Exhibit 10(r)
SALE OF A PARTNERSHIP
INTEREST
& ASSIGNMENT OF ASSET BASED
TRAIL COMMISSIONS
WHEREAS Legacy Marketing Group
(“LMG”) is entitled to receive certain asset based
trail commissions (“Trail Commissions”) as the result
of certain marketing agreements with Transamerica Life Insurance
Company, American National Insurance Company, Indianapolis Life
Insurance Company, Investors Insurance Company, Old Mutual
Financial Life Insurance Company, and Aviva plc (“Insurance
Carriers”);
WHEREAS LMG earns these Trail Commissions
on the cash value of certain fixed annuity and life insurance
products of the Insurance Carriers previously sold by
LMG;
WHEREAS LMG’s rights in these Trail
Commissions are vested and survive the termination of the marketing
agreements with the Insurance Carriers, and will continue for so
long as each underlying insurance policy generating such Trail
Commissions remains in force;
WHEREAS LMG has caused to be formed and
is the sole limited partner of a subsidiary entity known as Legacy
TM, LP (“Legacy TM”);
WHEREAS Legacy TM shall cause to be
created a class of limited partnership interest called “Class
A Limited Partnership Interest” defined to be that interest
in the Partnership entitled to receive a) the Trail Commissions
received from certain identified insurance policies in force after
the Closing (the “Future Trails”); and b) thirty-three
and one-third percent (33.33%) of the Trail Commissions revenues
received from certain identified insurance policies in force on or
before the Closing (the "Current Trails") for the one year period
subsequent to the date of this Agreement (after which the receipt
of income from the Current Trails shall terminate), less expenses
of the partnership chargeable to Class A Partnership Interests, as
more fully set forth in the First Amended and Restated Agreement of
Limited Partnership (the “Partnership Agreement”),
attached hereto as Exhibit A.
WHEREAS Legacy TM desires to purchase the
Trail Commissions from LMG as set forth herein; and
WHEREAS LMG desires to transfer and
assign all of its rights, title and interest in said Trail
Commissions to Legacy TM.,
NOW, THEREFORE, in consideration of the
mutual covenants contained herein, and for good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
Page 1 of 24
1.
Sale of Trail Commissions
.
At the Closing, as hereinafter defined,
and subject to all of the terms and conditions of this Agreement,
LMG shall sell and assign to Legacy TM, and Legacy TM shall acquire
from LMG, free and clear of any mortgage, security interest,
pledge, lien, conditional sales agreement, charge or other
encumbrance, all rights, title and interest in and to all Trail
Commissions to which LMG is now or may hereinafter become entitled
under its current or past marketing agreements with Insurance
Carriers.
2.
Purchase Price;
Payment.
For the sale and assignment of the Trail
Commissions, Legacy TM shall provide the following consideration to
LMG at Closing:
a)
the sum of Six Million Five Hundred
Thousand Dollars ($6,500,000.00) in cash; and
b)
all of the Class A Limited Partnership
Interest of Legacy TM.
3.
Indemnification.
a.
Legacy TM shall indemnify, hold harmless,
and defend LMG from and against any claims brought by a third party
related to this Agreement or the performance thereof arising out of
Legacy TM’s intentional or reckless acts or
omissions.
b.
LMG shall indemnify, hold harmless, and
defend Legacy TM from and against any claims brought by a third
party related to this Agreement or the performance thereof arising
out of LMG’s intentional or reckless acts or omissions,
including but not limited to any claims that LMG’s rights in
the Trail Commissions were encumbered, not transferable, not
perfected, or not owned in whole or in part by LMG.
4.
Reporting.
LMG shall provide monthly reports to
Legacy TM listing the policy number and policy cash value.
Legacy TM shall provide reports to LMG as set forth in the
Partnership Agreement.
5.
Closing.
The Closing shall be March 26,
2008.
6.
Representations.
This Assignment shall be binding upon and
inure to the benefit of LMG and Legacy TM and their respective
successors and assigns. The parties further represent, as
appropriate, that each is a legal entity able to enter into this
Assignment, that each possesses the appropriate authority to so
agree, and that the individual executing this Assignment on behalf
of each party is authorized by that party to do so. The
parties further agree that each is under no legal restriction or
infirmity which would prevent entering into and complying with this
Assignment. The parties further agree that no claim, lawsuit,
or right of any third party exists which would affect the
undertakings in this Assignment.
