UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
April 8, 2020
Date of Report (Date of earliest event reported)
ASTA FUNDING, INC.
(Exact name of registrant as specified in its charter)
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Delaware
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1-35637
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22-3388607
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(State or other jurisdiction of
incorporation or organization)
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(Commission File Number)
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(I.R.S. Employer
Identification No.)
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210 Sylvan Avenue
Englewood Cliffs, NJ 07632
(Address of principal executive offices, zip code)
(201) 567-5648
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Trading Symbol(s)
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Name of exchange on which registered
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Common stock, par value $0.01 per share
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ASFI
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Nasdaq Global Select Market
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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):
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☐
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Written communications pursuant to Rule 425 under the Securities
Act (17 CFR 230.425)
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☑
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
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Indicate by check mark whether the registrant is an emerging growth
company as defined in Rule 405 of the Securities Act of 1933
(§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange
Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
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Item 1.01.
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Entry Into a Material Definitive Agreement.
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Agreement and Plan of Merger
On April 8, 2020, Asta Funding, Inc., a Delaware corporation
(“Asta”), entered into an Agreement and Plan of Merger (the
“Merger Agreement”) with Asta Finance Acquisition Inc., a Delaware
corporation (“Parent”), Asta Finance Acquisition Sub Inc., a
Delaware corporation and a wholly-owned subsidiary of Parent
(“Merger Sub” and together with Parent, the “Parent Parties”),
pursuant to which Merger Sub shall merge with and into Asta and its
consolidated subsidiaries, with Asta surviving the Merger as a
wholly-owned subsidiary of Parent (the “Merger”).
The board of directors of Asta (“the Board”), acting upon the
unanimous recommendation of a special committee independent of
Asta’s Board and formed for the purpose of evaluating the possible
sale of Asta (the “Special Committee”), has unanimously approved
the proposed Merger. The consummation of the Merger is subject to
customary closing conditions, including the approval of the Merger
Agreement by a majority of the outstanding shares of the common
stock of Asta (the “Common Stock”) entitled to vote thereon, other
than the Parent, Gary Stern, Ricky Stern and certain related
parties that have executed the Stern Group Commitment Letter, as
described below (collectively, the “Stern Group”) and any
other officers and directors of Asta and any other person having
any equity interest in, or any right to acquire any equity interest
in, Merger Sub or any person of which Merger Sub is a direct or
indirect subsidiary. The Merger is expected to close during Asta’s
third fiscal quarter of 2020.
Under the terms of the Merger Agreement, if the Merger is
completed, holders of shares of Common Stock that are outstanding
immediately prior to the time of the consummation of the Merger
(the “Effective Time”) shall be entitled to receive $11.47 in cash
for each share of the Common Stock held by such stockholders (the
“Merger Consideration”), and all such shares shall be automatically
canceled and retired and shall cease to exist. Such Merger
Consideration shall not apply to each share of the Common Stock
that is owned immediately prior to the Effective Time by (i) Asta
(whether held in treasury or otherwise) or any direct or indirect
wholly-owned subsidiary of Asta or (ii) any of the Parent Parties,
including the Rollover Shares (as defined below) (collectively, the
“Excluded Shares”). The Excluded Shares shall be automatically
canceled and cease to exist as of the Effective Time. The Merger
Consideration shall also not apply to holders of Common Stock who
successfully exercise and perfect their appraisal rights under the
Delaware General Corporation Law (the “DGCL”).
Except as otherwise agreed to in writing prior to the Effective
Time of the Merger by Parent and a holder of any Asta stock options
with respect to any of such holder’s Asta stock options, each Asta
stock option, whether vested or unvested and whether with an
exercise price per share that is greater or less than, or equal to,
$11.47, that is outstanding immediately prior to the Effective
Time, will, as of the Effective Time, become fully vested and be
canceled and converted into the right to receive an amount in cash
from Asta as the surviving corporation equal to (a) the product of
(i) the excess, if any, of $11.47 over the exercise price per share
of the Common Stock subject to such Asta stock option multiplied by
(ii) the total number of shares of the Common Stock subject to such
Asta stock option, without interest, less (b) such amounts as are
required to be withheld or deducted under applicable tax
provisions.
