Impac Mortgage Holdings - Chapter 11 DIP Terms

DIP Terms

Borrower(s) / Guarantor(s)

• Impac Mortgage Holdings, Inc. and its affiliated debtors, including Copperfield Financial, LLC; Copperfield Capital Corporation; Impac Funding Corporation; Impac Commercial Capital Corporation; Impac Secured Assets Corp.; IMH Assets Corp.; Integrated Real Estate Service Corp.; Impac Mortgage Corp.; Impac Warehouse Lending, Inc.; Synergy Capital Mortgage Corp.; and Impac Warehouse Lending Group, Inc., as Debtors, together with certain subsidiaries identified as guarantors on the signature page to the DIP Agreement
• Any of the Debtors may, acting singly, request a loan under the DIP Agreement, and each of the Debtors has appointed each other as agent for all purposes thereunder, including requesting loans
• The Debtors are jointly and severally obligated to repay all loans made under the DIP Agreement, regardless of which Debtor actually receives the loans

Agent / Lender(s)

• Hildene Re SPC, Ltd., acting for and on behalf of the account of SP 1, as DIP Lender
• Hildene Re SPC, Ltd., acting for and on behalf of the account of SP 1, also serves as the Prepetition Lender under the Prepetition Loan Agreement and, as successor-by-assignment to Trinity Park Investments, LLC, as the Bridge Note Lender (collectively, the Prepetition Secured Parties)
• Neither the DIP Lender nor any of the Prepetition Secured Parties is a control person or insider of any Debtor

DIP Commitments

• $5 million senior secured postpetition term loan facility comprised of:
  • $1.5 million Initial Term Loan previously authorized pursuant to the Interim Order
  • Additional new money term loans in an amount such that, when combined with the DIP Roll-Up Loan and the Initial Term Loan, the total outstanding principal amount of the DIP Credit Facility shall not exceed $5 million (the "New Money Term Loan"), available from time to time pursuant to the DIP Agreement
  • $2 million DIP Roll-Up Loan, representing the principal amount of the Bridge Note (plus interest, fees, and other amounts due thereunder), which obligations were rolled up pursuant to the Interim Order and converted into DIP Obligations on a dollar-for-dollar basis, subject to the Challenge rights reserved in Paragraph 21 of the Final Order and the Carve-Out
• The Bridge Note Lender, who is also the DIP Lender, would not have consented to extend the Bridge Note Loan, DIP Loans, or other financial accommodations without the inclusion of the DIP Roll-Up Loan; the DIP Roll-Up Loan was consideration solely for the agreement of the DIP Lender to extend the DIP Loans and not on account of the Prepetition Bridge Note Obligations
• The DIP Lender shall have no obligation to make any loans unless the conditions precedent set forth in Section 7 of the DIP Agreement have been satisfied in full or waived by the DIP Lender in its sole discretion

Cash Collateral

• All of the Debtors' cash, including cash in deposit accounts and other accounts, wherever located, whether as original collateral or proceeds of other Prepetition Collateral, constitutes Cash Collateral, including:
  • All cash proceeds arising from the collection, sale, lease, or other disposition, use, or conversion of any real or personal property in which the DIP Lender or the Prepetition Secured Parties have a lien or replacement lien
  • All deposits, refund claims, and rights in retainers of the Debtors on which the DIP Lender or the Prepetition Secured Parties hold a lien or replacement lien
  • All cash and cash equivalents held in any depository or other accounts maintained by the Debtors
  • The proceeds of any sale, transfer, or other disposition of DIP Collateral or Prepetition Collateral
  • Any residual proceeds, after satisfaction of the Enterprise Loans, that flow to the Debtors' estates from (a) the EB&T Pledged Accounts, including any cash collateral in restricted cash accounts securing the Enterprise Loans, and (b) the cash surrender value or death benefit proceeds of the Life Insurance Policies assigned as collateral for the Enterprise Loans
• The Debtors' authorization to use Cash Collateral shall automatically terminate, without further order of the Court, upon the earliest of: (a) the Maturity Date; (b) entry of any order denying or terminating the Debtors' use of Cash Collateral; or (c) the occurrence or continuation of an Event of Default

