ZAIS Zais Grp. Holdings, Inc. (delisted)

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

 

(1) The shares reported above include (a) 831,250 Class A Shares that could be acquired on January 2, 2018 if CZ (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 and (b) 6,500,000 Class A Shares being acquired by Z Acquisition (as defined below) pursuant to a Share Purchase Agreement dated September 5, 2017 (the “Share Purchase Agreement”) as described in Item 4 and Item 6. CZ is the managing member of Z Acquisition. Notwithstanding his rights under the Exchange Agreement, CZ disclaims beneficial ownership of the Class A Shares referenced in clause (a) above, as the Audit Committee of the Issuer has discretion to determine whether CZ receives Class A Shares, cash or a combination of the two, upon an election to exchange Class A Units under the Exchange Agreement.

(2) The amount in row 11 does not include (a) 175,000 Class A Shares that could be acquired on January 2, 2018 under the Exchange Agreement by CZ’s spouse, Sonia Zugel, (b) 74,997 Class A Shares currently held and 131,250 Class A Shares that could be acquired on January 2, 2018 under the Exchange Agreement by Zugel Family Trust, which is governed by an independent trustee, and (c) 112,497 Class A Shares currently held and 262,500 Class A Shares that could be acquired on January 2, 2018 under the Exchange Agreement by Family Trust u/ Christian M Zugel 2005 GRAT, which is governed by an independent trustee. CZ disclaims beneficial ownership of all such shares because he does not have or share voting or investment power over such shares.

(3) The percentage of beneficial ownership reflected in this Statement is based upon 14,555,113 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 831,250 Class A Shares that could be issued if CZ exercised his rights under the Exchange Agreement on January 2, 2018.

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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

 

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CUSIP NO.    98887G106

 

1	NAMES OF REPORTING PERSONS
	I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
	Zugel Family Trust
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
	Delaware
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7	SOLE VOTING POWER
			206,247 shares
		8	SHARED VOTING POWER
			0 shares
		9	SOLE DISPOSITIVE POWER
			206,247 shares
		10	SHARED DISPOSITIVE POWER
			0 shares
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
	206,247 shares (4)
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)
	1.4% (5)(4)
14	TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
	OO

 

(4) The shares reported above include 131,250 Class A Shares that could be acquired on January 2, 2018 if ZFT (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, ZFT disclaims beneficial ownership of all such shares, as the Audit Committee of the Issuer has discretion to determine whether ZFT receives Class A Shares, cash or a combination of the two, upon an election to exchange Class A Units under the Exchange Agreement. The shares reported above do not include 6,500,000 Class A Shares being acquired by Z Acquisition pursuant to the Share Purchase Agreement. Zugel Family Trust disclaims beneficial ownership of all such shares because it does not have or share voting or investment power over such shares.

(5) 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 131,250 Class A Shares that could be issued if ZFT exercised its rights under the Exchange Agreement on January 2, 2018.

 

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CUSIP NO.    98887G106

 

1	NAMES OF REPORTING PERSONS
	I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
	Sonia 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
	United States of America
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7	SOLE VOTING POWER
			175,000 shares
		8	SHARED VOTING POWER
			0 shares
		9	SOLE DISPOSITIVE POWER
			175,000 shares
		10	SHARED DISPOSITIVE POWER
			0 shares
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
	175,000 shares (6)
12	CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)
	☒ (7)
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
	1.2% (8)(6)
14	TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
	IN

 

(6) The shares reported above include 175,000 Class A Shares that could be acquired on January 2, 2018 if SZ (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, SZ disclaims beneficial ownership of all such shares, as the Audit Committee of the Issuer has discretion to determine whether ZFT receives Class A Shares, cash or a combination of the two, upon an election to exchange Class A Units under the Exchange Agreement.