Page 2 of 24
7.
Representation of LMG.
LMG represents that it owns the Trail
Commissions and that it has obtained or will obtain the necessary
consents of said Insurance Carriers for this Assignment, and that
no such other consent is required to complete the transaction
contemplated herein.
8.
Delivery of the Partnership
Interest.
a.
Immediately upon Closing, LMG shall be
deemed to have fully and completely transferred to Legacy TM all
its rights, title and interest, if any, in, as well as possession,
custody and control of, the Trail Commission.
b.
LMG agrees that it is receiving and shall
take possession of the Class A Partnership Interest in AS IS, WHERE
IS, condition and acknowledges that it has previously been given
the opportunity to and has conducted such investigations and
inspections of the Class A Partnership Interest and its underlying
assets as it has deemed necessary or appropriate for the purposes
of this Agreement.
9.
Investment Intent.
LMG is acquiring the Class A Partnership
Interest for the purpose of investment and not with a view to, or
for resale in connection with, any distribution thereof in
violation of the Securities Act of 1933, as amended (the
"Securities Act"). LMG acknowledges that the Class A Partnership
Interest to be received is not registered under the Securities Act
or any applicable state securities law, and that such Class A
Partnership Interest may not be transferred or sold except pursuant
to the registration provisions of such Securities Act or pursuant
to an applicable exemption therefrom and pursuant to state
securities laws and regulations as applicable, and that any
certificate representing the Class A Partnership Interest will bear
appropriate legends to that effect.
10.
Entire Agreement.
The parties agree that this Agreement
constitutes the full, complete, and entire Agreement between them
and supersedes all prior understandings, agreements, conversations,
or representations between them with respect to the subject matter
of this Assignment.
11.
Severability.
If any provision of this Agreement or the
application thereof to any person or in any circumstances shall be
held to be invalid, unlawful, or unenforceable to any extent, the
remainder of this Agreement, and the application of such provision
other than to the persons or in the circumstances deemed invalid,
unenforceable or unlawful, shall not be affected thereby, and each
remaining provision hereof shall continue to be valid and may be
enforced to the fullest extent permitted by law.
12.
Construction and
Interpretation.
This Agreement shall be construed and
interpreted in accordance with the substantive laws of the State of
California without reference to the principles of conflict of laws
of such state.
Page 3 of 24
13.
Jurisdiction and Venue.
The parties agree to the exclusive
jurisdiction and venue of the federal and state courts in Sonoma
County, California, for any dispute arising out of this
Assignment.
IN WITNESS HEREOF, the parties hereto
have executed this Assignment.
LEGACY MARKETING GROUP
LEGACY TM, LP
By: /s/ R. Preston Pitts
R. Preston Pitts, General
Partner:
/s/ R.
Preston Pitts
Its: /i/ RPP
Date: March 26, 2008
Lynda Pitts, General
Partner:
/s/ Lynda Pitts
Page 4 of 24
EXHIBIT A
AMENDED AND RESTATED
AGREEMENT OF LIMITED
PARTNERSHIP
OF
LEGACY TM, LP
FIRST AMENDED AND
RESTATED
AGREEMENT OF LIMITED
PARTNERSHIP
OF
LEGACY TM,
LP
This First Amended and
Restated Agreement of limited partnership made March 26, 2008
between Preston Pitts and Lynda Regan, individuals with an office
in California located at 2090 Marina, Petaluma, California 94954
collectively referred to in this agreement as the General Partner
or General Partners, and all the parties who sign copies of this
agreement to become Limited Partners, including any persons
hereafter admitted to the Partnership as additional General
Partners or Limited Partners.
