Case rfn11 Doc 1782 Filed 04/01/16 Entered 04/01/16 16:06:02 Page 1 of 44

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1 Case rfn11 Doc 1782 Filed 04/01/16 Entered 04/01/16 16:06:02 Page 1 of 44 David M. Bennett John C. Leininger State Bar No State Bar No Nicole L. Williams Bieging Shapiro & Barber LLP State Bar No LBJ Freeway, Suite 930 Katharine Battaia Clark Dallas, Texas State Bar No (214) (Telephone) Thompson & Knight LLP jcl@bsblawyers.com 1722 Routh Street, Suite 1500 Dallas, Texas Keith L. Langston (214) (Telephone) State Bar No (214) (Facsimile) Langston Law Firm David.Bennett@tklaw.com 109 W. Tyler Street Nicole.Williams@tklaw.com Longview, Texas Katie.Clark@tklaw.com (903) (Telephone) (903) (Facsimile) ATTORNEYS FOR CHAPTER 11 TRUSTEE klangston@langston-lawfirm.com H. THOMAS MORAN II AND THE SUBSIDIARY DEBTORS Jeffrey D. Sternklar State Bar No Joseph J. Wielebinski Jeffrey D. Sternklar LLC Texas Bar No th Floor Dennis L. Roosien, Jr. 225 Franklin Street Texas Bar No Boston, MA Jay H. Ong (617) (Telephone) Texas Bar No jeffrey@sternklarlaw.com Munsch Hardt Kopf & Harr, P.C. 500 N. Akard Street, Suite 3800 ATTORNEYS FOR PLAINTIFFS Dallas, Texas (214) (Telephone) (214) (Facsimile) jwielebinski@munsch.com droosien@munsch.com jong@munsch.com ATTORNEYS FOR THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF TEXAS FORT WORTH DIVISION IN RE: LIFE PARTNERS HOLDINGS, INC., et. al. Debtors. CASE NO rfn11 JOINTLY ADMINISTERED (Chapter 11) JOINT MOTION TO COMPROMISE CLASS ACTION CONTROVERSIES, TO APPROVE PLAN SUPPORT AGREEMENT, AND FOR RELATED RELIEF H. Thomas Moran II (the Trustee ), as chapter 11 trustee for Life Partners Holdings, Inc. ( LPHI ), Life Partners, Inc. ( LPI ), and LPI Financial Services, Inc. ( LPIFS, and together with LPI, the Subsidiary Debtors, and together with LPHI, the Debtors or Life JOINT MOTION TO COMPROMISE CLASS ACTION CONTROVERSIES, TO APPROVE PLAN SUPPORT AGREEMENT, AND FOR RELATED RELIEF PAGE 1

2 Case rfn11 Doc 1782 Filed 04/01/16 Entered 04/01/16 16:06:02 Page 2 of 44 Partners ), 1 by and through undersigned counsel; Plaintiffs Philip M. Garner, Steve South, as Trustee for, and on behalf the South Living Trust, Christine Duncan, Michael Arnold, Janet Arnold, and John S. Ferris, M.D. (the Lead Plaintiffs ), on behalf of themselves and all those similarly situated (altogether the Class Action Plaintiffs or Settlement Class Members ), and the Official Committee of Unsecured Creditors (the Committee ), by and through undersigned counsel (collectively, the Parties ), file this Joint Motion to Compromise Controversies, to Approve Plan Support Agreement, and for Related Relief (the Joint Motion ). Pursuant to the Joint Motion, the parties seek entry of an order substantially in the form of Exhibit A approving the Class Action Settlement Agreement, which includes a Plan Support Agreement, among the Parties attached as Exhibit B (the Settlement Agreement ), and respectfully submit the following: 2 PRELIMINARY STATEMENT 1. The Trustee, the Subsidiary Debtors, and the Committee (collectively, the Estate Representatives ) submit that the proposed settlement is fair and equitable and decidedly in the best interests of the estates of the Debtors. The proposed settlement resolves all pending disputes arising from and related to the consolidated class action adversary proceeding 3 pending in this Court, which asserts (i) that certain interests in insurance policies are not property of the LPI bankruptcy estate, and (ii) that the Class Action Plaintiffs are entitled to rescission of their 1 The Trustee is serving as the sole director of LPI and LPIFS pursuant to the Trustee s authority under this Court s Order Authorizing the Trustee to Amend the Governing Documents and To File Voluntary Chapter 11 Petitions For Debtor s Subsidiaries (the Subsidiary Filing Order ) [Dkt. No. 261]. 2 Capitalized terms not defined herein shall have the meanings ascribed to them in the Settlement Agreement. 3 On March 25, 2016, the Court granted the Lead Plaintiffs Second Motion for Leave to File Consolidated Amended Complaint. See Order, Garner v. Life Partners, Inc., No [Dkt. No. 33, entered Mar. 25, 2016]. The March 25, 2016 Order consolidated the two pending class adversary proceedings and designated Garner v. Life Partners, Inc., No as the lead case. Id. On March 29, 2016, the Lead Plaintiffs filed their Second Amended Complaint in the lead case. Plaintiffs Consolidated Class Action Complaint, Garner v. Life Partners, Inc., No [Dkt. No. 35, filed Mar. 29, 2016]. JOINT MOTION TO COMPROMISE CLASS ACTION CONTROVERSIES, TO APPROVE PLAN SUPPORT AGREEMENT, AND FOR RELATED RELIEF PAGE 2

3 Case rfn11 Doc 1782 Filed 04/01/16 Entered 04/01/16 16:06:02 Page 3 of 44 various agreements to invest in life settlements with LPI. The proposed settlement also resolves claims filed by or on behalf of the Class Action Plaintiffs. 2. Most importantly, the settlements embodied in the Settlement Agreement are a critical and significant step towards the funding of the Estate Representatives proposed Second Amended Joint Plan of Reorganization of Life Partners Holdings, Inc., et al. Pursuant to Chapter 11 of the Bankruptcy Code [Dkt. No. 1688, filed March 24, 2016] (as may be amended, supplemented, or otherwise modified, the Plan ) that will furnish a mechanism to provide meaningful compensation and recovery to approximately 22,000 investors the Class Action Plaintiffs who have been so grievously damaged by the Debtors pre-petition activities. The proposed settlement is the foundation upon which the Plan rests. Simply put, without the compromises embodied in the Settlement Agreement, the Estate Representatives would be unable to propose a feasible and confirmable Plan in the case that provides equivalent benefits to the Settlement Class Members. Conversely, if this Joint Motion is approved, then the Estate Representatives anticipate confirmation of their Plan promptly, with disbursements to holders of allowed claims to commence shortly thereafter. The Estate Representatives believe the Settlement Agreement and the Plan together enable creditors to recover more than they are likely to recover under any realistic alternative scenario. 3. Because the Settlement Agreement proposes to settle a pending class action proceeding, the Consolidated Class Adversary (as defined below), and includes a request for certification of a settlement class and the appointment of class representatives and class counsel, the Parties will file separately in the Consolidated Class Adversary a Motion to Preliminarily Approve the Settlement Agreement and the Form and Manner of Notice to Class Members (the Preliminary Approval Motion ) and, after notice to the class members is completed, a Motion to JOINT MOTION TO COMPROMISE CLASS ACTION CONTROVERSIES, TO APPROVE PLAN SUPPORT AGREEMENT, AND FOR RELATED RELIEF PAGE 3

4 Case rfn11 Doc 1782 Filed 04/01/16 Entered 04/01/16 16:06:02 Page 4 of 44 Finally Approve the Settlement Agreement (the Final Approval Motion ), pursuant to Federal Rule of Civil Procedure 23 and Federal Rule of Bankruptcy Procedure 7023, as applicable. A Joint Motion to Withdraw the Reference is currently pending in the Consolidated Class Adversary and is scheduled for hearing on April 4, Once a decision is made on the Joint Motion to Withdraw the Reference, the parties will file the Preliminary Approval Motion, and, later, the Final Approval Motion, in the appropriate court. Attached as Exhibit C is a proposed schedule and order for the filing of the motions and other notices and filings related to the Settlement Agreement. JURISDICTION 4. This Court has jurisdiction over this matter pursuant to 28 U.S.C. 157 and This matter is a core proceeding pursuant to 28 U.S.C. 157(b). 5. Venue is proper in this district pursuant to 28 U.S.C and The statutory predicates for relief requested in this Motion include Sections 105, 362, 363, 502 and 541 of Title 11 of the United States Code (the Bankruptcy Code ), Rules 9014, 9019 and 7023 of the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules ), and Rule 23 of the Federal Rules of Civil Procedure. BACKGROUND I. The Class Actions and the Chapter 11 Cases 7. For years, LPI was engaged in the business of acquiring life insurance policies known as viatical settlements or life settlements. Generally speaking, viatical settlements and life settlements involve the holder of a life insurance policy selling his or her interests in a life insurance policy to a third party in exchange for a lump-sum cash payment less than the policy s death benefit. LPI marketed and sold investment contracts relating to those policies to investors. JOINT MOTION TO COMPROMISE CLASS ACTION CONTROVERSIES, TO APPROVE PLAN SUPPORT AGREEMENT, AND FOR RELATED RELIEF PAGE 4

5 Case rfn11 Doc 1782 Filed 04/01/16 Entered 04/01/16 16:06:02 Page 5 of LPI s marketing and business operations were successful in large part because of its intense efforts to create and to maintain a public perception that its investment products held the prospect of substantial returns. These efforts included a vigorous effort to silence and discredit any attempt to question LPI s claims. These efforts were made by LPI, its affiliates, principals, and hundreds of sales agents. Thus, for example, when a media report suggested that LPI s life expectancy projections were inaccurate, LPI engaged in a contra campaign to support those projections, point to returns generated when policies did mature, conceal the large number of policies that had not matured as represented, and thus to perpetually convince investors that the maturity of their policy was just around the corner. Similarly, when, in January 2011, the SEC announced that it was investigating LPHI, a concerted and sustained effort to disparage the SEC was undertaken by LPI, LPHI, and their principals. LPI also initiated a resale program that bought out unhappy investors for a time. As lawsuits were filed, LPI spent millions of dollars opposing the various cases, including those discussed below, and was able to obtain a number of favorable rulings and considerable delays and thus drive up the costs of those working to oppose or expose LPI. Through these combined efforts, LPI was able to maintain its façade essentially throughout the litigation described below. 9. In March 2011, a state court putative class action was filed captioned Arnold et al. v. Life Partners Inc., Case No. DC (Tex. Dist. Ct. 14th Dist.) (the Arnold State Court Action ), alleging that LPI s life settlement investments were securities that were not registered with either the Texas State Securities Board or the United States Securities and Exchange Commission and therefore LPI was selling unregistered securities. The Arnold State Court Action sought relief in the form of rescission pursuant to the Texas Securities Act section 33, along with attorneys fees, costs and interest. As indicated, this litigation, like others that JOINT MOTION TO COMPROMISE CLASS ACTION CONTROVERSIES, TO APPROVE PLAN SUPPORT AGREEMENT, AND FOR RELATED RELIEF PAGE 5

6 Case rfn11 Doc 1782 Filed 04/01/16 Entered 04/01/16 16:06:02 Page 6 of 44 followed, was vigorously opposed, and was at one point dismissed by the trial court. In May 2015, the Texas Supreme Court held in the Arnold State Court Action that the agreements LPI used to solicit money from investors are investment contracts and therefore securities pursuant to the Texas Securities Act. Life Partners, Inc. v. Arnold, 464 S.W.3d 660 (Tex. May 8, 2015). 10. On January 20, 2015 (the LPHI Petition Date ), LPHI filed a voluntary petition for relief under chapter 11 of title 11 of the United States Code thereby commencing its bankruptcy case, captioned In re Life Partners Holdings, Inc., Case No rfn11 (the LPHI Bankruptcy Case ). On March 13, 2015, the U.S. Trustee appointed Moran as the chapter 11 Trustee in the LPHI Bankruptcy Case, 4 and on March 19, 2015, the Bankruptcy Court affirmed Moran s appointment On May 19, 2015 (the Subsidiary Petition Date ), the Subsidiary Debtors filed their respective voluntary petitions for relief under chapter 11 of the Bankruptcy Code, captioned In re Life Partners, Inc., Case No rfn11 and In re LPI Financial Services, Inc., No rfn11, thereby initiating their bankruptcy cases in the Bankruptcy Court (the Subsidiary Bankruptcy Cases ). On May 22, 2015, the Bankruptcy Court granted the Subsidiary Debtors request to jointly administer the LPHI Bankruptcy Case and the Subsidiary Bankruptcy Cases (collectively, the Bankruptcy Cases ) The Arnold State Court Action was stayed due to the Bankruptcy Cases. 13. In the Bankruptcy Cases, LPI has claimed that it is the owner of the life insurance policies underlying the securities the Settlement Class Members purchased and that those policies are property of the bankruptcy estates. This position triggered significant dispute and 4 Dkt. No Dkt No. 225; Dkt. No Dkt. No JOINT MOTION TO COMPROMISE CLASS ACTION CONTROVERSIES, TO APPROVE PLAN SUPPORT AGREEMENT, AND FOR RELATED RELIEF PAGE 6

7 Case rfn11 Doc 1782 Filed 04/01/16 Entered 04/01/16 16:06:02 Page 7 of 44 litigation, referred to herein as the Ownership Issue. A class action adversary proceeding captioned Garner et al. v. Life Partners, Inc., Adversary No. 15-CV RFN (Bankr. N.D. Tex.) (the Garner Class Adversary ) was filed on July 19, 2015 in the Bankruptcy Court on behalf of a class addressing the Ownership Issue, alleging that the class members were the owners of the life settlement securities they purchased from LPI (including all death benefit proceeds), and that the securities held by the class members (including all death benefit proceeds) along with all other monies held in trust were not the property of LPI or the bankruptcy estates. The Garner Class Adversary sought relief in the form of a declaratory judgment pursuant to Federal Rule of Bankruptcy Procedure 7001, 28 U.S.C et seq., and 11 U.S.C On July 31, 2015, a Motion for Class Certification was filed in the Garner Class Adversary. 14. A class action adversary proceeding captioned Arnold et al. v. Life Partners, Inc., Adversary No. 15-CV RFN (Bankr. N.D. Tex.) (the Arnold Class Adversary ) was filed on July 28, 2015 in the Bankruptcy Court on behalf of a class alleging that LPI s life settlements were securities that were not registered with either the Texas State Securities Board or the United States Securities Exchange Commission, and therefore LPI was selling unregistered securities. The Arnold Class Adversary sought relief in the form of rescission pursuant to the Texas Securities Act 33, along with attorneys fees, costs and interest. 15. LPI filed an answer to the Garner Class Adversary on August 18, 2015, and an answer to the Arnold Class Adversary on August 28, LPI denied that class treatment was appropriate and also denied that the relief sought in both the Garner Class Adversary and the Arnold Class Adversary was appropriate. JOINT MOTION TO COMPROMISE CLASS ACTION CONTROVERSIES, TO APPROVE PLAN SUPPORT AGREEMENT, AND FOR RELATED RELIEF PAGE 7

8 Case rfn11 Doc 1782 Filed 04/01/16 Entered 04/01/16 16:06:02 Page 8 of An unopposed Motion for Leave to File Consolidated Amended Complaint for the Garner Class Adversary and the Arnold Class Adversary was filed on March 11, 2016, and was granted on March 25, On March 29, 2016, the Consolidated Class Action Amended Complaint was filed. 8 The resulting proceeding is the Consolidated Class Adversary On March 18, 2016, a Joint Motion to Withdraw the Reference for the Consolidated Class Adversary was filed. 10 That motion is set for hearing on April 4, The Lead Plaintiffs, on behalf of themselves and the Class Action Plaintiffs, have filed Claim Nos , 22128, 22662, 22670, 23205, and (the Class Proofs of Claim ), and the Lead Plaintiffs individually have filed Claim Nos , , , 19132, , 22663, 23666, 23667, 23213, 23215, 23216, 23600, and in the Bankruptcy Cases. Counsel for the Lead Plaintiffs ( Plaintiffs Counsel ) has filed Claim Nos and ( Class Counsel Proofs of Claim ). II. The Settlement Negotiations, Term Sheet, and Settlement Agreement 19. The Estate Representatives realized that resolution of the Consolidated Class Adversary and the Ownership Issue was critical and necessary to the formulation and confirmation of the Plan. If the Trustee prevailed in the Consolidated Class Adversary, then there was substantial risk that the creditors (largely Settlement Class Members) would not support any plan that was premised on such an outcome. Conversely, if the Lead Plaintiffs 7 Order, Garner v. Life Partners, Inc., No [Dkt. No. 33, entered Mar. 25, 2016]. 8 Plaintiffs Consolidated Class Action Complaint, Garner v. Life Partners, Inc., No [Dkt. No. 35, filed Mar. 29, 2016]. 9 For ease of reference, Consolidated Class Adversary will also be used to refer to the Garner Class Adversary and the Arnold Class Adversary collectively, prior to the consolidation. 10 Joint Motion to Withdraw the Reference, Garner v. Life Partners, Inc., No [Dkt. No. 27, filed Mar. 18, 2016]. 11 Notice of Status Conference on Joint Motion to Withdraw the Reference, Garner v. Life Partners, Inc., No [Dkt. No. 36, filed Mar. 29, 2016]. JOINT MOTION TO COMPROMISE CLASS ACTION CONTROVERSIES, TO APPROVE PLAN SUPPORT AGREEMENT, AND FOR RELATED RELIEF PAGE 8

9 Case rfn11 Doc 1782 Filed 04/01/16 Entered 04/01/16 16:06:02 Page 9 of 44 prevailed in the Consolidated Class Adversary, then it would put the Trustee s ability to confirm a feasible plan at risk, since at least a material portion of the assets necessary for the implementation of the Plan the beneficial interests in certain of the underlying life insurance policies would not be property of the Debtors bankruptcy estates. Accordingly, the Estate Representatives made resolution of the Consolidated Class Adversary and the Ownership Issue a high priority, and devoted substantial resources and effort toward achieving a reasonable, fair, and equitable settlement. The Parties, following preliminary correspondence and discussions over telephone, , and in person, engaged in and conducted intensive in-person settlement meetings among counsel, as well as additional correspondence and discussions over telephone and from August 2015 through March Due to these settlement negotiations, and as part of a joint effort to conserve the resources of the bankruptcy estates and maximize the benefits to the Settlement Class Members and other creditors of the estates, counsel agreed to stay all deadlines in the Consolidated Class Adversary. 20. As a result of complex and protracted discussions, the following proposed settlements were agreed to: (a) Term Sheet for Compromise to a Plan of Reorganization of LPHI, LPI, and LPIFS (Sept. 24, 2015) [Exhibit A to Dkt. No , filed Sept. 25, 2015] (the Term Sheet ); (b) Debtors Expedited Motion for Interim and Final Orders (I) (A) Authorizing Debtors to Obtain Post-Petition Financing, (B) Granting Security Interests and/or Superpriority Administrative Expense Status; and (II) Granting Related Relief [Dkt. No. 958, filed Sept. 16, 2015] (the Financing Motion ); (c) the Plan; and (d) the Settlement Agreement. 21. Based upon investigation, the circumstances surrounding the Bankruptcy Cases and the Consolidated Class Adversary, and the negotiation of the Term Sheet and the Plan, the Parties have agreed to settle the Consolidated Class Adversary pursuant to the provisions of the JOINT MOTION TO COMPROMISE CLASS ACTION CONTROVERSIES, TO APPROVE PLAN SUPPORT AGREEMENT, AND FOR RELATED RELIEF PAGE 9

10 Case rfn11 Doc 1782 Filed 04/01/16 Entered 04/01/16 16:06:02 Page 10 of 44 Settlement Agreement after considering such factors as: (a) the substantial benefits to the Settlement Class Members under the terms of the Settlement Agreement; (b) the attendant costs, risks, and uncertainty of litigation, including trial and potential appeals; (c) the benefit to all creditors, including the Settlement Class Members, arising from the implementation of the transactions contemplated by the Settlement Agreement and the Plan; (d) the distraction and diversion of personnel and resources as a result of continuing litigation; (e) the desirability of consummating the Settlement Agreement and the Plan promptly; and (f) the current financial condition of the Debtors. In addition, the Estate Representatives, after extensive due diligence and analysis of the issues that are the subject of the Settlement Agreement, believe that the Settlement Agreement, and the corresponding terms of the Plan, are an exercise of the Trustee s and the Subsidiary Debtors sound business judgment and in the best interest of the Debtors estates, their creditors, including the Settlement Class Members, and all other parties in interest, including, without limitation, the class of creditor interests comprising the Committee s constituency. 22. The Settlement Agreement is the product of sustained, arm s-length settlement negotiations and the Parties believe that the Settlement Agreement is fair, reasonable, and adequate. 23. The essential terms of the Settlement Agreement are as follows: 12 a. Certification of the Class in the Consolidated Class Adversary and for Purposes of Filing and Voting a Class Proof of Claim: The Parties have agreed to the certification of a mandatory settlement class consisting of two subclasses pursuant to Federal 12 This summary of the Settlement Agreement is for descriptive purposes only and is not, and is not intended to be, a complete recitation of the material terms of the Settlement Agreement. This summary of the Settlement Agreement is qualified in its entirety by the terms and provisions of the Settlement Agreement. To the extent that there are any inconsistencies between the description of the Settlement Agreement contained herein and the terms and the provisions of the Settlement Agreement, the Settlement Agreement shall control. JOINT MOTION TO COMPROMISE CLASS ACTION CONTROVERSIES, TO APPROVE PLAN SUPPORT AGREEMENT, AND FOR RELATED RELIEF PAGE 10

