Item 1.01 Entry into a Material definitive Agreement.

On May 9, 2022, Lakeshore Acquisition I Corp., a Cayman Islands exempted company (together with its successors, including after the Reincorporation (as defined below), the "Purchaser"), LAAA Merger Sub Inc., a Delaware corporation and wholly-owned subsidiary of Purchaser (the "Merger Sub"), ProSomnus Holdings Inc., a Delaware corporation ("ProSomnus"), HGP II, LLC, a Delaware limited liability company, as the representative of the stockholders of ProSomnus, and RedOne Investment Limited, a British Virgin Islands company, as the representative of the stockholders of Purchaser, entered into a Merger Agreement (the "Merger Agreement").

The Merger and Merger Consideration

Pursuant to the Merger Agreement, ProSomnus will merge with Merger Sub (the "Merger"), with ProSomnus surviving and the Purchaser acquiring 100% of the equity securities of ProSomnus. In exchange for their equity securities, the stockholders of ProSomnus (the "Company Stockholders") will receive an aggregate number of shares of common stock (the "Purchaser Common Stock") of the Purchaser (the "Merger Consideration") with an aggregate value equal to: (a) one hundred thirteen million U.S. dollars ($113,000,000), minus (b) the amount by which the Closing Net Indebtedness (as defined in the Merger Agreement) exceeds twelve million U.S. dollars ($12,000,000). Additionally, Purchaser shall make available to ProSomnus no less than $40,000,000, prior to the payment of expenses incurred in connection with the Merger and any outstanding debt of ProSomnus, in cash and cash equivalents (the "Minimum Cash Amount") immediately after the closing of the transaction contemplated under the Merger Agreement (the "Closing"), including the net proceeds from the trust account established by Purchaser with the proceeds from its initial public offering (the "Trust Account") and the net proceeds from the Transaction Financing (as defined below). The closing of the Transaction Financing is a condition to Closing.

The Merger Consideration otherwise payable to Company Stockholders is subject to the withholding of a number of shares of Purchaser Common Stock equal to three percent (3.0%) of the Merger Consideration to be placed in escrow for post-closing adjustments (if any) to the Merger Consideration, in accordance with the terms of the Merger Agreement following the Closing.

Additionally, the Company Stockholders may be entitled to receive up to 3.0 million earn-out shares in three tranches:

· the first tranche of 1.0 million earn-out shares will be issued when the


   volume-weighted average price per share of Purchaser Common Stock is $12.50 or
   greater for 20 trading days in any consecutive 30 trading day period commencing
   6 months after the Closing and ending at the third anniversary of the Closing;

· the second tranche of 1.0 million earn-out shares will be issued when the


   volume-weighted average price per share of Purchaser Common Stock is $15.00 or
   greater for 20 trading days in any consecutive 30 trading day period commencing
   6 months after the Closing and ending at the third anniversary of the Closing;
   and

· the third tranche of 1.0 million earn-out shares will be issued when the


   volume-weighted average price per share of Purchaser Common Stock is $17.50 or
   greater for 20 trading days in any consecutive 30 trading day period commencing
   6 months after the Closing and ending at the third anniversary of the Closing.

The parties agreed that immediately following the Closing, Purchaser's board of directors will consist of seven (7) to nine (9) individuals designated by ProSomnus, in its sole discretion, and appointed in compliance with the rules of The Nasdaq Stock Market ("Nasdaq"), including that a majority of the directors will qualify as independent directors.

Reincorporation of the Purchaser

Immediately prior to the Merger, the Purchaser shall reincorporate into the State of Delaware so as to re-domicile as and become a Delaware corporation by means of a merger of Purchaser with and into a newly formed Delaware corporation (the "Reincorporation"), and subject to the receipt of the approval of the shareholders of the Purchaser to the Reincorporation terms, the Purchaser shall adopt Delaware organizational documents, which will provide, among other things, that the name of the Purchaser shall be amended to be "ProSomnus, Inc." In connection with the Reincorporation, Purchaser's outstanding securities will be converted into equivalent securities of the Purchaser as a Delaware corporation, as follows:





    ·   Each of Purchaser's ordinary shares will be converted automatically into
        one share of Purchaser Common Stock.









    ·   Each warrant entitling the holder to purchase one Purchaser ordinary share
        at a price of $11.50 per whole share will be converted automatically into
        one warrant to purchase one share of Purchaser Common Stock at a price of
        11.50 per whole share.




    ·   Each issued and outstanding unit of Purchaser will be automatically
        separated into its constituent securities, with each constituent security
        being automatically converted into a security of the Purchaser as
        described in the preceding bullet points.