WHEREAS, the Partnership
was formed pursuant to a Certificate of Limited Partnership, dated
as of October 3, 2007, which was executed by the organizer and
filed for recordation in the office of the Secretary of State of
the State of California on October 4, 2007 and a Limited
Partnership Agreement dated as of October 4, 2007 between the
General Partner and the Initial Limited Partner; and
WHEREAS, the parties
desire to enter into this Amended and Restated Agreement of Limited
Partnership of the Partnership to create Class A Limited
Partnership Interests and Class B Limited Partnership Interests,
and permit the withdrawal of the Initial Limited Partner and the
admission of the parties listed on Schedule A as limited partners
of the Partnership, and further to make the modifications set out
in this Agreement.
NOW, THEREFORE, in
consideration of the mutual promises and agreements herein made and
intending to be legally bound hereby, the parties agree to amend
and restate the Limited Partnership Agreement of the Partnership in
its entirety to read as follows:
ARTICLE
ONE
DEFINITIONS
1.1
Definitions . As used in this agreement, the
indicated terms will have the following meanings:
1.1.1
"Act" will mean the
California Revised Limited Partnership Act, as amended from time to
time.
1.1.2
"Additional Limited
Partners" will mean those persons admitted to the partnership
pursuant to Paragraph 3.3.1.
1.1.3
"Affiliate" will mean,
when used with reference to a specified person,
any person that directly or
indirectly, through one or more intermediaries, controls or
is controlled by or is under common control with the specified
person, or any person that is an officer of, partner in, or trustee
of, or serves in a similar capacity with respect to the specified
person or of which the specified person is an officer, partner, or
trustee, or with respect to which the specified person serves in a
similar capacity.
Page 5 of 24
1.1.4
"Agreement" shall mean
this First Amended and Restated Agreement of Limited Partnership,
as originally executed and as amended, modified, supplemented, or
restated from time to time, as the context requires.
1.1.5
“Capital
Account” and “Class Capital Account” shall have
the following meanings:
(a)
The individual Capital
Account that shall be established and maintained for each Partner,
composed of all of the “Class Capital Accounts” of that
Partner.
(b)
Individual Class Capital
Account shall be established and maintained for each Partner in
accordance with the following provisions:
(i)
(i) The Partnership
intends to own and manage a stream of trailing commissions from
insurance contracts (“Trailing Commissions”). The
Partnership will establish one or more classes of Partner interests
(each a “Class”), each of which will be entitled to
receive income from certain Trailing Commissions. At the time that
all of the contracts resulting in Trailing Commissions for a
particular Class are terminated, or the class of partnership
interest is liquidated by the Partnership, the General Partner in
its exclusive discretion may terminate the Class Capital Accounts
that relate to those Trailing Commissions and cause any balances in
those Class Capital Accounts to be distributed to those
Partners;
(ii)
After establishing for
each Partner each Class Capital Account, there shall be credited
thereto any additional Capital Contributions by such Partner
designated for such Class, such Partner’s share of
Profits with respect to that Class Capital Account, any items in
the nature of income or gain that are specially allocated thereto
pursuant hereto and the amount of any Partnership liabilities
relating to that Class Capital Account that are personally assumed
by such Partner or that are secured by any Partnership property
distributed to such Partner;
(iii)
From each Class Capital
Account of each Partner, there shall be debited the amount of cash
and the fair market value of any Partnership property distributed
to or withdrawn by such Partner pursuant to any provision of this
Agreement and that is designated by the General Partner as being
distributed from that Class Capital Account, the balance of that
Class Capital Account if the General Partner elects to terminate
it, such Partner’s share of Loss with respect to that Class
Capital Account, any items in the nature of expenses or loss that
are specially allocated thereto pursuant hereto and the amount of
any liabilities of such Partner that are secured by any property
contributed by such Partner to the Partnership; and
(iv)
In determining the
amount of any liability, there shall be taken into account Code
section 752(c) and any other applicable provisions of the Code and
Regulations.
(c)
If any interest in the
Partnership is transferred in accordance with this Agreement, the
transferee shall succeed to the Capital Account and Class Capital
Accounts of the transferor to the extent that it relates to the
transferred interest.
