Consent Order

CHRISTINA A. SNYDER, District Judge.

Before this Court is the Complaint by the United States of America, on behalf of the United States Small Business Administration ("SBA"), for the appointment of the SBA as Receiver for RCV SBIC, L.P. ("RCV"). The Court, being fully advised as to the merits, and based upon the consent of the parties, believes this relief should be granted.

IT IS HEREBY ORDERED, ADJUDGED AND DECREED THAT:

1. Pursuant to the provisions of 15 U.S.C. § 687c, this Court shall take exclusive jurisdiction of RCV, and all of its assets, wherever located, and the United States Small Business Administration ("SBA"), is hereby appointed receiver ("the Receiver") of RCV to serve without bond until further order of this Court. The Receiver is appointed for the purpose of administering, marshalling and, if necessary, liquidating all of RCV's assets to satisfy 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, managers, officers, and directors of RCV under applicable state and federal law and by the Certificate of Limited Partnership and Partnership Agreement of said partnership, in addition to all powers and authority conferred upon the Receiver by the provisions of 15 U.S.C. § 687c and 28 U.S.C. § 754. The general partners, managers, directors, officers, employees and agents of RCV are hereby dismissed. Such persons shall have no authority with respect to RCV's operations or assets, except as may hereafter be expressly granted by the Receiver. The Receiver shall assume and control the operation of RCV and shall pursue and preserve all of its claims.

3. The past and/or present officers, directors, agents, managers, general partners, accountants, attorneys and employees of RCV, 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 said partnership and all other assets and property of the partnership, whether real or personal. RCV 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 RCV, as well as the names, addresses and amounts of claims of all known creditors of RCV. All persons having control, custody or possession of any assets or property of RCV, including its former General Partner, are hereby directed to turn such property over to the Receiver.

4. The Receiver shall promptly give notice of its appointment to all known officers, directors, agents, managers, general partners, employees, limited partners, creditors, debtors and agents of RCV. All persons and entities owing any obligations or debts to RCV shall, until further order of this Court, pay all such obligations in accordance with the terms thereof to the Receiver, and receipt for such payments by the Receiver shall have the same force and effect as if RCV had received such payments.

5. The Receiver is hereby authorized to open such Receiver's bank accounts, at banking or other financial institutions, to extend credit on behalf of RCV, to utilize SBA personnel, and to employ such other personnel as necessary (including the former managers of RCV at the Receiver's sole discretion) to effectuate the operation of the receivership including, but not limited to, attorneys and accountants, 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 payments for expenses incidental to administration of the Receivership. In addition, the Receiver is authorized to reimburse the SBA or its employees 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 claim or asset of RCV, other than real estate.

6. In accordance with the provisions of this Order and the Federal Rules of Civil Procedure, and if so requested by the Receiver, RCV's past and/or present officers, directors, agents, managers, general partners, limited partners, employees, and other appropriate persons (including, without limitation, the defendant's portfolio of small business concerns and of banks or other financial institutions doing business with defendant and/or defendant's portfolio of small business concerns) shall answer or provide answers, to all questions put to them by the Receiver regarding the business of RCV, or any other matter relevant to the operation or administration of the RCV receivership or the collection of funds due to RCV. In the event that the Receiver deems it necessary to require the appearance of any aforementioned persons, the production of documents, information, or any other form of discovery concerning the assets or property of RCV or any other matter relevant to the operation or administration of the Receivership or the collection of funds due to RCV, the Receiver shall provide notice of such to such persons in accordance with the Federal Rules of Civil Procedure.

7. The parties or prospective parties to any and all civil legal proceedings (excluding the instant receivership proceeding), wherever located including, but not limited to arbitration proceedings, bankruptcy or foreclosure actions, default proceedings, or any other proceedings' involving (i) RCV, (ii) any assets of RCV, (iii) the. Receiver for RCV or (iv) RCV's present or past officers, directors, managers, or general partners (including the managers or members of such general partner) to the extent said civil legal proceedings involve any action taken by them while acting in their official capacity with RCV, are enjoined from taking any action, including discovery, commencing or continuing any legal proceeding of any nature without further order of this Court.

8. All civil legal proceedings (excluding the instant receivership proceeding) wherever located, including arbitration proceedings, foreclosure activities, bankruptcy actions, or default proceedings, but excluding the instant proceeding, involving (i) RCV, (ii) any of assets of RCV, (iii) the Receiver for RCV or (iv) RCV's present or past officers, directors, managers, or general partners (including the managers or members of such general partner) to the extent said civil legal proceedings involve any action taken in their official capacity for RCV are stayed in their entirety, and all Courts having any jurisdiction thereof are enjoined from taking or permitting any action in such proceedings until further Order of this Court.

9. As to a cause of action accrued or accruing in favor of RCV against a third person or party, any applicable statute of limitation is tolled to the extent allowed by applicable law during the period in which this injunction against commencement of legal proceedings is in effect as to that cause of action.

