8-K - LPRO - Equibles

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): April 9, 2021

OPEN LENDING CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	001-39326	84-5031428
(State or other jurisdiction<br>of incorporation)	(Commission<br>File Number)	(IRS Employer<br>Identification No.)

1501 S. MoPac Expressway

Suite 450

Austin, Texas 78746

(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: 512-892-0400

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading<br>Symbol(s)	Name of each exchange<br>on which registered
Common stock, par value $0.01 per share	LPRO	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 1.01	Entry into a Material Definitive Agreement.

Effective April 9, 2021, Open Lending Corporation, a Delaware corporation (the “Company”), entered into Amendment No. 1 (the “Amendment”) to the Tax Receivable Agreement (the “TRA”) dated as of June 10, 2020 by and among the Company, Bregal Sagemount I, L.P. (the “Blocker Holder”) and the persons listed as Beneficiaries on the signature pages thereto (the “Beneficiaries” and together with the Blocker Holder, the “TRA Holders”).

The TRA provides for the payment by the Company to the TRA Holders of 85% of the net cash savings, if any, in U.S. federal, state and local income tax that the Company actually realized (or are deemed to realize in certain circumstances) in periods following the closing of the business combination between Nebula Acquisition Corp., the Company’s predecessor, and Open Lending LLC (the “Business Combination”) as a result of: (i) certain tax attributes of BRP Hold 11, Inc. and/or Open Lending LLC that existed prior to the Business Combination and were attributable to the BRP Hold 11, Inc.; (ii) certain increases in the tax basis of Open Lending LLC’s assets resulting from the transactions constituting the Business Combination; (iii) imputed interest deemed to be paid by the Company as a result of payments the Company makes under the TRA; and (iv) certain increases in tax basis resulting from payments the Company makes under the TRA (collectively, the “Tax Benefit Payments”). The Company retains the benefit of the remaining 15% of these cash savings. At December 31, 2020, the Company’s liability for expected Tax Benefit Payments was $92.4 million.

Prior to the Amendment, the TRA provided that the Company was permitted to exercise an early termination right, which would accelerate the Tax Benefit Payments payable to the TRA Holders under the TRA. Upon the exercise of such early termination right (if ever) under the existing TRA, the Company would be required to make payments to the TRA Holders equal to the present value, discounted at the early termination rate (equal to the long-term treasury rate in effect plus 300 basis points), of all Tax Benefit Payments that would be required to be paid under the TRA, using certain valuation assumptions (the “Existing Valuation Assumptions”).

The Amendment provides that in lieu of the early termination payments described in the preceding paragraph, the TRA Holders will instead be entitled to payments equal to 40% of all Tax Benefit Payments (other than any Actual Interest Amounts (as defined in the TRA)) that would be required to be paid by the Company under the TRA, using certain valuation assumptions (the “Revised Valuation Assumptions”) that are different than the Existing Valuation Assumptions. The Revised Valuation Assumptions are consistent with how the Tax Benefit Payments are calculated for purposes of the Company’s financial statements and are not expected to be significantly different than the Tax Benefit Payments that would be payable using the Existing Valuation Assumptions. Accordingly, the Amendment provides the Company with the right to terminate and settle all present and future obligations under the TRA with a single payment by the Company to the TRA Holders of $36.9 million (the “Early Termination Right”). Absent the Amendment and the exercise of the Early Termination Right, the Company anticipated making TRA payments totaling $92.4 million, undiscounted, over the life of the TRA.

In addition, the Amendment provides that upon exercise of the early termination right by the Company, the applicable early termination payments will be made within 5 business days following the Company’s delivery of notice of such exercise and a schedule containing the amount of the early termination payments. Prior to the Amendment, the TRA included certain procedures that were required to be followed and that would have resulted in a longer time period for payment.

Bregal Sagemount I, L.P., owns approximately 7% of the Company’s outstanding shares of the Company’s common stock. Gene Yoon is the managing director, and Blair Greenberg is a director, of Bregal Investments, Inc., which is the registered investment advisor of Bregal Sagemount I, L.P. Bregal Sagemount I, L.P. and Bregal Investments, Inc. are TRA Holders. Mr. Yoon and Mr. Greenberg are members of the Company’s Board of Directors. John Flynn, Chairman of the Company’s Board of Directors and the Company’s Chief Executive Officer, along with Ross Jessup, the Company’s President and Chief Operating Officer and member of the Company’s Board of Directors, are Beneficiaries under the TRA. A special committee of the Board of Directors of the Company, consisting solely of independent directors (the “Special Committee”), negotiated and approved the Amendment.