Fees

• The Debtors are authorized and directed to pay all reasonable and documented fees, costs, and expenses of the DIP Lender (including attorneys' fees and expenses), and all reasonable and documented fees and expenses payable to the Prepetition Secured Parties, in each case as provided in the DIP Agreement and the Final Order, without further application to the Court
• Payable fees, costs, and expenses include those incurred in connection with: (a) the preparation, negotiation, execution, and delivery of the DIP Documents and the funding of the DIP Loans; (b) administration of the DIP Credit Facility and any amendment or waiver of the DIP Documents or the Orders; (c) administration of the Chapter 11 Cases and any Successor Case; and (d) enforcement or protection of the DIP Lender's rights and remedies
• Such fees, costs, and expenses are deemed non-refundable and irrevocable, are not subject to the Budget, and are not subject to approval of the Court or U.S. Trustee guidelines, and no recipient shall be required to file any interim or final fee application
• Fees, costs, and expenses are payable within fourteen (14) days after delivery of a summary invoice; the U.S. Trustee shall receive a contemporaneous copy of each summary invoice
• If the Debtors or the U.S. Trustee object to the reasonableness of a summary invoice and the parties cannot resolve such objection within the 14-day period, a Fee Objection (limited to the reasonableness of such fees and expenses) may be filed; the undisputed amount shall be promptly paid, and the Court retains jurisdiction over the disputed portion

Maturity

• The earliest to occur of:
  • 90 days following the Petition Date
  • The effective date of a plan of reorganization or liquidation in the Chapter 11 Cases
  • The date of filing or support by the Debtors of a plan of reorganization other than the plan contemplated by the Restructuring Agreement
  • Entry of an order converting the Chapter 11 Cases to chapter 7 or appointing a chapter 11 trustee
  • Entry of a final order dismissing the Chapter 11 Cases
  • The date of termination of the DIP Credit Facility and the acceleration of any outstanding extensions of credit in accordance with the terms of the DIP Agreement
• The occurrence of an "Event of Default" under Section 10 of the DIP Agreement constitutes an event of default under the Final Order, unless expressly waived by the DIP Lender in its sole discretion in writing
• Upon the occurrence and during the continuance of an Event of Default, the DIP Lender shall have all rights to which it is entitled under the DIP Agreement and the Orders, subject to a five (5) Business Day Remedies Notice Period to the Debtors, any Committee, the Prepetition Secured Parties, and the U.S. Trustee, after which the automatic stay shall be deemed terminated absent a Stay Enforcement Order, with the sole basis for such order being that no Event of Default has occurred

Carve-Out

• U.S. Trustee Fees: All fees required to be paid to the Clerk of the Bankruptcy Court and to the Office of the U.S. Trustee under 28 U.S.C. § 1930(a)
• Professional Fees: All unpaid fees (including transaction fees paid upon closing of the respective transaction, but excluding success fees) and expenses accrued or incurred by Debtor and Committee professionals prior to delivery of a Carve-Out Trigger Notice, to the extent allowed and solely as provided for in the Budget
• Post-Carve-Out Trigger Notice Cap: Professional Fees not to exceed $125,000 in the aggregate for amounts incurred after the date of delivery of the Carve-Out Trigger Notice
• Carve-Out Trigger Notice: A written notice that may be delivered by the DIP Lender following an Event of Default, stating that (x) the Post-Carve-Out Trigger Notice Cap has been invoked, (y) the DIP Loans have been accelerated, and (z) the DIP Lender does not intend to fund further advances or consent to further use of Cash Collateral
• Professional Fee Escrow:
  • The Debtors shall wire transfer funds on a weekly basis to an escrow agent, in an amount equal to the professional fee line items under the "Restructuring Disbursements" subheading in the Budget
  • Upon delivery of a Carve-Out Trigger Notice, the Debtors may also fund the Professional Fee Escrow with the amount of the Post-Carve-Out Trigger Notice Cap
  • The Professional Fee Escrow is not subject to the control of the DIP Lender, the DIP Liens, the Adequate Protection Liens, or any other liens, and does not constitute DIP Collateral or Prepetition Collateral; provided that the DIP Liens shall automatically attach to any residual interest in the Professional Fee Escrow, with any excess proceeds reverting first to the DIP Lender until the DIP Obligations are satisfied in full and thereafter to the Debtors
• No portion of the Carve-Out or proceeds of the DIP Credit Facility may be used to pay fees or expenses incurred in challenging the liens or claims of the DIP Lender or the Prepetition Secured Parties