11 Case rfn11 Doc 1782 Filed 04/01/16 Entered 04/01/16 16:06:02 Page 11 of 44 Rule of Civil Procedure 23(b)(2) and Federal Rule of Bankruptcy Procedure 7023, as applicable (collectively, the Settlement Class ): the Ownership Settlement Subclass and the Rescission Settlement Subclass. The Ownership Settlement Subclass is defined in the Settlement Agreement as: All persons or entities (including all IRAs and their respective individual owners and related IRA custodians) who purchased and hold, as of the Plan Effective Date, securities issued or sold by LPI (directly or in the name of any Original IRA Note Issuer) related to viatical settlements or life settlements, regardless of how the investments were denominated (whether as fractional interests in life insurance policies, promissory notes, or otherwise) and who are Current Position Holders under the Plan, regardless of whether or not a claim was filed by a class member. Excluded from the Ownership Settlement Subclass are LPI; all affiliated Life Partners companies or entities; Linda Robinson-Pardo; Paget Holdings Ltd.; and investors whose only investments relate to Pre-Petition Abandoned Interests under the Plan. The Rescission Settlement Subclass is defined in the Settlement Agreement as: All persons or entities (including all IRAs and their respective individual owners and related IRA custodians) who purchased and hold, as of the Plan Effective Date, securities issued or sold by LPI (directly or in the name of any Original IRA Note Issuer) related to viatical settlements or life settlements, regardless of how the investments were denominated (whether as fractional interests in life insurance policies, promissory notes, or otherwise) and who are Current Position Holders under the Plan, regardless of whether or not a claim was filed by a class member. Excluded from the Rescission Settlement Subclass are LPI; all affiliated Life Partners companies or entities; Linda Robinson-Pardo; Paget Holdings Ltd.; investors whose only investments relate to Pre-Petition Abandoned Interests under the Plan; Qualified Plan Holders; and all persons and entities listed on Appendix A [of the Settlement Agreement]. Because the Settlement Class is being certified as a mandatory class under Federal Rule of Civil Procedure 23(b)(2) and Federal Rule of Bankruptcy Procedure Rule 7023, as applicable, and the predominant relief is equitable in nature i.e., declaratory judgment and rescission members of the Settlement Class are not permitted to opt out of or exclude themselves from the Settlement Class. The certification of the Settlement Class is proposed to occur in two separate JOINT MOTION TO COMPROMISE CLASS ACTION CONTROVERSIES, TO APPROVE PLAN SUPPORT AGREEMENT, AND FOR RELATED RELIEF PAGE 11

12 Case rfn11 Doc 1782 Filed 04/01/16 Entered 04/01/16 16:06:02 Page 12 of 44 proceedings. The Settlement Class will be certified in: (1) the Consolidated Class Adversary, in the appropriate court following determination of the pending Joint Motion to Withdraw the Reference; and (2) by this Motion in the Bankruptcy Court for purposes of filing and voting a class proof of claim. The Settlement Agreement provides for the certification of the Settlement Class in the Bankruptcy Cases for purposes of the claims allowance process and for voting on the Plan. Under the Settlement Agreement, Claim No shall be allowed on behalf of the Settlement Class pursuant to the Plan as a class proof of claim (the Class Claim ) to which Federal Rule of Bankruptcy Procedure 7023 applies pursuant to Federal Rule of Bankruptcy Procedure 9014, 13 and allocation of that claim for each individual holder is in the amount set forth in LPI s Bankruptcy Schedule F. The Class Claim shall be classified as an allowed claim in each of Classes B2, B2A, B3, and B3A in the Plan. The Lead Plaintiffs, in their capacity as appointed class representatives, shall be authorized to cast one or more ballots (as applicable) to accept or reject the Plan on behalf of those Settlement Class Members who do not cast a vote to accept or reject the Plan in Classes B2, B2A, B3, or B3A. 14 For purposes of determining whether Classes B2, B2A, B3, and B3A have accepted the Plan pursuant to 11 U.S.C. 1126(c), the ballot on account of the Class Claim described in this paragraph shall be tabulated as a vote of 11,322 class members in Class B2, 64 class members in Class B2A, 10,039 class members in Class B3, and 187 class members in Class B3A, reduced by the number of Settlement Class Members who 13 Further, the certification of the Settlement Class in the Consolidated Class Adversary pursuant to either Federal Rule of Bankruptcy Procedure 7023 or Federal Rule of Civil Procedure 23 provides an independent basis for approval of the Class Claim. 14 See Joint Motion to Approve (I) Disclosure Statement for Second Amended Joint Plan of Reorganization of Life Partners Holdings, Inc. et al. Pursuant to Chapter 11 of the Bankruptcy Code; (II) Form of Ballots and Solicitation, Voting, Balloting, and Election Procedures; (III) Procedures Relating to the Confirmation of the Plan; and (IV) Other Relief Relating to Plan Solicitation and Plan Confirmation Process [Dkt. No. 1690, filed March 25, 2016] (the Solicitation Motion ) at 12-20, JOINT MOTION TO COMPROMISE CLASS ACTION CONTROVERSIES, TO APPROVE PLAN SUPPORT AGREEMENT, AND FOR RELATED RELIEF PAGE 12

13 Case rfn11 Doc 1782 Filed 04/01/16 Entered 04/01/16 16:06:02 Page 13 of 44 timely and properly submit a ballot to accept or reject the Plan in each such class, and will be tabulated as a vote in the amount of $754,713, in Class B2, $5,912, in Class B2A, $697,029, in Class B3, and $24,529, in Class B3A, reduced by the amount attributed to each such Settlement Class Member who timely and properly submits a ballot to accept or reject the Plan in each such class, as set forth in LPI s Bankruptcy Schedule F. The Class Claim will be treated as set forth in the Plan. As described below, these purely core bankruptcy matters, occurring in this bankruptcy case in connection with the Plan, are central to the Estate Representatives strategy to obtain prompt confirmation of the Plan. b. Appointment of Class Counsel: Keith Langston of the Langston Law Firm shall be appointed class counsel for the Settlement Class (the Class Counsel ), for settlement purposes only. c. Appointment of Class Representatives: The Lead Plaintiffs shall be appointed class representatives for the Settlement Class (the Class Representatives ), for the purposes set forth in the Settlement Agreement. d. Equitable Relief: The Settlement Agreement provides the Class Action Plaintiffs the following equitable relief: (i) LPI (and any successor entity) will not sell or otherwise introduce into the market any securities unless those securities are (a) issued pursuant to the Plan or (b) properly registered as securities with all appropriate federal and state regulatory bodies; (ii) Debtors waive any claims to beneficial ownership in the Fractional Interests held in the name of the Settlement Class Members that are entitled to treatment as Continuing Fractional Holders, by election or otherwise, as set forth in the Plan and subject to the terms and conditions set forth in the Plan; (iii) subject to the terms and conditions set forth in the Plan, Debtors will provide each Settlement Class Member, for each Fractional Position, except for those Fractional Positions JOINT MOTION TO COMPROMISE CLASS ACTION CONTROVERSIES, TO APPROVE PLAN SUPPORT AGREEMENT, AND FOR RELATED RELIEF PAGE 13

14 Case rfn11 Doc 1782 Filed 04/01/16 Entered 04/01/16 16:06:02 Page 14 of 44 where a Pre-Petition Default Amount is owed and not paid by the close of business on the deadline set forth in the Plan, with the elections described in Section 3.07(b)-(e) of the Plan for each Fractional Interest Holder and IRA Holder, respectively, which are summarized as follows: (a) be treated as a Continuing Position Holder with respect to their Fractional Position and be confirmed as the owner of a Fractional Interest or a New IRA Note, after making the related Continuing Position Holder Contribution (the Continuing Position Holder Election ); (b) contribute their Fractional Position to the Position Holder Trust and receive an interest in the Position Holder Trust or the IRA Partnership (the Position Holder Trust Election ); or (c) (for Rescission Settlement Subclass Members only) rescind their purchase of the Fractional Interest and receive an interest in the Creditors Trust (the Creditors Trust Election ). In addition to the three election options listed above, IRA Holders will have a fourth option (the Conversion Election ), which allows the individual taxpayer who owns an IRA Holder to take an IRA Note out of his or her IRA Holder and exchange it for the related Fractional Interest, to be registered as owned individually, outside of the IRA Holder in which case the individual owner will be deemed to have made a Continuing Holder Election to become a Continuing Position Holder under the Plan. In addition, Rescission Settlement Subclass Members who assign their Additional Assigned Claims to the Creditors Trust pursuant to the Settlement Agreement shall receive an additional Allowed Claim in Class B4 in an amount equal to 0.5% (one-half of one percent) of their Allowed Claims amount on LPI s Bankruptcy Schedule F, for which the Rescission Settlement Subclass Member will receive a corresponding interest in the Creditors Trust (the Additional Allowed Claim ). The Settlement Class Members who are IRA Holders further stipulate that (i) there was never any transfer of ownership of any Fractional Interest or other interest in any Policy made to any IRA Note Issuer Trust by them or on their behalf, nor any effective conveyance of any property to JOINT MOTION TO COMPROMISE CLASS ACTION CONTROVERSIES, TO APPROVE PLAN SUPPORT AGREEMENT, AND FOR RELATED RELIEF PAGE 14

15 Case rfn11 Doc 1782 Filed 04/01/16 Entered 04/01/16 16:06:02 Page 15 of 44 any IRA Note Issuer Trusts, (ii) any authority Brian Pardo had to act on their behalf or for their benefit, as Trustee of an IRA Note Issuer Trust or otherwise, is revoked effective as of the Effective Date, (iii) the Settlement Class Members who are IRA Holders are not looking to Pardo to take, and he is not authorized to take, any actions on their behalf, as such a Trustee or in any capacity, and (iv) all claims and causes of action they have or that may be asserted on their behalf against Brian Pardo in any capacity are included in the Assigned Claims. e. Class Counsel s Fees: The Parties agree that Class Counsel will not seek all fees to which Class Counsel may be entitled, and instead shall submit a Fee Application to request payment of fees not to exceed a cap of $33,000,000 (the Agreed Fee ), to be paid from certain policy positions owned by the reorganized debtor as set forth more fully in the Settlement Agreement and the Plan. The Estate Representatives support full allowance and payment of the Agreed Fee. The Fee Application is subject to Court approval or modification, and the Settlement Agreement is not conditioned on Court approval of the Fee Application. f. Release by Settlement Class and Class Counsel: Upon the Effective Date, the Lead Plaintiffs (individually and as Class Representatives of all Settlement Class Members), all Settlement Class Members, Plaintiffs Counsel, and Class Counsel (the Settling Parties ) shall release, as set forth more fully in the Settlement Agreement, the claims against the Debtors asserted in Count II of the Consolidated Class Adversary, or that could have been asserted as part of Count II of the Consolidated Class Adversary (the Released Claims ). Further, the Settling Parties shall be deemed to have conclusively compromised and exchanged for the treatment under the Plan, as set forth more fully in the Settlement Agreement, all claims against the Debtors estates, including but not limited to any proof of claim or interest filed by any Settlement Class Member, the claims asserted in the Plaintiffs Counsel Proofs of Claim, the JOINT MOTION TO COMPROMISE CLASS ACTION CONTROVERSIES, TO APPROVE PLAN SUPPORT AGREEMENT, AND FOR RELATED RELIEF PAGE 15

16 Case rfn11 Doc 1782 Filed 04/01/16 Entered 04/01/16 16:06:02 Page 16 of 44 Lead Plaintiff Proofs of Claim, the Class Proofs of Claim, and any claim for rejection damages resulting from the rejection of an Investment Contract, except for the Class Claim that will be allowed and treated as set forth in the Settlement Agreement and the Plan, provided that nothing herein shall be deemed to release the Assigned Claims or Additional Assigned Claims. g. Assignment of Rescission Settlement Subclass Member Claims: Upon the Effective Date, the Lead Plaintiffs (individually and as Class Representatives of all Rescission Settlement Subclass Members), Rescission Settlement Subclass Members (excluding the MDL Plaintiffs, who will assign the same character of claims to the Creditors Trust via separate settlement agreement), and Plaintiffs Counsel (the Assigning Parties ), shall assign, as set forth more fully in the Settlement Agreement, all of their rights in any and all claims against the Debtors, Brian Pardo; Deborah Carr; Kurt Carr; R. Scott Peden; Linda Robinson a/k/a Linda Robinson-Pardo; Pardo Family Holdings, Ltd.; Pardo Family Holdings US, LLC; Pardo Family Trust; Paget Holdings, Inc.; Paget Holdings, Ltd.; Tad M. Ballantyne; Fred DeWald; and Harold E. Rafuse (the Assigned Claims ), to the Creditors Trust. The Assigned Claims include, but are not limited to, the claims asserted in the Arnold Class Adversary, the Arnold State Court Action, and the other pending litigation listed in Appendix B to the Settlement Agreement. Further, Rescission Settlement Subclass Members shall assign, subject to an opportunity on the ballot to elect not to assign, as set forth more fully in the Settlement Agreement, all of their rights in any and all claims against any other persons arising out of or relating to the investments with LPI, interest in the Debtors, or business of the Debtors, to the Creditors Trust (the Additional Assigned Claims ), with the exception of claims against any legal or tax professional retained on or after January 20, 2015, in exchange for an additional interest in the Creditors Trust. JOINT MOTION TO COMPROMISE CLASS ACTION CONTROVERSIES, TO APPROVE PLAN SUPPORT AGREEMENT, AND FOR RELATED RELIEF PAGE 16

17 Case rfn11 Doc 1782 Filed 04/01/16 Entered 04/01/16 16:06:02 Page 17 of 44 h. Plan Support Agreement: The Class Representatives, on behalf of the Settlement Class Members, will support confirmation of the Plan, provided, however, that no amendment to the Plan may materially change the terms of the Plan to be inconsistent with the Settlement Agreement without the written consent of Plaintiffs Counsel and that the Class Representatives may support an alternate plan in a good faith exercise of their fiduciary duty and taking into consideration factors including, but not limited to, the opinions of the Plan Proponents and the Plan Supporters, potential delay, financial outcome, and other legal and regulatory factors that may be relevant. BASIS FOR RELIEF REQUESTED I. The Settlement Agreement Should Be Approved Pursuant to Bankruptcy Rule Bankruptcy Rule 9019(a) states that [o]n motion by the trustee and after notice and a hearing, the court may approve a compromise or settlement.... Fed. R. Bankr. P. 9019(a). Compromises are favored in bankruptcy because they minimize litigation costs and further the parties interest in expediting the administration of a bankruptcy case. In re Idearc Inc., 423 B.R. 138, 182 (Bankr. N.D. Tex. 2009) (quoting In re Martin, 91 F.3d 389, 393 (3d Cir. 1996)), aff'd, 662 F.3d 315 (5th Cir. 2011). In determining whether to approve a proposed settlement, a bankruptcy court need not decide the numerous issues of fact and law raised by the settlement, but rather should canvass the issues and see whether the settlement fall[s] below the lowest point in the range of reasonableness. In re W.T. Grant Co., 699 F.2d 599, 608 (2d Cir. 1983) (quoting Newman v. Stein, 464 F.2d 689, 693 (2d Cir. 1972)); see also In re Idearc Inc., 423 B.R. at To be approved, a settlement must be fair and equitable and in the best interest of the estate. In re Jackson Brewing Co., 624 F.2d 599, 602 (5th Cir. 1980); see also In re Age JOINT MOTION TO COMPROMISE CLASS ACTION CONTROVERSIES, TO APPROVE PLAN SUPPORT AGREEMENT, AND FOR RELATED RELIEF PAGE 17

18 Case rfn11 Doc 1782 Filed 04/01/16 Entered 04/01/16 16:06:02 Page 18 of 44 Refining, Inc., 801 F.3d 530, 540 (5th Cir. 2015). Jackson Brewing sets out a three-part test to determine whether a settlement is fair and equitable. Jackson Brewing, 624 F.2d at 602. The bankruptcy court must evaluate: (1) the probability of success in litigating the claim subject to settlement, with due consideration for the uncertainty in fact and law; (2) the complexity and likely duration of litigation and any attendant expense, inconvenience, and delay; and (3) all other factors bearing on the wisdom of the compromise. Age Refining, 801 F.3d at 540 (describing the Jackson Brewing test). 26. The other factors in the Jackson Brewing test include (i) the best interests of the creditors, with proper deference to their reasonable views ; and (ii) the extent to which settlement is truly the product of arm s-length bargaining, and not of fraud or collusion. In re Cajun Elec. Power Coop., 119 F.3d 349, 356 (5th Cir. 1997) (quoting In re Foster Mortg. Corp., 68 F.3d 914, (5th Cir. 1995)). In addition, Bankruptcy Code section 105(a) provides that [t]he court may issue any order, process or judgment that is necessary or appropriate to carry out the provisions of this title. 11 U.S.C. 105(a). 27. The Estate Representatives and Lead Plaintiffs believe that each of the applicable Jackson Brewing factors support granting this Motion to approve the compromise described in the Settlement Agreement, for the reasons described below. a. Probability of Success in the Litigation 28. Although all of the Parties believe their litigation positions are strong, each recognizes that litigation is inherently risky and disfavored in bankruptcy. In re Idearc Inc., 423 B.R. at 182 (citation omitted). The issues in the Consolidated Class Adversary are complex, particularly with respect to the Ownership Issue. The litigation likely would be lengthy JOINT MOTION TO COMPROMISE CLASS ACTION CONTROVERSIES, TO APPROVE PLAN SUPPORT AGREEMENT, AND FOR RELATED RELIEF PAGE 18

19 Case rfn11 Doc 1782 Filed 04/01/16 Entered 04/01/16 16:06:02 Page 19 of 44 because the stakes of the Consolidated Class Adversary (and the Ownership Issue) are so high, it is expected the losing party would appeal this Court s ruling, resulting in potentially years of appellate litigation even after litigation in this Court concludes. Moreover, failure to resolve the Consolidated Class Adversary likely means there might well be significant additional litigation regarding the confirmability of the Plan. The Parties acknowledge that significant expense and a certain degree of uncertainty always exists with respect to litigation. The Parties believe that the Settlement Agreement fairly recognizes such risks and provides for the resolution of disputes without the need for continued litigation. 29. In entering into the Settlement Agreement, the Parties have evaluated the merits and weighed the costs of litigating any claims with respect to the Consolidated Class Adversary, as well as the merits and costs of the possibility of litigating objections to the Plan, and have determined that the benefits of the Settlement Agreement outweigh both. The Settlement Agreement will permit the Parties to avoid the costly, time consuming, inconvenient, and risky process of litigating the merits of those claims separately or in connection with the confirmation of the Plan and/or pursuant to any Claim Objections filed by the Debtors. 30. With respect to the Ownership Issue, the Parties believe further litigation is a lose/lose proposition, while the compromise and settlement of the Ownership Issue pursuant to the Settlement Agreement is a win/win outcome. At bottom, the proposed compromise provides each individual Settlement Class Member the opportunity to make one of the Elections detailed in the Plan while simultaneously properly capitalizing the Successor Entities such that there will be a servicer for all of the Policies underlying the life settlement securities invested in by the Settlement Class. This Settlement Agreement strengthens the feasibility of the Plan and makes confirmation of the Plan much less litigious than it would be if the settlement were not JOINT MOTION TO COMPROMISE CLASS ACTION CONTROVERSIES, TO APPROVE PLAN SUPPORT AGREEMENT, AND FOR RELATED RELIEF PAGE 19

20 Case rfn11 Doc 1782 Filed 04/01/16 Entered 04/01/16 16:06:02 Page 20 of 44 authorized. The Parties believe they all achieve a better outcome through the settlement than they likely would achieve if the settlement was not approved, which could result in the liquidation or conversion to chapter 7 of LPHI and the Subsidiary Debtors. 31. Moreover, the range of potential outcomes in litigating the Ownership Issue is wide and disparate. At one extreme, if the Trustee prevails on the Ownership Issue, then arguably the instruments sold to the Class Members at most give rise to unsecured claims against the Debtors estates. At the other extreme, if the Lead Plaintiffs prevail on the Ownership Issue, then the estate has significantly reduced assets to contribute to implementing any plan of reorganization. Thousands of Investors, while being declared owners, would be left scrambling to figure out how to preserve what they own from lapse due to non-payment of premiums or other administrative issues. That tens of thousands of Investors are involved in these investments and that these investments have, in some cases, existed over many years, makes determining who owns what in which policy particularly difficult. Thus, whoever wins the battle of the Ownership Issue nevertheless may lose the war in that the value in the positions held by the Settlement Class Members would be at grave risk of being lost due to an inability to administer the policies underlying the Settlement Class Members respective investments. b. The Complexity and Likely Duration of Litigation and any Attendant Expense, Inconvenience, and Delay Support Allowance of this Motion 32. The issues resolved by the Settlement Agreement are complex, particularly with respect to the Ownership Issue. The litigation likely would be lengthy since the stakes of the Consolidated Class Adversary are so high, it is expected the losing party in this Court would appeal this Court s ruling, resulting in years of appellate litigation even after litigation in this Court concludes. Moreover, failure to resolve the Consolidated Class Adversary likely means JOINT MOTION TO COMPROMISE CLASS ACTION CONTROVERSIES, TO APPROVE PLAN SUPPORT AGREEMENT, AND FOR RELATED RELIEF PAGE 20

21 Case rfn11 Doc 1782 Filed 04/01/16 Entered 04/01/16 16:06:02 Page 21 of 44 there will be significant additional litigation regarding the confirmability of the Plan. In entering into the Settlement Agreement, the Parties have evaluated the merits and weighed the costs of litigating any claims with respect to the Consolidated Class Adversary, as well as the merits and costs of the possibility of litigating objections to the Plan, and have determined that the benefits of the Settlement Agreement outweigh both. The Settlement Agreement will permit the Parties to avoid the costly, time consuming, and risky process of litigating the merits of those claims separately or in connection with the confirmation of the Plan and/or pursuant to any Claim Objections filed by the Debtors. c. The Best Interests of the Creditors, with Proper Deference to their Reasonable Views, Supports Allowance of this Motion 33. This factor perhaps is the strongest factor supporting approval of the compromise embodied in the Settlement Agreement. As noted above, the Plan provides the most overall value to injured Settlement Class Members, taking into consideration the risks of Chapter 7 conversion, the lose/lose prospects of litigating of the Ownership Issue, the essential need to address the issue of premium defaults, and the economic benefits to the investors of selffinancing. Without the compromises set forth in the Settlement Agreement, the Debtors lack sufficient cash flow to continue prolonged litigation or, even in the absence of litigation, preserve the various insurance policy positions that are the primary source of recovery for investors under the Plan. Since the Plan rests upon the approval and implementation of the settlement, unquestionably the best interests of creditors are served by approval of the Settlement Agreement. 34. Moreover, the support of the Lead Plaintiffs, Class Counsel, and Committee is compelling evidence that the vast majority of stakeholders recognize these benefits and support the settlement. The Settlement Class, comprised of substantially all of the injured investors, is JOINT MOTION TO COMPROMISE CLASS ACTION CONTROVERSIES, TO APPROVE PLAN SUPPORT AGREEMENT, AND FOR RELATED RELIEF PAGE 21

