UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 1)*
NRC Group Holdings Corp.
(Name of Issuer)
Common Stock, par value $0.0001 per share
(Title of Class of Securities)
629375 106
(CUSIP number)
Jennifer M. Pulick
General Counsel
Cyrus Capital Partners, L.P.
65 East 55th Street, 35th Floor
New York, New York 10022
(212) 380-5800
(Name, address and telephone number of person authorized to receive notices and communications)
July 2, 2019
(Date of event which requires filing of this statement)
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 Rule 13d-1(e), Rule 13d-1(f) or Rule 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 Rule 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 persons 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).
CUSIP No. 629375 106
1. |
NAMES OF REPORTING PERSONS
SBTS, LLC | |||||
2. | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) ☐ (b) ☒
| |||||
3. | SEC USE ONLY
| |||||
4. | SOURCE OF FUNDS*
WC | |||||
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:
5,728,415 (1) | ||||
8. | SHARED VOTING POWER:
0 | |||||
9. | SOLE DISPOSITIVE POWER:
5,728,415 (1) | |||||
10. | SHARED DISPOSITIVE POWER:
0 |
11. |
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:
5,728,415 (1) | |||||
12. | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
☐ | |||||
13. | PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13.5% (1)(2) | |||||
14. | TYPE OF REPORTING PERSON*
OO |
(1) | Includes 4,240,000 shares of common stock of NRC Group Holdings Corp. (the Issuer) issuable upon the conversion of 530,000 shares of the Issuers 7% Series A Convertible Cumulative Preferred Stock (Series A Preferred Stock) and 25,000 shares of common stock of the Issuer issuable upon the exercise of stock options (the Options) granted to John Rapaport, a member of the Issuers Board of Directors (the Board), who serves on the Board as a representative of SBTS, LLC (SBTS) and its affiliates and holds the Options for the benefit of SBTS. |
(2) | Based on 38,050,385 shares of common stock of the Issuer outstanding as of June 21, 2019, as disclosed in the Agreement and Plan of Merger, dated as of June 23, 2019, by and among US Ecology, Inc., US Ecology Parent, Inc., Rooster Merger Sub, Inc., ECOL Merger Sub, Inc., and the Issuer (the Merger Agreement), filed as Exhibit 2.1 to the Issuers Form 8-K filed with the Securities and Exchange Commission (SEC) on June 24, 2019. |
CUSIP No. 629375 106
1. |
NAMES OF REPORTING PERSONS
Cyrus Capital Partners, L.P. | |||||
2. | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) ☐ (b) ☒
| |||||
3. | SEC USE ONLY
| |||||
4. | SOURCE OF FUNDS*
OO | |||||
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:
5,728,415 (1) | ||||
8. | SHARED VOTING POWER:
0 | |||||
9. | SOLE DISPOSITIVE POWER:
5,728,415 (1) | |||||
10. | SHARED DISPOSITIVE POWER:
0 |
11. |
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:
5,728,415 (1) | |||||
12. | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
☐ | |||||
13. | PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13.5% (1)(2) | |||||
14. | TYPE OF REPORTING PERSON*
PN |
(1) | Includes 4,240,000 shares of common stock of the Issuer issuable upon the conversion of 530,000 shares of the Issuers Series A Preferred Stock and 25,000 shares of common stock of the Issuer issuable upon the exercise of the Options granted to John Rapaport, a member of the Board, who serves on the Board as a representative of SBTS and its affiliates and holds the Options for the benefit of SBTS. |
(2) | Based on 38,050,385 shares of common stock of the Issuer outstanding as of June 21, 2019, as disclosed in the Merger Agreement, filed as Exhibit 2.1 to the Issuers Form 8-K filed with the SEC on June 24, 2019. |
CUSIP No. 629375 106
1. |
NAMES OF REPORTING PERSONS
Cyrus Capital Partners GP, L.L.C. | |||||
2. | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) ☐ (b) ☒
| |||||
3. | SEC USE ONLY
| |||||
4. | SOURCE OF FUNDS*
OO | |||||
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:
5,728,415 (1) | ||||
8. | SHARED VOTING POWER:
0 | |||||
9. | SOLE DISPOSITIVE POWER:
5,728,415 (1) | |||||
10. | SHARED DISPOSITIVE POWER:
0 |
11. |
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:
5,728,415 (1) | |||||
12. | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
☐ | |||||
13. | PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13.5% (1)(2) | |||||
14. | TYPE OF REPORTING PERSON*
OO |
(1) | Includes 4,240,000 shares of common stock of the Issuer issuable upon the conversion of 530,000 shares of the Issuers Series A Preferred Stock and 25,000 shares of common stock of the Issuer issuable upon the exercise of the Options granted to John Rapaport, a member of the Board, who serves on the Board as a representative of SBTS and its affiliates and holds the Options for the benefit of SBTS. |
(2) | Based on 38,050,385 shares of common stock of the Issuer outstanding as of June 21, 2019, as disclosed in the Merger Agreement, filed as Exhibit 2.1 to the Issuers Form 8-K filed with the SEC on June 24, 2019. |
CUSIP No. 629375 106
1. |
NAMES OF REPORTING PERSONS
Stephen C. Freidheim | |||||
2. | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) ☐ (b) ☒
| |||||
3. | SEC USE ONLY
| |||||
4. | SOURCE OF FUNDS*
OO | |||||
5. | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e)
☐ | |||||
6. | CITIZENSHIP OR PLACE OF ORGANIZATION
United States of America |
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH |
7. | SOLE VOTING POWER:
5,728,415 (1) | ||||
8. | SHARED VOTING POWER:
0 | |||||
9. | SOLE DISPOSITIVE POWER:
5,728,415 (1) | |||||
10. | SHARED DISPOSITIVE POWER:
0 |
11. |
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:
5,728,415 (1) | |||||
12. | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
☐ | |||||
13. | PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13.5% (1)(2) | |||||
14. | TYPE OF REPORTING PERSON*
IN |
(1) | Includes 4,240,000 shares of common stock of the Issuer issuable upon the conversion of 530,000 shares of the Issuers Series A Preferred Stock and 25,000 shares of common stock of the Issuer issuable upon the exercise of the Options granted to John Rapaport, a member of the Board, who serves on the Board as a representative of SBTS and its affiliates and holds the Options for the benefit of SBTS. |
(2) | Based on 38,050,385 shares of common stock of the Issuer outstanding as of June 21, 2019, as disclosed in the Merger Agreement, filed as Exhibit 2.1 to the Issuers Form 8-K filed with the SEC on June 24, 2019. |
Amendment No. 1 to Schedule 13D
The following constitutes Amendment No. 1 (Amendment No. 1) to the Schedule 13D filed with the Securities and Exchange Commission (the SEC) by SBTS, LLC (SBTS), Cyrus Capital Partners, L.P. (Cyrus Capital Partners), Cyrus Capital Partners GP, L.L.C. (Cyrus Capital GP), and Stephen C. Freidheim (collectively, the Reporting Persons) on October 26, 2018. This Amendment No. 1 amends and supplements the Schedule 13D as specifically set forth herein.
All capitalized terms contained herein but not otherwise defined shall have the meanings ascribed to such terms in the Schedule 13D. Information given in response to each item shall be deemed incorporated by reference in all other items, as applicable.
ITEM 1. Security and Issuer.
Item 1 of this Schedule 13D is hereby amended and restated in its entirety as follows:
The class of equity security to which this statement on Schedule 13D relates is the common stock, par value $0.0001 per share of NRC Group Holdings Corp. (Common Stock). The address of the principal executive offices of NRC Group Holdings Corp. (the Issuer) is 952 Echo Lane, Suite 460, Houston, Texas 77024.
ITEM 4. Purpose of Transaction.