Use of Proceeds

• Continue operations, fund payroll and operating expenses, and administer and preserve the value of the Debtors' estates
• Pay fees, costs, and expenses under the DIP Documents
• Fund the Professional Fee Escrow and the Carve-Out
• All uses must be in strict compliance with the Budget (subject only to any variances permitted by the DIP Agreement or the Budget) and otherwise consistent with the terms of the DIP Agreement and the Final Order
• The Debtors and the DIP Lender may agree in writing to modify the Budget in the DIP Lender's sole discretion; any updated, modified, or supplemented Budget shall be deemed approved at 5:00 p.m. (Eastern Time) five (5) days following delivery to the DIP Lender absent approval or rejection
• Subject to the Challenge rights reserved in Paragraph 21 with respect to the DIP Roll-Up Loan, all net proceeds of any sale or other disposition of the DIP Collateral shall, subject to the Carve-Out, be applied first to repay the DIP Obligations in full

Credit Bid

• The DIP Lender shall have the power and right to credit bid the full amount of all DIP Obligations (inclusive of the DIP Roll-Up Loan, subject to the Challenge rights reserved in Paragraph 21 of the Final Order) to purchase, directly or through one or more acquisition vehicles, all or any portion of the DIP Collateral
• Subject to Paragraph 21, the Prepetition Lender shall have the right to credit bid the Prepetition Loan Obligations to purchase, directly or through one or more acquisition vehicles, all or any portion of the Prepetition Loan Collateral
• The Debtors have agreed not to challenge such credit bid rights and shall not support any Challenge to such rights
• Notwithstanding any termination of the DIP Credit Facility, the right to credit bid shall continue until all DIP Obligations have been indefeasibly paid in full in cash

Avoidance Actions

• The DIP Collateral excludes the Avoidance Actions themselves but includes all proceeds or property recovered in connection with Avoidance Actions arising under chapter 5 of the Bankruptcy Code (including §§ 544, 545, 547, 548, 549, 550, and 553) and any similar or related claims arising under applicable state or non-bankruptcy law

Challenge Period and Budget

• The Challenge Period expires upon the earlier of:
  • 75 calendar days after entry of the Interim Order
  • Confirmation of a chapter 11 plan
• Subject to further extension by (a) written agreement of the Debtors and the Prepetition Secured Parties, or (b) an order of the Court obtained on notice and after a hearing
• Any chapter 7 or chapter 11 trustee appointed or elected in these cases shall have until the expiration of the Challenge Period, and thereafter for the duration of any commenced adversary proceeding or contested matter, to bring a Challenge, regardless of whether such party is deemed a successor to the Debtors
• Challenge Budget: Up to $25,000 in the aggregate of the DIP Credit Facility, DIP Collateral, Cash Collateral, and Carve-Out may be used by any Committee or any chapter 7 or 11 trustee appointed or elected during the Challenge Period to investigate Challenges against the Prepetition Secured Party Releasees and the legality, validity, priority, perfection, enforceability, and extent of the Prepetition Liens

