Item 1.01 Entry Into A Material Definitive Agreement.
BUSINESS COMBINATION AGREEMENT
This section describes the material provisions of the Business Combination
Agreement but does not purport to describe all of the terms thereof.
Proficient's stockholders, warrant holders, rights holders and other interested
parties are urged to read such agreement in its entirety. The following summary
is qualified in its entirety by reference to the complete text of the Business
Combination Agreement, a copy of which is attached hereto as Exhibit 2.1. Unless
otherwise defined herein, the capitalized terms used below are defined in the
Business Combination Agreement.
General Description of the Business Combination Agreement
On March 10, 2020, Proficient Alpha Acquisition Corp., a Nevada corporation
("Proficient"), entered into a Business Combination Agreement (the "Business
Combination Agreement") with Lion Financial Group Limited, a corporation
organized under the laws of the British Virgin Islands ("Lion"), Lion Group
Holding Ltd., a Cayman Islands exempted company and wholly-owned subsidiary of
Lion ("Pubco"), Lion MergerCo 1, Inc., a Delaware corporation and a wholly-owned
subsidiary of Pubco ("Merger Sub"), Shih-Chung Chou, an individual, in the
capacity as the Purchaser Representative thereunder, Jian Wang and Legend
Success Ventures Limited, each, in the capacity as a Seller Representative
thereunder, and each of the holders of Lion's outstanding capital shares (the
"Sellers").
Pursuant to the Business Combination Agreement, subject to the terms and
conditions set forth therein, at the closing of the transactions contemplated by
the Business Combination Agreement (the "Closing"), (a) Merger Sub will merge
with and into Proficient, with Proficient continuing as the surviving entity
(the "Merger"), and with holders of Proficient securities receiving
substantially identical securities of Pubco, and (b) immediately prior to the
Merger, Pubco will acquire all of the issued and outstanding ordinary shares of
Lion (the "Purchased Shares") from the Sellers in exchange for Class A and Class
B ordinary shares of Pubco, with Lion becoming a wholly-owned subsidiary of
Pubco (the "Share Exchange", and together with the Merger and the other
transactions contemplated by the Business Combination Agreement, the
"Transactions").
Exchange Consideration
The total consideration to be paid by Pubco to the Sellers for the Purchased
Shares shall be an aggregate number of Pubco ordinary shares (the "Exchange
Shares") with an aggregate value (the "Exchange Consideration") equal to,
without duplication, (i) $125,000,000, plus (or minus, if negative) (ii) Lion's
net working capital less a target net working capital of $815,000, minus (iii)
the aggregate amount of any outstanding indebtedness, net of cash and cash
equivalents, of Lion and its subsidiaries, and minus (iv) the amount of any
unpaid transaction expenses of Lion, with each Pubco ordinary share to be issued
to the Sellers valued at a price equal to the price at which each share of
Proficient common stock is redeemed (the "Redemption Price") pursuant to the
redemption by Proficient of its public stockholders in connection with
Proficient's initial business combination, as required by its amended and
restated articles of incorporation (the "Redemption"). Jian Wang, the Chairman
of Lion (the "Main Seller"), and Legacy Success Ventures Limited (collectively,
the "Class B Sellers"), shall each receive solely Pubco Class B ordinary shares
(the "Class B Exchange Shares") and all of the other Sellers (the "Class A
Sellers") shall receive solely Pubco Class A ordinary shares (the "Class A
Exchange Shares"). The Pubco Class A ordinary shares and the Pubco Class B
ordinary shares will be identical in rights except that the Class B ordinary
shares will (i) entitle the holder to 10 votes per share and (ii) be
convertible, at the election of the holder, into Pubco Class A ordinary shares
on a one-to-one basis.
