Form 10-Q New Age Beverages Corp For: Mar 31

May 11, 2020 6:17 AM

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X]

QUARTERLY report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended March 31, 2020

[ ]

Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

For the Transition Period from ____________to___________

Commission File Number: 001-38014

New Age Beverages Corporation

(Exact Name of Registrant as Specified in its Charter)

Washington

27-2432263

(State or other jurisdiction

of incorporation or organization)

(I.R.S. Employer

Identification No.)

2420 17th Street, Suite 220 Denver, CO		80202
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code:		(303) 566-3030

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading symbol(s)		Name of each exchange on which registered
Common stock, par value $0.001 per share		NBEV		The Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ]

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YES [X] NO [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [ ]	Accelerated filer [X]
Non-accelerated filer [ ]	Smaller reporting company [ ]
	Emerging growth company [ ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES [ ] NO [X]

The registrant had 92,592,395 shares of its common stock, $0.001 par value per share, outstanding as of May 7, 2020.

NEW AGE BEVERAGES CORPORATION

TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION

ITEM 1.	Financial Statements
	Unaudited Condensed Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019	2
	Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended March 31, 2020 and 2019	3
	Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2020 and 2019	4
	Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2020 and 2019	5
	Notes to Unaudited Condensed Consolidated Financial Statements	7

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	33
ITEM 4.	Controls and Procedures	33

PART II. OTHER INFORMATION

ITEM 1.	Legal Proceedings	34
ITEM 1A.	Risk Factors	34
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
ITEM 3.	Defaults Upon Senior Securities	35
ITEM 4.	Mine Safety Disclosures	35
ITEM 5.	Other Information	35
ITEM 6.	Exhibits	38

SIGNATURES		39

PART I - FINANCIAL INFORMATION

ITEM 1. Financial Statements.

NEW AGE BEVERAGES CORPORATION

Unaudited Condensed Consolidated Balance Sheets

March 31, 2020 and December 31, 2019

(In thousands, except par value per share)

	2020			2019
ASSETS
Current assets:
Cash and cash equivalents	$	27,537		$	60,842
Accounts receivable, net of allowance of $717 and $535, respectively		11,535			11,012
Inventories		33,657			36,718
Prepaid expenses and other		6,036			4,384

Total current assets		78,765			112,956

Long-term assets:
Identifiable intangible assets, net		42,546			43,443
Right-of-use lease assets		38,261			38,458
Property and equipment, net		28,716			28,443
Restricted cash, net of current portion		17,230			3,729
Goodwill		10,284			10,284
Deferred income taxes		9,066			9,128
Deposits and other		4,360			4,689

Total assets	$	229,228		$	251,130

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	12,645		$	13,259
Accrued liabilities		41,960			49,451
Current portion of business combination liabilities		5,648			5,508
Current maturities of long-term debt		1,504			11,208

Total current liabilities		61,757			79,426

Long-term liabilities:
Long-term debt, net of current maturities		12,241			12,802
Operating lease liabilities, net of current portion:
Lease liability		35,135			35,513
Deferred lease financing obligation		16,378			16,541
Deferred income taxes		5,317			5,441
Other		9,606			9,132

Total liabilities		140,434			158,855

Contingencies (Note 10)

Stockholders’ equity:
Common Stock; $0.001 par value. Authorized 200,000 shares; issued and outstanding 87,245 and 81,873 shares as of March 31, 2020 and December 31, 2019, respectively		87			82
Additional paid-in capital		213,385			203,862
Accumulated other comprehensive income (loss)		(589	)		802
Accumulated deficit		(124,089	)		(112,471	)

Total stockholders’ equity		88,794			92,275

Total liabilities and stockholders’ equity	$	229,228		$	251,130

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

NEW AGE BEVERAGES CORPORATION

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss

Three Months Ended March 31, 2020 and 2019

(In thousands, except loss per share amounts)

	2020			2019

Net revenue	$	63,693		$	58,307
Cost of goods sold		22,169			19,731

Gross profit		41,524			38,576

Operating expenses:
Commissions		19,515			18,038
Selling, general and administrative		30,608			26,842
Depreciation and amortization expense		1,781			2,236

Total operating expenses		51,904			47,116

Operating loss		(10,380	)		(8,540	)

Non-operating income (expense):
Gain (loss) from sale of property and equipment		(80	)		6,442
Interest expense		(572	)		(1,646	)
Gain (loss) from change in fair value of derivatives		(326	)		470
Interest and other income (expense), net		463			(42	)

Loss before income taxes		(10,895	)		(3,316	)
Income tax benefit (expense)		(723	)		1,700

Net loss		(11,618	)		(1,616	)
Other comprehensive income (loss):
Foreign currency translation adjustments, net of tax		(1,391	)		427

Comprehensive loss	$	(13,009	)	$	(1,189	)


Net loss per share (basic and diluted)	$	(0.14	)	$	(0.02	)

Weighted average number of shares of Common Stock outstanding (basic and diluted)		85,371			75,226

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

NEW AGE BEVERAGES CORPORATION

Unaudited Condensed Consolidated Statements of Stockholders’ Equity

Three Months Ended March 31, 2020 and 2019

(In thousands)

							Accumulated
					Additional		Other
	Common Stock				Paid-in		Comprehensive			Accumulated
	Shares		Amount		Capital		Income (Loss)			Deficit			Total
Three Months Ended March 31, 2020
Balances, December 31, 2019		81,873	$	82	$	203,862	$	802		$	(112,471	)	$	92,275
Issuance of Common Stock for:
ATM public offering, net of offering costs		4,939		5		8,281		-			-			8,286
Exercise of stock options		2		-		4		-			-			4
Vesting of restricted stock awards		431		-		-		-			-			-
Stock-based compensation expense		-		-		1,238		-			-			1,238
Net change in other comprehensive income		-		-		-		(1,391	)		-			(1,391	)
Net loss		-		-		-		-			(11,618	)		(11,618	)

Balances, March 31, 2020		87,245	$	87	$	213,385	$	(589	)	$	(124,089	)	$	88,794

Three Months Ended March 31, 2019
Balances, December 31, 2018		75,067	$	75	$	176,471	$	626		$	(22,636	)	$	154,536
Issuance of Common Stock for:
Exercise of stock options		200		-		418		-			-			418
Grant of restricted stock awards		126		-		576		-			-			576
Stock-based compensation expense		-		-		2,127		-			-			2,127
Net change in other comprehensive income		-		-		-		427			-			427
Net loss		-		-		-		-			(1,616	)		(1,616	)

Balances, March 31, 2019		75,393	$	75	$	179,592	$	1,053		$	(24,252	)	$	156,468

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

NEW AGE BEVERAGES CORPORATION

Unaudited Condensed Consolidated Statements of Cash Flows

Three Months Ended March 31, 2020 and 2019

(In thousands)

	2020			2019

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(11,618	)	$	(1,616	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		1,879			2,236
Non-cash lease expense		1,282			1,389
Stock-based compensation expense		1,357			3,287
Loss (gain) from change in fair value of derivatives		326			(470	)
Accretion and amortization of debt discount and issuance costs		140			1,113
Loss (gain) from sale of property and equipment		80			(6,442	)
Change in fair value of earnout obligations		63			-
Deferred income tax benefit		(39	)		(13,916	)
Expense for make-whole premium		-			480
Changes in operating assets and liabilities:
Accounts receivable		(523	)		387
Inventories		3,068			(2,470	)
Prepaid expenses, deposits and other		85			122
Accounts payable		(675	)		2,231
Other accrued liabilities		(8,946	)		7,468

Net cash used in operating activities		(13,521	)		(6,201	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of equipment		174			-
Capital expenditures for property and equipment		(1,591	)		(283	)
Net proceeds from sale of land and building in Japan:
Related to sale of property		-			35,873
Repair obligation		-			1,675
Security deposit under sale leaseback arrangement		-			(1,800	)

Net cash provided by (used in) investing activities		(1,417	)		35,465

CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on borrowings		(10,075	)		(16,196	)
Proceeds from borrowings		-			36,550
Proceeds from issuance of common stock		8,288			-
Proceeds from deferred lease financing obligation		-			17,640
Payments under deferred lease financing obligation		(158	)		-
Proceeds from exercise of stock options		4			418
Debt issuance costs paid		(57	)		(250	)
Payments for deferred offering costs		(2	)		-
Cash paid for make-whole premium		-			(480	)

Net cash provided by (used in) financing activities		(2,000	)		37,682

Effect of foreign currency translation changes		(1,366	)		566

Net increase (decrease) in cash, cash equivalents and restricted cash		(18,304	)		67,512
Cash, cash equivalents and restricted cash at beginning of period		64,571			45,856

Cash, cash equivalents and restricted cash at end of period	$	46,267		$	113,368

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

NEW AGE BEVERAGES CORPORATION

Unaudited Condensed Consolidated Statements of Cash Flows, Continued

Three Months Ended March 31, 2020 and 2019

(In thousands)

	2020		2019

SUMMARY OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH:
Cash and cash equivalents at end of period	$	27,537	$	109,956
Restricted cash at end of period:
Current (included in prepaid expenses and other)		1,500		-
Long-term		17,230		3,412

Total	$	46,267	$	113,368

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest	$	227	$	55
Cash paid for income taxes	$	14,052	$	1,200
Cash paid for amounts included in the measurement of operating lease liabilities	$	2,394	$	1,874
Right-of-use assets acquired in exchange for operating lease liabilities	$	1,889	$	18,366

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Restricted stock granted for prepaid compensation	$	-	$	576
Increase in payables for:
Debt discount and issuance costs	$	179	$	654
Capital expenditures	$	35	$	128

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

NEW AGE BEVERAGES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

NOTE 1 —BASIS OF PRESENTATION AND SIGNFICANT ACCOUNTING POLICIES

Overview

New Age Beverages Corporation (the “Company”) was formed under the laws of the State of Washington on April 26, 2010. The Company is a healthy beverages and lifestyles company engaged in the development and commercialization of a portfolio of organic, natural and other better-for-you healthy beverages, liquid dietary supplements, cannabidiol (“CBD”) topical products, and other healthy lifestyle products.

Segments

The Company’s chief operating decision maker (the “CODM”), who is the Company’s Chief Executive Officer, allocates resources and assesses performance based on financial information of the Company. The CODM reviews financial information presented for each reportable segment for purposes of making operating decisions and assessing financial performance. The Company’s CODM assesses performance and allocates resources based on the financial information of two operating segments, the Noni by NewAge segment and the NewAge segment. These two reportable segments focus on the sale of distinctly different beverage products and are managed separately because they have different marketing strategies, customer bases, and economic characteristics. Please refer to Note 13 for additional information about the Company’s operating segments.

Basis of Presentation

The unaudited condensed consolidated financial statements, which include the accounts of the Company and its wholly-owned subsidiaries, are prepared in conformity with generally accepted accounting principles in the United States of America (“U.S. GAAP”). All intercompany balances and transactions have been eliminated. The accompanying unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, certain information and footnote disclosures required by U.S. GAAP for complete financial statements have been condensed or omitted in accordance with such rules and regulations. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the unaudited condensed consolidated financial statements have been included. These unaudited condensed consolidated financial statements for the three months ended March 31, 2020 should be read in conjunction with the Company’s audited consolidated financial statements for the fiscal year ended December 31, 2019, included in the Company’s 2019 Annual Report on Form 10-K filed with the SEC on March 16, 2020 and as amended on April 28, 2020 (the “2019 Form 10-K”).

The accompanying condensed consolidated balance sheet and related disclosures as of December 31, 2019 have been derived from the Company’s audited financial statements. The Company’s financial condition as of March 31, 2020 and operating results for the three months ended March 31, 2020 are not necessarily indicative of the financial condition and results of operations that may be expected for any future interim period or for the year ending December 31, 2020.

Use of Estimates

The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires the Company to make judgments, assumptions, and estimates that affect the amounts reported in its consolidated financial statements and accompanying notes. The Company bases its estimates and assumptions on current facts, historical experience, and various other factors that it believes are reasonable under the circumstances, to determine the carrying values of assets and liabilities that are not readily apparent from other sources. The Company’s significant accounting estimates include, but are not necessarily limited to, impairment of goodwill and long-lived assets; valuation assumptions for earnout obligations and assets acquired in business combinations; valuation assumptions for stock options, warrants and equity instruments issued for goods or services; estimated useful lives for identifiable intangible assets and property and equipment; allowances for sales returns, chargebacks and inventory obsolescence; deferred income taxes and the related valuation allowances; and the evaluation and measurement of contingencies. Additionally, the full impact of COVID-19 is unknown and cannot be reasonably estimated. However, the Company has made appropriate accounting estimates based on the facts and circumstances available as of the reporting date. To the extent there are material differences between the Company’s estimates and the actual results, the Company’s future consolidated results of operation will be affected.

NEW AGE BEVERAGES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

Recent Accounting Pronouncements

Recently Adopted Standards. The following recently issued accounting standards were adopted during the three months ended March 31, 2020:

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 amends the guidance on the impairment of financial instruments. This update adds an impairment model (known as the current expected credit losses model) that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes, as an allowance, its estimate of expected credit losses. In November 2018, ASU 2016-13 was amended by ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments – Credit Losses. ASU 2018-19 clarifies that operating lease receivables are not within the scope of Accounting Standards Codification (“ASC”) 326-20 and should instead be accounted for under the new leasing standard, ASC 842. ASU 2016-13 and ASU 2018-19 are effective for the Company beginning in the first quarter of 2020. The adoption of ASU 2016-13 and ASU 2018-19 did not have a material impact on the Company’s results of operations or financial position.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurements (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 modifies the disclosure requirements on fair value measurements. ASU 2018-13 was adopted by the Company for the three months ended March 31, 2020 and did not have a material impact on the Company’s results of operations, financial position, and related disclosures.

Standards Required to be Adopted in Future Years. The following accounting standards are not yet effective for the Company.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions and making simplifications in other areas. ASU 2019-12 is effective for the Company beginning in the first quarter of 2021, with early adoption in any interim period permitted. Management has not completed its evaluation to determine if this standard will be adopted before the first quarter of 2021, the impact that adoption of this standard will have on the Company’s consolidated financial statements, or the method that will be applied to adopt the standard.

No other recently issued accounting pronouncements are expected to have a material impact on the Company’s consolidated financial statements.

NOTE 2 — LIQUIDITY AND GOING CONCERN

As of March 31, 2020, the Company had an accumulated deficit of $124.1 million and the Company incurred a net loss of $11.6 million for the three months ended March 31, 2020. Net cash used in operating activities amounted to $13.5 million for the three months ended March 31, 2020, of which approximately $13.1 million was attributable to income tax payments paid in March 2020 related to the sale leaseback discussed in Note 5.

As discussed in Note 6, the Company entered into the third amendment and waiver (the “Third Amendment”) to the EWB Credit Facility in March 2020. The Third Amendment is expected to have a significant impact on the Company’s liquidity and capital resources for the 12-month period ending March 31, 2021. The Third Amendment required the Company to deposit an initial amount of $15.1 million in restricted cash balances with EWB that was funded in March 2020. In addition, for any future amounts borrowed under the EWB Revolver, the Company is required to increase restricted cash deposits by the corresponding amount of the borrowings.

As a result, the Company’s available cash and cash equivalents decreased from $60.8 million at December 31, 2019 to $27.5 million at March 31, 2020.

As discussed in Note 14, on April 14, 2020, the Company entered into a loan with EWB in an aggregate principal amount of approximately $6.9 million under the Paycheck Protection Program (the “PPP Loan”) pursuant to the recently enacted U.S. Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). This loan is unsecured, and the Company may apply to EWB for forgiveness of the loan in accordance with the terms of the CARES Act. Also, as discussed in Note 14, during April 2020, the Company sold an aggregate of approximately 5.3 million shares of Common Stock under the ATM Agreement for net proceeds of approximately $7.4 million.

The Company has begun a new product and marketing strategy to increase demand for the Company’s products. The Company is also actively pursuing strategic alternatives relating to the U.S retail brands and the BWR division, which could significantly improve its overall financial performance and reduce cash flow needs. As discussed in Note 14, the Company also initiated a restructuring plan that is designed to achieve annualized selling, general and administrative cost reductions between $5.0 million and $7.0 million.

Management believes the existing cash resources, combined with proceeds of $6.9 million from the PPP Loan under the CARES Act, proceeds received under the ATM Agreement subsequent to March 31, 2020, and significant cost-cutting efforts, will be sufficient to fund the Company’s debt and lease obligations and working capital requirements through May 2021.

NEW AGE BEVERAGES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

NOTE 3 — BUSINESS COMBINATIONS

BWR Business Combination

The Company completed a business combination with Brands Within Reach, LLC (“BWR”) in July 2019 that was accounted for using the acquisition method of accounting under ASC 805, Business Combinations, and using the fair value concepts set forth in ASC 820, Fair Value Measurement. As a result of the business combination with BWR, the Company acquired certain key licensing and distribution rights in the United States for some of the world’s leading beverage brands. The purchase consideration consisted of cash payments of $1.5 million and the issuance of 107,602 shares of Common Stock with an estimated fair value of approximately $453,000.

For the three months ended March 31, 2020, the accompanying condensed consolidated statements of operations include net revenue of $2.1 million and a net loss of $2.3 million for the post-acquisition results of operations of BWR.

Unaudited Pro Forma Disclosures

The following table summarizes on an unaudited pro forma basis, the Company’s results of operations for the three months ended March 31, 2019 giving effect to the BWR business combination as if it had occurred on January 1, 2019 (in thousands, except loss per share amount):

Net revenue	$	62,764
Net loss	$	(1,685	)
Net loss per share- basic and diluted	$	(0.02	)
Weighted average number of shares of common stock outstanding- basic and diluted		75,334

The pro forma financial results shown above reflect the historical operating results of the Company, including the unaudited pro forma results of BWR as if this business combination and the related equity issuances had occurred at the beginning of the first full calendar year preceding the acquisition date. The calculations of pro forma net revenue and pro forma net loss give effect to the pre-acquisition operating results of BWR based on (i) the historical net revenue and net income (loss), and (ii) incremental depreciation and amortization based on the fair value of property, equipment and identifiable intangible assets acquired and the related estimated useful lives. The pro forma information presented above does not purport to represent what the actual results of operations would have been for the periods indicated, nor does it purport to represent the Company’s future results of operations.

NEW AGE BEVERAGES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

Business Combination Liabilities

On December 21, 2018, the Company entered into a business combination with Morinda. The purchase consideration included the issuance of 43,804 shares of Series D Preferred Stock (the “Preferred Stock”) providing for the potential payment of up to $15.0 million (the “Milestone Dividend”) if the Adjusted EBITDA of Morinda was at least $20.0 million for the year ended December 31, 2019. If the Adjusted EBITDA of Morinda was less than $20.0 million, the Milestone Dividend was reduced whereby no Milestone Dividend was payable if actual Adjusted EBITDA was $17.0 million or lower. Adjusted EBITDA of Morinda for the year ended December 31, 2019 was less than $17.0 million and, accordingly, no Milestone Dividend was payable to the holders of the Preferred Stock. The Preferred Stock also provided for dividends at a rate of 1.5% per annum of the Milestone Dividend amount. The Company may choose to pay the Milestone Dividend and /or the annual dividend in cash or in kind, provided that if the Company chooses to pay in kind, the shares of Common Stock issued as payment therefore must be registered under the Securities Act of 1933, as amended (the “Securities Act”). The Preferred Stock terminated on April 15, 2020 and the cash dividend of approximately $0.3 million was paid on May 7, 2020.

As of March 31, 2020 and December 31, 2019, the following is a summary of purchase consideration payable to the former stockholders of Morinda, and outstanding earnout obligations related to business combinations with Morinda in December 2018 and the Marley Beverage Company (“Marley”) in June 2017 (in thousands):

	2020			2019

Payables to former Morinda stockholders:
Excess Working Capital (“EWC”) payable in
July 2020, net of discount	$	5,360		$	5,283
Earnout under Series D preferred stock		288			225
Marley earnout obligation		-	⁽¹⁾		-	⁽¹⁾
Total	$	5,648		$	5,508

⁽¹⁾

The Company was previously obligated to make a one-time earnout payment of $1.25 million over a period of two years beginning at such time that revenue for the Marley reporting unit was equal to or greater than $15.0 million during any trailing twelve calendar month period. As of December 31, 2019, the Company determined that revenue for the Marley reporting unit was not expected to exceed the $15.0 million earnout threshold and, accordingly, there was no fair value related to this liability. The Company terminated its license agreement with Marley as of March 31, 2020 to eliminate this obligation.

NOTE 4 — OTHER FINANCIAL INFORMATION

Inventories

Inventories consisted of the following as of March 31, 2020 and December 31, 2019 (in thousands):

	2020		2019

Raw materials	$	10,035	$	12,848
Work-in-process		1,665		872
Finished goods, net		21,957		22,998
Total inventories	$	33,657	$	36,718

NEW AGE BEVERAGES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

Other Accrued Liabilities

As of March 31, 2020 and December 31, 2019, other accrued liabilities consisted of the following (in thousands):

	2020		2019

Accrued commissions	$	8,754	$	8,914
Accrued compensation and benefits		5,999		5,868
Accrued marketing events		6,660		4,568
Deferred revenue		3,370		1,358
Income taxes payable		3,090		15,227
Current portion of operating lease liabilities		5,724		5,673
Other accrued liabilities		8,363		7,843

Total accrued liabilities	$	41,960	$	49,451

Depreciation and Amortization Expense

Depreciation expense related to property and equipment amounted to $1.0 million and $0.9 million for the three months ended March 31, 2020 and 2019, respectively. Amortization expense related to identifiable intangible assets was $0.9 million and $1.3 million for the three months ended March 31, 2020 and 2019, respectively.

NOTE 5 — LEASES

Sale Leaseback

On March 22, 2019, the Company entered into an agreement with a major Japanese real estate company resulting in the sale for approximately $57.1 million of the land and building in Tokyo that serves as the corporate headquarters of the Company’s Japanese subsidiary. Concurrently with the sale, the Company entered into a lease of this property for a term of 27 years with the option to terminate the lease any time after seven years. The monthly lease cost is ¥20.0 million (approximately $185,000 based on the exchange rate as of March 31, 2020) for the initial seven-year period of the lease term. Presented below is a summary of the selling price and resulting gain on sale calculation (in thousands):

Gross selling price	$	57,129
Less commissions and other expenses		(1,941	)
Less repair obligations		(1,675	)
Net selling price		53,513
Cost of land and building sold		(29,431	)
Total gain on sale		24,082
Portion of gain related to above-market rent concession		(17,640	)

Recognized gain on sale	$	6,442

The Company determined that $17.6 million of the $24.1 million gain on the sale of this property was the result of above-market rent inherent in the leaseback arrangement. The remainder of the gain of $6.4 million was attributable to the highly competitive process among the entities that bid to purchase the property, and is included in gain from sale of property and equipment in the accompanying condensed consolidated statement of operations for the three months ended March 31, 2019.

The $17.6 million portion of the gain related to above-market rent is being accounted for as a deferred lease financing obligation. Accordingly, the operating lease payments are allocated to (i) reduce the operating lease liability, (ii) reduce the principal portion of the deferred lease financing obligation, and (iii) to recognize imputed interest expense at an incremental borrowing rate of 3.5% on the deferred lease financing obligation over the 20-year lease term. The present value of the future lease payments amounted to a gross operating lease liability of $31.9 million. After deducting the $17.6 million deferred lease financing obligations, the Company recognized an initial ROU asset and operating lease liability of approximately $14.3 million.

NEW AGE BEVERAGES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

Operating Leases

The Company leases various office and warehouse facilities, vehicles and equipment under non-cancellable operating lease agreements that expire between April 2020 and March 2039. The Company has made accounting policy elections (i) to not apply the recognition requirements for short-term leases and (ii) for facility leases, when there are lease and non-lease components, such as common area maintenance charges, to account for the lease and non-lease components as a single lease component. For the three months ended March 31, 2020 and 2019, the Company had operating lease expense of $2.5 million and $2.3 million, respectively. As of March 31, 2020 and December 31, 2019, the weighted average remaining lease term under operating leases was 12.3 and 12.5 years, respectively. As of March 31, 2020 and December 31, 2019, the weighted average discount rate for ROU operating lease liabilities was 5.5% and 5.6%, respectively.

Future Lease Payments

As of March 31, 2020, future payments under operating lease agreements are as follows (in thousands):

Year Ending December 31,

Remainder of 2020	$	6,436
2021		7,266
2022		5,877
2023		5,389
2024		5,222
Thereafter		28,729

Total operating lease payments		58,919
Less imputed interest		(18,060	)⁽¹⁾

Present value of operating lease payments	$	40,859

⁽¹⁾

Calculated based on the term of the respective leases using discount rates ranging from 2.0% to 10.0%.

NOTE 6 — DEBT

Summary of Debt

As of March 31, 2020 and December 31, 2019, debt consisted of the following (in thousands):

	2020			2019

EWB Credit Facility:
Term loan, net of discount of $637 and $448 as of
March 31, 2020 and December 31, 2019, respectively	$	13,738		$	14,302
Revolver		-			9,700
Installment notes payable		7			8

Total		13,745			24,010
Less current maturities		(1,504	)		(11,208	)

Long-term debt, less current maturities	$	12,241		$	12,802

Future Debt Maturities

As of March 31, 2020, the scheduled future maturities of long-term debt, exclusive of discount accretion, are as follows:

NEW AGE BEVERAGES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

Year Ending December 31,

Remainder of 2020	$	1,129
2021		1,503
2022		1,500
2023		10,250

Total	$	14,382

EWB Credit Facility

On March 29, 2019, the Company entered into a Loan and Security Agreement (the “EWB Credit Facility”) with East West Bank (“EWB”). The EWB Credit Facility matures on March 29, 2023 and provides for (i) a term loan in the aggregate principal amount of $15.0 million, which may be increased to $25.0 million subject to the satisfaction of certain conditions (the “EWB Term Loan”) and (ii) a $10.0 million revolving loan facility (the “EWB Revolver”). The obligations of the Company under the EWB Credit Facility are secured by substantially all assets of the Company and guaranteed by certain subsidiaries of the Company.

The EWB Credit Facility requires compliance with certain financial and restrictive covenants and includes customary events of default. Key financial covenants include maintenance of minimum Adjusted EBITDA and a maximum Total Leverage Ratio (all as defined and set forth in the EWB Credit Facility). As of December 31, 2019, the Company was not in compliance with the financial covenants related to the EWB Credit Facility. On March 13, 2020, the Company entered into the Third Amendment to the EWB Credit Facility (the “Third Amendment”) that included a waiver of non-compliance with all financial covenants. As of March 31, 2020, the Company was in compliance with all of the terms under the EWB Credit Facility, as amended. In addition to the change in interest rate discussed above, the Third Amendment modified the Credit Facility as follows:

●	The Company was required to make an initial deposit of $15.1 million in restricted cash accounts designated by EWB. The future requirement to maintain restricted cash will be reduced by the amount of future principal payments under the EWB Term Loan. As of March 31, 2020, the Company had made deposits in the restricted cash accounts for the entire $15.1 million.
●	For any future amounts borrowed under the EWB Revolver, the Company is required to increase restricted cash deposits by the corresponding amount of the borrowings.
●	Less stringent requirements are applicable for future compliance with the minimum adjusted EBITDA covenant, the maximum total leverage ratio, and the fixed charge coverage ratio. Additionally, compliance with the maximum total leverage ratio and the fixed charge coverage ratio have been delayed until June 30, 2021.
●	The existing provision related to “equity cures” that may be employed to maintain compliance with financial covenants was increased from $5.0 million to $15.0 million for the year ending December 31, 2020, and to $10.0 million per year for each calendar year thereafter.
●	The Company is required to obtain equity infusions for at least $15.0 million for the first six months of 2020, of which gross proceeds of $8.5 million were received for the three months ended March 31, 2020 as discussed in Note 7, and gross proceeds of $7.6 million were received after March 31, 2020 as discussed in Note 14. Additional equity infusions that result in gross proceeds of $13.9 million must be received by December 31, 2020.

The Company evaluated the terms of the Third Amendment and determined it should be accounted for as a modification, whereby additional debt discount and issuance costs of approximately $0.2 million were incurred.

NEW AGE BEVERAGES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

NOTE 7 — STOCKHOLDERS’ EQUITY

On April 30, 2019, the Company entered into an At the Market Offering Agreement (“ATM Agreement”) with Roth Capital Partners, LLC (the “Agent”), pursuant to which the Company may offer and sell from time to time up to an aggregate of $100 million in shares of the Company’s Common Stock (the “Placement Shares”) through the Agent. The Agent is acting as sales agent and is required to use commercially reasonable efforts to sell on the Company’s behalf all of the Placement Shares requested to be sold by the Company, consistent with its normal trading and sales practices, on mutually agreed terms between the Agent and the Company.

The Company has no obligation to sell any of the Placement Shares under the ATM Agreement. The Company intends to use the net proceeds from the offering for general corporate purposes, including working capital. Under the terms of the ATM Agreement, the Company agreed to pay the Agent a commission equal to 3.0% of the gross proceeds from the gross sales price of the Placement Shares up to $30 million, and 2.5% of the gross proceeds from the gross sales price of the Placement Shares in excess of $30 million. In addition, the Company has agreed to pay certain expenses incurred by the Agent in connection with the offering. Through March 31, 2020, an aggregate of approximately 10.9 million shares of Common Stock were sold for gross proceeds of approximately $29.3 million. For the three months ended March 31, 2020, an aggregate of 4.9 million shares were sold for gross proceeds of $8.5 million. Total commissions and fees were deducted for $0.2 million for the three months ended March 31, 2020. As discussed in Note 14, on May 8, 2020, the ATM Agreement was amended and restated to eliminate the termination date of April 30, 2020. As amended and restated, the ATM Agreement will terminate when all of the Placement Shares have been sold, or earlier by the Company upon five business days’ notice to the Agent, at any time by the Agent, or by the mutual agreement of the parties.

NOTE 8 — STOCK OPTIONS AND WARRANTS

Stock Option Activity

The following table sets forth stock option activity under the Company’s stock option plans for the three months ended March 31, 2020 (shares in thousands):

	Shares			Price ⁽¹⁾		Term ⁽²⁾

Outstanding, beginning of period		3,551		$	2.65		8.7
Grants to:
Employees		417			1.79
Non-employees		10			1.77
Forfeited		(93	)		3.79
Exercised		(2	)		1.79

Outstanding, end of period		3,883	⁽³⁾		2.53		8.6

Vested, end of period		1,415	⁽³⁾		2.45		7.3

⁽¹⁾

Represents the weighted average exercise price.

⁽²⁾

Represents the weighted average remaining contractual term until the stock options expire.

⁽³⁾

As of March 31, 2020, the closing price of the Company’s Common Stock was $1.39 per share resulting in no intrinsic value associated with any outstanding stock options.

For the three months ended March 31, 2020, the valuation assumptions for stock options granted to employees and non-employees under the Company’s equity incentive plans were estimated on the date of grant using the BSM option-pricing model with the following weighted-average assumptions:

NEW AGE BEVERAGES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

Grant date closing price of Common Stock	$	1.79
Expected life (in years)		5.8
Volatility		104	%
Dividend yield		0	%
Risk-free interest rate		1.2	%

Based on the assumptions set forth above, the weighted-average grant date fair value per share for stock options granted for the three months ended March 31, 2020 and 2019 was $1.43 and $4.24, respectively. The BSM model requires various subjective assumptions that represent management’s best estimates of the fair value of the Company’s Common Stock, volatility, risk-free interest rates, expected term, and dividend yield. The expected term represents the weighted-average period that options granted are expected to be outstanding giving consideration to vesting schedules. Because the Company does not have an extended history of actual exercises, the Company has estimated the expected term using a simplified method which calculates the expected term as the average of the time-to-vesting and the contractual life of the awards. The Company has never declared or paid cash dividends and does not plan to pay cash dividends in the foreseeable future; therefore, the Company used an expected dividend yield of zero. The risk-free interest rate is based on U.S. Treasury rates in effect for maturities based on the expected term of the grant. The expected volatility is based on the historical volatility of the Company’s Common Stock for the period beginning in August 2016 when its shares were first publicly traded through the grant date of the respective stock options.