The Merger Agreement contains customary representations and
warranties of Asta and the Parent Parties and customary pre-closing
covenants, including covenants requiring Asta (i) to use its
commercially reasonable efforts to preserve in all material
respects Asta’s business organization and maintain in all material
respects existing relations and goodwill, (ii) to conduct its
business in the ordinary course, and (iii) to refrain from
taking certain actions. The Merger Agreement also includes
customary provisions prohibiting any solicitation or negotiations
by Asta of other possible acquisition transactions or any adverse
change to the Board’s recommendation to approve the Merger.
The Merger Agreement contains customary termination rights and may
be terminated by the mutual written consent of both Asta and the
Parent prior to the Effective Time of the Merger, whether before or
after stockholder approval has been obtained. In addition, the
Merger Agreement may be terminated by Asta or Parent if: (i)
the Merger has not been completed by on or before December
31, 2020 (the “Outside Date”); (ii) there is an injunction or
similar order prohibiting the consummation of the merger (A) by a
governmental entity having jurisdiction over the business of Asta
and its subsidiaries (other than a de minimis portion of such
business) or (B) that, if not abided by, would potentially result
in criminal liability; or (iii) the Merger Agreement has been
submitted to the stockholders of Asta for adoption at a duly
convened stockholders meeting and the requisite vote shall not have
been obtained at such meeting, provided, that Parent shall not have
the right to terminate the Merger Agreement if the failure to
obtain the requisite vote is due to the failure of the Stern Group
to vote the shares of Common Stock beneficially owned or controlled
by the Stern Group pursuant to the terms and conditions of the
Voting Agreement (as defined below).
Parent may terminate the Merger Agreement if (i) there is a breach,
in any material respect, of any representation, warranty, covenant
or agreement on the part of Asta which would result in a failure of
certain conditions relating to Asta’s representations, warranties,
covenants and agreements to be satisfied and which breach is
incapable of being cured by the Outside Date, or is not cured
within thirty days following delivery of written notice of such
breach, so long as the Parent is not then in material breach of
their representations, warranties, agreements or covenants
contained in the Merger Agreement; (ii) the Board or the Special
Committee does not include its recommendation to vote in favor of
the proposal to adopt the Merger Agreement in the proxy statement
or changes its recommendation; (iii) Asta enters into an
alternative acquisition agreement; (iv) the Board or the Special
Committee approves or recommends any alternative proposal or
publicly proposes to take any of the previous actions; or (v) a
tender or exchange offer constituting an alternative proposal has
been commenced and Asta has not sent to its stockholders within ten
business days a statement disclosing that the Board or the Special
Committee recommends rejection of such tender or exchange offer; so
long as Parent terminates the Merger Agreement within thirty
calendar days of the occurrence listed in (ii) through (v)
above.
Asta may terminate the Merger Agreement if (i) there is a breach,
in any material respect, of any representation, warranty, covenant
or agreement on the part of the Parent which would result in a
failure of certain conditions relating to the Parent’s
representations, warranties, covenants and agreements to be
satisfied and which breach is incapable of being cured by the
Outside Date, or is not cured within thirty days following delivery
of written notice of such breach, provided that Asta is not then in
material breach of its representations, warranties, agreements or
covenants contained in the merger agreement; (ii) prior to the
approval of the proposal to adopt the Merger Agreement by Asta’s
stockholders, in order to enter into a definitive agreement with
respect to a superior proposal, provided that substantially
concurrently with such termination, Asta must enter into such
definitive agreement and pay to Parent the termination fee as
described below; or (iii) if all conditions to the Parent Parties’
obligation to consummate the Merger have been satisfied or
irrevocably waived in writing by Asta and Asta stands ready,
willing and able to close and the Parent Parties fail to consummate
the Merger within three business days following the required
closing date and Asta stood ready, willing and able to close during
such three business days.
Under specified circumstances, Asta will be required to pay Parent
a termination fee of $400,000. Parent will be required to pay Asta
a termination fee of $500,000 under certain circumstances. Asta
will be required to pay Parent (or one or more of its designees)
the documented out-of-pocket expenses incurred by the Parent and
its respective affiliates in connection with the Merger Agreement
and the financing and the transactions contemplated thereby, up to
a maximum amount of $250,000, if Asta or Parent has terminated the
Merger Agreement because the meeting of the Asta’s stockholders has
concluded and the approval of the proposal to adopt the Merger
Agreement by the required vote of the stockholders has not been
obtained. Any such amount will be credited against any Asta
termination fee payable to the Parent.