10. RCV and its past and/or present directors, officers, managers, general partners, agents, employees and other persons acting in concert or participation 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 property of RCV to the detriment of the Receiver appointed in this cause, including but not limited to destruction of corporate or partnership records, or which would violate the Small Business Investment Act of 1958, as amended, (the "SBIA"), 15 U.S.C. Section 661 et seq., or the regulations promulgated thereunder, (the "Regulations"), 13. C.F.R. § 107.1 et seq.

11. The Receiver is authorized to borrow on behalf of RCV, from the SBA, up to $1,000,000, and is authorized to cause RCV 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 have priority over all other debts and obligations of RCV, excluding administrative expenses of the Receivership, whether presently existing or hereinafter incurred, including without limitation any claims of partners of RCV.

12. This Court determines and adjudicates that RCV has violated 13 C.F.R. § 107.1830(b) and 13 C.F.R. § 107.507(a) of the Regulations as alleged in the Complaint filed in this matter. After completing its activities in accordance with this Order, the Receiver may recommend that RCV's license as an SBIC be revoked.

Complaint for Receivership and Permanent Injunctive Relief

COMES NOW Plaintiff, the United States of America, on behalf of its agency, the United States Small Business Administration, and for its cause of action states as follows:

PARTIES, JURISDICTION, AND VENUE

1. This is a civil action bought by the United States on behalf of its agency, the U.S. Small Business Administration (hereinafter, "SBA," "Agency," or "Plaintiff"), whose central office is located at 409 Third Street, S.W., Washington, DC 20416.

2. Jurisdiction is conferred on this Court pursuant to sections 308(d), 311, and 316 of the Small Business Investment Act, as amended; 15 U.S.C. §§ 687(d), 687c, 687h; the Small Business Act, 15 U.S.C. § 634(b)(1); and 28 U.S.C. § 1345.

3. Defendant, RCV SBIC, L.P. (hereinafter "RCV", "Licensee," or "Defendant"), is a limited partnership formed under the laws of the State of Delaware that maintains its principal place of business at 2425 Olympic Boulevard Suite 6050W, Santa Monica Blvd, California 90404. The sole purpose of Defendant's partnership is to operate as a small business investment company under the Small Business Investment Act of 1958. Venue is proper under 15 U.S.C. §§ 687(d), 687h and 28 U.S.C. § 1391(b).

COMMON ALLEGATIONS

4. The purpose of the Small Business Investment Act of 1958, as amended, (hereinafter the "Act") is to improve and stimulate the national economy, and small businesses in particular, by stimulating and supplementing the flow of private equity capital and long-term loan funds which small businesses need for sound financing of their operations and growth. 15 U.S.C. § 661.

5. Congress authorized the SBA to carry out the provisions of the Act and to prescribe regulations governing the operations of Small Business Investment Companies (hereinafter "SBIC"). 15 U.S.C. § 687(c). SBA duly promulgated such regulations, which are set forth at Title 13 of the Code of Federal Regulations, Part 107 (hereinafter the "Regulations").

6. An SBIC is a corporation, a limited liability company, or a limited partnership organized solely for the purpose of performing the functions and conducting the activities contemplated under the Act. 15 U.S.C. § 681(a). Pursuant to the Act, SBA is authorized to license SBICs (Id. at § 681(c)), which, although they are non-depository institutions, are financial institutions that are similar to banks, savings and loans institutions and credit unions because they provide funding directly to the public. SBICs provide venture capital to qualified small independent businesses by supplementing the flow of private equity capital, long-term funds (debt securities) and loans.

7. An SBIC has the authority to borrow money, issue securities, promissory notes, or other obligations under such conditions and limitations as regulated by SBA. SBA is authorized to provide Leverage to SBICs through the purchase, or guarantee of payment, of debentures or participating securities issued by SBICs. 15 U.S.C. §§ 683(a) and (b). Such SBA financing (defined as "Leverage" under the Regulations) is subject to the Regulations, including but not limited to the provisions of 13 C.F.R. §§ 107.1820-1850 and § 107.507.

8. In consideration for being licensed to operate as an SBIC and/or receive federal tax dollar leverage, SBICs agree to comply with the requirements of the Act and the Regulations. Each Participating Securities instrument issued by an SBIC specifically incorporates the terms of the Regulations. Thus, a violation of any regulation, including exceeding the maximum capital impairment, is a violation of the terms of the Participating Securities and is a separate violation of the Act and Regulations.

9. SBA is charged with overseeing and regulating the SBIC program. If SBA determines that an SBIC licensee has engaged, or is about to engage, in any act or practices which constitute, or will constitute, a violation of the Act or Regulations, the SBA may seek, from the appropriate United States District Court, an order enjoining such act or practices, and upon a showing by the SBA that such licensee has engaged, or is about to engage, in any such act or practices, a permanent or temporary injunction, restraining order, or other order, shall be granted without bond. In addition, the Court is authorized to appoint SBA to act as receiver for such licensee. 15 U.S.C. § 687c. Moreover, if an SBIC violates, or fails to comply with, any of the provisions of the Act or Regulations, all of its rights, privileges, and franchises may be forfeited and the company may be declared dissolved. 15 U.S.C. § 687(d).

