January 31, 2002
Please accept this as our letter of introduction.
Enclosed is information regarding the ECLA (Equity Collateralized Loan Arrangement). ECLA creates liquidity while simultaneously protecting value of equity holdings (providing market downturn protection). This product is available to key employees, officers and major shareholders or any shareholder of publicly traded companies. It provides liquidity while overcoming the barrier of large block sales. Outright sales have limited appeal either because of triggering tax events or because of control restrictions on sales of issues. Also, the ECLA is a private event unlike selling your securities, which is a public event. We safeguard our clients? confidentiality. We insulate our clients and provide liquidity with total financial privacy. If you have any questions please call.
ECLA is much more than a loan; it enables you to receive significant liquidity from your stock portfolio without triggering a taxable event. Since the stock loan is both non-recourse (no personal financials required) and non-callable, it provides downside protection in the event the securities decline in value. Also, there are no or minimal margin calls, so you have no worries of a cash squeeze in the event of a market downturn. No matter what happens to the value of your stocks, you have unlimited upside potential with no downside risk.
We can finance shares out of margin account status thereby with a more attractive rate and term.
a) No Margin Maintenance Requirements ? In most cases there are no margin maintenance requirements on the loan.
b) Non-Callable - The loan will not be called during it?s term.
c) Non-Recourse ? The shares are the only collateral for the loan. There is no personal recourse in the event of default. If the securities are worth less than the value of the original loan and what you owe at maturity, you may walk away and pay nothing else. You only surrender your stock to satisfy the loan obligation.
d) High Loan to Value with Tax-free Liquidity - We can offer you 40% to 80% LTV, depending on the securities. Also, no triggered tax events. This means you can enjoy the liquidity of your position without selling shares and creating a tax liability.
e) Unlimited Upside Potential - Since you aren?t selling your position, you retain ownership of your securities. You continue to benefit from your stock?s appreciation.
f) Market Down Turn Protection - As there are no margin maintenance requirements, you have no worries of cash squeeze in the event of a market downturn, no matter what happens to the value of your stocks.
g) Flexible Terms - The term of the loan is generally for a one year period with up to four annual extensions.
h) Very Attractive Low Interest Rate ? Prime to Prime + four; Approximately 5% to 9% respectively. In special circumstances sub-Prime based financing is available.
I) Payment Structure - interest only payable quarterly.
j) Fast Closing/Funding ? the complete procedure time is from 48 hrs to 2 weeks.
When you want liquidity and need to take cash out of your security holdings, you are faced with either selling it or taking a margin loan. The first causes a taxable event; the second exposes you to the risk of a margin call. We offer a very attractive alternative that can produce more cash without the risk.
With Best Regards,
Sr. Vice President
Diversified Financial Group, Inc.
3905 Vincennes Road, Suite 303
Phone (317) 471-3575 Fax: (317) 471-3573
Email address firstname.lastname@example.org