DAVID C. GODBEY, District Judge.
IT IS HEREBY ORDERED, ADJUDGED AND DECREED:
1. Pursuant to the provisions of 15 U.S.C. §687c, this Court takes exclusive jurisdiction of NORTH TEXAS MESBIC, INC. ("NTM") and all of its assets and property, of whatever kind and wherever located, and the United States Small Business Administration ("SBA") is hereby appointed Receiver of NTM ("Receiver") to serve without bond until further order of this Court. The Receiver is appointed for the purpose of marshalling and liquidating all of NTM's assets and satisfying the claims of creditors therefrom in the order of priority as determined by this Court.
2. The Receiver shall have all powers, authorities, rights and privileges heretofore possessed by the general partners, limited partners, officers, directors, managers, investment advisors and other agents of NTM under applicable state and federal law, by the corporate charter, articles of incorporation, and by-laws of said corporation, in addition to all powers and authority of a receiver at equity, and all powers and authority conferred upon the Receiver by the provisions of 15 U.S.C. § 687c and 28 U.S.C. § 754. The trustees, directors, officers, employees, managers, investment advisors, attorneys, accountants and agents of NTM are hereby dismissed and the powers and authority of the general partner are suspended during the pendency of this receivership. Such persons shall have no authority with respect to NTM's operations or assets, except to the extent as may hereafter be expressly granted by the Receiver. The Receiver shall assume and control the operation of NTM and shall pursue and preserve all of its claims.
3. The Receiver is entitled to take immediate possession of all assets, bank accounts or other financial accounts, books and records and all other documents or instruments relating to NTM. The past and/or present general partners, officers, directors, managers, investment advisors, agents, trustees, attorneys, accountants, and employees of NTM, as well as all those acting in their place, are hereby ordered and directed to turn over to the Receiver forthwith all books, records, documents, accounts and all other instruments and papers of and relating to NTM and its assets and all other assets and property of the corporation, whether real or personal. The officers of NTM shall furnish a written statement within ten (10) days after the entry of this Order, listing the identity, location and estimated value of all assets of NTM as well as the names, addresses and amounts of claims of all known creditors of NTM. Within thirty (30) days following the entry of this Order, the officers shall also furnish a written report describing all assets. All persons or entities having control, custody or possession of any assets or property of NTM are hereby directed to turn such assets and property over to the Receiver.
4. The Receiver shall promptly give notice of its appointment to all known general partners, officers, directors, agents, employees, shareholders, creditors and debtors of NTM, as the Receiver deems necessary or advisable to effectuate the operation of the receivership. All persons and entities owing any obligation or debt to NTM shall, until further ordered by this Court, pay all such obligations in accordance with the terms thereof to the Receiver and its receipt for such payments shall have the same force and effect as if NTM had received such payments.
5. The Receiver is hereby authorized to open such Receiver's accounts at banking or other financial institutions to extend credit on behalf of NTM, to utilize SBA personnel, and to employ such other personnel as it may deem necessary to effectuate the operation of the receivership including, but not limited to, attorneys, accountants, and appraisers, and is further authorized to expend receivership funds to compensate such personnel in such amounts and upon such terms as the Receiver shall deem reasonable in light of the usual fees and billing practices and procedures of such personnel. The Receiver is not required to obtain Court approval prior to the disbursement of receivership funds for payments to personnel employed by the Receiver or for expenses that the Receiver deems advantageous to the orderly administration and operation of the receivership. In addition, the Receiver is authorized to reimburse the SBA for travel expenses incurred by SBA personnel in the establishment and administration of the receivership. The Receiver may, without further order of this Court, transfer, compromise, or otherwise dispose of any asset (including without limitation any claim), other than real estate.
6. NTM's past and/or present general partners, officers, directors, agents, accountants, managers, general partners, limited partners, shareholders, employees, debtors and creditors of NTM and other appropriate persons (including without limitation, the defendant's portfolio of small business concerns and financial institutions doing business with defendant and/or defendant's portfolio of small business concerns) shall answer under oath to the Receiver all questions which the Receiver may put to them in compliance with the Federal Rules of Civil Procedure, and pursuant thereto shall produce any documents as required by the Receiver regarding the business of said limited partnership, or any other matter relevant to the operation or administration of the receivership or the collection of funds due to NTM. In the event that the Receiver deems it necessary to require the appearance of the aforementioned persons, the production of documents, information, or any other discovery concerning the assets, property or business operations of NTM, or any other matter relevant to the operation or administration of the Receivership or the collection of funds due to NTM, the Receiver shall make its discovery request(s) in compliance with the Federal Rules of Civil Procedure.
