CUSIP NO.   98887G106

 

1	NAMES OF REPORTING PERSONS
	I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
	Christian Zugel
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP			(a)	☒
				(b)	☐
3	SEC USE ONLY
4	SOURCE OF FUNDS (SEE INSTRUCTIONS)
	OO; PF
5	CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(D) OR 2(E)				☐
6	CITIZENSHIP OR PLACE OF ORGANIZATION
	Federal Republic of Germany
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7	SOLE VOTING POWER
			1,131,250 shares
		8	SHARED VOTING POWER
			6,500,000 shares
		9	SOLE DISPOSITIVE POWER
			1,131,250 shares
		10	SHARED DISPOSITIVE POWER
			6,500,000 shares
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
	7,631,250 shares (1)
12	CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)
	☒(2)
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
	49.6% (1)(3)
14	TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
	IN

 

 

CUSIP NO.   98887G106

 

1	NAMES OF REPORTING PERSONS
	I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
	Z Acquisition LLC
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP			(a)	☒
				(b)	☐
3	SEC USE ONLY
4	SOURCE OF FUNDS (SEE INSTRUCTIONS)
	OO; AF
5	CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(D) OR 2(E)				☐
6	CITIZENSHIP OR PLACE OF ORGANIZATION
	Delaware
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7	SOLE VOTING POWER
			0 shares
		8	SHARED VOTING POWER
			6,500,000 shares
		9	SOLE DISPOSITIVE POWER
			0 shares
		10	SHARED DISPOSITIVE POWER
			6,500,000 shares
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
	6,500,000 shares
12	CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)
	☐
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
	42.2% (3)
14	TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
	OO

 

 

(10) The shares reported above include 262,500 Class A Shares that could be acquired on April 2, 2018 if FT GRAT (as defined below) elected to exchange an equal number of Class A Units of ZAIS Group Parent, LLC in accordance with the terms of the Exchange Agreement described in Item 4.  Notwithstanding its rights under the Exchange Agreement, FT GRAT disclaims beneficial ownership of all such shares, as the Audit Committee of the Issuer has discretion to determine whether FT GRAT receives Class A Shares, cash or a combination of the two, upon an election to exchange Class A Units under the Exchange Agreement.

(11) The percentage of beneficial ownership reflected in this Statement is based upon 14,555,113 Class A Shares outstanding as of November 13, 2017, as set forth in the Issuer’s Quarterly Report on Form 10-Q filed on November 13, 2017, as would be adjusted to reflect the issuance of 262,500 Class A Shares that could be issued if FT GRAT exercised its rights under the Exchange Agreement on April 2, 2018.

 

---

Item 1. Security and Issuer.

 

This Amendment No. 4 to Schedule 13D (this “Amendment No. 4” or “Statement”) amends and restates that certain Amendment No.3 to Schedule 13D (“Amendment No.3”) filed with the Securities and Exchange Commission on December 18, 2017, which amended and restated that certain Amendment No.2 to Schedule 13D (“Amendment No. 2”) filed with the Securities and Exchange commission on November 22, 2017, which amended and restated that certain Amendment No. 1 to Schedule 13D filed with the Securities and Exchange Commission on September 6, 2017 (“Amendment No. 1”), which amended and restated the statement on Schedule 13D filed by CZ with the Securities and Exchange Commission on February 2, 2017 (the “Original Schedule 13D”) relating to the Class A Common Stock, par value $0.0001 per share (“Class A Shares”), of ZAIS Group Holdings, Inc., a Delaware corporation (the “Issuer”). The principal executive offices of the Issuer are located at Two Bridge Avenue, Suite 322, Red Bank, NJ 07701.

Item 2. Identity and Background.

(a) Name of Person filing this Statement:

 

This Statement is being filed jointly by:

·	Christian Zugel (“CZ”)

·	Z Acquisition LLC (“Z Acquisition”)

·	Sonia Zugel (“SZ”)

·	The Zugel Family Trust (“ZFT”)

·	Family Trust U/A Christian M. Zugel 2005 GRAT (“FT GRAT” and, together with CZ, Z Acquisition, SZ and ZFT, the “Reporting Persons”)

CZ is the managing member of Z Acquisition. The other members of Z Acquisition are ZFT, SZ and Daniel Curry (“DC”).

(b) Residence or Business Address:

 

CZ’s and Z Acquisition’s principal business address is Two Bridge Avenue, Suite 322, Red Bank, NJ 07701.

ZFT’s and FT GRAT’s principal address is c/o Fiduciary Trust International of Delaware as co-trustee, 1220 North Market Street, Suite 333, Wilmington, Delaware 19801.

SZ’s residence address is 35 Middletown Road, Holmdel, NJ 07733.

 

(c) Present Principal Occupation and Employment:

 

CZ is the Issuer’s Chairman and Chief Investment Officer.

Z Acquisition, a Delaware limited liability company, was formed for the primary purpose of entering into the Original Share Purchase Agreement (as defined below) and acquiring the Target Shares (as defined below).

ZFT, a Delaware generation skipping trust, was formed for the benefit of the children and future generation descendants of CZ.

SZ is CZ’s spouse and is not currently employed.

FT GRAT, a Delaware grantor retained annuity trust, was formed for the benefit of SZ and the children and future generation descendants of CZ.

(d) Criminal Convictions:

 

None of the Reporting Persons has been convicted in a criminal proceeding during the last five years excluding traffic violations or similar misdemeanors.

 

(e) Civil Proceedings:

 

None of the Reporting Persons has, during the last five years, been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction where, as a result of such proceeding, such Reporting Person was or became subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.

 

(f) Citizenship:

 

CZ is a citizen of the Federal Republic of Germany.

Z Acquisition is a Delaware limited liability company.

ZFT is a Delaware trust.

SZ is a citizen of the United States of America.

FT GRAT is a Delaware trust.

Item 3. Source and Amount of Funds or Other Consideration.

The source of funds for the purchase of the Target Shares is expected to be personal funds of the members of Z Acquisition, which funds will be callable by CZ in his capacity as managing member of Z Acquisition pursuant to the terms of that certain Second Amended and Restated Limited Liability Company Agreement of Z Acquisition, dated as of January 11, 2018 (the “2^nd A&R LLC Agreement”) in order to fund the purchase of the Target Shares. With respect to the other Class A Shares covered by this Statement, the information set forth in Items 4, 5 and 6 hereof is hereby incorporated by reference into this Item 3, as applicable.

Item 4. Purpose of Transaction.

The Original Schedule 13D was filed to reflect the fact that CZ could acquire 831,250 Class A Shares if (1) he elected to exchange an equal number of Class A Units (“Class A Units”) of ZAIS Group Parent, LLC (“ZGP”) under the terms of the Exchange Agreement described below and (2) if the Audit Committee of the Issuer elected, in its discretion, to settle such exchange in Class A Shares, rather than in cash or a combination of cash and Class A Shares. Since CZ’s ability to receive Class A Shares upon any exchange of Class A Units under the Exchange Agreement is subject to the discretion of the Issuer’s Audit Committee, he disclaims beneficial ownership of such Class A Shares. Amendment No. 1 was filed to reflect the acquisition of the Target Shares pursuant to the terms of the Original Share Purchase Agreement.

 

CZ is (i) the founder of ZAIS Group, LLC, the Issuer’s operating subsidiary; (ii) the holder, in his capacity as voting trustee of the Class B Voting Trust, of 100% of the Issuer’s Class B Common Stock, par value $.0001 per share (the “Class B Shares”) (which provides CZ effective voting control over matters put to a vote of the Issuer’s shareholders, including the election of directors); (iii) the Chairman of the Board of Directors of the Issuer (the “Board”); and (iv) the Issuer’s Chief Investment Officer. As the Issuer has previously disclosed, it has been undertaking a strategic review of its business and has retained Berkshire Capital Securities LLC as its financial advisor.

 

On September 5, 2017, CZ, Z Acquisition and Ramguard LLC (formerly known as d.Quant Special Opportunities Fund, L.P.) (“Ramguard”) entered into a Share Purchase Agreement (the “Original Share Purchase Agreement”) pursuant to which Z Acquisition agreed to acquire 6,500,000 Class A Shares held by Ramguard (the “Target Shares”).

