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IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
UNITED STATES OF AMERICA,
GIV VENTURE PARTNERS, L.P.,
Civil Action No. I3-ev-
COMPLAINT FOR RECEIVERSHIP AND INJUNCTION
Plaintiff: the United States of Americ~ for its complaint in this action alleges as
1. The United States of America brings this action against defendant, GIV
Venture Partners, L.P., alleging violations of the Small Business Investment Act, IS U.S.C.
Section 661, et seq., and the regulations issued pursuant thereto, 13 C.F.R. § 107.1, ~
2. The plaintiff is the United States of America. It brings this action on behalf of
its agency, the United States Small Business Administration ("SHA"). SBA's central office is
located at 409 Third Street, S.W., Washington DC 20416.
3. The defendant is GIV Venture Partners, L.P. ("GIV" or "Licensee"), a
Delaware Limited Partnership with its principal place of business at 150 North Radnor Chester
Road, Suite F-200, Radnor PA 19087.
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JURlSDICTION AND VENUE
4. The Court has jurisdiction pursuant to the Small Business Investment Act of
1958. as amended ("the Act"), IS U.S.C. §§ 687(d), 687c, and 687(h); the Small Business Act,
15 U.S. § 634(b)(1); and 28 U.S.C. § 1345.
S. Venue is proper pursuant to IS U.S.C. §§ 687(d) and 687(h) and 28 U.S.C. §
J39I(b), because GIV's principal place of business is in this District.
6. On or about March 26, 2002, SBA licensed GIV as a Small Business
Investment Company ("SBIC") solely to do business under the provisions of the Act and the
regulations issued pursuant thereto. The general partner in GIV is GIV Venture Partners GP,
LLC. SBA is a preferred limited partner in GIV.
7. Sections l.01 and 2.01 ofGIV's Agreement of Limited Partnership (ULPA")
provide that GIV is subject to the Act and the regulations issued pursuant thereto ("the
8. Section 4.03(a) of the LPA provides that 13 C.F.R. § 107.1820 is incorporated
by reference into the LPA, as if set forth again in full. Section 107.1820 enumerates, inter aJia,
removal conditions, contingent removal conditions, and restricted operations conditions and the
remedies to which SSA is entitled as a result thereof.
9. Section 4.03(b) ofthe LPA provides that GIV and its partners consent to the
exercise by SBA ofall of its rights under 13 C.F.R. § 107.1820 and agree to take all actions
required by the SBA under that section.
10. Pursuant to Section 303 of the Act, 15 U.S.C. § 683, SBA provided funds to
OIV through the purchase and/or guaranty of Participating Securities, a lorm of leverage, as
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those tenns are defined under the Regulations. Pursuant to 13 C.F.R. § 107.50, "Participating
Securities" means preferred stock, preferred limited partnership interests, or similar instruments
issued by licensees.
ll. Currently, $25,002,281.00 in Participating Securities Leverage remain
outstanding. Pursuant to 13 C.F.R § 107.50, "leverage" means financial assistance provided by
SBA to a licensee, evidenced by a security ofthe licensee.
l2. The Participating Securities described in Paragraphs 1 0-ll hereinabove are
expressly subject to and incorporated by reference in the applicable regulations, inter alia. 13
C.F.R. §§ 107.1820-50 and 107.507.
13. Section 308(d) of the Act, 15 U.S.C. §687(d), provides that upon
detennination and adjudication of noncompliance or violation of the Act or the regulations, all of
the rights, privileges and franchises ofa licensee, such as GIV, may be forfeited and the
company may be declared dissolved.
]4. Section 311 of the Act, 15 U.S.C. §687c. provides that upon a detennination
by SBA that a licensee, such as GIV, has engaged in or is about to engage in any acts or
practices which constitute or will constitute a violation of the Act or ofany regulation issued
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 grant a pennanent 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 is authorized, inter
aliih to appoint SBA to act as receiver for such licensee.
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NONPERFORMANCE OF AGREEMENT WITH SSA
15. Paragraphs 1·14 hereinabove are incorporated by reference as if set forth
again in full.
16. Pursuant to 13 C.F.R. §107.507(a), Nonperformance of any written
agreement with SBA constitutes a violation ofthat regulatory section.
17. Pursuant to 13 C.P.R. §I07.l820(b), ifa licensee has a condition of"capital
impairment," it is not in compliance with the terms ofits leverage, and the SSA has the right to
impose the applicable remedies for non-compliance as provided by 13 C.P.R. §§ 107.1810(g)
and 107.l820(f). Pursuant to 13 C.F.R. §107.1820(c), OJV's Capital Impairment Percentage
may not exceed 60 %. 13 C.P.R. § 107.l830(c) provides further that the Capital Impairment
Percentage is calculated pursuant to a formula set forth in 13 C.F.R. §107.1840.