7. The parties to any and all civil legal proceedings of any nature, excluding the instant proceeding, but including without limitation bankruptcy proceedings, arbitration proceedings, foreclosure actions, default proceedings, or other actions of any nature involving NTM or any assets of NTM, including subsidiaries, partnerships and other business combinations of NTM, wherever located, or involving NTM, the Receiver, or any of NTM's past or present officers, directors, managers, agents, or general or limited partners sued for, or in connection with, any action taken by them while acting in such capacity of any nature, whether as plaintiff, defendant, third-party plaintiff, third-party defendant, or otherwise, are enjoined from commencing or continuing any such legal proceeding, or from taking any action, in connection with any such proceeding or any such asset. All civil legal proceedings of any nature, excluding the instant proceeding, but including without limitation bankruptcy proceedings, arbitration proceedings, foreclosure actions, default proceedings, or other action of any nature involving NTM or any assets of NTM, including subsidiaries, partnerships and other business combinations of NTM, wherever located, and excluding the instant proceeding, or involving NTM, the Receiver, or any of NTM's past or present officers, directors, managers, agents, or general or limited partners sued for, or in connection with, any action taken by them while acting in such capacity of any nature, whether as plaintiff, defendant, third-party plaintiff, third-party defendant, or otherwise, are stayed in their entirety, and all Courts having any jurisdiction thereof are enjoined from taking or permitting any action until further Order of this Court. Further, as to a cause of action accrued or accruing in favor of NTM against a third person or party, any applicable statute of limitation is tolled during the period in which this injunction against the commencement of legal proceedings is in effect as to that cause of action.
8. NTM and its past and/or present directors, officers, managers, general or limited partners, agents, investment advisors, employees and other persons acting in concert or participating therewith be, and they hereby are, enjoined from either directly or indirectly taking any actions or causing any such action to be taken which would dissipate the assets and/or property of NTM to the detriment of the Receiver appointed in this cause, including but not limited to destruction of corporate records, or which would violate the Small Business Investment Act of 1958, as amended, 15 U.S.C. 661
9. The Receiver is authorized to borrow on behalf of NTM, from the SBA, up to $500,000 and is authorized to cause NTM to issue Receiver's Certificates of Indebtedness in the principal amounts of the sums borrowed, which certificates will bear interest at or about 10 percent per annum and will have a maturity date no later than 18 months after the date of issue. Said Receiver's Certificates of Indebtedness shall be deemed to be administrative expenses of the Receivership.
10. This Court determines and adjudicates that NTM has violated the Act and the Regulations, as alleged in the Complaint filed against NTM in the instant action. After the foregoing activities are completed, the Receiver may submit a report to this Court recommending that NTM's SBA license be revoked.
1. This is a civil action brought under 15 U.S.C. § 687c by the United States of America on behalf of its agency, the U.S. Small Business Administration (hereinafter, "SBA"), whose central office is located at 409 Third Street, S.W., Washington, D.C., 20416.
2. Jurisdiction is conferred on this Court by virtue of the Small Business Investment Act of 1958, as amended (hereinafter, the "Act"), Sections 308(d), 311 and 316, 15 U.S.C. §§ 687(d), 687c and 687h; and 28 U.S.C. § 1345.
3. Defendant, North Texas MESBIC, Inc. ("NTM"), is a Texas corporation pursuant to Articles of Incorporation filed with the Texas Secretary of State on March 29, 1990.
4. As originally licensed by SBA, NTM's principal office was located at 12770 Coit Road, Suite 525, Dallas, Texas 75251. NTM currently maintains its principal office and/or principal place of business at 9720 Skillman Street, Dallas, Texas 75243. Venue is therefore proper under 15 U.S.C. §§ 687(d), 687h and 28 U.S.C. § 1391(b).
5. NTM was licensed by SBA as a small business investment company ("SBIC" or "Licensee") on July 11, 1991, SBA License No. 06/06-5302, under Section 301(d) of the Act, 15 U.S.C. § 681(c), solely to do business under the provisions of the Act and the regulations promulgated thereunder. SBA's issuance of the License is reported in the Federal Register at 56 F.R. 41594 (1991). Congress repealed Section 301(d) of the Act in 1996, but provided that "[t]he repeal under subparagraph (A) shall not be construed to require the Administrator to cancel, revoke, withdraw, or modify any license issued under section 301(d) of the Small Business Investment Act of 1958 before the date of enactment of this Act." See Section 208(b)(3)(B) of Pub. L. 104-208, 110 Stat. 3009-742 (Sept. 30, 1996).
6. SBICs are intended to advance the interests of small businesses by providing financial assistance to small concerns. 15 U.S.C. § 661.
7. The Articles of Incorporation of NTM submitted to, and approved by, SBA expressly provide that the sole business of NTM was to operate as a small business investment company pursuant to the Act.
8. Section 308(c) of the Act, 15 U.S.C. § 687(c), empowers SBA to prescribe regulations to carry out the provisions of the Act and to govern the operations of SBICs. SBA has duly promulgated such regulations, which are codified at Title 13 of the Code of Federal Regulations, Part 107 (the "Regulations").
9. Section 308(d) of the Act, 15 U.S.C. § 687(d), provides that upon determination and adjudication of noncompliance or violation of the Act or the Regulations, all of the rights, privileges and franchises of a Licensee may be forfeited and the company may be declared dissolved.