Additionally, on September 5, 2017, following the execution and delivery of the Original Share Purchase Agreement, CZ and Z Acquisition delivered a letter to the Special Committee of the Issuer (the “Special Committee”) in connection with the possible negotiated acquisition of the remaining issued and outstanding Class A Shares by way of a merger (a “Take Private Transaction”). CZ’s and Z Acquisition’s proposal for the Take Private Transaction was irrevocably conditioned upon the approval of the Take Private Transaction by the Special Committee of the Issuer and by a majority of the issued and outstanding Class A Shares not held by CZ and Z Acquisition, their affiliates and the executive officers and other affiliates of the Issuer. The letter to the Special Committee of the Issuer is included as Exhibit 99.9 and is incorporated herein by reference.

On November 21, 2017, CZ and Z Acquisition filed a Schedule 13E-3 with the SEC which includes a preliminary information statement relating to the proposed Take Private Transaction. The Schedule 13E-3 is included as Exhibit 99.10 and is incorporated herein by reference.

On December 14, 2017, SZ, ZFT and DC were admitted as members of Z Acquisition, and CZ was appointed as managing member. The limited liability company agreement of Z Acquisition was amended and restated in its entirety by an Amended and Restated LLC Agreement (the “A&R LLC Agreement”) to reflect, among other things, such admissions and appointment.

On January 11, 2018, the Issuer, ZGH Merger Sub, Inc., a wholly-owned subsidiary of the Issuer (“Merger Sub”) and Z Acquisition entered into an Agreement and Plan of Merger (the “Merger Agreement”), which provides for, among other things, the merger of Merger Sub with and into the Issuer (the “Merger”), and pursuant to which each outstanding Class A Share (other than those described in Item 6) will be converted into the right to receive $4.10 per share in cash, without interest.

Additionally, on January 11, 2018, (a) the Original Share Purchase Agreement was amended and restated in its entirety by the A&R Share Purchase Agreement, (b) the A&R LLC Agreement was amended and restated in its entirety by the 2^nd A&R LLC Agreement,  (c) the Issuer, CZ, Z Acquisition, SZ, ZFT and FT GRAT entered into a Stockholder Voting and Support Agreement (the “Voting Agreement”) and (d) ZGP, Z Acquisition and CZ (solely for purposes of Section 4.02 thereof) entered into an Investment Agreement (the “2018 Investment Agreement”).

Other than as described in this Item 4 above and in Item 6 below, the Reporting Persons do not have any current plans or proposals that relate to or that would result in any of the transactions or other matters specified in clauses (a) through (j) of Item 4 of Schedule 13D.

 

Item 5. Interest in Securities of the Issuer.

 

(a) and (b) The information contained on the cover pages to this Statement is incorporated herein by reference. By virtue of the relationship reported under Item 2 of this Statement, CZ and Z Acquisition may be deemed to have shared voting and dispositive power with respect to all of the Target Shares.

 

(c) None

 

(d) None.

 

(e) Not applicable.

 

Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer.

2014 Investment Agreement

 

On March 17, 2015, the Issuer completed a business combination (the “Business Combination”) with ZGP pursuant to the Investment Agreement, dated as of September 16, 2014 (as amended on October 31, 2014 and March 4, 2015, the “2014 Investment Agreement”), by and among Issuer, ZGP and the members of ZGP (or the “ZGP Founder Members”). The 2014 Investment Agreement provided for the Issuer, in exchange for newly issued Class A Units, to contribute $78.2 million in cash to ZGP and transfer all of the outstanding Class B Shares to the ZGP Founder Members, including CZ, SZ, ZFT and FT GRAT, on a pro rata basis which Class B Shares were immediately deposited into the ZGH Class B Voting Trust (the “Class B Voting Trust”), of which CZ is the sole trustee.

 

The Class B Shares hold no economic interest in the Issuer and are not registered under the Exchange Act or listed on any securities exchange.

 

The description of the 2014 Investment Agreement does not purport to be complete and is qualified in its entirety by the text of the 2014 Investment Agreement which is included as Exhibit 99.1 and Exhibit 99.2 to this Statement and incorporated herein by reference.

 

Exchange Agreement

 

On March 17, 2015, in connection with the closing of the Business Combination, the Issuer, ZGP, the Company Unitholders (as defined therein, but which include CZ, SZ, ZFT and FT GRAT) and CZ, as trustee of the Class B Voting Trust, entered into an exchange agreement (as amended on July 21, 2015, the “Exchange Agreement”). The Exchange Agreement entitles each ZGP Founder Member, including CZ, ZFT, FT GRAT and SZ, to exchange all of their respective Class A Units for either (at the Issuer’s option):

·	CZ held 3,325,000 Class A Units, all of which are exchangeable for Class A Shares in accordance with the terms of the Exchange Agreement, but subject to the limitations set forth below.

·	ZFT held 525,000 Class A Units, all of which are exchangeable for Class A Shares in accordance with the terms of the Exchange Agreement, but subject to the limitations set forth below.

·	FT GRAT held 1,050,000 Class A Units, all of which are exchangeable for Class A Shares in accordance with the terms of the Exchange Agreement, but subject to the limitations set forth below.

·	SZ held 700,000 Class A Units, all of which are exchangeable for Class A Shares in accordance with the terms of the Exchange Agreement, but subject to the limitations set forth below.

The Exchange Agreement provides that the Issuer’s determination under the Exchange Agreement of the method used for settlement of the exchange (i.e., stock, cash or a combination thereof) shall be made by the Issuer’s Audit Committee.

 

Each of CZ, SZ, ZFT and FT GRAT was entitled to exercise his, her, or its exchange rights for the first time on April 3, 2017 and subsequently thereafter on the first business day of each fiscal quarter of the Issuer. In addition, during any 12-month period after March 17, 2017, the second anniversary of the closing of the Business Combination, each of CZ, SZ, ZFT and FT GRAT is subject to further limitations on exchange. During any such 12-month period, CZ, SZ, ZFT and FT GRAT may only exchange up to 25% of the aggregate number of Class A Units held as of the first day of such 12-month period in which the exchange occurs. As to each of CZ, SZ, ZFT and FT GRAT, this limitation will expire after the first exchange date at which CZ, SZ, ZFT or FT GRAT (as applicable) no longer holds Class A Units exceeding 10% of the maximum number of Class A Units previously held by CZ, SZ, ZFT or FT GRAT (as applicable).

 

The Exchange Agreement provides for exceptions to these limitations on exchange rights. After the second anniversary of the closing of the Business Combination, the limitations on exchange rights of CZ, SZ, ZFT and FT GRAT can be waived by the Compensation Committee of the Board.

 

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.

 

The description of the Exchange Agreement does not purport to be complete and is qualified in its entirety by the text of the Exchange Agreement which is included as Exhibit 99.3 and Exhibit 99.4 to this Statement and incorporated herein by reference.

 

Class B Voting Trust Agreement

 

On March 17, 2015, in connection with the closing of the Business Combination, the ZGP Founder Members, including CZ, SZ, ZFT and FT GRAT, and the Issuer entered into a voting agreement for the Class B Voting Trust (the “Voting Trust Agreement”). Pursuant to the Voting Trust Agreement and in his capacity as trustee of the Class B Voting Trust, CZ has voting power over the shares of Class B Shares held in the Class B Voting Trust. Each share of Class B Common Stock is entitled to 10 votes and there are currently 20,000,000 Class B Shares outstanding. Consequently, in his capacity as trustee of the Class B Voting Trust, CZ has effective voting control of the Issuer. The Class B Shares hold no economic interest in the Issuer and are not registered under the Exchange Act or listed on any securities exchange. The description of the Voting Trust Agreement does not purport to be complete and is qualified in its entirety by the text of the Voting Trust Agreement, as amended. The Voting Trust Agreement is included as Exhibit 99.5 to this Statement and incorporated herein by reference.

 

Registration Rights Agreement

 

On March 17, 2015, the Issuer and the Founder Members, including CZ, SZ, ZFT and FT GRAT, entered into the Registration Rights Agreement (the “Registration Rights Agreement”). Pursuant to the Registration Rights Agreement, the Issuer granted registration rights to the ZGP Founder Members, including CZ, SZ, ZFT and FT GRAT, and other holders of Class A Units with respect to Class A Shares to be issued upon exchange of the Class A Units pursuant to the Exchange Agreement. A demand registration must be for securities reasonably expected to result in aggregate gross proceeds in excess of $20 million and is otherwise subject to the conditions set forth in the Registration Rights Agreement. The description of the Registration Rights Agreement does not purport to be complete and is qualified in its entirety by the text of the Registration Rights Agreement, which is included as Exhibit 99.6 to this Statement and incorporated herein by reference.