(7) The amount in row 11 does not include (a) 831,250 Class A Shares that could be acquired on January 2, 2018 under the Exchange Agreement by SZ’s spouse, Christian Zugel, (b) 74,997 Class A Shares currently held and 131,250 Class A Shares that could be acquired on January 2, 2018 under the Exchange Agreement by Zugel Family Trust, which is governed by an independent trustee, and (c) 112,497 Class A Shares currently held and 262,500 Class A Shares that could be acquired on January 2, 2018 under the Exchange Agreement by Family Trust u/ Christian M Zugel 2005 GRAT, which is governed by an independent trustee. SZ disclaims beneficial ownership of all such shares because she does not have or share voting or investment power over such shares.   The shares reported above do not include 6,500,000 Class A Shares being acquired by Z Acquisition pursuant to the Share Purchase Agreement. SZ disclaims beneficial ownership of all such shares because she does not have or share voting or investment power over such shares.

(8) 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 175,000 Class A Shares that could be issued if SZ exercised her rights under the Exchange Agreement on January 2, 2018.

 

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Item 1. Security and Issuer .

 

This Amendment No. 3 to Schedule 13D (this “Amendment No. 3” or “Statement”) amends and restates 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, 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” and, together with CZ, Z Acquisition and SZ, 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 principal address is c/o Fiduciary Trust International of Delaware as co-trustee, 1220 North Market Street, Suite 333, Wilmington, Delaware 1980.

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 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.

(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.

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 Amended and Restated Limited Liability Company Agreement of Z Acquisition, dated as of December 14, 2017 (the “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 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. In connection with such strategic review, CZ has previously discussed with the Board the possible sale or acquisition of assets, a merger or other business combination or other similar strategic transaction to enhance shareholder value. In addition CZ has considered and previously discussed with the Board terminating the registration of the Class A Shares under the Act so as to cease periodic and other public company compliance and reporting obligations, if the Issuer is then eligible to do so, or engaging in transactions or other acts designed to make the Issuer so eligible, including, but not limited to, a going private transaction effected through a merger or reorganization involving the Issuer, and/or a tender offer for the Class A Shares. In addition, CZ has discussed directly with the Issuer’s major shareholders, principally Ramguard LLC (successor by conversion to d.Quant Special Opportunities Fund, L.P.) and its manager, Neil Ramsey, potential strategic alternatives designed to return liquidity to the Issuer’s shareholders, including the transactions referred to above as well as transactions which would provide liquidity to the Issuer’s shareholders other than CZ and entities affiliated with Neil Ramsey. 

On September 5, 2017, CZ and Z Acquisition entered into a Share Purchase Agreement (the “Share Purchase Agreement”) pursuant to which Z Acquisition will acquire 6,500,000 Class A Shares held by Ramguard LLC (the “Target Shares”).

Additionally, on September 5, 2017, following the execution and delivery of the 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 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 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 October 5, 2017, counsel to CZ and Z Acquisition delivered to representatives of the Issuer and the Special Committee a draft agreement and plan of merger with respect to the Take Private Transaction (as subsequently revised, the “Draft Merger Agreement”).

On October 26, 2017, representatives of the Company and counsel to the Special Committee provided comments on the Draft Merger Agreement.

On November 16, 2017, counsel to the Special Committee advised counsel to CZ and Z Acquisition that the Special Committee, after consulting with its legal and financial advisers, had determined that the price of $4.00 per Class A Share proposed by CZ and Z Acquisition was inadequate. Counsel to the Special Committee communicated a counterproposal by the Special Committee for a Take Private Transaction by CZ and Z Acquisition at a price of $4.30 per Class A Share.

On November 20, 2017, counsel to CZ and Z Acquisition conveyed to counsel to the Special Committee the response of CZ and Z Acquisition to the Special Committee’s November 16, 2017 counterproposal. Counsel to CZ and Z Acquisition reported that CZ and Z Acquisition were prepared to increase their offer to $4.10 per Class A Share, and that that price represents CZ’s and Z Acquisition’s final offer.