Restricted Stock Activity

The following table sets forth activity related to grants of restricted stock under the Company’s stock option plans for the three months ended March 31, 2020 (in thousands):

	Equity-Classified Awards						Liability-Classified Awards ⁽¹⁾
	Number of			Unvested			Number of			Unvested
	Shares			Compensation			Shares			Compensation

Outstanding, December 31, 2019		2,123		$	4,605			37		$	67
Shares issued to Board members		339	⁽²⁾		600	⁽²⁾		-			-
Unvested awards granted to employees with service vesting criteria		206	⁽³⁾		365	⁽³⁾		-			-
Forfeitures		(2	)		(9	)		-			-
Fair value adjustments and other		-			(75	)		(1	)		(17	)⁽¹⁾
Vested shares and expense		(203	)⁽⁴⁾		(726	)⁽⁴⁾		-	⁽⁴⁾		(6	)⁽⁴⁾

Outstanding, March 31, 2020		2,463		$	4,760			36		$	44

Intrinsic value, March 31, 2020	$	3,424	⁽⁵⁾				$	51	⁽⁵⁾

	⁽¹⁾	Certain awards granted to employees in China are not permitted to be settled in shares, which requires classification as a liability in the Company’s condensed consolidated balance sheets. This liability is adjusted based on the closing price of the Company’s Common Stock at the end of each reporting period until these awards vest. As of March 31, 2020 and December 31, 2019, the cumulative amount of compensation expense recognized is based on the progress toward vesting and the total fair value of the respective awards on those dates.
	⁽²⁾	Represents grants to members of the Board of Directors whereby the shares of Common Stock will be issued upon vesting, which occurs one year after the grant date. The fair value of the shares was recorded based on the closing price for the Company’s Common Stock of $1.77 per share on the grant date.
	⁽³⁾	Represents restricted stock awards that generally vest over three years with fair value determined based on the closing price of the Company’s Common Stock on the respective grant dates.
	⁽⁴⁾	The “Number of Shares” column reflects shares that vested due to achievement of service conditions during the three months ended March 31, 2020. The “Unvested Compensation” column reflects the stock-based compensation expense recognized for both vested and unvested awards during the period.
	⁽⁵⁾	The intrinsic value is based on the closing price of the Company’s Common Stock of $1.39 per share on March 31, 2020.

NEW AGE BEVERAGES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

Stock-Based Compensation Expense

Substantially all stock-based compensation expense is included in general and administrative expenses in the accompanying condensed consolidated statements of operations. The table below summarizes stock-based compensation expense related to stock options and restricted stock awards for the three months ended March 31, 2020 and 2019, and the unrecognized compensation expense as of March 31, 2020 and 2019 (in thousands):

	Expense Recognized For				Unrecognized Expense
	Three Months Ended March 31,				as of March 31:
	2020		2019		2020		2019

Plan-based stock options awards	$	625	$	1,315	$	4,515	$	4,309
Plan-based restricted stock awards:
Equity-classified		726		1,353		4,760		3,213
Liability-classified		6		565		44		1,920
Non-plan equity-classified restricted stock awards		-		54		-		10

Total	$	1,357	$	3,287	$	9,319	$	9,452

As of March 31, 2020, unrecognized stock-based compensation expense is expected to be recognized on a straight-line basis over a weighted-average period of approximately 2.2 years for stock options, 2.0 years for equity-classified restricted stock awards, and 1.8 years for liability-classified restricted stock awards.

Warrants

As of March 31, 2020 and 2019, the Company had warrants outstanding for 0.3 million and 0.1 million shares of Common Stock, respectively. For the three months ended March 31, 2020 and 2019, no warrants were granted, exercised or expired.

NOTE 9 — INCOME TAXES

The Company’s provision for income taxes for the three months ended March 31, 2020 and 2019 resulted in income tax expense of $0.7 million and an income tax benefit of $1.7 million, respectively. The effective tax rate as a percentage of pre-tax losses for the three months ended March 31, 2020 and 2019 was negative 7% and 51%, respectively, compared to the U.S. federal statutory rate of 21%. The negative effective tax rate for the three months ended March 31, 2020 was primarily due to foreign income tax expense on profitable foreign operations and the impact of the domestic valuation allowance offsetting domestic income tax benefits. The difference between the effective tax rate for the first quarter of 2019 and the U.S. federal statutory rate was primarily attributable to losses of foreign subsidiaries.

Interim income taxes are based on an estimated annualized effective tax rate applied to the respective quarterly periods, adjusted for discrete tax items in the period in which they occur. Although the Company believes its tax estimates are reasonable, the Company can make no assurance that the final tax outcome of these matters will not be different from that which it has reflected in its historical income tax provisions and accruals. Such differences could have a material impact on the Company’s income tax provision and operating results in the period in which the Company makes such determination.

The total outstanding balance for liabilities related to unrecognized tax benefits was $1.5 million as of March 31, 2020 and December 31, 2019. The Company does not anticipate that unrecognized tax benefits will significantly increase or decrease within the next twelve months.

NEW AGE BEVERAGES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

NOTE 10 —CONTINGENCIES

Litigation, Claims and Assessments

The Company’s operations are subject to numerous governmental rules and regulations in each of the countries it does business. These rules and regulations include a complex array of tax and customs regulations as well as restrictions on product ingredients and claims, the commissions paid to the Company’s independent product consultants (“IPCs”), labeling and packaging of products, conducting business as a direct-selling business, and other facets of manufacturing and selling products. In some instances, the rules and regulations may not be fully defined under the law or are otherwise unclear in their application. Additionally, laws and regulations can change from time to time, as can their interpretation by the courts, administrative bodies, and the tax and customs authorities in each country. The Company actively seeks to be in compliance, in all material respects, with the laws of each of the countries in which it does business and expects its IPCs to do the same. The Company’s operations are often subject to review by local country tax and customs authorities and inquiries from other governmental agencies. No assurance can be given that the Company’s compliance with governmental rules and regulations will not be challenged by the authorities or that such challenges will not result in assessments or required changes in the Company’s business that could have a material impact on its business, consolidated financial statements and cash flow.

The Company has various non-income tax contingencies in several countries. Such exposure could be material depending upon the ultimate resolution of each situation. As of March 31, 2020 and December 31, 2019, the Company has recorded a current liability under ASC 450, Contingencies, of approximately $1.9 million and $0.9 million, respectively.

From time to time, the Company may be a party to litigation and subject to claims incident to the ordinary course of business. Although the results of litigation and claims cannot be predicted with certainty, the Company currently believes that the final outcome of these ordinary course matters will not have a material adverse effect on its business. Regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources, and other factors.

COVID-19 Pandemic

In foreign jurisdictions, which accounted for approximately 70% of the Company’s net revenue for the three months ended March 31, 2020, the impact of the pandemic did not have a significant impact on net revenue through March 31, 2020. While the Company’s direct-to-consumer selling model typically relies heavily on the use of its IPC sales force in close contact with customers, the pandemic has required alternative selling approaches such as through social media. As long as Orders are in place around the world, no assurance can be provided that the Company will be able to avoid future reductions in net revenue using alternative selling approaches that avoid direct contact with customers.

In certain jurisdictions, the Orders are beginning to be relaxed but considerable uncertainty remains about the ultimate impact on the Company’s business. Even if the Orders are lifted, there is no assurance that they will not be reinstated if the spread of COVID-19 resumes. While the current disruption to the Company’s business is expected to be temporary, the long-term financial impact on the Company’s business cannot be reasonably estimated at this time.

NOTE 11 —NET LOSS PER SHARE

Net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding during the period. The calculation of diluted net loss per share includes dilutive stock options, unvested restricted stock awards, and other Common Stock equivalents computed using the treasury stock method, in order to compute the weighted average number of shares outstanding. For the three months ended March 31, 2020 and 2019, basic and diluted net loss per share were the same since all Common Stock equivalents were anti-dilutive. As of March 31, 2020 and 2019, the following potential Common Stock equivalents were excluded from the computation of diluted net loss per share since the impact of inclusion was anti-dilutive (in thousands):

	2020		2019

Equity incentive plan awards:
Stock options		3,883		2,759
Unissued and unvested restricted stock awards		2,499		1,227
Common stock purchase warrants		311		103

Total		6,693		4,089

NEW AGE BEVERAGES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

NOTE 12 — FINANCIAL INSTRUMENTS AND SIGNIFICANT CONCENTRATIONS

Fair Value Measurements

Fair value is defined as the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. When determining fair value, the Company considers the principal or most advantageous market in which it transacts and considers assumptions that market participants would use when pricing the asset or liability. The Company applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair measurement:

Level 1—Quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date

Level 2—Other than quoted prices included in Level 1 that are observable for the asset and liability, either directly or indirectly through market collaboration, for substantially the full term of the asset or liability

Level 3—Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any market activity for the asset or liability at measurement date

As of March 31, 2020 and December 31, 2019, the fair value of the Company’s cash and cash equivalents, restricted cash, accounts receivable, accounts payable, and accrued liabilities approximated their carrying values due to the short-term nature of these instruments. Cash equivalents consist of short-term certificates of deposit that are classified as Level 2. The recorded amounts for the debt obligations in Notes 3 and 7 also approximated fair value due to the short-term maturities, variable nature of the interest rates and/or since the instruments had been recently negotiated.

Recurring Fair Value Measurements

Recurring measurements of the fair value of assets and liabilities as of March 31, 2020 and December 31, 2019 were as follows:

	As of March 31, 2020								As of December 31, 2019
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total

Earnout under Series D preferred stock	$	-	$	-	$	288	$	288	$	-	$	-	$	225	$	225
Interest rate swap liability		-		425		-		425		-		99		-		99

Total	$	-	$	425	$	288	$	713	$	-	$	99	$	225	$	324

Valuation assumptions for the earnout under the Series D preferred stock are set forth in Note 3. The interest rate swap agreement provides for a total notional amount of $10.0 million at a fixed interest rate of approximately 5.4% through May 1, 2023, in exchange for a floating rate indexed to the prime rate plus 0.50%, and is classified within Level 2 of the fair value hierarchy. The Company’s policy is to recognize asset or liability transfers among Level 1, Level 2 and Level 3 as of the actual date of the events or change in circumstances that caused the transfer. During the three months ended March 31, 2020 and 2019, the Company had no transfers of its assets or liabilities between levels of the fair value hierarchy.

NEW AGE BEVERAGES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

Significant Concentrations

A significant portion of the Noni by NewAge business is conducted in foreign markets, exposing the Company to the risks of trade or foreign exchange restrictions, increased tariffs, foreign currency fluctuations and similar risks associated with foreign operations. For the three months ended March 31, 2020 and 2019, approximately 70% and 72%, respectively, of the Company’s consolidated net revenue was generated outside the United States, primarily in the Asia Pacific market. Most of the Noni by NewAge’s products have a component of the Noni plant, Morinda Citrifolia (“Noni”) as a common element. Tahitian Noni^®Juice, MAX and other noni-based beverage products comprise over 80% of net revenue of the Noni by NewAge segment. However, if consumer demand for these products decreases significantly or if the Company ceases to offer these products without a suitable replacement, the Company’s consolidated financial condition and operating results would be adversely affected. The Company purchases fruit and other Noni-based raw materials from French Polynesia, but these purchases of materials are from a wide variety of individual suppliers with no single supplier accounting for more than 10% of its raw material purchases during the three months ended March 31, 2020. However, as the majority of the raw materials are consolidated and processed at the Company’s plant in Tahiti, the Company could be negatively affected by certain governmental actions or natural disasters if they occurred in that region of the world. For the three months ended March 31, 2020 and 2019, no single customer accounted for 10% or more of the Company’s consolidated net revenue.

Financial instruments that subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents, restricted cash, and accounts receivable. The Company maintains its cash, cash equivalents and restricted cash at high-quality financial institutions. Cash deposits, including those held in foreign branches of global banks, may exceed the amount of insurance provided on such deposits. As of March 31, 2020, the Company had cash and cash equivalents with two financial institutions in the United States with balances of $13.4 million and $1.4 million, and two financial institutions in China with balances of $8.3 million and $8.0 million. As of December 31, 2019, the Company had cash and cash equivalents with two financial institutions in the United States with balances of $22.2 million and $1.4 million, and two financial institutions in China with balances of $6.6 million and $3.6 million. The Company has never experienced any losses related to its investments in cash, cash equivalents and restricted cash.

Generally, credit risk with respect to accounts receivable is diversified due to the number of entities comprising the Company’s customer base and their dispersion across different geographies and industries. The Company performs ongoing credit evaluations on certain customers and generally does not require collateral on accounts receivable. The Company maintains reserves for potential bad debts.

NOTE 13 — SEGMENTS AND GEOGRAPHIC CONCENTRATIONS

Reportable Segments

The Company follows segment reporting in accordance with ASC Topic 280, Segment Reporting. The Company’s operating segments consist of the Noni by NewAge segment and the NewAge segment.

The Noni by NewAge segment is engaged in the development, manufacturing, and marketing of Tahitian Noni® Juice, MAX and other noni beverages as well as other nutritional, cosmetic and personal care products. The Noni by NewAge segment has manufacturing operations in Tahiti, Germany, Japan, the United States, and China. The Noni by NewAge segment’s products are sold and distributed in more than 60 countries using IPC’s through its direct to consumer selling network and ecommerce business model. Approximately 80% of the net revenue of the Noni by NewAge segment is generated in the key Asia Pacific markets of Japan, China, Korea, Taiwan, and Indonesia.

The NewAge segment markets and sells a portfolio of healthy beverage brands including XingTea, Búcha® Live Kombucha, Coco-Libre, Evian, Nestea, Illy Coffee and Volvic. These products are distributed through the Company’s Direct Store Distribution (“DSD”) network and a hybrid of other routes to market throughout the United States and in a few countries around the world. The NewAge brands are sold in all channels of distribution including hypermarkets, supermarkets, pharmacies, convenience, gas and other outlets. The NewAge segment distributes beverages to retail customers in Colorado and surrounding states, and sells beverages to wholesale distributors, key account owned warehouses and international accounts using several distribution channels.

NEW AGE BEVERAGES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

Net revenue by reporting segment for the three months ended March 31, 2020 and 2019, was as follows (in thousands):

Segment	2020		2019

Noni by NewAge	$	50,110	$	48,222
NewAge		13,583		10,085

Net revenue	$	63,693	$	58,307

Gross profit by reporting segment for the three months ended March 31, 2020 and 2019, was as follows (in thousands):

Segment	2020		2019

Noni by NewAge	$	39,606	$	37,705
NewAge		1,918		871

Total gross profit	$	41,524	$	38,576

Assets by reporting segment as of March 31, 2020 and December 31, 2019, were as follows (in thousands):

Segment	2020		2019

Noni by NewAge	$	186,610	$	201,600
NewAge		42,618		49,530

Total assets	$	229,228	$	251,130

Depreciation and amortization expense by reporting segment for the three months ended March 31, 2020 and 2019, was as follows (in thousands):

Segment	2020		2019

Noni by NewAge	$	1,719	$	1,695
NewAge		160		541

Total depreciation and amortization	$	1,879	$	2,236

Cash payments for capital expenditures for property and equipment and identifiable intangible assets by reporting segment for the three months ended March 31, 2020 and 2019, were as follows (in thousands):

Segment	2020		2019

Noni by NewAge	$	1,467	$	116
NewAge		124		295

Total capital expenditures	$	1,591	$	411

Geographic Concentrations

The Company attributes net revenue to geographic regions based on the location of its customers’ contracting entity. The following table presents net revenue by geographic region for the three months ended March 31, 2020 and 2019 (in thousands):

	2020		2019

United States of America	$	19,385	$	16,455
Japan		20,867		20,700
China		14,975		13,155
Other countries		8,466		7,997

Net revenue	$	63,693	$	58,307

NEW AGE BEVERAGES CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

As of March 31, 2020 and December 31, 2019, the net carrying value of property and equipment located outside of the United States amounted to approximately $22.6 million and $22.1 million, respectively.

NOTE 14 — SUBSEQUENT EVENTS

ATM Agreement

On May 8, 2020, the ATM Agreement discussed in Note 7 was amended and restated to eliminate the previous termination date of April 30, 2020. As amended and restated, the ATM Agreement will terminate (i) when all of the Placement Shares have been sold, (ii) if we elect to terminate upon five business days’ notice to the Agent, (iii) at any time by the Agent, or (iv) by the mutual agreement of the parties. During April 2020 the Company sold an aggregate of approximately 5.3 million shares of Common Stock under the ATM Agreement for net proceeds of approximately $7.4 million.

PPP Loan

On April 14, 2020, the Company entered into the PPP Loan with EWB in an aggregate principal amount of approximately $6.9 million pursuant to the CARES Act. The PPP Loan bears interest at a fixed rate of 1.0% per annum, with the first six months of interest deferred, has a term of two years, and is unsecured and guaranteed by the U.S. Small Business Administration. The Company may apply to the lender for forgiveness of the PPP Loan, with the amount which may be forgiven equal to the sum of payroll costs, covered rent and mortgage obligations, and covered utility payments incurred by the Company during the eight-week period beginning on April 10, 2020, calculated in accordance with the terms of the CARES Act. To the extent that all or part of the PPP Loan is not forgiven, the Company will be required to pay interest at 1.0%, and commencing in October 2020 principal and interest payments will be required through the maturity date in April 2022.The terms of the PPP Loan provide for customary events of default including, among other things, payment defaults, breach of representations and warranties, and insolvency events. The PPP Loan may be accelerated upon the occurrence of an event of default.

Employment Agreements

On May 8, 2020, the Company entered into employment agreements with three executive officers that provide for aggregate annual base compensation of $1.7 million plus potential for annual performance bonuses ranging between 50% and 100% of annual base compensation. The agreements expire on January 1, 2023 and provide for annual renewal periods thereafter. If the employment agreements are terminated by the Company before the expiration date, the Company will be required to make severance payments of between 9 and 18 months of base compensation and health insurance benefits, plus the entire performance bonus that would have been otherwise payable for the year in which termination occurs. If termination occurs in connection with a change of control, the Company is required to make (i) severance payments of between 150% and 200% of annual base compensation plus the performance bonus applicable in the year in which termination occurs, and (ii) payments for up to 18 months of health insurance benefits.

Restructuring

In April 2020, the Company initiated a restructuring plan that is designed to achieve annualized selling, general and administrative cost reductions between $5.0 million and $7.0 million. This restructuring plan is primarily focused on reductions in marketing personnel and consulting resources. No assurance can be provided that the restructuring plan will be successful in achieving the intended cost reductions.

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Special Note Regarding COVID-19

In December 2019, a novel strain of coronavirus known as COVID-19 was reported to have surfaced in China, and by March 2020 the spread of the virus had resulted in a world-wide pandemic. The U.S. economy has been largely shut down by mass quarantines and government mandated stay-in-place orders (the “Orders”) to halt the spread of the virus. These Orders have required some of our employees to work from home when possible, and other employees have been entirely prevented from performing their job duties until the Orders are relaxed or lifted. Due to the COVID-19 pandemic and the related Orders that were in effect in March 2020, sales by the NewAge segment to restaurants, hotels, stadiums and airports decreased by more than 70% between January and April 2020. We expect these lower sales levels for this line of business in our NewAge segment to continue until the COVID-19 Orders are lifted and consumers resume visiting restaurants and traveling. In foreign jurisdictions, which account for over 70% of our net revenue, our direct-to-consumer selling model typically relies heavily on the use of our IPC sales force in close contact with our customers. The COVID-19 pandemic has required alternative selling approaches such as through social media. We may be unable to avoid future reductions in net revenue using these alternative selling approaches that avoid direct contact with our customers. The world-wide response to the pandemic has resulted in a significant downturn in economic activity and there is no assurance that government stimulus programs will successfully restore the economy to the levels that existed before the pandemic. If an economic recession or depression is sustained, it could have a material adverse effect on our business as consumer demand for our products could decrease.

In certain jurisdictions, the Orders are beginning to be relaxed but considerable uncertainty remains about the ultimate impact on our business. Even if the Orders are lifted, there is no assurance that they will not be reinstated if the spread of COVID-19 resumes. While the current business disruption is expected to be temporary, the long-term financial impact on our business cannot be reasonably estimated at this time.

Special Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q (this “Report”) includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in this Report, including statements regarding our future results of operations and financial position, business strategy and plans, and our objectives for future operations, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “will,” “would” and similar expressions that convey uncertainty of future events or outcomes are intended to identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements include, but are not limited to, information concerning:

	●	Anticipated operating results, including revenue and earnings.
	●	Our expectations about the extent and duration of COVID-19 on our business.
	●	Volatility in credit and market conditions.
	●	Our belief that we have sufficient liquidity to fund our business operations over the next 12 months.
	●	Ability to bring new products to market in an ever-changing and difficult regulatory environment.
	●	Ability to re-patriate cash from certain foreign markets.
	●	Strategy for customer retention and growth.
	●	Risk management strategy.
	●	Expected capital expenditure levels for 2020.
	●	Ability to successfully integrate acquisitions.

We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in Item 1A. “Risk Factors” of our 2019 Annual Report on Form 10-K as filed with the SEC on March 16, 2020 (the “2019 Form 10-K”), and additional Risk Factors discussed in Part II, Item 1A of this Report. Moreover, we operate in very competitive and rapidly changing markets. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. The forward-looking statements in this Report are made as of the date of the filing, and except as required by law, we disclaim and do not undertake any obligation to update or revise publicly any forward-looking statements in this Report. You should read this Report and the documents that we reference in this Report and have filed with the Securities and Exchange Commission (“SEC”) with the understanding that our actual future results, levels of activity and performance, as well as other events and circumstances, may be materially different from what we expect.

Overview

You should read the following discussion and analysis of our financial condition and results of operations together with (i) our financial statements and related notes included in Part I, Item 1 of this Report, (ii) our audited financial statements for the years ended December 31, 2019 and 2018 set forth in Item 8 of our 2019 Form 10-K, and (iii) the related Management’s Discussion and Analysis set forth in Item 7 of our 2019 Form 10-K.

Certain figures, such as interest rates and other percentages included in this section, have been rounded for ease of presentation. Percentage figures included in this section have not in all cases been calculated on the basis of such rounded figures but on the basis of such amounts prior to rounding. For this reason, percentage and dollar amounts in this section may vary slightly from those obtained by performing the same calculations using the figures in our consolidated financial statements or in the associated text. Certain other amounts that appear in this section may similarly not sum due to rounding.

Our Business Model

Our mission is to inspire and educate the planet to “live healthy,” and we support this mission in part, by providing healthier, better-for-you products, that support improvement in people’s lives and health. Our goal is to do well by doing good, and in the process of embodying our mission, deliver superior, sustainable profitable growth and superior return on investment for our shareholders.

We are a healthy beverages and lifestyles purpose-driven company engaged in the development and commercialization of a portfolio of organic, natural and other better-for-you products. Those products are grouped into three category platforms, health & wellness, healthy appearance, and nutritional performance. We focus on the development and commercialization of healthy, functionally-differentiated brands within those platforms utilizing Noni, cannabidiol (“CBD”), plant-based ingredients, or phytonutrients as points of difference across the portfolio. We also are one of a few companies in our industry that commercializes its business across multiple channels, employing an omni-channel distinctive route to market, including products sold in traditional retail, ecommerce, direct to consumer, and via our Direct-Store-Distribution (“DSD”) Network. NewAge is building its omni-channel route to market in the 60 countries in which the Company operates, including leverage of its independent product consultants (“IPCs”), a peer-to-peer selling group of approximately 280,000 independent contractor IPCs and customers worldwide.

We believe consumer awareness of the benefits of healthier lifestyles and the availability of heathier products is rapidly accelerating worldwide, and we are seeking to capitalize on that shift. We also believe consumer purchasing behavior is shifting with significantly greater purchases made via ecommerce and alternative to traditional retail channels, with increasing demand for delivery direct to consumer’s homes.

To address the changes in consumer behaviors and opportunities presented by those shifts, NewAge implements a range of marketing and sales initiatives to capitalize on those shifts and build our brands with consumers. We intend for each of our brands to have superior functionality and efficacy versus their competitors, and at the same time, connect emotionally with their respective target audiences. We believe that building emotional connections with consumers, supported by functional points of difference, is critical to building brand loyalty.

Our brand portfolio consists of a range of owned brands and licensed brands that we commercialize through our omni-channel route to market. The owned brands include Tahitian Noni Juice, Te Mana, Hiro, Xing, Búcha Live Kombucha, Coco Libre, Aspen Pure and ‘Nhanced. The licensed brands include Nestea, Volvic, Evian, Illy and a range of specialty brands sold primarily in specialty outlets and the natural channel and retailers.

Operating Segments

The direct to consumer segment of our business acquired from Morinda Holdings, Inc. (“Morinda”) is now rebranded Noni by NewAge. We manage this business segment regionally with Asia Pacific being our largest region, followed by North America, and then our LEAD Division which includes Latin America, Europe and the rest of the world markets. The Noni by NewAge segment is engaged in the development, manufacturing, and marketing of Tahitian Noni® Juice, a range of other noni-based beverages, the Te Mana portfolio of Healthy Appearance products as well as various other nutritional, cosmetic and personal care products. The Noni by NewAge segment has manufacturing operations in Tahiti, Germany, Japan, the United States, and China. The products of the Noni by NewAge segment are sold and distributed in more than 60 countries using IPC’s through our direct to consumer selling network and e-commerce business model. Asia Pacific represents approximately 79% of this business, followed by North America at around 12%, with the LEAD Division comprising the remainder of 9%.

The NewAge segment manufactures, markets and sells a portfolio of healthy beverage brands including Nestea, Illy, Xing, Búcha Live Kombucha, Aspen Pure, Coco-Libre, Evian, Volvic, and a range of other imported specialty brands. These products are distributed through our DSD network and a hybrid of other routes to market throughout the United States and in 25 countries around the world. The NewAge brands are sold in all channels of distribution including hypermarkets, supermarkets, pharmacies, convenience, restaurants, hotels, airports, gas and other outlets.

Recent Developments

Reference is made to Notes 6 and 7 to our condensed consolidated financial statements included in Part I, Item 1 of this Report for a discussion of recent developments since January 1, 2020, including an amendment to the EWB Credit Facility in March 2020 as discussed in Note 6, and the ATM Agreement that resulted in net proceeds of $8.3 million for the three months ended March 31, 2020, as discussed in Note 7. In addition, reference is made to Note 14 to our condensed consolidated financial statements for discussion of additional financing activities completed in April 2020, including net proceeds under the ATM Agreement of $7.4 million, and proceeds from the PPP Loan with EWB in an aggregate principal amount of approximately $6.9 million pursuant to the recently-enacted U.S. Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). These recent developments are also discussed below under the caption Liquidity and Capital Resources.

In March 2020, we initiated a strategic review of our U.S. retail brands and the BWR division. This review is currently in process and is expected to be completed in the summer of 2020. We have not entered into any agreements or understandings with any potential strategic partners in connection with such review.

Key Components of Consolidated Statements of Operations

For a description of the key components of our condensed consolidated statements of operations, please refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2019 Form 10-K.

Critical Accounting Policies and Significant Judgments and Estimates

For a discussion of our critical accounting policies, please refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2019 Form 10-K.

Results of Operations

Our consolidated statements of operations for the three months ended March 31, 2020 and 2019 are presented below (dollars in thousands):

	2020			2019			Change			Percent

Net revenue	$	63,693		$	58,307		$	5,386			9	%
Cost of goods sold		22,169			19,731			2,438			12	%

Gross profit		41,524			38,576			2,948			8	%
Gross margin		65	%		66	%

Operating expenses:
Commissions		19,515			18,038			1,477			8	%
Selling, general and administrative		30,608			26,842			3,766			14	%
Depreciation and amortization expense		1,781			2,236			(455	)		-20	%

Total operating expenses		51,904			47,116			4,788			10	%

Operating loss		(10,380	)		(8,540	)		(1,840	)		22	%

Non-operating income (expenses):
Gain (loss) from sale of property and equipment		(80	)		6,442			(6,522	)		-101	%
Interest expense		(572	)		(1,646	)		1,074			-65	%
Gain (loss) from change in fair value of derivatives		(326	)		470			(796	)		-169	%
Interest and other income (expense), net		463			(42	)		505			-1202	%

Loss before income taxes		(10,895	)		(3,316	)		(7,579	)		229	%
Income tax benefit (expense)		(723	)		1,700			(2,423	)		-143	%

Net loss	$	(11,618	)	$	(1,616	)	$	(10,002	)		619	%

Comparison of Three Months ended March 31, 2020 and 2019

Presented below is our net revenue, cost of goods sold, gross profit and gross margin by segment for the three months ended March 31, 2020 and 2019 (dollars in thousands):

	Noni by NewAge Segment												NewAge Segment
		2020			2019			Change		Percent			2020			2019			Change	Percent

Net revenue	$	50,110		$	48,222		$	1,888		4	%	$	13,583		$	10,085		$	3,498	35	%
Cost of goods sold		10,504			10,517			(13	)	0	%		11,665			9,214			2,451	27	%

Gross profit	$	39,606		$	37,705		$	1,901		5	%	$	1,918		$	871		$	1,047	120	%
Gross margin		79	%		78	%							14	%		9	%

Net Revenue. Net revenue increased from $58.3 million for the three months ended March 31, 2019 to $63.7 million for the three months ended March 31, 2020, an increase of $5.4 million or 9%. For the three months ended March 31, 2020, this increase consisted of increases in net revenue of $3.5 million for the NewAge segment and $1.9 million for the Noni by NewAge segment.

Net revenue for the NewAge segment increased by $3.5 million from $10.1 million for the three months ended March 31, 2019 to $13.6 million for the three months ended March 31, 2020. The increase in net revenue for the NewAge segment was primarily attributable to an increase in net revenue of $1.4 million for our DSD division and the July 2019 acquisition of BWR, which had net revenue of $2.1 million for the three months ended March 31, 2020. We are currently evaluating our strategic alternatives with our U.S retail brands and the BWR division which generated an aggregate of $3.3 million of the revenue in the NewAge segment during the quarter ended March 31, 2020. Net revenue for the Noni by NewAge segment increased by $1.9 million from $48.2 million for the three months ended March 31, 2019 to $50.1 million for the three months ended March 31, 2020. The increase in net revenue for the Noni by NewAge segment was primarily attributable to higher unit sales in China that resulted in increased net revenue. For the three months ended March 31, 2019, we believe net revenue in China was adversely affected by an unfavorable regulatory environment that no longer exists.

Cost of goods sold. Cost of goods sold increased from $19.7 million for the three months ended March 31, 2019 to $22.2 million for the three months ended March 31, 2020, an increase of $2.4 million. For the three months ended March 31, 2020, substantially all of this increase was attributable to the July 2019 acquisition of BWR.

Despite the increase in net revenue of $1.9 million for the Noni by NewAge segment, cost of goods sold was substantially unchanged, primarily due to a charge of $0.8 million related to the Morinda business combination which closed on December 21, 2018. The fair value of work-in-process and finished goods inventories on the closing date exceeded the historical carrying value by approximately $2.2 million. This amount represented an element of built-in profit on the closing date that was charged to cost of goods sold as the related inventories were sold in 2019. For the three months ended March 31, 2019, a portion of the closing date inventories was sold, which resulted in a charge to cost of goods sold of approximately $0.8 million.

Gross profit. Gross profit increased from $38.6 million for the three months ended March 31, 2019 to $41.5 million for the three months ended March 31, 2020, an increase of $2.9 million or 8%. The increase in gross profit was primarily due to the Noni by NewAge segment which accounted for $1.9 million of gross profit due to higher net revenue and flat cost of goods sold as discussed above. The NewAge segment accounted for $1.0 million of the increase in gross profit, driven by net revenue that increased by 35% whereas cost of goods sold only increased by 27%. We are currently evaluating our strategic alternatives with our U.S. retail brands and the BWR division, which incurred a loss of $0.1 million of gross profit during the quarter ended March 31, 2020. For the three months ended March 31, 2020, consolidated gross margin decreased from 66% to 65%. Gross margin for our Noni by NewAge segment increased by 1% whereas gross margin for the NewAge segment increased by 5% primarily due to improved performance by the DSD distribution network of the NewAge segment.

Commissions. Commissions increased from $18.0 million for the three months ended March 31, 2019 to $19.5 million for the three months ended March 31, 2020, an increase of $1.5 million. Commissions for the Noni by NewAge segment increased from $17.8 million for the three months ended March 31, 2019 to $19.0 for the three months ended March 31, 2020. The increase in commissions of $1.2 million for the Noni by NewAge segment was primarily attributable to higher net revenue for the three months ended March 31, 2020. Commissions related to the NewAge segment increased by $0.2 million primarily due to $3.3 million of net revenue from the BWR reporting unit that was acquired in July 2019. For the three months ended March 31, 2020, commissions for the Noni by NewAge segment amounted to approximately 38% of the related net revenue whereas commissions for the NewAge segment were approximately 4% of the related net revenue of the NewAge segment.

Selling, general and administrative expenses. Selling, general and administrative (“SG&A”) expenses increased from $26.8 million for the three months ended March 31, 2019 to $30.6 million for the three months ended March 31, 2020, an increase of $3.8 million. This increase consisted of increases in (i) cash-based compensation and benefit costs of $2.2 million, primarily due to additional employees in 2020, (ii) professional fees of $1.9 million that was driven by higher auditing fees in 2020, and (iii) an increase in marketing, communications, travel and general business expenses of $1.9 million that was driven by higher director and officer insurance costs in 2020. These increases in SG&A expense totaled $6.0 million and were partially offset by reductions in stock-based compensation expense of $1.9 million and reduced occupancy costs of $0.3 million.

In April 2020, we initiated a restructuring plan that is designed to achieve annualized selling, general and administrative cost reductions between $5.0 million and $7.0 million. This restructuring plan is primarily focused on reductions in marketing personnel and consulting resources. Accordingly, we expect to reduce our SG&A expenses for the remainder of 2020. No assurance can be provided that this restructuring plan will be successful in achieving the intended cost reductions.

