Item
1.01 Entry into a Material Definitive Agreement.
On
July 20, 2020, New Age Beverages Corporation (the “Company”) entered into an Agreement and Plan of Merger (the
“Merger Agreement”), by and among the Company, Ariel Merger Sub, LLC (“Merger Sub”), Ariix, LLC (“Ariix”),
certain members of Ariix (the “Sellers”) and Frederick Cooper, as Sellers Agent (the “Sellers Agent”),
pursuant to which the Company agreed to acquire Ariix, which owns five brands in the e-commerce and direct selling channels, including
Arrix, Zennoa, Limu, MaVie, and Shannen, subject to the conditions and terms set forth therein (the “Acquisition”).
Pursuant to the Merger Agreement, on the closing date (the “Closing Date”), Ariix will merge with Merger Sub, with
Ariix as the surviving entity and becoming a wholly-owned subsidiary of the Company.
The
consideration for the Acquisition will be paid in a combination of cash, Company stock and convertible notes. On the Closing Date,
the Company will pay the Sellers $25.0 million in cash and will issue (i) 18 million shares of the Company’s common stock,
par value $0.001 per share (the “Common Stock”), (ii) a convertible promissory note in the aggregate amount of $10.0
million that matures six months from the Closing Date (the “Six-Month Convertible Note”), and (iii) a convertible
promissory note in the aggregate amount of $141.25 million that matures 24 months from the Closing Date (the “Two-Year Convertible
Note” and jointly with the Six-Month Convertible Note, the “Notes”). The amounts of the Notes are subject to
adjustment based on the working capital of Ariix at the Closing Date.
The
Six-Month Convertible Note bears no interest, is subordinated to all of the Company’s senior debt and is convertible into
Common Stock, subject to approval by the Company’s shareholders. The Two-Year Convertible Note bears no interest if it is
paid in full within six months of the Closing Date and is subordinated to all of the Company’s senior debt. If the Two-Year
Convertible Note in not paid in full within six months of the Closing Date, it will bear an interest rate of 7.0% per annum. Interest
is payable in cash or Common Stock, subject to approval by the Company’s shareholders. The Two-Year Convertible Note is
convertible into Common Stock at the Company’s election, subject to approval by the Company’s shareholders. The Convertible
Notes have a conversion price floor of $2.00 per share of Common Stock and a conversion price cap of $6.00 per share
of Common Stock and is subject to automatic conversion into Common Stock if the market price of the Common Stock reaches $6.00
per share, subject to approval by the Company’s shareholders.
The
Merger Agreement contains customary representations, warranties, covenants and indemnities by the parties to such agreement and
is subject to customary closing conditions, including, among other things, (i) the receipt of regulatory approvals, including
applicable antitrust approvals, (ii) the accuracy of the respective parties’ representations and warranties, subject to
customary qualifications, and (iii) material compliance by the parties with their respective covenants and obligations. In addition,
the Merger Agreement contains certain termination rights, including by the Company or the Sellers Agent in the event the closing
has not occurred by September 30, 2020 (the “Outside Date”).
In
addition, in connection with the Acquisition, the Company will issue to Frederick Cooper or his designees 7 million shares of
Common Stock in consideration of a three year non-competition, non-solicitation, invention assignment, and right of first refusal
agreement. Such issuance is subject to shareholder approval.
The
summary of the Merger Agreement in this Current Report on Form 8-K is qualified by reference to the full text of the Merger Agreement,
which is included as Exhibit 2.1 to this Current Report on Form 8-K and incorporated herein by reference.
The
Merger Agreement has been attached as an exhibit to this report to provide investors and security holders with information regarding
its terms. It is not intended to provide any other information about the Company, Ariix or their respective subsidiaries and affiliates.
The representations, warranties and covenants contained in the Merger Agreement were made only for purposes of such agreements
and as of specific dates, are solely for the benefit of the parties to the Merger Agreement, may be subject to limitations agreed
upon by the parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk
between the parties to the Merger Agreement instead of establishing these matters as facts, and may be subject to standards of
materiality applicable to the parties that differ from those applicable to investors. Investors should not rely on the representations,
warranties or covenants or any description thereof as characterizations of the actual state of facts or condition of the Company,
Ariix or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations,
warranties and covenants may change after the date of the Merger Agreement, which subsequent information may or may not be fully
reflected in public disclosures by the Company, Ariix or their subsidiaries or affiliates.
Forward-Looking
Statements
This
communication may contain certain “forward-looking statements” within the meaning of Section 27A of the Securities
Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation
Reform Act of 1995. Forward-looking statements may be identified by words such as “expect,” “anticipate,”
“believe,” “intend,” “estimate,” “plan,” “target,” “goal,”
or similar expressions, or future or conditional verbs such as “will,” “may,” “might,” “should,”
“would,” “could,” or similar variations. These statements are based on the beliefs and assumptions of
the management of the Company based on information currently available to management. Such forward-looking statements include,
but are not limited to, certain plans, expectations, goals, projections, and statements about the benefits of the transaction.
Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ
materially from future results expressed or implied by such forward-looking statements. While there is no assurance that any list
of risks and uncertainties or risk factors is complete, below are certain factors which could cause actual results to differ materially
from those contained or implied in the forward-looking statements including: risks related to the Acquisition and the integration
of the businesses and assets acquired; the financial performance of the acquired businesses; the possibility that the transaction
does not close when expected or at all because required regulatory or other approvals are not received or other conditions to
closing are not satisfied on a timely basis or at all; potential adverse reactions or changes to business or employee relationships,
including those resulting from the completion of the Acquisition; the possibility that the anticipated operating results and other
benefits of the Acquisition are not realized when expected or at all; risks associated with increased leverage from the transaction;
and other risks described in the section entitled “Risk Factors” under Item 1A in the Company’s Annual Report
on Form 10-K for the year ended December 31, 2019, as amended, and in subsequent periodic and current SEC filings the Company
may make. The Company disclaims any obligation to revise or update any forward-looking statement that may be made from time to
time by it or on its behalf.