Item 1.01 Entry Into a Definitive Material Agreement.
This section describes the material provisions of the Business Combination
Agreement (as defined below) and certain related documents, but does not purport
to describe all of the terms thereof. The following summary is qualified in its
entirety by reference to the complete text of the Business Combination
Agreement, a copy of which is filed herewith as Exhibit 2.1. Unless otherwise
defined herein, capitalized terms used below have the meanings given to them in
the Business Combination Agreement.
Business Combination Agreement
General Description of the Business Combination Agreement
On December 9, 2022, Better World Acquisition Corp., a Delaware corporation
("Better World"), announced the execution of a definitive business combination
agreement (the "Business Combination Agreement") with Heritage Distilling
Holding Company, Inc., a Delaware corporation (together with its successors,
"Heritage"), HDH Newco, Inc., a Delaware corporation and a wholly owned
subsidiary of Better World ("Pubco" ), BWA Merger Sub, Inc., a Delaware
corporation and a wholly owned subsidiary of Pubco ("SPAC Merger Sub"), HD
Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Pubco
("Company Merger Sub" and, together with SPAC Merger Sub, the "Merger Subs"; and
the Merger Subs, collectively with Better World and Pubco, the "SPAC Parties"),
BWA Holdings LLC, a Delaware limited liability company, in the capacity as the
representative for the stockholders of Better World and Pubco (other than the
former Heritage stockholders), and (vii) Justin Stiefel, in the capacity as the
representative for certain security holders of Heritage (the "Holder
Representative"), for a proposed business combination among the parties (the
"Business Combination"). Pursuant to the Business Combination Agreement, Pubco
is expected to change its name to Heritage Distilling Group, Inc. and will serve
as the parent company of each of Better World and Heritage following the
consummation of the Business Combination. Pubco is sometimes referred to herein
as the "Combined Company" following the Closing (as defined below).
Under 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"), among other matters, Merger Sub
will merge with and into Heritage, with Heritage continuing as the surviving
entity in the merger, as a result of which, (i) SPAC Merger Sub will merge with
and into Better World, with Better World continuing as the surviving entity (the
"SPAC Merger"), and, in connection therewith, (A) each share of common stock of
Better World ("SPAC Common Stock") issued and outstanding immediately prior to
the Effective Time will be cancelled in exchange for the right of the holder
thereof to receive, with respect to each share of SPAC Common Stock that is not
redeemed or converted in the Closing Redemption, one share of common stock of
Pubco ("Pubco Common Stock") and one CVR (subject to the holders of Founder
Shares and Representative Shares waiving their right to receive CVRs for such
shares pursuant to the CVR Funding and Waiver Letter), and (B) Pubco will assume
all of the outstanding SPAC Warrants and each SPAC Warrant will become a warrant
to purchase the same number of shares of Pubco Common Stock at the same exercise
price during the same exercise period and otherwise on the same terms as the
SPAC Warrant being assumed; (ii) Company Merger Sub will merge with and into
Heritage, with Heritage continuing as the surviving entity (the "Company
Merger", and, together with the SPAC Merger, the "Mergers"), and, in connection
therewith, (A) the shares of capital stock of Heritage issued and outstanding
immediately prior to the Effective Time will be cancelled in exchange for the
right of the holders thereof to receive shares of Pubco Common Stock as set
forth in the Business Combination Agreement, (B) holders of Company Interim
Notes of Heritage will receive shares of Pubco Common Stock separate from the
Stockholder Merger Consideration, (C) Pubco will assume all of the outstanding
Company Financing/Interim Warrants and each Company Financing/Interim Warrant
will become a warrant to purchase shares of Pubco Common Stock with the number
of shares and exercise price thereof equitably adjusted in accordance with the
Business Combination Agreement, (D) each Contributed Warrant shall be
contributed to Pubco and exchanged for the right to receive such number of
shares of Pubco Common Stock as such holder of a Contributed Warrant would have
received pursuant to Section 1.14(a) of the Business Combination Agreement if
such Contributed Warrant had been exercised immediately prior to the Effective
Time for the number of shares of Company Common Stock set forth in the
Contribution Agreement, (E) each Restricted Stock Unit Award outstanding
immediately prior to the Effective Time, as amended in accordance with the
Business Combination Agreement and the RSU Award Amendments, will be assumed by
Pubco, with the number of RSU Shares underlying such Restricted Stock Unit Award
to be adjusted in accordance with the Business Combination Agreement and the RSU
Award Amendments, and (F) all other Company Convertible Securities will be
terminated; and (iii) as a result of such Mergers, Better World and Heritage
each will become wholly owned subsidiaries of Pubco, and Pubco will become a
publicly traded company, all upon the terms and subject to the conditions set
forth in the Business Combination Agreement and the documents and agreements
ancillary to the Business Combination Agreement (the "Ancillary Documents") and
in accordance with applicable law (collectively, the "Transactions").
