Rotterdam, 31 May 2023

Dear Bondholder,

We are writing this letter to inform you of important developments within LCS Group and to make you a proposal to adjust the bond conditions. As you are aware from our previous communication and the FAQ that was sent to you, a case of accounting fraud has occurred within LCS Group with a damage amount of 255.000 euros. Including additional costs, such as lawyer fees and interest payments, the total damage will amount to 300.000 euros. This situation has put significant pressure on our liquidity position.

We would like to inform you that the employee in question has reported to the police and has made a confession. The case is currently with the Public Prosecution Service for further handling. In addition, we would also like to inform you of the process that LCS Group started in the middle of last year under the leadership of ABN Amro to attract new capital. This process has been initiated because we have made significant investments in our platform in recent years and now want to strengthen the commercial side of our company.

Last December we received an offer for 20% of our shares from Holland Capital (HC), a renowned Dutch venture capitalist specializing in B2B software companies. For more information, please visit www.hollandcapital.nl. After receiving this offer, we entered into lengthy negotiations with HC. They are prepared to invest 3 million euros in growth capital in LCS Group under certain conditions. HC believes that we are over-financed, the interest charges are too high and the term of the bonds is too short. That is why HC's original proposal included the condition that we would have to refinance the bond loan with a bank during the due diligence process. Due to the detected fraud, refinancing with a bank is currently not possible, which is why we have entered into new negotiations with HC.

This has led to the following conditions for the financing of HC or adjustment of the bond conditions:

  1. The interest rate on the bonds will be reduced from 8,5% to 7%.
  2. The term of the bond loan is extended until June 30, 2028.
  3. Rabobank currently sees no objections to removing the subordination with regard to the bond loan and confirmed this by email dated May 22, 2023.

Provided that financing by HC is a reality, the adjusted bond conditions will come into effect on July 1, 2023.

In addition, I will transfer 10% of my share capital to an Employee Stock Option Plan (ESOP pool), which will attract, among others, a new Chief Commercial Officer and a VP of Partnerships, as well as other highly qualified personnel. In addition, the current Chief Operating Officer and Chief Technology Officer participate in this ESOP pool. The deposit is not a cash deposit but a deposit of shareholder value for the growth of the company.

We believe that with these measures the company has a healthy future perspective.

The Bondholder Interest Foundation will convene an extraordinary meeting of bondholders on Monday, June 5, 2023 at 16.00 p.m. at which we will explain everything in detail and request your approval for the above-mentioned changes. You will receive a separate invitation for this.

It is important to note that if you vote against the proposal, we will be forced to partially dismantle our development team. Our developers understand the situation and have all made a salary sacrifice of 20% for a period of up to 5 months. Our CTO and COO have also made this salary sacrifice. Even though we achieved a positive EBITDA in the first quarter, the costs of development and interest still weigh heavily on the organization. The current development team consists of 18 people, and it is expected that we will have to say goodbye to 12 of them. This not only endangers our future prospects, but also your bonds.

We thank you in advance for your understanding and cooperation at this crucial stage of the venture. We aim to complete the due diligence with HC on June 28.

Yours faithfully,

Nick Blom
LCS Group