The Exchange Consideration is subject to adjustment after the Closing based on
final confirmation of Lion's net working capital, the outstanding indebtedness
of Lion and its subsidiaries net of cash and cash equivalents, and any unpaid
transaction expenses of Lion, as of the date of the Closing. If the finally
determined number of Exchange Shares is (i) greater than the estimated number of
Exchange Shares, Pubco will issue an additional number of Pubco Class A ordinary
shares and Pubco Class B ordinary shares equal to such difference to the
Sellers, subject to a maximum amount equal to the amount of Indemnity Escrow
Property (defined below) at such time or (ii) less than the estimated number of
Exchange Shares, Pubco will cause the Escrow Agent (as defined below) to release
from escrow a number of Indemnity Escrow Shares equal to such difference to
Pubco, subject to a maximum amount equal to the Indemnity Escrow Property at
such time.
The issuances of Pubco ordinary shares in connection with the Share Exchange
will be exempt from registration under the Securities Act in reliance upon
Section 4(a)(2) thereof because securities of Pubco will be issued to a limited
number of holders of Lion securities without involving a public offering. Such
issuances will also be exempted from registration in reliance upon Regulation S
of the Securities Act with regard to certain holders of Lion securities
receiving Pubco ordinary shares who are qualified as non-U.S. persons
thereunder.
(1)
Escrow Accounts
Indemnity Escrow
The parties agreed that at or prior to the Closing, Pubco, the Sellers and
American Stock Transfer & Trust Company, LLC, as escrow agent (the "Escrow
Agent" or "AST") will enter into an Escrow Agreement, effective as of the
Closing, in form and substance reasonably satisfactory to Proficient and Lion
(the "Escrow Agreement"), pursuant to which Pubco will deliver to the Escrow
Agent a number of Class B Exchange Shares (each valued at the Redemption Price)
equal to 15% of the estimated Exchange Consideration otherwise issuable to the
Sellers at the Closing (such Class B Exchange Shares, together with any equity
securities paid as dividends or distributions with respect to such shares or
into which such shares are exchanged or converted the "Indemnity Escrow Shares")
to be held, along with any dividends, distributions or income thereon (together
with the Indemnity Escrow Shares, the "Indemnity Escrow Property") in a
segregated account (the "Indemnity Escrow Account") and disbursed in accordance
with the Business Combination Agreement and the Escrow Agreement. The indemnity
Escrow Shares will be held in the Indemnity Escrow Account for a period of 24
months after the Closing and shall be the sole and exclusive source of payment
for any post-Closing purchase price adjustment and for any post-closing
indemnification claims (other than certain fraud claims and breaches of Lion and
the Sellers' fundamental representations, as discussed below); provided that
half of the Indemnity Escrow Property will be released to the Class B Sellers on
the 12 month anniversary of the Closing. Within three business days of the 24
month anniversary of the Closing, all remaining Indemnity Escrow Property will
be released to the Class B Sellers in accordance with the Business Combination
Agreement. However, an amount of Indemnity Escrow Property equal to the value of
any pending and unresolved claims will remain in the Indemnity Escrow Account
until finally resolved.
Earnout Escrow
Additionally, at the Closing, Pubco will deliver to the Escrow Agent a number of
Class B Exchange Shares (each valued at the Redemption Price) equal to thirty
percent (30%) of the estimated Exchange Consideration otherwise issuable to the
Sellers at the Closing (such Class B Exchange Shares, together with any equity
securities paid as dividends or distributions with respect to such shares or
into which such shares are exchanged or converted the "Earnout Escrow Shares"
and together with the Indemnity Escrow Shares, the "Escrow Shares") to be held,
along with any dividends, distributions or income thereon (together with the
Earnout Escrow Shares, the "Earnout Escrow Property") in a segregated account
(the "Earnout Escrow Account") and disbursed in accordance with the Business
Combination Agreement and the Escrow Agreement.
In the event that the net income for the calendar year ended December 31, 2021
(the "2021 Net Income"), as set forth in Pubco's audited financial statements,
is equal to or greater than $19,000,000 (the "First Net Income Target"), then,
the Class B Sellers' rights to 50% of the Earnout Escrow Property (the "First
Half Earnout Property") shall vest and shall no longer be subject to forfeiture.