Amended and Restated Share Purchase Agreement

On January 11, 2018, CZ and Z Acquisition entered into the A&R Share Purchase Agreement, which amended and restated the Original Share Purchase Agreement, to acquire the Target Shares for an aggregate purchase price of $26,650,000 or $4.10 per Target Share payable in the manner set forth below:

·

At the closing, Z Acquisition will make a cash payment of $10,250,000 and issue a promissory note and pledge agreement (the “Promissory Note”) in the principal amount of $13,325,000 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; and

·	On or before the three month anniversary of the closing, CZ will make a cash payment of $3,075,000 to Ramguard, together with interest in the amount of $125,000.

The acquisition of the Target Shares under the A&R Share Purchase Agreement is not conditioned upon the consummation of the Merger.

In accordance with the Original Share Purchase Agreement, Z Acquisition and CZ filed a Schedule 13E-3 with the SEC relating to the purchase of the Target Shares. Pursuant to the A&R Share Purchase Agreement, Z Acquisition, CZ and the Issuer will file an amendment to the Schedule 13E-3 relating to the purchase of the Target Shares and the other transactions contemplated by the A&R Share Purchase Agreement.

Under the A&R Share Purchase Agreement, effective upon the closing, Ramguard will assign and transfer to Z Acquisition all rights to vote or act by written consent with respect to the Target Shares with respect to each and every meeting of stockholders or action by written consent in lieu of a meeting having a record date on or prior to the date of transfer of the Target Shares to Z Acquisition on the stock transfer records of the Issuer and a meeting or (in the case of action by written consent) effective date following the closing. In furtherance of the foregoing, Ramguard will deliver to Z Acquisition, concurrently with the closing, a duly executed irrevocable proxy with respect to the Target Shares in the form set forth in the A&R Share and Purchase Agreement, with respect to each and every meeting of stockholders or action by written consent of stockholders after the closing with respect to the matters contemplated by the preceding sentence.

The A&R Share Purchase Agreement also provides that in the event that within one year after September 5, 2017, 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 $4.10, each of the cash consideration amounts paid or payable to Ramguard and the initial principal amount of the Promissory Note shall be adjusted on a pro rata basis, such that Ramguard 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 September 5, 2017, there is a change in control transaction or sale of a majority or more of the Class A Shares at a price per share in excess of $4.10.

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

Promissory Note

At the closing of the transactions contemplated by the A&R Share Purchase Agreement, Z Acquisition will issue the Promissory Note to Ramguard. Under the Promissory Note, Ramguard 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 (other than equity securities issued by the Issuer’s subsidiaries or equity tranches issued by CLOs, in each case, held by the Issuer or any direct or indirect subsidiary of the Issuer). 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, which includes, among other things, a payment 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 a 45-day grace period, or a breach of covenant by Z Acquisition or any pledgor under the Promissory Note which continues for 20 days (i) the interest rate on the Promissory Note shall increase to 12.5% and (ii) Ramguard 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 CZ, Z Acquisition and their controlled affiliates and any third parties acting in concert with CZ and Z Acquisition, if CZ or Z Acquisition 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 CZ or Z Acquisition 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’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 CZ or Z Acquisition 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.

Letter to Special Committee

On September 5, 2017, following the execution and delivery of the Original Share Purchase Agreement, CZ also delivered a letter to the Special Committee of the Issuer in connection with a possible Take Private Transaction at $4.00 per Class A Share. CZ’s and Z Acquisition’s proposal for the Take Private Transaction is irrevocably conditioned upon the approval of the Take Private Transaction by the Special Committee of the Issuer and by a majority of the issued and outstanding Class A Shares not held by CZ, Z Acquisition, their respective affiliates or any executive officers or other affiliates of the Issuer.

The letter to the Special Committee of the Issuer is included as Exhibit 99.9 and is incorporated herein by reference.

Second A&R LLC Agreement

On January 11, 2018, the A&R LLC Agreement was amended and restated in its entirety by the 2^nd A&R LLC Agreement to reflect the entry by Z Acquisition into the 2018 Investment Agreement. Under the terms of the 2^nd A&R LLC Agreement, the managing member has complete and exclusive control of the management of Z Acquisition and has no obligation to obtain the vote of the members on any matter, except with respect to the following matters which require the approval of members holding at least 80% of issued and outstanding units of Z Acquisition:

·	materially altering the nature and scope of the business of Z Acquisition, or creating or holding ownership interests in any subsidiary whose business is substantially unrelated to that of Z Acquisition;

·	effecting any liquidation, dissolution or winding up of Z Acquisition or any of its subsidiaries, in each case, unless required by applicable law (subject to the exercise of drag-along rights by CZ);

·	entering into any transaction with an affiliate of Z Acquisition or any member which is not on arm’s-length terms;

·	redeeming, purchasing, or otherwise acquiring any units issued by Z Acquisition, except for any redemption, purchase, or other acquisition of units on a pro rata basis or as otherwise provided in the 2nd A&R LLC Agreement;

·

admitting any new member (other than in the case of a permitted transferee of a member or persons who are issued units that are excluded from the pre-emptive rights of the members) to Z Acquisition or taking or otherwise accepting any additional capital contributions from any member subsequent to such member’s admission as a member of the Z Acquisition (other than pursuant the “Additional Funding” provisions of the 2nd A&R LLC Agreement which are summarized below);

·

materially amending or altering the terms of, or waiving any of Z Acquisition’s or the members’ rights or powers with respect to or under, the A&R Share Purchase Agreement or, following its execution and delivery, the Promissory Note, in a manner that is material and adverse to Z Acquisition or the members; or

·	incurring or guaranteeing any indebtedness for borrowed money of Z Acquisition in excess of $1,000,000, except for the Promissory Note, capital leases, trade debt or otherwise in the ordinary course of business.

The A&R LLC Agreement provides that the managing member may be removed for “cause” by members holding at least 25% of the issued and outstanding units of Z Acquisition. “Cause” means, with respect to a managing member, one or more of the following: (i) the conviction of, or plea of nolo contendere to, a serious felony (excluding any vehicular felony); (ii) any material breach of the 2^nd A&R LLC Agreement, not cured within thirty (30) days of written notice from Z Acquisition, that causes Z Acquisition and its subsidiaries, taken as a whole, material economic harm, or (iii) conduct in the performance of duties as a managing member rising to the level of fraud, in the case of subclauses (ii) and (iii), where the determination of material breach or fraud is made by a court of competent jurisdiction, pursuant to a final, non-appealable judgment.  Notwithstanding the foregoing, “cause” will not include any act or failure to act performed or omitted to be performed in good faith or with a reasonable belief that such act or failure to act was in or was not opposed to the interests of Z Acquisition.

By the terms of the 2^nd A&R LLC Agreement the managing member may call additional capital on a pro rata basis to satisfy the payment obligations under the Share Purchase Agreement and Z Acquisition’s obligations under the Promissory Note, the 2018 Investment Agreement and the 2^nd A&R LLC Agreement. Any member who fails to timely contribute its pro rata portion of a capital call forfeits its pre-emptive rights under the 2^nd A&R LLC Agreement.

Except for certain, limited exceptions, no member may transfer its units in Z Acquisition without the prior written approval of the managing member.  In the event that CZ or any of his affiliates or permitted transferees intends to sell any units in Z Acquisition to a third party, the other members may participate in the sale by exercising co-sale rights.  If CZ or any of his affiliates or permitted transferees intends to sell all of their units in Z Acquisition to a third party or if Z Acquisition intends to sell all or substantially all of the equity, assets or business of Z Acquisition, CZ may require that all members sell their units in the same transaction and, pursuant to the terms of the 2^nd A&R LLC Agreement, all members would be required to participate in such sale.

The 2^nd A&R LLC Agreement is included as Exhibit 99.11 to this Statement and is incorporated herein by reference.