Item 4 of Schedule 13D is supplemented and superseded, as the case may be, as follows:
On July 2, 2019, counsel for SBTS submitted a letter (the Letter) on behalf of SBTS and Zazove Associates, LLC (Zazove) to counsel for the Issuer stating that the Involuntary Conversion (as defined below) of shares of the Issuers 7% Series A Convertible Cumulative Preferred Stock (Series A Preferred Stock) pursuant to the transaction (the Merger) contemplated by the Agreement and Plan of Merger, dated as of June 23, 2019, by and among US Ecology, Inc., US Ecology Parent, Inc., Rooster Merger Sub, Inc., ECOL Merger Sub, Inc., and the Issuer (the Merger Agreement) violates Delaware law and breaches the plain language of multiple provisions of the Certificate of Designations, Preferences, Rights and Limitations of 7.00% Series A Convertible Cumulative Preferred Stock of NRC Group Holdings Corp., dated as of October 17, 2018. The Letter states that SBTS holds a majority of the outstanding shares of Series A Preferred Stock and Zazove has discretionary authority with regard to a significant number of shares of Series A Preferred Stock. Under the Merger Agreement, upon consummation of the Merger, each share of Series A Preferred Stock will convert automatically into, and become exchangeable for, a certain number of shares of common stock issued by U.S. Ecology Parent, Inc., pursuant to a predetermined formula described in the Merger Agreement (the Involuntary Conversion).
The Letter states that SBTS, Zazove and other holders of the Series A Preferred Stock negotiated specifically for many of the protections that the Issuer now proposes to breach with the Involuntary Conversion. The Letter urges the Issuer to reconsider requiring the Involuntary Conversion as an element of the proposed Merger as it would severely (and potentially irreparably) harm holders of the Series A Preferred Stock. The Letter concludes by noting that the holders of shares of Series A Preferred Stock continue to reserve all rights and remedies regarding their rights as holders of Series A Preferred Stock.
The foregoing description of the Letter does not purport to be complete and is qualified in its entirety by reference to the full text of the Letter, which is filed as Exhibit 99.1, and is incorporated herein by reference.
The Reporting Persons intend to review their investment in the Issuer on a continuing basis and may from time to time and at any time in the future depending on various factors, including, without limitation, the Issuers financial position and strategic direction, actions taken by the Issuers Board of Directors, price levels of the Issuers securities, other investment opportunities available to the Reporting Persons, conditions in the securities market and general economic and industry conditions, take such actions with respect to the investment in the Issuer as they deem appropriate. These actions may include: (i) acquiring additional shares of Common Stock and/or other equity, debt, notes, other securities, or derivative or other instruments that are based upon or relate to the value of securities of the Issuer (collectively, Securities) in the open market or otherwise; (ii) disposing of any or all of their Securities in the open market or otherwise; (iii) engaging in any hedging or similar transactions with respect to the Securities; or (iv) proposing or considering one or more of the actions described in subsections (a) through (j) of Item 4 of Schedule 13D.
Except as set forth herein, the Reporting Persons do not have present plans or proposals at this time that relate to or would result in any of the transactions described in subparagraphs (a) through (j) of Item 4 of Schedule 13D.
ITEM 5. Interest in Securities of the Issuer.
Item 5 of this Schedule 13D is hereby amended and restated in its entirety as follows:
(a) and (b) Items 7 through 11 and 13 of each of the cover pages of this Schedule 13D are incorporated herein by reference. Such information is based on 38,050,385 shares of Common Stock of the Issuer outstanding as of June 21, 2019, as disclosed in the Merger Agreement, filed as Exhibit 2.1 to the the Issuers Form 8-K filed with the Securities and Exchange Commission on June 24, 2019.
(c) There have been no transactions by the Reporting Persons in the class of securities reported on that were effected within the past 60 days.
(d) The disclosure regarding the relationship between the Reporting Persons in Item 2(c) of this Schedule 13D is incorporated by reference herein.
(e) Not applicable.
Item 7. Material to Be Filed as Exhibits.
Exhibit | Description | |
99.1 | Letter to Alain A. Dermarkar of Jones Day, dated July 2, 2019, on behalf of SBTS, LLC and Zazove Associates, LLC. |
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.