(d)
The foregoing provisions
and other provisions of this Agreement relating to the maintenance
of Capital Accounts and Class Capital Accounts are intended to
comply with Regulations section 1.704-1(b), and shall be
interpreted and applied in a manner consistent therewith. If
the General Partner determines that it is prudent to modify the
manner in which the Capital Accounts and Class Capital Accounts, or
any debits or credits thereto, are computed in order to comply with
Regulations section 1.704-1(b), the General Partner may make such
modification if it is not likely to have a material adverse effect
on amounts distributable to any Partner pursuant hereto
Page 6 of 24
on the dissolution of
the Partnership. The General Partner shall adjust the amounts
debited or credited to Capital Accounts and Class Capital Accounts
with respect to any property contributed to the Partnership or
distributed to a Partner and any liabilities secured by such
contributed or distributed property or assumed by the Partnership
or Partner in connection with such contribution or distribution if
the General Partner determines that such adjustments are necessary
or appropriate under Regulations section 1.704-1(b)(2)(iv).
The General Partner shall also make any appropriate
modifications if unanticipated events might cause this Agreement
not to comply with Regulations section 1.704-1(b), and the General
Partner shall make all elections provided for under such
Regulations.
1.1.6
"Capital Contribution"
will mean the total amount of cash, securities, or other
instruments contributed to the partnership by all the partners or
any class of partners or any one partner, as the case may be (or
the predecessor holders of the interest of such partner or
partners).
1.1.7
“Class A Limited
Partner” means any Person who becomes a Class A Limited
Partner pursuant to the terms of this Agreement and identified as a
Class A Limited Partner on Schedule A.
1.1.8
“Class B Limited
Partner” means any Person who becomes a Class B Limited
Partner pursuant to this Agreement and identified as a Class B
Limited Partner on Schedule A.
1.1.9
“Class A Limited
Partnership Interest” means that Interest in the Partnership
entitled to receive the trailing commission revenues received from
certain identified insurance policies in force after March 26, 2008
(the “Future Trails”), and thirty-three and one-third
percent (33.33%) of the trailing commission revenues received from
certain identified insurance policies in force on or before March
26, 2008 (the "Current Trails") for the one year period subsequent
to the date of this Agreement (after which the receipt of income
from the Current Trails shall terminate), less expenses of the
partnership chargeable to Class A Partnership Interests.
1.1.10
“Class B Limited
Partnership Interest” means that Interest in the Partnership
entitled to receive a portion of the
Current Trails equal to sixty-six and two thirds percent (66.67%)
of the Current Trails for the one year period subsequent to the
date of this Agreement and 100% of Current Trails thereafter, plus
any other income of the partnership not otherwise allocated to
Class A Limited Partnership Interests herein below, less expenses
of the partnership chargeable to Class B Partnership
Interests.
1.1.11
"Distributable Cash"
will mean with respect to any period all cash revenues of the
partnership (not including (a) capital contributions, (b) funds
received by the partnership in respect of indebtedness incurred by
the partnership, (c) interest or other income earned on
contemporary investment of partnership funds pending utilization,
and (d) proceeds from the sale of assets in partial or complete
liquidation of the partnership), less the sum of the following: all
amounts expended by the partnership pursuant to this agreement in
such period; and such working capital or reserves or other amounts
as the general partner reasonably determines to be necessary or
appropriate for the proper operation of the partnership business
and its winding up and liquidation.
1.1.12
"General Partner" shall
mean Preston Pitts, Lynda Regan, or any person who, at the time of
reference, serves as general partner of the partnership, whether
individually or collectively.
1.1.13
"Interest" will mean the
ownership interest of a partner in the partnership at any
particular time, including the right of such partner to any and all
benefits to which a partner may be entitled as provided in this
agreement, together with the obligations of such partner to comply
with all the terms and provisions of this agreement. A
partner’s interest in the limited partnership shall be the
percentage computed by dividing that Partner’s Class Capital
Account balance at that date by the aggregate of all
Partners’ Capital Account balances of all classes at that
date. Reference to a majority or a specified percentage in
interest of the limited partners will mean limited partners whose
Interest represents over fifty percent (50%), or such other
specified percentage, respectively, of the Interest of all limited
partners.
Page 7 of 24
1.1.14
"Limited Partner" will
mean any person who is a limited partner (whether the
initial limited partner, an additional limited
partner, or a substituted limited partner) at the time of
reference, in such person's capacity as a limited partner of the
partnership.