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 information set forth in the Schedule 13E-3 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 the A&R LLC Agreement to reflect, among other things, such admissions and appointment.

As of the date hereof, CZ and Z Acquisition continue to engage in discussions and negotiations with the Special Committee but have not reached a definitive agreement with the Company with respect to a Take Private Transaction, and there can be no assurance that the parties will reach an agreement or that any Take Private Transaction will be consummated.

The Reporting Persons do not intend to further amend this Statement regarding any further discussions or negotiations until such time as an agreement has been reached or such discussions have been terminated, unless otherwise required to do so.

There is no assurance that CZ, Z Acquisition or their affiliates will reach an agreement with the Issuer with respect to a Take Private Transaction. The acquisition of the Target Shares is not conditioned upon the consummation of a Take Private Transaction.

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.

Other than as described in this Item 4 above, 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 .

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 “Investment Agreement”), by and among Issuer, ZGP and the members of ZGP (or the “ZGP Founder Members”). The 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 and ZFT, 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 Investment Agreement does not purport to be complete and is qualified in its entirety by the text of the 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 and ZFT) 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 and SZ, to exchange all of their respective Class A Units for either (at the Issuer’s option):

As of December 15, 2017:

·	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.

·	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 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 and ZFT is subject to further limitations on exchange. During any such 12-month period, CZ, SZ and ZFT 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 and ZFT, this limitation will expire after the first exchange date at which CZ, SZ or ZFT (as applicable) no longer holds Class A Units exceeding 10% of the maximum number of Class A Units previously held by CZ, SZ or ZFT (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 and ZFT 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 and ZFT, 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 and ZFT, 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 and ZFT, 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.

Share Purchase Agreement

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

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

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

The Share Purchase Agreement also provides that in the event that within one year after the execution of the Share Purchase Agreement, Z Acquisition, CZ or any of their respective controlled affiliates enters into a definitive agreement with the Issuer or commences a tender offer recommended by the Issuer’s board for a Take Private Transaction at a price per share in excess of $4.00, each of the cash consideration amounts paid or payable to Ramguard LLC and the initial principal amount of the Promissory Note shall be adjusted on a pro rata basis, such that Ramguard LLC shall have received (or be entitled to receive) such greater per share consideration amount. A similar adjustment in the price payable for the Target Shares will be made if within the one (1) year period after the Share Purchase Agreement is executed, there is a change in control transaction or sale of a majority or more of the Class A Shares at a price per share in excess of $4.00. If CZ and Z Acquisition reach a definitive agreement with the Issuer for a Take Private Transaction at $4.10 per share, the financial terms of the Share Purchase will be adjusted in accordance with the second preceding sentence.

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

Promissory Note

Under the Promissory Note, Ramguard LLC will be granted a security interest over (a) all of the equity securities of Z Acquisition, (b) all of the Class A Units of ZAIS Group Parent, LLC owned by CZ and (c) all of the equity securities of the Issuer and its subsidiaries held directly or indirectly by Z Acquisition, CZ and/or any entity wholly owned by Z Acquisition or CZ (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 LLC will have the right (but not the obligation) to declare all amounts outstanding immediately due and payable and to exercise its security interest in the collateral securing the Promissory Note, and to recover collection costs (including reasonable legal fees).

Additionally, until such time that a Take Private Transaction is consummated by 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 LLC’s prior written consent will not be required if an amount equal to the net, after-tax cash proceeds of any such sale of assets will be distributed by the Issuer and or its subsidiaries to their equity owners  and an amount equal to the net, after-tax proceeds of any such sale of assets or compensatory payment or distribution received by 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 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.

A&R LLC Agreement

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 the A&R LLC Agreement to reflect, among other things, such admissions and appointment. Under the terms of the 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 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 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 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 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 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 and the 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 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 A&R LLC Agreement, all members would be required to participate in such sale.