If the 2021 Net Income is less than the First Net Income Target, but is equal to
or greater than $9,500,000, then the Class B Sellers' rights to 50% of the First
Half Earnout Property shall vest and shall no longer be subject to forfeiture.
In all other cases, the First Half Earnout Property will be forfeited.
In the event that the net income for the calendar year ended December 31, 2022
(the "2022 Net Income"), as set forth in Pubco's audited financial statements,
is equal to or greater than $21,850,000 (the "Second Net Income Target"), then
the Class B Sellers' rights to the remaining Earnout Escrow Property (after
giving effect to any forfeitures for the 2021 calendar year, the "Second Half
Earnout Property") shall vest and shall no longer be subject to forfeiture. If
the 2022 Net Income is less than the Second Net Income Target, but is equal to
or greater than $10,925,000, then the Class B Sellers' rights to 50% of the
Second Half Earnout Property shall vest and shall no longer be subject to
forfeiture. In all other cases, the Second Half Earnout Property will be
forfeited.
Representations and Warranties
The Business Combination Agreement contains a number of representations and
warranties made by Proficient, Lion and Pubco as of the date of such agreement
or other specific dates solely for the benefit of certain of the parties to the
Business Combination Agreement, which in certain cases are subject to specified
exceptions and materiality, Material Adverse Effect, knowledge and other
qualifications contained in the Business Combination Agreement or in information
provided pursuant to certain disclosure schedules to the Business Combination
Agreement. "Material Adverse Effect" as used in the Business Combination
Agreement means with respect to any specified person or entity, any fact, event,
occurrence, change or effect that has had or would reasonably be expected to
have, individually or in the aggregate, a material adverse effect on the
business, assets, liabilities, results of operations, prospects or condition
(financial or otherwise) of such person or entity and its subsidiaries, taken as
a whole, or the ability of such person or entity or any of its subsidiaries on a
timely basis to consummate the transactions contemplated by the Business
Combination Agreement, subject to certain customary exceptions.
(2)
In the Business Combination Agreement, Lion made certain customary
representations and warranties to Proficient, including among others, related to
the following: (1) corporate matters, including due organization, existence and
good standing; (2) authority and binding effect relating to execution and
delivery of the Business Combination Agreement and other ancillary documents;
(3) capitalization; (4) subsidiaries; (5) governmental approvals; (6)
non-contravention; (7) financial statements; (8) absence of certain changes; (9)
compliance with laws; (10) permits; (11) litigation; (12) material contracts;
(13) intellectual property; (14) taxes and tax returns; (15) real property; (16)
personal property; (17) title to and sufficiency of assets; (18) employee
matters; (19) benefit plans; (20) environmental matters; (21) transactions with
related persons; (22) insurance; (23) customers and suppliers; (24) business
practices; (25) Investment Company Act of 1940 ("Investment Company Act"); (26)
finders and brokers; (27) information supplied and (28) independent
investigation. Additionally, Pubco made certain customary representations and
warranties to Proficient with respect to Pubco and Merger Sub, including
representations and warranties related to the following: (1) corporate matters,
including due organization, existence and good standing; (2) authority and
binding effect relating to execution and delivery of the Business Combination
Agreement and other ancillary documents; (3) governmental approvals; (4)
non-contravention; (5) capitalization; (6) title and ownership of the Pubco
shares to be issued to the Sellers; (7) Pubco and Merger Sub activities; (8)
finders and brokers; (9) Investment Company Act; (10) information supplied; and
(11) independent investigation.
In the Business Combination Agreement, Proficient made certain customary
representations and warranties to Lion and the Sellers, including among others,
related to the following: (1) corporate matters, including due organization,
existence and good standing; (2) authority and binding effect relative to
execution and delivery of the Business Combination Agreement and other ancillary
documents; (3) governmental approvals; (4) non-contravention; (5)
capitalization; (6) SEC filings, financial statements and internal controls; (7)
absence of certain changes; (8) compliance with laws; (9) litigation, orders and
permits; (10) taxes and returns; (11) employees and employee benefit plans; (12)
properties; (13) material contracts; (14) transactions with affiliates; (15)
Investment Company Act and the JOBS Act; (16) finders and brokers; (17) business
practices; (18) insurance; (19) trust account; and (20) independent
investigation.