22 Case rfn11 Doc 1782 Filed 04/01/16 Entered 04/01/16 16:06:02 Page 22 of 44 estimated to include approximately 22,000 members. While a vocal minority of interested third parties is expected to oppose this settlement, the support of the Lead Plaintiffs, Class Counsel, and Committee speaks volumes about the more widespread support for the settlement of the silent majority of injured investors and creditors. 35. It is well settled that the Lead Plaintiffs and Class Counsel are charged with representing the interests of the Settlement Class Members. Smith v. Swormstedt, 57 U.S. (16 How.) 288, 302 (1852) (where litigation is conducted by representation, care must be taken that persons are brought on the record fairly representing the interest or right involved, so that it may be fully and honestly tried ); see FED. R. CIV. P. 23(a)(3) and (4). Similarly, the Committee has a fiduciary duty to the constituency of creditors for whom it was appointed generally, as a class (see In re SPM Mfg. Co., 984 F.2d 1305, 1315 (1st Cir. 1993)), and is charged with pursuing whatever lawful course best serves the interests of the class of creditors represented. Id. (citations omitted); Kaye v. Hughes & Luce, LLP, 2007 WL at *11 (N.D. Tex. July 13, 2007) (unreported). 36. In the exercise of their fiduciary duties to the Settlement Class Members and unsecured creditors generally, the Lead Plaintiffs, Class Counsel, and the Committee believe (as recited at 19 of the Settlement Agreement) that the settlement terms, and the corresponding terms of the Plan, are an exercise of the Trustee s and the Subsidiary Debtors sound business judgment and in the best interest of the Debtors estates, their creditors, including the Settlement Class Members, and all other parties in interest, including, without limitation, the class of creditor interests represented by the Committee. Equally importantly, in the Trustee s judgment, the proposed Settlement Agreement is an exercise of the Trustee s and the Subsidiary Debtors sound business judgment and is in the best interest of the Debtors estates, their JOINT MOTION TO COMPROMISE CLASS ACTION CONTROVERSIES, TO APPROVE PLAN SUPPORT AGREEMENT, AND FOR RELATED RELIEF PAGE 22

23 Case rfn11 Doc 1782 Filed 04/01/16 Entered 04/01/16 16:06:02 Page 23 of 44 creditors, including the Settlement Class Members, and all other parties in interest, including the class of creditors represented by the Committee. 37. In entering into the Settlement Agreement, the Parties have evaluated the merits and weighed the costs of litigating any claims with respect to the Consolidated Class Adversary, as well as the merits and costs of the possibility of litigating objections to the Plan, and have determined that the benefits of the Settlement Agreement outweigh both. The Settlement Agreement will permit the Parties to avoid the costly, time consuming, inconvenient, and risky process of litigating the merits of those claims separately or in connection with the confirmation of the Plan and/or pursuant to any Claim Objections filed by the Debtors. 38. In contrast, for the reasons stated, the best interests of Settlement Class Members and other creditors generally are served if the Court grants this Motion and approves the Settlement Agreement. d. The Proposed Settlement is Truly the Product of Arm s-length Bargaining, and Not of Fraud or Collusion 39. It would be an understatement to suggest the Settlement Agreement was the product of anything other than hard fought and contentious negotiations. Through months of extensive good-faith and arm s-length bargaining, including two days of mediation with retired bankruptcy Judge Richard Schmidt, the Parties have reached a resolution they believe minimizes the potential damage and risk to all parties and maximizes value for the Settlement Class Members and the Debtors estates and their creditors. The Estate Representatives believe resolution of the Consolidated Class Adversary and the Ownership Issue substantially increases both the prospects for consensual confirmation of the Plan as well as the results all creditors, including class members, will obtain in these cases. This result falls well within the range of reasonableness, In re Idearc Inc., 423 B.R. at 182, and there is absolutely no evidence to JOINT MOTION TO COMPROMISE CLASS ACTION CONTROVERSIES, TO APPROVE PLAN SUPPORT AGREEMENT, AND FOR RELATED RELIEF PAGE 23

24 Case rfn11 Doc 1782 Filed 04/01/16 Entered 04/01/16 16:06:02 Page 24 of 44 suggest, let alone prove, that the settlement was anything other than truly the product of arm slength bargaining and not of fraud or collusion. e. The Attorneys Fees requested by Plaintiffs are fair and reasonable The Estate Representatives, acting as fiduciaries, negotiated strongly with respect to the payment of attorneys fees to Plaintiffs Counsel only after the parties reached agreement on the essential terms of the settlement. The result was a concession by Plaintiffs Counsel to limit his fee request only to the Agreed Fee, and not to seek fees in an amount greater than the Agreed Fee. The Parties and their counsel negotiated the terms regarding fees only after reaching agreement regarding all material terms of the Settlement Agreement, the Term Sheet, and the Plan in other words, there was no horse-trading at the expense of class members in connection with Plaintiffs Counsel s concession to limit his fee request to the Agreed Fee. 41. The Estate Representatives believe Plaintiffs Counsel should be awarded fees in the amount of the Agreed Fee. 16 The Agreed Fee is justified on numerous grounds, under applicable law. 42. For example, Plaintiffs, the Trustee, and the Subsidiary Debtors maintain that the Agreed Fee, as a percentage of the actual monetary value class members will receive, is substantially lower than fees awarded generally in class action litigation. This is not a case where class counsel will be paid substantial fees while class members get virtually nothing. 15 Class Counsel will separately file a motion in the appropriate court for approval of the attorneys fees determined in the Settlement Agreement, and the Parties therefore do not request that those fees be approved now. The Parties include this section because the attorneys fees provision is part of the Settlement Agreement and to disclose the facts and case law supporting the reasonableness of that agreement for the Court s consideration of this Motion. 16 As explained in detail infra, although nominally in the amount of $33,000,000, the Agreed Fee is actually substantially less, since the Agreed Fee (i) will be paid over many years, and (ii) will be in-kind with the recoveries by Settlement Class Members because it will be paid with Abandoned Positions. The Trustee and Subsidiary Debtors estimate the discounted present value of the Agreed Fee is estimated to be $5,219,043 million, depending upon certain assumptions and variables about the amount and timing of recoveries on account of Abandoned Positions, as well as the discount rate, used in calculating the present value. In either instance, the actual Agreed Fee on a discounted present value is substantially less than $33,000,000. JOINT MOTION TO COMPROMISE CLASS ACTION CONTROVERSIES, TO APPROVE PLAN SUPPORT AGREEMENT, AND FOR RELATED RELIEF PAGE 24

25 Case rfn11 Doc 1782 Filed 04/01/16 Entered 04/01/16 16:06:02 Page 25 of 44 Indeed, the value created under the Plan and channeled to class members is the direct and traceable result of work performed by Plaintiffs Counsel. Further, Plaintiffs Counsel s Fee Application is subject to court review and approval. This is not a class action in which the attorneys fees dwarf or are disproportionately large compared to the amounts to be received by class members. To further provide value to class members, Plaintiffs Counsel also has agreed to provide, free of charge, to the Trustee or his successor, certain assistance with the development, analysis, and prosecution of the Assigned Claims, the benefits of which will ultimately inure to creditors of the Debtors estates, including Settlement Class Members. 43. Plaintiffs Counsel made a further significant concession, in that fees will not be paid in a lump sum cash payment, but instead through the award and transfer of certain policy positions owned by the reorganized debtor. In other words, Plaintiffs Counsel is waiving his right to immediate, lump sum cash payment and instead accepting payment in policy positions, which is the same currency the Trustee will use under the Plan to satisfy claims. Moreover, Settlement Class Members will not be required to pay Plaintiffs Counsel s fees from any portion of Fractional Positions owned by or contributed to the Position Holder Trust by Settlement Class Members. Therefore, Plaintiffs Counsel is accepting deferred payment in-kind, rather than in cash, and Plaintiffs Counsel will realize fees through recovery over time, with the risk attendant to the ownership of policy positions. Plaintiffs Counsel s acceptance of payment over time through this mechanism, rather than in a lump sum in cash on the Effective Date, significantly increases the Debtors liquidity and ability to perform the future obligations that benefit all creditors under the Plan and is a significant benefit to the bankruptcy estates, and therefore to the Settlement Class Members. JOINT MOTION TO COMPROMISE CLASS ACTION CONTROVERSIES, TO APPROVE PLAN SUPPORT AGREEMENT, AND FOR RELATED RELIEF PAGE 25

26 Case rfn11 Doc 1782 Filed 04/01/16 Entered 04/01/16 16:06:02 Page 26 of Plaintiffs Counsel intends to seek payment of fees on the common fund percentage theory, and the Trustee and the Subsidiary Debtors have agreed to support and advance that fee request. Union Asset Mgmt. Holding A.G. v. Dell, Inc., 669 F.3d 632, 643, 644 (5th Cir. 2012) (noting that percentage method of common fund has near universal adoption as a method of paying attorneys fees in securities cases and that the Fifth Circuit has never reversed a district court judge s decision to use the percentage method ). Under this theory, a litigant or a lawyer who recovers a common fund for the benefit of persons other than himself or his client is entitled to a reasonable attorney s fee from the fund as a whole. Boeing Co. v. Van Gemert, 444 U.S. 472, 478 (1980). The court simply awards the attorneys a percentage of the fund..... Staton v. Boeing Co., 327 F.3d 938, 968 (9th Cir. 2003) (citing Hanlon v. Chrysler Corp., 150 F.3d 1011, 1029 (9th Cir. 1998)). In order for attorneys to obtain an award of fees from a common fund, the court must be able to (i) sufficiently identify the class of beneficiaries, (ii) accurately trace the benefits, and (iii) shift the fee to those benefiting with some exactitude. Boeing Co. v. Van Gemert, 444 U.S. at [T]he criteria are satisfied when each member of a certified class has an undisputed and mathematically ascertainable claim to part of a lumpsum judgment recovered on his behalf.... Id. at 479. Under these requirements, monetary relief for the plaintiff class provided for in a court decree could be converted so as to qualify as a common fund from which class counsel could obtain an award of attorneys fees. Staton v. Boeing Co., 327 F.3d at Plaintiffs, the Trustee, and the Subsidiary Debtors believe the Court can execute the standards of Boeing Co. v. Van Gemert and other precedent: (i) the Settlement Class Members are defined and will be specifically identifiable; (ii) Plaintiffs Counsel obtained a significant result for the Settlement Class Members, including a right of rescission in the amount JOINT MOTION TO COMPROMISE CLASS ACTION CONTROVERSIES, TO APPROVE PLAN SUPPORT AGREEMENT, AND FOR RELATED RELIEF PAGE 26

27 Case rfn11 Doc 1782 Filed 04/01/16 Entered 04/01/16 16:06:02 Page 27 of 44 of $1,283,607,944; (iii) shift the fee to those benefiting with some exactitude; and (iv) Plaintiffs Counsel will be paid a percentage of the common fund out of policy positions that would have otherwise belonged to the reorganized debtor, thereby not reducing the recovery of the Settlement Class Members. Moreover, if approved, under the contemplated settlement Plaintiffs Counsel will be paid from the common fund in that he will be paid from certain policy positions, as more particularly described in the Settlement Agreement, which is the same currency the Debtors have elected to use under the Plan to pay class members. 46. The Trustee and the Subsidiary Debtors believe the value of the common fund, under any reasonable analysis, is large enough that the Agreed Fee are amply justified by existing case law. The common fund could be as much as the amount of claims entitled to rescission as a result of the opinion obtained through Plaintiffs Counsel s litigation in Texas Supreme Court, which are in the amount of $1,283,607,944. Staton v. Boeing Co., 327 F.3d at 972 (converting amount provided to common fund for purposes of evaluating reasonableness of class counsel fee). If adopted by the Court, the face amount of the Agreed Fee ($33 million, paid out over many years) is only 2.57% of the common fund calculated in this manner, a percentage well below any reasonable percentage adopted by any court. See Eisenberg & Miller, Attorney Fees in Class Action Settlements: An Empirical Study 1 J. Empirical Legal Stud. 27 (2004) (analyzing fees paid to class counsel as a percentage of class recovery); see, e.g., Hanlon v. Chrysler Corp., 150 F.3d at 1029 (establishing 25% of the common fund as a benchmark award for attorneys fees); In re US Bancorp Litig., 291 F.3d 1035, 1038 (8th Cir. 2002) (approving attorneys fees equal to 36% of the common fund); Jenkins v. Trustmark Nat l Bank, 300 F.R.D. 291, 307 (S.D. Miss. 2014) (approving 33.3% attorneys fees); Gaskill v. Gordon, 942 F. Supp. 382, (N.D. Ill. 1996) (in class action regarding Ponzi scheme, awarding class counsel JOINT MOTION TO COMPROMISE CLASS ACTION CONTROVERSIES, TO APPROVE PLAN SUPPORT AGREEMENT, AND FOR RELATED RELIEF PAGE 27

28 Case rfn11 Doc 1782 Filed 04/01/16 Entered 04/01/16 16:06:02 Page 28 of 44 fees equal to 38% of the total recovery for the class); In re Prudential Bache Energy Income P ship Securities Litig., No. MDL 888, 1994 WL , at *4 (E.D. La. April 13, 1994) (approving use of common fund method to award attorneys fees and citing cases awarding class counsel fees ranging from 20-33% of the fund). 47. The Plaintiffs, the Trustee, and the Subsidiary Debtors maintain that alternative methodologies also produce a common fund such that the Agreed Fee is well within the range of reasonableness under any analysis of the case law. Many cases, concerned that the amount of attorneys fees dwarfs the actual recovery to class members, calculate the common fund by reference to the value of benefits actually put in the hands of the class members. In re Heartland Payment Sys., Inc. Customer Data Sec. Breach Lit., 851 F. Supp. 2d 1040, 1074 (S.D. Tex. 2012), quoting In re TJX Cos. Retail Sec. Breach Lit., 584 F. Supp. 2d 395 (D. Mass. 2008) (emphasis in original omitted). Under this approach, the Court must determine the actual monetary value conferred to the class members by the settlement. In re Heartland Payment Sys., Inc. Customer Data Sec. Breach Lit., 851 F. Supp. 2d at Since this is not a case where there is a lack of direct benefits to class members, and is not a case where the Agreed Fee is disproportionately large compared to the actual value created for, and received by, the class (see id. at 1073), it is not clear the Court must undertake this analysis. Nevertheless, under the actual monetary value approach, the Plan proposed by the Estate Representatives results in substantial value and direct benefits going to the class members on account of the claims awarded to them with that value preserved for the benefit of class members by the Consolidated Class Adversary. Under an actual monetary value approach, the Plan results in substantial value and direct benefits presently estimated to be $1,098,858,000 to the Settlement Class Members on account of the claims awarded to them through the Arnold State Court Action and the settlement JOINT MOTION TO COMPROMISE CLASS ACTION CONTROVERSIES, TO APPROVE PLAN SUPPORT AGREEMENT, AND FOR RELATED RELIEF PAGE 28

29 Case rfn11 Doc 1782 Filed 04/01/16 Entered 04/01/16 16:06:02 Page 29 of 44 of the Consolidated Class Adversary. This value is comprised of at least the sum of the stream of payments that will be paid to Settlement Class Members through the Plan. If the common fund is calculated using the actual monetary value method, then the Agreed Fee is only 3% of the common fund. 48. Accordingly, Plaintiffs, the Trustee, and the Subsidiary Debtors maintain it is not necessary for the Court to calculate the common fund with mathematical precision. Whether the Agreed Fee is 2.57% of the common fund (see paragraph 38, supra), or 3.06% of the common fund (see paragraph 39, supra), in either instance the fees are substantially less on a percentage basis than is ordinarily awarded to class counsel. 17 The Estate Representatives have analyzed carefully all relevant factors and exercised their reasonable business judgment and concluded this is not a close call under any legally supportable analysis, the Agreed Fee is much smaller percentage of the common fund, however calculated. Under any analysis, the benefits to the class members traceable to the Plaintiffs Counsels efforts are extraordinary, and are synergistic with the efforts of the Trustee, Subsidiary Debtors, and Committee in this case. Plaintiffs Counsel created the undisputed and mathematically ascertainable claim, Boeing Co. v. Van Gemert, supra, 444 U.S. at 479, for each class member, and the efforts of the Estate Representatives to formulate and obtain confirmation of the Plan preserved and created the value, at risk of loss from prepetition management s wrongdoing if the Plan is not confirmed, which will be distributed and channeled to class members under the Plan on account of those claims. 49. The Parties are mindful that the Fifth Circuit supports using the so-called Johnson factors as a cross-check to ensure the fee award under the percentage common fund method is reasonable. See generally Humphrey v. United Way of Tex. Gulf Coast, 802 F. Supp. 2d 847, See cases cited at paragraph 46, supra. JOINT MOTION TO COMPROMISE CLASS ACTION CONTROVERSIES, TO APPROVE PLAN SUPPORT AGREEMENT, AND FOR RELATED RELIEF PAGE 29

30 Case rfn11 Doc 1782 Filed 04/01/16 Entered 04/01/16 16:06:02 Page 30 of 44 n.12 (S.D. Tex. 2011) (citations omitted). The Johnson factors are the factors for approval of fee awards the Fifth Circuit articulated in Johnson v. Georgia Highway Express, Inc., 488 F.2d 714, (1974), 18 and are the standards familiar to this Court in determining fee applications filed by estate professionals in bankruptcy cases. See generally Asarco, L.L.C. v. Jordan Hyden Womble Culbreth & Holzer, P.C. (In re Asarco, L.L.C.), 751 F.3d 291, 295 (5th Cir. 2014). The Estate Representatives have carefully reviewed all relevant documents, including the confidential time records of Plaintiffs Counsel, and believe the application of the Johnson factors supports allowance of the Agreed Fee as reasonable. Among other things, factors 1, 2, 3, 5, 6, 8, 9, 11 and 12 particularly support the Agreed Fee. Plaintiffs Counsel have been involved in these cases since 2011 and have not received any payment for their services in the Consolidated Class Adversary or the Arnold State Court Action on behalf of the Lead Plaintiffs or the Settlement Class. In addition to the risk of non-payment that Plaintiffs Counsel assumed in pursuing the Arnold State Court Action and the Consolidated Class Adversary, former management of LPI caused LPI to move for and obtain an erroneous state trial court order granting sanctions against Plaintiffs Counsel for asserting a frivolous lawsuit, and sought an award of attorneys fees against Plaintiffs Counsel in an amount in excess of $360, Plaintiffs Counsel was vindicated when the appellate courts reversed and vacated these erroneous rulings. Similarly, the issues in the securities litigation and these bankruptcy cases were exceptionally complex, and the results obtained are far greater than in other class actions. 18 The 12 Johnson factors are (1) the time and labor required; (2) the novelty and difficulty of the issues; (3) the skill required to perform the legal service adequately; (4) the preclusion of other employment by the attorney because he accepted this case; (5) the customary fee for similar work in the community; (6) whether the fee is fixed or contingent; (7) time limitations imposed by the client or the circumstances; (8) the amount involved and the results obtained; (9) the experience, reputation, and ability of the attorneys; (10) the undesirability of the case; (11) the nature and length of the professional relationship with the client; and (12) awards in similar cases. JOINT MOTION TO COMPROMISE CLASS ACTION CONTROVERSIES, TO APPROVE PLAN SUPPORT AGREEMENT, AND FOR RELATED RELIEF PAGE 30

31 Case rfn11 Doc 1782 Filed 04/01/16 Entered 04/01/16 16:06:02 Page 31 of 44 II. Pursuant to Bankruptcy Rule 7023, for Purposes of the Class Proof of Claim and Voting to Accept the Plan, the Settlement Class Should be Certified and Class Counsel and Class Representatives Should Be Appointed. 50. As noted above, the Settlement Agreement provides for the certification of the Settlement Class for purposes of allowing the Class Claim and appoint the Class Representatives and Class Counsel for purposes of voting on the Plan on behalf of the Settlement Class Members who do not cast a vote to accept or reject the Plan, in the manner contemplated by 11 U.S.C. 1126(c) and Bankruptcy Rule Also as noted above, the Parties will be requesting certification of the Settlement Class and appointment of the Class Representatives and Class Counsel for purposes of the Settlement Agreement and the Consolidated Class Adversary through a Preliminary Approval Motion and a Final Approval Motion in the appropriate court. 52. Further, if independently considered, the factors support application of Bankruptcy Rule 7023 and certification of a class and the appointment of class representatives for purposes of allowing a class proof of clam and related voting procedures in the Bankruptcy Cases. 19 The certification of the Settlement Class by this Court will allow the Class Representatives to assert and vote the Class Claim for the Settlement Class Members Although the Fifth Circuit has not addressed whether a class proof of claim is permissible, it has not prohibited class proofs of claim and has laid out the procedure the Court must use to determine if a class proof of claim is allowed in Teta v. Chow (In re TWL Corp.), 712 F.3d 886, 892 (5th Cir. 2013). In TWL, the Fifth Circuit vacated and remanded the district court s affirmance of the bankruptcy court s denial of plaintiff s class certification motion in his 19 See Solicitation Motion at 12-20, Further, the certification of the class in the Consolidated Class Adversary will support the allowance of the Class Claim because at that time the Class Representatives are the court-appointed representatives for the Settlement Class Members. JOINT MOTION TO COMPROMISE CLASS ACTION CONTROVERSIES, TO APPROVE PLAN SUPPORT AGREEMENT, AND FOR RELATED RELIEF PAGE 31