Depreciation and amortization expense. Depreciation and amortization expense included in operating expenses decreased from $2.2 million for the three months ended March 31, 2019 to $1.8 million for the three months ended March 31, 2020, a decrease of $0.4 million. This decrease was attributable to the impairment charges recorded in December 2019 that eliminated the net carrying value of substantially all of the intangible assets of the NewAge segment.

Gain (loss) from sale of property and equipment. On March 22, 2019, we entered into an agreement with a major Japanese real estate company resulting in the sale for approximately $57.0 million of the land and building in Tokyo that serves as the corporate headquarters of the Company’s Japanese subsidiary. Concurrently with the sale, we entered into a lease of this property for an expected term of 20 years with an extension option for an additional seven years. The sale of this property resulted in a gain of $24.1 million. We determined that $17.6 million of the gain was the result of above-market rent inherent in the leaseback arrangement. The $17.6 million portion of the gain related to above-market rent is being accounted for as a lease financing obligation whereby the gain will result in a reduction of rent expense of approximately $0.9 million per year over the 20-year lease term. The remainder of the gain of $6.4 million was attributable to the highly competitive process among the entities that bid to purchase the property and, accordingly, is recognized as a gain in our condensed consolidated statement of operations for the three months ended March 31, 2019. For the three months ended March 31, 2020, a loss of $0.1 million was recognized due to the sale of equipment.

Interest expense. Interest expense decreased from $1.6 million for the three months ended March 31, 2019 to $0.6 million for the three months ended March 31, 2020, a decrease of $1.0 million. For the three months ended March 31, 2020, interest expense was primarily attributable to (i) interest expense based on the contractual rates under the EWB Credit Facility of $0.2 million based on a weighted average interest rate of 5.1% and weighted average borrowings outstanding of $15.0 million for the three months ended March 31, 2020, (ii) accretion of discount for a total of $0.2 million related to the Morinda business combination liabilities and the EWB Credit Facility, (iii) accrued dividends on the debt-classified Series D preferred stock of $0.1 million, and (iv) imputed interest expense of $0.1 million related to our deferred lease financing obligation. For the three months ended March 31, 2019, interest expense was primarily attributable to (i) termination of the Siena Revolver, which resulted in a make-whole prepayment penalty of $0.5 million, (ii) accretion of discount and write-off of debt issuance costs of $0.5 million related to the Siena Revolver, (iii) accretion of discount and amortization of debt discount for a total of $0.6 million related to the Morinda business combination liabilities, and (iv) interest at the contractual rate of approximately $54,000.

Gain (loss) on change in fair value of derivatives. For the three months ended March 31, 2020, we recognized a loss from the change in fair value of derivatives of $0.3 million compared to a gain of $0.5 million for the three months ended March 31, 2019. In July 2019, we entered into an interest rate swap agreement with EWB. This swap agreement provides for a total notional amount of $10.0 million at a fixed interest rate of approximately 5.4% through May 1, 2023, in exchange for a floating rate indexed to the prime rate plus 0.5%. For the three months ended March 31, 2020, we had an unrealized loss of $0.3 million from this interest rate swap agreement due to a decline in interest rates. For the three months ended March 31, 2019, we recognized a gain of $0.5 million from the change in fair value of embedded derivatives related to the Siena Revolver that was terminated in March 2019.

Interest and other income (expense), net. For the three months ended March 31, 2020 and 2019, we had interest and other income (expense), net of $0.5 million and $42,000, respectively. Interest and other income (expense), net for the three months ended March 31, 2020 consisted of foreign exchange gains of $0.4 million and interest income of $0.1 million. Interest and other income (expense), net for the three months ended March 31, 2019 consisted of other debt financing expenses of $0.2 million, partially offset by interest and other income of approximately $0.1 million.

Income tax expense. For the three months ended March 31, 2020, we recognized income tax expense of $0.7 million, which consisted of foreign income taxes associated with profitable foreign markets. For the three months ended March 31, 2019, we recognized a net income tax benefit of $1.7 million. This income tax benefit was determined by applying an estimated annual effective tax rate to the loss before income tax. The difference between the income tax expense of $0.7 million for the three months ended March 31, 2020 and the income tax benefits of $1.7 million for the three months ended March 31, 2019 is primarily attributable to the establishment of a domestic valuation allowance in the quarter ended September 30, 2019.

Liquidity and Capital Resources

Overview

As of March 31, 2020, we had cash and cash equivalents of $27.5 million and working capital of $17.0 million. For the three months ended March 31, 2020, we incurred a net loss of $11.6 million and we used cash in our operating activities of $13.5 million. For the three months ended March 31, 2020, approximately $13.1 million of our cash used in operating activities was attributable to March 2020 income tax payments related to the sale leaseback of our Tokyo, Japan land and building. As of March 31, 2020, we have debt and lease obligations due during the 12-months ending March 31, 2021 that will require cash payments to the former stockholders of Morinda of $5.8 million, operating lease payments of $8.3 million, and principal payments under the EWB Credit Facility of $1.5 million (which will be paid from our restricted cash deposits).

We entered into the third amendment and waiver (the “Third Amendment”) to the EWB Credit Facility on March 13, 2020. The Third Amendment is expected to have a significant impact on our liquidity and capital resources for the 12-month period ending March 31, 2021. Beginning in March 2020, the Third Amendment required us to deposit an initial amount of $15.1 million in restricted cash balances with EWB. In addition, for any future amounts borrowed under the EWB Revolver, we are required to increase restricted cash deposits by the corresponding amount of the borrowings. The Third Amendment requires equity infusions of at least $15.0 million for the first six months of 2020. We complied with this requirement through the issuance and sale of 10.3 million shares of Common Stock for gross proceeds of $16.1 million through April 2020 under our ATM Agreement. In addition, under the Third Amendment we are required to sell an additional $13.9 million of equity by December 31, 2020. We intend to raise the remainder of the total required equity infusions through the ATM Agreement.

On April 14, 2020, we entered into an unsecured PPP Loan with EWB in an aggregate principal amount of approximately $6.9 million under the CARES Act. Under the terms of the CARES Act, we may apply to EWB for forgiveness of the loan based on our actual expenditures for payroll, rent, interest and utilities during the eight-week period following the funding of the loan. To the extent that all or part of the loan is not forgiven, we will be required to pay interest at 1.0%, and commencing in October 2020 principal and interest payments will be required through the maturity date in April 2022.

We believe our existing cash resources of $27.5 million combined with proceeds of $6.9 million received in April 2020 from the PPP Loan under the CARES Act, and net proceeds of $7.4 million received under the ATM Agreement in April 2020, expected future equity net offering proceeds under the ATM Agreement, and future cash expected to be generated from operations, will be sufficient to fund debt and lease obligations, and working capital requirements for the next 12 months. There are no assurances that we will be able to obtain additional financing through equity offerings, including under the ATM Agreement, and debt financings in the future. Even if these financing sources are available, they may be on terms that are not acceptable to our board of directors and stockholders.

Please refer to the following sections for further discussion of the terms of the EWB Credit Facility and the ATM Agreement.

East West Bank Credit Facility

On March 29, 2019, we entered into a credit facility with East West Bank (the “EWB Credit Facility”). The EWB Credit Facility matures on March 29, 2023 (the “Maturity Date”) and provides for (i) a term loan in the initial principal amount of $15.0 million (the “EWB Term Loan”) and (ii) a $10.0 million revolving loan agreement (the “EWB Revolver”). As of March 31, 2020, we had outstanding borrowings of $14.4 million under the EWB Term Loan and no borrowings were outstanding under the EWB Revolver. Our obligations under the EWB Credit Facility are secured by substantially all of our assets and guaranteed by certain of our subsidiaries.

Borrowings outstanding under the EWB Credit Facility initially provided for interest at the prime rate plus 0.50%. As of December 31, 2019, the prime rate was 4.75% and the contractual rate applicable to outstanding borrowings under the EWB Credit Facility was 5.25%. Pursuant to the Third Amendment discussed below, the interest rate applicable to outstanding borrowings under the EWB Credit Facility increased from 0.5% to 2.0% in excess of the prime rate beginning on March 13, 2020. As of March 31, 2020, the prime rate was 3.25% and the contractual rate applicable to outstanding borrowings under the EWB Credit Facility was 5.25%. Payments under the EWB Term Loan were interest-only through September 30, 2019, followed by monthly principal payments of $125,000 plus interest through the stated maturity date of the EWB Term Loan. We may elect to prepay the EWB Term Loan before the Maturity Date on 10 business days’ notice to EWB subject to a prepayment fee of 1.0% of the principal balance of the EWB Term Loan for any prepayment through March 29, 2021. In the event the EWB Revolver is terminated prior to the Maturity Date, we would be required to pay an early termination fee in the amount of 0.50% of the revolving line. The EWB Revolver also provides for an unused line fee equal to 0.50% per annum of the undrawn portion.

The EWB Credit Facility requires compliance with certain financial and restrictive covenants and includes customary events of default. Key financial covenants include maintenance of minimum Adjusted EBITDA and a maximum Total Leverage Ratio (all as defined and set forth in the EWB Credit Facility). As of December 31, 2019, we were not in compliance with the financial covenants. Our non-compliance with the financial covenants was waived in connection with the Third Amendment to the EWB Credit Facility discussed below. There is no assurance that EWB will waive any future instances of noncompliance. As of March 31, 2020, we were in compliance with all of the covenants under the EWB Credit Facility.

On March 13, 2020, we entered into the Third Amendment to the EWB Credit Facility whereby EWB waived all financial covenants for the 12-month period ended December 31, 2019. In addition to the increase in our interest rate discussed above, the Third Amendment modified the EWB Credit Facility as follows:

	●	We were required to make an initial deposit of $15.1 million in restricted cash accounts with EWB. In the future, this amount will be reduced by the amount of future principal payments we make under the EWB Term Loan. As of March 31, 2020, we had made the required deposits in restricted cash accounts controlled by EWB.
	●	For any future amounts borrowed under the EWB Revolver, we are required to increase restricted cash deposits by the amount of the borrowings.
	●	Less stringent requirements are applicable for future compliance with the minimum adjusted EBITDA covenant, the maximum total leverage ratio, and the fixed charge coverage ratio. Additionally, compliance with the maximum total leverage ratio and the fixed charge coverage ratio have been delayed until June 30, 2021.
	●	The existing provisions related to “equity cures” that may be employed to maintain compliance with financial covenants were increased from $5.0 million to $15.0 million for the year ending December 31, 2020, and $10.0 million per year for each calendar year thereafter.
	●	We were required to obtain equity infusions for at least $15.0 million for the first six months of 2020. We complied with this requirement through total equity issuances of $16.1 million through April 2020 under to the ATM Agreement. In addition, we are required to obtain additional equity infusions of $13.9 million by December 31, 2020.

At the Market Offering Agreement

On April 30, 2019, we entered into an At the Market Offering Agreement (the “ATM Agreement”) with Roth Capital Partners, LLC (the “Agent”), under which we may offer and sell from time to time up to an aggregate of $100 million in shares of our Common Stock (the “Placement Shares”), through the Agent. We have no obligation to sell any of the Placement Shares under the ATM Agreement. We intend to use the net proceeds from the offering for general corporate purposes, including working capital. For the three months ended March 31, 2020, we sold an aggregate of approximately 4.9 million shares of Common Stock for gross proceeds of approximately $8.5 million. Total commissions and other offering costs deducted from the proceeds were $0.2 million resulting in net proceeds of $8.3 million. In April 2020, we received additional gross proceeds under the ATM Agreement of $7.6 million from the issuance of approximately 5.3 million shares of our Common Stock.

Under the ATM Agreement, we agreed to pay the Agent a commission equal to 3% of the gross proceeds from the gross sales price of the Placement Shares up to $30 million, and 2.5% of the gross proceeds from the gross sales price of the Placement Shares in excess of $30 million. Through April 2020, the cumulative gross proceeds totaled $36.9 million and all future commissions will be at 2.5% of the gross proceeds. On May 8, 2020, the ATM Agreement was amended and restated to eliminate the previous termination date of April 30, 2020. As amended and restated, the ATM Agreement will terminate (i) when all of the Placement Shares have been sold, (ii) if we elect to terminate upon five business days’ notice to the Agent, (iii) at any time by the Agent, or (iv) by the mutual agreement of the parties.

Cash Flows Summary

Presented below is a summary of our operating, investing and financing cash flows for the three months ended March 31, 2020 and 2019 (in thousands):

	2020			2019			Change
Net cash provided by (used in):
Operating activities	$	(13,521	)	$	(6,201	)	$	(7,320	)
Investing activities		(1,417	)		35,465			(36,882	)
Financing activities		(2,000	)		37,682			(39,682	)

Cash Flows Provided by Operating Activities

For the three months ended March 31, 2020 and 2019, net cash used in operating activities amounted to $13.5 million and $6.2 million, respectively. The key components in the calculation of our net cash used in operating activities for the three months ended March 31, 2020 and 2019, are as follows (in thousands):

	2020			2019			Change
Net loss	$	(11,618	)	$	(1,616	)	$	(10,002	)
Deferred income tax benefit		(39	)		(13,916	)		13,877
Loss (gain) from sale of property and equipment		80			(6,442	)		6,522
Loss (gain) from change in fair value of derivatives		326			(470	)		796
Other non-cash expenses		4,721			8,505			(3,784	)
Changes in operating assets and liabilities, net		(6,991	)		7,738			(14,729	)

Total	$	(13,521	)	$	(6,201	)	$	(7,320	)

For the three months ended March 31, 2020, our net loss was $11.6 million compared to a net loss of $1.6 million for the three months ended March 31, 2019. Please refer to Results of Operations above for a discussion of the factors that resulted in our net loss for the three months ended March 31, 2020 and 2019.

For the three months ended March 31, 2020, we had an unrealized loss on the change in fair value of derivatives of $0.3 million and a loss from the sale of property and equipment of $0.1 million. For the three months ended March 31, 2020, other non-cash expenses partially mitigated the impact of our net loss by $4.7 million. Non-cash expenses consisted primarily of (i) depreciation and amortization expense of $1.9 million, (ii) non-cash lease expense of $1.3 million, (iii) stock-based compensation expense of $1.4 million, and (iv) accretion and amortization of debt discount and issuance costs of $0.1 million.

For the three months ended March 31, 2020, changes in operating assets and liabilities used $7.0 million of operating cash flows. The primary use of operating cash flows for the three months ended March 31, 2020 was due to a reduction in other accrued liabilities of $8.9 million, a decrease in accounts payable of $0.7 million, and an increase in accounts receivable of $0.5 million. These decreases in operating cash flow totaled $10.1 million and were partially offset by changes in operating assets and liabilities that increased our operating cash flows, including a decrease in inventories of $3.1 million, and a reduction in prepaid expenses, deposits and other assets of $0.1 million. The $8.9 million decrease in accrued liabilities was primarily attributable to a payment of income tax liabilities of $13.1 million that arose from the sale of our land and building in Tokyo, Japan in March 2019 as discussed below.

For the three months ended March 31, 2019, our net loss of $1.6 million, a non-cash gain of $0.5 million from the change in fair value of derivatives, a gain on sale of property and equipment of $6.4 million due to the sale of our land and building in Tokyo, and a deferred income tax benefit of $13.9 million resulted in combined negative operating cash flow of $22.4 million. These amounts were partially offset by non-cash expenses of $8.5 million, and changes in operating assets and liabilities of $7.7 million to arrive at net cash used in operating activities of $6.2 million. For the three months ended March 31, 2019, non-cash expenses of $8.5 million included stock-based compensation expense of $3.3 million, depreciation and amortization expense of $2.2 million, non-cash lease expense of $1.4 million, accretion and amortization of debt discount and issuance costs of $1.1 million, and a cash expense for make-whole applicable premium of $0.5 million that was classified as a financing cash outflow since it related to the prepayment of debt.

For the three months ended March 31, 2019, for financial reporting purposes we had a $6.4 million gain that is excluded from our operating cash flows because it was generated from the receipt of investing cash flows. Differences in the timing of our recognition of this gain on sale for income tax and financial reporting purposes were primarily responsible for an increase in accrued income taxes payable of $11.9 million. This gain on sale and the related deferred income tax benefit favorably impacted our net loss but did not generate any operating cash flows for the three months ended March 31, 2019.

For the three months ended March 31, 2019, we recognized a non-cash gain due to changes in the fair value of the derivatives of $0.5 million. For the three months ended March 31, 2019, the net changes in operating assets and liabilities provided $7.7 million of operating cash flows, including (i) higher cash collections that resulted in a decrease in accounts receivable of $0.4 million, (ii) a decrease in prepaid expenses and other assets of $0.1 million, and (iii) an increase in accounts payable and accrued liabilities of $9.7 million. These increases in operating cash flow totaled $10.2 million and were partially offset by higher spending that resulted in an increase in inventories of $2.5 million.

Cash Flows from Investing Activities

For the three months ended March 31, 2020, our investing cash flows consisted of cash payments for capital expenditures of $1.6 million, partially offset by proceeds from the sale of equipment of $0.2 million. Our capital expenditures consisted of $1.5 million in our Noni by NewAge segment and $0.1 million in our NewAge segment.

For the three months ended March 31, 2019, our investing activities provided net cash flow of $35.5 million that was primarily driven by the sale leaseback of our land and building in Tokyo, which was sold for $57.1 million. After deducting commissions and other selling expenses of $1.9 million, the net proceeds amounted to $55.2 million. The net proceeds attributable to investing activities included $35.9 million that was related to the sale of the property, and $1.7 million that was designated to fund future repair obligations for a total of $37.6 million. The remainder of the net proceeds of $17.6 million was a financial inducement to enter into a 20-year operating lease as discussed under Cash Flows from Financing Activities. Investing cash outflows for the three months ended March 31, 2019 included capital expenditures for property and equipment of $0.3 million and a security deposit of $1.8 million withheld by the purchaser in the sale leaseback.

Cash Flows from Financing Activities

Our financing activities resulted in net cash outflows of $2.0 million for the three months ended March 31, 2020, as compared to net cash inflows of $37.7 million for the three months ended March 31, 2019. For the three months ended March 31, 2020, the principal source of cash from our financing activities consisted of cash proceeds of $8.3 million from the issuance of approximately 4.9 million shares of Common Stock pursuant to the ATM Agreement. For the three months ended March 31, 2020, our cash outflows consisted of principal repayments under the EWB Credit Facility of $10.1 million, payments of $0.2 million related to the deferred lease financing obligation, and payments of $0.1 million for debt issuance costs. For the three months ended March 31, 2020, our principal payments included $0.4 million under the EWB Term Loan and $9.7 million of voluntary prepayments which may be subsequently reborrowed under the EWB Revolver.

For the three months ended March 31, 2019, the principal sources of cash from our financing activities consisted of (i) proceeds of $36.6 million from borrowings, including $25.0 million under the EWB Credit Facility and $11.6 million under the Siena Revolver that was terminated in March 2019, (ii) proceeds of $17.6 million for the deferred lease financing obligation related to the sale leaseback of our land and building in Tokyo, and (iii) proceeds from the exercise of stock option of $0.4 million. These financing cash proceeds totaled $54.6 million and were partially offset by principal payments under the Siena Revolver of $13.6 million, repayment of the mortgage on the Tokyo land and building for $2.6 million, a make-whole premium fee of $0.5 million due to the termination of the Siena Revolver, and payments for debt issuance costs of $0.3 million. As discussed above the Siena Revolver was terminated on March 29, 2019 and replaced with the EWB Credit Facility.

As discussed above, the net proceeds received from the buyer of our land and building in Tokyo included $17.6 million that represented an inducement to enter into the related leaseback financing arrangement. Since we agreed to pay above market lease payments for the 20-year lease term in exchange for an up-front cash payment included in the selling price, we have recognized a deferred lease financing obligation for this amount. For financial reporting purposes, a portion of the monthly operating lease payments is not being recognized as rent expense, but rather is allocated to reduce this financial liability and recognize imputed interest expense. For the three months ended March 31, 2020, $0.2 million of our lease payments was allocated to reduce the financial liability.

Off-Balance Sheet Arrangements

During the three months ended March 31, 2020 and 2019, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities, which were established for the purpose of facilitating off-balance sheet arrangements.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board or other standard setting bodies that are adopted by us as of the specified effective date. Unless otherwise discussed in Note 1 to our condensed consolidated financial statements included in Part I, Item 1 of this Report, we believe that the impact of recently issued standards that are not yet effective will not have a material impact on our financial position or results of operations upon adoption. For additional information on recently issued accounting standards and our plans for adoption of those standards, please refer to the section titled Recent Accounting Pronouncements under Note 1 to our condensed consolidated financial statements.

Non-GAAP Financial Measures

The primary purpose of using non-GAAP financial measures is to provide supplemental information that we believe may be useful to investors and to enable investors to evaluate our results in the same way we do. We also present the non-GAAP financial measures because we believe they assist investors in comparing our performance across reporting periods on a consistent basis, as well as comparing our results against the results of other companies, by excluding items that we do not believe are indicative of our core operating performance. Specifically, we use these non-GAAP measures as measures of operating performance; to prepare our annual operating budget; to allocate resources to enhance the financial performance of our business; to evaluate the effectiveness of our business strategies; to provide consistency and comparability with past financial performance; to facilitate a comparison of our results with those of other companies, many of which use similar non-GAAP financial measures to supplement their GAAP results; and in communications with our board of directors concerning our financial performance. Investors should be aware however, that not all companies define these non-GAAP measures consistently.

We provide in the tables below a reconciliation from the most directly comparable GAAP financial measure to each non-GAAP financial measure presented. Due to a valuation allowance for our deferred tax assets, there were no income tax effects associated with any of our non-GAAP adjustments.

EBITDA and Adjusted EBITDA. The calculation of our EBITDA and Adjusted EBITDA is presented below for the three months ended March 31, 2020 and 2019 (in thousands):

	2020			2019

Net loss	$	(11,618	)	$	(1,616	)
EBITDA Non-GAAP adjustments:
Interest expense		572			1,646
Income tax expense (benefit)		723			(1,700	)
Depreciation and amortization expense		1,879			2,236

EBITDA		(8,444	)		566
Adjusted EBITDA Non-GAAP adjustment:
Stock-based compensation expense		1,357			3,287

Adjusted EBITDA	$	(7,087	)	$	3,853

EBITDA is defined as net income (loss) adjusted to exclude GAAP amounts for interest expense, income tax expense, and depreciation and amortization expense. For the calculation of Adjusted EBITDA, we also exclude the following item for the periods presented:

Stock-Based Compensation Expense: Our compensation strategy includes the use of stock-based compensation to attract and retain employees, directors and consultants. This strategy is principally aimed at aligning the employee interests with those of our stockholders and to achieve long-term employee retention, rather than to motivate or reward operational performance for any particular period. As a result, stock-based compensation expense varies for reasons that are generally unrelated to operational decisions and performance in any particular period.

Included in our Adjusted EBITDA shown above for the three months ended March 31, 2020 is an operating loss of $2.9 million related to our U.S. retail brands and the BWR division for which we are currently evaluating our strategic alternatives.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.

Foreign Currency Exchange Risk

We have foreign currency risks related to our revenue and operating expenses denominated in currencies other than the U.S. Dollar, primarily the Japanese Yen, Chinese Yuan, and Euro. We generated approximately 70% and 72% of our revenue from our international business for the three months ended March 31, 2020 and 2019, respectively. Increases in the relative value of the U.S. Dollar to other currencies may negatively affect our revenue, partially offset by a positive impact to operating expenses in other currencies as expressed in U.S. Dollars. We have experienced and will continue to experience fluctuations in our net income (loss) as a result of transaction gains or losses related to revaluing certain current asset and current liability balances, including intercompany receivables and payables, which are denominated in currencies other than the functional currency of the entities in which they are recorded. While we have not engaged in the hedging of our foreign currency transactions to date, we are evaluating the costs and benefits of initiating such a program and we may in the future hedge selected significant transactions denominated in currencies other than the U.S. Dollar.

During the three months ended March 31, 2020 and 2019, after considering the net impact on our net revenue and operating expenses, the effect of a hypothetical 10% change in foreign currency exchange rates applicable to our business would not have had a material impact on our condensed consolidated financial statements.

Interest Rate Sensitivity

As of March 31, 2020, our EWB Credit Facility provided for total borrowings of up to $24.4 million. The interest rate applicable to outstanding borrowings under the EWB Credit Facility is currently 2.0% in excess of the prime rate. We have also entered into an interest rate swap agreement with EWB that provides for a total notional amount of $10.0 million at a fixed interest rate of approximately 5.4% through May 1, 2023, in exchange for a floating rate indexed to the prime rate plus 0.5%. Therefore, as interest rates fluctuate, we will experience changes in interest expense that will impact our financial results. Assuming outstanding borrowings of $24.4 million, as a result of the $10.0 million swap we would only be subject to market risk for borrowings up to $14.4 million. Accordingly, if interest rates were to increase or decrease by one percentage point, the result would be an increase or decrease in annual interest expense of approximately $144,000. Accordingly, increases in interest rates could significantly increase our future interest expense.

As of March 31, 2020, we hold cash, cash equivalents and restricted cash of $46.3 million. The weighted average interest rate on these temporary investments is substantially less than 1.0% and we earned interest income of $0.1 million for the three months ended March 31, 2020. Assuming weighted average investments of $46.3 million, if interest rates were to increase by one percentage point, the result would be an increase in annual interest income of $463,000.

Inflation Risk

We do not believe that inflation currently has a material effect on our business.

ITEM 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31, 2020. Based on such evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2020, the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed in reports the Company files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) accumulated and communicated to management to allow timely decisions regarding required disclosure. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during our first fiscal quarter of 2020 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. Legal Proceedings.

From time to time, we may be a party to litigation and subject to claims incident to the ordinary course of business. Although the results of litigation and claims cannot be predicted with certainty, we currently believe that the final outcome of these ordinary course matters will not have a material adverse effect on our business. Regardless of the outcome, litigation can have an adverse impact on us because of judgment, defense and settlement costs, diversion of management resources and other factors.

ITEM 1A. Risk Factors.

The following additional risk factor relating to COVID-19 should be read in conjunction with the risk factors set forth under “Item 1A. Risk Factors” in our 2019 Form 10-K. The developments described in this additional risk factor have heightened, or in some cases manifested, certain of the risks disclosed in the risk factor section of our 2019 Form 10-K, and such risk factors are further qualified by the information relating to COVID-19 that is described in this Report, including in the additional risk factor below. Except as described herein, there have been no material changes with respect to the risk factors disclosed in our 2019 Form 10-K.

You should carefully consider the risks described below and in our 2019 Form 10-K in addition to the other information set forth in this Report and in our 2019 Form 10-K, including the Management’s Discussion and Analysis of Financial Condition and Results of Operations sections and the consolidated financial statements and related notes. These risks, some of which have occurred and any of which may occur in the future, can have a material adverse effect on our business, financial condition, results of operations or the prices of our publicly traded securities. The risks described below and in our 2019 Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial, may occur or become material in the future and adversely affect our business, reputation, financial condition, results of operations or the prices of our publicly traded securities. Therefore, historical operating results, financial and business performance, events and trends are often not a reliable indicator of future operating results, financial and business performance, events or trends.

The impact of the spread of COVID-19 is creating significant uncertainty for our business, financial condition and results of operations and for the prices of our publicly traded securities.

The extent of the impact of the COVID-19 pandemic on our business and financial results will depend on numerous evolving factors that we are not able to accurately predict and which all will vary by market, including the duration and scope of the pandemic, global economic conditions during and after the pandemic, governmental actions that have been taken, or may be taken in the future, in response to the pandemic, and changes in consumer behavior in response to the pandemic, some of which may be more than just temporary.

Our global operations expose us to risks associated with the COVID-19 pandemic, which has resulted in challenging operating environments. COVID-19 has spread across the globe to almost all of the countries in which our products are made, manufactured, distributed or sold. Authorities in many of these markets have implemented numerous measures to stall the spread of COVID-19, including travel bans and restrictions, quarantines, curfews, shelter in place orders, and business shutdowns. These measures have impacted and will further impact us, our customers, consumers, employees, contract manufacturers, distributors, suppliers and other third parties with whom we do business. Due to these measures, we have experienced, and expect to continue to experience, a significant decrease in revenues associated with restaurants, hotels, airports, and stadiums. In addition, due to the pandemic, some retailers have opted to reduce or stop carrying our products in favor of products from very large, well-established companies with large market share. In foreign jurisdictions, which account for over 70% of our net revenue, our direct-to-consumer selling model typically relies heavily on the use of our IPC sales force in close contact with our customers. The COVID-19 pandemic has required alternative selling approaches such as through social media. We may be unable to avoid future reductions in net revenue using these alternative selling approaches that avoid direct contact with our customers.

There is considerable uncertainty regarding how these measures and future measures in response to the pandemic will impact our business, including whether they will result in further changes in demand for our products, further increases in operating costs (whether as a result of changes to our supply chain or increases in employee costs or otherwise), how they will further impact our supply chain and whether they will result in further reduced availability of air or other commercial transport, port closures or border restrictions, each or all of which can impact our ability to make, manufacture, distribute and sell our products. In addition, measures that impact our ability to access our offices, plants, warehouses, distribution centers or other facilities, or that impact the ability of our customers, consumers, employees, contract manufacturers, distributors, suppliers and other third parties to do the same, may impact the availability of our and their employees, many of whom are not able to perform their job functions remotely. If a significant percentage of our or our business partners’ workforce is unable to work, including because of illness, facility closures, quarantine, curfews, shelter in place orders, travel restrictions or other governmental restrictions, our operations will be negatively impacted. Any sustained interruption in our or our business partners’ operations, distribution network or supply chain or any significant continuous shortage of raw materials or other supplies as a result of these measures, restrictions or disruptions can impair our ability to make, manufacture, distribute or sell our products. Compliance with governmental measures imposed in response to COVID-19 has caused and may continue to cause us to incur additional costs, and any inability to comply with such measures can subject us to restrictions on our business activities, fines, and other penalties, any of which can adversely affect our business. In addition, the increase in certain of our employees working remotely has amplified certain risks to our business, including increased demand on our information technology resources and systems, increased phishing and other cybersecurity attacks as cybercriminals try to exploit the uncertainty surrounding the COVID-19 pandemic, and an increase in the number of points of potential attack, such as laptops and mobile devices (both of which are now being used in increased numbers), to be secured, and any failure to effectively manage these risks, including to timely identify and appropriately respond to any cyberattacks, may adversely affect our business. Further, we experienced, and will continue to experience, costs associated with continuing to pay certain employees who are unable to work due to the travel bans and restrictions, quarantines, curfews, shelter in place orders and, therefore, do not generate any corresponding revenue.

Public concern regarding the risk of contracting COVID-19 impacts demand from consumers, including due to consumers not leaving their homes or otherwise shopping in a different manner than they historically have or because some of our consumers have lower discretionary income due to unemployment or reduced or limited work as a result of measures taken in response to the pandemic. As we sell a wide variety of products worldwide, the profile of the products we sell and the amount of revenue attributable to such products varies by jurisdiction and changes in demand as a result of COVID-19 will vary in scope and timing across these markets. Any reduced demand for our products or change in consumer purchasing and consumption patterns, as well as continued economic uncertainty, can adversely affect our customers’ and business partners’ financial condition, resulting in an inability to pay for our products, reduced or canceled orders of our products, closing of stores, restaurants, airports, hotels, entertainment or sports complexes or other venues where our products are sold, or our business partners’ inability to supply us with ingredients or other items necessary for us to make, manufacture, distribute or sell our products. Such adverse changes in our customers’ or business partners’ financial condition may also result in our recording additional impairment charges for our inability to recover or collect any accounts receivable, owned or leased assets, including certain equipment, or prepaid expenses. In addition, economic uncertainty associated with the COVID-19 pandemic has resulted in volatility in the global capital and credit markets which can impair our ability to access these markets on terms commercially acceptable to us, or at all.

There can be no assurance that we will be successful in our efforts to mitigate the negative impact of COVID-19, and as a result, our business, financial condition and results of operations and the prices of our publicly traded securities may be adversely affected.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.

There were no unregistered sales of our equity securities during the three months ended March 31, 2020.

ITEM 3. Defaults Upon Senior Securities.

None.

ITEM 4. Mine Safety Disclosures.

Not applicable.

ITEM 5. Other Information.

Amended and Restated ATM Agreement

On May 8, 2020, the ATM Agreement was amended and restated to eliminate the previous termination date of April 30, 2020. As amended and restated, the ATM Agreement will terminate (i) when all of the Placement Shares have been sold, (ii) if we elect to terminate upon five business days’ notice to the Agent, (iii) at any time by the Agent, or (iv) by the mutual agreement of the parties.