Securities and Priorities

• To secure the DIP Obligations, the DIP Lender is granted valid, enforceable, and fully perfected DIP Liens on all DIP Collateral, including all of each Debtor's now owned or hereafter acquired right, title, and interest in cash, accounts, accounts receivable, goods, inventory, property, plant and equipment, commercial tort claims, intellectual property, contract rights, tax refunds, prepaid expenses, deposits, general intangibles, real estate, leaseholds, the EB&T Pledged Accounts, intercompany claims, equity interests of each direct subsidiary, all assets constituting Prepetition Collateral, all Cash Collateral, and all proceeds or property recovered in connection with Avoidance Actions (but excluding the Avoidance Actions themselves), subject only to prior payment of the Carve-Out and any Prior Permitted Liens, with the following priorities:
  • Pursuant to § 364(c)(1): Allowed superpriority administrative expense claims against each Debtor and its estate, having priority over any and all administrative expenses and other claims, subject (solely with respect to the DIP Roll-Up Loan) to the Challenge rights reserved in Paragraph 21
  • Pursuant to § 364(c)(2): Perfected first-priority senior liens on all DIP Collateral that, as of the Petition Date, was not subject to any valid, perfected, and unavoidable lien, or was subject only to invalid, unperfected, or avoidable liens
  • Pursuant to § 364(c)(3): Perfected junior liens on all DIP Collateral that, as of the Petition Date, was subject to a valid, perfected, and unavoidable lien, other than the Primed Liens (such third-party senior liens, the "Prior Permitted Liens")
  • Pursuant to § 364(d)(1): Perfected, first-priority senior priming liens on all DIP Collateral subject to the existing liens in favor of the Prepetition Secured Parties securing the Prepetition Obligations (the "Primed Liens"), which shall also prime any liens granted after the Petition Date as adequate protection of any Primed Liens; effective upon the making of the Roll-Up Loan pursuant to the Interim Order, any prepetition liens securing the Bridge Note Obligations were deemed replaced by the DIP Liens securing the DIP Obligations (including the DIP Roll-Up Loan), subject to the Challenge rights in Paragraph 21 and the Carve-Out
• Prior Permitted Liens are not being primed by the DIP Credit Facility
• The DIP Superpriority Claim is payable from all pre- and post-petition property of the Debtors and all proceeds thereof, including proceeds or property recovered in connection with Avoidance Actions (but excluding the Avoidance Actions themselves), subject and subordinate in priority of payment only to prior payment of the Carve-Out, and is senior in all respects to any superpriority claims granted in these Chapter 11 Cases or any Successor Case
• The Final Order constitutes sufficient and conclusive evidence of the validity, perfection, and priority of the DIP Liens without the necessity of filing or recording any financing statement or other instrument; the DIP Lender may, at its sole discretion, file financing statements (which may describe the collateral as "all assets of the Borrower" or words of similar effect)

Adequate Protection

Prepetition Secured Parties

• As adequate protection for any Diminution resulting from the incurrence and payment of the DIP Obligations, the use of Cash Collateral and other Prepetition Collateral, the granting of the DIP Liens and the DIP Superpriority Claim, the subordination of the Prepetition Obligations to the DIP Obligations and the Carve-Out, and the imposition of the automatic stay, and subject to the DIP Liens, the DIP Superpriority Claim, and prior payment of the Carve-Out, the Prepetition Secured Parties are granted (subject to the Challenge rights reserved in Paragraph 21):
  • Adequate Protection Liens: Valid, perfected, postpetition security interests and liens in and on all of the DIP Collateral, with a priority subject and subordinate only to (i) the DIP Liens, (ii) prior payment of the Carve-Out, and (iii) any liens senior by operation of law or otherwise permitted under the Prepetition Loan Documents (to the extent such permitted liens were valid, properly perfected, non-avoidable, and senior in priority to the Prepetition Liens as of the Petition Date, or are valid, non-avoidable senior priority liens in existence as of the Petition Date that are perfected after the Petition Date as permitted by § 546(b))
  • Adequate Protection Superpriority Claims: Administrative superpriority expense claims pursuant to § 507(b), junior and subordinate only to the DIP Obligations and the Carve-Out, having priority over any and all other claims against the Debtors, payable from and with recourse to all pre- and post-petition property of the Debtors and all proceeds thereof, including proceeds or property recovered in connection with Avoidance Actions
  • Payment of all outstanding prepetition and postpetition reasonable and documented fees and expenses incurred by the Prepetition Secured Parties, including the reasonable and documented fees and expenses of counsel, in accordance with the procedures identified in Paragraph 8 of the Final Order

Waivers

• Section 506(c): No costs or expenses of administration incurred in the Chapter 11 Cases or any Successor Case shall be surcharged against the DIP Lender, the Prepetition Secured Parties, the Carve-Out, the DIP Collateral, or the Prepetition Collateral, without the prior written consent of the DIP Lender and the Prepetition Secured Parties (and the Professional Persons in the case of an asserted surcharge against the Carve-Out); nothing herein shall alter the Challenge Budget
• Section 552(b): The "equities of the case" exception provided in §§ 552(b)(1) and (2) of the Bankruptcy Code shall not apply to the DIP Lender or the Prepetition Secured Parties with respect to proceeds, product, offspring, or profits of any of the Prepetition Collateral or DIP Collateral
• No Marshaling: The Prepetition Secured Parties and the DIP Lender shall not be subject to the equitable doctrine of "marshaling" or any other similar doctrine with respect to the DIP Collateral or the Prepetition Collateral, and no party (other than the Prepetition Secured Parties and the DIP Lender) shall be entitled, directly or indirectly, to direct the exercise of remedies or seek to marshal or otherwise control the disposition of the DIP Collateral or Prepetition Collateral after an Event of Default
• The Debtors waive any right to require the DIP Lender to: (i) proceed against the Debtors or any other person; (ii) proceed against or exhaust any security; (iii) seek to impose the equitable doctrine of marshalling; or (iv) pursue any other remedy
• The Debtors waive demand, protest, notice of protest, notice of default or dishonor, notice of payment and nonpayment, notice of any default, nonpayment at maturity, release, compromise, settlement, extension, or renewal of accounts, documents, instruments, chattel paper, and guarantees at any time held by the DIP Lender on which the Debtors may be liable