1.1.15
"Partners" will mean
both the general partner and the limited partners unless otherwise
indicated.
1.1.16
"Person" will mean any
individual, partnership, limited partnership (domestic or foreign),
trust, estate, association, corporation, or other
entity.
1.1.17
"Profits or Losses" will
mean the profits or losses of the partnership for federal income
tax purposes, including, without limitation, each item of
partnership income, gain, loss, deduction, or credit.
1.1.18
"Substituted Limited
Partner" will have the meaning given in Paragraph 8.6.
ARTICLE
TWO
FORMATION AND
STRUCTURE
2.1
Formation of Limited
Partnership .
The undersigned parties hereby establish the limited partnership
pursuant to the provisions of the Act. The rights and liabilities
of the partners shall be as provided in the Act, except as
otherwise provided in this agreement. The partnership will continue
without interruption as a limited partnership pursuant to the
provisions of the Act after the admission to the partnership of the
additional limited partners pursuant to Paragraph 3.3.1, and the
withdrawal of the initial limited partners.
2.2
Name
. The name of the
partnership will be Legacy TM, LP. However, the business of
the partnership may be conducted, upon compliance with all
applicable laws, under any other name designated in writing by the
general partner to the limited partners.
2.3
Principal Place of
Business .
The partnership's principal place of business will be such place or
places as the general partners may from time to time designate in
writing to the limited partners.
2.4
Purpose
. The business of the partnership is to own and
manage the receipt of an income stream or balloon payment from
insurance contracts entered into by or on behalf of Legacy
Marketing Group, commonly known as an asset based trailing
commission, and to collateralize such income stream. The
Partnership shall have the power to do all acts and things in
furtherance of and incidental to this business, and to have and
exercise all the powers and to engage in any lawful business
related or incidental to the stated business purpose.
2.5
Term
. The term of the
partnership shall be from the date of this agreement until February
22, 2108, unless sooner terminated as subsequently
provided.
2.6
Filing of
Certificates . The general partner will execute,
file and publish all certificates, notices, statements or other
instruments required by law for the formation or operation of a
limited partnership in all jurisdictions where the partnership may
elect to do business.
2.7
Partnership Act of
2008 .
The partners agree that this Partnership Agreement shall be
governed by the Uniform Limited Partnership Act of 2008.
Page 8 of 24
ARTICLE
THREE
PARTNERS' NAMES,
ADDRESSES, CAPITAL CONTRIBUTIONS, PARTNERSHIP UNITS
AND
INTEREST IN
PARTNERSHIP
3.1
General
Partner .
3.1.1
The name, address, and
capital contribution, if any, of the general partner are set forth
in Schedule A, attached to this agreement, as amended from time to
time.
3.1.2
The general partner, as
general partner, shall not be required or permitted to make any
additional capital contribution to the partnership, except as set
forth in Paragraph 3.1.1.
3.2
Initial Limited
Partner .
3.2.1
The name, address,
capital contribution, and Interest of the initial limited partner
are set forth on Schedule A attached to this agreement, as amended
from time to time.
3.2.2
Upon the admission of
the additional limited partners pursuant to paragraph 3.3.1, the
initial limited partner shall withdraw from the partnership and
will be entitled to immediate return of his or her capital
contribution without interest or reduction.
3.3
Additional limited
partners .
3.3.1
The names, addresses,
class of partnership interest, and capital contributions of the
additional limited partners are as set forth in Schedule A attached
to this agreement, as amended from time to time.
3.3.1
No limited partner will
be required or authorized to make any additional capital
contributions to the partnership.
3.4
No Interest; No
Return .
No partner will have any right to demand or receive the
return of his or her or its capital contribution to the
partnership. No partner will be entitled to interest on any capital
contribution to the partnership or on such partner's capital
account.
3.5
General Partner as
Limited Partner . The general partner
will also be a limited partner to the extent that it purchases or
becomes a transferee of all or any part of the interest of a
limited partner, and to such extent will be treated in all respects
as a limited partner, and the consent of the limited partners to
such transfer to the general partner need not be obtained. The
general partner's capital contributions referred to in Paragraph
3.1.1 of this agreement will be made in its capacity as general
partner and such contributions will not entitle the general partner
to any rights of a limited partner, including, without limitation,
those rights set forth in Article Eight.