32 Case rfn11 Doc 1782 Filed 04/01/16 Entered 04/01/16 16:06:02 Page 32 of 44 adversary proceeding. In explaining its reasoning, the Fifth Circuit observed that while Rule 23 does not apply automatically in contested matters, nevertheless, pursuant to Bankruptcy Rule 9014, the bankruptcy court may at any stage direct that Rule 23 applies. Id. Therefore, Rule 23 s operation in contested matters involves a two-step process. Id. (citation omitted). First, the court must exercise its discretion [under Rule 9014] as to whether to apply Rule 23 to the contested proceeding. Then, if the court decides to apply Rule 23, the court must then determine whether the Rule s requirements for class certification have been satisfied. Id. at At least one court in this district has found class proofs of claim permissible. In re Craft, 321 B.R. 189, 192 (Bankr. N.D. Tex. 2005) (Lynn, J.). This is also the majority view, including courts in the Fourth, Sixth, Seventh, Ninth, and Eleventh Circuits. See id. at 892 n.5 (surveying cases and observing that [s]everal courts of appeal and numerous lower courts have held that class representatives might file claims on behalf of their classes ) 21 ; In re Quick Cash, Inc., 2015 Bank. LEXIS 3852, at *12-13 (Bankr. D.N.M. Nov. 10, 2015) (citing cases); see, e.g., In re Amer. Family Enters., 256 B.R. 377 (D.N.J. 2000) (court exercises discretion to allow class proof of claim and voting); Birting Fisheries v. Lane (In re Birting Fisheries), No. C Z, 1995 U.S. Dist. LEXIS 3296 (W.D. Wash. Mar. 8, 1995) (affirming bankruptcy court allowance of class proof of claim and voting); In re Commonpoint Mortg. Co., 283 B.R. 469 (Bankr. W.D. Mich. 2002) (allowing class proof of claim and voting); In re Mort. & Realty Trust, 125 B.R. 575 (Bankr. C.D. Cal. 1991) (same). 21 The case from this district holding otherwise, Kahler v. FirstPlus Fin., Inc. (In re FirstPlus Fin., Inc.), 248 B.R. 60 (Bankr. N.D. Tex. 2000) (Abramson, J.), is contrary to the majority view and the more recent opinion of Judge Lynn. JOINT MOTION TO COMPROMISE CLASS ACTION CONTROVERSIES, TO APPROVE PLAN SUPPORT AGREEMENT, AND FOR RELATED RELIEF PAGE 32

33 Case rfn11 Doc 1782 Filed 04/01/16 Entered 04/01/16 16:06:02 Page 33 of The factors to be considered in whether to apply Bankruptcy Rule 7023 to a class proofs of claim pursuant to Bankruptcy Rule 9014 are (i) whether the class was certified pre-petition; (ii) whether the members of the putative class received notice of the bar date; and (iii) whether class certification will adversely affect the administration of the case, especially if the proposed litigation would cause undue delay. 56. These factors overall weigh in favor of applying Bankruptcy Rule 7023 and certifying a class in this case. The first factor whether the class was certified pre-petition is inapplicable here because the Consolidated Class Adversary was not filed until after the petition date. Thus, there was no opportunity for a court anywhere to certify the class in that proceeding. The second factor is similarly inapplicable to this situation because the members of the Settlement Class will receive a distribution and be entitled to vote to accept or reject the plan regardless of whether they filed a proof of claim. And the Class Representatives will only vote on behalf of Settlement Class Members who chooses not to cast their own individual vote. The third factor is most relevant here, and most strongly supports application of Bankruptcy Rule 7023 to the Class Claim. Not only will class certification for purposes of the Class Claim and voting not adversely affect the administration of the Bankruptcy Cases, it will facilitate the administration of the Bankruptcy Cases by avoiding wasteful, costly, and lengthy litigation, support confirmation of the Plan to resolve the claims of all Settlement Class Members to the benefit of the Settlement Class Members, and allow the Estate Representatives to satisfy 11 U.S.C to confirm the Plan. 57. Once it has been determined that Bankruptcy Rule 7023 should apply, the next step is to determine whether the requirements of Federal Rule of Civil Procedure 23(a) and at least one subpart of 23(b) are met as to the proposed class and class representatives. In this case, the proposed Settlement Class, Class Representatives, and Class Counsel meet the requirements JOINT MOTION TO COMPROMISE CLASS ACTION CONTROVERSIES, TO APPROVE PLAN SUPPORT AGREEMENT, AND FOR RELATED RELIEF PAGE 33

34 Case rfn11 Doc 1782 Filed 04/01/16 Entered 04/01/16 16:06:02 Page 34 of 44 of Civil Rule 23(a) (1) numerosity, (2) commonality, (3) typicality, and (4) adequacy of representation and the requirements of Civil Rule 23(b)(2). a. Numerosity: Federal Rule of Civil Procedure (a)(1) requires that the proposed class be so numerous that joinder of all its members is impracticable. See In re TWL Corp., 712 F.3d at 894. The numerosity factor is met here because the Settlement Class involves tens of thousands of current life settlement investors. b. Commonality: The commonality element requires a determination that there are questions of law or fact common to the class. FED R. CIV. P. 23(a)(2). Commonality requires the plaintiffs to demonstrate that the class members have suffered the same injury. Dukes v. Wal- Mart, 564 U.S. 338, 349 (2011). Moreover, the common contention must be capable of classwide resolution. Id. at 350. This means that the determination of the issue will resolve an issue that is central to the validity of each one of the claims in one stroke. Id. In other words, do the claims have the capacity to generate common answers to drive the resolution of the litigation? Id. Here, the circumstances create multiple questions of law and fact that are common to every proposed Settlement Class Member, including (i) who is the owner of the securities backed by the life insurance policies and the death benefits underlying those securities; (ii) whether the Settlement Class Members have the right to rescind the investment contracts; and (iii) how the investment contracts should be treated by the Debtors estates. These common questions are applicable to the merits of this case and are subject to common proof thereby satisfying the commonality requirement. Therefore, Rule 23(a)(2) s element of commonality is satisfied. c. Typicality: The typicality factor of Federal Rule of Civil Procedure 23(a)(3) does not require a complete identity of claims, but instead examines whether the class representative s claims have the same essential characteristics of those of the putative class. JOINT MOTION TO COMPROMISE CLASS ACTION CONTROVERSIES, TO APPROVE PLAN SUPPORT AGREEMENT, AND FOR RELATED RELIEF PAGE 34

35 Case rfn11 Doc 1782 Filed 04/01/16 Entered 04/01/16 16:06:02 Page 35 of 44 Stirman v. Exxon Corp., 280 F.3d 554, 562 (5th Cir. 2002). Here, the typicality factor is met because the Class Representatives claims for declaratory judgment of equitable ownership and/or rescission are typical of all the Settlement Class Members potential claims, and every Settlement Class Member would be entitled to the same type of relief as the Class Representatives upon prevailing on these potential claims. d. Adequacy of Class Representatives: The final requirement of Federal Rule of Civil Procedure 23(a) is that the named representatives must fairly and adequately protect the interests of the class. Fed. R. Civ. P. 23(a)(4). The Lead Plaintiffs, the proposed Class Representatives, have and will continue to diligently prosecute the Consolidated Class Adversary and protect the interests of the Settlement Class. In reaching this Settlement Agreement, the proposed Class Representatives have no conflicts of interest with the other Settlement Class Members. In addition, the Lead Plaintiffs have engaged counsel, namely Keith L. Langston of The Langston Law Firm, who has done extensive work in identifying and investigating potential claims in the Arnold State Court Action and the Consolidated Class Adversary, has significant experience in and knowledge of class action litigation, and has committed extensive resources to representing the Settlement Class. Fed. R. Civ. P. 23(g)(1). This work has included efforts to put together a Plan that, in the view of the Trustee, the Committee, and the Plan Supporters, is in the best interest of the Settlement Class (and other creditors). In re Noble Arnold Carfat, Debtors and In re Mirant Corp. et al. Debtors, 321 B.R. 189 (Bankr. N.D. Tex. 2005) (setting forth additional considerations concerning the adequacy of the class representative that apply to postpetition class certification). Therefore, the proposed Class Representatives and Class Counsel will provide the Settlement Class with adequate representation. JOINT MOTION TO COMPROMISE CLASS ACTION CONTROVERSIES, TO APPROVE PLAN SUPPORT AGREEMENT, AND FOR RELATED RELIEF PAGE 35

36 Case rfn11 Doc 1782 Filed 04/01/16 Entered 04/01/16 16:06:02 Page 36 of 44 e. Civil Rule 23(b)(2). The Settlement Class also meets the requirements of Federal Rule of Civil Procedure 23(b)(2), which mandates that the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole. Fed. R. Civ. P. 23(b)(2). Here, as all of the Settlement Class Members ownership and/or rescission claims arose from the same operative set of facts and are determined by the same governing law, the Trustee and the Subsidiary Debtors acted on grounds generally applicable to the Settlement Class in the dispute of the ownership and/or rescission issues. A declaratory judgment and injunctive relief was sought and would provide a single and indivisible resolution to these issues for every Settlement Class Member. Therefore, Federal Rule of Civil Procedure 23(b)(2) is the appropriate provision under which to certify this mandatory 22 Settlement Class. 58. Based on the foregoing, to implement and subject to the terms of the Settlement Agreement, the Parties respectfully request that this Court certify the Settlement Class as a mandatory Rule 23(b)(2) class, appoint Lead Plaintiffs as the Class Representatives, and appoint Keith L. Langston of The Langston Law Firm as Class Counsel, for purposes of asserting and voting the Class Claim. 59. Further, pursuant to the Settlement Agreement, the Class Representatives are allowed to vote the Class Claim in classes B2, B2A, B3, and B3A of the Plan for all Settlement Class Members who do not timely and properly submit a ballot to accept or reject the Plan. This voting structure was adopted by the court in In re Mort. & Realty Trust, 125 B.R. at 583, which held that once a class is certified pursuant to a class claim, the class members, acting through their representatives and their counsel of record, are entitled to exercise all of the rights of 22 Members of a class certified under Civil Rule 23(b)(2) do not have a right to exclusion or to opt out of the class. Fed. R. Bankr. P. 7023; Fed. R. Civ. P. 23(b)(2). JOINT MOTION TO COMPROMISE CLASS ACTION CONTROVERSIES, TO APPROVE PLAN SUPPORT AGREEMENT, AND FOR RELATED RELIEF PAGE 36

37 Case rfn11 Doc 1782 Filed 04/01/16 Entered 04/01/16 16:06:02 Page 37 of 44 creditors in a bankruptcy case. The court reasoned that [t]he consequence of the certification of a class is that the members of the class are creditors in the case for all purposes. Id. Thus, the court ruled, that [o]nce the Court certifies the class, the class... acts through its certified representatives and their appointed counsel. Id. To give full meaning to the class members bankruptcy voting rights, the Court ruled that voting normally is exercised through the class representatives and their counsel. Id. 60. The Mortgage & Realty Trust case has been relied upon by other courts to allow voting of a class proof of claim by the class representative and their counsel. For example, in In re American Family Enters., the New Jersey bankruptcy court relied on Mortgage & Realty Trust and allowed the class representatives to vote on behalf of non-voting class members. The court had approved a notice to creditors previously advising creditors that they need do nothing if they wish to support the plan, because the class representatives would vote the class claim in favor of the plan absent the filing of ballots by individual class members. 61. Similarly here, the Class Representatives are obligated to and will protect the interests of the Settlement Class and act on their behalf. The notice of the class action settlement will provide an explanation of the allowance of the Class Claim and the voting by the Class Representatives on behalf of any Settlement Class Members who do not case their own ballot. A similar notice will accompanying the ballot sent to Settlement Class Members. Allowing the Class Representatives to vote the Class Claim to accept the Plan, except for those Settlement Class Members who vote themselves, comports the Plan voting process with non-bankruptcy class action procedure, allows Settlement Class Members to fully exercise their rights as creditors and participate in the bankruptcy case through their authorized representatives, and ensures the silent majority of Settlement Class Members are not disenfranchised by a small but JOINT MOTION TO COMPROMISE CLASS ACTION CONTROVERSIES, TO APPROVE PLAN SUPPORT AGREEMENT, AND FOR RELATED RELIEF PAGE 37

38 Case rfn11 Doc 1782 Filed 04/01/16 Entered 04/01/16 16:06:02 Page 38 of 44 vocal minority, who may vote to reject the Plan for motives other than to maximize recoveries to creditors, including the Settlement Class Members. 62. Accordingly, the Parties request that the Court certify the class and authorize the Class Claim and authorize the Lead Plaintiffs to vote the Class Claim to accept the Plan as holders of a claim in each of Class B2, B2A, B3, and B3A, as set forth in the Settlement Agreement. III. The Plan Support Provisions of the Settlement Agreement are Fair and Reasonable, and Should be Approved 63. As noted above, the Settlement Agreement requires the Lead Plaintiffs to support the Plan, unless they determine to support an alternate plan in the exercise of their fiduciary duties to the Settlement Class, taking into consideration factors including, but not limited to, the opinions of the Plan Proponents and the Plan Supporters, potential delay, financial outcome, and other legal and regulatory factors that may be relevant. These plan support provisions are a significant component of the settlement and a material term in the Settlement Agreement, and should be approved. 64. The case law on the propriety of plan support agreements is evolving. Most recently, the court in In re Indianapolis Downs, LLC, 486 B.R. 286 (Bankr. D. Del. 2013) denied a request by certain creditors to designate the votes of other creditors to a Restructuring Support Agreement and not count those votes pursuant to 11 U.S.C. 1125(g) and 1126(e). In denying the motion, the court relied upon In re Century Glove, 860 F.2d 94 (3rd Cir. 1988). In Century Glove, which the Indianapolis Downs court characterized as the seminal case [in the Third Circuit] construing solicitation and the designation of votes, the court affirmed the denial of a motion to designate votes of a creditor who had circulated an alternative plan to the creditors committee seeking to garner that body s support. The Third Circuit ruled that solicitation must JOINT MOTION TO COMPROMISE CLASS ACTION CONTROVERSIES, TO APPROVE PLAN SUPPORT AGREEMENT, AND FOR RELATED RELIEF PAGE 38

39 Case rfn11 Doc 1782 Filed 04/01/16 Entered 04/01/16 16:06:02 Page 39 of 44 be read narrowly and that a broad reading can seriously inhibit free creditor negotiations. Id. at Indianapolis Downs also cites (489 B.R. at ) to In re Clamp-All Corp., 233 B.R. 198 (Bankr. D. Mass. 1999). In Clamp-All, a creditor filed an objection to a disclosure statement, attaching as an exhibit a full copy of a disclosure statement and alternative, competing reorganization plan. The Court held that such conduct violated Sections 1121(b) and 1125(b) of the Bankruptcy Code as well as Federal Rule of Bankruptcy Procedure 3017(a). Nevertheless, the Court emphasized that open negotiation by creditors is imperative. Id. at 206. The Court characterized the difficult task as distinguishing between permissible negotiations and prohibited solicitations.... Id. To pass muster as permissible negotiations, such negotiations must be conducted in a manner consistent with the policy goals intended by Congress to be effectuated through sections 1121(b) and 1125(b) of the Bankruptcy Code. Id. Section 1125(b) requires a written disclosure statement, approved by the bankruptcy court as containing adequate information, be transmitted to creditors, together with a plan or a summary of the plan, prior to any post-petition solicitation of votes for or against the plan. Id. at 208. The Court noted that the requirement of advance court approval was thought to discourage the undesirable practice... of soliciting acceptance or rejection at a time when creditors and stockholders were too ill-informed to act capably in their own interests. Clamp-All Corp., 233 B.R. at 206 (citations and internal quotations omitted). 66. Consistently, Indianapolis Downs cites to Clamp-All in finding that the interests that 1125 and the disclosure requirements are intended to protect are not at material risk [from the plan support agreement] in this case. In re Indianapolis Downs, LLC, 486 B.R. at Here, as in Indianapolis Downs, the Parties are all sophisticated... players and have been JOINT MOTION TO COMPROMISE CLASS ACTION CONTROVERSIES, TO APPROVE PLAN SUPPORT AGREEMENT, AND FOR RELATED RELIEF PAGE 39

40 Case rfn11 Doc 1782 Filed 04/01/16 Entered 04/01/16 16:06:02 Page 40 of 44 represented by able and experienced professionals throughout these proceedings. Id. at 296. [T]he entities whose votes are targeted [here, the Lead Plaintiffs] cannot seriously be characterized as too ill-informed to act capably in their own interests. Id. (quoting In re Heritage Organization, LLC, 376 B.R. 783, 794 (Bankr. N.D. Tex. 2007)). 67. In sum, both Indianapolis Downs and Clamp-All acknowledged the Century Glove court s concern that a broad reading of 1125(b) could limit creditor communications and negotiations. Clamp-All, 233 B.R. at 209. Such an anomalous result, which Indianapolis Downs avoided partly in reliance upon Clamp-All, would occur here if this Court does not approve the plan support provisions of the Settlement Agreement. The negotiations and the Settlement Agreement are all consistent with the policy goals intended by Congress to be effectuated through... the Bankruptcy Code. Clamp-All, 233 B.R. at 209. There is no plan competing with or proposed as an alternative to the Plan that the Class Representatives were solicited to accept. There is nothing in the Settlement Agreement that affects or limits the Estate Representatives obligations to solicit properly all votes under Bankruptcy Code Sections 1125 and 1126, including those of the Settlement Class Members, or that limits the right of the Settlement Class Members to vote to reject the Plan in the unlikely event they wish to do so. The plan support provisions operate to foster, rather than disrupt, the formulation and confirmation of the Plan to maximize the recovery of creditors consensually, without a battle between competing plans. Accordingly, the Parties submit that this Court can and should approve the Settlement Agreement in its entirety, including the plan support provisions. IV. The Parties Propose the Procedure and Schedule Attached as Exhibit C. JOINT MOTION TO COMPROMISE CLASS ACTION CONTROVERSIES, TO APPROVE PLAN SUPPORT AGREEMENT, AND FOR RELATED RELIEF PAGE 40

41 Case rfn11 Doc 1782 Filed 04/01/16 Entered 04/01/16 16:06:02 Page 41 of As referenced above, following the Court s recommendation on the pending Joint Motion to Withdraw the Reference, 23 the Class Representatives, the Trustee, and the Subsidiary Debtors will file separately, in the Consolidated Class Adversary in the appropriate court, a Motion to Preliminarily Approve the Settlement Agreement and the Form and Manner of Notice to Class Members (the Preliminary Approval Motion ) and, after notice to the class members is completed, a Motion to Finally Approve the Settlement Agreement (the Final Approval Motion ), pursuant to Federal Rule of Civil Procedure 23 and Federal Rule of Bankruptcy Procedure 7023, as applicable. The Parties propose the following procedure and schedule for the filing of these motions, subject to the availability and approval of the appropriate courts: DATE [SET] April 4, :30 a.m. Week of April 11, 2016 Week of April 25, 2016 May 2, 2016 June 1, :00 p.m. June 8, 2016 Week of June 13, 2016 DESCRIPTION Status Conference on Joint Motion to Withdraw the Reference in Lead Case File Preliminary Approval Motion in the Consolidated Class Adversary Hearing on Preliminary Approval Motion (if necessary, or on submission) in the Consolidated Class Adversary Class Notice to be sent with Plan solicitation materials Objection deadline File Final Approval Motion in the Consolidated Class Adversary Hearing on Final Approval Motion in the Consolidated Class Adversary 23 Garner v. Life Partners, Inc., No [Dkt. No. 27, filed Mar. 18, 2016]. JOINT MOTION TO COMPROMISE CLASS ACTION CONTROVERSIES, TO APPROVE PLAN SUPPORT AGREEMENT, AND FOR RELATED RELIEF PAGE 41

42 Case rfn11 Doc 1782 Filed 04/01/16 Entered 04/01/16 16:06:02 Page 42 of This proposed schedule tracks the schedule proposed by the Debtors and Committee for the solicitation and approval of the Plan. 24 Therefore, this procedure and schedule will, if the Preliminary Approval Motion is granted, permit the Parties to send notice to all Settlement Class Members with the Plan Ballots, resulting in a tremendous savings to the Estate Further, this procedure and schedule will result in the appropriate court ruling on the Final Approval Motion and determining whether to approve the Settlement Class in the Consolidated Class Adversary at approximately the same time as the Bankruptcy Court rules on Plan confirmation. As explained above, this Class Settlement and the Plan are mutually supportive, so confirmation or approval of one will support confirmation or approval of the other. PRAYER WHEREFORE, the Parties request that the Court grant this Motion and, pursuant to Rule 9019 of the Federal Rules of Bankruptcy Procedure, approve the Trustee s authority to enter into the Settlement Agreement on behalf of the Debtors, by entering an order in substantially the form attached as Exhibit A. The Parties further request that the Court grant the Parties such other and further relief as this Court deems proper, both at law and in equity. DATED: April 1, See the Solicitation Motion at Although notice is not required for a class certified under Federal Rule of Civil Procedure 23(b)(2), the Parties have agreed to provide notice to all Settlement Class Members. JOINT MOTION TO COMPROMISE CLASS ACTION CONTROVERSIES, TO APPROVE PLAN SUPPORT AGREEMENT, AND FOR RELATED RELIEF PAGE 42

43 Case rfn11 Doc 1782 Filed 04/01/16 Entered 04/01/16 16:06:02 Page 43 of 44 Respectfully submitted, By:/s/ Keith L. Langston Keith L. Langston Texas Bar No Langston Law Firm 109 W. Tyler Street Longview, Texas Telephone: (903) Facsimile: (903) ATTORNEYS FOR LEAD PLAINTIFFS AND CLASS ACTION PLAINTIFFS By:/s/ Joseph J. Wielebinski Joseph J. Wielebinski Texas Bar No Dennis L. Roossien, Jr. Texas Bar No Jay H. Ong Texas Bar No By:/s/ David M. Bennett David M. Bennett Texas Bar No Nicole L. Williams Texas Bar No Katharine Battaia Clark Texas Bar No THOMPSON & KNIGHT LLP 1722 Routh Street, Suite 1500 Dallas, Texas Telephone: (214) Facsimile: (214) ATTORNEYS FOR CHAPTER 11 TRUSTEE H. THOMAS MORAN II AND THE SUBSIDIARY DEBTORS MUNSCH HARDT KOPF & HARR, P.C Ross Tower 500 N. Akard Street Dallas, Texas Telephone: (214) Facsimile: (214) ATTORNEYS FOR THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS JOINT MOTION TO COMPROMISE CLASS ACTION CONTROVERSIES, TO APPROVE PLAN SUPPORT AGREEMENT, AND FOR RELATED RELIEF PAGE 43