July 9, 2019
SBTS, LLC | ||
By: | Cyrus Capital Partners, L.P. its Manager | |
By: | Cyrus Capital Partners GP, L.L.C., its general partner | |
By: | /s/ Stephen C. Freidheim | |
Name: | Stephen C. Freidheim | |
Title: |
Sole Member/Manager |
CYRUS CAPITAL PARTNERS, L.P. | ||
By: | Cyrus Capital Partners GP, L.L.C., its general partner | |
By: | /s/ Stephen C. Freidheim | |
Name: | Stephen C. Freidheim | |
Title: |
Sole Member/Manager |
CYRUS CAPITAL PARTNERS GP, L.L.C. | ||
By: | /s/ Stephen C. Freidheim | |
Name: | Stephen C. Freidheim | |
Title: |
Sole Member/Manager | |
/s/ Stephen C. Freidheim | ||
STEPHEN C. FREIDHEIM |
Exhibit 99.1
July 2, 2019
VIA OVERNIGHT MAIL AND EMAIL
Alain A. Dermarkar
Jones Day
2727 North Harwood Street
Suite 500
Dallas, Texas 75201-1515
Re: | Agreement and Plan of Merger by and between U.S. Ecology, Inc., NRCG, and others, dated June 23, 2019 |
Dear Mr. Dermarkar:
We represent SBTS, LLC (SBTS) and write on behalf of SBTS and Zazove Associates, LLC (Zazove) in reference to the Certificate of Designations, Preferences, Rights and Limitations of 7.00% Series A Convertible Cumulative Preferred Stock of NRC Group Holdings Corp. (NRCG), dated as of October 17, 2018 (the COD) and the Agreement and Plan of Merger by and between U.S. Ecology, Inc., NRCG, and others, dated June 23, 2019 (the Merger Agreement).1 As NRCG is aware, SBTS holds a majority of the preferred stock issued pursuant to the COD (the Preferred Stock), and Zazove has discretionary authority with regard to a significant number of shares of the Preferred Stock. The Merger Agreement provides, among other things, that, upon consummation of the Merger, each share of Preferred Stock will convert automatically into, and become exchangeable for, a certain number of shares of common stock issued by US Ecology Parent, Inc., pursuant to a predetermined formula described in the Merger Agreement (the Involuntary Conversion).
The Involuntary Conversion violates Delaware law and breaches the plain language of multiple provisions of the COD. First, NRCG admits that the transaction contemplated by the Merger Agreement (the Merger) qualifies as a Fundamental Change under the terms of the COD. Section 5(b) of the COD provides, in relevant part, that [w]ithin 15 days following the Effective Date of [a] Fundamental Change, each Outstanding share of the Preferred Stock shall (subject to the applicable limitations set forth in Section 12), at the election of the Holder thereof pursuant to the delivery of a Notice of Conversion, be converted into a number of shares of Common Stock . . . . COD at Section 5(b) (emphasis added). Section 5(b), therefore,
1 | Capitalized terms not defined herein shall have the meanings ascribed to them in the COD. |
Alain A. Dermarkar
July 2, 2019
Page 2
expressly provides that in connection with the Merger, the Preferred Stock can be converted into common stock only at the election of each respective holder of the Preferred Stock. Neither SBTS nor Zazove has elected to convert its Preferred Stock into common stock in connection with the Merger, and neither has any plans to do so regardless of whether the Merger is consummated.
Section 5(b) of the COD harmonizes with Section 8(j), which provides in relevant part that upon a Reorganization Event (which includes any consolidation, merger or combination involving the Corporation), the right of the holders of the Preferred Stock to convert their shares
shall be changed into a right to convert such share into the kind and amount of shares of stock . . . that a holder of a number of shares of Common Stock equal to the Conversion Rate immediately prior to such Reorganization Event would have owned or been entitled to receive upon such Reorganization Event.
Section 8(j) further confirms that [n]one of the foregoing provisions shall affect the right of a Holder of Preferred Stock to convert its Preferred Stock into shares of Common Stock as set forth in Section 8(a) prior to the effective time of such Reorganization Event. Section 8(j) therefore clearly provides that, although the holders of the Preferred Stock have the right to convert their Preferred Stock in advance of a Reorganization Event such as the Merger, such holders have no obligation to convert their Preferred Stock in advance of a Reorganization Event.
Second, the Involuntary Conversion breaches the plain language of Section 6(d) of the COD because it would materially and adversely amend the COD without the required vote of the holders of the Preferred Stock (voting together as a single class). Section 6(d) expressly states that:
[s]o long as any shares of Preferred Stock remain Outstanding, . . . [NRCG] shall not, without the affirmative vote or consent of (a) the Holders of at least 50.1% of the shares of Preferred Stock Outstanding at the time, voting together as a single class . . . amend, alter or repeal the provisions of the Certificate of Incorporation, whether by merger, consolidation or otherwise, so as to materially and adversely affect any right, preference, privilege or voting powers of the shares of Preferred Stock.