Agreement and Plan of Merger

On January 11, 2018, the Issuer, Merger Sub and Z Acquisition entered into the Merger Agreement, which provides for, among other things, the merger of Merger Sub with and into the Issuer, and pursuant to which each issued and outstanding Class A Share, other than shares (i) beneficially owned by Z Acquisition, CZ, ZFT, FT GRAT, SZ and DC (collectively, the “Purchaser Group”), (ii) owned by stockholders who agree with Z Acquisition to retain certain of their Class A Shares (“Rollover Shares”), (iii) acquired by a holder of Class A Units  pursuant to an exercise of exchange rights under the Exchange Agreement prior to the closing (“Exchange Shares”), and (iv) owned by stockholders who have properly and validly perfected, and not withdrawn or lost, their statutory appraisal rights under Delaware law (such Class A Shares, “Appraisal Shares”), will be converted into the right to receive US $4.10 per share in cash without interest (the “Merger Consideration”), subject to any required withholding taxes.  Under the terms of the Merger Agreement, each restricted stock unit in respect of Class A Shares (“RSU”), whether or not vested, will be converted into the right to receive the Merger Consideration multiplied by the number of shares underlying the RSU, unless the holder thereof enters into an agreement with Z Acquisition (which is approved by the Issuer) to have such RSUs remain outstanding.

The Issuer has made customary representations and warranties and covenants in the Merger Agreement. Each party’s obligation to consummate the Merger is subject to certain conditions, including (i) obtaining the affirmative vote in favor of the adoption of the Merger Agreement of (A) the holders of the majority of the aggregate voting power of the issued and outstanding Class A Shares and Class B Shares and (B) the holders of a majority of outstanding Class A Shares not beneficially owned by any member of the Purchaser Group, any director or executive officer of the Issuer, Ramguard, any holder of Rollover Shares or Exchange Shares, or any affiliates of the foregoing persons; (ii) the absence of any legal restraint with respect to the Merger; (iii) the Issuer’s obtaining an opinion from an independent appraisal or valuation firm that, after taking into account the payment of the total Merger Consideration payable in respect of all Class A Shares and RSUs entitled to receive the Merger Consideration, the Issuer is solvent; (iv) the continued accuracy of the representations and warranties of Z Acquisition, in the case of the Issuer, and of the Issuer, in the case of Z Acquisition, as contained in the Merger Agreement (subject to certain qualifiers, as applicable); and (v) compliance in all material respects with the covenants and agreements contained in the Merger Agreement by Z Acquisition, in the case of the Issuer, and by the Issuer, in the case of Z Acquisition.  Further, the Issuer’s obligation to consummate the Merger is subject to additional conditions, including that (i) the transactions contemplated by the A&R Share Purchase Agreement shall have been consummated in accordance with the terms of the A&R Share Purchase Agreement; and (ii) the acquisition of additional Class A Units by Z Acquisition shall have been consummated in accordance with the terms of the 2018 Investment Agreement.  Z Acquisition’s obligation to consummate the Merger is also subject to additional conditions, including that (i) certain of the Issuer’s expenses in connection with the Merger and the other transactions contemplated by the Merger Agreement do not exceed $4,500,000; (ii) the number of Appraisal Shares immediately prior to the effective time of the Merger does not exceed 500,000 Class A Shares (other than any Appraisal Shares held by members of Purchaser Group, Ramguard, holders of Rollover Shares or Exchange Shares, or their respective affiliates); and (iii) the Issuer shall have not suffered a material adverse effect. The Merger is not subject to a financing condition.

The Merger Agreement contains certain termination rights for both Z Acquisition and the Issuer (with respect to the Issuer, only pursuant to a resolution adopted by the Special Committee), and further provides that upon the termination of the Merger Agreement under certain circumstances, the Issuer will be required to pay Z Acquisition and other members of the Purchaser Group, as applicable, an expense reimbursement amount up to a maximum of $1,500,000. Subject to certain limitations, either the Issuer or Z Acquisition may terminate the Merger Agreement if the Merger is not consummated by July 11, 2018 (the “Termination Date”); provided that the Issuer or Z Acquisition may extend the Termination Date under certain circumstances or waive certain obligations under the Merger Agreement.

The Merger Agreement contains customary non-solicitation provisions, whereby, among other things, the Issuer and its subsidiaries have agreed not to solicit or initiate, or knowingly facilitate or knowingly encourage the submission of, an alternative acquisition proposal. However, the Issuer may respond to and engage in discussions of certain unsolicited acquisition proposals, subject to certain conditions, if the Board or an independent committee of the Board (including the Special Committee) determines in good faith that such proposals are or could lead to superior proposals, such proposals did not result from the Issuer’s material breach of its obligations under such non-solicitation provisions of the Merger Agreement, and, if the Board or an independent committee of the Board (including the Special Committee) determines, after consultation with its counsel, that the failure to take action concerning such proposals could reasonably be expected to be contrary to its fiduciary duties under applicable law. The Board or an independent committee of the Board (including the Special Committee) may change its recommendation to approve the Merger if (i) in response to an intervening event either not known or the consequences of which were not foreseeable to the Special Committee on the date of the Merger Agreement, the Board or an independent committee of the Board (including the Special Committee) determines, after consultation with its outside legal counsel, that the failure to take action concerning such intervening event could reasonably be expected to be contrary to its fiduciary duties under applicable law or (ii) in response to an alternative acquisition proposal, the Board or an independent committee of the Board (including the Special Committee) determines in good faith, after consultation with its financial advisor and outside legal counsel, that such acquisition proposal constitutes a superior proposal and that the failure to take such action could reasonably be expected to be contrary to its fiduciary duties under applicable law.

Following the consummation of the Merger and the transactions contemplated by the A&R Share Purchase Agreement, 100% of the outstanding equity interests in the Issuer will be beneficially owned by the Purchaser Group, holders of Rollover Shares and holders of Exchange Shares, the Issuer will cease to be registered under the Act, and the Class A Shares will cease to trade on NASDAQ.

The description of the Merger Agreement does not purport to be complete and is qualified in its entirety by the text of the Merger Agreement which is included as Exhibit 99.13 to this Statement and incorporated herein by reference.

2018 Investment Agreement

On January 11, 2018, ZGP, Z Acquisition and CZ (solely with respect to Section 4.02 thereof) entered into the 2018 Investment Agreement, pursuant to which the parties (other than CZ) agreed that, immediately prior to the consummation of the Merger, ZGP will issue 3,085,287 Class A Units in exchange for a contribution from Z Acquisition to ZGP of an amount in cash equal to US $12,649,676.70.  ZGP intends to use the proceeds from the contribution by Z Acquisition to redeem for cash, at $4.10 per unit, a certain number of Class A Units held by the Issuer.  Following the redemption, the Issuer intends to use cash paid to it by ZGP for the redemption of Class A Units to fund a portion of the Merger Consideration.

The description of the 2018 Investment Agreement does not purport to be complete and is qualified in its entirety by the text of the 2018 Investment Agreement which is included as Exhibit 99.14 to this Statement and incorporated herein by reference.

Voting Agreement

On January 11, 2018, the Issuer, CZ, Z Acquisition, SZ, ZFT and FT GRAT (the “Covered Stockholders”) entered into the Voting Agreement, pursuant to which the Covered Stockholders agreed (i) to vote, or cause to be voted, all Class A Shares and Class B Shares owned by the Covered Stockholders for the adoption of the Merger Agreement and approval of the Merger, (ii) not to transfer or engage in certain transactions with respect to Class A Shares and Class B Shares owned by the Covered Stockholders (subject to certain exceptions), (iii) to use their reasonable best efforts to consummate the transactions contemplated by the A&R Share Purchase Agreement and the 2018 Investment Agreement, (iv) to refrain from seeking to remove any member of the Special Committee or taking any action that would limit the independence of authority of the Special Committee, and (v) to take, or refrain from taking, certain other actions in furtherance of the consummation of the Merger.

The description of the Voting Agreement does not purport to be complete and is qualified in its entirety by the text of the Voting Agreement which is included as Exhibit 99.15 to this Statement and incorporated herein by reference.

Item 7. Material to Be Filed as Exhibits

  

 

 

After reasonable inquiry and to the best of the undersigned’s knowledge and belief, the undersigned certifies that the information set forth in this Statement is true, complete and correct.

