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| SMHG > SEC Filings for SMHG > Form 8-K on 13-May-2009 | All Recent SEC Filings |
13-May-2009
Entry into a Material Definitive Agreement, Termination of a Mate
(a) On May 11, 2009, Sanders Morris Harris Group Inc. (the "Company") entered into a Credit Agreement (the "Credit Agreement") with Prosperity Bank, as lender (the "Lender"). Pursuant to the terms of the Credit Agreement, the Lender made a $25,000,000 term loan (the "Loan") to the Company. The Loan bears interest at a per annum rate equal to the greater of (a) the prime rate published by The Wall Street Journal or (b) 5.00%. The Loan is repayable in 42 equal monthly installments of principal in the amount of $595,238.09 plus accrued interest. The Loan contains customary representations, warranties, and covenants and is secured by substantially all of the assets of the Company and its subsidiaries. Exhibit 99.1 is hereby incorporated by reference into Item 1.01.
(b) In addition, on May 11, 2009, the Company completed the purchase of 58
units (58%) of member interest in Edelman Financial Advisers, LLC ("EFA") from
Fredric M. Edelman and 8 units (8%) of member interest in EFA from Edward P.
Moore for an aggregate consideration consisting of (a) $25,500,000 in cash and
(b) a subordinated promissory note in the principal amount of $10,000,000. The
purchase was consummated in accordance with the terms of the agreement dated as
of January 1, 2009, as amended (the "Agreement") among the Company, Mr. Edelman
and Mr. Moore pursuant to which the parties agreed to make certain amendments to
(1) the Reorganization and Purchase Agreement dated as of May 10, 2005 (the
"Purchase Agreement"), among the Company, The Edelman Financial Center, Inc., a
Virginia corporation ("EFC Inc"), The Edelman Financial Center, LLC, a Delaware
limited liability company ("EFC LLC"), and Mr. Edelman, pursuant to which the
Company agreed to purchase 100% of the member interests in EFC LLC from EFC Inc.
and Mr. Edelman and (2) the Letter Loan Agreement and Letter Agreement each
dated December 8, 2006 (the "EFA Agreements"), between the Company and EFA,
pursuant to which the Company agreed to make certain loans to EFA and acquired
10 Units (10%) of member interest in EFA.
As part of the same transaction, the Purchase Agreement was amended, effective as of January 1, 2009, to delete references to the "Third Closing" and the EFA Agreements were terminated. Consequently, the Company is not required to pay the Third Closing Consideration. The Company will retain a 76% member interest in EFC LLC and EFC Inc. will retain a 24% member interest.
In connection with the funding of the Credit Agreement with the Lender, the Company amended the Credit Agreement dated as of May 9, 2005, between the Company and JPMorgan Chase Bank, National Association to terminate the commitment of the lender to make loans and issue new letters of credit, and to release and terminate all liens and security interests held by the lender.
The information set forth in Item 1.01(b) "Entry into a Material Agreement" is also furnished pursuant to this Item 2.01.
The information set forth in Item 1.01(a) "Entry into a Material Agreement" is also furnished pursuant to this Item 2.03 and Exhibit 99.1 is hereby incorporated by reference into Item 2.03.
The information set forth in Item 1.01(b) "Entry into a Material Agreement" is also furnished pursuant to this Item 2.06.
Although the Company has not completed a valuation of EFA following its purchase of the additional 66% member interest, it is expected that a substantial portion of the $35,500,000 purchase price will be accounted for as goodwill associated with the acquisition. The Company's goodwill related to acquisitions is required to be evaluated for impairment on a periodic basis under applicable accounting rules. As previously reported, in the past, reconciliation between fair market value of the reporting units and market capitalization was not deemed necessary as the Company's market capitalization was significantly greater. However, generally accepted accounting principles require that the Company consider the current market value of its common stock when evaluating goodwill for impairment. The impairment charge reduces the book value of the Company's goodwill to reflect the current price of the Company's common stock. Based on the price of the Company's common stock on the date the purchase of EFA was announced, the Company anticipates that it will take an impairment charge of a substantial portion of the goodwill associated with the EFA purchase. The Company is unable to make a determination of an estimate of the amount of the impairment charge at this time.
a. Financial statements of business acquired
Not Applicable
b. Pro forma financial information
Not Applicable
c. Exhibits
99.1 Credit Agreement dated as of May 11, 2009, between Sanders Morris Harris Group Inc. and Prosperity Bank.
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