44 Case rfn11 Doc 1782 Filed 04/01/16 Entered 04/01/16 16:06:02 Page 44 of 44 CERTIFICATE OF SERVICE I hereby certify that on April 1, 2016, the foregoing was served on all parties entitled to service via the Court s Electronic Filing System, and I directed Epiq Bankruptcy Solutions, LLC, as service agent, to serve a true and correct copy of the foregoing upon all other parties on the Consolidated Master Service List via electronic mail, where available, and otherwise via United States first class mail, postage prepaid. /s/ David M. Bennett One of Counsel JOINT MOTION TO COMPROMISE CLASS ACTION CONTROVERSIES, TO APPROVE PLAN SUPPORT AGREEMENT, AND FOR RELATED RELIEF PAGE 44

45 Case rfn11 Doc Filed 04/01/16 Entered 04/01/16 16:06:02 Page 1 of 14 EXHIBIT A PROPOSED ORDER

46 Case rfn11 Doc Filed 04/01/16 Entered 04/01/16 16:06:02 Page 2 of 14 IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF TEXAS FORT WORTH DIVISION IN RE: LIFE PARTNERS HOLDINGS, INC., et. al. Debtors. CASE NO rfn11 JOINTLY ADMINISTERED (Chapter 11) ORDER GRANTING JOINT MOTION TO COMPROMISE CLASS ACTION CONTROVERSIES, TO APPROVE PLAN SUPPORT AGREEMENT, AND FOR RELATED RELIEF Upon the Joint Motion to Compromise Class Action Controversies, to Approve Plan Support Agreement, and for Related Relief (the Joint Motion ) filed by H. Thomas Moran II (the Trustee ), as chapter 11 trustee for Life Partners Holdings, Inc. ( LPHI ), Life Partners, Inc. ( LPI ), and LPI Financial Services, Inc. ( LPIFS, and together with LPI, the Subsidiary

47 Case rfn11 Doc Filed 04/01/16 Entered 04/01/16 16:06:02 Page 3 of 14 Debtors, and together with LPHI, the Debtors or Life Partners ), 1 Philip M. Garner, Steve South, as Trustee for, and on behalf the South Living Trust, Christine Duncan, Michael Arnold, Janet Arnold, and John S. Ferris, M.D. (the Lead Plaintiffs ), on behalf of themselves and all those similarly situated (altogether the Class Action Plaintiffs or Settlement Class Members ), and the Official Committee of Unsecured Creditors (the Committee ) (collectively, the Parties ); and a hearing having been held before this Court regarding the Joint Motion and any objections thereto (the Objections ) on, 2016 (the Hearing ); this Court having reviewed and considered (i) the Joint Motion, (ii) the arguments of counsel, (iii) the evidence proffered or adduced at the Hearing, (iv) the record in this case and in all cases arising in, arising under, or related to this case, and (v) the Objections (if any) having been otherwise resolved, overruled, or withdrawn; and all parties in interest having been heard, or having had the opportunity to be heard, regarding the matters raised by the Joint Motion and relief related thereto; and after due deliberation thereon, this Court for the reasons stated on the record at the Hearing and for the following reasons hereby concludes, finds and orders that: 2 Jurisdiction, Final Order and Statutory Predicates A. This Court has jurisdiction over the Motion pursuant to 28 U.S.C. 157 and 1334, and this matter is a core proceeding pursuant to 28 U.S.C. 157(b). B. Venue is proper before this Court pursuant to 28 U.S.C and The Trustee is serving as the sole director of LPI and LPIFS pursuant to the Trustee s authority under this Court s Order Authorizing the Trustee to Amend the Governing Documents and To File Voluntary Chapter 11 Petitions For Debtor s Subsidiaries (the Subsidiary Filing Order ) [Dkt. No. 261]. 2 The findings and conclusions set forth herein constitute this Court s findings of fact and conclusions of law pursuant to Bankruptcy Rule 7052, as made applicable to this proceeding pursuant to Bankruptcy Rule To the extent any of the following findings of fact constitute conclusions of law, they are adopted as such. To the extent any of the following conclusions of law constitute findings of fact, they are adopted as such

48 Case rfn11 Doc Filed 04/01/16 Entered 04/01/16 16:06:02 Page 4 of 14 C. The predicates for the relief sought in the Motion are Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules ) 9014, 9019, and 7023 (incorporating Federal Rule of Civil Procedure 23 ( Rule 23 ), and Sections 105, 362, 363, 503, and 541 of Title 11 of the United States Code (the Bankruptcy Code ). Notice D. Notice of the Joint Motion 3 and the Hearing (the Notice of Hearing ) was served in accordance with the applicable Bankruptcy Rules and Local Rules by the Trustee or his agents by electronic mail to the parties subscribing to the Court s CM/ECF system in this case and by Epiq Bankruptcy Solutions, LLC, as service agent, on all other parties on the Consolidated Master Service List via electronic mail, where available, and otherwise via United States first class mail, postage prepaid. Therefore, due, adequate and sufficient notice of the Joint Motion and the Notice of Hearing has been given to all parties entitled to receive notice as of the date hereof, no other or further notice is required, and a reasonable opportunity to object to the Joint Motion and to be heard at the Hearing was given as required by the Bankruptcy Code and the Bankruptcy Rules to all persons entitled to or who received notice. Settlement Agreement E. The Settlement Agreement was the product of arm s-length negotiations among the Parties. The Settlement Agreement was negotiated, proposed, and entered into by the Parties in good faith and without fraud or collusion. 3 Unless otherwise indicated, all capitalized terms not otherwise defined herein shall have the meanings ascribed to such terms in the Joint Motion, and if there is no meaning ascribed in the Joint Motion, shall have the meaning ascribed to such terms in the Settlement Agreement. 3

49 Case rfn11 Doc Filed 04/01/16 Entered 04/01/16 16:06:02 Page 5 of 14 F. The Settlement Agreement represents the exercise of the Trustee s and Subsidiary Debtors sound business judgment, is fair and reasonable, and is in the best interests of creditors, the estate, and all parties in interest. Reasonableness of Proposed Compromise G. The compromise set forth in the Settlement Agreement is fair and reasonable and otherwise satisfies the requirements of Bankruptcy Rule With regard to the specific factors the Court is directed to consider in reviewing the reasonableness of the proposed compromise pursuant to Protective Committee For Independent Stockholders of TMT Trailer Ferry, Inc. v. Anderson, 390 U.S. 414, (1968), In re Age Refining, Inc., 801 F.3d 530, 540 (5th Cir. 2015), In re Cajun Elec. Power Coop., 119 F.3d 349, 356 (5th Cir. 1997); and In re Jackson Brewing Co., 624 F.2d 599, 602 (5th Cir. 1980) the Court finds the factors weigh in favor of allowing the Motion, as follows: a. Probability of Success in the Litigation Being Compromised: The probability of success in the litigation being compromised is speculative and unclear. Litigation is inherently risky. b. Complexity, Expense, Inconvenience and Delay of litigation: The complexity, expense, inconvenience, and delay of litigation is overwhelming and, in some respects, would waste the assets of the estates that otherwise would be available for creditors who ultimately hold allowed claims in this case. The issues are overwhelmingly complex and significant expense would be involved in ongoing litigation and related appeals. c. Other Factors Bearing on the Wisdom of the Compromise: The Court defers to the Trustee s and Subsidiary Debtors business judgment and has examined all of the relevant factors bearing on the wisdom of the compromise brought to the Court s attention. The Court believes the other relevant factors overwhelmingly support approval of the proposed compromise. Among other things, the compromise embodied in the Settlement Agreement furthers the prospects that a chapter 11 plan will be confirmed that maximizes the recovery of creditors who hold allowed claims, including, without limitation, the Settlement Class Members. This factor significantly weighs in favor of approving the proposed compromise. Finally, Class Counsel has agreed to limit the amount of his 4

50 Case rfn11 Doc Filed 04/01/16 Entered 04/01/16 16:06:02 Page 6 of 14 fee request to an amount far less than the amount Class Counsel otherwise might be entitled to receive. Class Counsel has agreed, for no additional compensation, to provide certain services post-confirmation to the Liquidating Trust. These concessions and agreements of Class Counsel are significant and weigh heavily in favor of the approving the proposed compromise. d. Paramount Interests of Creditors and Proper Deference to Views: All parties representing interests of creditors are in favor of approval of the Joint Motion. The Committee was extensively involved in the negotiation of the terms and conditions embodied in the Settlement Agreement and seeks approval of the Joint Motion. The Committee has examined the relevant issues very carefully and has invested its time and effort in ensuring that the outcome is in the best interests of creditors of the Debtors bankruptcy estates. Similarly, the Lead Plaintiffs and Class Counsel are obligated to act in the best interests of the putative class members and they also have reviewed the relevant issues carefully and believe the proposed settlement is in the best interests of the putative class members. e. The Extent to Which the Settlement is Truly the Product of Arm s- Length Bargaining, and Not of Fraud or Collusion: The Court finds that the settlement truly is the product of arm s-length bargaining, and is not the product of fraud or collusion. No evidence has been adduced suggesting that the Settlement Agreement is anything other than the product of extensive, good faith, and arm s-length bargaining. Among other things, the Parties engaged in mediation before Retired Bankruptcy Judge Richard Schmidt. The Parties negotiated extensively for months over the terms and conditions of the Settlement Agreement and related documents. The Parties sought input during those negotiations from persons who are not Parties to the Settlement Agreement, but who, nevertheless, asserted an interest in the terms and conditions of the Settlement Agreement. Certification of the Rescission Settlement Subclass and the Ownership Subclass H. The Settlement Agreement contemplates Claim No shall be allowed on behalf of the Settlement Class pursuant to the Plan as a class proof of claim ( Class Claim ), to which Bankruptcy Rule 7023 applies pursuant to Bankruptcy Rule 9014, and allocation of that claim for each individual holder is in the amount set forth in LPI s Bankruptcy Schedule F. The Class Claim shall be classified as an allowed claim in each of Classes B2, B2A, B3, and B3A in the Plan as appropriate. Further, the Lead Plaintiffs, in their capacity as Class Representatives, 5

51 Case rfn11 Doc Filed 04/01/16 Entered 04/01/16 16:06:02 Page 7 of 14 shall be authorized to cast one or more ballots (as applicable) to accept the Plan on behalf of those Settlement Class Members with claims and interests in Class B2, B2A, B3, or B3A who do not timely cast a vote to accept or reject the Plan in the respective Class B2, B2A, B3, or B3A. I. To approve, implement, and effectuate these provisions of the Settlement Agreement, the Court must engage in a two-step process as outlined in Teta v. Chow (In re TWL Corp.), 712 F.3d 886, (5th Cir. 2013). First, the Court must determine whether to exercise discretion under Bankruptcy Rule 9014 to apply Bankruptcy Rule 7023 and Rule 23 to the contested matter arising from the filing of the Joint Motion. The Court has determined to exercise its discretion under Bankruptcy Rule 9014 and apply Bankruptcy Rule 7023, and therefore Rule 23, to this contested matter. Among other considerations, the Court is directed to consider whether class certification will adversely affect the administration of the case, especially if the proposed litigation would cause undue delay. Id. at 893 (citation omitted). Here, the Court determines class certification will accelerate, and not delay, the administration of these cases, because class certification is part of the proposed compromise upon which the Plan is based. Allowance of class certification makes confirmation of the Plan more likely. Conversely, failure to exercise discretion to apply Bankruptcy Rule 7023 in this bankruptcy case will adversely affect the administration of these cases. The delay and cost attendant to the Parties developing alternatives to the Settlement Agreement if the Court declines to exercise its discretion to apply Bankruptcy Rule 7023 here is substantial. J. Second, the Court must determine whether the requirements for class certification have been met. Id. at Rule 23 requires that certification be liberally granted where the prerequisites of Rule 23(a) and any part of Rule 23(b) is satisfied. The Rule 23(a) factors are as follows: 6

52 Case rfn11 Doc Filed 04/01/16 Entered 04/01/16 16:06:02 Page 8 of 14 (1) the class is so numerous that joinder of all members is impracticable; (2) there are questions of law or fact common to the class; (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and (4) the representative parties will fairly and adequately protect the interests of the class. FED. R. CIV. P. 23(a). The Court determines that the requirements of Rule 23(a) are satisfied as follows: i. Numerosity The class includes in excess of 20,000 investors. The class is so numerous that joinder would be impracticable. In light of this evidence, and the absence of evidence to the contrary, the Court finds that Plaintiffs have satisfied the numerosity requirement. ii. Commonality The commonality element requires a determination that there are questions of law or fact common to the class. FED R. CIV. P. 23(a)(2). Commonality requires the plaintiffs to demonstrate that the class members have suffered the same injury. Dukes v. Wal-Mart, 564 U.S. 338, 349 (2011). Moreover, the common contention must be capable of class-wide resolution. Id. at 350. This means that the determination of the issue will resolve an issue that is central to the validity of each one of the claims in one stroke. Id. In other words, do the claims have the capacity to generate common answers to drive the resolution of the litigation? Id. The circumstances create multiple questions of law and fact that are common to every proposed Settlement Class Member, including (i) who is the owner of the securities backed by the life insurance policies and the death benefits underlying those securities; (ii) whether the Settlement Class Members have the right to rescind the investment contracts; and (iii) how the 7

53 Case rfn11 Doc Filed 04/01/16 Entered 04/01/16 16:06:02 Page 9 of 14 investment contracts should be treated by the Debtors estates. These common questions are applicable to the merits of this case and are subject to common proof thereby satisfying the commonality requirement. Therefore, Rule 23(a)(2) s element of commonality is satisfied. iii. Typicality. The typicality prong requires that the claims or defenses of the representative parties are typical of the claims or defenses of the class[.] FED R. CIV. P. 23(a)(3). The typicality factor does not require a complete identity of claims, but instead examines whether the class representative s claims have the same essential characteristics of those of the putative class. Stirman v. Exxon Corp., 280 F.3d 554, 562 (5th Cir. 2002). Typicality requires the class representatives only to have the same interests and seek a remedy for the same injuries as other class members. E. Tex. Motor Freight Sys. Inc. v. Rodriguez, 431 U.S. 395, 403 (1977). The interests of the named Plaintiffs are aligned with those of the proposed class. The Lead Plaintiffs claims, like those of the Settlement Class Members, arise out of the same alleged conduct LPI s sale of unregistered securities and subsequent treatment of those securities and involve the same claims disputes over the ownership of those securities and the right to rescission. Additionally, the remedies sought by the Lead Plaintiffs are identical to and protective of the interests of the class and are the same remedies that the Settlement Class Members would be entitled to upon prevailing on the alleged claims. Plaintiffs have satisfied the typicality requirement. iv. Adequacy The final prerequisite to class certification under Rule 23(a) is that the Lead Plaintiffs must establish they will fairly and adequately protect the interests of the class. FED R. CIV. P. 23(a)(4). 8

54 Case rfn11 Doc Filed 04/01/16 Entered 04/01/16 16:06:02 Page 10 of 14 There is no evidence before the Court demonstrating the Lead Plaintiffs interests conflict with the interests of the class. To the contrary, the Lead Plaintiffs assert identical causes of action arising out of alleged identical misconduct and seek identical relief for identical harm that the Settlement Class Members would have. Lead Plaintiffs have and are expected to continue to fully and effectively represent the interests of the class. The causes of action asserted by Lead Plaintiffs on behalf of themselves and the Class are appropriate, comprehensive and seek an appropriate array of relief. The fact that Lead Plaintiffs will vigorously prosecute and adequately protect the interests of the class is further ensured by the fact that Lead Plaintiffs hired experienced, competent, and qualified counsel. In this case, Lead Plaintiffs and their counsel have already demonstrated both their willingness and ability to fully and effectively represent the interests of the Settlement Class Members. Plaintiffs Counsel has likewise vigorously guarded the legal interests of Lead Plaintiffs and the class. To date, Plaintiffs Counsel litigated this matter to the Texas Supreme Court, is active in the Plan Support Group, and has defended the Settlement Class s rights both prior to the filing of the chapter 11 petition by the debtor and throughout the pendency of this bankruptcy case. The Court finds that the quality of representation exhibited by counsel for both Lead Plaintiffs and the Trustee and the Subsidiary Debtors has been exemplary. The Court finds Plaintiffs and their counsel can, have, and will continue to fairly and adequately protect the interests of the class and that the adequacy element has been satisfied. Having found the named Plaintiffs satisfy the requirements of Rule 23(a), the Court will now analyze whether Plaintiffs have satisfied the requirements of Rules 23(b)(2). 9

55 Case rfn11 Doc Filed 04/01/16 Entered 04/01/16 16:06:02 Page 11 of 14 v. Federal Rule of Civil Procedure 23(b)(2) Lead Plaintiffs seek certification of the class under Rule 23(b)(2). The Court finds that the Settlement Class is well-suited for certification under Rule 23(b)(2). Rule 23(b)(2) provides that class certification is appropriate where [t]he party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole. In Dukes v. Wal-Mart, the Supreme Court held: The key to the (b)(2) class is the indivisible nature of the injunctive or declaratory remedy warranted the notion that the conduct is such that it can be enjoined or declared unlawful only as to all of the class members or as to none of them. In other words, Rule 23(b)(2) applies only when a single injunction or declaratory judgment would provide relief to each member of the class. It does not authorize class certification when each individual class member would be entitled to a different injunction or declaratory judgment against the defendant. Similarly, it does not authorize class certification when each class member would be entitled to an individualized award of monetary damages. *** Classes certified under (b)(1) and (b)(2) share the most traditional justifications for class treatment that individual adjudications would be impossible or unworkable, as in a (b)(1) class, or that the relief sought must perforce affect the entire class at once, as in a (b)(2) class. For that reason these are also mandatory classes: The Rule provides no opportunity for (b)(1) or (b)(2) class members to opt out, and does not even oblige the District Court to afford them notice of the action. 564 U.S. 338, (2011) (internal quotations and citations omitted). The Court finds that the Settlement Class should be certified as a mandatory class under Rule 23(b)(2). Lead Plaintiffs have sought declaratory relief that they are the owners of life settlement securities sold by LPI, that LPI was engaged in the sale of unregistered securities, and resulting injunctive and equitable relief, including a claim for rescission. All of the Settlement Class s ownership and/or rescission claims arose from the same operative set of facts and are 10

56 Case rfn11 Doc Filed 04/01/16 Entered 04/01/16 16:06:02 Page 12 of 14 determined by the same governing law. The Trustee and Subsidiary Debtors acted on grounds generally applicable to the Settlement Class in the dispute of the ownership and/or rescission issues. A declaratory judgment was sought and would provide a single and indivisible resolution to these issues for every Settlement Class Member. K. In sum, the Court finds that the Settlement Agreement is an appropriate mechanism by which to resolve these claims. Accordingly, in these bankruptcy cases, the Court hereby certifies the Rescission Settlement Subclass and the Ownership Settlement Subclass as defined and set forth in the Settlement Agreement for purposes of asserting all rights as the holders of the Class Claims, including for purposes of voting the Class Claims as set forth in the Settlement Agreement. Further, in these bankruptcy cases, the Court hereby appoints Keith L. Langston of The Langston Law Firm as Class Counsel and appoints the Lead Plaintiffs as class representatives for the Rescission Settlement Subclass and the Ownership Settlement Subclass, without prejudice to the determination whether to certify the Settlement Class in the Consolidated Class Adversary. PLAN SUPPORT PROVISIONS L. The Settlement Agreement contains plan support provisions (the Plan Support Provisions ) pursuant to which the Lead Plaintiffs agree to support confirmation of the Plan pursuant to 11 U.S.C. 1129, subject to certain conditions. The Court finds that the interests that 11 U.S.C are intended to protect are not at material risk from the Plan Support Provisions of the Settlement Agreement. The Parties are all sophisticated and have been represented by experienced professionals throughout these proceedings. The Lead Plaintiffs and their counsel are sufficiently well-informed to act capably in protecting the interests of the Settlement Class Members. There is nothing in the Settlement Agreement that limits the right of Settlement Class 11

57 Case rfn11 Doc Filed 04/01/16 Entered 04/01/16 16:06:02 Page 13 of 14 Members to vote to reject the Plan if they wish to do so. The Plan Support Provisions operate to foster, rather than disrupt, the formulation and confirmation of the Plan to maximize the recovery of creditors consensually. NOW, THEREFORE, IT IS HEREBY ORDERED THAT: 1. The Joint Motion is GRANTED subject to the provisions of this Order. 2. Any Objections to the Joint Motion and the relief requested therein that have not been withdrawn, waived, or settled, are denied and overruled on the merits. 3. The Settlement Agreement attached to the Joint Motion as Exhibit B (including all of the related documents, appendices, exhibits, schedules, lists, and agreements), and the settlements, compromises, and transactions embodied therein, are APPROVED in all respects. 4. The Plan Support Provisions of the Settlement Agreement are APPROVED in all respects. 5. The Ownership Settlement Subclass and the Rescission Settlement Subclass are hereby certified as mandatory classes pursuant to Rule 23(b)(2), made applicable pursuant to Bankruptcy Rules 7023 and 9014, for the purposes and as otherwise set forth and described in the Settlement Agreement. 6. The Lead Plaintiffs are hereby appointed as class representatives for the Settlement Classes for purposes of acting as and exercising all rights as the holder of the Class Claim as set forth in the Settlement Agreement, including, without limitation, to vote to accept the Plan as set forth in the Settlement Agreement. 7. Keith L. Langston of The Langston Law Firm is hereby is appointed as class counsel of the Ownership Settlement Subclass and the Rescission Settlement Subclass in these bankruptcy cases in accordance with the Settlement Agreement. 12