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Consideration; CVRs; Earnouts
The total consideration to be paid by Pubco to Heritage's security holders
(other than the holders of Heritage warrants that are assumed by Pubco, which
will not affect the consideration) at the Closing (the "Participant
Consideration") will be an amount equal to $77,500,000, less the amount of
Closing Net Debt and the aggregate amount of any Company Transaction Bonuses,
which Participant Consideration will payable in new shares of Pubco Common
Stock, each valued at a price per share of $10.00; provided that such shares of
Pubco Common Stock payable to holders of Company Interim Notes shall be valued
at a price per share equal to seventy five percent (75%) of the Redemption
Price. Any such shares of Pubco Common Stock payable to holders of Company
Interim Notes shall reduce the shares of Pubco Common Stock allocable to
Heritage shareholders, and therefore will not affect the total consideration
payable by the Pubco. The portion of the Participant Consideration payable to
Heritage security holders is set forth in the Business Combination Agreement.
Better World public stockholders who do not redeem their shares of SPAC Common
Stock in connection with the Transactions will receive one contingent value
right ("CVR") in the SPAC Merger in addition to one share of Pubco Common Stock.
At the Closing, BWA Holdings LLC, Better World's sponsor (the "Sponsor"), will
place 1,000,000 shares of Pubco Common Stock (the "Founder CVR Escrow Shares"),
and certain Heritage security holders will place 3,000,000 shares of Pubco
Common Stock from the Participant Consideration less the number of RSU CVR
Shares (the "Company CVR Escrow Shares") into escrow, for an aggregate of
4,000,000 shares of Pubco Common Stock to support the CVR, pursuant to a
contingent value rights agreement (the "CVR Agreement") to be entered into prior
to the Closing, by and among the Holder Representative (on behalf of the
Heritage stockholders), Pubco, the Sponsor and Continental Stock Transfer &
Trust Company, as rights agent. Upon the date that is 18 months from Closing
(which date may be extended to 24 months following the Closing at the option of
the Sponsor), CVR holders will be entitled to receive a number of escrowed
shares (and earnings thereon other than ordinary dividends) designed to provide
the CVR holders with a simple annual rate of return of 10% on the redemption
price for their SPAC Common Stock based on the price of the Pubco Common Stock
as of such 18 or 24 month anniversary and any amounts that they have received
with respect to their shares of Pubco Common Stock through such time, including
if the stock price drops below the price in the Closing Redemption, but solely
to the extent of the escrowed shares and earnings thereon other than ordinary
dividends, and up to a maximum of the equivalent of two shares of Pubco Common
Stock for each CVR. The number of shares to be released to the CVR holders will
be allocated from the Heritage security holders' and the Sponsor's escrowed
shares on a pro-rata basis, and any escrowed shares not released to CVR holders
by the end of the CVR term will be released to the contributing Heritage
security holders and the Sponsor on a pro-rata basis.
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In addition, certain security holders of Heritage (the "Company Earnout
Participants") will have the contingent right to receive to up to an aggregate
of 3,000,000 additional shares of Pubco Common Stock (the "Earnout Shares"),
including amounts attributable to Restricted Stock Unit Awards, as contingent
consideration after the Closing based on Pubco's net revenue performance for the
years 2023, 2024 and 2025 and stock price performance during the three (3)-year
period following the Closing (the "Earnout Period"), as follows:
(i) an aggregate of 500,000 Earnout Shares will be issued to the Company Earnout
. . .
Item 7.01 Regulation FD Disclosure.
Furnished as Exhibit 99.1 hereto is the investor presentation dated December 15,
2022 that will be used by Better World and Heritage in connection with the
Business Combination.
The foregoing information (including Exhibits 99.1 hereto) is being furnished
pursuant to Item 7.01 of Form 8-K 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.
