SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported) January 27, 2005
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VELOCITY ASSET MANAGEMENT, INC.
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(Exact name of registrant as specified in Charter)
Delaware 000-161570 65-0008442
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(State of other Jurisdiction of (Commission file no.) (IRS employer
incorporation) identification no.)
48 S. Franklin Turnpike, 3rd Floor, Ramsey, NJ 07446
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (201-760-1030)
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(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
Forward Looking Statements
This Form 8-K and other reports we file from time to time with the
Securities and Exchange Commission (collectively the "Filings") contain or may
contain forward looking statements and information that are based upon beliefs
of, and information currently available to, our management as well as estimates
and assumptions made by our management. When used in the filings the words
"anticipate", "believe", "estimate", "expect", "future", "intend", "plan" or the
negative of these terms and similar expressions as they relate to us or our
management identify forward looking statements. Such statements reflect our
current view with respect to future events and are subject to risks,
uncertainties, assumptions and other factors (including the risks contained in
the section of this report entitled "Risk Factors") relating to our industry and
our operations and results of operations. Should one or more of these risks or
uncertainties materialize, or should the underlying assumptions prove incorrect,
actual results may differ significantly from those anticipated, believed,
estimated, expected, intended or planned.
Although we believe that the expectations reflected in the forward
looking statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Except as required by applicable law,
including the securities laws of the United States, we do not intend to update
any of the forward-looking statements to conform these statements to actual
results. The following discussion should be read in conjunction with our
financial statements and the related notes that appear elsewhere in this report.
Item 1.01. Entry into a Material Definitive Agreement
On January 27, 2005 (the "Closing Date"), our wholly owned subsidiary,
Velocity Investments, LLC ("Velocity"), entered into a Loan and Security
Agreement (the "Loan Agreement") with Wells Fargo Foothill, Inc., a California
corporation (the "Lender"), pursuant to which the Lender agreed to provide
Velocity with a two year $12,500,000 senior credit facility to finance the
acquisition of individual pools of unsecured consumer receivables that are
approved by the Lender under specific eligibility criteria set forth in the Loan
Agreement.
On the Closing Date, the following agreements were also entered into
with the Lender: a Continuing Guaranty (the "Guaranty"), under which we provide
a secure guaranty of Velocity's obligations under the Loan Agreement; a Security
and Pledge Agreement (the "Pledge Agreement"), by and among the Registrant and
the Lender, under which we pledged all of our assets to secure the credit
facility; and a Subordination Agreement (the "Subordination Agreement"), by and
among the Registrant, the Lender and Velocity, under which we agreed to
subordinate certain sums of the intercompany payable due and owing from Velocity
to the payments owed under the credit facility.
The details of the Loan Agreement, the Continuing Guaranty, the Pledge
Agreement, the Subordination Agreement and the credit facility, including all
information required by Item 1.01. of this Current Report on Form 8-K (this
"Report"), are set forth in Item 2.03. "Creation of a Direct Financial
Obligation or an Obligation under an Off-Balance Sheet Arrangement" below, the
contents of which are incorporated by reference herein.
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement.
The following is a summary of the Loan Agreement, the Guaranty, the
Pledge Agreement and the Subordination Agreement and is qualified in its
entirety by reference to the Loan Agreement and related agreements that are
filed as exhibits to this Report.
Pursuant to the Loan Agreement, the Lender has agreed to advance to
Velocity up to $12,500,000 to be used to finance up to 60% of the purchase price
of individual pools of unsecured consumer receivables that are approved by the
Lender under specific eligibility criteria set forth in the Loan Agreement. The
interest rate on the loan is 3.50% above the prime rate of Wells Fargo Bank,
N.A. The maturity date of the facility is January 27, 2008.
Use of the senior credit facility is subject to Velocity undertaking
certain restrictive covenants under the Loan Agreement including but not limited
to: a restriction on incurring additional indebtedness or liens; a change of
control of Velocity; a restriction on entering into transactions with affiliates
outside the course of Velocity's ordinary business; and a restriction on making
payments to the Registrant in compliance with the Subordination Agreement. In
addition, Velocity has agreed to maintain certain ratios with respect to
outstanding advances on the credit facility against the estimated remaining
return value on Lender financed portfolios, and, until Velocity's member's
equity equals or exceeds $3,250,000, Velocity has agreed to maintain at least
$3,250,000 in member's equity and subordinated debt. The Registrant has also
agreed to maintain at least $6,000,000 in stockholder's equity and subordinated
debt for the duration of the facility.
Pursuant to the Guaranty, we have irrevocably and unconditionally
guaranteed Velocity's obligations under the Loan Agreement. Three of our
executive officers, John C. Kleinert, W. Peter Ragan, Sr. and W. Peter Ragan,
Jr., are also providing joint and several limited guarantees of Velocity's
obligations under the Loan Agreement. Under the Pledge Agreement, we have, as
security for advances under the Loan Agreement, pledged all of our assets to the
Lender as secured party, including but not limited to all of our stock ownership
of J. Holder, Inc. and all our membership interests in Velocity and VOM, LLC.
Under the Subordination Agreement, all sums owing to the Registrant by Velocity
as an intercompany payable for advances or loans made or property transferred to
Velocity will be subordinated to the credit facility to the extend that such
sums, when added to Velocity's membership interest in the parent does not exceed
$3,250,000.
Item 8.01. Other Events
On February 2, 2005, Velocity Asset Management, Inc. (the "Company")
issued a press release (the "Press Release") entitled "Velocity Asset Management
Closes $12.5 Million Credit Facility With Wells Fargo Foothill" relating to the
$12,500,000 senior credit facility that the Company's subsidiary Velocity
entered into with Wells Fargo Foothill, Inc. to finance the purchase of pools of
unsecured non-performing consumer receivables. The Press Release, which is filed
herewith as Exhibit 99.1, is incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits
(a) Not Applicable.
(b) Not Applicable.
(c) Exhibits.
Number Description
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4.1 Loan and Security Agreement, dated as of
January 27, 2005, by and between Velocity
Investments, LLC and
4.2 General Continuing Guaranty, dated January
27, 2005, executed by Velocity Asset
Management, Inc. in favor of Wells Fargo
Foothill, Inc.
4.3 Security and Pledge Agreement, dated as of
January 27, 2005, by and between Velocity
Asset Management, Inc. and Wells Fargo
Foothill, Inc.
4.4 Subordination Agreement, dated as of January
27, 2005, by and between Velocity Asset
Management, Inc., Velocity Investments, LLC
and Wells Fargo Foothill, Inc.
99.1 Press release of Velocity Asset Management,
Inc. dated February 2, 2005
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this Report to be signed on its behalf by
the undersigned hereunto duly authorized.
VELOCITY ASSET MANAGEMENT, INC.
/s/ JOHN C. KLEINERT
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John C. Kleinert
Chief Executive Officer
Dated: February 1, 2005