18. As of September 30,2010, SSA determined that GIV had a condition of
Capital Impairment of 82.3%, a percentage greater than that allowed under § 107.1830 ofthe
19. As a consequence of its failure to cure its condition ofcapital impairment
under 13 C.F.R. § 107.1820 (e)(3), by letter ofJanuary 5, 2011, SBA placed OIV in restricted
operation status under under 13 C.F.R. §107.1820(1).
20. As a further consequence of its failure to cure its condition ofcapital
impainnent, ON was notified, by letter dated May 11, 2011, that it had been placed into
liquidation status by SBA and that ON was to continue to comply with the restricted operations
conditions described therein.
I § r
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21. On or about April 17, 2012, GIY and SBA entered into a Wind Down
Agreement ("the Agreement") whereby SBA agreed to forebear from exercising its regulatory
and statutory remedies and allowed GIY to liquidate itself under the terms of a Wind Do,"n
Plan (''the Plan") submitted by OIY to SBA on or about April 6, 2012.
22. SBA's approval of the Plan, and its execution of the Agreement, was based
on cash flow projections from OIY anticipating the full repayment of SBA's outstanding
debenture leverage in fulL
23. GIY failed to meet its projected repayment targets for calendar year 2012.
24. On or about May 7,2013, SBA received revised projections from OIY, along
with an email. indicating that OIY was not going to meet its repayment targets for calendar year
25. By that same email dated May 7. 2013 and referenced in paragraph 24,
above, GIY informed SBA that it would not meet its repayment targets for 2014, due in pari to
the devaluation ofan asset held by OIY.
26. The revised projections from GIY indicate that it will be unable to repay
SBA's leverage in full even after calendar year 20)4 and will thus be unable to meet the terms
27. Under the terms ofthe Agreement, SSA's decision granting approval for the
OIY to proceed with its own liquidation was subject to reconsideration if the actual wind down
substantiaJly and negatively deviated from that projected by GIY in the Plan.
28. Section 11 or the Agreement provides that in consideration ofSBA's
agreement to the Plan, OIY would execute a consent order of receivership so that SBA could
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proceed with a receivership action if, in SBA's discretion (a) GIV was no longer substantially
meeting the material terms of the Plan or (b) the Plan was no longer advisable. Section 11 of
the Agreement further provides that the consent order of receivership could be executed by
SBA on or after September 16. 20] 2.
29. After reviewing GIV's revised projections as submitted on May 7, 2013,
SBA determined that GIV was no longer substantially meeting the tenns of the Plan and that the
Plan was no longer advisable.
30. By email dated June 18,2013, SBA advised GIV that it was no longer
substantially meeting the terms of the Plan and that the Plan was no longer advisable in part due
to the failure ofthe revised projections to provide for the repayment ofSBA's leverage in fuU.
31. GIV's failure to meet the tenns ofthe Plan and of the Agreement constitutes
nonperformance of a written agreement with SBA and violation of 13 C.F.R. §] 07.507(a).
32. As a consequence ofGIV's violation of 13 C.F.R. §] 07.507(a) ofthe
regulations, SBA is entitled to be appointed as liquidating receiver for GIV and is further
entitled to the injunctive reJiefprovided under the Act. 15 U.S.C. § 687c.
WHEREFORE, Plaintiff prays as follows:
A. That this Court enter the Consent Order filed simultaneously herewith and
grant injunctive relief. both preliminary and pennanent in nature, restraining and enjoining
GIV, its past or present general partner(s), managers, management company, directors, officers,
agents, employees. and other persons acting in concert or participation therewith from: (1)
making any disbursements ofGIV's funds; (2) using. investing, conveying, disposing,
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executing or encumbering in any fashion any funds or assets of GIV. wherever located; and (3)
further violating the Act or the regulations promulgated thereunder.
B. That this Court detennine and adjudicate GIV's noncompliance with and
violation ofthe Act and the Regulations promulgated thereunder.
C. That this Court, pursuant to 15 U.S.C. § 687c, take exclusive jurisdiction of
OIV and all of its assets, wherever located, appoint SBA as receiver of GIV for the purpose of
marshaling and liquidating the assets of OIV and satisfYing the claims ofcreditors as approved
by this Court, and such other relief as contained in the proposed order for the appointment of
SBA as receiver orON in accordance with 15 U.S.C. § 687c flJed simultaneously with this
Complaint and with Plaintiff's motion for injunctive relief.
D. That this Court grant such other relief as may' be deemed just and proper.
Assistant United States Attorney
Chief, Civil Division
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'.LLrLL'......, M. BERNSTEIN (PA.#
~ssistant United States Attorney
615 Chestnut Street Suile 1250
Philadelphia PA 19106·4476
(21S) 861-8618 (fax)
ARLENE M. EMBREY
U.S. Small Business Administration
409 Third Street, S.W. 7111 Floor
Washington DC 20416