ITEM 1.01. Entry into a Material Definitive Agreement
On July 17, 2020, LM Capital Solutions, LLC ("LMCS"), a majority-owned
subsidiary of CCUR Holdings, Inc. (the "Company"), entered into a series of
transactions resulting in the recapitalization of LMCS (the "Recapitalization"),
with such transactions including the redemption by LMCS of certain of the
Company's equity interests in LMCS and the granting to LMCS's minority member,
AZOKKB, LLC (formerly Luxemark Capital LLC) ("AZOKKB"), a right to purchase the
Company's remaining equity interests in LMCS upon the occurrence of certain
conditions, including without limitation the repayment of an intercompany note
from the Company to LMCS; the waiver of LMCS's obligations to pay contingent
consideration to AZOKKB; the termination of certain warrants to purchase the
Company's capital stock held by certain affiliates of AZOKKB; the assignment of
certain contractual rights of LMCS to AZOKKB; and the amendment of an
intercompany note from the Company to LMCS, each of which are described in
further detail below.
Amendment to LMCS Operating Agreement
The Company and AZOKKB entered into an amendment to the operating agreement of
LMCS (the "Amendment"). Under the Amendment, among other things, LMCS redeemed
5,918.3673 Class A Units from the Company, such that the Company's percentage
ownership interest in LMCS was reduced from 80% to 51% (the "Redemption"). The
Amendment further granted the right to AZOKKB to purchase all of the remaining
Class A Units that the Company holds in LMCS upon the repayment in full of the
Master Promissory Note (described below), for the consideration of one (1)
dollar. The Amendment also contains a joint written consent of the board of
managers and members of LMCS authorizing LMCS to make, prior to July 22, 2020, a
distribution of the aggregate net cash flow of LMCS for the period commenced
January 1, 2020 and ended May 31, 2020, to be distributed based upon the
ownership percentages of LMCS prior to the Redemption.
Waiver and Release under the Asset Purchase Agreement with AZOKKB
LMCS also entered into a Waiver and Release Agreement (the "Waiver and Release")
with AZOKKB pursuant to which AZOKKB irrevocably waived rights to certain
contingent consideration under that certain Asset Purchase Agreement by and
among LMCS, AZOKKB, Avraham Zeines ("Zeines"), Oskar Kowalski ("Kowalski") and
Kamil Blaszczak ("Blaszczak", and together with Zeines and Kowalski, the "AZOKKB
Principals") dated as of February 13, 2019 (the "Purchase Agreement"). The
Purchase Agreement was disclosed in the Company's Current Report on Form 8-K,
filed with the Securities and Exchange Commission on February 11, 2019.
The Waiver and Release contains a waiver and forfeiture of all rights of the
AZOKKB Principals and AZOKKB to any amounts payable by LMCS to the AZOKKB
Principals or AZOKKB pursuant to Section 1.4(d) of the Purchase Agreement, which
provides for, among other things, potential earn-out payments payable to AZOKKB
upon the achievement by LMCS of certain performance-based thresholds, and a
release of all claims of the AZOKKB Principals and AZOKKB against LMCS or any of
its affiliates (including the Company) relating thereto.
Termination of Common Stock Purchase Warrants
On July 17, 2020, the Company and each of the AZOKKB Principals entered into an
Omnibus Termination of Common Stock Warrants ("Warrant Termination") pursuant to
which the Common Stock Purchase Warrants (each a "Warrant", and collectively the
"Warrants") issued to each of the AZOKKB Principals in connection with the
Purchase Agreement on February 13, 2019 were terminated in full.
Assignment and Assumption Agreement
LMCS and AZOKKB also entered into an Assignment and Assumption Agreement (the
"Assignment and Assumption"), pursuant to which LMCS assigned, and AZOKKB
assumed, certain rights and obligations under three commercial agreements that
LMCS is party to relating to the merchant cash advance business of LMCS. For
consideration of a payment of $1,154,080.32 from AZOKKB to LMCS and the
assumption of certain liabilities with respect to the assigned agreements, LMCS
assigned to AZOKKB substantially all of LMCS's right, title and interest in the
three commercial agreements. The Assignment and Assumption also contemplates
that the right to receive amounts held by funders in cash under the commercial
agreements as of July 17, 2020 will be retained by LMCS. The Assignment and
Assumption contains, among other things, customary representations, warranties
and covenants from both parties.
Amendment to Master Promissory Note
On July 17, 2020, CCUR and LMCS entered into an Amendment to Note (the "Note
Amendment") amending the terms of a Master Promissory Note (the "Master
Promissory Note") issued by LMCS to the Company on February 13, 2019. Under the
Master Promissory Note, the Company made $10.35 million in debt financing
available to LMCS for working capital purposes, including without limitation
providing capital in support of merchant cash advance transactions. The Note
Amendment included, among other things, adding covenants to the terms of the
Master Promissory Note regarding LMCS's use of its free cash and prohibitions on
dividends or distributions by LMCS with certain limited exceptions. The Note
Amendment also included an amendment to events that would result in acceleration
of the Master Promissory Note and affirmative notice to the Company upon the
occurrence of certain events.
Relationship between the Parties
AZOKKB and the Company are the two equity holders of LMCS. In February 2019,
LMCS acquired the assets and liabilities related to its current merchant cash
advance business from AZOKKB. The AZOKKB Principals are engaged by LMCS pursuant
to consulting arrangements with LMCS and are the equity holders of AZOKKB. Prior
to the Recapitalization, the AZOKKB Principals held Common Stock Purchase
Warrants in the Company entitling them to purchase up to an aggregate of 444,630
shares of Common Stock of the Company.
The foregoing description of the agreements relating to the Recapitalization is
qualified in its entirety by the full text of such agreements, copies of which
are attached as Exhibits 10.1, 10.2, 10.3, 10.4 and 10.5, respectively, hereto
and incorporated herein by reference.
ITEM 9.01. Financial Statements and Exhibits.
The following exhibits are filed herewith:
Exhibit No. Description
10.1 Amendment to Operating Agreement of LM Capital Solutions, LLC by and
among LM Capital Solutions, LLC, AZOKKB LLC, CCUR Holdings, Inc., Igor
Volshteyn, Warren Sutherland and Oskar Kowalski
Waiver and Release Agreement by and among AZOKKB LLC, LM Capital
10.2 Solutions, LLC, Avraham Zeines, Oskar Kowalski and Kamil Blaszczak,
dated as of July 17, 2020
10.3 Omnibus Termination of Common Stock Warrants by and among CCUR
Holdings, Inc. Avraham Zeines, Oskar Kowalski and Kamil Blaszczak,
dated as of July 17, 2020
10.4 Assignment and Assumption Agreement by and between LM Capital
Solutions, LLC and AZOKKB LLC, dated as of July 17, 2020+
10.5 Amendment to Master Promissory Note by and between CCUR Holdings,
Inc. and LM Capital Solutions, LLC, dated as of July 17, 2020
+ Certain schedules, exhibits and similar supporting attachments to this
agreement have been omitted and the Company agrees to furnish supplemental
copies of any such schedules, exhibits and similar supporting attachments to the
Securities and Exchange Commission upon request.
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