Alain A. Dermarkar
July 2, 2019
Page 3
Delaware law considers the COD to be a part of NRCGs Certificate of Incorporation. See, e.g., Elliott Associates, L.P. v. Avatex Corp., 715 A.2d 843, 844 n.3 (Del. 1998) (When certificates of designations become effective, they constitute amendments to the certificate of incorporation so that the rights of preferred stockholders become part of the certificate of incorporation.) (citing Kaiser Aluminum Corp. v. Matheson, 681 A.2d 392, 394 n. 3 (Del. 1996) and 8 Del. Code. §§ 102(a)(4), 151(g)). Thus, under well-established Delaware law, the Merger will be void, if NRCG purports to conduct it without the vote required by the COD. See, e.g., STAAR Surgical Co. v. Waggoner, 588 A.2d 1130, 1137 (Del. 1991) (finding stock issued in violation of the corporations certificate of incorporation to be void).
Third, each of SBTS and Zazove is a Required Holder as that term is defined in the COD. Section 6(d) provides that each Required Holder has an individual consent right over any amendment, alteration or repeal (including by merger) that would effect a Material Change. A Material Change is defined to include, among other things, any change that expediting the commencement of the First Mandatory Conversion Period. The First Mandatory Conversion Period is defined as the period on or after the 3-year anniversary of the Issue Date but prior to the 5-year anniversary of the Issue Date. The proposed Merger violates Section 6(d) because it amends and alters the COD in a manner that expedites the commencement of the First Mandatory Conversion Period without the required consent of the Required Holder(s).
Fourth, even assuming that the Involuntary Conversion does not violate Sections 5(b) and 6(d) of the COD, which it does, Section 9(a) of the COD permits NRCG to effect the Involuntary Conversion only if the Weighted Average Price of the Common Stock equals or exceeds 140% of the then-current Conversion Price for at least 20 trading days in a period of 30 consecutive trading days. Accordingly, NRCG can effect the Involuntary Conversion only if the Weighted Average Price of the Common Stock equals or exceeds $17.50 per share during the relevant conversion period. The highest the common stock has ever traded is $11.50 per share.
Fifth, for many of the same reasons described above with respect to Section 6(d) of the COD, the Involuntary Conversion violates the express provisions of Section 242(b)(2) of the Delaware General Corporation Law. Section 242(b)(2) provides:
The holders of the outstanding shares of a class shall be entitled to vote as a class upon a proposed amendment, whether or not entitled to vote thereon by the certificate of incorporation, if the amendment would . . . alter or change the powers, preferences, or special rights of the shares of such class so as to affect them adversely.
Alain A. Dermarkar
July 2, 2019
Page 4
The Merger will change the powers of the Preferred Stock, forcibly converting it to common stock. Yet, NRCG intends to proceed with the Merger without a vote of the Preferred Stock. If NRCG proceeds with the Merger as structured, the Merger will be void. See, e.g. Nguyen v. View, Inc., No. CV 11138-VCS, 2017 WL 2439074, at *8 (Del. Ch. June 6, 2017), reargument denied, No. CV 11138-VCS, 2017 WL 3169051 (Del. Ch. July 26, 2017). That outcome will be detrimental to NRCG as a whole as well as SBTS.
We previously invited you to provide us with a valid basis under Delaware law and the COD to support the Involuntary Conversion. You have provided us with no such justification. We urge you to reconsider requiring the Involuntary Conversion as an element of the proposed Merger. SBTS, Zazove and other holders of the Preferred Stock negotiated specifically for many of the protections that NRCG now proposes to breach via the Involuntary Conversion. SBTS, Zazove and the other holders of Preferred Stock will be severely (and potentially irreparably) harmed by the Involuntary Conversion and may therefore be required to seek appropriate judicial relief to preserve and enforce their rights under Delaware law and the COD. Please let us know on or before July 5, 2019 if NRCG intends to continue to require the Involuntary Conversion in connection with the Merger. The holders of the Preferred Stock continue to reserve all rights and remedies.
Sincerely,
/s/ Stephen M. Baldini
Stephen M. Baldini