A copy of the Amendment is filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated by reference in this Item 1.01. The description above is a summary of the Amendment and is qualified in its entirety by the complete text of the Amendment.

Item 1.02	Termination of a Material Definitive Agreement.

On April 12, 2021, the Special Committee approved the Company’s decision to exercise the Early Termination Right. On April 12, 2021, as required by the TRA, as amended by the Amendment, the Company will provide notice of the early termination to the TRA Holders, with settlement expected to occur on or around April 16, 2021.

The description of the TRA and the Amendment in Item 1.01 above is incorporated by reference into this Item 1.02.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits

10.1	Amendment No. 1 to the Tax Receivable Agreement, dated April 9, 2021
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

OPEN LENDING CORPORATION
By:	/s/ Charles D. Jehl
Name:	Charles D. Jehl
Title:	Chief Financial Officer

Date: April 12, 2021

EX-10.1

Exhibit 10.1

AMENDMENT NO 1. TO TAX RECEIVABLE AGREEMENT

This AMENDMENT NO. 1 TO TAX RECEIVABLE AGREEMENT (this “Amendment”), dated as of April 9, 2021, is hereby entered into by and among Open Lending Corporation (f/k/a Nebula Parent Corp.), a Delaware corporation (“Parent”), the person listed as the Blocker Holder on the signature pages hereto (the “Blocker Holder”) and the undersigned persons listed as Beneficiaries on the signature pages hereto, with respect to the Tax Receivable Agreement, dated as of June 10, 2020 (as amended, restated, supplemented and/or otherwise modified from time to time the “Agreement”), by and among Parent, the Blocker Holder, the Beneficiaries and certain other parties thereto.

RECITALS

WHEREAS, Parent, the Blocker Holder, the Beneficiaries (including the undersigned Beneficiaries) and certain other persons are party to the Agreement;

WHEREAS, pursuant to Section 7.6 of the Agreement, the Agreement may be amended if such amendment is approved in writing by Parent and by the Beneficiaries or the Blocker Holder who would be entitled to receive at least two-thirds of the Early Termination Payments payable to all Beneficiaries and the Blocker Holder thereunder if the Company had exercised its right of early termination under Section 4.2 thereof (such persons, the “Requisite Holders”); provided that no such amendment shall be effective if such amendment will have a materially disproportionate effect on the payments certain Beneficiaries or the Blocker Holder may receive under this Agreement unless certain other conditions are met;

WHEREAS, the Blocker Holder and the undersigned Beneficiaries constitute the Requisite Holders;

WHEREAS, Parent has determined that this Amendment will not have a materially disproportionate effect on the payments any of the Beneficiaries or the Blocker Holder may receive under the Agreement; and

WHEREAS, Parent and the undersigned Requisite Holders desire to amend the Agreement as set forth herein.

NOW, THEREFORE, in consideration of the foregoing and the respective covenants and agreements set forth herein, and intending to be legally bound hereby, Parent, the Blocker Holder and the undersigned Beneficiaries agree as follows:

1. Amendment of Agreement. This Amendment shall be deemed an amendment to the Agreement and shall become effective and binding upon each of the parties to the Agreement in accordance with its terms when executed and delivered by Parent and the Requisite Holders. To the extent there is a conflict or inconsistency between the terms of this Amendment and the terms of the Agreement, the terms of this Amendment will control. Unless otherwise specifically defined herein or as may otherwise be specified, each capitalized term used herein (including the preamble and recitals hereto) but not otherwise defined herein shall have the meaning assigned to such term in the Agreement. Each reference in the Agreement to “this Agreement”, “hereunder”, “hereby”, “hereof” or words of like import shall mean and be a reference to the Agreement as amended and supplemented by this Amendment. Except as expressly modified by this Amendment, the Agreement shall remain in full force and effect in accordance with its terms.

2. Amount of Payment. Section 4.4(b) of the Agreement is hereby amended and restated in its entirety as follows:

(b) Amount of Payment. The “Early Termination Payment” payable to a Beneficiary or the Blocker Holder pursuant to Section 4.4(a) shall equal 40% of all Tax Benefit Payments (other than any Actual Interest Amounts) that would be required to be paid by Parent to such Beneficiary or the Blocker Holder, beginning from the Early Termination Effective Date and using the Valuation Assumptions.