Releases

• Upon entry of the Final Order, the Debtors forever and irrevocably release, discharge, and acquit the DIP Lender (solely in its capacity as DIP Lender), its affiliates and predecessors in interest, and their respective former, current, and future officers, employees, directors, agents, representatives, owners, members, partners, advisors, legal advisors, shareholders, managers, consultants, accountants, and attorneys (collectively, the "DIP Lender Releasees") from any and all claims, demands, liabilities, causes of action, indebtedness, and obligations of every type arising prior to the Petition Date, including all Avoidance Actions
• Subject to the Challenge rights reserved in Paragraph 21, the Debtors also release the Prepetition Secured Parties (solely in their capacity as prepetition lenders under the Prepetition Loan Documents) and the same categories of affiliated/related persons (the "Prepetition Secured Party Releasees") from all such prepetition claims, including Avoidance Actions
• No release applies to claims determined in a final, non-appealable judgment to have resulted from actual fraud, gross negligence, bad faith, self-dealing, or willful misconduct
• The release of the Prepetition Secured Parties applies only to conduct, acts, and omissions occurring on or before entry of the Final Order, and does not apply to future conduct or ongoing obligations under the Prepetition Loan Documents

Indemnification

• The Debtors and their estates indemnify and hold harmless the DIP Lender in respect of any claim or liability incurred in connection with negotiating, implementing, documenting, or obtaining approval of the DIP Loans, including the granting of the DIP Liens and any challenges or objections to the DIP Credit Facility
• The indemnity does not extend to costs, expenses, or liabilities determined in a final, non-appealable judgment of a court of competent jurisdiction to have resulted from the indemnified party's actual fraud, gross negligence, bad faith, or willful misconduct
• No Debtor has any obligation to indemnify, contribute to, or reimburse the DIP Lender or its affiliates, agents, or representatives for losses, claims, damages, liabilities, or expenses arising from or relating to a successful Challenge under Paragraph 21

Section 364(e) Good Faith Protections

• The DIP Lender and the Prepetition Secured Parties have acted in good faith in negotiating the DIP Documents, consenting to use of Cash Collateral, and relying on the Interim Order and Final Order
• The DIP Obligations, DIP Liens, DIP Superpriority Claim, Adequate Protection Liens, and other rights and protections granted by the Orders will not be affected by any subsequent reversal or modification of the Interim Order or the Final Order, to the extent provided in § 364(e) of the Bankruptcy Code

Account Control Upon Event of Default

• Upon an Event of Default and expiration of the Remedies Notice Period without entry of a Stay Enforcement Order, the Prepetition Lender (solely in its capacity as party to any deposit account control agreements or similar control agreements in effect as of the Petition Date ("DACAs")) is granted limited relief from the automatic stay to deliver any "notice of exclusive control," "activation notice," or similar instruction required under the DACAs, to acknowledge and implement that the Prepetition Lender has exclusive control over the applicable accounts for the benefit of itself and the DIP Lender
• Depository Institutions subject to a DACA are authorized to comply with such notices or instructions without further order of the Court, and receive § 364(e) protections for taking such actions in good faith
• Nothing in this provision requires the Prepetition Lender or any Depository Institution to sweep, transfer, or apply funds in any account before expiration of the Remedies Notice Period; the provision is intended to complement, not conflict with, any cash management order

No Modification of Final Order

• Until the DIP Obligations are indefeasibly paid in full in cash and all commitments under the DIP Credit Facility are terminated, the Debtors shall not seek or consent to, directly or indirectly, any modification, stay, vacatur, or amendment of the Interim Order or the Final Order without the prior written consent of the DIP Lender and the Prepetition Secured Parties
• No such consent shall be implied by any action or inaction of the DIP Lender or the Prepetition Secured Parties