58 Case rfn11 Doc Filed 04/01/16 Entered 04/01/16 16:06:02 Page 14 of The Class Claim shall be and hereby is ALLOWED as set forth in the Settlement Agreement and the Plan. 9. The Parties are authorized and directed to consummate all aspects of the transactions embodied in the Settlement Agreement, including, but not limited, to execute all documents and to take all necessary or appropriate steps required to effectuate the terms of the Settlement Agreement. 10. This Order shall become effective immediately upon its entry. 11. This Court shall retain jurisdiction to determine any and all disputes concerning the interpretation, implementation or enforcement of this Order or the Settlement Agreement. 12. The terms and provisions of this Order shall be binding and enforceable in all respects upon the Parties, the Debtors estates, and their creditors, and all persons or entities who have actual or constructive notice or knowledge of Joint Motion, and all of the foregoing shall take all actions reasonably requested of them or necessary to implement and effectuate the transactions contemplated by the Settlement Agreement. 13. To the extent there is a conflict between the provisions of this Order and the Settlement Agreement, the terms of the Settlement Agreement shall govern the interpretation of the salient provision or term. ***END OF ORDER*** 13

59 Case rfn11 Doc Filed 04/01/16 Entered 04/01/16 16:06:02 Page 1 of 60 EXHIBIT B SETTLEMENT AGREEMENT

60 Case rfn11 Doc Filed 04/01/16 Entered 04/01/16 16:06:02 Page 2 of 60

61 Case rfn11 Doc Filed 04/01/16 Entered 04/01/16 16:06:02 Page 3 of 60 BACKGROUND 1. For years, LPI was engaged in the business of acquiring life insurance policies known as viatical settlements or life settlements. Generally speaking, viatical settlements and life settlements involve the holder of a life insurance policy selling his or her interests in a life insurance policy to a third party in exchange for a lump-sum cash payment less than the policy s death benefit. LPI marketed and sold investment contracts relating to those policies to investors. 2. LPI s marketing and business operations were successful in large part because of its intense efforts to create and to maintain a public perception that its investment products held the prospect of substantial returns. These efforts included a vigorous effort to silence and discredit any attempt to question LPI s claims. These efforts were made by LPI, its affiliates, principals, and hundreds of sales agents. Thus, for example, when a media report suggested that LPI s life expectancy projections were inaccurate, LPI engaged in a contra campaign to support those projections, point to returns generated when policies did mature, conceal the large number of policies that had not matured as represented, and thus to perpetually convince investors that the maturity of their policy was just around the corner. Similarly, when, in January 2011, the SEC announced that it was investigating LPI, a concerted and sustained effort to disparage the SEC was undertaken by LPI, LPHI, and their principals. LPI also initiated a resale program that bought out unhappy investors for a time. As lawsuits were filed, LPI spent millions of dollars opposing the various cases, including those discussed below, and was able to obtain a number of favorable rulings and considerable delays and thus drive up the costs of those working to oppose or expose LPI. Through these combined efforts, LPI was able to maintain its façade essentially throughout the litigation described below. Page 2 of 52

62 Case rfn11 Doc Filed 04/01/16 Entered 04/01/16 16:06:02 Page 4 of In March 2011, the Arnold State Court Action was filed, alleging that LPI violated various federal and state securities laws, as LPI s life settlement investments were securities that were not registered with either the Texas State Securities Board or the United States Securities and Exchange Commission and therefore LPI was selling unregistered securities. The Arnold State Court Action sought relief in the form of rescission pursuant to the Texas Securities Act 33, along with attorneys fees, costs, and interest. As indicated, this litigation, like others that followed, was vigorously opposed, and was at one point dismissed by the trial court. 4. After more than four years of litigation, in May 2015, the Texas Supreme Court held in the Arnold State Court Action that the agreements LPI used to solicit money from investors are investment contracts and therefore securities pursuant to the Texas Securities Act. Life Partners, Inc. v. Arnold, 464 S.W.3d 660 (Tex. May 8, 2015). 5. On January 20, 2015, LPHI filed a voluntary petition for relief under chapter 11 of title 11 of the United States Code (as amended, the Bankruptcy Code ), thereby commencing its bankruptcy case captioned In re Life Partners Holdings, Inc., Case No rfn11 (the LPHI Bankruptcy Case ). On March 13, 2015, the U.S. Trustee appointed Moran as the Chapter 11 Trustee in the LPHI Bankruptcy Case, and on March 19, 2015, the United States Bankruptcy Court for the Northern District of Texas (the Bankruptcy Court ) affirmed Moran s appointment. 6. On May 19, 2015, the Subsidiary Debtors filed their respective voluntary petitions for relief under chapter 11 of the Bankruptcy Code, captioned In re Life Partners, Inc., Case No rfn11 and In re LPI Financial Services, Inc., No rfn11, thereby initiating their bankruptcy cases in the Bankruptcy Court (the Subsidiary Bankruptcy Cases ). On May 22, 2015, the Bankruptcy Court granted the Subsidiary Debtors request to jointly administer the LPHI Page 3 of 52

63 Case rfn11 Doc Filed 04/01/16 Entered 04/01/16 16:06:02 Page 5 of 60 Bankruptcy Case and the Subsidiary Bankruptcy Cases (collectively, the Bankruptcy Cases ). 7. The Arnold State Court Action was stayed due to the Bankruptcy Cases. 8. In the Bankruptcy Cases, LPI has claimed that it is the owner of the life insurance policies underlying the securities the Settlement Class Members purchased and that those policies are property of the bankruptcy estates. The Plaintiffs (as defined herein) dispute that the policies, their proceeds, or any rights to which the owners of such policies are entitled (including, without limitation, the cash surrender value of each such policy) are property of the bankruptcy estates pursuant to 11 U.S.C This dispute is referred to herein as the Ownership Issue. 9. Lead plaintiff Philip Garner filed the Garner Class Adversary on July 19, 2015 in the Bankruptcy Court on behalf of a class of All persons or entities who invested in viatical settlement or life settlement securities sold by LPI. Excluded from the Class are LPI, all affiliated Life Partners companies or entities and any individual who served as an officer, director, advisor, board member, or otherwise was employed by LPI, including but not limited to all insiders of LPI, alleging that the class members were the equitable owners of the life settlement securities they purchased from LPI (including all death benefit proceeds), and that the securities held by the class members (including all death benefit proceeds) along with all other monies held in trust are not the property of LPI or its bankruptcy estate. The Garner Class Adversary sought relief in the form of a declaratory judgment pursuant to Federal Rule of Bankruptcy Procedure 7001, 28 U.S.C et seq., and 11 U.S.C On July 31, 2015, a motion for class certification [Dkt. No. 8] was filed in the Garner Class Adversary. 10. Lead plaintiffs Michael Arnold, Janet Arnold, Dr. John Ferris, Steve South as trustee for the South Living Trust, and Christine Duncan, filed the Arnold Class Adversary on July Page 4 of 52

64 Case rfn11 Doc Filed 04/01/16 Entered 04/01/16 16:06:02 Page 6 of 60 28, 2015 in the Bankruptcy Court on behalf of a class of All persons or entities who invested in viatical settlement or life settlement securities sold by LPI. Excluded from the Class are [LPI], all affiliated Life Partners companies or entities and any individual who served as an officer, director, advisor, board member, or otherwise was employed by LPI, including but not limited to all insiders of LPI, alleging that LPI s life settlement investments were securities that were not registered with either the Texas State Securities Board or the United States Securities Exchange Commission, and therefore LPI was selling unregistered securities. The Arnold Class Adversary sought relief in the form of rescission pursuant to the Texas Securities Act 33, along with attorneys fees, costs, and interest. 11. There was an unopposed Motion for Leave to File Consolidated Amended Complaint for the Garner Class Adversary and the Arnold Class Adversary filed on March 11, 2016 (when this motion is granted, the resulting proceeding will be the Consolidated Class Adversary ). The Consolidated Class Adversary is captioned South, et al. v. Life Partners, Inc. There also will be a Joint Motion to Withdraw the Reference for the Consolidated Class Adversary filed on March 16, 2016 (the Motion to Withdraw Reference ). 12. LPI filed an answer to the Garner Class Adversary on August 18, 2015 [Dkt. No. 10], and an answer to the Arnold Class Adversary on August 28, 2015 [Dkt. No. 8]. LPI denied that class treatment was appropriate and also denied that the relief sought in both the Garner Class Adversary and the Arnold Class Adversary was appropriate. 13. The Lead Plaintiffs, on behalf of the Plaintiffs, have filed Claim Nos , 22128, 22662, 22670, 23205, and (the Class Proofs of Claim ), and the Lead Plaintiffs individually have filed Claim Nos , , , 19132, , 22663, Page 5 of 52

65 Case rfn11 Doc Filed 04/01/16 Entered 04/01/16 16:06:02 Page 7 of , 23667, 23213, 23215, 23216, 23600, and (the Lead Plaintiff Proofs of Claim ) in the Bankruptcy Cases. 14. Plaintiffs Counsel has filed Claim Nos and (the Plaintiffs Counsel Proofs of Claim ). 15. Counsel for the Parties, following preliminary correspondence and discussions over telephone, , and in person, engaged in and conducted in-person settlement meetings among counsel, as well as additional correspondence and discussions over telephone and from August 2015 through March Due to these settlement negotiations, and as part of a joint effort to conserve the resources of the bankruptcy estates and maximize the benefits to the Plaintiffs, counsel agreed to stay all deadlines in the Garner Class Adversary and the Arnold Class Adversary. 16. As a result of complex and protracted discussions, the following settlements were agreed to: (a) Term Sheet for Compromise to a Plan of Reorganization of LPHI, LPI, and LPIFS (Sept. 24, 2015) [Exhibit A to Dkt. No. 1032, filed Sept. 25, 2015] (the Term Sheet ); (b) Debtors Expedited Motion for Interim and Final Orders (I) (A) Authorizing Debtors to Obtain Post-Petition Financing, (B) Granting Security Interests and/or Superpriority Administrative Expense Status; and (II) Granting Related Relief [Dkt. No. 958, filed Sept. 16, 2015] (the Financing Motion ); (c) the Plan (as defined below); and (d) this Settlement Agreement. 17. Plaintiffs Counsel conducted extensive investigation relating to the claims and the underlying events and transactions alleged in the Consolidated Class Adversary. Plaintiffs Counsel has analyzed evidence adduced during its investigation and has researched the applicable law with respect to the claims Plaintiffs have asserted against LPI, as well as the potential defenses Page 6 of 52

66 Case rfn11 Doc Filed 04/01/16 Entered 04/01/16 16:06:02 Page 8 of 60 thereto. Additionally, Plaintiffs Counsel s efforts in the Arnold State Court Action were traceable and necessary to the ultimate resolution of the Consolidated Class Adversary because, inter alia, the issue of whether the Settlement Class Members investments with Debtors were securities, as that term is defined by the Texas Securities Act, is a prerequisite to determining the ultimate Ownership Issue and the right to rescission in the Consolidated Class Adversary. 18. Due to the complex nature of the issues involved, the Parties recognize that the outcome of the Consolidated Class Adversary is uncertain. The Plaintiffs have the burden of proof on some of the issues in the Consolidated Class Adversary, and LPI has the burden on others. The trial of the Consolidated Class Adversary would be lengthy and complex, adding to cost and potential delay. Importantly, the Plan cannot be formulated or confirmed without resolution of the Consolidated Class Adversary and the Ownership Issue. The interests of creditors of the Debtors are served if the compromise and settlement transactions contemplated in this Settlement Agreement (which resolves the Consolidated Class Adversary and the Ownership Issue) and the Plan are approved and implemented. 19. Based upon investigation, the circumstances surrounding the Bankruptcy Cases and the Consolidated Class Adversary, and the negotiation of the Term Sheet and the Plan, Lead Plaintiffs and Plaintiffs Counsel have agreed to settle the Consolidated Class Adversary pursuant to the provisions of this Settlement Agreement after considering such factors as: (a) the substantial benefits to the Settlement Class Members under the terms of this Settlement Agreement; (b) the attendant costs, risks, and uncertainty of litigation, including trial and potential appeals; (c) the benefit to all creditors, including the Settlement Class Members, arising from the implementation of the transactions contemplated by this Settlement Agreement and the Plan; (d) the distraction and Page 7 of 52

67 Case rfn11 Doc Filed 04/01/16 Entered 04/01/16 16:06:02 Page 9 of 60 diversion of personnel and resources as a result of continuing litigation; (e) the desirability of consummating this Settlement Agreement and the Plan promptly; and (f) the current financial condition of the Debtors. 20. The Estate Representatives have performed extensive due diligence and conducted extensive analysis of the issues that are the subject of this Settlement Agreement and believe that the terms of this Settlement Agreement, and the corresponding terms of the Plan, are an exercise of the Trustee s and the Subsidiary Debtors sound business judgment and in the best interest of the Debtors estates, their creditors, including the Settlement Class Members, and all other parties in interest, including, without limitation, the class of creditor interests represented by the Committee. 21. The Parties and their counsel negotiated the terms regarding the attorneys fees and the attorney releases provided for in paragraphs below after reaching agreement regarding material terms of the Settlement Agreement. Plaintiffs Counsel has not received any payment for their services in the Consolidated Class Adversary or the Arnold State Court Action on behalf of the Lead Plaintiffs or the Settlement Class. In addition to the risk of non-payment that Plaintiffs Counsel assumed in pursuing the Arnold State Court Action and the Consolidated Class Adversary, prior to the commencement of its Bankruptcy Case, LPI also moved for, and the state trial court entered an order granting, sanctions against Plaintiffs Counsel for asserting a frivolous lawsuit and sought an award of attorneys fees against Plaintiffs Counsel in an amount in excess of $360,000.00, which order of sanction subsequently was reversed and vacated after extensive litigation by Plaintiffs Counsel. 22. This Settlement Agreement is the product of sustained, arm s-length settlement negotiations, including two day-long mediation sessions mediated by retired Federal Bankruptcy Page 8 of 52

68 Case rfn11 Doc Filed 04/01/16 Entered 04/01/16 16:06:02 Page 10 of 60 Judge Richard Schmidt, and the Parties believe that the terms of this Settlement Agreement, including the provisions regarding the payment of attorneys fees to Plaintiffs Counsel are fair, reasonable, and adequate. Therefore, the Estate Representatives, joined by Lead Plaintiffs and Plaintiffs Counsel, will seek Court approval of this Settlement Agreement as set forth below. 23. This Settlement Agreement shall in no way be construed or deemed to be evidence of, or an admission or concession on the part of any Party, with respect to any claim of fault or liability or wrongdoing or damage whatsoever, or any infirmity in the defenses that any Party has, or could have, asserted. Any and all statements, representations, and findings herein regarding, or in any way related to the Plaintiffs and Plaintiffs Counsel (including, but not limited to, whether the Plaintiffs in the Consolidated Class Adversary can be certified as a class pursuant to Bankruptcy Rule 7023 or Federal Rule of Civil Procedure 23 or whether the Class Proofs of Claim can proceed on a class basis pursuant to Bankruptcy Rule 9014 or 7023) are made solely for the purpose of this Settlement Agreement, and shall not be deemed an admission or concession on the part of the Trustee or the Debtors; however, upon the Court s entry of the Final Approval Order (as defined below) and the Confirmation Order (as defined herein), the stipulations, representations, and findings in this Settlement Agreement shall be final, conclusive, and binding on the Parties as among each other solely (i) to enforce or construct this Settlement Agreement and (ii) in any proceeding or matter in which the terms of this Settlement Agreement are at issue, subject to the reversal or modification of the Final Approval Order or the Confirmation Order on appeal and the rescission rights under the terms of this Settlement Agreement. The Parties recognize that the Consolidated Class Adversary was filed and defended in good faith and that the Consolidated Class Adversary is being voluntarily settled on terms that the Parties believe to be Page 9 of 52

69 Case rfn11 Doc Filed 04/01/16 Entered 04/01/16 16:06:02 Page 11 of 60 reasonable considering the merits of the claims or defenses and taking into account the expense and uncertainty of continued litigation and the Bankruptcy Cases. This Settlement Agreement has resulted from extensive, good-faith, and arm s-length negotiations among the Parties. The Parties agree that each has complied fully with the strictures of Federal Rule of Bankruptcy Procedure 9011 and Federal Rule of Civil Procedure 11 and that no sanctions or other relief against any Party is warranted or appropriate under such circumstances. 24. NOW, THEREFORE, subject to the approval of the Bankruptcy Court and confirmation of the Plan, and in consideration of the agreements and releases and assignments set forth herein and other good and valuable consideration, and intending to be legally bound, the Parties agree that the Consolidated Class Adversary and all other claims of the Plaintiffs and the Settlement Class Members encompassed within the scope of this Settlement Agreement and as set forth in the Plan be fully, finally, and forever settled, compromised, released, or assigned, and that the Consolidated Class Adversary, the Arnold State Court Action, and all other proceedings described herein or in Appendix B be: (i) dismissed with or without prejudice, without costs to the Parties except as provided herein; and/or (ii) assigned to the Creditors Trust, as set forth herein, on the following terms and conditions: DEFINITIONS When used in this Settlement Agreement, unless otherwise specifically indicated, the following terms shall have the meanings set forth below: a. Amended Schedule F has the meaning set forth in the Plan. 1 All other defined terms included throughout this Settlement Agreement shall have the meanings ascribed in this Settlement Agreement. Page 10 of 52

70 Case rfn11 Doc Filed 04/01/16 Entered 04/01/16 16:06:02 Page 12 of 60 b. Assigning Position Holder has the meaning set forth in the Plan. c. Class Notice means the notice to the Settlement Class as shall be given in the form deemed sufficient by the Court. d. Confirmation Order means the order of the Bankruptcy Court confirming the Plan pursuant to Bankruptcy Code section e. Continuing Fractional Holder has the meaning set forth in the Plan. f. Continuing Position Holder has the meaning set forth in the Plan. g. Continuing Position Holder Contribution has the meaning set forth in the Plan. h. Court means any court of competent jurisdiction, including but not limited to the Bankruptcy Court and the United States District Court for the Northern District of Texas. i. Creditors Trust has the meaning set forth in the Plan. j. Current Position Holder has the meaning set forth in the Plan. k. Days, unless specified as business days, means all calendar days, including Saturdays, Sundays, and legal holidays, but if the last day of a period is a Saturday, Sunday, or legal holiday, the period continues to run until the end of the next day that is not a Saturday, Sunday, or legal holiday. l. Effective Date means the first date by which all of the following have occurred: (1) no Party has availed itself of any right to withdraw from or terminate the Settlement that has arisen pursuant to paragraphs herein; (2) the Court has entered the Final Approval Order; (3) the Court has entered a final Confirmation Order; and (4) the Plan Effective Date has occurred and the Plan has become effective in accordance with its terms. Neither the provisions of Rule 60 of the Federal Rules of Civil Procedure nor the All Writs Act, 28 U.S.C. 1651, shall be taken into Page 11 of 52

71 Case rfn11 Doc Filed 04/01/16 Entered 04/01/16 16:06:02 Page 13 of 60 account in determining the above-stated times. m. Final 9019 Order means a Final Order approving this Settlement Agreement and authorizing, empowering, and directing the Parties to enter into and perform their respective obligations under and pursuant to this Settlement Agreement under Rule 9019 of the Federal Rules of Bankruptcy Procedure. n. Final Approval Order means a Final Order approving the Settlement Agreement as fair, reasonable, and adequate pursuant to Federal Rule of Bankruptcy Procedure 7023 or Federal Rule of Civil Procedure 23. o. Final Order has the meaning set forth in the Plan. p. Fractional Interest has the meaning set forth in the Plan. q. Fractional Interest Holder has the meaning set forth in the Plan. r. Fractional Position has the meaning set forth in the Plan. s. Investment Contract has the meaning set forth in the Plan. t. IRA Holder has the meaning set forth in the Plan. u. IRA Partnership has the meaning set forth in the Plan. v. MDL Plaintiffs means the plaintiffs in the multi-district litigation captioned In re Life Partners, Inc. Litigation, MDL No (Tex. Dist. Ct. Dallas Cnty., created Sept. 9, 2013) identified on Appendix C, and limited to the capacity in which they are identified on Appendix C. w. New IRA Note has the meaning set forth in the Plan. x. Objection Date means the date by which Settlement Class Members must file any written objection or opposition to the Settlement Agreement or any part or provision thereof in the Page 12 of 52

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73 Case rfn11 Doc Filed 04/01/16 Entered 04/01/16 16:06:02 Page 15 of 60 Settlement Agreement as fair, reasonable, and adequate pursuant to Federal Rule of Civil Procedure 23 and/or Federal Rule of Bankruptcy Procedure 7023 and approving the sending of the Class Notice to the Settlement Class. gg. hh. ii. jj. Pre-Petition Abandoned Positions has the meaning set forth in the Plan. Pre-Petition Default Amount has the meaning set forth in the Plan. Qualified Plan Holders has the meaning set forth in the Plan. Rescission Settlement Subclass means the class to be certified for settlement purposes composed of: All persons or entities (including all IRAs and their respective individual owners and related IRA custodians) who purchased and hold, as of the Plan Effective Date, securities issued or sold by LPI (directly or in the name of any Original IRA Note Issuer) related to viatical settlements or life settlements, regardless of how the investments were denominated (whether as fractional interests in life insurance policies, promissory notes, or otherwise) and who are Current Position Holders under the Plan, regardless of whether or not a claim was filed by a class member. Excluded from the Rescission Settlement Subclass are LPI; all affiliated Life Partners companies or entities; Linda Robinson-Pardo; Paget Holdings Ltd.; investors whose only investments relate to Pre-Petition Abandoned Interests under the Plan; Qualified Plan Holders; and all persons and entities listed on Appendix A. kk. Rescission Settlement Subclass Member (plural Rescission Settlement Subclass Members ) means each person and entity who is a member of the Rescission Settlement Subclass. ll. Settlement Class means, collectively, the Ownership Settlement Subclass and the Rescission Settlement Subclass. mm. Settlement Class Member (plural Settlement Class Members or Plaintiffs ) means each person and entity who is an Ownership Settlement Subclass Member or the Rescission Settlement Subclass Member. Page 14 of 52