Employment Agreement with Brent D. Willis

On May 8, 2020, the Company and Mr. Brent Willis entered into an Employment Agreement (the “Willis Agreement”). The Willis Agreement provides that Mr. Willis will be paid an annual base salary of $650,000, and his salary will be reviewed annually each January. Mr. Willis is entitled to earn an annual cash bonus equal to 100% of his then annual base salary at target performance, based upon the achievement of annual performance objectives set by the Compensation Committee of the Company’s Board of Directors at the beginning of each year. Mr. Willis is also eligible to participate in the Company’s equity plans. His employment with the Company is for a term ending on January 1, 2023, and such term renews annually beginning January 1, 2023 and each year thereafter unless the Company or Mr. Willis provides written notice not to renew on or before 180 days before the commencement of a renewal period or until Mr. Willis reaches age 65, unless the parties agree otherwise.

Under the terms of the Willis Agreement, in the event of Mr. Willis’ termination, Mr. Willis will be entitled to receive any accrued and unpaid base salary, the value of any accrued and unused vacation and any unreimbursed business expenses incurred by Mr. Willis prior to the date of termination. If the Company terminates Mr. Willis’ employment without Cause (as defined in the Willis Agreement), Mr. Willis terminates his employment for Good Reason (as defined in the Willis Agreement) or the Company provides notice not to renew the term of his employment, Mr. Willis will be entitled to receive (i) 15 months of his then-current base salary plus his target bonus, with one additional month added for every full year of service up to a maximum of 18 months, (ii) his COBRA health care premiums for up to 15 months with one additional month added for every full year of service up to a maximum of 18 months, and (iii) all unvested equity awards (other than awards based on performance conditions) immediately vest prior to the termination date and any equity awards with performance conditions vest in accordance with the applicable award agreement. Under the Willis Agreement, the Company may not terminate Mr. Willis for Cause without his first receiving written notice of the basis of termination, a 30-day cure period, and an opportunity to be heard by the Company’s Board of Directors.

If Mr. Willis is terminated within two months prior or 24 months following a Change in Control (as defined in the Willis Agreement), Mr. Willis will be entitled to (i) two years of then-current base salary plus his target bonus, (ii) his COBRA health care premiums for 18 months following termination, and (iii) all unvested equity awards (other than awards based on performance conditions) immediately vest prior to the termination date and any equity awards with performance conditions vest in accordance with the applicable award agreement.

The Willis Agreement contains customary confidentiality provisions as well as customary non-competition, non-solicitation, and non-disparagement covenants. In connection with the Willis Agreement, the Company and Mr. Willis also entered into an Indemnification Agreement, pursuant to which the Company agreed to indemnify Mr. Willis and advance expenses under the terms thereof.

The foregoing summary of the Willis Agreement does not purport to be complete and is qualified in its entirety by reference to the Willis Agreement, a copy of which is included as Exhibit 10.4 to this Form 10-Q and is incorporated herein by reference thereto.

Employment Agreement with Gregory A. Gould

On May 8, 2020, the Company and Mr. Gregory A. Gould entered into an Employment Agreement (the “Gould Agreement”). The Gould Agreement provides that Mr. Gould will be paid an annual base salary of $500,000, and his salary will be reviewed annually each January. Mr. Gould is entitled to earn an annual cash bonus equal to 50% of his then annual base salary at target performance, based upon the achievement of annual performance objectives set by the Compensation Committee of the Company’s Board of Directors at the beginning of each year. Mr. Gould is also eligible to participate in the Company’s equity plans. His employment with the Company is for a term ending on January 1, 2023, and such term renews annually beginning January 1, 2023 and each year thereafter unless the Company or Mr. Gould provides written notice not to renew on or before 180 days before the commencement of a renewal period or until Mr. Gould reaches age 65, unless the parties agree otherwise.

Under the terms of the Gould Agreement, in the event of Mr. Gould’s termination, Mr. Gould will be entitled to receive any accrued and unpaid base salary, the value of any accrued and unused vacation and any unreimbursed business expenses incurred by Mr. Gould prior to the date of termination. If the Company terminates Mr. Gould’s employment without Cause (as defined in the Gould Agreement), Mr. Gould terminates his employment for Good Reason (as defined in the Gould Agreement) or the Company provides notice not to renew the term of his employment, Mr. Gould will be entitled to receive (i) one year of his then-current base salary plus his target bonus, (ii) his COBRA health care premiums for one year, and (iii) all unvested equity awards (other than awards based on performance conditions) that are scheduled to vest in the 12 months following the termination date immediately vest prior to the termination date and any equity awards with performance conditions vest in accordance with the applicable award agreement. Under the Gould Agreement, the Company may not terminate Mr. Gould for Cause without his first receiving written notice of the basis of termination, a 30-day cure period, and an opportunity to be heard by the Company’s Board of Directors and Chief Executive Officer.

If Mr. Gould is terminated within two months prior or 24 months following a Change in Control (as defined in the Gould Agreement), Mr. Gould will be entitled to (i) one and one half (1.5) years of then-current base salary plus his target bonus, (ii) his COBRA health care premiums for 18 months following termination, and (iii) all unvested equity awards (other than awards based on performance conditions) immediately vest prior to the termination date and any equity awards with performance conditions vest in accordance with the applicable award agreement.

The Gould Agreement contains customary confidentiality provisions as well as customary non-competition, non-solicitation, and non-disparagement covenants. In connection with the Gould Agreement, the Company and Mr. Gould also entered into an Indemnification Agreement, pursuant to which the Company agreed to indemnify Mr. Gould and advance expenses under the terms thereof.

The foregoing summary of the Gould Agreement does not purport to be complete and is qualified in its entirety by reference to the Gould Agreement, a copy of which is included as Exhibit 10.5 to this Form 10-Q and is incorporated herein by reference thereto.

Employment Agreement with David Vanderveen

On May 8, 2020, the Company and Mr. David Vanderveen entered into an Employment Agreement (the “Vanderveen Agreement”). The Vanderveen Agreement provides that Mr. Vanderveen will be paid an annual base salary of $550,000, and his salary will be reviewed annually each January. Mr. Vanderveen is entitled to earn an annual cash bonus equal to 50% of his then annual base salary at target performance, based upon the achievement of annual performance objectives set by the Compensation Committee of the Company’s Board of Directors at the beginning of each year. Mr. Vanderveen is also eligible to participate in the Company’s equity plans. His employment with the Company is for a term ending on January 1, 2023, and such term renews annually beginning January 1, 2023 and each year thereafter unless the Company or Mr. Vanderveen provides written notice not to renew on or before 180 days before the commencement of a renewal period or until Mr. Vanderveen reaches age 65, unless the parties agree otherwise.

Under the terms of the Vanderveen Agreement, in the event of Mr. Vanderveen’s termination, Mr. Vanderveen will be entitled to receive any accrued and unpaid base salary, the value of any accrued and unused vacation and any unreimbursed business expenses incurred by Mr. Vanderveen prior to the date of termination. If the Company terminates Mr. Vanderveen’s employment without Cause (as defined in the Vanderveen Agreement) at the end of the term (and any renewals thereof) by providing the required notification to Mr. Vanderveen or Mr. Vanderveen terminates his employment for Good Reason (as defined in the Vanderveen Agreement), Mr. Vanderveen will be entitled to receive (i) nine months of his then-current base salary plus his target bonus, with one additional month of base salary added for every full year of service up to a maximum of 12 months, (ii) his COBRA health care premiums for nine months with one additional month added for every full year of service up to 12 months following termination, and (iii) all unvested equity awards (other than awards based on performance conditions) scheduled to vest in the 12 months following the termination date immediately vest prior to the termination date and any equity awards with performance conditions vest in accordance with the applicable award agreement. Under the Vanderveen Agreement, the Company may not terminate Mr. Vanderveen for Cause without his first receiving written notice of the basis of termination, a 30-day cure period, and an opportunity to be heard by the Company’s Board of Directors and Chief Executive Officer.

If Mr. Vanderveen is terminated within two months prior or 24 months following a Change in Control (as defined in the Vanderveen Agreement), Mr. Vanderveen will be entitled to (i) one and one half (1.5) years of then-current base salary plus his target bonus, (ii) his COBRA health care premiums for 18 months following termination, and (iii) all unvested equity awards (other than awards based on performance conditions) immediately vest prior to the termination date and any equity awards with performance conditions vest in accordance with the applicable award agreement.

The Vanderveen Agreement contains customary confidentiality provisions as well as customary non-competition, non-solicitation, and non-disparagement covenants. In connection with the Vanderveen Agreement, the Company and Mr. Vanderveen also entered into an Indemnification Agreement, pursuant to which the Company agreed to indemnify Mr. Vanderveen and advance expenses under the terms thereof.

The foregoing summary of the Vanderveen Agreement does not purport to be complete and is qualified in its entirety by reference to the Vanderveen Agreement, a copy of which is included as Exhibit 10.6 to this Form 10-Q and is incorporated herein by reference thereto.

ITEM 6. Exhibits.

The following exhibits are incorporated by reference or filed as part of this Quarterly Report on Form 10-Q:

Exhibit Number		Description
10.1		Third Amendment and Waiver to Loan and Security Agreement by and between New Age Beverages Corporation and East West Bank, dated as of March 13,2020 (Incorporated by reference to Exhibit 10.26 of our 2019 Form 10-K filed with the SEC on March 16, 2020)
10.2*		Employment Offer Letter dated January 13, 2020 by and between the Company and David Vanderveen
10.3*		Amended and Restated At the Market Offering Agreement between the Company and Roth Capital Partners, LLC, dated as of May 8, 2020
10.4*		Employment Agreement dated May 8, 2020 by and between the Company and Brent D. Willis
10.5*		Employment Agreement dated May 8, 2020 by and between the Company and Gregory A. Gould
10.6*		Employment Agreement dated May 8, 2020 by and between the Company and David Vanderveen
31.1*		Certification of the Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a).
31.2*		Certification of the Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a).
32.1*		Certification of the Chief Executive Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350.
32.2*		Certification of the Chief Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350.
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema
101.CAL		XBRL Taxonomy Extension Calculation Linkbase
101.DEF		XBRL Taxonomy Extension Definition Linkbase
101.LAB		XBRL Taxonomy Extension Label Linkbase
101.PRE		XBRL Taxonomy Extension Presentation Linkbase

* Filed herewith.

SIGNATURES

Pursuant to the requirements of Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	NEW AGE BEVERAGES CORPORATION

Date: May 11, 2020	/s/ Brent Willis
	Name: Brent Willis
	Title: Chief Executive Officer
	(Principal Executive Officer)

Date: May 11, 2020	/s/ Gregory A. Gould
	Name: Gregory A. Gould
	Title: Chief Financial Officer
	(Principal Financial and Accounting Officer)

Exhibit 10.2

DATE:	December 12, 2019

TO:	David Vanderveen

FROM:	Brent Willis	cc: Greg Gould Gary Williams

SUBJECT:	NBEV OFFER LETTER

Dear Dave,

We are very pleased to offer this opportunity to join NewAge as Chief Operating Officer. Congratulations. To achieve our objective of becoming the world’s leading healthy products company we need the best people, with the right focus and culture, and the right skill sets for the challenges we face as an organization. We know that you meet embody all of those characteristics and more, and are highly confident that you will add tremendous value to our leadership team. We are excited about the prospect of you joining the Company, and know you will make a real difference for NewAge, all of our associates, and all of our valued shareholders.

This opportunity comes with significant responsibility and we are counting on your significant contributions and leadership to drive the Company’s performance. We look forward to building the business together with you and sharing in our collective success.

As compensation for your efforts on behalf of the Company your offer includes:

Annual Base Cash Compensation:	$550,000	Paid 2x monthly

Annual Cash Bonus:	2x target = 100% of base salary with an opportunity to earn a total 4x target bonus = 200% of base salary	Paid annually by 3/31

Annual Long Term Incentive:	50% of base salary in stock options & stock	33% vest every year granted each year by 12/31

Sign On Incentive:	$100,000	Paid at commencement

Sign On Incentive:	125,000 stock options 125,000 restricted shares	33% vest every year

Your base salary level will be reviewed every year to ascertain if an adjustment should be made based on performance and based on the financial performance of the Company.

In the event of a change of control or significant change in the Company’s financial circumstances, 100% of your equity compensation will immediately vest. If the Executive resigns from the Company within the first 12 months of employment, all sign-on incentives and unvested equity compensation will be reimbursed within 30 days of his resignation.

A separate target setting worksheet will be provided defining your bonus requirements. As part of your annual bonus, you will have the opportunity to earn up to 4 times your base bonus level (2x target) for achieve agreed upon performance metrics, which will subject to your individual performance, the overall performance of the Company, and Board approval.

You agree to retain all non-public information obtained from New Age as confidential and agree not to release or discuss any of such information unless you have obtained the prior consent of New Age or is otherwise forced, compelled, or required to disclose this information by operation of law or applicable government authority. You also agree to abide by the non-disclosure, non-circumvention, and non-compete clauses signed at the time your hiring.

You shall be entitled to four-weeks of vacation with pay annually. Such vacation shall be taken at a time acceptable to the Corporation with regard to its operations. You will also be entitled to participate in all benefit plans of the Corporation, including the Company’s health care and other plans and Company-issued phone programs in accordance with the terms of those programs.

All expenses are the responsibility of New Age Beverages Corporation. However, any major expenses incurred must be pre-approved, and all expenses must comply with the New Age expense report policy.

This Agreement will commence and upon signing of this document effective January 15, 2020, and is subject to final Board approval. It may be terminated by either party upon 15 days written notice.

The parties agree that any action which is required to be filed to enforce the terms of this Agreement or any issue arising from this contract or the services performed under it shall go to arbitration.

In the event that either party is required to retain the services of an attorney to enforce the provisions of this Agreement, then in such case then each party agrees to pay their own attorney’s fees and all costs and expenses incurred including collection costs.

All actions arising out of the performance of this Agreement shall be governed by the laws of the State of Colorado.

The parties do hereby execute this Agreement at the places and dates set forth below.

Signed for and on behalf of:		Signed for and on behalf of:

New Age Beverages Corporation		David Vanderveen

By:	/s/ Brent David Willis	By:	/s/ David Vanderveen

Print Name:	Brent David Willis	Print Name:	David Vanderveen

Title:	Chief Executive Officer	Title:	Chief Operating Officer

Date:	November 15, 2019	Date:	January 13, 2020

Exhibit 10.3

EXECUTION VERSION

AMENDED AND RESTATED AT THE MARKET OFFERING AGREEMENT

May 8, 2020

Roth Capital Partners, LLC

888 San Clemente Drive

Newport Beach, California 92660

Ladies and Gentlemen:

Reference is made to the At the Market Offering Agreement (the “ATM Agreement”) dated April 30, 2019 between New Age Beverages Corporation, a Washington corporation (the “Company”) and Roth Capital Partners, LLC (the “Manager”). This letter constitutes an agreement (the “Agreement”) between the Company and the Manager to amend and restate the ATM Agreement, effective as of April 30, 2020, as follows:

1. Definitions. The terms that follow, when used in this Agreement and any Terms Agreement, shall have the meanings indicated.

“Accountants” shall have the meaning ascribed to such term in Section 3(o).

“Act” shall mean the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder.

“Action” shall have the meaning ascribed to such term in Section 3(q).

“Affiliate” shall mean any Person that, directly or indirectly, through one or more intermediaries, controls or is controlled by, or is under common control with, a Person, as such terms are used in and construed under Rule 144 of the Act.

“Applicable Time” shall mean, with respect to any Shares, the time of sale of such Shares pursuant to this Agreement or any relevant Terms Agreement.

“Base Prospectus” shall mean the base prospectus contained in the Registration Statement at the Execution Time.

“Board” shall have the meaning ascribed to such term in Section 2(b)(iii).

“Broker Fee” shall have the meaning ascribed to such term in Section 2(b)(v).

“Business Day” shall mean any day other than a Saturday, a Sunday or a legal holiday or a day on which banking institutions or trust companies are authorized or obligated by law to close in New York City.

“Commission” shall mean the United States Securities and Exchange Commission.

“Common Stock” shall have the meaning ascribed to such term in Section 2.

“Common Stock Equivalents” shall have the meaning ascribed to such term in Section 3(g).

“Company Counsel” shall have the meaning ascribed to such term in Section 4(l).

“DTC” shall have the meaning ascribed to such term in Section 2(b)(vii).

“Effective Date” shall mean each date and time that the Registration Statement and any post-effective amendment or amendments thereto became or becomes effective.

“Evaluation Date” shall have the meaning ascribed to such term in Section 3(y).

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder.

“Execution Time” shall mean the date and time that this Agreement is executed and delivered by the parties hereto.

“Filing Date” shall have the meaning ascribed to such term in Section 4(w).

“FINRA” shall have the meaning ascribed to such term in Section 3(e).

“GAAP” shall have the meaning ascribed to such term in Section 3(n).

“Governmental Entity” shall be defined as any arbitrator, court, governmental body, regulatory body, administrative agency or other authority, body or agency (whether foreign or domestic) having jurisdiction over the Company or any of its subsidiaries or any of their respective properties, assets or operations.

“Incorporated Documents” shall mean the documents or portions thereof filed with the Commission on or before the Effective Date that are incorporated by reference in the Registration Statement or the Prospectus and any documents or portions thereof filed with the Commission after the Effective Date that are deemed to be incorporated by reference in the Registration Statement or the Prospectus.

“Indebtedness” shall mean (a) any liabilities for borrowed money or amounts owed in excess of $500,000 (other than accrued liabilities and trade accounts payable incurred in the ordinary course of business), (b) all guaranties, endorsements and other contingent obligations in respect of indebtedness of others, whether or not the same are or should be reflected in the Company’s balance sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business and (c) the present value of any lease payments in excess of $500,000 due under leases required to be capitalized in accordance with GAAP.

“Intellectual Property Rights” shall have the meaning ascribed to such term in Section 3(v).

“Issuer Free Writing Prospectus” shall mean an issuer free writing prospectus, as defined in Rule 433.

“Liens” shall mean a lien, charge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.

“Losses” shall have the meaning ascribed to such term in Section 7(d).

“Material Adverse Effect” shall have the meaning ascribed to such term in Section 3(b).

“Material Permits” shall have the meaning ascribed to such term in Section 3(t).

“Maximum Amount” shall have the meaning ascribed to such term in Section 2.

“Net Proceeds” shall have the meaning ascribed to such term in Section 2(b)(v).

“Permitted Free Writing Prospectus” shall have the meaning ascribed to such term in Section 4(g).

“Person” shall mean an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind, including the Trading Market.

“Placement” shall have the meaning ascribed to such term in Section 2(c).

“Proceeding” shall mean any action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened.

“Prospectus” shall mean the Base Prospectus, as supplemented by the most recently filed Prospectus Supplement (if any).

“Prospectus Supplement” shall mean each prospectus supplement relating to the Shares prepared and filed pursuant to Rule 424(b) from time to time.

“Registration Statement” shall mean the shelf registration statement (File Number 333-230755) on Form S-3, including exhibits and financial statements and any prospectus supplement relating to the Shares that is filed with the Commission pursuant to Rule 424(b) and deemed part of such registration statement pursuant to Rule 430B, as amended on each Effective Date and, in the event any post-effective amendment thereto becomes effective, shall also mean such registration statement as so amended.

“Representation Date” shall have the meaning ascribed to such term in Section 4(k).

“Required Approvals” shall have the meaning ascribed to such term in Section 3(e).

“Rule 158”, “Rule 164”, “Rule 172”, “Rule 173”, “Rule 405”, “Rule 415”, “Rule 424”, “Rule 430B” and “Rule 433” refer to such rules under the Act.

“Sales Notice” shall have the meaning ascribed to such term in Section 2(b)(i).

“SEC Reports” shall have the meaning ascribed to such term in Section 3(m).

“Settlement Date” shall have the meaning ascribed to such term in Section 2(b)(vii).

“Shares” shall have the meaning ascribed to such term in Section 2.

“Subsidiary” shall have the meaning ascribed to such term in Section 3(a).

“Terms Agreement” shall have the meaning ascribed to such term in Section 2(a).

“Time of Delivery” shall have the meaning ascribed to such term in Section 2(c).

“Trading Market” means Nasdaq Capital Market.

2. Sale and Delivery of Shares. The Company proposes to issue and sell through or to the Manager, as sales agent and/or principal, up to $100 million of shares (the “Shares”) of the Company’s common stock, $0.001 par value (“Common Stock”), from time to time during the term of this Agreement and on the terms set forth herein; provided, however, that in no event shall the Company issue or sell through the Manager such number of Shares that (a) exceeds the number or dollar amount of shares of Common Stock registered on the Registration Statement, pursuant to which the offering is being made, (b) exceeds the number of authorized but unissued shares of Common Stock or (c) would cause the Company or the offering of the Shares to not satisfy the eligibility and transaction requirements for use of Form S-3 (including, if applicable, General Instruction I.B.6 of Registration Statement on Form S-3 (the lesser of (a), (b) and (c), the “Maximum Amount”)). Notwithstanding anything to the contrary contained herein, the parties hereto agree that compliance with the limitations set forth in this Section 2 on the number and aggregate sales price of Shares issued and sold under this Agreement shall be the sole responsibility of the Company and that the Manager shall have no obligation in connection with such compliance.

(a) Appointment of Manager as Selling Agent; Term Agreement. For purposes of selling the Shares through the Manager pursuant to this Agreement, the Company hereby appoints the Manager as exclusive agent of the Company and the Manager agrees to use its commercially reasonable efforts to sell the Shares on the terms and subject to the conditions stated herein. The Company agrees that, whenever it determines to sell the Shares directly to the Manager as principal, it will enter into a separate agreement (each, a “Terms Agreement”) in substantially the form of Annex I hereto, relating to such sale in accordance with Section 2 of this Agreement.

(b) Agent Sales. Subject to the terms and conditions and in reliance upon the representations and warranties herein set forth, the Company will issue and agrees to sell Shares, from time to time, through the Manager, acting as sales agent, and the Manager agrees to use its commercially reasonable efforts to sell, as sales agent for the Company, on the following terms:

(i) The Shares are to be sold on a daily basis or otherwise as shall be agreed to by the Company and the Manager on any day that (A) is a trading day for the Trading Market, (B) the Company has instructed the Manager by telephone (confirmed promptly by electronic mail) to make such sales (“Sales Notice”) and (C) the Company has satisfied its obligations under Section 6 of this Agreement. The Company will designate the maximum amount of the Shares to be sold by the Manager daily (subject to the limitations set forth in Section 2(d)) and the minimum price per Share at which such Shares may be sold. Subject to the terms and conditions hereof, the Manager shall use its commercially reasonable efforts to sell on a particular day all of the Shares designated for sale by the Company on such day. The gross sales price of the Shares sold under this Section 2(b) shall be the market price for shares of the Company’s Common Stock sold by the Manager under this Section 2(b) on the Trading Market at the time of sale of such Shares.

(ii) The Company acknowledges and agrees that (A) there can be no assurance that the Manager will be successful in selling the Shares, (B) the Manager will incur no liability or obligation to the Company or any other Person or entity if it does not sell the Shares for any reason other than a failure by the Manager to use its commercially reasonable efforts consistent with its normal trading and sales practices and applicable law and regulations to sell such Shares as required under this Agreement and (C) the Manager shall be under no obligation to purchase Shares on a principal basis pursuant to this Agreement, except as otherwise specifically agreed by the Manager and the Company pursuant to a Terms Agreement.

(iii) The Company shall not authorize the issuance and sale of, and the Manager shall not be obligated to use its commercially reasonable efforts to sell, any Share at a price lower than the minimum price therefor designated, from time to time, by the Company’s Board of Directors (the “Board”), or a duly authorized committee thereof, or such duly authorized officers of the Company, and notified to the Manager in writing. The Company or the Manager may, upon notice to the other party hereto by telephone (confirmed promptly by electronic mail), suspend the offering of the Shares for any reason and at any time; provided, however, that such suspension or termination shall not affect or impair the parties’ respective obligations with respect to the Shares sold hereunder prior to the giving of such notice.

(iv) The Manager may sell Shares by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415 under the Act, including, without limitation, sales made directly on the Trading Market, on any other existing trading market for the Common Stock or to or through a market maker. The Manager may also sell Shares in privately negotiated transactions, provided that the Manager receives the Company’s prior written approval for any sales in privately negotiated transactions and if so provided in the “Plan of Distribution” section of the Prospectus Supplement.

(v) The compensation to the Manager for sales of the Shares under this Section 2(b) shall be a placement fee of 3% of the gross sales price of the Shares sold pursuant to this Section 2(b) up to $30.0 million and 2.5% of the gross sales price of the Shares sold pursuant to this Section 2(b) in excess of $30.0 million (“Broker Fee”). The foregoing rate of compensation shall not apply when the Manager acts as principal, in which case the Company may sell Shares to the Manager as principal at a price agreed upon at the relevant Applicable Time pursuant to a Terms Agreement. The remaining proceeds, after deduction of the Broker Fee and deduction for any transaction fees imposed by any clearing firm, execution broker, or governmental or self-regulatory organization in respect of such sales, shall constitute the net proceeds to the Company for such Shares (the “Net Proceeds”).

(vi) The Manager shall provide written confirmation (which may be by facsimile or electronic mail) to the Company following the close of trading on the Trading Market each day in which the Shares are sold under this Section 2(b) setting forth the number of the Shares sold on such day, the aggregate gross sales proceeds and the Net Proceeds to the Company, and the compensation payable by the Company to the Manager with respect to such sales.

(vii) Upon delivery of a Sales Notice, the Company shall issue and deliver the maximum number of Shares to be sold pursuant to the Sales Notice to the Manager’s account at The Depository Trust Company (“DTC”) via the DWAC system, which Shares shall be deposited by the Manager in the Company’s account with the Manager. The Manager shall have no obligation to attempt to sell the Shares until the Company has delivered the Shares to the Manager. Settlement for sales of the Shares pursuant to this Section 2(b) will occur at 10:00 a.m. (New York City time), or at such time as the Company and the Manager may mutually agree, on the second Business Day following delivery of the Shares issued pursuant to the Sales Notice (each such day, a “Settlement Date”). On each Settlement Date, the Manager shall deliver the Net Proceeds from the sale of the Shares to the Company. If on any Settlement Date not all Shares were sold as issued pursuant to the Sales Notice, then, at the election of and upon notice from the Company, the Shares shall be applied to a future Settlement Date or returned to the Company.

(viii) At each Applicable Time, Settlement Date, Representation Date and Filing Date, the Company shall be deemed to have affirmed each representation and warranty contained in this Agreement as if such representation and warranty were made as of such date, modified as necessary to relate to the Registration Statement and the Prospectus, as amended as of such date. Any obligation of the Manager to use its commercially reasonable efforts to sell the Shares on behalf of the Company shall be subject to the continuing accuracy of the representations and warranties of the Company herein, to the performance by the Company of its obligations hereunder and to the continuing satisfaction of the additional conditions specified in Section 6 of this Agreement.

(c) Term Sales. If the Company wishes to sell the Shares pursuant to this Agreement but other than as set forth in Section 2(b) of this Agreement (each, a “Placement”), it will notify the Manager of the proposed terms of such Placement. If the Manager, acting as principal, wishes to accept such proposed terms (which it may decline to do for any reason in its sole discretion) or, following discussions with the Company, wishes to accept amended terms, the Manager and the Company will enter into a Terms Agreement setting forth the terms of such Placement. The terms set forth in a Terms Agreement will not be binding on the Company or the Manager unless and until the Company and the Manager have each executed such Terms Agreement accepting all of the terms of such Terms Agreement. In the event of a conflict between the terms of this Agreement and the terms of a Terms Agreement, the terms of such Terms Agreement will control. A Terms Agreement may also specify certain provisions relating to the reoffering of such Shares by the Manager. The commitment of the Manager to purchase the Shares pursuant to any Terms Agreement shall be deemed to have been made on the basis of the representations and warranties of the Company herein contained and shall be subject to the terms and conditions herein set forth. Each Terms Agreement shall specify the number of the Shares to be purchased by the Manager pursuant thereto, the price to be paid to the Company for such Shares, any provisions relating to rights of, and default by, underwriters acting together with the Manager in the reoffering of the Shares, and the time and date (each such time and date being referred to herein as a “Time of Delivery”) and place of delivery of and payment for such Shares. Such Terms Agreement shall also specify any requirements for opinions of counsel, accountants’ letters and officers’ certificates pursuant to Section 6 of this Agreement and any other information or documents required by the Manager.

(d) Maximum Number of Shares. Under no circumstances shall the Company cause or request the offer or sale of any Shares if, after giving effect to the sale of such Shares, the aggregate amount of Shares sold pursuant to this Agreement would exceed the lesser of (A) together with all sales of Shares under this Agreement, the Maximum Amount, (B) the amount available for offer and sale under the currently effective Registration Statement and (C) the amount authorized, from time to time, to be issued and sold under this Agreement by the Board, a duly authorized committee thereof or a duly authorized executive committee, and notified to the Manager in writing. Under no circumstances shall the Company cause or request the offer or sale of any Shares pursuant to this Agreement at a price lower than the minimum price authorized, from time to time, by the Board, a duly authorized committee thereof or a duly authorized executive committee, and notified to the Manager in writing. Further, under no circumstances shall the Company cause or permit the aggregate offering amount of Shares sold pursuant to this Agreement to exceed the Maximum Amount.

(e) Regulation M Notice. Unless the exceptive provisions set forth in Rule 101(c)(1) of Regulation M under the Exchange Act are satisfied with respect to the Shares, the Company shall give the Manager at least one Business Day’s prior notice of its intent to sell any Shares in order to allow the Manager time to comply with Regulation M.

3. Representations and Warranties. The Company represents and warrants to, and agrees with, the Manager at the Execution Time and on each such time the following representations and warranties are repeated or deemed to be made pursuant to this Agreement, as set forth below or in the Registration Statement, the Prospectus or the Incorporated Documents.

(a) Subsidiaries. All of the direct subsidiaries (individually, a “Subsidiary”, and collectively, the “Subsidiaries”) of the Company are set forth on Exhibit 21.1 to the Company’s most recent Annual Report on Form 10-K filed with the Commission. Except as otherwise disclosed in the SEC Reports, the Company owns, directly or indirectly, all of the capital stock or other equity interests of each Subsidiary free and clear of any Liens. All of the issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities.

(b) Organization and Qualification. The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization (as applicable), with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company nor any Subsidiary is in violation or default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not reasonably be expected to result in (i) a material adverse effect on the legality, validity or enforceability of this Agreement, (ii) a material adverse change in the results of operations, assets, business, prospects or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, from that set forth in the Registration Statement, the Base Prospectus, any Prospectus Supplement, the Prospectus or the Incorporated Documents or (iii) a material adverse effect on the Company’s ability to perform in any material respect on a timely basis its obligations under this Agreement (any of (i), (ii) or (iii), a “Material Adverse Effect”) and no Proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.

(c) Authorization and Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder. The execution and delivery of this Agreement by the Company and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, the Board or its stockholders in connection herewith other than in connection with the Required Approvals. This Agreement has been duly executed and delivered by the Company and constitutes the valid and binding obligation of the Company enforceable against the Company in accordance with its terms except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

(d) No Conflicts. The execution, delivery and performance of this Agreement by the Company, the issuance and sale of the Shares and the consummation by the Company of the other transactions contemplated herein do not and will not (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter documents, (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected, except in the case of each of clauses (ii) and (iii), such as could not reasonably be expected to result in a Material Adverse Effect.

(e) Filings, Consents and Approvals. The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of this Agreement, other than (i) the filings required by this Agreement, (ii) the filing with the Commission of the Prospectus Supplement, (iii) the filing of application(s) to, and approval by, the Trading Market for the listing of the Shares for trading thereon in the time and manner required thereby and (iv) such filings as are required to be made under applicable state securities laws and the rules and regulations of the Financial Industry Regulatory Authority, Inc. (“FINRA”) (collectively, the “Required Approvals”).

(f) Issuance of Shares. The Shares are duly authorized and, when issued and paid for in accordance with this Agreement, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company. The Company has reserved from its duly authorized capital stock the maximum number of shares of Common Stock issuable pursuant to this Agreement. The issuance by the Company of the Shares has been registered under the Act and all of the Shares are freely transferable and tradable by the purchasers thereof without restriction (other than any restrictions arising solely from an act or omission of such a purchaser). The Shares are being issued pursuant to the Registration Statement and the issuance of the Shares has been registered by the Company under the Act. The “Plan of Distribution” section within the Registration Statement permits the issuance and sale of the Shares as contemplated by this Agreement. Upon receipt of the Shares, the purchasers of such Shares will have good and marketable title to such Shares and the Shares will be freely tradable on the Trading Market.