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

Additionally, CZ and DC have agreed in principle that, if an agreement is reached with the Company with respect to a Take Private Transaction, in connection with the Take Private Transaction, Z Acquisition will contribute approximately $11,100,000 to ZGP in order to provide a portion of the funds required to consummate the Take Private Transaction.

The information set forth in Item 4 of this Statement regarding communications between the Issuer and CZ and Z Acquisition subsequent to September 5, 2017 is incorporated herein by reference.

Item 7. Material to Be Filed as Exhibits

  

Exhibit Number	Description
99.1	Investment Agreement, dated as of September 16, 2014, by and among ZAIS Group Parent, LLC, HF2 Financial Management Inc. and the members of ZAIS Group Parent, LLC, as amended on October 31, 2014 (incorporated by reference to Annex A to the Issuer’s Definitive Proxy Stated on Schedule 14A (File No. 001-35848), filed with the United States Securities and Exchange Commission (“SEC”) on January 16, 2015).
99.2	Second Amendment to Investment Agreement, dated as of March 4, 2015, by and among ZAIS Group Parent, LLC, HF2 Financial Management Inc. and the members of ZAIS Group Parent, LLC (incorporated by reference to Exhibit 2.1 to the Issuer’s Current Report on Form 8-K (File No. 001-35848), filed with the SEC on March 4, 2015).
99.3	Exchange Agreement, dated as of March 17, 2015, by and among ZAIS Group Holdings, Inc., ZAIS Group Parent, LLC, the Company Unitholders (as defined therein) and Christian M. Zugel, as trustee (solely in his capacity as the trustee) of the ZGH Class B Voting Trust (incorporated by reference to Exhibit 10.3 to the Issuer’s Current Report on Form 8-K (File No. 001-35848), filed with the SEC on March 23, 2015).
99.4	First Amendment to Exchange Agreement by and among ZAIS Group Parent, LLC, ZAIS Group Holdings, Inc., the Company Unitholders (as defined therein) and Christian M. Zugel, as trustee of the ZGH Class B Voting Trust, entered into as of July 21, 2015 (incorporated by reference to Exhibit 10.2 to the Issuer’s Current Report on Form 8-K (File No. 001-35848), filed with the SEC on July 27, 2015).
99.5	Voting Trust Agreement, dated as of March 17, 2015, by and among Christian M. Zugel, Laureen Lim, Sonia Zugel, Family Trust u/ Christian M. Zugel 2005 GRAT, Zugel Family Trust, Christian M. Zugel, as trustee, and ZAIS Group Holdings, Inc. (incorporated by reference to Exhibit 9.1 to the Company’s Current Report on Form 8-K (File No. 001-35848), filed with the SEC on March 23, 2015).
99.6	Registration Rights Agreement, dated as of March 17, 2015, by and among ZAIS Group Holdings, Inc. and the Holders (as defined therein) (incorporated by reference to Exhibit 10.4 to the Issuer’s Current Report on Form 8-K (File No. 001-35848), filed with the SEC on March 23, 2015).
99.7	Power of Attorney of Christian Zugel regarding Schedule 13D filings (incorporated by reference to Exhibit 24 to the Form 3 filed by Christian Zugel with the SEC on March 19, 2015).
99.8	Share Purchase Agreement, dated as of September 5, 2017, by and among Z Acquisition LLC Ramguard LLC and Christian Zugel (incorporated by reference to Exhibit 99.8 to Amendment No. 1 to Schedule 13D (File No. 005-87370), filed with the SEC on September 6, 2017).
99.9	Letter from Christian Zugel to the Special Committee of Zais Group Holdings, Inc., dated as of September 5, 2017 (incorporated by reference to Exhibit 99.9 to Amendment No. 1 to Schedule 13D (File No. 005-87370), filed with the SEC on September 6, 2017).
99.10	Schedule 13E-3 (File No. 005-87370), filed by CZ and Z Acquisition with the SEC on November 21, 2017.
99.11	Amended and Restated Limited Liability Company Agreement of Z Acquisition LLC, dated as of December 14, 2017.
99.12	Joint Filing Agreement, dated as of December 18, 2017.