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75 Case rfn11 Doc Filed 04/01/16 Entered 04/01/16 16:06:02 Page 17 of , and incorporating Federal Rule of Civil Procedure 23, the Parties hereby stipulate that the requirements of Federal Rule of Civil Procedure 23(a) and 23(b)(2) are satisfied with respect to the Ownership Settlement Subclass defined in paragraph 25(z) and the Rescission Settlement Subclass defined in paragraph 25(ii). The Ownership Settlement Subclass and Rescission Settlement Subclass shall each be certified as a mandatory subclass under Federal Rule of Civil Procedure 23(b)(2), with no right of any Settlement Class Member to opt out of either subclass, including for the purposes of a class proof of claim and class voting of the class ballots to the extent provided for in paragraph 28; provided, however, that, in the event the Effective Date does not occur or this Settlement Agreement is later rescinded in accordance with its terms: (a) no class or subclass shall be deemed to have been certified by or as a result of this Settlement Agreement; (b) the Trustee and the Subsidiary Debtors shall not be deemed to have consented to the allowance or priority of any claim or the certification of any class; (c) the agreements and stipulations in this Settlement Agreement concerning class definition or class certification shall not be used as evidence or argument to support class definition or class certification; (d) the Trustee and the Subsidiary Debtors shall retain all rights to object to the claims in the Bankruptcy Cases asserted by Lead Plaintiffs, Plaintiffs, and Plaintiffs Counsel; and (e) Lead Plaintiffs, Plaintiffs, and Plaintiffs Counsel reserve all rights and remedies, including without limitation, the right to seek certification of one or more classes in the Consolidated Class Adversary. 28. Claim No shall be allowed on behalf of the Settlement Class pursuant to the Plan as a class proof of claim ( Class Claim ) to which Federal Rule of Bankruptcy Procedure 7023 applies pursuant to Federal Rule of Bankruptcy Procedure 9014, and allocation of that claim for each individual holder is in the amount set forth in Amended Schedule F. The Class Claim Page 16 of 52

76 Case rfn11 Doc Filed 04/01/16 Entered 04/01/16 16:06:02 Page 18 of 60 shall be classified as an allowed claim in each of Classes B2, B2A, B3, and B3A in the Plan as appropriate. The Lead Plaintiffs, in their capacity as Class Representatives, shall be authorized to cast one or more ballots (as applicable) to accept the Plan on behalf of those Settlement Class Members with claims and interests in Class B2, B2A, B3, or B3A who do not cast a vote to accept or reject the Plan in the respective Class B2, B2A, B3, or B3A. 29. The Parties also stipulate to the designation of Lead Plaintiffs to be appointed class representatives ( Class Representatives ) on behalf of the Settlement Class, the Ownership Settlement Subclass and the Rescission Settlement Subclass for purposes of this Settlement and the Plan. 30. The Parties also stipulate to the designation of Keith L. Langston of the Langston Law Firm to be appointed class counsel ( Class Counsel ) on behalf of the Settlement Class, the Ownership Settlement Subclass and the Rescission Settlement Subclass for purposes of this Settlement and the Plan. 31. The Estate Representatives, joined by Lead Plaintiffs and Plaintiffs Counsel, shall obtain entry of the necessary order(s) of the Court authorizing, empowering, and directing the Trustee and Subsidiary Debtors to send the Class Notice to the Settlement Class Members in a form and manner deemed sufficient by the Court. This Notice will include, at a minimum: (a) a summary of the terms of the Settlement Agreement and instructions as to where the full terms of the Settlement Agreement can be obtained; (b) the definition of the stipulated Settlement Class and an explanation that the class will be mandatory with no right of the Settlement Class Members to exclusion or to opt-out, but with an opportunity to object; (c) an explanation of the Class Claim that will be allowed and treated in accordance with the Plan; (d) an explanation of Class Counsel s Page 17 of 52

77 Case rfn11 Doc Filed 04/01/16 Entered 04/01/16 16:06:02 Page 19 of 60 Agreed Fee as defined herein, subject to Court approval; and (e) an explanation that all Settlement Class Members will have the opportunity to vote on the Plan themselves, but that any Settlement Class Members who do not vote will have their claims and interests voted by the Class Representatives in favor of the Plan. EQUITABLE RELIEF 32. The Final Approval Order shall be incorporated into and become part of the Confirmation Order. The Parties shall seek for the Court to enter, as part of the Final Approval Order or the Confirmation Order, or both, as applicable, equitable and declaratory relief summarized as follows and set forth fully in the Plan: a. LPI (and any successor entity) will not sell or otherwise introduce into the market any securities unless those securities are (i) issued pursuant to the Plan or (ii) properly registered as securities with all appropriate federal and state regulatory bodies; b. Debtors waive any claims to beneficial ownership in the Fractional Interests held in the name of the Settlement Class Members that are entitled to treatment as Continuing Fractional Holders, by election or otherwise, as set forth in the Plan and subject to the terms and conditions set forth in the Plan; c. Subject to the terms and conditions set forth in the Plan, Debtors will provide each Ownership Settlement Subclass Member, for each Fractional Position, except for those Fractional Positions where a Pre-Petition Default Amount is owed and not paid by the close of business on the deadline set forth in the Plan, with the elections described in Section 3.07(c) and (e) of the Plan for each Fractional Interest Holder Page 18 of 52

78 Case rfn11 Doc Filed 04/01/16 Entered 04/01/16 16:06:02 Page 20 of 60 and IRA Holder, respectively, which are summarized as follows: (i) be treated as a Continuing Position Holder with respect to their Fractional Position and be confirmed as the owner of a Fractional Interest or a New IRA Note, after making the related Continuing Position Holder Contribution; or (ii) contribute their Fractional Position to the Position Holder Trust or the IRA Partnership and receive an interest in the Position Holder Trust or the IRA Partnership. In addition, IRA Holders will have the option to distribute the IRA Note to the individual owner of the IRA Holder so that it is owned outside of the IRA, in which case the individual owner will be able to make a Continuing Holder Election to become a Continuing Fractional Holder under the Plan; d. Subject to the terms and conditions set forth in the Plan, Debtors will provide the Rescission Settlement Subclass Members, for each Fractional Position, except for those Fractional Positions where a Pre-Petition Default Amount is owed and not paid by the close of business on the deadline set forth in the Plan, with the elections described in Section 3.07(b) and (d) of the Plan, which include the options summarized in paragraph 32(c) and the additional third option to rescind their purchase of the Fractional Interest and receive an interest in the Creditors Trust. e. The Settlement Class Members who are IRA Holders stipulate that there was never any transfer of ownership of any Fractional Interest or other interest in any Policy made to any IRA Note Issuer Trust by them or on their behalf, nor any effective conveyance of any property to any of the IRA Note Issuer Trusts. The Settlement Class Members who are IRA Holders further stipulate that (i) any authority Brian Page 19 of 52

79 Case rfn11 Doc Filed 04/01/16 Entered 04/01/16 16:06:02 Page 21 of 60 Pardo had to act on their behalf or for their benefit, as Trustee of an IRA Note Issuer Trust or otherwise, is revoked effective as of the Effective Date; (ii) the Settlement Class Members who are IRA Holders are not looking to Brian Pardo to take, and he is not authorized to take, any actions on their behalf, as such a Trustee or in any capacity; and (iii) all claims and causes of action they have or that may be asserted on their behalf against Brian Pardo in any capacity are included in the Assigned Claims; and f. The Rescission Settlement Subclass Members who assign their Additional Assigned Claims (as defined herein) to the Creditors Trust pursuant to paragraph 37 and the Plan shall receive an additional Allowed Claim in Class B4 in an amount equal to 0.5% (one-half of one percent) of their Allowed Claim amount on Amended Schedule F, for which the Rescission Settlement Subclass Member will receive a corresponding interest in the Creditors Trust (the Additional Allowed Claim ). This interest shall be in addition to any interest in the Creditors Trust granted under paragraph 32(d) of this Agreement. RELEASE AND ASSIGNMENT OF CLAIMS AND DISMISSAL OF ACTIONS 33. Upon the Effective Date, the Lead Plaintiffs (individually and as Class Representatives of all Settlement Class Members), all Settlement Class Members, Plaintiffs Counsel, Class Counsel, and all of their current and former parents and subsidiaries, affiliates, partners, officers and directors, agents, employees, and any of their legal representatives (and the predecessors, heirs, executors, administrators, successors, purchasers, and assigns of each of the foregoing) (collectively, the Settling Parties ) shall be deemed to have conclusively, absolutely, Page 20 of 52

80 Case rfn11 Doc Filed 04/01/16 Entered 04/01/16 16:06:02 Page 22 of 60 unconditionally, irrevocably, and forever, released, waived, and discharged the claims against the Debtors asserted in Count II of the Consolidated Class Adversary, or that could have been asserted as part of Count II of the Consolidated Class Adversary (the Released Claims ). 34. Upon the Effective Date, the Settling Parties shall be deemed to have conclusively compromised and exchanged for the treatment under the Plan all claims against the Debtors estates, including but not limited to any proof of claim or interest filed by any Settlement Class Member, the claims asserted in the Plaintiffs Counsel Proofs of Claim, the Lead Plaintiff Proofs of Claim, the Class Proofs of Claim, and any claim for rejection damages resulting from the rejection of an Investment Contract, except for the Class Claim that will be allowed and treated as set forth in paragraph 28 of this Settlement Agreement and the Plan (the Compromised Claims ), provided that nothing herein shall be deemed to release the Assigned Claims or Additional Assigned Claims, as defined and referenced in paragraphs herein. After the Effective Date, the Settling Parties shall not seek, and are hereafter barred and enjoined from seeking, to recover from the Debtors estates based in whole or in part upon any of the Compromised Claims or conduct at issue in the Compromised Claims. 35. In addition, as to the Released Claims and the Compromised Claims, the Settling Parties hereby expressly waive and release upon the Effective Date any and all provisions, rights, and benefits conferred by Section 1542 of the California Civil Code and Section of the South Dakota Codified Laws, each of which provides that a general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor, and any similar provision, statute, regulation, rule, or principle of law or equity of any other state or Page 21 of 52

81 Case rfn11 Doc Filed 04/01/16 Entered 04/01/16 16:06:02 Page 23 of 60 applicable jurisdiction. The Settling Parties acknowledge that they are aware that they may hereafter discover facts in addition to, or different from, those facts which they know or believe to be true with respect to the subject matter of this Settlement Agreement, but that it is their intention to release fully, finally, and forever all Released Claims and to conclusively compromise and exchange for the treatment under the Plan the Compromised Claims, and in furtherance of such intention, this release and/or compromise shall be and will remain in effect notwithstanding the discovery or existence of any such additional or different facts. 36. Upon the Effective Date, the Lead Plaintiffs (individually and as Class Representatives of all Rescission Settlement Subclass Members), Rescission Settlement Subclass Members (excluding the MDL Plaintiffs, who will assign the same character of claims to the Creditors Trust via separate settlement agreement), Plaintiffs Counsel, and all of their current and former parents and subsidiaries, affiliates, partners, officers and directors, agents, employees, and any of their legal representatives (and the predecessors, heirs, executors, administrators, successors, purchasers, and assigns of each of the foregoing) (collectively, the Assigning Parties ) assign all of their rights in any and all claims, damages, demands, suits, causes of action, obligations, remedies, debts, rights, and liabilities, whether known or unknown, liquidated or unliquidated, fixed or contingent, foreseen or unforeseen, matured or unmatured, whether class or individual, in law, equity, or otherwise, including claims for costs, fees, expenses, penalties, and attorneys fees (except those that are the subject to the Fee Application, as defined below, or otherwise deemed allowed and treated pursuant to this Settlement Agreement or the Plan), asserted by the Assigning Parties, or that could have been asserted by the Assigning Parties, or that the Assigning Parties have, may have, or are entitled to assert directly, representatively, derivatively, or in any other Page 22 of 52

82 Case rfn11 Doc Filed 04/01/16 Entered 04/01/16 16:06:02 Page 24 of 60 capacity, against the Debtors, Brian Pardo, Deborah Carr, Kurt Carr, R. Scott Peden, Linda Robinson a/k/a Linda Robinson-Pardo, Pardo Family Holdings, Ltd., Pardo Family Holdings US, LLC, Pardo Family Trust, Paget Holdings, Inc., Paget Holdings Ltd., Tad M. Ballantyne, Fred DeWald, and Harold E. Rafuse (collectively, the Assigned Claims ), to the Creditors Trust. The Assigning Parties, as of the Effective Date, transfer and assign all aspects of title to the Assigned Claims to the Creditors Trust, including but not limited to the right to bring suit on the Assigned Claims, to recover any form of relief whatsoever on the Assigned Claims, including but not limited to money damages, and to distribute funds to the creditors of the Debtors estates in accordance with the terms of the Plan. No further action on the part of the Assigning Parties is necessary to effectuate the assignment of the Assigned Claims set forth in this paragraph, and the Assigning Parties confirm that it is their present intent to retain no right or interest in the Assigned Claims. The Assigning Parties further acknowledge that after the Effective Date the Creditors Trust has the exclusive legal right and power to prosecute, compromise, settle, assign, receive proceeds from, or otherwise control the Assigned Claims. The Assigning Parties represent that they will do nothing in the future to impair, release, compromise, waive, or relinquish the Assigned Claims, to defend or take the position that the Assigned Claims were released or do not belong to the Creditors Trust, or to assist any person in defending any of the Assigned Claims or arguing that the Assigned Claims do not belong to the Creditors Trust. The Assigned Claims include, but are not limited to, the claims asserted in the Arnold Class Adversary, the Arnold State Court Action, and the other pending litigation listed in Appendix B. The assignee (as determined by the Plan) of the Assigned Claims shall cause the appropriate substitution of parties and counsel to the litigation listed in Appendix B within 30 days of the Effective Date. Page 23 of 52

83 Case rfn11 Doc Filed 04/01/16 Entered 04/01/16 16:06:02 Page 25 of The ballot sent to all Rescission Settlement Subclass Members will contain a statement and opportunity for a Rescission Settlement Subclass Member (excluding the MDL Plaintiffs, who will assign their claims to the Creditors Trust via separate settlement agreement) to elect not to provide an assignment to the Creditors Trust of any claims other than the Assigned Claims. Upon the Effective Date, the Lead Plaintiffs, individually, and all Rescission Settlement Subclass Members who do not elect through their ballot not to provide an assignment of the Additional Assigned Claims (as defined herein) (excluding the MDL Plaintiffs, who will assign their claims to the Creditors Trust via separate settlement agreement), and all of their current and former parents and subsidiaries, affiliates, partners, officers and directors, agents, employees, and any of their legal representatives (and the predecessors, heirs, executors, administrators, successors, purchasers, and assigns of each of the foregoing) (collectively, the Additional Assigning Parties ) assign all of their rights in any and all claims, damages, demands, suits, causes of action, obligations, remedies, debts, rights, and liabilities, whether known or unknown, liquidated or unliquidated, fixed or contingent, foreseen or unforeseen, matured or unmatured, whether class or individual, in law, equity, or otherwise, including claims for costs, fees, expenses, penalties, and attorneys fees (except those that are the subject to the Fee Application, as defined below, or otherwise deemed allowed and treated pursuant to this Settlement Agreement or the Plan), asserted by the Additional Assigning Parties, or that could have been asserted by the Additional Assigning Parties, or that the Additional Assigning Parties have, may have, or are entitled to assert directly, representatively, derivatively, or in any other capacity, against Life Settlement Exchange, LLC; Fred A. Cowley; Security Reserve Financial, Inc.; Gallagher Financial Group; Edward G. Burford Corporation; Sun Safety, Inc.; Faye Bagby; Ella Oliver d/b/a Investingmakesmesick.com; Page 24 of 52

84 Case rfn11 Doc Filed 04/01/16 Entered 04/01/16 16:06:02 Page 26 of 60 Wealthstone Financial; Falco Group, LLC; Mark McKay; Kainos Asset Management, LLC; Peyton Inge a/k/a H/ Peyton Inge; Life Strategy Services, LLC; Ted Hasson; James Sundelius; Abundant Income, LLC; B G & S Management Consultants; BG & S Consultants; BG & S; Tim Harper; Brian Harper; American Safe Retirement, LLC; ASR Alternative Investments, LP; Joe Barkate dba MTLRC, LLC; Rich DePaolo; Alpha & Omega Global Risk Mgt., LP; AO Global, LLC; Petra World Wide, Inc.; Tolleson Investments, LLC; William M. Tolleson; Tolleson Holdings, LLC; Steadfast Endeavors, LLC; New Asset Advisors, LLC; Curtis M. Cole; New Asset Alternative, LLC; Lakeside Equity Partners, Inc.; Dewitt & Dunn, LLC; Frank W. Bice; The Retirement & Investment Council; Russell Hagan; and all prior officers, directors, affiliates, associates, members, principals, partners, officers, directors, trustees, control persons, employees, agents, brokers, attorneys, shareholders, advisors, investment advisors, banks, IRA advisers, IRA brokers, IRA custodians, insurers, insiders, licensees, master licensees, and representatives of the Debtors, and any entities in which any of these persons or entities has a direct or indirect interest, and any other persons or entities against whom the Additional Assigning Parties have a claim arising out of or relating to their investment with LPI or interest in the Debtors, arising out of or relating to any conduct, act, or omission of any of these persons or entities or otherwise related to the business of the Debtors from the beginning of the world until the Effective Date (collectively, the Additional Assigned Claims ), to the Creditors Trust. Excluded from Additional Assigned Claims are all claims against any legal or tax professional retained on or after January 20, The Additional Assigning Parties, as of the Effective Date, transfer and assign all aspects of title to the Additional Assigned Claims to the Creditors Trust, including but not limited to the right to bring suit on the Assigned Claims, to recover any form of relief whatsoever on the Additional Assigned Claims, Page 25 of 52

85 Case rfn11 Doc Filed 04/01/16 Entered 04/01/16 16:06:02 Page 27 of 60 including but not limited to money damages, and to distribute funds to the creditors of the Debtors estates in accordance with the terms of the Plan. No further action on the part of the Additional Assigning Parties is necessary to effectuate the assignment of the Additional Assigned Claims set forth in this paragraph, and the Additional Assigning Parties confirm that it is their present intent to retain no right or interest in the Additional Assigned Claims. The Additional Assigning Parties further acknowledge that after the Effective Date the Creditors Trust has the exclusive legal right and power to prosecute, compromise, settle, assign, receive proceeds from, or otherwise control the Additional Assigned Claims. The Additional Assigning Parties represent that will do nothing in the future to impair, release, compromise, waive, or relinquish the Additional Assigned Claims, to defend or take the position that the Additional Assigned Claims were released or do not belong to the Creditors Trust, or to assist any person in defending any of the Additional Assigned Claims or arguing that the Additional Assigned Claims do not belong to the Creditors Trust. As consideration for assigning the Additional Assigned Claims to the Creditors Trust, each Additional Assigning Party shall receive an Additional Allowed Claim, as defined in paragraph 32(f). 38. Nothing in this Settlement Agreement or in any ballot signed by any Settlement Class Member shall affect or limit: (a) the right of the Trustee, Debtor, Creditors Trust and its trustee, or their successors to prosecute: (i) Moran v. Pardo, et al., Case No. 4:15-cv O; (ii) Moran v. Sundelius, et al., Adversary No rfn11; (iii) Moran v. Abundant Income, LLC et al., Adversary No rfn; (iv) Moran, et al. v. 72 Vest, et al., Case No ; (v) Moran, et al. v. Ostler, et al., Case No ; (vi) Moran, et al. v. A. Roger O. Whitley, Group, Inc., et al., Case No ; (vii) Moran, et al. v. Happy Endings, Case No ; (viii) Moran, et al. v. Robin Rock, et al., Case No ; (ix) Moran, et al. v. Ballantyne, et al., 16- Page 26 of 52

86 Case rfn11 Doc Filed 04/01/16 Entered 04/01/16 16:06:02 Page 28 of ; (x) Moran, et al. v. Funds for Life, et al., Case No ; (xi) Moran, et al. v. Averritt, et al., Case No ; (xii) Moran, et al. v. Coleman, et al., Case No ; (xiii) Moran, et al. v. Atwell, et al., Case No ; (xiv) Moran, et al. v. Atwell, et al., Case No ; (xv) Moran, et al. v. Blanc & Otus, et al., Case No ; (xvi) Moran, et al. v. Alexander, et al., Case No ; (xvii) Moran, et al. v. ESP Communications, Case No ; (xviii) Moran, et al. v. Cassidy, Case No ; (xix) Moran, et al. v. Brooks, Case No ; (xx) Moran, et al. v. Summit Alliance Settlement Co., LLC, et al., Case No ; (xxi) Moran, et al. v. American Heart Association, et al, Case No ; (xxii) any other adversary proceedings brought by or against the Trustee pending on March 15, 2016; and (xxiii) any objections to any and all claims filed by, scheduled or listed for, or otherwise asserted by any person or entity listed on Appendix A, or any other individual who served prior to January 20, 2015 as an officer, director, advisor, board member, or otherwise was employed by LPI or any of its affiliates, including but not limited to all insiders of LPI or any of its affiliates, or any sales agents, brokers, IRA advisors, IRA custodians, IRA brokers, or other individuals affiliated with Life Partners sales or business, or any licensee or master licensee; or (vi) any other claims owned by the Trustee, the Debtors, or any of their successors; or (b) the Creditors Trust and its trustee s or their successor s right to prosecute: (i) the Arnold State Court Action; (ii) In re Life Partners Holdings, Inc. Shareholder Derivative Litigation, Case No. DR-11-CV-43-AM (W.D. Tex.); (iii) the litigation matters identified in Appendix B; (iv) the litigation matters assigned to the Creditors Trust by the MDL Plaintiffs; (v) any claims assigned to the Creditors Trust by the Plan, the Trustee, or the Debtors; (vi) the Assigned Claims; (vii) subject to the terms of paragraph 37, the Additional Assigned Claims; or (viii) any other claims assigned to or otherwise owned by the Page 27 of 52