Gary Stern is chairman, founding president and chief executive
officer of Asta. As of his most recent Schedule 13D filed with the
SEC on November 22, 2019, he beneficially owns 33.2% of the
outstanding shares of Common Stock of the Company. Ricky Stern is
senior vice president of Asta. As of his most recent Schedule 13D
filed with the SEC on November 22, 2019, he beneficially owns
38.2% of the outstanding Common Stock of Company.
The foregoing summary of the Merger Agreement is qualified in its
entirety by reference to the complete text of such document, which
is filed as Exhibit 2.1 attached hereto and which is incorporated
herein by reference. The Merger Agreement has been attached as an
exhibit to provide investors with information regarding its terms.
It is not intended to provide any other factual information about
Asta. The representations, warranties and covenants contained in
the Merger Agreement were made solely for the purposes of the
Merger Agreement and for the benefit of the parties to the Merger
Agreement and may be subject to limitations agreed upon by the
contracting parties. Certain of the representations and warranties
have been made for the purposes of allocating contractual risk
between the parties to the Merger Agreement instead of establishing
these matters as facts. Investors are not third-party beneficiaries
under the Merger Agreement. In addition, the representations and
warranties contained in the Merger Agreement (i) are qualified by
information in a disclosure letter that the parties have exchanged,
(ii) were made only as of the dates specified in the Merger
Agreement, and (iii) in some cases are subject to qualifications
with respect to materiality, knowledge and/or other matters,
including standards of materiality applicable to the contracting
parties that differ from those applicable to investors. Moreover,
information concerning the subject matter of the representations
and warranties may change after the date of the Merger Agreement,
which subsequent information may or may not be fully reflected in
Asta’s public disclosures. Accordingly, investors should not rely
on the representations and warranties as characterizations of the
actual state of facts or condition of Asta or any of its
subsidiaries or affiliates.
Form of Voting Agreement
In connection with entering into the Merger Agreement, the Stern
Group has entered into a voting agreement with Asta (the “Voting
Agreement”) as a condition and inducement to the willingness of
Asta to enter into the Merger Agreement. The foregoing summary of
the Voting Agreement is qualified in its entirety by reference to
the complete text of such document, a form of which is filed as
Exhibit 10.1 attached hereto and which is incorporated herein by
reference.
Commitment Letters
In connection with entering into the Merger Agreement, the Stern
Group has entered into a rollover commitment letter in favor of the
Parent (the “Stern Group Commitment Letter”). Pursuant to the Stern
Group Commitment Letter, the Stern Group has committed to transfer,
contribute and deliver shares of Common Stock (the “Rollover
Shares”) to the Parent in exchange for common stock of the Parent.
The foregoing summary of the Stern Group Commitment Letter is
qualified in its entirety by reference to the complete text of such
document, a form of which is filed as Exhibit 10.2 attached hereto
and which is incorporated herein by reference.
In connection with the Merger Agreement, Parent entered into a
Commitment Letter with Bank Leumi USA (the “Debt Commitment
Letter”). Pursuant to the Debt Commitment Letter, Bank Leumi has
committed to provide a loan facility to Parent for purposes of
funding the Merger Consideration.
Limited Guarantee
In connection with entering into the Merger Agreement, Gary Stern
has executed and delivered a limited guarantee (the “Limited
Guarantee”) in favor of Asta as a condition and inducement of Asta
to enter into the Merger Agreement. Pursuant to the Limited
Guarantee, Gary Stern is guaranteeing certain obligations of the
Parent Parties in connection with the Merger Agreement. The
foregoing summary of the Limited Guarantee is qualified in its
entirety by reference to the complete text of such document, a form
of which is filed as Exhibit 10.3 attached hereto and which is
incorporated herein by reference.
Additional Information about the Merger and Where
to Find It
In connection with the proposed Merger, Asta will file a proxy
statement with the Securities and Exchange Commission (the “SEC”).
The proxy statement will contain important information about Asta,
the Merger and related matters. Asta will mail or otherwise deliver
the proxy statement to its stockholders when it becomes available.
