to shareholder approval of an amendment to the Plan at the Company’s 2015 annual meeting, there were 308,940 securities remaining for future issuance under the Omnibus Plan as of September 30, 2014.

During the nine months ended September 30, 2014, the Company adopted ASU No. 2013-11, resulting in an increase to additional paid-in-capital of $6.3 million on the Company’s consolidated balance sheet and consolidated statement of stockholders’ equity as of September 30, 2014. See Note 3, Recent Accounting Pronouncements