(g) Capitalization. The capitalization of the Company is as set forth in the Registration Statement, the Base Prospectus, the Prospectus Supplement and the Prospectus. The Company has not issued any capital stock since its most recently filed periodic report under the Exchange Act, other than pursuant to the exercise of employee stock options under the Company’s stock option plans, the issuance of shares of Common Stock to employees pursuant to the Company’s employee stock purchase plan and pursuant to the conversion or exercise of securities exercisable, exchangeable or convertible into Common Stock (“Common Stock Equivalents”) or other than as disclosed in the Registration Statement, the Base Prospectus, the Prospectus Supplement and the Prospectus. No Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by this Agreement. Except (i) pursuant to the Company’s stock option plans and (ii) pursuant to agreements or instruments filed as exhibits to Incorporated Documents, there are no outstanding options, warrants, script rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire, any shares of Common Stock, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock or Common Stock Equivalents. The issuance and sale of the Shares will not obligate the Company to issue shares of Common Stock or other securities to any Person and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under such securities. All of the outstanding shares of capital stock of the Company are validly issued, fully paid and nonassessable, have been issued in compliance with all federal and state securities laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities. There are no stockholders agreements, voting agreements or other similar agreements with respect to the Company’s capital stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s stockholders.

(h) Registration Statement; Prospectus. The Company meets the requirements for use of Form S-3 under the Act and has prepared and filed with the Commission the Registration Statement, including a related Base Prospectus, for registration under the Act of the offering and sale of the Shares. Such Registration Statement is effective and available for the offer and sale of the Shares as of the date hereof. As filed, the Base Prospectus contains all information required by the Act and the rules thereunder, and, except to the extent the Manager shall agree in writing to a modification, shall be in all substantive respects in the form furnished to the Manager prior to the Execution Time or prior to any such time this representation is repeated or deemed to be made. The Registration Statement, at the Execution Time, each such time this representation is repeated or deemed to be made and at all times during which a prospectus is required by the Act to be delivered (whether physically or through compliance with Rule 172, Rule 173 or any similar rule) in connection with any offer or sale of the Shares, meets the requirements set forth in Rule 415(a)(1)(x). The initial Effective Date of the Registration Statement was not earlier than the date three years before the Execution Time. The Registration Statement, when it became effective, and the Prospectus, and any amendment or supplement thereto, on the date of such Prospectus or amendment or supplement, conformed and will conform in all material respects with the requirements of the Act. At each Settlement Date, the Registration Statement and the Prospectus, as of such date, will conform in all material respects with the requirements of the Act. The Registration Statement, when it became or becomes effective, did not and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. The Prospectus and any amendment and supplement thereto, on the date thereof and at each Applicable Time, did not or will not include an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The Prospectus delivered to the Manager for use in connection with the sale of the Shares pursuant to this Agreement will be identical to the versions of the Prospectus created to be transmitted to the Commission for filing via EDGAR, except to the extent permitted by Regulation S-T.

(i) Accuracy of Incorporated Documents. The Incorporated Documents, when they were filed with the Commission, conformed in all material respects to the requirements of the Exchange Act and the rules thereunder, and none of the Incorporated Documents, when they were filed with the Commission, contained any untrue statement of a material fact or omitted to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and any further documents so filed and incorporated by reference in the Registration Statement, the Base Prospectus, the Prospectus Supplement or the Prospectus, when such documents are filed with the Commission, will conform in all material respects to the requirements of the Exchange Act and the rules thereunder, as applicable, and will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

(j) Ineligible Issuer. (i) At the earliest time after the filing of the Registration Statement that the Company or another offering participant made a bona fide offer (within the meaning of Rule 164(h)(2)) of the Shares and (ii) as of the Execution Time and on each such time this representation is repeated or deemed to be made (with such date being used as the determination date for purposes of this clause (ii)), the Company was not and is not an Ineligible Issuer (as defined in Rule 405), without taking account of any determination by the Commission pursuant to Rule 405 that it is not necessary that the Company be considered an Ineligible Issuer (as defined in Rule 405).

(k) Free Writing Prospectus. The Company is eligible to use Issuer Free Writing Prospectuses. Each Issuer Free Writing Prospectus does not include any information the substance of which conflicts with the information contained in the Registration Statement, including any Incorporated Documents and any Prospectus Supplement deemed to be a part thereof that has not been superseded or modified, and each Issuer Free Writing Prospectus does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The foregoing sentence does not apply to statements in, or omissions from, any Issuer Free Writing Prospectus based upon and in conformity with written information furnished to the Company by the Manager specifically for use therein. Any Issuer Free Writing Prospectus that the Company is required to file pursuant to Rule 433(d) has been, or will be, filed with the Commission in accordance with the requirements of the Act and the rules thereunder. Each Issuer Free Writing Prospectus that the Company has filed, or is required to file, pursuant to Rule 433(d) or that was prepared by or behalf of, or used by, the Company complies or will comply in all material respects with the requirements of the Act and the rules thereunder. The Company will not, without the prior consent of the Manager, prepare, use or refer to any Issuer Free Writing Prospectuses.

(l) Proceedings Related to Registration Statement. The Registration Statement is not the subject of a pending proceeding or examination under Section 8(d) or Section 8(e) of the Act and the Company is not the subject of a pending proceeding under Section 8A of the Act in connection with the offering of the Shares. The Company has not received any notice that the Commission has issued or intends to issue a stop order with respect to the Registration Statement or that the Commission otherwise has suspended or withdrawn the effectiveness of the Registration Statement, either temporarily or permanently, or intends or has threatened in writing to do so.

(m) SEC Reports. The Company has complied in all material respects with requirements to file all reports, schedules, forms, statements and other documents required to be filed by it under the Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or such shorter period as the Company was required by law to file such material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “SEC Reports”) on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension.

(n) Financial Statements. The consolidated financial statements incorporated by reference in the Registration Statement, the Prospectus or the Incorporated Documents and any amendments thereof or supplements thereto comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing or as amended or corrected in a subsequent filing. Such financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) applied on a consistent basis during the periods involved, except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company and its consolidated subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.

(o) Accountants. The Company’s accountants are Accell Audit & Compliance, PA and Deloitte & Touche LLP with respect to Morinda Holdings, Inc. (the “Accountants”). To the knowledge of the Company, such Accountants, are a registered public accounting firm as required by the Act.

(p) Material Adverse Events. Since the date of the latest audited financial statements included within the SEC Reports, except as specifically disclosed in a subsequent SEC Report filed prior to the date hereof, (i) there has been no event, occurrence or development that has had, or that could reasonably be expected to result in, a Material Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP or required to be disclosed in filings made with the Commission, (iii) the Company has not altered its method of accounting, (iv) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock and (v) the Company has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing Company stock option plans. The Company does not have pending before the Commission any request for confidential treatment of information. No event, liability or development has occurred or exists with respect to the Company or the Subsidiaries or their respective business, properties, operations or financial condition, that would be required to be disclosed by the Company under applicable securities laws at the time this representation is deemed made, that has not been publicly disclosed at least one trading day prior to the date that this representation is deemed made.

(q) Litigation. There is no action, suit, inquiry, notice of violation, Proceeding or investigation pending, or, to the knowledge of the Company, threatened against or affecting, the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “Action”) which (i) adversely affects or challenges the legality, validity or enforceability of this Agreement or the Shares or (ii) could, if there were an unfavorable decision, reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any Subsidiary, nor, to the knowledge of the Company, any director or officer thereof, is or has been the subject of any Action involving a claim of violation of, or liability under, federal or state securities laws or a claim of breach of fiduciary duty. There has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the Commission involving the Company or any current or former director or officer of the Company. The Commission has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under the Exchange Act or the Act.

(r) Labor Relations. No material labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company which could reasonably be expected to result in a Material Adverse Effect. None of the Company’s or the Subsidiaries’ employees is a member of a union that relates to such employee’s relationship with the Company, and neither the Company nor any of the Subsidiaries is a party to a collective bargaining agreement, and the Company and the Subsidiaries believe that their relationships with their employees are good. No executive officer, to the knowledge of the Company, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive covenant, and the continued employment of each such executive officer does not subject the Company or any of the Subsidiaries to any liability with respect to any of the foregoing matters. The Company and the Subsidiaries are in compliance with all federal, state, local and foreign laws and regulations relating to employment and employment practices, terms and conditions of employment and wages and hours, except where the failure to be in compliance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

(s) No Existing Defaults. Neither the Company nor any Subsidiary (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of any order of any court, arbitrator or governmental body or (iii) is or has been in violation of any statute, rule or regulation of any governmental authority, including, without limitation, all federal, state, local and foreign laws and regulations relating to taxes, environmental protection, occupational health and safety, product quality and safety and employment and labor matters, except in each case as could not reasonably be expected to result in a Material Adverse Effect.

(t) Regulatory Permits. The Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses as described in the Registration Statement, the Base Prospectus, any Prospectus Supplement or the Prospectus, except where the failure to possess such permits could not reasonably be expected to result in a Material Adverse Effect (“Material Permits”), and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any Material Permit. For clarity, the Company has not received the approval of any regulatory agency to market any of its product candidates.

(u) Title to Assets. The Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by them that is material to the business of the Company and the Subsidiaries and good and marketable title in all personal property owned by them that is material to the business of the Company and the Subsidiaries, in each case free and clear of all Liens, except for Liens disclosed in the SEC Reports and as do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company and the Subsidiaries and Liens for the payment of federal, state or other taxes, the payment of which is neither delinquent nor subject to penalties. Any real property and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases of which the Company and the Subsidiaries are in compliance, except where such non-compliance would not reasonably be expected to have a Material Adverse Effect.

(v) Intellectual Property. The Company and the Subsidiaries have, or have rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other similar intellectual property rights necessary or material for use in connection with their respective businesses as described in the Registration Statement, the Base Prospectus, any Prospectus Supplement or the Prospectus and which the failure to so have could reasonably be expected to have a Material Adverse Effect (collectively, the “Intellectual Property Rights”). Neither the Company nor any Subsidiary has received, since the date of the latest audited financial statements included within the SEC Reports, a notice (written or otherwise) that the Intellectual Property Rights violate or infringe upon the rights of any Person, except as would not have a Material Adverse Effect. To the knowledge of the Company, all such Intellectual Property Rights are enforceable (other than patent and trademark applications) and there is no existing infringement by another Person of any of the Intellectual Property Rights. The Company and the Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all of their Intellectual Property Rights, except where failure to do so could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

(w) Insurance. The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary for companies of similar size as the Company in the businesses in which the Company and the Subsidiaries are engaged, including, but not limited to, directors and officers insurance coverage. To the knowledge of the Company, such insurance contracts and policies are accurate and complete. Neither the Company nor any Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business without a significant increase in cost.

(x) Affiliate Transactions. Except as set forth in the Registration Statement, the Base Prospectus, any Prospectus Supplement or the Prospectus, none of the officers or directors of the Company and, to the knowledge of the Company, none of the employees of the Company is presently a party to any transaction with the Company or any Subsidiary (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner, in each case in excess of $120,000, other than for (i) payment of salary or consulting fees for services rendered, (ii) reimbursement for expenses incurred on behalf of the Company and (iii) other employee benefits, including stock option agreements under any stock option plan of the Company.

(y) Sarbanes Oxley Compliance. Except as disclosed in the Registration Statement, the Base Prospectus, any Prospectus Supplement or the Prospectus, the Company is in material compliance with all provisions of the Sarbanes-Oxley Act of 2002 which are applicable to it as of the Effective Date. The Company and the Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company has established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed such disclosure controls and procedures to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms. The Company’s certifying officers have evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by the Company’s most recently filed periodic report under the Exchange Act (such date, the “Evaluation Date”). The Company presented in its most recently filed periodic report under the Exchange Act the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date. Since the Evaluation Date, there has been no change in the Company’s internal control over financial reporting (as such term is defined in the Exchange Act) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

(z) Finder’s Fees. Other than payments to be made to the Manager, no brokerage or finder’s fees or commissions are or will be payable by the Company to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Agreement. The Manager shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated by this Agreement.

(aa) No Other Sales Agency Agreement. The Company has not entered into any other sales agency agreements or other similar arrangements with any agent or any other representative in respect of at the market offerings of the Shares.

(bb) Regulation M Compliance. The Company has not, and to its knowledge no one acting on its behalf has, (i) taken, directly or indirectly, any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of any of the Shares, (ii) sold, bid for, purchased, or paid any compensation for soliciting purchases of, any of the Shares or (iii) paid or agreed to pay to any Person any compensation for soliciting another to purchase any other securities of the Company, other than, in the case of clauses (ii) and (iii), compensation paid to the Manager in connection with the placement of the Shares.

(cc) Listing and Maintenance Requirements. The issuance and sale of the Shares as contemplated in this Agreement does not contravene the rules and regulations of the Trading Market. The Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and the Company has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act, nor has the Company received any notification that the Commission is contemplating terminating such registration. Except as disclosed in the Registration Statement, the Base Prospectus, any Prospectus Supplement or the Prospectus, the Company has not, in the 12 months preceding the date hereof, received notice from any Trading Market on which the Common Stock is or has been listed or quoted to the effect that the Company is not in compliance with the listing or maintenance requirements of such Trading Market.

(dd) Application of Takeover Protections. Except as set forth in the Registration Statement, the Base Prospectus, any Prospectus Supplement or the Prospectus, the Company and its Board have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Company’s certificate of incorporation (or similar charter documents) or the laws of its state of incorporation that is or could become applicable to the purchasers of the Shares.

(ee) Investment Company. The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Shares, will not be or be an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended. The Company currently intends to conduct its business in a manner so that it will not become subject to the Investment Company Act of 1940, as amended.

(ff) Solvency. Based on the financial condition of the Company as of the Effective Date, (i) the Company’s fair saleable value of its assets exceeds the amount that will be required to be paid on or in respect of the Company’s existing debts and other liabilities (including known contingent liabilities) as they mature, (ii) the Company’s assets do not constitute unreasonably small capital to carry on its business as now conducted and as proposed to be conducted, including its capital needs taking into account the particular capital requirements of the business conducted by the Company, and projected capital requirements and capital availability thereof and (iii) the current cash flow of the Company, together with the proceeds the Company would receive were it to liquidate all of its assets, after taking into account all anticipated uses of the cash, would be sufficient to pay all amounts on or in respect of its debt when such amounts are required to be paid. Within one year of the Effective Date, the Company does not intend to incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on or in respect of its debt). The SEC Reports set forth, as of the dates thereof, all outstanding secured and unsecured Indebtedness of the Company or any Subsidiary, or for which the Company or any Subsidiary has commitments. Neither the Company nor any Subsidiary is in default with respect to any Indebtedness.

(gg) Tax Status. Except for matters that would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect, the Company and each Subsidiary has (i) made or filed all necessary foreign and United States federal, state and local income and franchise tax returns and have paid or accrued all taxes shown as due thereon, and the Company has no knowledge of a tax deficiency which has been asserted or threatened against the Company or, reports and declarations required by any jurisdiction to which it is subject, (ii) paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations and (iii) set aside on its books provision reasonably adequate for the payment of all material taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company or of any Subsidiary know of no basis for any such claim.

(hh) Foreign Corrupt Practices. Neither the Company, nor to the knowledge of the Company, any agent or other Person acting on behalf of the Company, has (i) directly or indirectly used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by the Company (or made by any Person acting on its behalf of which the Company is aware) which is in violation of law or (iv) violated in any material respect any provision of the Foreign Corrupt Practices Act of 1977, as amended.

(ii) FINRA Member Shareholders. There are no affiliations with any FINRA member firm among the Company’s officers, directors or, to the knowledge of the Company, any five percent (5%) or greater stockholder of the Company.

(jj) Food Law and Food Regulatory Matters.

(i) The Company has not received written notice that it is not in compliance with all Food Laws (as defined below) applicable to the Company and the Company’s operations (including those of the Company’s current facilities where products are manufactured, processed, packaged, or stored) are currently in compliance with all Food Laws currently applicable to the Company. The Company has not received written notice that any of the Company’s current facilities used by the Company to process, hold, distribute, or otherwise handle food, and all of the Company’s current facilities that produce, process, pack, store or otherwise handle food products manufactured, imported or distributed by the Company were not, at the time food was held or business was transacted, properly registered with, as applicable, the U.S. Food and Drug Administration (“FDA”), and any Governmental Entities with jurisdiction over the Company or its assets.

(ii) The Company has not received written notice that its suppliers are not in compliance with any Food Laws. As used herein, “Food Laws” means (i) the United States, the Federal Food, Drug, and Cosmetic Act, the Food Safety Modernization Act, the Food Allergen Labeling and Consumer Protection Act of 2004, the National Labeling and Education Act of 1990, the Perishable Agricultural Commodities Act, the Federal Meat Inspection Act, the Poultry Product Inspection Act, the Federal Trade Commission Act and the Lanham Act, California’s Proposition 65, and all applicable regulations promulgated thereunder; or (ii) other applicable international, national, federal, state, provincial, county, city, municipal or local law (including common law), statute, code, code ordinance, rule, regulation or treaty as in effect as of the date hereof.

(iii) No investigation or review is pending or threatened in writing by any Governmental Entity with respect to any material violation by the Company of any material Food Law. The Company has not received any written notice from the FDA, United States Department of Agriculture (“USDA”), or any comparable Governmental Entity with jurisdiction over the Company or its assets (including, without limitation, the Food and Drug Branch of the California Department of Public Health) that alleges that the Company, Company products, ingredients in the Company products, labeling of Company products or those of the Company’s current facilities at which the Company products are manufactured, held, stored, distributed, marketed, or sold are not in compliance in any material respect with Food Laws. The Company is not subject to any liability arising under an administrative or regulatory action, or commitment made to or with the FDA, or any comparable Governmental Entity with jurisdiction over the Company or its assets (including, without limitation, the Food and Drug Branch of the California Department of Public Health). The Company has responded to all observations made by the FDA, or any comparable Governmental Entity with jurisdiction over the Company or its assets during inspections by such Governmental Entities and has not received any Form 483, or “warning letters.” No inspection by the FDA, the Canadian Food Inspection Agency, Food Standards Australia New Zealand or any comparable Governmental Entity with jurisdiction over the Company or its assets (including the Food and Drug Branch of the California Department of Public Health) with respect to the Company has been classified as “Voluntary Action Indicated” (or “VAI” or similar classification) or “Official Action Indicated” (or “OAI” or similar classification), or resulted in enforcement actions by any international Government Entity.

(iv) No Company product has been seized, withdrawn, recalled, detained, or subject to a suspension of manufacturing, and there are no facts or circumstances reasonably likely to cause the FDA, or any comparable federal, state, provincial, municipal or local Governmental Entity) or the Federal Trade Commission, or any comparable Governmental Entity. There are no legal proceedings in the United States, Canada or Australia seeking the withdrawal, recall, suspension, import detention, or seizure of any Company product are pending or threatened against the Company.

(kk) Food and Product Safety.

(i) All Company products and Company’s current facilities currently comply and for the past five years have complied, in each case, in all material respects, with all current “good manufacturing practices,” as defined by the FDA, and applicable Food Laws. The Company has prepared and maintains in the ordinary course, hazard analysis and risk-based preventive control programs consistent with applicable Food Laws for the control of biological, chemical and physical hazards at the Company’s current facilities (as well as foreign supplier verification programs) to verify that food products, raw material and ingredients, procurements, handling, manufacturing and distribution of finished products meet United States, food safety, formulation, and labeling standards (in each case, to the extent that such standards are applicable in the jurisdiction in question) in all material respects, or other applicable international, national, federal, state, provincial, county, city, municipal or local law (including common law), statute, code, code ordinance, rule, regulation or treaty as in effect as of the date hereof.

(ii) To the extent the Company is subject to the Food Safety Modernization Act (“FSMA”), the Company currently complies in all material respects with such requirements. To the extent that the transportation of any Food Products is subject to FDA’s Sanitary Transportation of Human and Animal Food regulations, or similar foreign applicable laws, such transportation is currently being performed and has been performed in compliance with such requirements in all material respects.

(iii) All promotional and advertising materials used or produced by the Company comply, in all material respects, with all Food Laws.

(ll) Product Quality and Warranties. All Company products are not, as of the time and place that customer takes physical possession thereof:

(i) adulterated or misbranded (as defined in the Federal Food, Drug, and Cosmetic Act, the Federal Meat Inspection Act, or the Poultry Products Inspection Act or other applicable international, national, federal, state, provincial, county, city, municipal or local law (including common law), statute, code, code ordinance, rule, regulation or treaty as in effect as of the date hereof;

(ii) an article which may not, under Section 404, 505 or 512 of the Federal Food, Drug, and Cosmetic Act (and all acts and/or rules and regulations amending or supplementing the same, including applicable foreign equivalent laws), be introduced into interstate commerce or that may not be conveyed from one Canadian province to another; or

(iii) spoiled, stale, or aged beyond any shelf life applicable to such goods.

(mm) Money Laundering Laws. The operations of the Company and its subsidiaries are and have been conducted at all times in compliance in all material respects with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money laundering statutes of all jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any Governmental Entity (collectively, the “Money Laundering Laws”); and no action, suit or proceeding by or before any Governmental Entity involving the Company or any of its subsidiaries with respect to the Money Laundering Laws is pending or, to the knowledge of the Company, threatened.

(nn) OFAC. Neither the Company nor any of its subsidiaries nor any director or officer of the Company or any subsidiary, nor, to the knowledge of the Company, any employee, representative, agent or affiliate of the Company or any of its subsidiaries or any other person acting on behalf of the Company or any of its subsidiaries is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”); and the Company will not directly or indirectly use the proceeds of the offering of the Shares contemplated hereby, or lend, contribute or otherwise make available such proceeds to any person or entity, for the purpose of financing the activities of any person currently subject to any U.S. sanctions administered by OFAC, where such activities would be prohibited as to a U.S. Person (which is defined to include a U.S. citizen or permanent resident, entity established in the United States (including its foreign branches) and any entity in the United States).

(oo) Data Privacy. In connection with its collection, storage, transfer and/or use of any personally identifiable information from any individuals, including, without limitation, any customers, prospective customers, employees and/or other third parties (collectively “Private Information”), the Company is and has been for the past five years in compliance in all material respects with all applicable laws in all relevant jurisdictions, the Company’s applicable external privacy policies and the applicable requirements of any contract to which the Company is a party. The Company takes and has taken reasonable steps to protect Private Information against loss and against unauthorized access, use, modification, disclosure or other misuse. In the past three years, there has been no material unauthorized access, modification, disclosure or other misuse of any Private Information. The Company is not subject to any complaints, lawsuits, proceedings, audits, investigations or claims by any private party, the Federal Trade Commission, any state attorney general or similar state official, or any other governmental authority, foreign or domestic, regarding its collection, use, storage, disclosure, transfer or maintenance of any Private Information and there are no such complaints, lawsuits, proceedings, audits, investigations or claims threatened.

4. Agreements. The Company agrees with the Manager that:

(a) Right to Review Amendments and Supplements to Registration Statement and Prospectus. During any period when the delivery of a prospectus relating to the Shares is required (including in circumstances where such requirement may be satisfied pursuant to Rule 172, Rule 173 or any similar rule) to be delivered under the Act in connection with the offering or the sale of Shares, the Company will not file any amendment to the Registration Statement or supplement (including any Prospectus Supplement) to the Base Prospectus unless the Company has furnished to the Manager a copy for its review prior to filing and will not file any such proposed amendment or supplement to which the Manager reasonably objects. The Company has properly completed the Prospectus, in a form approved by the Manager, and filed such Prospectus, as amended at the Execution Time, with the Commission pursuant to the applicable paragraph of Rule 424(b) by the Execution Time and will cause any supplement to the Prospectus to be properly completed, in a form approved by the Manager, and will file such supplement with the Commission pursuant to the applicable paragraph of Rule 424(b) within the time period prescribed thereby and will provide evidence reasonably satisfactory to the Manager of such timely filing. The Company will promptly advise the Manager (i) when the Prospectus and any supplement thereto shall have been filed (if required) with the Commission pursuant to Rule 424(b), (ii) when, during any period when the delivery of a prospectus (whether physically or through compliance with Rule 172, Rule 173 or any similar rule) is required under the Act in connection with the offering or sale of the Shares, any amendment to the Registration Statement shall have been filed or become effective (other than any annual report of the Company filed pursuant to Section 13(a) or 15(d) of the Exchange Act), (iii) of any request by the Commission or its staff for any amendment of the Registration Statement, or any Rule 462(b) Registration Statement, or for any supplement to the Prospectus or for any additional information, (iv) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or of any notice objecting to its use, or the institution or threatening of any proceeding for that purpose, and (v) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Shares for sale in any jurisdiction or the institution or threatening of any proceeding for such purpose. The Company will use its best efforts to prevent the issuance of any such stop order or the occurrence of any such suspension or objection to the use of the Registration Statement and, upon such issuance, occurrence or notice of objection, to obtain as soon as possible the withdrawal of such stop order or relief from such occurrence or objection, including, if necessary, by filing an amendment to the Registration Statement or a new registration statement and using its best efforts to have such amendment or new registration statement declared effective as soon as practicable.

(b) Subsequent Events. If, at any time on or after an Applicable Time but prior to the related Settlement Date, any event occurs as a result of which the Registration Statement or the Prospectus would include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made or the circumstances then prevailing, not misleading, the Company will (i) notify promptly the Manager so that any use of the Registration Statement or the Prospectus may cease until such are amended or supplemented, (ii) amend or supplement the Registration Statement or the Prospectus to correct such statement or omission, and (iii) supply any amendment or supplement to the Manager in such quantities as the Manager may reasonably request.

(c) Notification of Subsequent Filings. During any period when the delivery of a prospectus relating to the Shares is required (including in circumstances where such requirement may be satisfied pursuant to Rule 172, Rule 173 or any similar rule) to be delivered under the Act, any event occurs as a result of which the Prospectus as then supplemented would include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, or if it shall be necessary to amend the Registration Statement, file a new registration statement or supplement the Prospectus to comply with the Act or the Exchange Act or the respective rules thereunder, including in connection with use or delivery of the Prospectus, the Company promptly will (i) notify the Manager of any such event, (ii) subject to Section 4(a), prepare and file with the Commission an amendment or supplement or new registration statement which will correct such statement or omission or effect such compliance, (iii) use its best efforts to have any amendment to the Registration Statement or new registration statement declared effective as soon as practicable in order to avoid any disruption in use of the Prospectus and (iv) supply any supplemented Prospectus to the Manager in such quantities as the Manager may reasonably request.

(d) Earnings Statements. As soon as practicable, the Company will make generally available to its security holders and to the Manager an earnings statement or statements of the Company and the Subsidiaries which will satisfy the provisions of Section 11(a) of the Act and Rule 158.

(e) Delivery of Registration Statement. Upon the request of the Manager, the Company will furnish to the Manager and counsel for the Manager, without charge, signed copies of the Registration Statement (including exhibits thereto) and, so long as delivery of a prospectus by the Manager or dealer may be required by the Act (including in circumstances where such requirement may be satisfied pursuant to Rule 172, Rule 173 or any similar rule), as many copies of the Prospectus and each Issuer Free Writing Prospectus and any supplement thereto as the Manager may reasonably request. The Company will pay the expenses of printing or other production of all documents relating to the offering.

(f) Qualification of Shares. The Company will arrange, if necessary, for the qualification of the Shares for sale under the laws of such jurisdictions as the Manager may designate and will maintain such qualifications in effect so long as required for the distribution of the Shares; provided that in no event shall the Company be obligated to qualify to do business in any jurisdiction where it is not now so qualified or to take any action that would subject it to service of process in suits, other than those arising out of the offering or sale of the Shares, in any jurisdiction where it is not now so subject.

(g) Free Writing Prospectus. The Company agrees that, unless it has or shall have obtained the prior written consent of the Manager, and the Manager agrees with the Company that, unless it has or shall have obtained, as the case may be, the prior written consent of the Company, it has not made and will not make any offer relating to the Shares that would constitute an Issuer Free Writing Prospectus or that would otherwise constitute a “free writing prospectus” (as defined in Rule 405) required to be filed by the Company with the Commission or retained by the Company under Rule 433. Any such free writing prospectus consented to by the Manager or the Company is hereinafter referred to as a “Permitted Free Writing Prospectus.” The Company agrees that (i) it has treated and will treat, as the case may be, each Permitted Free Writing Prospectus as an Issuer Free Writing Prospectus and (ii) it has complied and will comply, as the case may be, with the requirements of Rule 164 and Rule 433 applicable to any Permitted Free Writing Prospectus, including in respect of timely filing with the Commission, legending and record keeping.

(h) Subsequent Equity Issuances. Neither the Company nor any Subsidiary will offer, sell, issue, contract to sell, contract to issue or otherwise dispose of, directly or indirectly, any other shares of Common Stock or any Common Stock Equivalents (other than the Shares) during the term of this Agreement without the prior written consent of the Manager (i) without giving the Manager at least three Business Days’ prior written notice specifying the nature of the proposed transaction and the date of such proposed transaction and (ii) unless the Manager suspends acting under this Agreement for such period of time requested by the Company or as deemed appropriate by the Manager in light of the proposed transaction; provided, however, that the Company may issue and sell Common Stock pursuant to any employee stock option plan, stock ownership plan or dividend reinvestment plan of the Company, upon the conversion or exercise of Common Stock Equivalents outstanding at the Execution Time or pursuant to any other agreement in effect at the Execution Time or as compensation for services rendered and, with as much notice as reasonably practicable, the Company may issue Common Stock issuable upon the conversion or exercise of Common Stock Equivalents outstanding at the Execution Time.

(i) Market Manipulation. Until the termination of this Agreement, the Company will not take, directly or indirectly, any action designed to or that would constitute or that might reasonably be expected to cause or result in, under the Exchange Act or otherwise, stabilization or manipulation in violation of the Act, Exchange Act or the rules and regulations thereunder of the price of any security of the Company to facilitate the sale or resale of the Shares or otherwise violate any provision of Regulation M under the Exchange Act.

(j) Notification of Incorrect Certificate. The Company will, at any time during the term of this Agreement, as supplemented from time to time, advise the Manager immediately after it shall have received notice or obtained knowledge thereof, of any information or fact that would alter or affect any opinion, certificate, letter and other document provided to the Manager pursuant to Section 6 herein.

(k) Certification of Accuracy of Disclosure. Upon commencement of the offering of the Shares under this Agreement (and upon the recommencement of the offering of the Shares under this Agreement following the termination of a suspension of sales hereunder lasting more than 30 trading days), and each time that (i) the Registration Statement or the Prospectus shall be amended or supplemented, other than by means of Incorporated Documents, (ii) the Company files its Annual Report on Form 10-K under the Exchange Act, (iii) the Company files its Quarterly Reports on Form 10-Q under the Exchange Act, (iv) the Company files a Current Report on Form 8-K containing amended financial information (other than information that is furnished and not filed), if the Manager reasonably determines that the information in such Form 8-K is material or (v) the Shares are delivered to the Manager as principal at the Time of Delivery pursuant to a Terms Agreement (such commencement or recommencement date and each such date referred to in clauses (i), (ii), (iii), (iv) and (v) above, a “Representation Date”), if requested by the Manager, the Company shall furnish or cause to be furnished to the Manager forthwith a certificate dated and delivered on the Representation Date, in form reasonably satisfactory to the Manager, to the effect that the statements contained in the certificate referred to in Section 6 of this Agreement which were last furnished to the Manager are true and correct at the Representation Date, as though made at and as of such date (except that such statements shall be deemed to relate to the Registration Statement and the Prospectus, as amended and supplemented to such date) or, in lieu of such certificate, a certificate of the same tenor as the certificate referred to in said Section 6, modified as necessary to relate to the Registration Statement and the Prospectus as amended and supplemented to the date of delivery of such certificate.

(l) Bring Down Opinions; Negative Assurance. At each Representation Date, unless waived by the Manager, the Company shall furnish or cause to be furnished forthwith to the Manager and to counsel to the Manager a written opinion of counsel to the Company (“Company Counsel”) and the Company’s local counsel, if different than the Company Counsel, addressed to the Manager and dated and delivered on such Representation Date, in form and substance reasonably satisfactory to the Manager, including a negative assurance representation.

(m) Auditor Bring Down “Comfort” Letter. At each Representation Date, unless waived by the Manager, the Company shall cause (i) the Accountants, or other independent accountants satisfactory to the Manager, forthwith to furnish the Manager a letter and (ii) the Chief Financial Officer of the Company forthwith to furnish the Manager a certificate, in each case dated on such Representation Date, in form satisfactory to the Manager, of the same tenor as the letters and certificate referred to in Section 6 of this Agreement but modified to relate to the Registration Statement and the Prospectus, as amended and supplemented to the date of such letters and certificate; provided, however, that the Company will not be required to cause the Accountants to furnish such letters to the Manager in connection with the filing of a Current Report on Form 8-K unless (A) such Current Report on Form 8-K is filed at any time during which a prospectus relating to the Shares is required to be delivered under the Act and (B) the Manager has requested such letter based upon the event or events reported in such Current Report on Form 8-K.