87 Case rfn11 Doc Filed 04/01/16 Entered 04/01/16 16:06:02 Page 29 of 60 Creditors Trust, its trustee, or their successors. RESCISSION 39. If the Court does not approve or enter the Final Approval Order or the Final 9019 Order; if the Final Approval Order or the Final 9019 Order is modified or set aside on appeal; or if the Confirmation Order is modified, reversed, or vacated on appeal, then the Party or Parties adversely affected by or who opposed such refusal to provide or affirm the requested relief, modification, vacation, or appeal shall each, in their sole discretion, have the option to rescind this Settlement Agreement in its entirety by written notice to the Court and to counsel for the other Parties that is filed and served within ten (10) days of the event triggering the right to rescind. Any decision with respect to an application for or award of attorneys fees, costs, or expenses, by the Court, on appeal, or otherwise, shall not be considered material to the Settlement Agreement and shall not be grounds for rescission. 40. If the Settlement Agreement is rescinded in accordance with its terms, is not approved by the Court, or otherwise fails to become effective in accordance with its terms, including if the Effective Date fails to occur, then this Settlement Agreement will not take effect and will become null and void for all purposes, and the Parties will be restored to their respective positions in the Consolidated Class Adversary and the Arnold State Court Action as of the Execution Date of this Agreement, which shall be the date set forth in the introductory paragraph of this Settlement Agreement. In that event, this Settlement Agreement, and representations made in conjunction with it, may not be used in the Consolidated Class Adversary, the Arnold State Court Action, or otherwise for any purpose. The Parties expressly reserve all rights if the Settlement Agreement does not become effective or if it is rescinded. Page 28 of 52

88 Case rfn11 Doc Filed 04/01/16 Entered 04/01/16 16:06:02 Page 30 of 60 PLAN SUPPORT AND ENTRY OF FINAL 9019 ORDER, FINAL APPROVAL ORDER, AND CONFIRMATION ORDER 41. The Estate Representatives, joined by the Lead Plaintiffs and Plaintiffs Counsel, shall seek entry of the Final Approval Order and Final 9019 Order, which as applicable shall include the provisions in Paragraph 32 of this Settlement Agreement and provisions: (a) authorizing the Trustee and the Debtors to enter into this Settlement Agreement; (b) approving this Settlement Agreement, and directing its implementation pursuant to its terms and conditions; (c) approving the allowance of the Class Claim as a class proof of claim pursuant to Bankruptcy Rules 9014 and/or 7023; (d) deeming the Plan and Confirmation Order to incorporate and include the terms and conditions of this Settlement Agreement and to approve the compromise and settlement that is contemplated in this Settlement Agreement as part of the Plan pursuant to 11 U.S.C. 1123(b); (e) as of the Effective Date, releasing the Released Claims, and permanently barring and enjoining all Settling Parties from instituting, maintaining, or prosecuting, either directly or indirectly, any lawsuit that asserts Released Claims; (f) as of the Effective Date, approving the assignment of and assigning the Assigned Claims and Additional Assigned Claims to the Creditors Trust; (g) appointing Lead Plaintiffs as Class Representatives of the Ownership Settlement Subclass and Rescission Settlement Subclass, and authorizing and empowering Lead Plaintiffs, in their capacity as Class Representatives of the Settlement Class, to complete the class ballots and vote to accept the Plan on behalf of all Settlement Class Members who do not cast an individual ballot, subject to and in accordance with this Settlement Agreement; and (g) reserving to the Court that enters the Final Approval Order continuing jurisdiction over the Parties with respect to the Settlement Agreement and the Final Approval Order. Page 29 of 52

89 Case rfn11 Doc Filed 04/01/16 Entered 04/01/16 16:06:02 Page 31 of Class Representatives and Plaintiffs Counsel agree to fully support the Plan, and, pursuant to the Class Claim allowed under this Settlement Agreement, Class Representatives agree to vote in favor of the Plan on behalf of themselves and in their capacity as Class Representatives on behalf of any Settlement Class Members who do not cast an individual ballot, provided, however, that if the Class Representatives, in consultation with Plaintiffs Counsel, determine in the good faith exercise of their fiduciary duty and taking into consideration all relevant risk factors including, but not limited to, the opinions of the Plan Proponents and the Plan Supporters, potential delay, financial outcome, and other legal and regulatory factors, that there is a proposed plan other than the Plan that fully incorporates the terms of and is not inconsistent with this Settlement Agreement and is in the best interest of the Settlement Class Members (the Alternate Plan ), then Class Representatives and Plaintiffs Counsel may choose to support that Alternate Plan. DISCOVERY AND COOPERATION 43. Discovery from Arnold State Court Action. Within 30 days after the Effective Date, Class Counsel shall deliver to the Trustee, by and through his attorneys at Thompson & Knight, 1722 Routh Street, Suite 1500, Dallas, Texas 75201, Attn: Jennifer R. Ecklund, a copy of all written discovery, deposition transcripts and exhibits, and documents that are not subject to any privilege or immunity that were produced in the Arnold State Court Action that have not already been provided to the Trustee, through counsel. 44. Cooperation from Lead Plaintiffs. Upon reasonable notice, each Lead Plaintiff agrees to make himself or herself available for an interview, at mutually convenient times and at a location or locations of his or her choice within the United States, or by telephone. Each Lead Plaintiff will provide truthful information and requested documents (if reasonably available), and Page 30 of 52

90 Case rfn11 Doc Filed 04/01/16 Entered 04/01/16 16:06:02 Page 32 of 60 shall cooperate in the preparation of truthful declarations and/or affidavits if requested by the Trustee or his successor, the trustee of the Creditors Trust, or their counsel. Nothing herein shall require the Debtors to pay any expense of the Lead Plaintiffs or his or her attorney in connection with any interview provided for in this paragraph 44. An interview for purposes of this paragraph 44 shall last no longer than two hours, excluding reasonable breaks. 45. Cooperation from Class Counsel. Class Counsel for the Rescission Settlement Subclass agrees to reasonably cooperate with a designee of the Trustee or his successor, the trustee of the Creditors Trust, or their counsel, free of any charge, to provide information relevant to the Settlement Class Members investments with LPI, including consulting with a designee of the Trustee or his successor, the trustee of the Creditors Trust, or their counsel on the discovery and events from the Arnold State Court Action, securing documents requested from Lead Plaintiffs, and providing work product from the Arnold State Court Action or the Consolidated Class Adversary relevant to the Creditors Trust s prosecution of the Assigned Claims, the Additional Assigned Claims, or other litigation to benefit the bankruptcy estates or the Creditors Trust, up to fifty (50) hours of attorney time, including travel time. Provided, however, that Class Counsel shall not be required to provide requested cooperation if Class Counsel reasonably believes providing such cooperation is unlawful, would result in Class Counsel violating any ethical rule governing the practice of law, and/or expose Class Counsel to risk of liability to any person or entity. ATTORNEYS FEES 46. Class Counsel will apply to the Court for an award of attorneys fees in an amount not to exceed $33,000,000 (the Agreed Fee ), to be paid over time through the mechanism described below (the Fee Application ). The Trustee and Subsidiary Debtors estimate the present Page 31 of 52

91 Case rfn11 Doc Filed 04/01/16 Entered 04/01/16 16:06:02 Page 33 of 60 value of the Agreed Fee to be $5,219,043. The Fee Application is subject to approval by the Court, and the final amount awarded by the Court on the Fee Application (the Approved Fee ) will be paid through the mechanism described below and set forth in Section 4.03(b) and 4.13(e) of the Plan. 47. Settlement Class Members will not be required to pay the Approved Fee from any portion of Fractional Positions owned by or contributed to the Position Holder Trust by Settlement Class Members pursuant to the Plan. Class Counsel agrees to defer payment of the Approved Fee and instead to be paid the Approved Fee in accordance with the Plan in kind and over time on the basis of the face amount of Pre-Petition Abandoned Positions, and through transfer to Class Counsel (or a designee of Class Counsel) of ownership of a pro rata share 2 of the Pre-Petition Abandoned Positions to Class Counsel in the aggregate face amount of the Approved Fee (the Fee Positions 3 ) on or before the later of: (i) the completion of Catch-Up Reconciliation (as defined in the Plan); or (ii) ten (10) days after the Fee Application is approved in the amount of the Approved Fee, regardless of whether the Approved Fee or Final Approval Order is appealed or sought to be modified by any person or entity. If the Approved Fee or Final Approval Order is appealed, maturity proceeds allocated to the Fee Positions will be placed into escrow pending the outcome of the appeal, and if the Approved Fee or Final Approval Order is modified or reversed on appeal, the registered ownership of the affected Pre-Petition Abandoned Positions (or maturity proceeds therefrom) will be transferred to the Position Holder Trust, but only to the extent of the 2 The Fee Positions will be a percentage of every Pre-Petition Abandoned Position determined by taking the Approved Fee and dividing it by the total value of the Pre-Petition Abandoned Positions. For example, if the total value of the Pre-Petition Abandoned Positions is $180 million and if the Approved Fee is $33 million, the Fee Positions will be % of each of the Pre-Petition Abandoned Positions. 3 Also referred to as Class Action Litigants Counsel Fee Positions in the Plan. Page 32 of 52

92 Case rfn11 Doc Filed 04/01/16 Entered 04/01/16 16:06:02 Page 34 of 60 modification or reversal. Plaintiffs Counsel s ownership of the Fee Positions will be subject to a 3% (three percent) servicing fee and no other encumbrances, including but not limited to catchup payments or ongoing premium payment obligations. The Fee Positions will be governed by and treated under the Plan. In no event will Class Counsel have the right to recover payment or recovery of its attorneys fees pursuant to this Settlement Agreement in excess of the Approved Fee. 48. The Estate Representatives: (a) shall not directly or indirectly oppose and shall advance and support the Fee Application and entry of one or more appropriate orders authorizing and directing the payment and allowance of the Agreed Fee, in full, payable as set forth in this Agreement; and (b) shall not take any position that would be inconsistent with the positions asserted by Class Counsel in support of the Agreed Fee. The Trustee and Subsidiary Debtors shall: (a) cooperate with Class Counsel as reasonably requested with respect to the Fee Application; and (b) oppose any request by any person or entity to reduce the amount of the Allowed Fee below the Agreed Fee. The Trustee and Subsidiary Debtors agree that payment and allowance of an Approved Fee to Class Counsel in the amount of the Agreed Fee, payable as set forth in this Agreement, is a fair and reasonable fee calculated as a percentage of the common fund under applicable non-bankruptcy law, based upon and directly traceable to the work performed by Plaintiffs Counsel and the significant benefits conferred on the Settlement Class, inter alia, traceable to the relief awarded to the Settlement Class Members in the terms of this Settlement Agreement. 49. The Trustee and Subsidiary Debtors recognize that the Agreed Fee is less than the amount that Class Counsel may otherwise be entitled to receive, as a percentage of a common fund, Page 33 of 52

93 Case rfn11 Doc Filed 04/01/16 Entered 04/01/16 16:06:02 Page 35 of 60 a fund that Plaintiffs Counsel discovered, prosecuted, and created for the benefit of the Settlement Class. Class Counsel asserts the common fund traceable to the amounts recovered by Class Counsel for the benefit of the Settlement Class Members is $1,283,607,944, which is the amount of claims entitled to rescission as a result of the opinion obtained through Plaintiffs Counsel s litigation in the Arnold State Court Action. Regardless, under an actual monetary value approach, the Plan results in substantial value and direct benefits presently estimated to be $1,078,582,000 to the Settlement Class Members on account of the claims awarded to them through the Arnold State Court Action and the settlement of the Consolidated Class Adversary. This value is comprised of at least the sum of the stream of payments that will be paid to Settlement Class Members through the Plan. If the common fund is calculated using the actual monetary value method, then the Agreed Fee is only 3.06% of the common fund. 50. Accordingly, the Trustee and Subsidiary Debtors acknowledge and agree that regardless of the methodology employed to calculate the common fund, the amount of the common fund is sufficiently large that the amount of fees to be requested by Class Counsel pursuant to this Agreement in the Fee Application (i.e., the Agreed Fee) is fair and reasonable as a percentage of the common fund and should be allowed and is a significant concession by Class Counsel. 51. Moreover, the Trustee and Subsidiary Debtors recognize that that the resolution of the Ownership Issue is required in order to permit the formulation and confirmation of the Plan, and Class Counsel s acceptance of payment over time through the mechanism described in paragraph 47, rather than in a lump sum in cash on the Effective Date, significantly increases the Debtors liquidity and ability to perform the future obligations that benefit all creditors under the Plan and is a significant factor supporting the averment that the Plan is feasible and satisfies, inter Page 34 of 52

94 Case rfn11 Doc Filed 04/01/16 Entered 04/01/16 16:06:02 Page 36 of 60 alia, 11 U.S.C. 1129(a)(11). Therefore, the Trustee and Subsidiary Debtors acknowledge that the Agreed Fee is both fair and reasonable, considering the factors expressed in Johnson v. Georgia Highway Express, Inc., 488 F.2d 714 (5th Cir. 1974). 52. A reduction, by the Court, on appeal, or otherwise, of the Agreed Fee or Approved Fee is not considered material to this Agreement and shall not affect any other rights or obligations under this Agreement. In the event the amount payable to Class Counsel is reduced, by the Court, on appeal, or otherwise, the related funds or Pre-Petition Abandoned Interests will remain part of the Debtors bankruptcy estates and be treated in accordance with the Plan. ADDITIONAL PROVISIONS 53. Reasonable Best Efforts to Obtain Final Approval of the Settlement Agreement. Counsel for all Parties agree to use their reasonable best efforts to obtain final approval of this Settlement Agreement, subject to the Parties rights to rescind the Settlement Agreement as set forth in paragraphs and fiduciary obligations of the Parties. 54. Audit Rights. Debtors agree to cause the Position Holder Trust to be required to keep sufficient books, records, and accounts regarding its collection and distribution of death benefits and its other obligations under this Agreement, and to maintain such records until the expiration of seven (7) years after the year to which such records pertain. Upon ten (10) days notice, Class Counsel shall have the right, at its own expense and not more than once every other calendar year, to have an independent auditor, who shall be a certified public accountant from an accounting firm of Class Counsel s choice, inspect and audit the Position Holder Trust s relevant records and practices during the Position Holder Trust s normal business hours solely to verify the accuracy of payments and compliance with the Position Holder Trust s obligations under this Page 35 of 52

95 Case rfn11 Doc Filed 04/01/16 Entered 04/01/16 16:06:02 Page 37 of 60 Agreement, subject to the independent auditor signing a confidentiality agreement with the Position Holder Trust. The independent auditor shall only disclose to Class Counsel the amount of death benefits collected and distributed and the amount of any underpayment or overpayment, and shall not disclose to Class Counsel documents, invoices, investor identities, or any other confidential or proprietary information of the Position Holder Trust. If any such audit should disclose an alleged insufficient payment to Class Counsel, the independent auditor shall deliver a report to the Position Holder Trust, and the Position Holder Trust shall have thirty (30) days to review the report and either accept or object to the findings of the report. If the Position Holder Trust accepts the findings of the report, the Position Holder Trust shall bring itself into compliance with the Agreement within fifteen (15) days after acceptance and pay Class Counsel for any shortfall determined. If the Position Holder Trust objects to the findings of the report, Class Counsel and the Position Holder Trust will jointly hire a third-party certified public accountant unaffiliated with either side to prepare a report within thirty (30) days. If the third-party report identifies a shortfall owed to Class Counsel, the Position Holder Trust shall bring itself into compliance with the Agreement within fifteen (15) days after issuance of the third-party report determining any shortfall. In the case of an accepted audit report or third-party audit report showing underpayment of more than one percent (1%) for any calendar year, the Position Holder Trust shall also pay for Class Counsel s reasonable expenses of such audit (including attorneys fees and fees paid to the auditor). In the case of an accepted audit report or third-party audit report showing no underpayment for any calendar year, Class Counsel shall pay for the Position Holder Trust s reasonable expenses of such audit (including attorneys fees and fees paid to the auditor), if any. 55. No Admission. This Settlement Agreement, whether or not it shall become final, Page 36 of 52

96 Case rfn11 Doc Filed 04/01/16 Entered 04/01/16 16:06:02 Page 38 of 60 and any and all negotiations, communications, and discussions associated with it, shall not be: (a) offered or received by or against any person as evidence of, or be construed as or deemed to be evidence of, any presumption, concession, or admission by a Party of the truth of any fact alleged or defense asserted, of the validity of any claim, of the deficiency of any defense, or of any liability, negligence, fault or wrongdoing on the part of any Party; (b) offered or received by or against any person as a presumption, concession, admission or evidence of the violation of any state or federal statute, law, rule, or regulation or of any liability or wrongdoing by any Party, or of the truth of any of the claims, and evidence thereof shall not be directly or indirectly, in any way, offered or received (whether in the Consolidated Class Adversary, or in any other action or proceeding), except for purposes of enforcing this Settlement Agreement and the Final Approval Order and Confirmation Order, including, without limitation, asserting as a defense the release and waivers provided herein; (c) offered or received by or against any person as evidence of a presumption, concession, or admission with respect to a decision by any court regarding the certification of a class, or for purposes of proving any liability, negligence, fault, or wrongdoing, or in any way referred to for any other reason as against the Trustee or the Debtors, in any other civil, criminal, or administrative action or proceeding, other than such proceedings as may be necessary to effectuate the provisions of this Settlement Agreement; provided, however, that if this Settlement Agreement is approved by the Court, then the signatories to the Agreement may refer to it to enforce their rights hereunder; or (d) construed as an admission or concession by an Party that the consideration to be given in this Settlement Agreement represents the relief that could or would have been obtained through trial in the Consolidated Class Adversary or the Arnold State Court Action. Page 37 of 52

97 Case rfn11 Doc Filed 04/01/16 Entered 04/01/16 16:06:02 Page 39 of Arm s-length Negotiations. The Parties agree that the terms of this Settlement Agreement were negotiated at arm s length and in good faith, and reflect a settlement that was reached voluntarily after consultation with experienced legal counsel. This Settlement Agreement shall not be construed more strictly against one Party than another merely by virtue of the fact that it, or any part of it, may have been prepared by counsel for one of the Parties, it being recognized that it is the result of arm s-length negotiations between the Parties and their counsel, and all Parties have contributed substantially and materially to the preparation of this Settlement Agreement. 57. Only written modification. This Settlement Agreement, including the appendices to this Settlement Agreement, may not be modified or amended, nor may any of its provisions be waived, except by a writing signed by all signatories to this Settlement Agreement or their successors-in-interest. Any condition in this Settlement Agreement may be waived by the Party entitled to enforce the condition in a writing signed by that Party or its counsel. The waiver by any Party of any breach of this Settlement Agreement by any other Party shall not be deemed a waiver of the breach by any other Party, or a waiver of any other prior or subsequent breach of this Settlement Agreement by that Party or any other Party. Without further order of the Bankruptcy Court, the Parties may agree to reasonable extensions of time to carry out any of the provisions of this Settlement Agreement. 58. Headings. The headings herein are used for the purpose of convenience only and are not meant to have legal effect. 59. Authority of the Court. The administration and consummation of this settlement as embodied in this Settlement Agreement shall be under the authority of the Court orders approving Page 38 of 52

98 Case rfn11 Doc Filed 04/01/16 Entered 04/01/16 16:06:02 Page 40 of 60 this Settlement Agreement and authorizing and directing the Parties to effectuate and implement this Settlement Agreement pursuant to Federal Rules of Bankruptcy Procedure 9019 and 7023 and Federal Rule of Civil Procedure 23 and the Confirmation Order, and the Court that enters the Final Approval Order shall retain continuing and exclusive jurisdiction for the purpose of, inter alia, entering orders providing for the enforcement of the terms of this Settlement Agreement. 60. Taxes. The Plaintiffs and Plaintiffs Counsel acknowledge that neither of the Trustee, the Debtors, any of their counsel, nor Plaintiffs Counsel, have provided, made, or are making in connection with the Settlement Agreement, any tax advice or any representations regarding possible tax consequences relating to the Settlement Agreement or the Plan. The Plaintiffs and Plaintiffs Counsel further acknowledge that neither the Trustee, the Debtors, the Committee, 4 and their successors under the Plan, any of their counsel, nor Plaintiffs Counsel, have or will have any responsibility for any taxes due based upon the equitable relief provisions in paragraph 32 or based upon any other provision of the Settlement Agreement or the Plan except for the Approved Fee. Plaintiffs Counsel acknowledges that neither the Trustee, the Debtors, the Committee, and their successors under the Plan, nor any of their counsel, have or will have any responsibility for any taxes due based upon payment of the Approved Fee. Each Settlement Class Member s tax obligations, if any, and the determination thereof, are the sole responsibility of the Settlement Class Member. The Debtors shall comply with all applicable reporting and withholding obligations imposed by law, including reporting the payment of the Approved Fee and backup withholding if Class Counsel does not furnish its taxpayer identification number to the Debtors 4 Nothing in this paragraph is intended to diminish or affect in any manner any responsibility for any taxes due, based upon the equitable relief provisions in paragraph 32, that any Committee member may have by virtue of such individual s status as a Settlement Class Member. Page 39 of 52

99 Case rfn11 Doc Filed 04/01/16 Entered 04/01/16 16:06:02 Page 41 of 60 using Form W-9, Request for Taxpayer Identification Number and Certification. 61. Entire Agreement. This Settlement Agreement (inclusive of its appendices) and the Plan constitutes the entire agreement among the Parties concerning this settlement, and no representations, warranties or inducements have been made by any Party concerning this Settlement Agreement (inclusive of its appendices) other than those contained and memorialized in the Settlement Agreement (inclusive of its appendices) or the Plan. In the event of a conflict between the terms of this Settlement Agreement and the terms of the Plan, the terms of this Settlement Agreement shall control. 62. No Third Party Beneficiaries. This Settlement Agreement is not intended to confer any rights, obligations, or remedies on any person other than the Parties and their successors and assigns. 63. Multiple Counterparts. This Settlement Agreement may be executed in one or more original, ed, and/or faxed counterparts. All executed counterparts and each of them shall be deemed to be one and the same instrument. 64. Binding Nature. This Settlement Agreement shall be binding upon, and inure to the benefit of, the successors and assigns of the Parties. 65. Choice of Law. The construction, interpretation, operation, effect and validity of this Settlement Agreement shall be governed by the laws of the State of Texas without regard to the applicable choice of law rules, except to the extent that federal law requires that federal law govern. 66. Representations and Warranties. All counsel and any other person executing this Settlement Agreement and any of its appendices, or any documents related to the Settlement Agreement, warrant and represent that they have the full authority to do so and that they have the Page 40 of 52

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