ASTA FUNDING, INC. (NASDAQ:ASFI) Files An 8-K Entry into a Material Definitive Agreement
Item1.01 Entry into a Material Definitive Agreement.
On November 8, 2016, Asta Funding, Inc. (the Company) entered
into a binding Term Sheet (the Term Sheet) with ASFI Pegasus
Holdings, LLC, Fund Pegasus, LLC, Pegasus Funding, LLC (Pegasus),
Pegasus Legal Funding, LLC (PLF), Max Alperovich and Alexander
Khanas. Pegasus is currently the Companys personal injury claims
funding business and is a joint venture that is 80% owned by the
Company and 20% owned by PLF. The Company and PLF have decided
not to renew the Pegasus joint venture that by its terms
terminates on December 28, 2016. The Term Sheet amends certain
provisions to Pegasus operating agreement dated as of December
28, 2011 (as amended, the Operating Agreement) and governs the
terms relating to the liquidation of the existing Pegasus
portfolio (the Portfolio).
to the Term Sheet, the parties thereto have agreed that PLF will
liquidate the Portfolio beginning on January 2, 2017 (the
Liquidation Period). The Company will fund overhead expenses
relating to the liquidation of the Portfolio based on a budget
agreed upon by the Company and PLF. Any cash received by Pegasus
will be distributed to its members in the order provided for in
the Operating Agreement. The Company will be repaid an amount
equal to 20% of all principal collected on each investment paid
back beginning October 1, 2016 and continuing through the
Liquidation Period, which will be applied against the outstanding
balance of overhead expenses previously advanced by the Company
to Pegasus. After January 2, 2017, additional overhead expenses
advanced during the Liquidation Period will be paid back monthly
as incurred by the Company prior to the calculation and
distribution of any profits.
In connection with the Term Sheet, the parties thereto have also
entered into a customary mutual release and non-disparagement
agreement as well as a release from the non-competition
obligations under the Operating Agreement.
The foregoing description of the Term Sheet is not complete and
is qualified in its entirety by reference to the Term Sheet,
which is attached as Exhibit10.1 to this Current Report on Form
8-K and incorporated herein by reference.
On November 11, 2016, the Company announced that it will continue
its personal injury claims funding business through the formation
of a wholly owned subsidiary, Simia Capital, LLC (Simia). In
connection with its formation, Simia entered into an employment
agreement with Patrick F. Preece to serve as its Chief Executive
Officer. See Item 5.02.
Item5.02 Departure of Directors or Certain Officers;
Election of Directors; Appointment of Certain Officers;
Compensatory Arrangements of Certain Officers.
On November 11, 2016, the Companys newly formed wholly owned
subsidiary, Simia, entered into an employment agreement with
Patrick F. Preece (the Employment Agreement). Under the
Employment Agreement, Mr. Preece will serve as the Chief
Executive Officer of Simia. Mr. Preece will be a named executive
officer of the Company.
Under the Employment Agreement, Mr. Preece will receive an annual
base salary of $250,000, subject to annual increase at the
discretion of the compensation committee (the Compensation
Committee) of the board of directors of the Company (the Board).
Mr. Preece will be eligible to receive an annual cash or non-cash
bonus in the sole and exclusive discretion of the Compensation
Committee. Mr. Preece will also be eligible to receive a cash or
non-cash profit bonus of an aggregate amount up to 15% of the
profit of the business of Simia (the Business) for each fiscal
year in which the Business achieves an internal rate of return of
at least 18%. In the event that the Business is sold to a
third-party solely for cash consideration during Mr. Preeces
employment period, he will be eligible to receive a cash or
non-cash sale profit bonus of up to 15% of the closing
consideration received by the Company. He will also be entitled
to participate in any other benefit plans established by the
Company for management employees.
The Employment Agreement has a five year term. Under the
Employment Agreement, Mr. Preece may be terminated with or
without cause (as defined in the Employment Agreement) and may
resign with or without good reason (as defined in the Employment
Agreement). If Mr. Preece is terminated without cause or resigns
for good reason he will receive severance equal to two years of
his base salary. He will also be entitled to a pro-rata share of
the profit bonus and his deferred compensation will vest
immediately. Mr. Preece is also subject to a non-compete and
non-solicitation provision during the term of his employment and,
unless his employment is terminated without cause or he resigns
for good reason, for two years thereafter.
The foregoing description of the Employment Agreement is not
complete and is qualified in its entirety by reference to the
Employment Agreement, which is attached as Exhibit10.2 to this
Current Report on Form 8-K and incorporated herein by reference.
In connection with the Employment Agreement, onNovember 15, 2016,
the Board determined to increase the size of the Board from six
to seven directors and appointed Mr. Preece to fill the resulting
vacancy.
Mr. Preece has served in the last five years as the Chief
Executive Officer of GWG MCA Capital, Inc., a subsidiary of a
public company, SVP Head of Alternative Assets at Esquire Bank,
and was Chief Executive Officer at Walker Preston. In addition,
Mr. Preece was Managing Director and Global Head of Asset
Securitization for DZ Bank, managing Autobahn Funding, a $6
billion commercial paper conduit that specialized in alternative
asset classes, from 2000 to 2011. Throughout his career Mr.
Preece has focused on the origination and management of
structured finance and asset-backed lending with an emphasis on
litigation finance. Mr. Preece also serves on the board of
directors of Saving Children, Building Families Foundation, the
Wellington Group, Star Angel Network, Vital Neuro, LLC,
IndicaTree, LLC, and Saratov Capital, LLC. Mr. Preece holds a
Bachelor of Science in Mechanical Engineering and an MBA in
Finance, both from the University of Michigan. Mr. Preece will
not receive any additional compensation other than as provided in
the Employment Agreement for serving on the Board. We expect to
enter into our standard form of indemnification agreement for
officers and directors with Mr. Preece.
Other than the Employment Agreement, there is no arrangement or
understanding with any person to which Mr. Preece was appointed
as a member of the Board. Mr. Preece is not a party to any
transaction required to be disclosed to Item 404(a) of
Regulation S-K. Mr. Preece is 51 years old and has no family
relationship with any executive officer or member of the Board
of the Company.
Item7.01 Regulation FD Disclosure.
A copy of the press release announcing the formation of Simia
and the appointment of Mr. Preece as the Chief Executive
Officer of Simia and his appointment to the Board is furnished
as Exhibit99.1 to this Current Report on Form 8-K.
The information in the press release is being furnished and
shall not be deemed filed for purposes of Section18 of the
Securities Exchange Act of 1934, as amended (the Exchange Act)
or otherwise subject to the liabilities of that Section. The
information in the press release shall not be incorporated by
reference into any registration statement or other document to
the Securities Act of 1933, as amended, or the Exchange Act.
Item9.01 Exhibits
(d)Exhibits. The following exhibit is furnished with this
Current Report on Form 8-K:
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No. |
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Description |
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10.1 |
Term Sheet, dated as of November 8, 2016, by and among |
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10.2 |
Employment Agreement of Patrick F. Preece, dated as of |
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99.1 |
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Press release of Asta Funding, Inc. dated November 15, |
About ASTA FUNDING, INC. (NASDAQ:ASFI)