Investors and stockholders of Asta are urged to read carefully the
proxy statement relating to the Merger (including any amendments or
supplements thereto) in its entirety when it is available, because
it will contain important information about the proposed
Merger.
Investors and stockholders of Asta will be able to obtain free
copies of the proxy statement for the proposed Merger (when it is
available) and other documents filed with the SEC by Asta through
the website maintained by the SEC at www.sec.gov. In addition,
investors and stockholders of Asta will be able to obtain free
copies of the proxy statement for the proposed Merger (when it is
available) by contacting Asta, Attn: Seth Berman,
sberman@astafunding.com.
Participants in the Merger
Asta and certain of its directors, executive officers and other
members of management and employees may, under SEC rules, be deemed
to be “participants” in the solicitation of proxies from
stockholders of Asta with respect to the proposed Merger.
Information regarding the persons who may be considered
“participants” in the solicitation of proxies will be set forth in
the Asta’s proxy statement relating to the proposed Merger when it
is filed with the SEC. Information regarding Asta’s directors and
executive officers is contained in Asta’s Annual Report on Form
10-K for the fiscal year ended September 30, 2019, which was filed
with the SEC on December 20, 2019 and amended on January 27, 2020,
and will also be available in the proxy statement that will be
filed by Asta with the SEC in connection with the Merger.
Cautionary Statement Regarding Forward-Looking
Statements
This document contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, Section 21E
of the Securities Exchange Act of 1934 and as that term is defined
in the Private Securities Litigation Reform Act of 1995, including,
but not limited to, Asta’s expectations or predictions of future
financial or business performance or conditions. Forward-looking
statements are sometimes identified by their use of the terms and
phrases such as “estimate,” “project,” “intend,” “forecast,”
“anticipate,” “plan,” “planning, “expect,” “believe,” “will,” “will
likely,” “should,” “could,” “would,” “may” or the negative of such
terms and other comparable terminology. These forward-looking
statements are subject to numerous assumptions, risks and
uncertainties, which change over time, are difficult to predict and
are generally beyond the control of Asta. Actual results may differ
materially from current projections.
Important factors that may cause actual results to differ
materially from the results discussed in the forward-looking
statements or historical experience include risks and
uncertainties, including but not limited to, the ability of the
parties to consummate the proposed Merger; satisfaction of closing
conditions to the consummation of the proposed Merger; the impact
of the announcement or the closing of the Merger on the Asta’s
relationships with its employees, existing customers or potential
future customers; and the ability to realize anticipated benefits
of the proposed Merger. Further information on the factors and
risks that could affect Asta’s respective businesses, financial
conditions and results of operations are contained in Asta’s
filings with the SEC, which are available at www.sec.gov.
Forward-looking statements contained in this Current Report on Form
8-K speak only as of the date hereof. Asta assumes no obligation to
update any forward-looking statement contained in this Current
Report on Form 8-K.
On April 8, 2020, Asta issued a press release announcing the
execution of the Merger Agreement. The press release is attached as
Exhibit 99.1 and is incorporated by reference herein.
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Item 9.01.
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Financial Statements and Exhibits.
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(d) Exhibits.
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Exhibit No.
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Description
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2.1*
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Agreement
and Plan of Merger, dated as of April 8, 2020, by and among Asta
Finance Acquisition, Inc., Asta Finance Acquisition Sub Inc.
and Asta Funding, Inc.
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10.1
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Form of
Voting Agreement between the Stern Group and Asta Funding, Inc.
dated April 8, 2020
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10.2
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The Stern
Group Commitment Letter dated April 8, 2020.
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10.3
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Form of
Limited Guarantee dated April 8, 2020.
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99.1
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Press
Release issued by Asta Funding, Inc. dated April 8, 2020.
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*
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The schedules and exhibits to the Agreement and Plan of Merger have
been omitted from this filing pursuant to
Item 601(b)(2) of Regulation S-K. Asta will furnish
copies of any such schedules or exhibits to the SEC upon
request.
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SIGNATURE
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.
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ASTA FUNDING, INC.
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Date: April 8, 2020
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By: /s/ Steven Leidenfrost
Steven Leidenfrost
Chief Financial Officer
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