Filing Details

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 13D/A

(Amendment No. 1)

 

Under the Securities Exchange Act of 1934*

 

ZAIS GROUP HOLDINGS, INC. 

(Name of Issuer)

Class A Common Stock, par value $0.0001 per share 

 

98887G106

 

Christian Zugel

Two Bridge Avenue, Suite 322

Red Bank, NJ 07701

(732) 530-3610

 

 

September 5, 2017

 

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. ☐

 

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See §240.13d-7 for other parties to whom copies are to be sent.

 

*The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

 

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

 

 

 

(2) The amount in row 11 does not include an aggregate of 187,498 Class A Shares currently held and 568,750 Class A Shares that could be acquired on October 2, 2017 under the Exchange Agreement by two trusts that are governed by an independent trustee and by CZ’s spouse. CZ disclaims beneficial ownership of all such shares because he does not have or share voting or investment power over such shares.

(3) The percentage of beneficial ownership reflected in this Statement is based upon 14,480,782 Class A Shares outstanding as of August 14, 2017, as set forth in the Issuer’s Quarterly Report on Form 10-Q filed on August 14, 2017, as would be adjusted to reflect the issuance of 831,250 Class A Shares that could be issued if CZ exercised his rights under the Exchange Agreement on October 2, 2017.

Under the Exchange Agreement, holders of Class A Units also have the right to exchange their Class A Units for Class A Shares upon a change of control of the Issuer, regardless of when that change of control occurs. A change of control includes a sale, lease or transfer of all or substantially all of the Issuer’s assets, including a sale of all Class A Units held by the Issuer; a person or group of persons (within the meaning of Section 13(d) of the Act) becoming the beneficial owner of a majority of the Issuer’s voting securities (excluding a group that includes CZ, his affiliates or the Class B Voting Trust) and a merger after the consummation of which members of the Board do not comprise at least a majority of the board of directors of the resulting entity or the Issuer’s voting securities do not represent a majority of the voting securities of the resulting entity.

 

The Exchange Agreement also provides that a holder of Class A Units will not have the right to exchange Class A Units if ZGP or the Issuer reasonably determines that such exchange would be prohibited by law or regulation or would violate the ZGP LLC Agreement or other agreements of the Issuer or ZAIS Group to which the holder of Class A Units may be subject. ZGP or the Issuer may impose additional restrictions on exchanges that it determines are necessary or advisable so that ZGP is not treated as a “publicly traded partnership” for United States federal income tax purposes.

Share Purchase Agreement

On September 5, 2017, the Reporting Persons entered into the Share Purchase Agreement to acquire the Target Shares for an aggregate purchase price of $26 million or $4.00 per Target Share payable in the manner set forth below:

·	On the Closing, Z Acquisition will make a cash payment of $5 million and issue a note (the “Promissory Note”) in the principal amount of $13 million with an interest rate of 8% per annum, payable quarterly in cash, and a maturity date of December 31, 2019, in each case, to Ramguard LLC; and

·	On or before each of January 30, 2018 and April 30, 2018 CZ will make a cash payment of $5 million and $3 million respectively to Ramguard LLC, in each case, together with interest in the amount of $125,000.

The Share Purchase Agreement also provides that in the event that within one year after the execution of the Share Purchase Agreement, Z Acquisition, CZ or any of their respective controlled affiliates enters into a definitive agreement with the Issuer or commences a tender offer recommended by the Issuer’s board for a Take Private Transaction at a price per share in excess of $4.00, each of the cash consideration amounts paid or payable to Ramguard LLC and the initial principal amount of the Promissory Note shall be adjusted on a pro rata basis, such that Ramguard LLC shall have received (or be entitled to receive) such greater per share consideration amount. A similar adjustment in the price payable for the Target Shares will be made if within the one (1) year period after the Share Purchase Agreement is executed, there is a change in control transaction or sale of a majority or more of the Class A Shares are acquired at a price per share in excess of $4.00.

The Share Purchase Agreement is included as Exhibit 99.8 to this Statement and is incorporated herein by reference.

Promissory Note

Under the Promissory Note, Ramguard LLC will be granted a security interest over (a) all of the equity securities of Z Acquisition, (b) all of the Class A Units of ZAIS Group Parent, LLC owned by CZ and (c) all of the equity securities of the Issuer and its subsidiaries held directly or indirectly by Z Acquisition, CZ and/or any entity wholly owned by Z Acquisition or CZ.  If and to the extent required at any time in order to comply with the federal margin regulations, CZ shall cause Z Acquisition either (x) to provide additional collateral for the outstanding balance of the Promissory Note or (y) prepay a portion of the outstanding balance under the Promissory Note.

 

The Promissory Note will also provide that upon a default, including a payment default and any default by Z Acquisition, the Issuer or any subsidiary in the payment of any judgment or the payment when due of any indebtedness for borrowed money in the amount of $1 million or more, which remains uncured beyond any applicable grace period, (i) the interest rate on the Promissory Note shall increase to 12.5% and (ii) Ramguard LLC will have the right (but not the obligation) to declare all amounts outstanding immediately due and payable and to exercise its security interest in the collateral securing the Promissory Note, and to recover collection costs (including reasonable legal fees).

Additionally, until such time that a Take Private Transaction is consummated by the Reporting Persons and their controlled affiliates and any third parties acting in concert with the Reporting Persons, if any of the Reporting Persons or any of their controlled affiliates receives any dividend or distribution from the Issuer or if CZ receives any compensatory payments or distributions in excess of his base salary, an amount equal to the net, after-tax cash proceeds received by the applicable Reporting Person or any such controlled affiliate, as the case may be, will be used by Z Acquisition to repay outstanding principal under the Promissory Note. After consummation of a Take-Private Transaction,  Z Acquisition will cause the Issuer and the Issuer’s subsidiaries not to consummate any sale of material assets for a price in excess of $2.5 million, and/or make any compensatory payments or distributions to CZ in excess of his base salary; provided, however, that Ramguard LLC’s prior written consent will not be required if an amount equal to the net, after-tax cash proceeds of any such sale of assets will be distributed by the Issuer and or its subsidiaries to their equity owners  and an amount equal to the net, after-tax proceeds of any such sale of assets or compensatory payment or distribution received by any of the Reporting Persons or any of their controlled affiliates (other than the  Issuer and its subsidiaries) will be used by Z Acquisition to repay outstanding principal under the Promissory Note. In addition, after consummation of a Take-Private Transaction, Z Acquisition will not (i) enter into any agreement that would cause a change in control transaction or sale of a majority or more of the Class A Shares or (ii) make any distributions to its equity owners other than tax distributions until such time that the unpaid principal and any accrued and unpaid interest under the Promissory Note has been paid off.

In the event CZ at any time is no longer an employee or officer of the Issuer, or is no longer the controlling shareholder of the Issuer and/or Z Acquisition, the unpaid principal and accrued and unpaid interest under the Promissory Note will become immediately due and payable.

All unpaid principal and accrued and unpaid interest under the Promissory Note may be paid in full or in part at the election of CZ (x) on any quarterly interest payment date occurring on or after the date the purchase price payable by CZ pursuant to the Share Purchase Agreement has been paid in full or (y) at any time in order to comply with the last sentence of the first paragraph under the heading “Promissory Note” above.