SIGNATURE

 

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: December 18, 2017

 

 

Christian Zugel

/s/ Christian Zugel

 

EXHIBIT INDEX

 

 

 

Exhibit Number	Description
99.1	Investment Agreement, dated as of September 16, 2014, by and among ZAIS Group Parent, LLC, HF2 Financial Management Inc. and the members of ZAIS Group Parent, LLC, as amended on October 31, 2014 (incorporated by reference to Annex A to the Issuer’s Definitive Proxy Stated on Schedule 14A (File No. 001-35848), filed with the United States Securities and Exchange Commission (“SEC”) on January 16, 2015).
99.2	Second Amendment to Investment Agreement, dated as of March 4, 2015, by and among ZAIS Group Parent, LLC, HF2 Financial Management Inc. and the members of ZAIS Group Parent, LLC (incorporated by reference to Exhibit 2.1 to the Issuer’s Current Report on Form 8-K (File No. 001-35848), filed with the SEC on March 4, 2015).
99.3	Exchange Agreement, dated as of March 17, 2015, by and among ZAIS Group Holdings, Inc., ZAIS Group Parent, LLC, the Company Unitholders (as defined therein) and Christian M. Zugel, as trustee (solely in his capacity as the trustee) of the ZGH Class B Voting Trust (incorporated by reference to Exhibit 10.3 to the Issuer’s Current Report on Form 8-K (File No. 001-35848), filed with the SEC on March 23, 2015).
99.4	First Amendment to Exchange Agreement by and among ZAIS Group Parent, LLC, ZAIS Group Holdings, Inc., the Company Unitholders (as defined therein) and Christian M. Zugel, as trustee of the ZGH Class B Voting Trust, entered into as of July 21, 2015 (incorporated by reference to Exhibit 10.2 to the Issuer’s Current Report on Form 8-K (File No. 001-35848), filed with the SEC on July 27, 2015).
99.5	Voting Trust Agreement, dated as of March 17, 2015, by and among Christian M. Zugel, Laureen Lim, Sonia Zugel, Family Trust u/ Christian M. Zugel 2005 GRAT, Zugel Family Trust, Christian M. Zugel, as trustee, and ZAIS Group Holdings, Inc. (incorporated by reference to Exhibit 9.1 to the Company’s Current Report on Form 8-K (File No. 001-35848), filed with the SEC on March 23, 2015).
99.6	Registration Rights Agreement, dated as of March 17, 2015, by and among ZAIS Group Holdings, Inc. and the Holders (as defined therein) (incorporated by reference to Exhibit 10.4 to the Issuer’s Current Report on Form 8-K (File No. 001-35848), filed with the SEC on March 23, 2015).
99.7	Power of Attorney of Christian Zugel regarding Schedule 13D filings (incorporated by reference to Exhibit 24 to the Form 3 filed by Christian Zugel with the SEC on March 19, 2015).
99.8	Share Purchase Agreement, dated as of September 5, 2017, by and among Z Acquisition LLC, Ramguard LLC and Christian Zugel (incorporated by reference to Exhibit 99.8 to Amendment No. 1 to Schedule 13D (File No. 005-87370), filed with the SEC on September 6, 2017).
99.9	Letter from Christian Zugel to the Special Committee of Zais Group Holdings, Inc., dated as of September 5, 2017 (incorporated by reference to Exhibit 99.9 to Amendment No. 1 to Schedule 13D (File No. 005-87370), filed with the SEC on September 6, 2017).
99.10	Schedule 13E-3 (File No. 005-87370), filed by CZ and Z Acquisition with the SEC on November 21, 2017.
99.11	Amended and Restated Limited Liability Company Agreement of Z Acquisition LLC, dated as of December 14, 2017
99.12	Joint Filing Agreement, dated as of December 18, 2017.