Cautionary Note Regarding Forward-Looking Statements
Certain statements included in this report are not historical facts, but are
forward-looking statements. Forward-looking statements generally are accompanied
by words such as "believe," "may," "will," "estimate," "continue," "anticipate,"
"intend," "expect," "should," "would," "plan," "future," "outlook," and similar
expressions that predict or indicate future events or trends or that are not
statements of historical matters, but the absence of these words does not mean
that a statement is not forward-looking. These forward-looking statements
include, but are not limited to, statements regarding estimates and forecasts of
other performance metrics and projections of market opportunity. These
statements are based on various assumptions, whether or not identified in this
report and on the current expectations of Better World's and Heritage's
respective management and are not predictions of actual performance. These
forward-looking statements are provided for illustrative purposes only and are
not intended to serve as, and must not be relied on by any investor as, a
guarantee, an assurance, a prediction or a definitive statement of fact or
probability. Actual events and circumstances are difficult or impossible to
predict and will differ from assumptions. Many actual events and circumstances
are beyond the control of Better World and Heritage. Some important factors that
could cause actual results to differ materially from those in any
forward-looking statements could include, without limitation, changes in
business, market, financial, political and legal conditions.
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These forward-looking statements are subject to a number of risks and
uncertainties, including, without limitation, the inability of the parties to
successfully or timely consummate the Transactions; the failure to realize the
anticipated benefits of the Transactions; the ability of Better World prior to
the Transactions, and Pubco following completion of the Transactions, to
maintain (in the case of Better World) and to obtain and maintain (in the case
of Pubco) the listing of Better World's shares prior to the Transactions, and,
following the Transactions, Pubco's shares, on the Nasdaq Capital Market; costs
related to the Transactions; the failure to satisfy the conditions to the
consummation of the Transactions, including the approval of the Business
Combination Agreement by the stockholders of Better World, the risk that the
Transactions may not be completed by the stated deadline and the potential
failure to obtain an extension of the stated deadline; the inability to complete
a transaction financing; the outcome of any legal proceedings that may be
instituted against Better World or Heritage related to the Transactions; the
attraction and retention of qualified directors, officers, employees and key
personnel of Better World and Heritage prior to the Transactions, and Pubco
following the Transactions; the ability of Pubco to compete effectively in a
highly competitive market; the ability to protect and enhance Heritage's
corporate reputation and brand; the impact from future regulatory, judicial, and
legislative changes in Heritage's industry; the uncertain effects of the
COVID-19 pandemic or other public health matters; competition from larger
companies that have greater resources, technology, relationships and/or
expertise; the future financial performance of Pubco following the Transactions,
including the ability of future revenues to meet projected annual projections;
the ability of Pubco to forecast and maintain an adequate rate of revenue growth
and appropriately plan its expenses; Pubco's ability to manage a complex set of
marketing relationships and realize projected revenues from subscriptions,
advertisements, product sales and/or services; Heritage's ability to execute its
business plans and strategy; Pubco's ability to secure the attention and focus
of its distributor and retailer buyers to support the level of growth
anticipated in Pubco's business plans; Pubco's ability to negotiate terms with
Native American tribes in accordance with Pubco's business plans; the potential
difficulty of enforcing certain provisions in agreements with Native American
tribes due to their sovereign status; the ability to ensure product consistency,
quality control and presentation of the Heritage brand and products in locations
owned by third parties; the length of time required to receive approval from
Native American tribes, various related entities and Federal regulators with
regulatory oversight of the Federal-tribal relationship; and those factors set
forth in documents of Better World or Pubco filed, or to be filed, with the U.S.
Securities and Exchange Commission ("SEC"). You should carefully consider the
foregoing factors and the other risks and uncertainties that will be described
in the "Risk Factors" section of the registration statement on Form S-4 and
related proxy statement/prospectus and other documents to be filed by Better
World or Pubco from time to time with the SEC. These filings identify and
address other important risks and uncertainties that could cause actual events
and results to differ materially from those contained in the forward-looking
statements. The foregoing list of risks is not exhaustive.