Representations and Warranties

In the Merger Agreement, ProSomnus makes certain representations and warranties (with certain exceptions set forth in the disclosure schedules to the Merger Agreement) relating to, among other things: (a) proper corporate organization of ProSomnus and its subsidiaries and similar corporate matters; (b) authorization, execution, delivery and enforceability of the Merger Agreement and other transaction documents; (c) absence of conflicts; (d) capital structure; (e) accuracy of charter documents and corporate records; (f) required consents and approvals; (g) financial information; (h) absence of certain changes or events; (i) title to assets and properties; (j) material contracts; (k) ownership of real property; (l) licenses and permits; (m) compliance with laws, including those relating to foreign corrupt practices and money laundering; (n) ownership of intellectual property; (o) customers and suppliers; (p) employment and labor matters; (q) taxes and audits; (r) brokers and finders; (s) that ProSomnus is not an investment company; and (t) other customary representations and warranties.

In the Merger Agreement, Purchaser and Merger Sub make certain representations and warranties relating to, among other things: (a) proper corporate organization and similar corporate matters; (b) authorization, execution, delivery and enforceability of the Merger Agreement and other transaction documents; (c) litigation; (d) brokers and finders; (e) capital structure; (f) validity of share issuance; (g) the Minimum Cash Amount; (h) validity of Nasdaq listing; (i) SEC filing requirements and financial statements; (j) that Purchaser is not an investment company; and (k) compliance with laws, including those relating to money laundering.

Conduct Prior to Closing; Covenants

Each of ProSomnus and Purchaser has agreed to, and cause its subsidiaries to, operate the business in the ordinary course, consistent with past practices, prior to the Closing (with certain exceptions) and not to take certain specified actions without the prior written consent of the other party.

The Merger Agreement also contains, among other things, covenants providing for:





    ?   Each party providing access to their books and records and providing
        information relating to their respective business to the other party, its
        legal counsel and other representatives;




    ?   ProSomnus delivering the financial statements required by Purchaser to
        make applicable filings with the SEC;




    ?   Purchaser timely filing all of its public filings with the SEC and
        otherwise complying with applicable securities laws and using its
        reasonable best efforts prior to the Closing to maintain the listing of
        its units, ordinary shares and warrants on Nasdaq;




    ?   The parties shall not solicit, initiate, encourage or continue discussions
        with any third party with respect to any transaction other than the
        transactions contemplated or permitted by the Merger Agreement; and




    ?   The Purchaser, with the reasonable assistance of ProSomnus, shall file and
        cause to become effective a registration statement on S-4 (the "Form S-4")
        registering the Purchaser Common Stock, which will also contain a proxy
        statement of Purchaser for the purpose of soliciting proxies from
        Purchaser's shareholders for approval of certain matters related to the
        transactions contemplated by the Merger Agreement.










Conditions to Closing



General Conditions

Consummation of the transactions contemplated by the Merger Agreement is conditioned on, among other things, (i) the absence of any order or provisions of any applicable law prohibiting the transactions or preventing the transactions; (ii) Purchaser and ProSomnus receiving approval from their respective stockholders to the transactions, (iii) the Purchaser having no less than $40,000,000 in cash and cash equivalents available to them immediately after the Closing, including the net proceeds from the Trust Account and the net proceeds from the Transaction Financing (as defined in the Merger Agreement); (iv) the Purchaser Common Stock having been approved for listing on Nasdaq, and (v) the SEC having declared the Form S-4 effective.





ProSomnus's Conditions to Closing
. . .

Item 7.01. Regulation FD Disclosure.

On May 10, 2022, Purchaser and ProSomnus issued a joint press release announcing the execution of the Merger Agreement. The press release is attached hereto as Exhibit 99.1 and incorporated by reference herein.

Furnished as Exhibit 99.2 hereto and incorporated into this Item 7.01 by reference is the investor presentation that Purchaser and ProSomnus have prepared for use in connection with the announcement of the execution of the Merger Agreement.

Furnished as Exhibit 99.3 hereto and incorporated into this Item 7.01 by reference is the transcript of an audio investor presentation that Purchaser and ProSomnus prepared for use in connection with the announcement of the execution of the Merger Agreement.

The information in this Item 7.01, including Exhibits 99.1, 99.2 and 99.3, is being furnished and will not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise be subject to the liabilities of that section, nor will it be deemed to be incorporated by reference in any filing under the Securities Act or the Exchange Act.

Item 9.01. Financial Statements and Exhibits.






Exhibit No.   Description
  2.1           Merger Agreement dated May 9, 2022
  10.1          Form of Purchaser Support Agreement
  10.2          Form of Voting and Support Agreement
  10.3          Form of Lock-up Agreement
  10.4          Form of Non-Competition and Non-Solicitation Agreement
  10.5          Form of Registration Rights Agreement
  10.6          Form of 2022 Equity Incentive Plan
  99.1          Press Release dated May 10, 2022
  99.2          Investor Presentation
  99.3          Investor presentation recording transcript
  99.4          Letter to investors, dated May 10, 2022
  99.5          Email to shareholders of ProSomnus, dated May 10, 2022
104           Cover Page Interactive Data File (embedded within the Inline XBRL
              document)

© Edgar Online, source Glimpses