 

Date: January 16, 2018

---

AMENDED AND RESTATED SHARE PURCHASE AGREEMENT

This AMENDED AND RESTATED SHARE PURCHASE AGREEMENT (this “Agreement”), dated as of January 11, 2018, is made by and among Z Acquisition LLC, a Delaware limited liability company (“Buyer”), Ramguard LLC, a Delaware limited liability company (as successor-in-interest by conversion to d.Quant Special Opportunities Fund, L.P., a Delaware limited partnership) (“Seller”) and Christian Zugel (“CZ”).

RECITALS

WHEREAS, as of the date hereof, Seller owns 9,207,056 shares of Class A common stock, par value $0.0001 per share (“Class A Common Stock”), of ZAIS Group Holdings, Inc., a Delaware corporation (the “Company”).

WHEREAS, upon the terms and subject to the conditions set forth in this Agreement, Seller desires to sell, assign and transfer to Buyer, and Buyer desires to purchase from Seller, 6,500,000 shares of Class A Common Stock of the Company (the “Target Shares”), free and clear of all liens, encumbrances or other restrictions of any kind (“Liens”).

WHEREAS, on the date hereof, Buyer is entering into an Agreement and Plan of Merger (the “Merger Agreement”) by and among the Company, ZGH Merger Sub, Inc. (“Merger Sub”) and Buyer, which, among other things, provides for the merger (the “Merger”) of Merger Sub with and into the Company, pursuant to which the outstanding shares of Class A Common Stock (other than Excluded Shares and Appraisal Shares (each as defined in the Merger Agreement)) shall be converted into the right to receive $4.10 per share in cash, without interest.

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the parties hereto hereby approve and adopt this Agreement and mutually covenant and agree with each other as follows:

ARTICLE I
PURCHASE AND SALE

 

Section 1.04    Assignment of Voting Right and Proxy. Effective upon the Closing, Seller hereby assigns and transfers to Buyer all rights to vote or act by written consent with respect to the Target Shares with respect to each and every meeting of stockholders or action by written consent in lieu thereof having a record date on or prior to the date of transfer of the Target Shares to Buyer on the stock transfer records of the Company and a meeting or (in the case of action by written consent) effective date following the Closing Date. In furtherance of the foregoing, Seller shall deliver to Buyer, concurrently with the Closing, a duly executed proxy with respect to the Target Shares in the form attached hereto as Schedule C (the “Proxy”), which proxy shall be coupled with an interest sufficient in law to support an irrevocable proxy, and shall be irrevocable to the fullest extent permitted by law, with respect to each and every meeting of stockholders of the Company or action by written consent of stockholders of the Company after the Closing with respect to the matters contemplated by the preceding sentence. Seller hereby revokes any and all prior proxies (other than the Proxy) given by Seller with respect to the subject matter contemplated by this Section 1.04, and, except as contemplated by that certain Stockholder Voting and Support Agreement of even date herewith, Seller shall not grant any subsequent proxies with respect to such subject matter, or enter into any agreement or understanding with any person or entity to vote or give instructions with respect to the Target Shares in any manner inconsistent with the terms of this Section 1.04, until the termination of this Agreement.

ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER

Seller hereby represents and warrants to Buyer as of the date hereof and as of the Closing Date as follows:

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER AND CZ

Buyer and CZ hereby jointly and severally represent and warrant to Seller as of the date hereof and as of the Closing Date as follows:

ARTICLE IV
ACTIONS PRIOR TO THE CLOSING

ARTICLE V
CONDITIONS TO CLOSING

 

Section 5.01     Conditions to Obligations of Buyer. The obligations of Buyer to consummate the transactions contemplated hereby are subject to the satisfaction or waiver of the following conditions at or prior to the Closing:

 

ARTICLE VI
GENERAL PROVISIONS

 

If to Seller, to:

Ramguard LLC
1515 Ormsby Station Court
Louisville, KY 40223

Attention:  Neil Ramsey

with a copy (which shall not constitute notice), to:

Wyatt, Tarrant & Combs, LLP
500 West Jefferson Street
Suite 2800
Louisville, Kentucky 40202

Attention: Mark J. Farmer

If to Buyer or CZ, to:

Two Bridge Avenue

Suite 322

Red Bank NJ 07701

Attention:  Christian Zugel

with a copy (which shall not constitute notice), to:

 

Any such notice shall be effective (a) if delivered personally, when received, (b) if sent by overnight courier, when receipted for, or (c) if mailed, five business days after being mailed as described above.

 

 

 

 

 

 

 

 

 

 

[The remainder of this page is intentionally left blank.]

IN WITNESS WHEREOF, the parties have duly executed this Share Purchase Agreement as of the date first above written.

	BUYER:
	Z Acquisition LLC
	By:	/s/ Christian Zugel
		Name:	Christian Zugel
		Title:	Managing Member

 

	SELLER:
	Ramguard LLC
	By:	/s/ Christian Zugel
		Name:	Christian Zugel
		Title:	Managing Member

	CZ:
	/s/ Christian Zugel
	Christian Zugel

 

 

 

 

Note and Pledge Agreement

 

New York, New York [_____], 2018

$13,325,000

Pledgor	Pledged Interests	Certificate Number

Owner	Equity Interest

 

In the event that within one (1) year after September 5, 2017, Buyer, CZ or any of their respective controlled affiliates enters into a definitive agreement with the Company or commences a tender offer recommended by the Company’s board for a Take-Private Transaction at a price per share in excess of $4.10, each of the cash consideration amounts paid or payable to Seller and the initial principal amount of the promissory note contained in the Note and Pledge Agreement shall be adjusted on a pro rata basis, with effect from Closing, such that Seller 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 September 5, 2017, there is a change in control transaction or sale of a majority or more of the Class A common stock of the Company at a price per share in excess of $4.10.

IRREVOCABLE PROXY

TO VOTE 6,500,000 SHARES OF CLASS A COMMON STOCK OF

ZAIS GROUP HOLDINGS, INC.

Ramguard LLC (“Seller”) hereby irrevocably (to the fullest extent permitted by applicable law) appoints Christian Zugel, or any other designee of Z Acquisition LLC (“Buyer”), as the sole and exclusive attorney and proxy of Seller, with full power of substitution and resubstitution, to vote and exercise all voting and related rights (to the fullest extent that Seller is entitled to do so) with respect to the 6,500,000 shares of Class A Common Stock of Zais Group Holdings, Inc, (the “Company”) transferred to Buyer on the date of this Irrevocable Proxy (collectively, the “Target Shares”), with respect to each and every meeting of stockholders of the Company or action by written consent in lieu thereof having a record date on or prior to the date of transfer of the Target Shares to Buyer on the stock transfer records of the Company and a meeting or (in the case of action by written consent) effective date following the date of this Irrevocable Proxy. Upon Seller’s execution of this Irrevocable Proxy, any and all prior proxies (other than this Irrevocable Proxy) given by Seller with respect to the subject matter contemplated by this Irrevocable Proxy are hereby revoked with respect to such subject matter and Seller agrees not to grant any subsequent proxies with respect to such subject matter or enter into any agreement or understanding with any person to vote or give instructions with respect to such subject matter in any manner inconsistent with the terms of this Irrevocable Proxy (if and to the extent Seller retains such authority).

 This Irrevocable Proxy is irrevocable (to the fullest extent permitted by applicable law), is coupled with an interest sufficient in law to support an irrevocable proxy and is granted pursuant to that certain Amended and Restated Share Purchase Agreement dated as of January 11, 2018 (the “Agreement”).

The attorneys and proxies named above, and each of them, are hereby authorized and empowered by Seller to act as Seller’s attorney and proxy to vote the Target Shares, and to exercise all voting and other rights of Seller with respect to the Target Shares (including, without limitation, the power to execute and deliver written consents pursuant to Section 228(a) of the Delaware General Corporation Law), at every annual, special or adjourned meeting of the stockholders of the Company and in every written consent in lieu of such meeting having a record date on or prior to the date of transfer of the Target Shares to Buyer on the stock transfer records of the Company and a meeting or (in the case of action by written consent) effective date following the date of this Irrevocable Proxy.

All authority herein conferred and all obligations of Seller hereunder shall be binding upon the successors and assigns of Seller.