If any of these risks materialize or the underlying assumptions prove incorrect,
actual results could differ materially from the results implied by these
forward-looking statements. There may be additional risks that neither Better
World nor Heritage presently know or that Better World or Heritage currently
believe are immaterial that could also cause actual results to differ from those
contained in the forward-looking statements. In addition, forward-looking
statements reflect Better World's and Heritage's current expectations, plans and
forecasts of future events and views as of the date of this Current Report on
Form 8-K. Nothing herein should be regarded as a representation by any person
that the forward-looking statements set forth herein will be achieved or that
any of the contemplated results of such forward-looking statements will be
achieved. You should not place undue reliance on forward-looking statements in
this Current Report on Form 8-K, which speak only as of the date they are made
and are qualified in their entirety by reference to the cautionary statements
herein and the risk factors of Better World and Heritage described above. Better
World and Heritage anticipate that subsequent events and developments will cause
their assessments to change. However, while Better World and Heritage may elect
to update these forward-looking statements at some point in the future, they
each specifically disclaim any obligation to do so, except as may be required by
law. These forward-looking statements should not be relied upon as representing
Better World's or Heritage's assessments as of any date subsequent to the date
of this Current Report on Form 8-K. Accordingly, undue reliance should not be
placed upon the forward-looking statements.
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Participants in the Solicitation
Better World and Heritage and their respective directors and executive officers
may be considered participants in the solicitation of proxies with respect to
the proposed transaction described in this report under the rules of the SEC.
Information about the directors and executive officers of Better World is set
forth in its Annual Report on Form 10-K for the year ended December 31, 2021,
filed with the SEC on March 31, 2022, and is available free of charge at the
SEC's website at www.sec.gov or by directing a request to: Better World
Acquisition Corp., 775 Park Avenue, New York, New York 10021. Information
regarding the persons who may, under the rules of the SEC, be deemed
participants in the solicitation of the Better World stockholders in connection
with the proposed Transactions will be set forth in the registration statement
on Form S-4 containing a proxy statement/prospectus to be filed by Pubco with
the SEC with respect to the proposed Transactions. These documents can be
obtained free of charge from the sources indicated herein.
Important Information About the Transactions and Where to Find It
This report relates to a proposed Transactions between Better World and
Heritage. This report does not constitute an offer to sell or exchange, or the
solicitation of an offer to buy or exchange, any securities, nor shall there be
any sale of securities in any jurisdiction in which such offer, sale or exchange
would be unlawful prior to registration or qualification under the securities
laws of any such jurisdiction. In connection with the Transactions described
herein, Better World and Heritage intend to file relevant materials with the
SEC, including a registration statement on Form S-4 to be filed by Pubco, which
will include a proxy statement/prospectus. Security holders are encouraged to
carefully review such information, including the risk factors and other
. . .
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
The following exhibits are being filed herewith:
2.1* Business Combination Agreement, dated as of December 9, 2022, by and
among Better World Acquisition Corp., HDH Newco, Inc., BWA Merger Sub,
Inc., HD Merger Sub, Inc., Heritage Distilling Holding Company, Inc.,
BWA Holdings LLC, and Justin Stiefel.
10.1 Form of Lock-Up Agreement, dated as of December 9, 2022, by and among
BWA Holdings LLC, HDH Newco, Inc., and the Security Holder of Heritage
Distilling Holding Company, Inc. named therein.
10.2 Form of Voting Agreement, dated as of December 9, 2022, by and among
Better World Acquisition Corp., Heritage Distilling Holding Company,
Inc., and the Security Holder of Heritage Distilling Holding Company,
Inc. named therein.
10.3 Form of Non-Competition Agreement, dated as of December 9, 2022, by
and among Better World Acquisition Corp., Heritage Distilling Holding
Company, Inc., HDH Newco, Inc., and the Security Holder of Heritage
Distilling Holding Company, Inc. named therein.
10.4 Form of Registration Rights Agreement by and among Better World
Acquisition Corp., Heritage Distilling Group, Inc. (f/k/a HDH Newco,
Inc.), and the Investors named therein.
10.5 Form of First Amendment to Registration Rights Agreement, by and
among Better World Acquisition Corp., BWA Holdings LLC, and the Holders
named therein.
10.6 Form of Contingent Value Rights Agreement, by and among Heritage
Distilling Group, Inc. (f/k/a HDH Newco, Inc.), BWA Holdings LLC,
Justin Stiefel, and Continental Stock Transfer & Trust Company, as
rights agent.
10.7 CVR Funding and Waiver Letter, by and among BWA Holdings LLC, Better
World Acquisition Corp., EarlyBirdCapital, Inc., HDH Newco, Inc., and
Heritage Distilling Holding Company, Inc.
10.8 Form of Sponsor Earnout Letter Agreement, by and among BWA Holdings
LLC, Better World Acquisition Corp., Heritage Distilling Group, Inc.
(f/k/a HDH Newco, Inc.), and Heritage Distilling Holding Company,
Inc.
99.1 Investor Presentation, dated December 15, 2022.
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document).
* 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 SEC upon its request.
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