10. Section 311 of the Act, 15 U.S.C. § 687c, provides that, whenever in the judgment of SBA, a Licensee, or any other person, has engaged in or is about to engage in any acts or practices which constitute or will constitute a violation of the Act or of any Rule or Regulation promulgated pursuant to the Act, or of any order issued under the Act, then SBA may make application for an injunction, and such Court shall have jurisdiction of such action and shall grant permanent or temporary injunction, or other relief without bond, upon a showing that such Licensee has engaged in or is about to engage in any such acts or practices. The Court may also appoint SBA to act as receiver for such Licensee.
11. In accordance with Sections 303(a) and 303(b) of the Act, 15 U.S.C. §683(a) and (b), SBA provided financing to NTM in the principal sum of $3,600,000 through the purchase or guarantee of the following debentures (hereinafter, the "Debentures"), which amounts below reflect all payments made by NTM on the loans through May 13, 2013:
12. The Debentures are expressly subject to and incorporated by reference into the Regulations, including but not limited to the provisions of 13 C.F.R. § 107.1810 and 107.1830 through 1850. Section 107.1810(g)(1) provides that the entire indebtedness of an SBIC to SBA may be declared by SBA to be immediately due and payable upon the happening of certain events of default identified in 13 C.F.R. § 107.1810(f), including without limitation capital impairment and failure to pay SBA.
13. Based upon information and documents provided by NTM to SBA under NTM's reporting obligations under the Regulations, SBA determined that NTM was in violation of the Regulations by having a condition of Capital Impairment as determined under 13 C.F.R. § 107.1830.
14. By a letter dated September 5, 2012 (the "Notice of Violation"), SBA notified NTM that it was in default under terms of its debentures issued to SBA under 13 C.F.R. §§ 107.1810(f)(5) of the Code of Federal Regulations. SBA's letter identified the event of default as due to capital impairment that exceeded NTM's allowable limit of 75%.
15. SBA's Notice of Violation provided NTM an opportunity to cure its violation of the regulations within the 15-day time period provided in the Regulations, 13 C.F.R. § 107.1810(g).
16. NTM failed to cure its violation of the Regulations due to capital impairment to the satisfaction of SBA as required by the Regulations under 13 C.F.R. § 107.1810(g).
17. NTM's failure to pay SBA all amounts due constitutes a further violation of the Regulations under 13 C.F.R. § 107.1810(f)(3).
18. By letter dated March 11, 2013, SBA notified NTM that (a) NTM had failed to cure its capital impairment under the regulations; (b) SBA had accelerated NTM's debentures; (c) SBA had transferred NTM to liquidation status; and (d) SBA provided NTM an opportunity to pay all amounts due, including applicable interest, within fifteen (15) days of the letter.
19. NTM has failed to pay SBA in full and remains in violation of applicable law and regulations.
20. According to financial information provided to SBA from NTM as required by SBA's regulations, NTM's capital impairment has worsened and continues to exceed its maximum limit of 75%.
21. NTM has failed to pay SBA all amounts due as of the maturity dates of the Debentures — April 24, 2013 — constituting a further violation of SBA Regulations for nonperformance under at 13 C.F.R. §§ 107.507(a) and 107.1810(f)(7).
22. Due to NTM's failure to cure its violation of the Regulations, SBA is authorized under 13 C.F.R. § 107.1810(g)(2) and 15 U.S.C. § 687c to institute these proceedings for the appointment of SBA as NTM's receiver.
23. Paragraphs 1 through 22, above, are hereby incorporated by reference as though set forth in their entirety herein.
24. SBA has determined that NTM is capitally impaired and thereby in violation of the Regulations, 13 C.F.R. §§ 107.1810(f)(5), 1810(g) and 1830.
25. NTM's violation of the Regulations for capital impairment entitles SBA to relief pursuant to 15 U.S.C. § 687c, including injunctive relief and appointment of SBA as Receiver of NTM.
A. That injunctive relief, both preliminary and permanent in nature, be granted restraining NTM, its officers, agents, employees and other persons acting in concert or participation therewith from: (1) making any disbursements of Defendant's funds; (2) without the prior written consent of the receiver, using, investing, conveying, disposing, executing or encumbering in any fashion any or all funds or assets of Defendant, wherever located; or (3) violating the Act or the Regulations promulgated thereunder.
B. That this Court determine and adjudicate NTM's default and noncompliance with the Debentures and noncompliance and violation of the Act and the Regulations promulgated thereunder.
C. That pursuant to 15 U.S.C. § 687c, this Court take exclusive jurisdiction of NTM, and all of its assets, wherever located, appoint SBA as permanent receiver of NTM for the purpose of liquidating all of Defendant's assets and satisfying the claims of creditors therefrom in the order of priority as determined by this Court, and pursuing causes of action available to NTM, as appropriate.
D. That this Court direct entry of an order against NTM which also provides that NTM's license to operate as an SBIC shall be revoked upon the wind-up and conclusion of the receivership thereof.
E. That this Court enter a money judgment in favor of SBA in the amount of $3,036,490.66 as of May 13, 2013, and per diem interest of $493.43 after May 13, 2013 until the date judgment is entered, and then post-judgment interest at the rate allowed by law.
F. That this Court grant such other and further relief as may be deemed just and equitable.