In the Business Combination Agreement, each Seller made customary
representations and warranties to Proficient, including among others, related to
the following: (1) organization and good standing; (2) authority and binding
effect relating to execution and delivery of the Business Combination Agreement
and other ancillary documents; (3) ownership of the Purchased Shares; (iv)
governmental approvals; (v) non-contravention; (6) litigation; (7) investment
representations; (8) finders and brokers; (9) information supplied; and (10)
independent investigation.
Covenants of the Parties
Each party agreed in the Business Combination Agreement to use its commercially
reasonable efforts to effect the Closing. The Business Combination Agreement
. . .
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Exhibit No. Description
2.1* Business Combination Agreement, dated as of March 10, 2020, by and among
Proficient Alpha Acquisition Corp., Shih-Chung Chou, in the capacity as
the Purchaser Representative, Lion Group Holding Ltd., Lion MergerCo 1,
Inc., Lion Financial Group Limited, Wang Jian and Legend Success Ventures
Limited, in the capacity as the Seller Representatives and the
stockholders of Lion Financial Group Limited named therein.
10.1 Lock-Up Agreement, dated as of March 10, 2020, by and among Lion Group
Holding Ltd., Shih-Chung Chou, in the capacity as the Purchaser
Representative, and Jian Wang.
10.2 Lock-Up Agreement, dated as of March 10, 2020, by and among Lion Group
Holding Ltd., Shih-Chung Chou, in the capacity as the Purchaser
Representative, and Legend Success Ventures Limited.
10.3 Non-Competition and Non-Solicitation Agreement, dated as of March 10,
2020, by and among Lion Group Holding Ltd., Proficient Alpha Acquisition
Corp., Lion Financial Group Limited and Jian Wang.
10.4 Non-Competition and Non-Solicitation Agreement, dated as of March 10,
2020, by and among Lion Group Holding Ltd., Proficient Alpha Acquisition
Corp., Lion Financial Group Limited and Chunning Wang.
10.5 Form of Seller Registration Rights Agreement, by and among, Lion Group
Holding Ltd. and the Sellers .
10.6 Form of First Amendment to Registration Rights Agreement, by and among,
Proficient Alpha Acquisition Corp., Lion Group Holding Ltd., I-Bankers
Securities, Inc. and the Founders.
10.7 Securities Assignment and Joinder Agreement, dated as of March 12, 2020,
by and among Complex Zenith Limited, Proficient Alpha Acquisition Corp.,
Shih-Chung Chou, and the other parties thereto.
* The exhibits and schedules to this Exhibit have been omitted in accordance
with Regulation S-K Item 601(b)(2). The Registrant agrees to furnish
supplementally a copy of all omitted exhibits and schedules to the Securities
and Exchange Commission upon its request.
(9)
ADDITIONAL INFORMATION
Lion Group Holding Ltd., a Cayman Islands exempted company ("Pubco") intends to
file with the Securities and Exchange Commission (the "SEC"), a Registration
Statement on Form F-4 (as amended, the "Registration Statement"), which will
include a preliminary proxy statement of Proficient Alpha Acquisition Corp., a
Nevada Corporation ("Proficient") and a prospectus in connection with the
proposed business combination (the "Business Combination") involving Proficient,
Lion Financial Group Limited, a corporation organized under the laws of the
British Virgin Islands ("Lion"), Lion MergerCo 1, Inc., a Delaware corporation
and a wholly-owned subsidiary of Pubco ("Merger Sub"), Shih-Chung Chou, an
individual, in the capacity as the Purchaser Representative, Jian Wang and
Legend Success Ventures Limited, each, in the capacity as a Seller
Representative, and each of the holders of Lion's outstanding capital shares
(the "Sellers"). The definitive proxy statement and other relevant documents
will be mailed to stockholders of Proficient as of a record date to be
established for voting on the Business Combination. Stockholders of Proficient
and other interested persons are advised to read, when available, the
preliminary proxy statement, and amendments thereto, and the definitive proxy
statement in connection with Proficient's solicitation of proxies for the
special meeting of its stockholders to be held to approve the Business
Combination because these documents will contain important information about
Proficient, Lion, Pubco and the Business Combination, including the Merger (as
defined below). Stockholders will also be able to obtain copies of the
Registration Statement and the proxy statement/prospectus, without charge, once
available, on the SEC's website at www.sec.gov or by directing a request to
Proficient by contacting its Chief Financial Officer, Tracy Luo, c/o Proficient
Alpha Acquisition Corp., 40 Wall St., 29th Floor, New York, New York 10005, at
(917) 289-0932 or at info@paac-us.com.