This Irrevocable Proxy is coupled with an interest as aforesaid and is irrevocable. This Irrevocable Proxy may not be amended or otherwise modified without the prior written consent of Buyer.

Dated:

Ramguard LLC

By: ______________
Name:
Title:

SECOND AMENDED AND RESTATED

LIMITED LIABILITY COMPANY AGREEMENT

OF

Z ACQUISITION LLC

(A DELAWARE LIMITED LIABILITY COMPANY)

DATED AS OF JANUARY 11, 2018

 

AMENDED AND RESTATED

LIMITED LIABILITY COMPANY AGREEMENT

OF

Z ACQUISITION LLC

This SECOND Amended and Restated Limited Liability Company Agreement of Z Acquisition LLC, a Delaware limited liability company (the “Company”), dated as of  January 11, 2018, is entered into by and among Christian M. Zugel (“Zugel”) and the other Persons listed under the heading “Members” on Schedule A attached hereto (Zugel, each such Person, and each other Member admitted to the Company from time to time pursuant to the terms of this Agreement is referred to herein as a “Member”).

WHEREAS, the Company was formed on September 1, 2017 pursuant to the Delaware Limited Liability Company Act (6 Del. C. § 18-101, et seq.), as amended from time to time (the “Act”);

WHEREAS, Zugel entered into a Limited Liability Company Agreement with respect to the Company on September 1, 2017 (the “Original Agreement”); and

WHEREAS, the Members entered into an Amended and Restated Limited Liability Company Agreement with respect to the Company on December 14, 2017 (the “Amended and Restated Agreement”) which amended and restated the Original Agreement in its entirety; and

WHEREAS, the Members and the Company wish to amend and restate the Amended and Restated Agreement to set forth their binding agreement as to the affairs of the Company, the conduct of the Company’s business and the rights and obligations of the Members.

NOW, THEREFORE, in consideration of the foregoing and of the covenants and agreements hereinafter set forth, it is hereby agreed that the Amended and Restated Agreement is hereby amended and restated in its entirety as follows:

 

ARTICLE II


MEMBERS

ARTICLE III


CAPITAL CONTRIBUTIONS

(a)     The Managing Member may require the Members to make additional Capital Contributions in order for the Company to satisfy the payment obligations set forth in the Ramguard Purchase Agreement, its obligations under the Ramguard Note and Pledge Agreement, its obligations under the Investment Agreement and its obligations under this Agreement (provided, that any additional Capital Contributions required to satisfy the Company’s obligations under this Agreement shall not exceed One Million Dollars ($1,000,000.00) which, for the avoidance of doubt, shall not include or apply to the obligations under the Ramguard Purchase Agreement, the Ramguard Note and Pledge Agreement or the Investment Agreement).  Upon such a determination, the Managing Member shall notify the Members (other than any Defaulting Member) of the amount of the Capital Contribution to be made pursuant to this Section 3.04 (a “Capital Call”) by delivering written notice to the Members (other than any Defaulting Member), at least five (5) Business Days prior to the date that the corresponding payment under the Ramguard Purchase Agreement, the Ramguard Note and Pledge Agreement, or this Agreement is due, specifying (i) the aggregate amount of the Capital Call required at such time, (ii) the amount of the Capital Call to be provided by each such Member, which amount shall be equal to the product of (A) the aggregate amount of the Capital Call to be made and (B) such Member’s Percentage Interest (excluding for purposes of the calculation thereof any Units held by Defaulting Members), (iii) the date on which such Capital Call is due (which date shall be at least two (2) Business Days prior to the date that the corresponding payment under the Ramguard Purchase Agreement or the Ramguard Note and Pledge Agreement is due), and (iv) the bank account for the wire transfer of cash amounts, and any other information the Managing Member determines.  The Members satisfying such Capital Call shall receive additional Units at a price per Unit equal to the Fair Market Value of such Units, as determined by the Managing Member in good faith.

ARTICLE IV


MANAGEMENT

The Managing Member shall provide the Members advance written notice of the Company’s intention to make any decision or take any action set forth in this Section 4.03.

ARTICLE V


REPRESENTATIONS, WARRANTIES AND COVENANTS

ARTICLE VI


CAPITAL ACCOUNTS

The foregoing provisions and the other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Treasury Regulations Section 1.704-1(b) and shall be interpreted and applied in a manner consistent with such Treasury Regulations.  The Managing Member shall modify the manner in which the Capital Accounts are maintained if necessary to comply with such Treasury Regulations.

ARTICLE VII


ALLOCATIONS

 

ARTICLE VIII


DISTRIBUTIONS

ARTICLE IX


BOOKS AND RECORDS; TAX MATTERS

ARTICLE X


LIABILITY, EXCULPATION AND INDEMNIFICATION

ARTICLE XI


PREEMPTIVE RIGHTS OF MEMBERS

ARTICLE XII


RIGHTS AND RESTRICTIONS ON UNITS

 

ARTICLE XIII


DISSOLUTION, LIQUIDATION AND TERMINATION

Notwithstanding the foregoing, the expulsion, bankruptcy, death or dissolution of any Member or the occurrence of any other event that terminates the continued membership of any Member in the Company under the Act shall not, in and of itself, cause the dissolution of the Company.  In such event, the remaining Member(s) shall continue the business of the Company without dissolution.  In the event of the death of a Member, the Units owned by the deceased Member shall automatically be transferred to such Member’s heirs (provided that, within a reasonable time after such transfer, the applicable heirs comply with Section 12.06).

provided, that no payment or distribution in any of the foregoing categories shall be made until all payments in each prior category shall have been made in full (or reasonable provision shall have been made for payment of the same), and provided, further, that, if the payments due to be made in any of the foregoing categories exceed the remaining assets available for such purpose, such payments shall be made to the Persons entitled to receive the same, pro rata in accordance with the respective amounts due to them.

ARTICLE XIV


MISCELLANEOUS

If to the Company:

Z Acquisition LLC

Two Bridge Avenue, Suite 322

Red Bank, New Jersey 07701

Attn: Christian Zugel

Email:  christian.zugel@zaisgroup.com

with copies (which shall not constitute notice) to:

Fried, Frank, Harris, Shriver & Jacobson LLP

One New York Plaza

New York, NY 10004

Attn:  Warren de Wied, Esq.

Email:  warren.de.wied@friedfrank.com

If to the Managing Member:

Christian Zugel

35 Middletown Road

Holmdel, New Jersey 07733

Email:  christian.zugel@zaisgroup.com

with copies (which shall not constitute notice) to:

Fried, Frank, Harris, Shriver & Jacobson LLP

One New York Plaza

New York, NY 10004

Attn:  Warren de Wied, Esq.

Email:warren.de.wied@friedfrank.com

If to any other Member, at the address set forth below such Member’s name on the Schedule A attached hereto, or at such other address as such Member may hereafter designate by written notice to the Company.

Notices shall be delivered by personal delivery, by email or by a recognized courier service and shall be effective upon receipt, provided, that notices shall be deemed to have been received:

provided, however, that any action taken pursuant to this power shall not, in any way, increase the liability of the Members beyond the liability expressly set forth in this Agreement, and provided, further, that, where action by the Managing Member or the Members is required, such action shall have been taken.

Such attorney-in-fact is not by the provisions of this Section 14.14 granted any authority on behalf of the undersigned to amend this Agreement, except as provided for in this Agreement.  Such power of attorney is coupled with an interest and shall continue in full force and effect notwithstanding the subsequent death or incapacity of the Member granting such power of attorney.

ARTICLE XV


DEFINED TERMS

“Act” has the meaning given in the recitals to this Agreement.

“Adjusted Capital Account Deficit” means, with respect to any Member, the deficit balance, if any, in such Member’s Capital Account as of the end of the relevant Taxable Year, after giving effect to the following adjustments:

The foregoing definition of Adjusted Capital Account Deficit is intended to comply with the provisions of Treasury Regulation Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith

“Affiliate” means, with respect to any Person, any other Person, which directly or indirectly controls, is controlled by or is under common control with such Person.

“Agreement” means this Amended and Restated Limited Liability Company Agreement of the Company, as this Agreement may be amended, modified, supplemented or restated from time to time after the date hereof.

“Amended and Restated Agreement” has the meaning given in the recitals to this Agreement.