(n) Due Diligence Session. Upon commencement of the offering of the Shares under this Agreement (and upon the recommencement of the offering of the Shares under this Agreement following the termination of a suspension of sales hereunder lasting more than 30 trading days), and at each Representation Date, the Company will conduct a due diligence session, in form and substance reasonably satisfactory to the Manager, which shall include representatives of management and Accountants. The Company shall cooperate timely with any reasonable due diligence request from, or review conducted by, the Manager or its agents, from time to time, in connection with the transactions contemplated by this Agreement, including, without limitation, providing information and available documents and access to appropriate corporate officers and the Company’s agents during regular business hours and at the Company’s principal offices, and timely furnishing or causing to be furnished such certificates, letters and opinions from the Company, its officers and its agents as the Manager may reasonably request. The Company shall reimburse the Manager for Manager’s counsel’s time in each such due diligence update session, up to a maximum of $7,500 per update, plus any incidental expense incurred by the Manager in connection therewith.

(o) Acknowledgment of Trading. The Company consents to the Manager trading in the Common Stock for the Manager’s own account and for the account of its clients at the same time as sales of the Shares occur pursuant to this Agreement or pursuant to a Terms Agreement.

(p) Disclosure of Shares Sold. The Company will disclose in its Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, as applicable, the number of Shares sold through the Manager under this Agreement, the Net Proceeds to the Company and the compensation paid by the Company with respect to sales of Shares pursuant to this Agreement during the relevant quarter, and, if required by any subsequent change in Commission policy or request, more frequently by means of a Current Report on Form 8-K or a further Prospectus Supplement.

(q) Rescission Right. If to the knowledge of the Company, the conditions set forth in Section 6 of this Agreement shall not have been satisfied as of the applicable Settlement Date, the Company will offer to any Person who has agreed to purchase Shares from the Company as the result of an offer to purchase solicited by the Manager the right to refuse to purchase and pay for such Shares.

(r) Bring Down of Representations and Warranties. Each acceptance by the Company of an offer to purchase the Shares hereunder, and each execution and delivery by the Company of a Terms Agreement, shall be deemed to be an affirmation to the Manager that the representations and warranties of the Company contained in, or made pursuant to, this Agreement are true and correct as of the date of such acceptance or of such Terms Agreement as though made at and as of such date, and an undertaking that such representations and warranties will be true and correct as of the Settlement Date for the Shares relating to such acceptance or as of the Time of Delivery relating to such sale, as the case may be, as though made at and as of such date (except that such representations and warranties shall be deemed to relate to the Registration Statement and the Prospectus as amended and supplemented relating to such Shares).

(s) Reservation of Shares. The Company shall ensure that there are at all times sufficient shares of Common Stock to provide for the issuance, free of any preemptive rights, out of its authorized but unissued shares of Common Stock or shares of Common Stock held in treasury, of the maximum aggregate number of Shares authorized for issuance by the Board pursuant to the terms of this Agreement. The Company will use its commercially reasonable efforts to cause the Shares to be listed for trading on the Trading Market and to maintain such listing.

(t) Obligation under Exchange Act. During any period when the delivery of a prospectus relating to the Shares is required (including in circumstances where such requirement may be satisfied pursuant to Rule 172, Rule 173 or any similar rule) to be delivered under the Act, the Company will file all documents required to be filed with the Commission pursuant to the Exchange Act within the time periods required by the Exchange Act and the regulations thereunder.

(u) DTC Facility. The Company shall cooperate with the Manager and use its reasonable efforts to permit the Shares to be eligible for clearance and settlement through the facilities of the DTC.

(v) Use of Proceeds. The Company will apply the Net Proceeds from the sale of the Shares in the manner set forth in the Prospectus.

(w) Filing of Prospectus Supplement. The Company agrees that on such dates as the Act shall require, the Company will (i) file a prospectus supplement with the Commission under the applicable paragraph of Rule 424(b) under the Act (each and every filing under Rule 424(b), a “Filing Date”), which prospectus supplement will set forth, within the relevant period, the amount of Shares sold through the Manager, the Net Proceeds to the Company and the compensation payable by the Company to the Manager with respect to such Shares (provided that the Company may satisfy its obligations under this Section 4(w)(i) by effecting a filing in accordance with the Exchange Act with respect to such information) and (ii) deliver such number of copies of each such prospectus supplement or Exchange Act report to each exchange or market on which such sales were effected as may be required by the rules or regulations of such exchange or market. In the event any sales are made pursuant to this Agreement which are NOT made in “at the market” offerings as defined in Rule 415, including, without limitation, any Placement pursuant to a Terms Agreement, the Company shall file a Prospectus Supplement describing the terms of such transaction, the amount of Shares sold, the price thereof, the Manager’s compensation, and such other information as may be required pursuant to Rule 424 and Rule 430B, as applicable, within the time required by Rule 424.

(x) Additional Registration Statement. To the extent that the Registration Statement is not available for the sales of the Shares as contemplated by this Agreement, the Company shall file a new registration statement with respect to any additional shares of Common Stock necessary to complete such sales of the Shares and shall cause such registration statement to become effective as promptly as practicable. After the effectiveness of any such registration statement, all references to Registration Statement included in this Agreement shall be deemed to include such new registration statement, including all documents incorporated by reference therein pursuant to Item 12 of Form S-3, and all references to Base Prospectus included in this Agreement shall be deemed to include the final form of prospectus, including all documents incorporated therein by reference, included in any such registration statement at the time such registration statement became effective.

5. Payment of Expenses. The Company agrees to pay the costs and expenses incident to the performance of its obligations under this Agreement, whether or not the transactions contemplated hereby are consummated, including, without limitation: (i) the preparation, printing or reproduction and filing with the Commission of the Registration Statement (including financial statements and exhibits thereto), the Prospectus and each Issuer Free Writing Prospectus, and each amendment or supplement to any of them, (ii) the printing (or reproduction) and delivery (including postage, air freight charges and charges for counting and packaging) of such copies of the Registration Statement, the Prospectus, and each Issuer Free Writing Prospectus, and all amendments or supplements to any of them, as may, in each case, be reasonably requested for use in connection with the offering and sale of the Shares, (iii) the preparation, printing, authentication, issuance and delivery of certificates for the Shares, including any stamp or transfer taxes in connection with the original issuance and sale of the Shares, (iv) the printing (or reproduction) and delivery of this Agreement, any blue sky memorandum and all other agreements or documents printed (or reproduced) and delivered in connection with the offering of the Shares, (v) the registration of the Shares under the Exchange Act, if applicable, and the listing of the Shares on the Trading Market, (vi) any registration or qualification of the Shares for offer and sale under the securities or blue sky laws of the several states (including filing fees and the reasonable fees and expenses of counsel for the Manager relating to such registration and qualification), (vii) the transportation and other expenses incurred by or on behalf of Company representatives in connection with presentations to prospective purchasers of the Shares, (viii) the fees and expenses of the Company’s Accountants and the fees and expenses of counsel (including local and special counsel) for the Company, (ix) the filing fee under FINRA Rule 5110, (x) the reasonable fees and expenses of the Manager’s counsel, not to exceed $75,000 (excluding any periodic due diligence fees provided for under Section 4(n)) of this Agreement and (xi) all other costs and expenses incident to the performance by the Company of its obligations hereunder.

6. Conditions to the Obligations of the Manager. The obligations of the Manager under this Agreement and any Terms Agreement shall be subject to (i) the accuracy of the representations and warranties on the part of the Company contained herein as of the Execution Time, each Representation Date, and as of each Applicable Time, Settlement Date and Time of Delivery, (ii) to the performance by the Company of its obligations hereunder and (iii) the following additional conditions:

(a) Filing of Prospectus Supplement. The Prospectus, and any supplement thereto, required by Rule 424 to be filed with the Commission have been filed in the manner and within the time period required by Rule 424(b) with respect to any sale of Shares; each Prospectus Supplement shall have been filed in the manner required by Rule 424(b) within the time period required hereunder and under the Act; any other material required to be filed by the Company pursuant to Rule 433(d) under the Act, shall have been filed with the Commission within the applicable time periods prescribed for such filings by Rule 433; and no stop order suspending the effectiveness of the Registration Statement or any notice objecting to its use shall have been issued and no proceedings for that purpose shall have been instituted or threatened.

(b) Delivery of Opinion. The Company shall have caused the Company Counsel and the Company’s local counsel, if different than the Company Counsel, to furnish to the Manager, requested by the Manager and upon reasonable advance notice in connection with any offering of the Shares, its opinion and negative assurance statement, dated as of such date and addressed to the Manager in form and substance acceptable to the Manager.

(c) Delivery of Officer’s Certificate. The Company shall have furnished or caused to be furnished to the Manager, to the extent requested by the Manager and upon reasonable advance notice in connection with any offering of the Shares, a certificate of the Company signed by the Chief Executive Officer or the President and the principal financial or accounting officer of the Company, dated as of such date, to the effect that the signers of such certificate have carefully examined the Registration Statement, the Prospectus, any Prospectus Supplement and any documents incorporated by reference therein and any supplements or amendments thereto and this Agreement and that:

(i) the representations and warranties of the Company in this Agreement are true and correct on and as of such date with the same effect as if made on such date and the Company has complied with all of the agreements and has satisfied all of the conditions on its part to be performed or satisfied at or prior to such date;

(ii) no stop order suspending the effectiveness of the Registration Statement or any notice objecting to its use has been issued and no proceedings for that purpose have been instituted or, to the Company’s knowledge, threatened; and

(iii) since the date of the most recent financial statements included in the Registration Statement, the Prospectus and the Incorporated Documents, there has been no Material Adverse Effect on the condition (financial or otherwise), earnings, business or properties of the Company and the Subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business, except as set forth in, or contemplated by, the Registration Statement and the Prospectus.

(d) Delivery of Accountants’ “Comfort” Letter. The Company shall have requested and caused the Accountants to have furnished to the Manager, to the extent requested by the Manager and upon reasonable advance notice in connection with any offering of the Shares, letters (which may refer to letters previously delivered to the Manager), dated as of such date, in form and substance satisfactory to the Manager, confirming that they are independent accountants within the meaning of the Act and the Exchange Act and the respective applicable rules and regulations adopted by the Commission thereunder and that they have performed a review of any unaudited interim financial information of the Company or Morinda Holdings, Inc., as applicable, and included or incorporated by reference in the Registration Statement and the Prospectus and provide customary “comfort” as to such review in form and substance satisfactory to the Manager.

(e) No Material Adverse Event. Since the respective dates as of which information is disclosed in the Registration Statement, the Prospectus and the Incorporated Documents, except as otherwise stated therein, there shall not have been (i) any change or decrease in previously reported results specified in the letter or letters referred to in paragraph (d) of this Section 6 or (ii) any change, or any development involving a prospective change, in or affecting the condition (financial or otherwise), earnings, business or properties of the Company and the Subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business, except as set forth in, or contemplated by, the Registration Statement, the Prospectus and the Incorporated Documents (exclusive of any amendment or supplement thereto) the effect of which, in any case referred to in clause (i) or (ii) above, is, in the sole judgment of the Manager, so material and adverse as to make it impractical or inadvisable to proceed with the offering or delivery of the Shares as contemplated by the Registration Statement (exclusive of any amendment thereof), the Incorporated Documents and the Prospectus (exclusive of any amendment or supplement thereto).

(f) Payment of All Fees. The Company shall have paid the required Commission filing fees relating to the Shares within the time period required by Rule 456(b)(1)(i) of the Act without regard to the proviso therein and otherwise in accordance with Rule 456(b) and Rule 457(r) of the Act and, if applicable, shall have updated the “Calculation of Registration Fee” table in accordance with Rule 456(b)(1)(ii) of the Act either in a post-effective amendment to the Registration Statement or on the cover page of a prospectus filed pursuant to Rule 424(b).

(g) No FINRA Objections. FINRA shall not have raised any objection with respect to the fairness and reasonableness of the terms and arrangements under this Agreement.

(h) Shares Listed on Trading Market. The Shares shall have been listed and admitted and authorized for trading on the Trading Market, and satisfactory evidence of such actions shall have been provided to the Manager.

(i) Other Assurances. Prior to each Settlement Date and Time of Delivery, as applicable, the Company shall have furnished to the Manager such further information, certificates and documents as the Manager may reasonably request.

If any of the conditions specified in this Section 6 shall not have been fulfilled when and as provided in this Agreement, or if any of the opinions and certificates mentioned above or elsewhere in this Agreement shall not be reasonably satisfactory in form and substance to the Manager and counsel for the Manager, this Agreement and all obligations of the Manager hereunder may be canceled at, or at any time prior to, any Settlement Date or Time of Delivery, as applicable, by the Manager. Notice of such cancellation shall be given to the Company in writing, or by telephone or facsimile and confirmed in writing.

The documents required to be delivered by this Section 6 shall be delivered at the office of DLA Piper LLP (US), counsel for the Manager, at 2525 East Camelback Road, Suite 1000, Phoenix, Arizona 85016-4232 on each such date as provided in this Agreement.

7. Indemnification and Contribution.

(a) Indemnification by Company. The Company agrees to indemnify and hold harmless the Manager, the directors, officers, employees and agents of the Manager and each Person who controls the Manager within the meaning of either the Act or the Exchange Act against any and all losses, claims, damages or liabilities, joint or several, to which they or any of them may become subject under the Act, the Exchange Act or other federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement for the registration of the Shares as originally filed or in any amendment thereof, or in the Base Prospectus, any Prospectus Supplement, the Prospectus, any Issuer Free Writing Prospectus, the Incorporated Documents or in any amendment thereof or supplement thereto, or arise out of, or are based upon, the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or result from or relate to any breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement, and agrees to reimburse each such indemnified party for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Company by the Manager specifically for inclusion therein. This indemnity provision will be in addition to any liability that the Company may otherwise have.

(b) Indemnification by Manager. The Manager agrees to indemnify and hold harmless the Company, each of its directors, each of its officers who signs the Registration Statement, and each Person who controls the Company within the meaning of either the Act or the Exchange Act, to the same extent as the foregoing indemnity from the Company to the Manager, but only with reference to written information relating to the Manager furnished to the Company by the Manager specifically for inclusion in the documents referred to in the foregoing indemnity; provided, however, that in no case shall the Manager be responsible for any amount in excess of the Broker Fee applicable to the Shares and paid hereunder. This indemnity provision will be in addition to any liability which the Manager may otherwise have.

(c) Indemnification Procedures. Promptly after receipt by an indemnified party under this Section 7 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 7, notify the indemnifying party in writing of the commencement thereof but the failure so to notify the indemnifying party (i) will not relieve it from liability under paragraph (a) or (b) above unless and to the extent it did not otherwise learn of such action and such failure results in the forfeiture by the indemnifying party of substantial rights and defenses and (ii) will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraph (a) or (b) above. The indemnifying party shall be entitled to appoint counsel of the indemnifying party’s choice at the indemnifying party’s expense to represent the indemnified party in any action for which indemnification is sought (in which case the indemnifying party shall not thereafter be responsible for the fees and expenses of any separate counsel retained by the indemnified party or parties except as set forth below); provided, however, that such counsel shall be reasonably satisfactory to the indemnified party. Notwithstanding the indemnifying party’s election to appoint counsel to represent the indemnified party in an action, the indemnified party shall have the right to employ separate counsel (including local counsel), and the indemnifying party shall bear the reasonable fees, costs and expenses of such separate counsel if (i) the use of counsel chosen by the indemnifying party to represent the indemnified party would present such counsel with a conflict of interest, (ii) the actual or potential defendants in, or targets of, any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, (iii) the indemnifying party shall not have employed counsel reasonably satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of the institution of such action or (iv) the indemnifying party shall authorize the indemnified party to employ separate counsel at the expense of the indemnifying party. An indemnifying party will not, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding.

(d) Contribution. In the event that the indemnity provided in paragraph (a), (b) or (c) of this Section 7 is unavailable or insufficient to hold harmless an indemnified party for any reason, the Company and the Manager agree to contribute to the aggregate losses, claims, damages and liabilities (including legal or other expenses reasonably incurred in connection with investigating or defending the same) (collectively, “Losses”) to which the Company and the Manager may be subject in such proportion as is appropriate to reflect the relative benefits received by the Company, on the one hand, and by the Manager, on the other, from the offering of the Shares; provided, however, that in no case shall the Manager be responsible for any amount in excess of the Broker Fee applicable to the Shares and paid hereunder. If the allocation provided by the immediately preceding sentence is unavailable for any reason, the Company and the Manager severally shall contribute in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company, on the one hand, and of the Manager, on the other, in connection with the statements or omissions which resulted in such Losses as well as any other relevant equitable considerations. Benefits received by the Company shall be deemed to be equal to the total net proceeds from the offering (before deducting expenses) received by it, and benefits received by the Manager shall be deemed to be equal to the Broker Fee applicable to the Shares and paid hereunder as determined by this Agreement. Relative fault shall be determined by reference to, among other things, whether any untrue or any alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information provided by the Company, on the one hand, or the Manager, on the other, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The Company and the Manager agree that it would not be just and equitable if contribution were determined by pro rata allocation or any other method of allocation which does not take account of the equitable considerations referred to above. Notwithstanding the provisions of this paragraph (d), no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 7, each Person who controls the Manager within the meaning of either the Act or the Exchange Act and each director, officer, employee and agent of the Manager shall have the same rights to contribution as the Manager, and each Person who controls the Company within the meaning of either the Act or the Exchange Act, each officer of the Company who shall have signed the Registration Statement and each director of the Company shall have the same rights to contribution as the Company, subject in each case to the applicable terms and conditions of this paragraph (d).

8. Termination.

(a) The Company shall have the right, by giving written notice as hereinafter specified, to terminate the provisions of this Agreement relating to the solicitation of offers to purchase the Shares in its sole discretion at any time upon five (5) Business Days’ prior written notice. Any such termination shall be without liability of any party to any other party except that (i) with respect to any pending sale through the Manager for the Company, the obligations of the Company, including in respect of compensation of the Manager, shall remain in full force and effect notwithstanding the termination and (ii) the provisions of Sections 5, 6, 7, 8, 9, 10, 12 and 14 of this Agreement shall remain in full force and effect notwithstanding such termination.

(b) The Manager shall have the right, by giving written notice as hereinafter specified, to terminate the provisions of this Agreement relating to the solicitation of offers to purchase the Shares in its sole discretion at any time. Any such termination shall be without liability of any party to any other party except that the provisions of Sections 5, 6, 7, 8, 9, 10, 12 and 14 of this Agreement shall remain in full force and effect notwithstanding such termination.

(c) This Agreement shall remain in full force and effect until the earlier of (i) the issuance and sale of all of the Shares through the Manager on the terms and subject to the conditions set forth herein and (ii) such date that this Agreement is terminated pursuant to Sections 8(a) or (b) above or otherwise by mutual agreement of the parties; provided that any such termination by mutual agreement shall in all cases be deemed to provide that Sections 5, 6, 7, 8, 9, 10, 12 and 14 shall remain in full force and effect.

(d) Any termination of this Agreement shall be effective on the date specified in such notice of termination; provided that such termination shall not be effective until the close of business on the date of receipt of such notice by the Manager or the Company, as the case may be. If such termination shall occur prior to the Settlement Date or Time of Delivery for any sale of the Shares, such sale shall settle in accordance with the provisions of Section 2(b) of this Agreement.

(e) In the case of any purchase of Shares by the Manager pursuant to a Terms Agreement, the obligations of the Manager pursuant to such Terms Agreement shall be subject to termination, in the absolute discretion of the Manager, by prompt oral notice given to the Company prior to the Time of Delivery relating to such Shares, if any, and confirmed promptly by facsimile or electronic mail, if since the time of execution of the Terms Agreement and prior to such delivery and payment, (i) trading in the Company’s Common Stock shall have been suspended by the Commission or the Trading Market or trading in securities generally on the Trading Market shall have been suspended or limited or minimum prices shall have been established on such exchange, (ii) a banking moratorium shall have been declared either by Federal or New York State authorities or (iii) there shall have occurred any outbreak or escalation of hostilities, declaration by the United States of a national emergency or war, or other calamity or crisis the effect of which on financial markets is such as to make it, in the sole judgment of the Manager, impractical or inadvisable to proceed with the offering or delivery of the Shares as contemplated by the Prospectus (exclusive of any amendment or supplement thereto).

9. Representations and Indemnities to Survive. The respective agreements, representations, warranties, indemnities and other statements of the Company or its officers and of the Manager set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation made by the Manager or the Company or any of the officers, directors, employees, agents or controlling persons referred to in Section 7, and will survive delivery of and payment for the Shares.

10. Notices. All communications hereunder will be in writing and effective only on receipt, and, if sent to the Manager, will be mailed, delivered or facsimiled to the address set forth on the signature page hereto.

11. Successors. This Agreement will inure to the benefit of, and be binding upon, the parties hereto and their respective successors and the officers, directors, employees, agents and controlling persons referred to in Section 7, and no other Person will have any right or obligation hereunder.

12. No Fiduciary Duty. The Company hereby acknowledges that (i) the purchase and sale of the Shares pursuant to this Agreement is an arm’s-length commercial transaction between the Company, on the one hand, and the Manager and any affiliate through which it may be acting, on the other, (ii) the Manager is acting solely as sales agent and/or principal in connection with the purchase and sale of the Company’s securities and not as a fiduciary of the Company and (iii) the Company’s engagement of the Manager in connection with the offering and the process leading up to the offering is as an independent contractor and not in any other capacity. Furthermore, the Company agrees that it is solely responsible for making its own judgments in connection with the offering (irrespective of whether the Manager has advised or is currently advising the Company on related or other matters). The Company agrees that it will not claim that the Manager has rendered advisory services of any nature or respect, or owes an agency, fiduciary or similar duty to the Company, in connection with such transaction or the process leading thereto.

13. Integration. This Agreement and any Terms Agreement supersede all prior agreements and understandings (whether written or oral) between the Company and the Manager with respect to the subject matter hereof.

14. Applicable Law. This Agreement and any Terms Agreement will be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed within the State of New York.

15. WAIVER OF JURY TRIAL. THE COMPANY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY TERMS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

16. Counterparts. This Agreement and any Terms Agreement may be signed in one or more counterparts, each of which shall constitute an original and all of which together shall constitute one and the same agreement, which may be delivered by facsimile or in .pdf file via e-mail.

17. Headings. The section headings used in this Agreement and any Terms Agreement are for convenience only and shall not affect the construction hereof.

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If the foregoing is in accordance with your understanding of our agreement, please sign and return to us the enclosed duplicate hereof, whereupon this Agreement and your acceptance shall represent a binding agreement among the Company and the Manager.

Very truly yours,

NEW AGE BEVERAGES CORPORATION

By:	/s/ Gregory A. Gould
Name:	Gregory A. Gould
Title:	Chief Financial Officer

Address for Notice:

The foregoing Agreement is hereby confirmed and accepted as of the date first written above.

ROTH CAPITAL PARTNERS, LLC

By:	/s/ Aaron M. Gurewitz
Name:	Aaron M. Gurewitz
Title:	Head of Equity Capital Markets

Address for Notice:
Roth Capital Partners, LLC
888 San Clemente Drive
Newport Beach, California 92660

ANNEX I

FORM OF TERMS AGREEMENT

NEW AGE BEVERAGES CORPORATION TERMS AGREEMENT

Dear Sirs:

New Age Beverages Corporation (the “Company”) proposes, subject to the terms and conditions stated herein and in the Amended and Restated At The Market Offering Agreement, dated May 5, 2020 (the “Amended and Restated At The Market Offering Agreement”), between the Company and Roth Capital Partners, LLC (the “Agent”), to issue and sell to the Agent the securities specified in Schedule I hereto (the “Purchased Shares”).

Each of the provisions of the Amended and Restated At The Market Offering Agreement not specifically related to the solicitation by Roth Capital Partners, LLC, as agent of the Company, of offers to purchase securities is incorporated herein by reference in its entirety, and shall be deemed to be part of this Terms Agreement to the same extent as if such provisions had been set forth in full herein. Each of the representations and warranties set forth therein shall be deemed to have been made at and as of the date of this Terms Agreement and the Time of Delivery, except that each representation and warranty in Section 3 of the Amended and Restated At The Market Offering Agreement which makes reference to the Prospectus (as therein defined) shall be deemed to be a representation and warranty as of the date of the Amended and Restated At The Market Offering Agreement in relation to the Prospectus, and also a representation and warranty as of the date of this Terms Agreement and the Time of Delivery in relation to the Prospectus, as amended and supplemented, to relate to the Purchased Shares.

An amendment to the Registration Statement (as defined in the Amended and Restated At The Market Offering Agreement), or a supplement to the Prospectus, as the case may be, relating to the Purchased Shares, in the form heretofore delivered to the Agent, is now proposed to be filed with the Securities and Exchange Commission.

Subject to the terms and conditions set forth herein and in the Amended and Restated At The Market Offering Agreement, which are incorporated herein by reference, the Company agrees to issue and sell to the Agent and the latter agrees to purchase from the Company the number of shares of the Purchased Shares at the time and place and at the purchase price set forth in Schedule I hereto.

If the foregoing is in accordance with your understanding, please sign and return to us a counterpart hereof, whereupon this Terms Agreement, including those provisions of the Amended and Restated At The Market Offering Agreement incorporated herein by reference, shall constitute a binding agreement between the Manager and the Company.

NEW AGE BEVERAGES CORPORATION

By:	/s/ Gregory A. Gould
Name:	Gregory A. Gould
Title:	Chief Financial Officer

Accepted as of the date first written above.

ROTH CAPITAL PARTNERS, LLC

By:
Name:	Aaron M. Gurewitz
Title:	Head of Equity Capital Markets

Schedule I

Purchased Shares

Exhibit 10.4

EMPLOYMENT AGREEMENT

This Employment Agreement (the “Agreement”) is made and entered into by and between Brent D. Willis (“Employee”) and New Age Beverages Corporation (the “Company”), effective as of May 8, 2020 (the “Effective Date”). For convenience, Employee and the Company together may be referred to as the “Parties” or each individually as a “Party.”

RECITALS

A. The Company is in the business of manufacturing and distributing organic and natural healthy beverages and other lifestyle products (the “Business”).

B. Employee is an experienced employee with considerable skill and expertise valuable to the success of the Company.

C. The Company desires to employ Employee, and Employee wishes to provide Employee’s services to the Company, subject to the terms and conditions set forth in this Agreement.

D. During employment with the Company, Employee will have access to the Company’s and its Affiliates’ (as defined herein) confidential, proprietary and trade secret information. It is desirable and in the best interests of the Company to protect the confidential, proprietary and trade secret information of the Company and its Affiliates, to prevent unfair competition by former employees of the Company following separation of their employment with the Company and to secure cooperation from former employees with respect to matters related to their employment with the Company.

E. Employee acknowledges that Employee’s receipt of benefits under this Agreement depends on, among other things, Employee’s willingness to agree to and abide by the non-disclosure, non-competition, non-solicitation, and other covenants contained in this Agreement.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing premises and the respective agreements of the Company and Employee set forth below, the Company and Employee, intending to be legally bound, agree as follows:

1. Employment. Subject to the foregoing and all terms and conditions hereof, as of the Effective Date, the Company will employ Employee, and Employee will accept such employment and perform services for the Company, upon the terms and conditions set forth in this Agreement.

2. Term of Employment and Renewal. Subject to the other provisions of Sections 2 and 8 below, the term of Employee’s employment with the Company pursuant to this Agreement shall be for the period commencing on the Effective Date and ending on January 1, 2023. The period of time between the Effective Date and the termination of Employee’s employment hereunder shall be referred to herein as the “Term.” The Term shall be renewed thereafter on an annual basis for a one-year term beginning January 1, 2023 to January 1, 2024, and for each successive year thereafter, unless one Party provides to the other Party a written notice not to renew the Term of employment on or before one hundred eighty (180) days before the commencement of the renewal period or (ii) the Employee has reached age 65, in which case the Agreement shall terminate automatically unless the parties agree otherwise.

3. Position and Duties.

(a) Position with the Company. While employed, Employee shall serve as the Chief Executive Officer of the Company and shall report to the Board of Directors of the Company (the “Board”). As the Chief Executive Officer, Employee shall: (i) manage the day-to-day affairs and operations of the Company and each of its subsidiaries; (ii) have all of the duties and powers customarily associated with the office of the Chief Executive Officer of a significant business enterprise; and (iii) perform such responsibilities as the Board may assign to him from time-to-time, which will be consistent with his position.

(b) Performance of Duties and Responsibilities. While Employee is employed by the Company hereunder, Employee will serve the Company and its Affiliates faithfully and to the best of his ability and will devote his full time, attention and efforts to the business of the Company and its Affiliates. Employee will follow and comply with applicable policies and procedures adopted by the Board or the Company or management from time-to-time, including without limitation, policies relating to business ethics, conflict of interest, non-discrimination and non-harassment, confidentiality and protection of trade secrets. Employee must not accept other employment or engage in other material business activity that conflicts with Employee’s duties to the Company, except as approved in writing by the Board, but may participate in charitable and personal investment activities, including sitting on boards of charitable organizations and one board of a private or public company, so long as such activities do not interfere with the performance of his duties and responsibilities hereunder. The Board’s approval of Employee’s participation in any such activities will not be unreasonably withheld. Employee hereby represents and confirms that Employee is under no contractual or legal commitments that would prevent Employee from fulfilling Employee’s duties and responsibilities as set forth in this Agreement.

4. Compensation.

(a) Base Salary. Employee’s base salary shall be $650,000 per annum (“Base Salary”), which shall be payable in equal installments during the year in accordance with the Company’s normal payroll schedule and shall be subject to deductions for customary withholdings, including, without limitation, federal and state withholding taxes and payroll taxes. The Base Salary of $650,000.00 per annum shall be subject to annual review beginning on or about January 1, 2021. In January of each year, the Compensation Committee of the Board of Directors (or the full Board of Directors, if there is no Compensation Committee) will determine if a salary increase is warranted for Employee.

(b) Annual Short-Term Incentives. In January of each year, the Compensation Committee of the Board of Directors shall establish the criteria for the payment of an incentive bonus to Employee with respect to the then current or completed fiscal year (the “Performance Bonus”), based on overall Company performance and outlook. The Performance Bonus will be based on a percentage of Base Salary, with target bonus at 1 times Base Salary. This bonus will be paid annually no later than March 15th of the year following the year in which the Targets were achieved. All bonuses are subject to overall Company performance and Board or the Compensation Committee of the Board approval.

(c) Annual Long-Term Incentives. Employee shall be eligible to participate in the Company’s plan, the Employee’s equity grant will be determined by the Board of Directors each year, in its sole discretion.

(d) Benefits, Perquisites, and Continuation of Existing Plans. Employee shall be entitled to participate in all of the Company’s specific benefit plans made generally available to the employees and at the level of the senior executives of the Company, subject to eligibility and in accordance with the terms of such plans. The Company provides no assurance as to the adoption or continuance of any particular employee benefit plan or program.

(e) Expenses. While Employee is employed by the Company hereunder, the Company shall reimburse Employee for all reasonable out-of-pocket business, travel and entertainment expenses incurred by Employee in the performance of the duties and responsibilities hereunder. Such reimbursement shall be subject to the Company’s normal policies and procedures for the Senior Executives of the Company for expense pre-approval and verification, documentation and reimbursement. In no event shall any such expense reimbursement in compliance with policy be paid later than two-and-a-half months after the end of the calendar year in which the expense was incurred.

(f) Vacation. Employee shall be entitled to five (5) weeks of vacation with pay annually. Such vacation shall be taken at a time acceptable to the Company with regard to its operations. Unused vacation will be paid out upon termination.

5. Confidential Information.

(a) “Confidential Information” means all non-public or proprietary information relating to the Company’s business or that of any Company customer. Examples of Confidential Information include, but are not limited to, software (in source or object code form); databases; algorithms; processes; designs; prototypes; methodologies; reports; specifications; information regarding products sold, distributed or being developed by the Company; information regarding the Company’s current and developing technology; information regarding customers, prospective customers, clients, business contacts, prospective and executed contracts and subcontracts; marketing and/or sales plans; or any other plans and proposals used by the Company in the course of its business; and any non-public or proprietary information regarding the Company or the Company’s present or future business plans, financial information, or any intellectual property, whether any of the foregoing is embodied in hard copy, computer-readable form, electronic or optical form, or otherwise.

(b) Employee’s Use of Confidential Information. Employee will, at all times during and after Employee’s employment with the Company, maintain the confidentiality of the Confidential Information. Employee will not, without Company’s prior written consent, directly or indirectly: (i) copy or use any Confidential Information for any purpose not within the scope of Employee’s work on the Company’s behalf; or (ii) show, give, sell, disclose or otherwise communicate any Confidential Information to any person or entity other than the Company unless such person or entity is authorized by the Company to have access to the Confidential Information in question. These restrictions do not apply if the Confidential Information has been made generally available to the public by the Company or becomes generally available to the public through some other normal course of events. All Confidential Information prepared by or provided to Employee is and will remain the Company’s property or the property of the Company customer to which they belong. Notice is hereby provided that Employee is immune from criminal and civil liability under state and federal trade secret law if Employee discloses trade secrets: (i) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney solely for the purpose of reporting or investigating a suspected violation of law or for pursuing an anti-retaliation lawsuit; or (ii) in a complaint or other document filed in a lawsuit or other proceeding when the filing is made under seal and Employee does not disclose the trade secret except as allowed (if at all) pursuant to a court order.