10. One of the regulatory conditions that an SBIC is subject to is "Capital Impairment" as that term is defined under the Regulations. Together, 13 C.F.R. 107.1830 and 107.1850 set forth the maximum amount of Capital Impairment that an SBIC licensee may have during the forbearance period and thereafter, as applicable. A licensee that has a condition of Capital Impairment is not in compliance with the terms of its Leverage. 13 C.F.R. § 107.1830(b).

11. Another regulatory condition affecting licensees such as Defendant is the failure to perform under a written agreement with SBA under 13 C.F.R. §107.507 (a).

12. SBA licensed Defendant as an SBIC pursuant to 15 U.S.C. § 681(c) on or about April 9, 2003 under SBA License No. 09/79-0450, solely to do business under the provision of the Act and the regulations promulgated thereunder.

13. Defendant's general partner is RCV SHIC Partners, LLC, a limited liability company formed under the laws of the State of Delaware.

14. Defendant's Limited Partnership Agreement, at Section 2.01, acknowledges that Defendant was required at all times to be operated in accordance with the Act and Regulations.

15. Defendant applied for and received funding from the SBA through the purchase and/or guaranty of Participating Securities, a form of Leverage, as those terms are defined under the Regulations. To date, a total principal balance of $80,531,889.00 remains outstanding.

16. Section 107.1830(c) of the Regulations requires that Defendant not have a condition of Capital Impairment of greater than 60%, as that term is defined under the Regulations.

17. Based on Defendant's financial submission (SBA Form 468) for the quarter ending September 30, 2008, the SBA determined that Defendant had a condition of Capital Impairment in excess of the regulatory limit applicable to it, and by letter dated December 22, 2008, SBA directed the company to cure the impairment within 15 days of the date on the letter.

18. SBA's December 22, 2008 letter informed Defendant that failure to cure the impairment would result in the company being placed in Restricted Operations.

19. Defendant failed to cure its condition of Capital Impairment within the permitted time and, consequently, SBA informed Defendant that it had been transferred to liquidation status.

20. Based on the last SBA Form 468 for the period ending June 30, 2013, Defendant remains in a condition of Capital Impairment.

21. To date, Defendant has failed to cure its condition of Capital Impairment, which has risen to over 129%.

22. In September, 2010, RCV entered into a Wind Down Agreement with SBA, wherein RCV was to pay back SBA's leverage within certain targets set forth in the Agreement. RCV predicted the leverage would be paid in full in December, 2011.

23. As partial consideration for the Wind Down Agreement, RCV executed a Consent Order of Receivership, which order would not be entered prior to one year after the execution of the Agreement. That time has now elapsed.

24. RCV has failed to meet its targets under the Wind Down Agreement and failed to perform under a written agreement with SBA.

COUNT ONE

CAPITAL IMPAIRMENT

25. Paragraphs 1 through 24 are incorporated herein by reference.

26. Defendant has failed to cure its condition of Capital Impairment, and a principal balance of over $80,000,000 of Participating Securities purchased by the SBA remains outstanding.

27. Defendant's failure to cure its condition of Capital Impairment is non-compliance with the terms of its Leverage and a violation of §107.1830(b) of the Regulations.

28. As a consequence of Defendant's continued condition of capital impairment, SBA is entitled to the injunctive relief provided under the Act, 15 U.S.C. §§ 687(d) and 687c, including the appointment of the SBA as Receiver of Defendant.

COUNT TWO

NONPERFORMANCE OF WRITTEN AGREEMENT WITH SBA

29. Paragraphs 1 through 28 are incorporated herein by reference.

30. On or about September 13, 2010, RCV executed a Wind Down Agreement with SBA wherein RCV agreed to meet certain criteria to pay SBA's leverage in full.

31. As partial consideration for the Wind Down Agreement, RCV executed a Consent Order of Receivership, which order would not be entered prior to one year after the execution of the Agreement. That time has now elapsed.

32. RCV has failed to meet the targets for repayment agreed to in the Wind Down Agreement of September, 2010. To date, only $750,000 of SBA's leverage has been repaid.

33. By failing to meet the terms and conditions of the Wind Down Agreement, RCV has failed to perform under a written agreement with SBA in violation of 13 C.F.R. § 107.507(a) of the Regulations.

PRAYER FOR RELIEF

WHEREFORE, Plaintiff prays as follows:

A. That this Court grant injunctive relief, both preliminary and permanent in nature, restraining Defendant, its managers, general partners, directors, officers, agents, employees, and other persons acting in concert or participation therewith from: (1) making any disbursements of Defendant's funds; (2) using, investing, conveying, disposing, executing, or encumbering in any fashion, any funds or assets of Defendant, wherever located; and (3) further violating the Act or the Regulations promulgated thereunder.

B. That this Court determine and adjudicate Defendant's non-compliance with and violation of the Act and the Regulations promulgated thereunder.

C. That this Court, pursuant to 15 U.S.C. § 687c, take exclusive jurisdiction of Defendant and all of its assets, wherever located, appoint the SBA as receiver of Defendant for the purpose of marshaling and liquidating the assets of Defendant and satisfying the claims of creditors as determined by the Court, and such other relief as contained in the Consent Order filed simultaneously herewith.

D. That this Court grant such other relief as may be deemed just and equitable.