“Assumed Tax Rate” means the highest combined marginal federal, state and local income tax rates (including applicable self-employment taxes and the net investment income tax imposed by Section 1411 of the Code), in effect at the relevant time, generally applicable to an individual who is a resident of New Jersey, taking into account (i) the character of the income and (ii) the deductibility of state and local income taxes for federal income tax purposes, in each case, as reasonably determined by the Managing Member.

“Available Cash” means all cash receipts of the Company (but excluding Capital Contributions and proceeds of any loan which are not used by the Company), plus cash available from any reduction in the amount of any reserves of the Company, less the sum of the following to the extent made from such cash receipts or reserves: (a) all cash expenditures of the Company (except distributions to the Members), including debt service and expenses and costs incurred in the acquisition, ownership, or management of the Company’s property, and (b) funds set aside as reserves for contingencies, working capital, debt service, taxes, insurance or other anticipated costs or expenses incident to the conduct of the Company’s business.

“Book Value” means, with respect to any Company asset, the adjusted basis of such asset for federal income tax purposes, except as follows:

“Business Day” means any day excluding Saturday, Sunday and any day which is a legal holiday under the laws of the State of New York or the State of Delaware, or is a day on which banking institutions located in the State of New York, the City of New York or the State of Delaware are authorized or required by Law or other governmental action to close.

“Capital Account” has the meaning given in Section 6.01(a).

“Capital Call” has the meaning given in Section 3.04(a).

“Capital Contribution” means, for any Member, the total amount of cash and the Fair Market Value of any property, as determined by the Managing Member in good faith, contributed to the Company by such Member.

“Capital Transaction” means the sale, exchange or other disposition of all or substantially all of the Company’s assets (including securities) in one or a series of related transactions.  For purposes of this definition, the phrase “other disposition” includes any transaction not in the ordinary course of business which results in the Company’s or the Members’ receipt of cash or other consideration, including financings, refinancings, mergers, consolidations, or conversions of the Company.

“Cause” means, with respect to a Managing Member, one or more of the following: (i) the conviction of, or plea of nolo contendere to, a serious felony (excluding any vehicular felony); (ii) any material breach of this Agreement, not cured within thirty (30) days of written notice from the Company, that causes the Company and its Subsidiaries, taken as a whole, material economic harm, or (iii) conduct in the performance of duties as a Managing Member rising to the level of fraud, in the case of subclauses (ii) and (iii), where the determination of material breach or fraud is made by a court of competent jurisdiction, pursuant to a final, non-appealable judgment.  Notwithstanding the foregoing, “Cause” will not include any act or failure to act performed or omitted to be performed in good faith or with a reasonable belief that such act or failure to act was in or was not opposed to the interests of the Company.

“Certificate of Formation” means the Certificate of Formation of the Company, as amended from time to time.

“Code” means the Internal Revenue Code of 1986, as amended.

“Company” has the meaning given in the preamble to this Agreement.

“Company Minimum Gain” shall have the meaning set forth for “partnership minimum gain” in Treasury Regulation Section 1.704-2(d).

“Confidential Information” has the meaning given in Section 2.04.

“control,” including the terms “controlled by” and “under common control with,” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, as trustee or executor, as general partner or managing member, by contract or otherwise, including the ownership, directly or indirectly, of securities having the power to elect a majority of the board of directors or similar body governing the affairs of such Person.

“Corporate Opportunities Group” has the meaning given in Section 2.05(b)(i).

“Co-Sale Notice” has the meaning given in Section 12.04(c).

“Co-Sale Participant” has the meaning given in Section 12.04(c).

“Co-Sale Period” has the meaning given in Section 12.04(c).

“Co-Sale Portion” has the meaning given in Section 12.04(d).

“Co-Sale Transfer” has the meaning given in Section 12.04(a).

“Covered Person” means a Member, any Affiliate of a Member, any officer, director, manager, shareholder, employee, partner or member of a Member or any of its Affiliates, the Managing Member, or any Officer of the Company.

“Defaulting Member” has the meaning given in Section 3.04(b).

“Depreciation” means, for each Fiscal Year, an amount equal to the depreciation, amortization, or other cost recovery deduction allowable with respect to an asset for such Fiscal Year for federal income tax purposes, except that if the Book Value of an asset differs from its adjusted basis for federal income tax purposes at the beginning of such Fiscal Year, Depreciation shall be an amount which bears the same ratio to such beginning Book Value as the federal income tax depreciation, amortization, or other cost recovery deduction for such Fiscal Year bears to such beginning adjusted tax basis; provided, that if the adjusted basis for federal income tax purposes of an asset at the beginning of such Fiscal Year is zero and the Book Value of the asset is positive, Depreciation shall be determined with reference to such beginning Book Value using any permitted method selected by the Managing Member.

“Drag Transaction” has the meaning given in Section 12.05(a).

“Dragged Member” has the meaning given in Section 12.05(a).

“Dragging Member” has the meaning given in Section 12.05(a).

“Equity Purchase Right” has the meaning given in Section 11.01(a).

“Excluded Units” means (i) Units issuable to officers, employees or consultants of the Company or any Subsidiary of the Company (including, for the purposes of this definition, Holdings and its Subsidiaries) pursuant to an option plan approved by the Managing Member, if any (provided, the aggregate Units issued pursuant to such option plan (together with the aggregate Units issued pursuant to clause (ii) hereof) shall not exceed fifteen percent (15%) of the issued and outstanding Units), (ii) Units issuable (and/or rights granted) under any other equity incentive plan approved by the Managing Member, if any (provided, that the aggregate Units issued pursuant to this clause (ii) (together with the aggregate Units issued pursuant to clause (i) hereof) shall not exceed fifteen percent (15%) of the issued and outstanding Units), (iii) any Units issuable pursuant to any reclassification or subdivision of, or as a dividend or other distribution on, the Units, (iv) any Units issuable as consideration for the acquisition by the Company or any Subsidiary of the Company of another business entity or interest therein (including, without limitation, a joint venture or strategic alliance) by merger, stock purchase, purchase of all or substantially all of the assets, or other business combination or investment (provided, that such acquisition has been approved by the Managing Member), (v) any Units issuable to lessors, financial institutions or similar Persons, in each case, primarily for business purposes, including licensing or research or development activities (provided, that the principal purpose of such transaction is not to raise capital through the issuance or sale of equity securities), and (vi) any Units issuable pursuant to Section 3.04.

“Exercising Member” has the meaning given in Section 11.01(d).

“Fair Market Value” of Units or other property, as the case may be, means the cash price that a Third Party would pay to acquire all of such Units (computed on a fully-diluted basis after giving effect to the exercise of any and all outstanding conversion rights, exchange rights, warrants and options) or other property in an arm’s-length transaction, assuming with respect to the Fair Market Value of Units, that the Company was being sold in a manner reasonably designed to solicit all possible participants and permit all interested Persons an opportunity to participate and to achieve the best value reasonably available to the Members at the time, taking into account all existing circumstances (provided, that in no event shall any minority interest discount be taken into account in calculating the Fair Market Value of any Units), including, without limitation, the terms and conditions of all agreements (including this Agreement) to which the Company is then a party or by which it is otherwise benefited or affected.

“Fiscal Year” has the meaning given in Section 1.05.

“Funding Shortfall” has the meaning given in Section 3.04(b).

“Governmental Authority” means any nation or government, any foreign or domestic federal, state, county, municipal or other political instrumentality or subdivision thereof and any foreign or domestic entity or body exercising executive, legislative, judicial, regulatory, administrative or taxing functions of or pertaining to government, including any court.

“Holdings” has the meaning given in Section 1.03.

“Initial Public Offering” means the initial bona fide underwritten public offering and sale of Units (or other equity securities of the Company or any Subsidiary of the Company, or of any successor of the Company or any of its Subsidiaries); provided, that following such offering, such equity securities are listed on a United States national securities exchange or quoted on any United States automated securities quotation system.

“Interest” means a limited liability company interest in the Company, which represents the interest of each Member in and to the capital and Profits and Losses of the Company and such Member’s right to receive distributions of the Company’s assets (liquidating or otherwise), notices and information, and all other rights, benefits and privileges enjoyed by such Member and all obligations, duties and liabilities imposed on such Member (in each case under the Act, the Certificate of Formation, this Agreement or otherwise), all as set forth in this Agreement, and “Interests” refers to such interests, collectively.