3.6
Withdrawal of Initial
Limited Partner . The execution of this
Agreement by the Initial Limited Partner constitutes its withdrawal
as a limited partner of the Partnership. An amount equal to the
balance of the Capital Account of the Initial Limited Partner shall
be distributed to such Initial Limited Partner on the date of this
Agreement.
Page 9 of 24
ARTICLE
FOUR
ALLOCATION OF PROFITS
OR LOSSES; DISTRIBUTIONS
4.1
Profits or
Losses .
Among the limited partners, Profits and Losses will be
allocated to the Partners in proportion to the Interest of each
limited partner in such limited partners class
4.2
Allocation Among
Partners Subsequent to Assignment . The profits of the partnership
attributable to any interest in the partnership acquired by reason
of an assignment from a partner, as permitted herein, will be
allocated between the assignor and the assignee based upon the
length of time in any fiscal period of the partnership, as measured
by the effective date of the assignment (determined as specified in
Paragraph 8.4), during which the interest in the partnership so
assigned was owned by each of them.
4.3
Distribution of
Partnership Funds . All distributable cash may, at the
election of the General Partner, be distributed to the partners
within 20 days after the close of each calendar month or more
frequently as determined by the General Partner, in proportion to
their Interest in the partnership, or according to Paragraph 8.11
if such partner is a Liquidating Partner.
ARTICLE
FIVE
RECORDS AND
ACCOUNTING; REPORTS
5.1
Records and
Accounting .
Proper and complete records and books of account of the business of
the partnership will be maintained at the partnership's principal
place of business, and each limited partner and his or her
authorized representative will have access to them, upon reasonable
notice and for a proper purpose, at all reasonable times during
business hours. Such books and records of
the partnership will be kept on the cash basis of accounting, which
will be the method of accounting filed by the partner ship for
federal income tax purposes. The external financial statements of
the partnership will be prepared in accordance with generally
accepted accounting principles consistently applied, and will be
appropriate and adequate for the partnership's business and
for the carrying out of all provisions of this
agreement.
5.2
Tax
Returns . The
general partner will cause income tax and information returns for
the partnership to be prepared and filed at the appropriate times
with the appropriate authorities, as required.
5.3
Annual
Reports .
Within 90 days after the end of each fiscal year, or as soon as
possible thereafter, the general partner will cause to be delivered
to each person who was a partner at any time during the fiscal
year, copies of all federal, state and local tax and informational
returns as required by statute.
5.4
Blue Sky and SEC
Information .
The general partner will prepare and file with the appropriate
state authorities all reports required to be filed by state
securities or "Blue Sky" authorities, and will also prepare and
file with the Securities and Exchange Commission all reports
required to be filed with such agency.
5.5
Trade
Secrets .
Anything in this agreement to the contrary notwithstanding,
the partnership will have no obligation to disclose to any limited
partner any trade secret or confidential or similar information,
the disclosure of which the general partner reasonably believes may
adversely affect the partnership's business.
ARTICLE
SIX
FISCAL
AFFAIRS
6.1
Fiscal
Year . The
fiscal year of the partnership will be the calendar
year.
Page 10 of 24
6.2
Partnership
Funds . The
liquid funds of the partnership will be deposited in such bank
account or accounts, or will be invested in such interest-bearing
or noninterest-bearing investments, including, without limitation,
checking and savings accounts, certificates of deposit and time or
demand deposits in commercial banks, or any other such security as
is customary in the industry, and as will be designated by the
general partner. Such funds shall not be commingled with funds of
any other person. Withdrawals will be made upon such signatures as
the general partner may designate.
6.3
Accounting
Decisions .
All decisions as to accounting principles, except as specifically
provided to the contrary in this agreement, will be made by the
general partner on a basis that is acceptable to the partnership's
independent certified public accountants.
6.4
Interim Closing of
the Books .
There will be an interim closing of the books of account of the
partnership as of the date of the admission of addition