(c) Former Employers’ Confidential Information. Employee will not improperly use or disclose to the Company, or to any Company employee, agent or contractor, any confidential or proprietary information (including unpublished patent applications or invention disclosures) belonging to any former employer of Employee or to any other person or entity to whom/which Employee owes a duty of non-disclosure.

(d) Return of Company Information, Material and Property. Upon request of the Company or upon termination (whether voluntary or involuntary), Employee will immediately turn over to the Company all Confidential Information, including all copies, and other property belonging to the Company or any of its customers, including documents, disks, computer equipment or other computer media in Employee’s possession or under his control. Employee will also immediately return any car in his possession or under his control that is owned by the Company. In addition, Employee will return any materials that contain or are derived from Confidential Information or are connected with or relate to Employee’s services to the Company or any of its customers.

(e) Permitted Communications. Employee understands that nothing in this Agreement is intended to prevent Employee from responding to a subpoena or other court order, from filing a charge with the United States Equal Employment Opportunity Commission or any other governmental agency, or from participating in an investigation conducted by a governmental agency.

6. Company Inventions.

(a) Definition of Company Inventions. “Company Inventions” means all ideas, methodologies, processes, trademarks and service marks, trade secrets, copyrights, patents, inventions, discoveries and improvements to any of the foregoing, that Employee learns of, conceives, develops or creates alone or with others during Employee’s employment with the Company (whether or not conceived, developed or created during regular working hours) that directly or indirectly arise from or relate to: (i) the Company’s Business (as defined below), technology, products, software, or services; (ii) work or research performed for the Company by Employee or any other Company officer, employee, agent, contractor or subcontractor; (iii) the use of the Company’s products, technology, equipment, software, or time; or (iv) access to Confidential Information belonging to the Company or a Company customer.

(b) Disclosure of Company Inventions. Whether upon the Company’s request or voluntarily, Employee will promptly disclose to the Company, or its designee, all Company Inventions that Employee has created, contributed to or knows about, regardless of the nature of that knowledge, and regardless of whether such Company Invention, or any aspect of such Company Invention, has been described, committed to writing, or reduced to practice, in whole or part, by any other person. At all other times, Employee will treat any Company Invention as Confidential Information, as that term is defined in Section 5(a) above.

(c) Assignment and Disclosure of Inventions. Employee hereby assigns to the Company all right, title and interest to all Company Inventions, which will be the sole and exclusive property of the Company, whether or not subject to patent, copyright, trademark or trade secret protection. Employee also acknowledges that all original works of authorship that are made by Employee (solely or jointly with others), within the scope of Employee’s employment with the Company, and that are protectable by copyright, are “works made for hire,” as that term is defined in the United States Copyright Act. To the extent that any such works, by operation of law, cannot be “works made for hire,” Employee hereby assigns to the Company all right, title, and interest in and to such works and to any related copyrights. The consideration for such assignment and the assistance provided in this Section 6(c) is the normal compensation due Employee by virtue of Employee’s service to the Company. Employee will also disclose to the Chief Executive Officer of the Company all inventions made, discovered, conceived, reduced to practice, or developed by Employee, either alone or jointly with others, within six (6) months after the termination of Employee’s employment with the Company which results, in whole or in part, from Employee’s prior employment by the Company. Such disclosures will be received by the Company in confidence to the extent such inventions are not assigned to the Company pursuant to this Section 6(c).

(d) Additional Instruments. Employee will promptly execute, acknowledge and deliver to the Company all additional instruments or documents that the Company determines at any time to be necessary to carry out the intentions of this Section 6. Furthermore, whether during or after Employee’s employment with the Company, Employee will promptly perform any acts deemed necessary or desirable by the Company, at the Company’s expense, to assist it in obtaining, maintaining, defending and enforcing any rights and/or assignment of a Company Invention. Employee hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as Employee’s agent and attorney-in-fact to act for and on Employee’s behalf and instead of Employee, to execute and file any documents, applications or related findings and to do all other lawfully permitted acts in furtherance of the purposes set forth above in this Section 6(d), including, without limitation, the perfection of assignment and the prosecution and issuance of patents, patent applications, copyright applications and registrations, trademark applications and registrations, or other rights in connection with such Company Inventions and improvements thereto with the same legal force and effect as if executed by Employee.

(e) Pre-existing Inventions. Employee will retain all right, title and interest in and to inventions that Employee created and owned prior to Employee’s service to the Company, if any, as listed on Schedule 1. If Schedule 1 is left blank, Employee concedes that no such pre-existing inventions exist. Employee will promptly disclose and hereby assigns to the Company any modifications or improvements to such inventions that are developed during his employment with the Company, which will become Company Inventions in accordance with this Section 6. Sections 6(a), 6(b), 6(c), and 6(d) shall not apply to any inventions listed on Schedule 1 and no such invention shall become a Company Invention.

7. Non-Competition and Non-Solicitation Covenants.

(a) Non-Competition. In order to protect the Company’s Confidential Information and trade secrets, which would cause irreparable harm to the Company if disclosed to a competitor, Employee covenants and agrees that during Employee’s employment with the Company and for one (1) year thereafter or the duration of the Severance 9 (i), whichever is greater (the “Restricted Period”), Employee will not, directly or indirectly, engage or participate in any business activity or enterprise, whether as a proprietor, owner, principal, agent, partner, officer, director, stockholder, employee, manager, member, consultant, independent contractor, joint venturer, agent, advisor, or otherwise that competes with the Company or any Affiliate of the Company in the Healthy Beverages Market (sports and performance beverages, energy drinks, RTD teas, enhanced fruit drinks, soy beverages, and enhanced water), skin care, or health supplements (the “Company’s Business”) or engages in any services or other activity (or any substantially similar service, activity or line of business) that competes or interferes with the Company’s Business, has resulted, or threatens imminently to result in the disclosure or use of the Company’s Confidential Information in the Company’s Business (the “Restricted Business”). For purposes of this Section 7, the applicable geographical area of the Restricted Business is anywhere in the United States or any other area in which Employee knows, or reasonably should know, the Company or any Affiliate of the Company (as defined below) conducts the Restricted Business, including, but not limited to, any business that the Company or any Affiliate of the Company is actively engaged in or interested in pursuing, as of the Termination Date (the “Restricted Area”).

(b) Non-Solicitation. Employee covenants and agrees that during the term of employment and 24 months thereafter, Employee will not on behalf of himself or directly or indirectly through another person or entity (including without limitation as a proprietor, owner, principal, agent, partner, officer, director, stockholder, employee, manager, member, consultant or otherwise):

(i) solicit, divert, take away, or otherwise attempt in any manner to solicit, divert, or take away, the business of any customer, supplier, or other business relation of the Company or any of its Affiliates, that Employee knows, or reasonably should know, is a customer, supplier, or other business relation of the Company, for a purpose that is related to a Restricted Business, or in any way interfere with the relationship between any such customer, supplier or other business relation and the Company or any of its Affiliates (including, without limitation, inducing such person or entity to cease doing business with the Company or any of its Affiliates, or making any negative statements or communications about the Company or any of its Affiliates); or

(ii) solicit or induce to leave the Company (either on Employee’s behalf or on behalf of any other person) any person who Employee knows, or reasonably should know, is then an employee, consultant or contractor of the Company or any of its Affiliates or who was an employee, consultant or contractor of the Company or any of its Affiliates (with respect to the Company’s or any of its Affiliates’ business) at any time during the six-month period immediately preceding termination of Employee’s employment with the Company, if applicable; provided, however, the restrictions in this Section 7(b)(ii) shall not apply to: (a) any contractors or consultants who or which has provided services to the other person or entity prior to the Termination Date; or (b) any individual whose employment was previously terminated by the Company or any Affiliate of the Company; and, provided, further, the foregoing shall not apply to any general solicitation conducted through the use of advertisements in the media, through the use of search firms or other routine recruiting activities, provided that such searches are not specifically targeted at employees of the Company or any Affiliate of the Company.

(c) Permitted Ownership. Nothing herein shall prohibit Employee from: (i) being a passive owner of not more than 2% of the outstanding stock of any class of securities of any person or entity listed on a national securities exchange which is engaged in a Restricted Business, so long as Employee has no active participation in the Restricted Business of such person or entity and does not serve on the board of directors or similar body of such person or entity; or (ii) performing any services to the Company or its subsidiaries or that are otherwise permitted hereunder.

(d) Reasonable Restrictions. Each of Employee and the Company hereby agrees and acknowledges that the Company’s Business is global in nature and therefore the geographic restrictions imposed by the non-competition and non-solicitation covenants set forth in Sections 7(a) and 7(b) are reasonable, necessary and appropriate in light of the nature of the Company’s Business.

(e) Agreement to Modify. If the duration or scope of, or any business activity covered by, any provision of this Section 7 is in excess of what is determined to be valid and enforceable under applicable law, such provision shall be construed to cover only that duration, scope or activity that is determined to be valid and enforceable. Employee hereby acknowledges that this Section 7 shall be given the construction which renders its provisions valid and enforceable to the maximum extent, not exceeding its express terms, possible under applicable law.

(f) Remedies. Employee acknowledges and affirms that a breach of Section 7(a) or 7(b) by Employee cannot be adequately compensated in an action for damages at law, and equitable relief would be necessary to protect the Company and its Affiliates from a violation of this Agreement and from the harm which this Agreement is intended to prevent. Accordingly, Employee agrees that in the event of any actual or threatened breach of such provisions, the Company and its Affiliates shall (in addition to any other remedies which they may have) be entitled to enforce their rights and Employee’s obligations under this Section 7 not only by an action or actions for damages, but also by an action or actions for specific performance, temporary or permanent injunctive relief, or other equitable relief, or a combination of such forms of relief, in order to enforce or prevent any violations (whether anticipatory, continuing or future) of the provisions of this Section 7. In no circumstance shall the Company be entitled to obtain from the court equitable relief in the form of a Restricted Period exceeding one (1) year. The prevailing Party in such a proceeding shall be entitled to recover his or its attorneys’ fees and costs from the other Party for the same.

8. Termination of Employment.

(a) Employee’s employment with the Company under this Agreement will terminate upon:

(i) Expiration of the Term based solely on the Company’s election not to renew the Term under Section 2 of this Agreement;

(ii) Employee’s actual receipt of notification by the Company that Employee’s employment has been terminated;

(iii) Employee’s resignation;

(iv) Employee’s Disability; or

(v) Employee’s death.

(b) Termination Date. The date upon which Employee’s termination of employment with the Company occurs shall be the “Termination Date.” For purposes of Section 9 of this Agreement only, with respect to the timing of any payments thereunder, the Termination Date shall mean the date on which a “separation from service” has occurred for purposes of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and the regulations and guidance thereunder.

(c) Resignation as Officer and/or Director. Upon termination of Employee’s employment with the Company for any reason, Employee shall resign from all positions held as officer or director of the Company or its Affiliates effective as of the Termination Date, and his fiduciary duties with respect to each such position shall end also.

(d) Salary and Benefits. Upon termination of Employee’s employment with the Company for any reason, Employee shall be entitled to receive Employee’s then current Base Salary that has been earned through the Termination Date, reimbursement of business expenses and unused vacation as provided in Section 4 and any vested rights of Employee under any equity plans or agreements (including stock options, restricted stock, restricted stock units, and any other equity agreements and retirement plans) to the extent provided for in accordance with the terms thereof.

(e) Shares, Options, Warrants and Equivalents. Upon termination of Employee’s employment, all vested shares, options, warrants or share equivalents shall be retained by Employee. Subject to the terms of the applicable award agreement, Employee will have one (1) year from the Termination Date to exercise any vested options,: provided, however, that in no event shall options be exercisable beyond their original term. Notwithstanding the foregoing, all outstanding unvested equity awards, shall be forfeited immediately upon a termination for Cause.

(f) Notice of Voluntary Resignation. In the event Employee wishes to resign his employment, he shall provide the Company a minimum of sixty (60) days’ notice in writing. The Company may waive such notice in whole or in part by paying Employee’s Base Salary and continuing his benefits and perquisites to the effective date of resignation.

9. Payments upon Termination of Employment.

(a) Severance. If the Company terminates Employee’s employment without Cause, if Employee resigns with Good Reason, or if the Company provides notice not to renew the Term of Employee’s employment under Section 2, the Company will pay Employee:

(i) Fifteen (15) months of Base Salary plus target bonus with one (1) additional month for every full year of service up to a maximum of eighteen (18) months;

(ii) Employee’s COBRA health care premiums for a period of up to 15 (15) months following the termination date with one (1) additional month for every year of service up to a maximum of eighteen (18) months; and

(iii) all unvested equities, including but not limited to restricted stock, stock options, restricted stock units, and any other equities, shall immediately vest prior to termination: provided, however, that any equity awards that vest relative to performance shall vest in accordance with the applicable award agreement.

In the event of a termination described in Section 9(a) within two months prior or twenty four (24) months following a Change in Control of the Company, the Company will pay Employee: (i) two (2) years of Base Salary plus target bonus; (ii) Employee’s COBRA health care premiums for a period of eighteen (18) months following termination; and (iii) all unvested equities, including but not limited to restricted stock, stock options, warrants, and any other equities, shall immediately vest prior to termination: provided , however, that any equity awards that vest relative to performance shall vest in accordance with the applicable award agreement.

(b) Payment of Severance. Cash severance paid pursuant to Section 9(a) will be paid to Employee in equal installments in accordance with the Company’s regular payroll schedule, less all legally required and authorized deductions and withholdings; and stock, stock options, restricted stock units, and any other equities, shall vest immediately pursuant to Section 9(a), in each case commencing on the first normal payroll date of the Company following the expiration of the applicable rescission periods provided by law applicable to the release specified in Section 9(j) below and continuing for the applicable period thereafter.

(c) Payment of COBRA. If Employee timely elects COBRA coverage at the time of his/her termination of employment, the subsidized COBRA premium payments will continue for the number of months described in Section 9(a), unless Employee becomes covered under other group health insurance, in which case the COBRA coverage shall terminate at the end of the month in which Employee’s other coverage begins. The value of the subsidized COBRA premium shall be treated as taxable compensation to Employee.

(d) No Severance. If Employee’s employment with the Company is terminated by reason of:

(i) Employee’s resignation without Good Reason;

(ii) Termination of Employee’s employment by the Company for Cause;

(iii) Employee’s Disability; or

(iv) Employee’s death;

then the Company will pay to Employee, Employee’s beneficiary, or Employee’s estate, as the case may be, only Employee’s then current Base Salary that has been earned by Employee through the Termination Date and the additional amounts specified in Section 8(d).

There shall be no termination of Employee by the Company for Cause without Employee first being given actual written notice of the basis for termination for Cause, a 30-day period to cure any items identified in the written notice, and an opportunity to be heard by the Board of Directors of the Company to determine whether a preponderance of evidence supports a finding of Cause by the Board of Directors.

(e) “Cause” means:

(i) Any material breach by Employee of this Agreement, excluding for this purpose an action not taken in bad faith and which is remedied by Employee within 30 days after actual receipt of written notice thereof given by the Company;

(ii) Unlawful gross misconduct that is willful and deliberate on Employee’s part and that, , is materially injurious to the Company;

(iii) the conviction of Employee in any jurisdiction for (or pleading of no contest to or nolo contendere to) any crime that constitutes a felony;

(iv) failure or refusal to attempt to follow the lawful written directions of the Board of Directors, excluding for this purpose an action not taken in bad faith and which is remedied by Employee within 30 days after actual receipt of written notice of a failure to follow such directions is delivered to Employee;

(v) material nonfeasance with regard to Employee’s duties, including but not limited to the duties set forth in 3(b), excluding for this purpose an action not taken in bad faith and which is remedied by Employee within 30 days after actual receipt of written notice thereof given by the Company;

(vi) willful and deliberate breach by Employee of Employee’s fiduciary obligations as an officer or director of the Company or any of its Affiliates; or

(vii) the commission of any act or, acts of dishonesty, theft, destruction of property, fraud, or embezzlement, undertaken by the Employee and intended to result in substantial gain or substantial personal enrichment of Employee and that is materially injurious to the Company, whether financially, reputationally, or otherwise.

(f) “Good Reason” means, so long as Employee has not committed conduct giving rise to the Company’s right to terminate for Cause, the occurrence of any of the following without Employee’s consent:

(i) a material diminution in Employee’s authority, duties, responsibilities, Base Salary, or target bonus opportunity;

(ii) any other action or inaction that constitutes a material breach by the Company of this Agreement, except where there is a general reduction applicable to the management team generally; or

Notwithstanding the above, the occurrence of any of the events described above will not constitute Good Reason unless (a) Employee gives the Company written notice within 90 days after the initial occurrence of an event that Employee believes constitutes Good Reason and describes in such notice the details of such event; (b) the Company thereafter fails to cure any such event within 30 days after receipt of such notice; and (c) Employee’s Termination Date as a result of such event occurs within 120 days after the initial occurrence of such event.

(g) “Disability” hereunder shall be construed in compliance with all applicable laws and generally means the inability of Employee to perform the essential duties and responsibilities of Employee’s employment with the Company by reason of Employee’s illness or other physical or mental impairment or condition even with reasonable accommodations of such disability or impairment provided by the Company.

(h) “Change in Control” shall mean any of the following:

(i) the acquisition by any individual, entity, or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (the “Acquiring Person”), other than the Company, or any of its Subsidiaries, of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of the combined voting power or economic interests of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (excluding any issuance of securities by the Company in a transaction or series of transactions made principally for bona fide equity financing purposes); or

(ii) the acquisition of the Company by another entity by means of any transaction or series of related transactions to which the Company is party (including, without limitation, any stock acquisition, reorganization, merger or consolidation but excluding any issuance of securities by the Company in a transaction or series of transactions made principally for bona fide equity financing purposes) other than a transaction or series of related transactions in which the holders of the voting securities of the Company outstanding immediately prior to such transaction or series of related transactions retain, immediately after such transaction or series of related transactions, as a result of shares in the Company held by such holders prior to such transaction or series of related transactions, at least a majority of the total voting power represented by the outstanding voting securities of the Company or such other surviving or resulting entity (or if the Company or such other surviving or resulting entity is a wholly-owned subsidiary immediately following such acquisition, its parent); or

(iii) the sale or other disposition of all or substantially all of the assets of the Company in one transaction or series of related transactions; or

(i) Sole Obligation. In the event of termination of Employee’s employment, the sole obligation of the Company hereunder shall be its obligation to make the payments called for by Sections 8 and 9, and the Company shall have no other obligation to Employee or to Employee’s beneficiaries or Employee’s estate, except as otherwise provided by law, under the terms of any employee benefit plans or programs then maintained by the Company or any of its Affiliates in which Employee participates and reimbursement of business expenses as provided in Section 4(g).

(j) Requirements to Receive Severance. Notwithstanding the foregoing provisions of this Section 9, the Company will not be obligated to make any payments under Section 9 hereof unless: (i) Employee signs a release of claims in favor of the Company and its Affiliates substantially in a form to be prescribed by the Board and all applicable consideration and rescission periods provided by law have expired; and (ii) Employee is in material compliance with the terms of this Agreement and any other agreements with the Company that survive the termination of Employee’s employment.

10. Directors and Officers. If Employee is an officer or director at the relevant time, Employee agrees that upon termination or expiration of his employment with the Company he will tender his resignation from any position he may hold as an officer or Board Member of the Company or any of its affiliated or related companies. Following the execution of this Agreement by the Parties, the Company shall undertake reasonable efforts to acquire and maintain such directors’ and officers’ liability insurance on commercially reasonable terms for the benefit of Employee in accordance with corporate policies and as generally provided to the Directors of the Company.

11. Indemnification. See Schedule 2 “Indemnification Agreement”.

12. Return of Records and Property. Upon termination of Employee’s employment with the Company or at any time upon the Company’s request, Employee shall promptly deliver to the Company any and all of the Company’s and its Affiliates’ records and any and all of the Company’s and its Affiliates’ property in his possession or under his control, including manuals, books, blank forms, documents, letters, memoranda, notes, notebooks, reports, printouts, computer disks, computer tapes, source codes, data, tables or calculations and all copies thereof, documents that in whole or in part contain any trade secrets or confidential, proprietary, or other secret information of the Company or its Affiliates and all copies thereof, and keys, access cards, access codes, passwords, credit cards, automobiles, personal computers, telephones, and other electronic equipment belonging to the Company or its Affiliates.

13. Non-Disparagement. Employee will not, at any time during or after Employee’s employment with the Company, disparage, defame, or denigrate the reputation, character, image, or services of the Company, or of any of its Affiliates, or any of its or their directors, officers, stockholders, members, employees, or agents. Likewise, the Company will not, at any time during or after Employee’s employment with the Company, disparage, defame, or denigrate the reputation, character, image or services of Employee. The Parties agree that nothing in this provision or Agreement is intended to prevent Employee from filing a charge with the United States Equal Employment Opportunity Commission or any other governmental agency or from participating in an investigation conducted by a governmental agency.

14. Remedies. Employee acknowledges that monetary damages alone will not adequately compensate the Company for the harm caused by any breach by Employee of the provisions of Sections 5, 6, 7, 10 11, or 12 hereof, or breach by the Company of the provisions of Section 12. Accordingly, in the event of any actual or threatened breach of any such provisions, the Company shall, in addition to any other remedies it may have, be entitled to injunctive and other equitable relief to enforce such provisions, and such relief may be granted without the necessity of proving actual monetary damages. Nothing in this sub-paragraph shall be construed to limit or prevent the Company from recovering any monetary damages it can prove as a result of Employee’s breach of Sections 5, 6, 7, 10, 11, or 12 hereof, or Employee from recovering any monetary damages he can prove as a result of the Company’s breach of Section 12 hereof.

15. Arbitration. Except as otherwise provided in this Agreement, any dispute or controversy between the Parties in relation to this Agreement, with the exception of the Company’s right to seek injunctive or equitable relief for any actual or threatened breach of Sections 5, 6, 7, 10, 11, or 12 by Employee or Employee’s right to seek injunctive or equitable relief for any actual or threatened breach of Section 12, shall be submitted to final and binding arbitration in accordance with this section and pursuant to the Federal Arbitration Act (“FAA”), 9 U.S.C. § 1, et seq. The arbitration shall be conducted in accordance with the then-current National Rules for the Resolution of Employment Disputes of the American Arbitration Association (“AAA”) and shall proceed in the City and County of Denver in the State of Colorado before an arbitrator who is licensed in good standing to practice law in Colorado and has at least ten (10) years of prior demonstrable experience in Colorado in the area of employment law (“the Arbitrator”). In the event the parties cannot agree on an arbitrator, the preferred arbitrators of each party will select an arbitrator to hear the dispute within seven (7) business days of receipt of notice by either or both Parties that they were unable to agree on an arbitrator. The Arbitrator(s) shall have the exclusive authority to resolve any dispute relating to the interpretation, applicability, enforceability or formation of, and the arbitrability of any dispute relating to or arising from, this Agreement, with the exception of the Company’s right to seek injunctive or equitable relief for any actual or threatened breach of Sections 5, 6, 7, 10, 11, or 12 by Employee or Employee’s right to seek injunctive or equitable relief for any actual or threatened breach of Section 12. The Arbitrator(s) shall have all powers as set forth in the FAA and such other powers as are authorized in accordance with the National Rules for the Resolution of Employment Disputes of the AAA. The award and determination of the Arbitrator(s) shall be binding upon the Parties and their respective heirs, executors, administrators and assigns.

16. Miscellaneous.

(a) Governing Law. All matters relating to the interpretation, construction, application, validity and enforcement of this Agreement, and any disputes or controversies arising hereunder, shall be governed by the laws of the State of Colorado without giving effect to any choice or conflict of law provision or rule, whether of the State of Colorado or any other jurisdiction, that would cause the application of laws of any jurisdiction other than those of the State of Colorado.

(b) Jurisdiction and Venue. For all matters not subject to resolution by Arbitration pursuant to Section 14 hereof, Employee and the Company consent to jurisdiction of the courts of the State of Colorado and/or the federal district courts, District of Colorado, for the purpose of resolving all issues of law, equity, or fact, arising out of or in connection with this Agreement, and any action involving claims of a breach of this Agreement shall be brought in such courts. Each Party consents to personal jurisdiction over such Party in the state and/or federal courts of Colorado and hereby waives any defense of lack of personal jurisdiction. Venue, for the purpose of all such suits, shall be in any state or federal court in Denver, Colorado.

(c) Fees and Costs. Subject to Section 14, in any action relating to or arising from this Agreement, or involving its application, the Party substantially prevailing shall recover from the other Party the expenses incurred by the prevailing Party in the action, including costs and reasonable attorneys’ fees. In the event of an arbitration pursuant to Section 14, the Company shall pay all fees and expenses of the Arbitrator(s).

(d) Entire Agreement. This Agreement and the documents referred to herein contain the entire agreement of the Parties relating to Employee’s employment with the Company and supersede all prior agreements and understandings with respect to such subject matter and the Parties hereto have made no agreements, representations or warranties relating to the subject matter of this Agreement that are not set forth herein or in the documents referred to above.

(e) No Violation of Other Agreements or Obligations. Employee hereby represents and agrees that neither: (i) Employee’s entering into this Agreement, nor (ii) Employee’s carrying out the provisions of this Agreement, will violate any other agreement (oral, written or other) to which Employee is a Party or by which Employee is bound, including without limitation any agreement to keep in confidence proprietary information, knowledge or data acquired by Employee in confidence or in trust prior to his employment with the Company. Employee will not disclose to the Company or induce the Company to use any confidential or proprietary information or material belonging to any previous employer or others and agrees not to enter into any agreement, either written or oral, in conflict with this Agreement.

(f) Amendments. No amendment or modification of this Agreement shall be deemed effective unless made in writing and signed by the Parties hereto.

(g) No Waiver. No term or condition of this Agreement shall be deemed to have been waived, except by a statement in writing signed by the Party against whom enforcement of the waiver is sought. Any written waiver shall not be deemed a continuing waiver unless specifically stated, shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future or as to any act other than that specifically waived.

(h) Assignment. Employee shall not assign Employee’s rights or delegate Employee’s obligations under this Agreement. The Company may assign its rights or delegate its obligations under this Agreement without the consent of Employee.

(i) Affiliated Entities. As used in this Agreement, the term “Affiliate” means, with respect to any person or entity, any person or entity controlling, controlled by, or under common control with such person or entity, and, in the case of an individual, means his or her spouse, siblings, ascendants and descendants, and, with respect to the Company’s Business, includes, without limitation, each person or entity which controls the Company, is controlled by the Company, or is under common control with the Company. For purposes of this definition, “control,” “controlled by” and “under common control with,” as applied to any person or entity, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that person or entity, whether through the ownership of voting securities, by contract or otherwise.

(j) Notices. Notices required to be given under this Agreement must be in writing and will be deemed to have been given when notice is personally served, one (1) business day after notice is sent by reliable overnight courier, or three (3) business days after notice is mailed by United States registered or certified mail, return receipt requested, postage prepaid, to the last known residence address of Employee or, in the case of the Company, to its principal office, to the attention of the Board, or to such other address as either Party may have furnished to the other in writing in accordance herewith, except that notice of change of address will be effective only upon receipt by the other Party.

(k) Taxes. The Company may deduct from any payments made and benefits provided to Employee hereunder any withholding or other taxes which the Company is required or authorized to deduct under applicable law. Employee shall be liable and responsible for all of Employee’s tax obligations applicable to the compensation and benefits provided to Employee under this Agreement.

(l) Internal Revenue Code Section 409A. Anything in this Agreement to the contrary notwithstanding, if at the time of Employee’s separation from service within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), the Company determines that Employee is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code, then to the extent any payment or benefit that Employee becomes entitled to under this Agreement on account of Employee’s separation from service would be considered deferred compensation and otherwise subject to the 20 percent (20%) additional tax imposed pursuant to Section 409A(a) of the Code as a result of the application of Section 409A(a)(2)(B)(i) of the Code, such Payment shall not be payable and such benefit shall not be provided until the date that is the earlier of (A) six months and one day after Employee’s separation from service, or (B) Employee’s death. If any such delayed cash payment is otherwise payable on an installment basis, the first payment shall include a catch-up payment covering amounts that would otherwise have been paid during the six-month period but for the application of this provision, and the balance of the installments shall be payable in accordance with their original schedule.

All in-kind benefits provided and expenses eligible for reimbursement under this Agreement shall be provided by the Company or incurred by Employee during the time periods set forth in this Agreement. All reimbursements shall be paid as soon as administratively practicable, but in no event shall any reimbursement be paid after the last day of the taxable year following the taxable year in which the expense was incurred. To the extent such in-kind benefit is subject to Section 409A of the Code, the amount of in-kind benefits provided or reimbursable expenses incurred in one taxable year shall not affect the in-kind benefits to be provided or the expenses eligible for reimbursement in any other taxable year (except for any lifetime or other aggregate limitation applicable to medical expenses) and such right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.

To the extent that any payment or benefit described in this Agreement constitutes “non-qualified deferred compensation” under Section 409A of the Code, and to the extent that such payment or benefit is payable upon Employee’s termination of employment, then such payments or benefits shall be payable only upon Employee’s “separation from service.” The determination of whether and when a separation from service has occurred shall be made in accordance with the presumptions set forth in Treasury Regulation Section 1.409A-1(h).

The Parties intend that this Agreement will be administered in accordance with Section 409A of the Code. To the extent that any provision of this Agreement is ambiguous as to its compliance with Section 409A of the Code, the provision shall be read in such a manner so that all payments hereunder comply with Section 409A of the Code. Each Payment pursuant to this Agreement is intended to constitute a separate payment for purposes of Treasury Regulation Section 1.409A-2(b)(2). The Parties agree that this Agreement may be amended, as reasonably requested by either Party, and as may be necessary to fully comply with Section 409A of the Code and all related rules and regulations in order to preserve the payments and benefits provided hereunder without additional cost to either Party.

(m) Application of Internal Revenue Code Section 280G. If any payment or benefit Employee would receive pursuant to a Change in Control from the Company or otherwise (“Payment”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code, and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then such Payment shall be equal to the “Net Best Amount.” The “Net Best Amount” shall be either (x) the largest portion of the Payment that would result in no portion of the Payment being subject to the Excise Tax or (y) the total Payment, whichever amount, after taking into account all applicable federal, state and local employment taxes, income taxes, and the Excise Tax (all computed at the highest applicable marginal rate), results in Employee’s receipt, on an after-tax basis, of the greater economic benefit. If a reduction in payments or benefits constituting “parachute payments” is necessary so that the Payment equals the Net Best Amount, reduction shall occur in the manner that results in the greatest economic benefit to Employee. If more than one method of reduction will result in the same economic benefit, Employee can choose which Payments to reduce, including the option to reduce Payments pro-rata.

Unless Employee and the Company agree on an alternative accounting firm, the accounting firm engaged by the Company for general tax compliance purposes shall perform the foregoing calculations prior to the date of the Change in Control. If the accounting firm so engaged by the Company is serving as accountant or auditor for the individual, entity or group effecting the Change in Control, the Company shall hire a nationally recognized accounting firm to make the determinations required hereunder. The Company shall bear all expenses with respect to the determinations by such accounting firm required to be made hereunder. The Company shall use commercially reasonable efforts to cause the accounting firm engaged to make the determinations hereunder to provide its calculations, together with detailed supporting documentation, to Employee and the Company within fifteen (15) calendar days after the date on which Employee’s right to a Payment is triggered (if requested at that time by Employee or the Company) or such other time as requested by Employee or the Company.

(n) Counterparts. This Agreement may be executed in any number of counterparts, and such counterparts executed and delivered, each as an original, shall constitute but one and the same instrument.

(o) Severability. In the event there is litigation involving this Agreement and a court of competent jurisdiction concludes that one or more provisions are invalid or unenforceable for whatever reason, the court shall have the authority to modify such provision(s) to make said provision(s) enforceable, if possible, within the bounds of the Parties’ original intent. The invalidity or unenforceability of any particular provision of this Agreement shall not affect the remainder of the Agreement, which shall be construed in all respects as if any invalid or unenforceable provision was omitted. Further, the unenforceability or invalidity of any provision of this Agreement shall not affect the validity or enforceability of the other provisions.

(p) Captions and Headings. The captions and paragraph headings used in this Agreement are for convenience of reference only and shall not affect the construction or interpretation of this Agreement or any of the provisions hereof.

IN WITNESS WHEREOF, Employee and the Company have executed this Agreement as of the date set forth in the first paragraph.

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NEW AGE BEVERAGES CORPORATION:		BRENT D. WILLIS:

By:	/s/ Greg Fea	/s/ Brent D. Willis
Name:	Greg Fea	Date:	May 8, 2020
Title:	Chairman
Date:	May 8, 2020

Schedule 1

None

Schedule 2

Indemnification Agreement

Indemnification Agreement

This Indemnification Agreement (this “Agreement”) is dated as of [March 14, 2018] (the “Effective Date”), and is between New Age Beverages Corporation, a Washington corporation (the “Company”), and Brent Willils (“Indemnitee”).