“Interest Holder” means any Person who holds an Interest, whether as a Member or an unadmitted assignee of a Member.

“Investment Agreement” means that certain Investment Agreement, dated as of January 11, 2018, between the Company and ZGP.

“Involuntary Transfer” has the meaning given in Section 12.03.

“Involuntary Transferee” has the meaning given in Section 12.03.

“IRS” means the United States Internal Revenue Service.

“Issuance Notice” has the meaning given in Section 11.01(b).

“Law” means (a) any federal, state, local or foreign constitution, treaty, law, statute, code, regulation, ordinance, order, decree, rule, or other requirement with similar effect of any Governmental Authority (including common or case law) and (b) any judgment, order, writ, injunction, decision, ruling, decree or award of any Governmental Authority.

“Legal Representative” means the guardian, executor, administrator or other legal representative of a Member which is an individual, and all references herein to such Member shall include a reference to such Member’s Legal Representative, if any, unless the context otherwise requires.

“Litigation” means any claim, action, suit, proceeding, arbitration, or governmental investigation, audit or inquiry.

“Losses” has the meaning given in Section 6.01(b).

“Managing Member” has the meaning given in Section 4.01.

“Member” and “Members” has the meaning given in the preamble to this Agreement and includes any Person admitted as an additional or substitute Member of the Company pursuant to this Agreement.

“Member Minimum Gain” with respect to each Member Nonrecourse Debt, means the amount of Company Minimum Gain (as determined according to Treasury Regulation Section 1.704-2(d)(1)) that would result if such Member Nonrecourse Debt were treated as a nonrecourse liability, determined in accordance with Treasury Regulation Section 1.704-2(i)(3).

“Member Nonrecourse Debt” shall have the meaning set forth in Treasury Regulation Section 1.704-2(b)(4) with respect to the term “partner nonrecourse debt.”

“Member Nonrecourse Deduction” shall have the meaning set forth in Treasury Regulation Section 1.704-2(i)(2) with respect to the term “partner nonrecourse deductions,” and the amount of Member Nonrecourse Deductions with respect to a Member Nonrecourse Debt for a Company Taxable Year shall be determined in accordance with the rules of Treasury Regulation Section 1.704-2(i)(2).

“misallocated item” has the meaning given in Section 7.03.

“Net Capital Transaction Proceeds” means any and all proceeds (whether in the form of cash or property) received by the Company from a Capital Transaction, reduced by expenses incurred by the Company in connection with such Capital Transaction, liabilities of the Company which are repaid out of the proceeds from such Capital Transaction, and such reserves as the Managing Member may determine to be necessary for the needs of the Company.

“Non-Purchasing Member” has the meaning given in Section 11.01(d).

“Notice Recipients” has the meaning given in Section 12.04(b).

“Officers” has the meaning given in Section 4.02.

“Original Agreement” has the meaning given in the recitals to this Agreement.

“Percentage Interest” means, with respect to each holder of any Units, as of any date, (i) the aggregate number of Units held by such holder on such date, divided by (ii) the aggregate number of then outstanding Units on such date.

“Permitted Transferee” means, with respect to any Member, (a) any spouse, parent, sibling, descendant (whether natural or adopted and including stepchildren) (each, a “Family Member”) of such Member who is a natural person, (b) any trust, family limited partnership or other estate planning vehicle solely for the benefit of such Member and/or one or more Family Members of such Member (and the trustees of which are solely such Member and/or one or more Family Members of such Member), and (c) any Affiliate of such Member; provided, that in any such case such Transferee shall agree in a writing to be bound by and to comply with all applicable provisions of this Agreement in accordance with Section 12.06.

“Person” means any individual, corporation, association, partnership (general or limited), joint venture, trust, estate, limited liability company, or other legal entity or organization.

“Preemptive Participants” has the meaning given in Section 11.01(a).

“Preemptive Portion” has the meaning given in Section 11.01(c).

“Preemptive Units” has the meaning given in Section 11.01(a).

“Profits” has the meaning given in Section 6.01(b).

“Prospective Transferee” has the meaning given in Section 12.06.

“Ramguard” means Ramguard LLC, a Delaware limited liability company (as successor-in-interest by conversion to d.Quant Special Opportunities Fund, L.P.).

“Ramguard Note and Pledge Agreement” means that certain Promissory Note and Pledge Agreement to be issued by the Company to Ramguard in accordance with the terms of the Ramguard Purchase Agreement.

“Ramguard Purchase Agreement” means that certain Share Purchase Agreement entered into by and between Ramguard and the Company, dated as of September 5, 2017.

“Regulatory Allocations” has the meaning given in Section 7.02(f).

“Rule 144” has the meaning given in Section 5.01(e).

“Securities Act” means the Securities Act of 1933, as amended from time to time.

“Subsidiary” or “Subsidiaries” means, with respect to any specific Person, any other Person of which a majority of the outstanding shares or other equity interests having the power to vote for directors or comparable managers are owned, directly or indirectly, by the specified Person.

“Tax Matters Partner” has the meaning given in Section 9.02(b).

“Taxable Year” means the Company’s taxable year ending on December 31 (or part thereof in the case of the Company’s first and last taxable year), or such other year as is (i) required by Code Section 706 or (ii) determined by the Managing Member (if no year is so required by Code Section 706).

“Third Party” means any Person who, immediately prior to the contemplated transaction, is not (i) a Permitted Transferee of a Member or an Affiliate thereof or (ii) a shareholder, partner or member of a Member or an Affiliate thereof.

“Transfer” or “Transferred” in respect of any Units, property or other assets, any sale, assignment, hypothecation, lien, encumbrance, transfer, distribution or other disposition thereof or of a participation therein, or other conveyance of legal or beneficial interest therein, including rights to vote and to receive dividends or other income with respect thereto, or any short position in a security or any other action or position otherwise reducing risk related to ownership through hedging or other derivative instruments, whether voluntarily or by operation of Law, or any agreement or commitment to do any of the foregoing, in each case, other than pursuant to the Ramguard Note and Pledge Agreement.

“Transfer Notice” has the meaning given in Section 12.04(b).

“Transferee” means any Person that is a transferee of all or a portion of a Member’s Units (including any Permitted Transferee).

“Transferred Units” has the meaning given in Section 12.04(b).

“Transferring Member” has the meaning given in Section 12.04(a).

“Treasury Regulations” shall mean the final or temporary regulations that have been issued by the U.S. Department of the Treasury under the Code, and any successor regulations.

“unallocated item” has the meaning given in Section 7.03.

“Unit” means any class or series of units representing a fractional share of Interests in the Company, and “Units” refers to all or any of the above.

“Unreturned Capital Contributions” shall mean, with respect to any Member, at any time the excess, if any, of the aggregate Capital Contributions made by such Member over the cumulative distributions made to such Member pursuant to Section 8.01(a).

“U.S. GAAP” means United States generally accepted accounting principles.

“ZGP” has the meaning given in Section 14.08(b).

“Zugel” has the meaning set forth in the preamble to this Agreement.

IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the date first above written.

 

	MEMBERS:
	/s/ Christian M. Zugel
	Christian M. Zugel
	/s/ Sonia Zugel
	Sonia Zugel
	/s/ Daniel Curry
	Daniel Curry
	ZUGEL FAMILY TRUST
	By:	/s/ Jean W. Mottel
		Name:	Jean W. Mottel
		Title:	Managing Director

 

JOINT FILING AGREEMENT

	s/ Christian Zugel
	Name:	Christian Zugel
	/s/ Sonia Zugel
	Name:	Sonia Zugel
	Zugel Family Trust
	By:	Fiduciary Trust International of Delaware Trustee
	By:	/s/ Jean W. Mottel
		Name:	Jean W. Mottel
		Title:	Managing Director
	Family Trust U/A Christian M. Zugel 2005 GRAT
	By:	Fiduciary Trust International of Delaware Trustee
	By:	/s/ Jean W. Mottel
		Name:	Jean W. Mottel
		Title:	Managing Director
	Z Acquisition LLC
	By:	/s/ Christian Zugel
		Name:	Christian Zugel
		Title:	Managing Member