Kingswood (KWAC) Amends Merger Agreement with Wentworth

Kingswood (KWAC) Amends Merger Agreement with Wentworth

Kingswood (OTC Pink:KWAC) announced via 8-K this afternoon that they have entered into their Second Amendment to the merger with broker-dealer aggregator Wentworth Management Services LLC.

This combination was originally announced over a year ago in July of 2022, with a pro forma enterprise value of $208 million. New York City-based Wentworth Management Services LLC specializes in consolidating independent broker-dealers to capture economies of scale needed. It and Kingswood are to become wholly-owned subsidiaries of Binah Capital Group as a part of transaction.

Today’s amendment includes a number of changes which have been summarized below.

Additional Sponsor Loans and Shares:

The Second Amendment incorporates the introduction of new definitions for “Additional Sponsor Loans” and “Additional Shares of Holdings Common Stock.” “Additional Sponsor Loans” now refer to an additional $250,000 loaned to Kingswood by the Sponsor or an Affiliate of the Sponsor between the date of the Second Amendment and the Closing Date. Meanwhile, “Additional Shares of Holdings Common Stock” amount to 1,100,000 shares to be issued to certain holders of Continuing Company Units, as determined by the Company, prior to the filing of the final Form S-4 amendment.

Redefined Company Merger Consideration:

The definition of “Company Merger Consideration” has been revised to encompass 12,000,000 shares of Holdings Common Stock at the Per Share Price, excluding any Holdings Warrants issued or issuable to Continuing Company Unit Holders, along with the newly added “Additional Shares of Holdings Common Stock.”

Removal of Certain Definitions:

The Second Amendment streamlines the merger by eliminating the definitions of “Converted Company Debt Amount” and “Minimum Company Share Amount,” along with their corresponding references in the Existing Merger Agreement.

Forfeiture of SPAC Private Placement Warrants:

Section 2.09(d)(i) has been modified to mandate the forfeiture of 3,084,450 SPAC Private Placement Warrants by Kingswood Global Sponsor, LLC, immediately prior to the Effective Time.

Escrow of Holdings Common Stock:

Section 2.09(b) has been amended to introduce an escrow option for 1,100,000 shares of Holdings Common Stock, which may be released to Sponsor under specific conditions, including the VWAP of Holdings Common Stock exceeding $12.00 for 20 trading days within any 30-day trading period over four years following Closing.

Lock-Up Agreement and Listing Requirements:

The Second Amendment now clarifies that the “Additional Shares of Holdings Common Stock” will not be subject to the Lock-Up Agreement. Additionally, it empowers Craig Gould to release certain entities and their Holdings Common Stock from Lock-Up Agreement obligations to meet initial listing requirements.

Reimbursement and Repayment Provisions:

A significant change is the introduction of provisions related to reimbursement and repayment. In case the Closing does not occur, SPAC will reimburse the Company for SPAC Extension Costs. If the Closing fails due to SPAC’s inability to meet certain conditions precedent, SPAC will reimburse the Company for up to $150,000 in expenses. Furthermore, Wentworth is given options to repay Sponsor Loans and Prior Expenses either in Holdings Common Stock or immediately available funds.

Payment of Outstanding Company Expenses:

The Second Amendment permits Wentworth, with Kingswood’s consent, to pay Outstanding Company Expenses owed to third parties before the Closing in exchange for additional shares of Holdings Common Stock.

Subscription Agreements and Preferred Stock:

The covenants and agreements in Section 7.10 have been revised to require parties to pursue subscription agreements with investors and acknowledge the proposed issuance of up to 1,500,000 Series A Convertible Preferred Stock of Holdings.

Revised Closing Conditions and Termination Date:

Several closing conditions have been amended and restated in the Second Amendment, including the payment of Sponsor Loans, the minimum Available Closing Date Cash, and the issuance of the Company Merger Consideration. Additionally, the “Termination Date” has been extended to November 24, 2023.