DISCLAIMER
This report and the exhibits hereto do not constitute an offer to sell or the
solicitation of an offer to buy any securities, nor shall there be any sale of
securities in any jurisdiction in which the offer, solicitation or sale would be
unlawful prior to the registration or qualification under the securities laws of
any such jurisdiction. No offering of securities shall be made except by means
of a prospectus meeting the requirements of Section 10 of the Securities Act of
1933, as amended.
PARTICIPANTS IN THE SOLICITATION
Proficient, Pubco, and their respective directors and executive officers may be
deemed to be participants in the solicitation of proxies from the stockholders
of Proficient in connection with the Business Combination. Information regarding
the officers and directors of Proficient is set forth in Proficient's annual
report on Form 10-K, which was filed with the SEC on December 30, 2019.
Additional information regarding the interests of such potential participants
will also be included in the Registration Statement on Form F-4 (and will be
included in the definitive proxy statement/prospectus for the Business
Combination) and other relevant documents filed with the SEC.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements that involve risks and
uncertainties concerning the Business Combination, Lion's expected financial
performance, as well as its strategic and operational plans. Actual events or
results may differ materially from those described in this report due to a
number of risks and uncertainties. These risks and uncertainties could cause
actual results or outcomes to differ materially from those indicated by such
forward looking-statements. Most of these factors are outside the control of
Proficient, Lion or Pubco and are difficult to predict. Factors that may cause
such differences include, but are not limited to: (1) the occurrence of any
event, change or other circumstances that could give rise to the termination of
the Business Combination Agreement; (2) the outcome of any legal proceedings
that may be instituted against Proficient, Lion or others following announcement
of the Business Combination Agreement and the transactions contemplated therein;
(3) the inability to complete the transactions contemplated by the Business
Combination Agreement due to the failure to obtain approval of the stockholders
of Proficient or other conditions to closing in the Business Combination
Agreement; (4) delays in obtaining, adverse conditions contained in, or the
inability to obtain necessary regulatory approvals required to complete the
transactions contemplated by the Business Combination Agreement; (5) the risk
that the Business Combination disrupts current plans and operations as a result
of the announcement and consummation of the transactions described herein; (6)
the inability to recognize the anticipated benefits of the Business Combination,
which may be affected by, among other things, competition, the ability of the
combined company to grow and manage growth profitably and retain its key
employees; (7) the inability to obtain or maintain the listing of Pubco's
securities on The Nasdaq Stock Market, following the Business Combination,
including having the requisite number of stockholders; (8) costs related to the
Business Combination; (9) changes in applicable laws or regulations; (10) the
possibility that Lion, Pubco or the combined company may be adversely affected
by other economic, business, and/or competitive factors; and (11) other risks
and uncertainties indicated from time to time in filings with the SEC by
Proficient or Pubco. Readers are referred to the most recent reports filed with
the SEC by Proficient. Readers are cautioned that the foregoing list of factors
is not exclusive, and not to place undue reliance upon any forward-looking
statements, which speak only as of the date made, and we undertake no obligation
to update or revise the forward-looking statements to reflect any change in its
expectations or any change in events, conditions or circumstances on which any
such statement is based, subject to applicable law, whether as a result of new
information, future events or otherwise.
(10)
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