3. Valuation Assumptions. Clause (6) in the definition of “Valuation Assumptions” in Section 1.1. of the Agreement is hereby amended and restated in its entirety as follows:

(6) any payment obligations pursuant to this Agreement will be satisfied on January 20^th^ of the year following the date that any Tax Return to which such payment obligation relates is required to be filed excluding any extensions.

4. Early Termination Rate. The definition of “Early Termination Rate” in Section 1.1. of the Agreement is hereby deleted in its entirety.

5. Early Termination Notice. Section 4.3 of the Agreement is hereby amended and restated in its entirety as follows:

4.3 Early Termination Notice. If Parent chooses to exercise its right of early termination under Section 4.2 above, Parent shall deliver to the Beneficiaries and the Blocker Holder a notice of Parent’s decision to exercise such right (an “Early Termination Notice”) and a schedule (the “Early Termination Schedule”) showing the amount of the Early Termination Payment. The date on which the Early Termination Notice and the Early Termination Schedule are delivered in accordance with this Section 4.3 shall be the “Early Termination Reference Date.”

6. Representation and Warranty of Parent. Parent represents and warrants to the other parties hereto that the execution and delivery by Parent of this Amendment has been duly and validly authorized by all necessary corporate action on the part of Parent.

7. Representation and Warranty of the Blocker Holder. The Blocker Holder represents and warrants to the other parties hereto that the execution and delivery by the Blocker Holder of this Amendment has been duly and validly authorized by all necessary limited partnership action on the part of the Blocker Holder.

8. Representation and Warranty of the Beneficiaries. Each undersigned Beneficiary that is an entity and not an individual represents and warrants, solely on behalf of itself, to the other parties hereto that the execution and delivery by such Beneficiary of this Amendment has been duly and validly authorized by all necessary corporate or other applicable company action on the part of such Beneficiary.

9. Counterparts. This Amendment may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties hereto and delivered to the other parties hereto, it being understood that all parties hereto need not sign the same counterpart. Delivery of an executed signature page to this Amendment by facsimile transmission or electronic mail shall be as effective as delivery of a manually signed counterpart of this Amendment.

10. Entire Agreement; No Third Party Beneficiaries. This Amendment and the Agreement constitute the entire agreement and supersede all prior agreements and understandings, both written and oral, among the parties to the Agreement with respect to the subject matter hereof. This Amendment shall be binding upon and inure solely to the benefit of the parties to the Agreement and their respective successors and permitted assigns, and nothing in this Amendment, express or implied, is intended to or shall confer upon any other Person any right, benefit or remedy of any nature whatsoever under or by reason of this Amendment; provided, that the Beneficiary Representative shall be a third party beneficiary entitled to enforce this Amendment.

11. Governing Law. This Amendment shall be governed by, and construed in accordance with, the law of the State of Delaware, without regard to the conflicts of laws principles thereof that would mandate the application of the laws of another jurisdiction.

12. Severability. If any term or other provision of this Amendment is invalid, illegal or incapable of being enforced by any law or public policy, all other terms and provisions of this Amendment shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties hereto shall negotiate in good faith to modify this Amendment so as to effect the original intent of the Parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the greatest extent possible.

13. Successors; Waiver.

(a) Successors. All of the terms and provisions of this Amendment shall be binding upon, and shall inure to the benefit of and be enforceable by, the parties to the Agreement and their respective successors, assigns, heirs, executors, administrators and legal representatives. Parent shall require and cause any direct or indirect successor (whether by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of Parent, by written agreement, expressly to assume and agree to perform this Amendment in the same manner and to the same extent that Parent would be required to perform if no such succession had taken place.

(b) Waiver. No failure by any Party to insist upon the strict performance of any covenant, duty, agreement, or condition of this Amendment, or to exercise any right or remedy consequent upon a breach thereof, shall constitute a waiver of any such breach or any other covenant, duty, agreement, or condition.

14. Titles and Subtitles. The headings and titles of the sections and subsections of this Amendment are for convenience of reference only and are not to be considered in construing this Amendment.

[Signature Page Follows]

IN WITNESS WHEREOF, Parent and the other Persons party hereto have duly executed this Amendment as of the date first written above.

PARENT:
OPEN LENDING CORPORATION
By:	/s/ Charles Jehl
	Name: Charles Jehl
	Title: Chief Financial Officer