RECITALS:

A. Indemnitee’s service to the Company substantially benefits the Company.

B. Individuals may be reluctant to serve as directors or officers of corporations or in certain other capacities unless they are provided with adequate assurance of protection through insurance or indemnification against the risks of claims and actions against them arising out of such service.

C. Indemnitee does not regard the protection currently provided by applicable law, the Company’s governing documents and any insurance as adequate under the present circumstances, and Indemnitee may not be willing to serve as a director or officer without additional protection.

D. In order to induce Indemnitee to continue to provide services to the Company, it is reasonable, prudent and necessary for the Company to contractually obligate itself to indemnify, and to advance expenses on behalf of, Indemnitee as permitted by applicable law.

E. This Agreement is a supplement to and in furtherance of the indemnification provided in the Company’s articles of incorporation, bylaws and applicable law, and any resolutions adopted pursuant thereto, and this Agreement shall not be deemed a substitute therefor, nor shall this Agreement be deemed to limit, diminish or abrogate any rights of Indemnitee thereunder.

The parties therefore agree as follows:

1. Definitions.

(a) A “Change in Control” shall be deemed to occur upon the earliest to occur after the date of this Agreement of any of the following events:

(i) Acquisition of Stock by Third Party. Any Person (as defined below) is or becomes the Beneficial Owner (as defined below), directly or indirectly, of securities of the Company representing twenty percent (20%) or more of the combined voting power of the Company’s then outstanding securities; provided, however, that the foregoing shall not include any Person having such status prior to the consummation of the initial public offering of the Company’s securities unless after the initial public offering such Person is or becomes the Beneficial Owner, directly or indirectly, of additional securities of the Company representing in the aggregate an additional five percent (5%) or more of the combined voting power of the Company’s then outstanding securities;

(ii) Change in Board Composition. During any period of two (2) consecutive years (not including any period prior to the Effective Date), individuals who at the beginning of such period constitute the Company’s board of directors, and any new directors (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in Sections 1(a)(i), 1(a)(iii) or 1(a)(iv)) whose election by the board of directors or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds of the directors then-still in office, who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority of the members of the Company’s Board of Directors;

(iii) Corporate Transactions. A merger or consolidation of the Company with any other entity, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior to such merger or surviving entity) [more than 50%] of the combined voting power of the voting securities of the surviving entity consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the outstanding immediately after such merger or consolidation and with the power to elect at least a majority of the board of directors or other governing body of such surviving entity;

(iv) Liquidation. The approval by the stockholders of the Company of a complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets; and

(v) Other Events. Any other event of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or in response to any similar item on any similar schedule or form) promulgated under the Securities Exchange Act of 1934, as amended, whether or not the Company is then subject to such reporting requirement.

For purposes of this Section 1(a), the following terms shall have the following meanings:

(1) “Person” shall have the meaning as set forth in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended; provided, however, that “ Person ” shall exclude (i) the Company, (ii) any trustee or other fiduciary holding securities under an employee benefit plan of the Company, and (iii) any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company.

(2) “Beneficial Owner” shall have the meaning given to such term in Rule 13d-3 under the Securities Exchange Act of 1934, as amended; provided, however, that “ Beneficial Owner ” shall exclude any Person otherwise becoming a Beneficial Owner by reason of (i) the stockholders of the Company approving a merger of the Company with another entity or (ii) the Company’s board of directors approving a sale of securities by the Company to such Person.

(3) “Corporate Status” describes the status of a person who is or was a director, trustee, general partner, managing member, officer, employee, agent, deemed fiduciary or fiduciary of the Company or any other Enterprise.

(4) “Disinterested Director” means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.

(5) “Enterprise” means the Company and any other corporation, partnership, limited liability company, joint venture, trust, employee benefit plan or other enterprise of which Indemnitee is or was serving at the request of the Company as a director, trustee, general partner, managing member, officer, employee, agent, deemed fiduciary or fiduciary.

(6) “Expenses” include all direct and indirect costs of any type or nature whatsoever, including without limitation, attorneys’ fees, retainers, court costs, transcript costs, fees and costs of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses actually and reasonably, and of the types customarily, incurred by Indemnitee, or on his or her behalf, in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, or otherwise participating in, a Proceeding. Expenses also include (i) Expenses incurred in connection with any appeal resulting from any Proceeding, including without limitation the premium, security for, and other costs relating to any cost bond, or other appeal bond or their equivalent, (ii) any federal, state, local or foreign taxes imposed on the Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement and (iii) for purposes of Section 12(d), Expenses incurred by Indemnitee in connection with the interpretation, enforcement or defense of Indemnitee’s rights under this Agreement or under any directors’ and officers’ liability insurance policies maintained by the Company. Expenses, however, shall not include amounts paid in settlement by Indemnitee or the amount of judgments or fines against Indemnitee.

(7) “Independent Counsel” means a law firm, or a partner or member of a law firm, that is experienced in matters of corporation law and neither currently is, as of the time the request for indemnification is made nor in the previous five (5) years has been, retained to represent (i) the Company or Indemnitee in any matter material to either such party (other than as Independent Counsel with respect to matters concerning Indemnitee under this Agreement, or other indemnitees under similar indemnification agreements), or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “ Independent Counsel ” shall not include any person who, under the applicable standards of professional conduct then-prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement.

(8) “Proceeding” means any threatened, pending or completed action, suit, arbitration, mediation, alternate dispute resolution mechanism, investigation, inquiry, hearing or proceeding, preliminary, information or formal, of any type whatsoever, or claim, demand, action issue or matter therein, whether brought in the right of the Company, a Subsidiary or otherwise, and whether of a civil, criminal, administrative or investigative nature, including any appeal therefrom, and including without limitation any such Proceeding pending as of the Effective Date, in which Indemnitee was, is or will be involved as a party, a potential party, a non-party witness or otherwise by reason of (i) the fact that Indemnitee is or was a director or officer of the Company or of a Subsidiary, or (ii) the fact or assertion that he or she is or was serving at the request of the Company or of a Subsidiary as a director, trustee, general partner, managing member, officer, employee, agent, deemed fiduciary or fiduciary of the Company, a Subsidiary or any other Enterprise, in each case whether or not serving in such capacity at the time any liability or Expense is incurred for which indemnification or advancement of expenses can be provided under this Agreement.

(9) “Subsidiary” means any entity of which more than 50% of the outstanding voting securities is owned directly or indirectly by the Company.

(10) Reference to “other enterprises” shall include employee benefit plans; references to “fines” shall include any excise taxes assessed on a person with respect to any employee benefit plan (excluding any “parachute payments” within the meanings of Sections 280G and 4999 of the Internal Revenue Code of 1986, as amended); references to “ serving at the request of the Company ” shall include any service as a director, officer, employee or agent of the Company or of a Subsidiary which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries, including as a deemed fiduciary thereto; and a person who acted in good faith and in a manner he or she reasonably believed to be in the best interests of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “ not opposed to the best interests of the Company ” as referred to in this Agreement.

2. Indemnity in Third-Party Proceedings.

The Company shall indemnify Indemnitee in accordance with the provisions of this Section 2 if Indemnitee is, or is threatened to be made, a party to or a participant in any Proceeding, other than a Proceeding by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 2, Indemnitee shall be indemnified to the fullest extent permitted by applicable law against all Expenses, judgments, fines and amounts paid in settlement in connection with such Proceeding, if Indemnitee acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his or her conduct was unlawful.

3. Indemnity in Proceedings by or in the Right of the Company.

The Company shall indemnify Indemnitee in accordance with the provisions of this Section 3 if Indemnitee is, or is threatened to be made, a party to or a participant in any Proceeding by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 3, Indemnitee shall be indemnified to the fullest extent permitted by applicable law against all Expenses in connection with such Proceeding, if Indemnitee acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company. No indemnification for Expenses shall be made under this Section 3 in respect of any claim, issue or matter as to which Indemnitee shall have been finally adjudged by a court of competent jurisdiction to be liable to the Company, unless and only to the extent that the Washington District Courts shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnification for such expenses as the Washington State District Courts shall deem proper.

4. Indemnification for Expenses of a Party Who is Wholly or Partly Successful.

To the extent that Indemnitee is a party to or a participant in and is successful (on the merits or otherwise) in defense of any Proceeding or any claim, issue or matter therein, the Company shall indemnify Indemnitee against all Expenses in connection therewith. To the extent permitted by applicable law, if Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, in defense of one or more but fewer than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee against all Expenses in connection with (a) each successfully resolved claim, issue or matter and (b) any claim, issue or matter related to any such successfully resolved claim, issue or matter. For purposes of this Section 4, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, or settlement, with or without court approval, shall be deemed to be a successful result as to such claim, issue or matter.

5. Indemnification for Expenses of a Witness.

To the extent that Indemnitee is, by reason of his or her Corporate Status, a witness, or is made (or asked to) respond to discovery requests, in any Proceeding to which Indemnitee is not a party, Indemnitee shall be indemnified to the extent permitted by applicable law against all Expenses in connection therewith.

6. Additional Indemnification.

(a) Notwithstanding any limitation in Sections 2, 3 or 4, above, the Company shall indemnify Indemnitee to the fullest extent permitted by applicable law if Indemnitee is, or is threatened to be made, a party to or a participant in any Proceeding (including a Proceeding by or in the right of the Company to procure a judgment in its favor) against all Expenses, judgments, fines and amounts paid in settlement in connection with the Proceeding.

(b) For purposes of Section 6(a), the meaning of the phrase “to the fullest extent permitted by applicable law” shall include, but not be limited to: (i) the fullest extent permitted by the provision of the Washington Statutes that authorizes or contemplates additional indemnification by agreement, or the corresponding provision of any amendment to or replacement of the Washington Statutes; and (ii) the fullest extent authorized or permitted by any amendments to or replacements of the Washington Statutes adopted after the date of this Agreement that increase the extent to which a corporation may indemnify its officers and directors.

7. Exclusions.

Notwithstanding any provision in this Agreement, the Company shall not be obligated under this Agreement to make any indemnity or provide any benefit to Indemnitee under this Agreement or otherwise, in connection with any Proceeding (or any part of any Proceeding):

(a) for which payment has actually been made to or on behalf of Indemnitee under any statute, insurance policy, indemnity provision, vote or otherwise, except with respect to any excess beyond the amount paid[, subject to any subrogation rights set forth in Section 15];

(b) for an accounting or disgorgement of profits pursuant to Section 16(b) of the Securities Exchange Act of 1934, as amended, or similar provisions of federal, state or local statutory law or common law, if Indemnitee is held liable therefor (including pursuant to any settlement arrangements);

(c) for any reimbursement of the Company by Indemnitee of any bonus or other incentive-based or equity-based compensation or of any profits realized by Indemnitee from the sale of securities of the Company, as required in each case under the Securities Exchange Act of 1934, as amended (including any such reimbursements that arise from an accounting restatement of the Company pursuant to Section 304 of the Sarbanes-Oxley Act of 2002 (the “ Sarbanes-Oxley Act ”), or the payment to the Company of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 306 of the Sarbanes-Oxley Act), if Indemnitee is held liable therefor (including pursuant to any settlement arrangements);

(d) initiated by Indemnitee and not by way of defense, including against the Company or its directors, officers, employees, agents or other indemnitees, unless (i) the Company’s board of directors authorized the Proceeding (or the relevant part of the Proceeding) prior to its initiation, (ii) the Company provides the indemnification, in its sole discretion, pursuant to the powers vested in the Company under applicable law, (iii) otherwise authorized in Section 12(d), (iv) brought to discharge Indemnitee’s fiduciary responsibilities, whether under ERISA or otherwise, or (v) otherwise required by applicable law or the Company’s bylaws; or (e) if prohibited by applicable law as determined in a final adjudication not subject to further appeal.

8. Advances of Expenses.

The Company shall advance the Expenses incurred by Indemnitee in connection with any Proceeding prior to its final resolution, and such advancement shall be made as soon as reasonably practicable, but in any event no later than 30 days, after the receipt by the Company of a written statement or statements requesting such advances from time to time (which shall include invoices received by Indemnitee in connection with such Expenses but, in the case of invoices in connection with legal services, any references to legal work performed or to expenditure made that would cause Indemnitee to waive any privilege accorded by applicable law shall not be included with the invoice).

Reimbursements hereunder shall be deemed advances, and advances shall be unsecured and interest free and made without regard to Indemnitee’s ability to repay such advances or subject to the satisfaction of any standard of conduct. Indemnitee hereby undertakes to repay any such advance to the extent that it is ultimately determined that Indemnitee is not entitled to be indemnified by the Company. No other form of undertaking shall be required other than the execution of this Agreement. This Section 8 shall not apply to prevent reimbursement to the extent advancement is prohibited by law, as determined in a final adjudication not subject to further appeal, or with respect to Proceeding for which indemnity is not permitted under this Agreement, but shall apply to any Proceeding referenced in Section 7(b) or 7(c) prior to a determination that Indemnitee is not entitled to be indemnified by the Company. The Company shall not seek from a court, or agree to, a “bar order” which would have the effect of prohibiting or limiting the Indemnitee’s rights to receive advancement of expenses under this Agreement.

9. Procedures for Notification and Defense of Claim.

(a) Indemnitee shall notify the Company in writing of any matter with respect to which Indemnitee intends to seek indemnification or advancement of Expenses as soon as reasonably practicable following the receipt by Indemnitee of notice thereof. The written notification to the Company shall include, in reasonable detail, a description of the nature of the Proceeding and the facts underlying the Proceeding. The failure by Indemnitee to notify the Company will not relieve the Company from any liability which it may have to Indemnitee hereunder or otherwise than under this Agreement, and any delay in so notifying the Company shall not constitute a waiver by Indemnitee of any rights, except to the extent that such failure or delay materially prejudices the Company.

(b) If, at the time of the receipt of a written notice of a Proceeding pursuant to the terms hereof, the Company has directors’ and officers’ liability insurance in effect, the Company shall give prompt notice of the commencement of the Proceeding to such insurers in accordance with the procedures set forth in the applicable policies. The Company shall thereafter take all commercially-reasonable actions to cause such insurers to pay, on behalf of Indemnitee, all amounts payable as a result of such Proceeding in accordance with the terms of such policies.

(c) In the event the Company may be obligated to make any indemnity in connection with a Proceeding, the Company shall be entitled to assume the defense of such Proceeding with counsel approved by Indemnitee, which approval shall not be unreasonably withheld, upon the delivery to Indemnitee of written notice of the Company’s election to do so. After delivery of such notice, approval of such counsel by Indemnitee and the retention of such counsel by the Company, the Company will not be liable to Indemnitee for any fees or expenses of counsel subsequently incurred by Indemnitee with respect to the same Proceeding. Notwithstanding the Company’s assumption of the defense of any such Proceeding, the Company shall be obligated to pay the fees and expenses of Indemnitee’s separate counsel to the extent (i) the employment of separate counsel by Indemnitee is authorized by the Company, (ii) counsel for the Company or Indemnitee shall have reasonably concluded that there is a conflict of interest between the Company and Indemnitee in the conduct of any such defense, such that Indemnitee needs to be separately represented, (iii) the fees and expenses are non-duplicative and reasonably incurred in connection with Indemnitee’s role in the Proceeding despite the Company’s assumption of the defense, (iv) the Company is not financially or legally able to perform its indemnification obligations, or (v) the Company shall not have retained, or shall not continue to retain, such counsel to defend such Proceeding. Regardless of any provision in this Agreement, Indemnitee shall have the right to employ counsel in any Proceeding at Indemnitee’s personal expense. The Company shall not be entitled, without the consent of Indemnitee, to assume the defense of any claim brought by or in the right of the Company.

(d) Indemnitee shall give the Company such information and cooperation in connection with the Proceeding as may be reasonably appropriate.

(e) The Company shall not be liable to indemnify Indemnitee for any settlement of any Proceeding (or any part thereof) without the Company’s prior written consent, which shall not be unreasonably withheld.

(f) The Company shall not settle any Proceeding (or any part thereof) with respect to Indemnitee without Indemnitee’s prior written consent, which shall not be unreasonably withheld. Indemnitee (including the Company) without the consent of Indemnitee.

(g) The Company shall have the right to settle any Proceeding (or any part thereof) with respect to persons other than on its own behalf, settle any part of any Proceeding to which Indemnitee is party with respect to other parties (including the Company) without the written consent of Indemnitee if any portion of such settlement is to be funded from insurance proceeds unless approved by (1) the written consent of Indemnitee or (2) a majority of the independent members of the Company’s board of directors; provided, further, that the right to constrain the Company’s use of corporate insurance as described in this section shall terminate at the time the Company concludes (per the terms of this Agreement) that (i) Indemnitee is not entitled to indemnification pursuant to this agreement, or (ii) such indemnification obligation to Indemnitee has been fully discharged by the Company.

(h) The Company shall promptly notify Indemnitee once the Company has received an offer or intends to make an offer to settle any such Proceeding (or any part thereof) and the Company shall provide Indemnitee as much time as reasonably practicable to consider such offer prior to responding to the offer or making the offer to settle any such Proceeding (or part thereof).

(i) If the Indemnitee is the subject of or is implicated in any way during an investigation, whether formal or informal, the Company will use commercially reasonable efforts to notify Indemnitee of such investigation and shall share with Indemnitee any information it has furnished to any third parties concerning the investigation, unless the Company in good faith makes a judgment that it would be inappropriate to do so under the circumstances, including with respect to the nature, integrity or progress of the investigation or as would be in violation of a governmental order or directive and, provided, however, that if Indemnitee was never a director of the Company, the rights described in this section 9(i) shall terminate when Indemnitee is no longer an employee of the Company.

10. Procedures upon Application for Indemnification.

(a) To obtain indemnification, Indemnitee shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and as is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification following the final disposition of the Proceeding. The Company shall, as soon as reasonably practicable after receipt of such a request for indemnification, advise the board of directors that Indemnitee has requested indemnification. Any delay in providing the request will not relieve the Company from its obligations under this Agreement, except to the extent such failure is prejudicial.

(b) Upon written request by Indemnitee for indemnification pursuant to Section 10(a), a determination, if required by applicable law, with respect to Indemnitee’s entitlement thereto shall be made in the specific case (i) if a Change in Control shall have occurred, by Independent Counsel in a written opinion to the Company’s board of directors, a copy of which shall be delivered to Indemnitee or (ii) if a Change in Control shall not have occurred, (A) by a majority vote of the Disinterested Directors, even though less than a quorum of the Company’s board of directors, (B) by a committee of Disinterested Directors designated by a majority vote of the Disinterested Directors, even though less than a quorum of the Company’s board of directors, (C) if there are no such Disinterested Directors, or if such Disinterested Directors so direct, by Independent Counsel in a written opinion to the Company’s board of directors, a copy of which shall be delivered to Indemnitee, or (D) if so directed by the Company’s board of directors, by the stockholders of the Company.

If it is so determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within ten (10) days after such determination. Indemnitee shall cooperate with the person, persons or entity making the determination with respect to Indemnitee’s entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information that is not privileged or otherwise protected from disclosure and that is reasonably available to Indemnitee and reasonably necessary to such determination. Any Expenses incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company, to the extent permitted by applicable law.

(c) In the event the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 10(b), the Independent Counsel shall be selected as provided in this Section 10(c). If a Change in Control shall not have occurred, the Independent Counsel shall be selected by the Company’s board of directors, and the Company shall give written notice to Indemnitee advising him or her of the identity of the Independent Counsel so selected. If a Change that such selection be made by the Company’s board of directors, in which event the preceding sentence shall apply), and Indemnitee shall give written notice to the Company advising it of the identity of the Independent Counsel so selected. In either event, Indemnitee or the Company, as the case may be, may, within ten days after such written notice of selection shall have been given, deliver to the Company or to Indemnitee, as the case may be, a written objection to such selection; provided , however , that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of “Independent Counsel,” as defined in Section 1 of this Agreement, and the objection shall set forth with particularity the factual basis of such assertion.

Absent a proper and timely objection, the person so selected shall act as Independent Counsel. If such written objection is so made and substantiated, the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit. If, within 20 days after the later of (i) submission by Indemnitee of a written request for indemnification pursuant to Section 10(a) hereof and (ii) the final disposition of the Proceeding, the parties have not agreed upon an Independent Counsel, either the Company or Indemnitee may petition a court of competent jurisdiction for resolution of any objection which shall have been made by the Company or Indemnitee to the other’s selection of Independent Counsel and for the appointment as Independent Counsel of a person selected by the court or by such other person as the court shall designate, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel under Section 10(b), above.

Upon the due commencement of any judicial proceeding or arbitration pursuant to Section 12(a), below, the Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then-prevailing).

(d) The Company agrees to pay the reasonable fees and expenses of any Independent Counsel and to fully indemnify such counsel against any and all Expenses, claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto.

(e) Notwithstanding a final determination by any reviewing party identified in Section 10(b) above that Indemnitee is not entitled to indemnification with respect to a specific Proceeding, Indemnitee shall have the right to apply to the District Courts, for the purpose of enforcing Indemnitee’s right to indemnification pursuant to the provisions of this Agreement, the Company’s articles of incorporation or Bylaws.

11. Presumptions and Effect of Certain Proceedings.

(a) In making a determination with respect to entitlement to indemnification hereunder, the person, persons or entity making such determination shall, to the fullest extent not prohibited by applicable law, presume that Indemnitee is entitled to indemnification if Indemnitee has submitted a request for indemnification in accordance with Section 10(a) of this Agreement, and the Company shall, to the fullest extent not prohibited by applicable law, have the burden of proof to overcome that presumption in connection with the making by such person, persons or entity of any determination contrary to that presumption.

(b) The termination of any Proceeding, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement or as required by applicable law) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that his or her conduct was unlawful.

(c) For purposes of any determination of good faith, Indemnitee shall be deemed to have acted in good faith or not to have acted in bad faith to the extent Indemnitee relied in good faith on (i) the records or books of account of the Enterprise, including financial statements, (ii) information supplied to Indemnitee by the officers of the Enterprise in the course of their duties, (iii) the advice of legal counsel for the Enterprise or its board of directors, or counsel selected by any committee of the board of directors, or (iv) information or records given or reports made to the Enterprise by an independent certified public accountant, an appraiser, investment banker or other expert selected with reasonable care by the Enterprise or its board of directors or any committee of the board of directors (including consultants or advisors formally engaged by the board or committee). The provisions of this Section 11(c) shall not be deemed to be exclusive or to limit in any way the other circumstances in which Indemnitee may be deemed to have met the applicable standard of conduct set forth in this Agreement.

(d) Neither the knowledge, actions nor failure to act of the Enterprise or any other director, officer, agent or employee of the Enterprise shall be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement.

12. Remedies of Indemnitee.

(a) Subject to Section 12(e), in the event that (i) a determination is made pursuant to Section 10, above, that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 8, above, or 12(d), below, (iii) no determination of entitlement to indemnification shall have been made pursuant to Section 10, above, within 90 days after the later of the receipt by the Company of the request for indemnification or the final disposition of the Proceeding, (iv) payment of indemnification pursuant to this Agreement is not made (A) within ten (10) days after a determination has been made that Indemnitee is entitled to indemnification or (B) with respect to indemnification pursuant to Sections 4 or 5, above, and 12(d), below, within 30 days after receipt by the Company of a written request therefor, or (v) the Company or any other person or entity takes or threatens to take any action to declare this Agreement void or unenforceable, or institutes any litigation or other action or proceeding to deny, or to recover from, Indemnitee the benefits provided or intended to be provided to Indemnitee hereunder, Indemnitee shall be entitled to an adjudication in a court of competent jurisdiction of his or her entitlement to such indemnification or advancement of Expenses.

Alternatively, Indemnitee, at his or her option, may seek an award in arbitration with respect to his or her entitlement to such indemnification or advancement of Expenses, to be conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association. Indemnitee shall commence such proceeding seeking an adjudication or an award in arbitration within 180 days following the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 12(a); provided, however, that the foregoing clause shall not apply in respect of a proceeding brought by Indemnitee to enforce his or her rights under Section 4, above. The Company shall not oppose Indemnitee’s right to seek any such adjudication or award in arbitration in accordance with this Agreement.

(b) Neither (i) the failure of the Company, its board of directors, any committee or subgroup of the board of directors, Independent Counsel or stockholders to have made a determination that indemnification of Indemnitee is proper in the Circumstances because Indemnitee has met the applicable standard of conduct, nor (ii) an actual determination by the Company, its board of directors, any committee or subgroup of the board of directors, Independent Counsel or stockholders that Indemnitee has not met the applicable standard of conduct, may be asserted or offered into evidence as a defense to the action or to create a presumption that Indemnitee has or has not met the applicable standard of conduct. In the event that a determination shall have been made pursuant to Section 10 of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 12 shall be conducted in all respects as a de novo trial, or arbitration, on the merits, and Indemnitee shall not be prejudiced by reason of that adverse determination. In any judicial proceeding or arbitration commenced pursuant to this Section 12, the Company shall, to the fullest extent not prohibited by applicable law, have the burden of proving Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be.

(c) To the fullest extent not prohibited by applicable law, the Company shall be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 12 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Agreement. If a determination shall have been made pursuant to Section 10, above, that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 12, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statements not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law.

(d) To the extent not prohibited by applicable law the Company shall indemnify Indemnitee against all Expenses that are incurred by Indemnitee in connection with any action for indemnification or advancement of Expenses from the Company extent Indemnitee is successful in such action, and, if requested by Indemnitee, the Company shall (as soon as reasonably under this Agreement or under any directors’ and officers’ liability insurance policies maintained by the Company to the practicable, but in any event no later than 60 days, after receipt by the Company of a written request therefor) advance such Expenses to Indemnitee, subject to the provisions of Section 8, above.

(e) Notwithstanding anything in this Agreement to the contrary, no determination as to entitlement to indemnification shall be required to be made prior to the final disposition of the Proceeding.

13. Contribution.

To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amounts incurred by Indemnitee, whether for Expenses, judgments, fines or amounts paid or to be paid in settlement, in connection with any claim relating to an indemnifiable event under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (i) the relative benefits received by the Company and Indemnitee as a result of the events and transactions giving rise to such Proceeding; and (ii) the relative fault of Indemnitee and the Company (and its other directors, officers, employees and agents) in connection with

such events and transactions.

14. Non-exclusivity; No Limitation on Indemnity Rights.

The rights of indemnification and to receive advancement of Expenses as provided by this Agreement shall not be deemed exclusive of, or in any manner limit, any other rights to which Indemnitee may at any time be entitled under applicable law, the Company’s articles of incorporation or bylaws, any agreement, a vote of stockholders or a resolution of directors, or otherwise. To the extent that a change in Washington law, whether by statute or judicial decision, permits greater indemnification or advancement of Expenses than would be afforded currently under the Company’s articles of incorporation and bylaws and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change, subject to the restrictions expressly set forth herein or therein. Except as expressly set forth herein, no right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. Except as expressly set forth herein, the assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.

15. No Duplication of Payments.

The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder (or for which advancement is provided hereunder) if and to the extent that Indemnitee has otherwise actually received payment for such amounts under any insurance policy, contract, agreement or otherwise. Notwithstanding any other provision of this Agreement to the contrary, (i) Indemnitee shall have no obligation to reduce, offset, allocate, pursue or apportion any indemnification, hold harmless, exoneration, advancement, contribution or insurance coverage among multiple parties possessing such duties to Indemnitee prior to the Company’s satisfaction and performance of all its obligations under this Agreement, and (ii) the Company shall perform fully its obligations under this Agreement without regard to whether Indemnitee holds, may pursue or has pursued any indemnification, advancement, hold harmless, exoneration, contribution or insurance coverage rights against any person or entity other than the Company.

16. Insurance.

To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, trustees, general partners, managing members, officers, employees, agents or fiduciaries of the Company or any other Enterprise, Indemnitee shall be covered by such policy or policies to the same extent as the most favorably insured persons under such policy or policies in a comparable position. In the event of a Change in Control, or the Company becoming insolvent (including being placed into receivership or entering the federal bankruptcy process and the like), the Company shall maintain in force any and all insurance policies then maintained by the Company in respect of Indemnitee (including directors’ and officers’ liability, fiduciary, employment practices or otherwise), for a period of six years thereafter (“Tail Policy”). The Tail Policy shall be placed by the broker of the Company’s choice with incumbent insurance carriers using the policies that were in place at the time of the Change in Control (unless the incumbent carriers do not offer such policies, in which case the Tail Policy shall be substantially comparable in scope and amount as the expiring policies.

17. Services to the Company.

Indemnitee agrees to serve as a director or officer of the Company or, at the request of the Company, as a director, trustee, general partner, managing member, officer, employee, agent, deemed fiduciary or fiduciary of another Enterprise, for so long as Indemnitee is duly elected or appointed or until Indemnitee tenders his or her resignation or is removed from such position. Indemnitee may at any time and for any reason resign from such position (subject to any other contractual obligation or any obligation imposed by operation of law), in which event the Company shall have no obligation under this Agreement to continue Indemnitee in such position. This Agreement shall not be deemed an employment contract between the Company (or any of its subsidiaries or any Enterprise) and Indemnitee.

Indemnitee specifically acknowledges that any employment with the Company (or any of its subsidiaries or any Enterprise) is at will, and Indemnitee may be discharged at any time for any reason, with or without cause, with or without notice, except as may be otherwise expressly provided in any executed, written employment contract between Indemnitee and the Company (or any of its subsidiaries or any Enterprise), any existing formal severance policies adopted by the Company’s board of directors or, with respect to service as a director or officer of the Company, the Company’s articles of incorporation or bylaws. No such document shall be subject to any oral modification thereof.

18. Duration.

This Agreement shall commence as of the Effective Date and continue until and terminate upon the later of (a) ten (10) years after the date that Indemnitee shall have ceased to serve as a director or officer of the Company or a Subsidiary, or as a director, trustee, general partner, managing member, officer, employee, agent, deemed fiduciary or fiduciary of any other Enterprise, as applicable, or (b) one (1) year after the final termination of any Proceeding, including any appeal, then-pending in respect of which Indemnitee is granted rights of indemnification or advancement of Expenses hereunder and of any proceeding commenced by Indemnitee pursuant to Section 12, above, relating thereto. For the avoidance of doubt, this Agreement shall provide for rights of indemnification and advancement of Expenses as set forth herein regardless of whether such events or occurrences occurred before or after the Effective Date.

19. Successors.

This Agreement shall be binding upon the Company and its successors and assigns, including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company, and shall inure to the benefit of Indemnitee and Indemnitee’s heirs, executors and administrators. The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company, by written agreement, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.

20. Severability.

Nothing in this Agreement is intended to require or shall be construed as requiring the Company to do or fail to do any act in violation of applicable law. The Company’s inability, pursuant to court order or other applicable law, to perform its obligations under this Agreement shall not constitute a breach of this Agreement. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (i) the validity, legality and enforceability of the remaining provisions of this Agreement (including without limitation, each portion of any section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and shall remain enforceable to the fullest extent permitted by law; (ii) such provision or provisions shall be deemed reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto; and (iii) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby.

21. Enforcement.

The Company expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on it hereby in order to induce Indemnitee to serve as a director or officer of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as a director or officer of the Company. The Company and Indemnitee agree that a monetary remedy for breach of this Agreement may be inadequate, impracticable and difficult of proof, and further agree that such breach may cause Indemnitee irreparable harm. Accordingly, the parties hereto agree that Indemnitee may enforce this Agreement by seeking injunctive relief and/or specific performance hereof, without any necessity of showing actual damage or irreparable harm and that by seeking injunctive relief and/or specific performance, Indemnitee shall not be precluded from seeking or obtaining any other relief to which he may be entitled.

The Company and Indemnitee further agree that Indemnitee shall be entitled to such specific performance and injunctive relief, including temporary restraining orders, preliminary injunctions and permanent injunctions, without the necessity of posting bonds or other undertaking in connection therewith. The Company acknowledges that in the absence of a waiver, a bond or undertaking may be required of Indemnitee by the Court, and the Company hereby waives any such requirement of a bond or undertaking.

22. Entire Agreement.

This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof, including any other indemnification agreement between the parties hereto; provided , however , that this Agreement is a supplement to and in furtherance of the Company’s obligations to Indemnitee, as provided by its articles of incorporation and bylaws, and by applicable law.

23. Modification and Waiver.

No supplement, modification or amendment to this Agreement shall be binding unless and only to the extent executed in writing by the parties hereto. No amendment, alteration or repeal of this Agreement shall adversely affect any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in his or her Corporate Status prior to such amendment, alteration or repeal. No waiver of any of the provisions of this Agreement shall constitute or be deemed a waiver of any other provision of this Agreement nor shall any waiver constitute a continuing waiver.

24. Notices.

All notices and other communications required or permitted hereunder shall be in writing and shall be mailed by registered or certified mail, postage prepaid, sent by facsimile or electronic mail or otherwise delivered by hand, messenger or courier service addressed:

(a) if to Indemnitee, to Indemnitee’s address, facsimile number or electronic mail address as shown on the signature page of this Agreement or in the Company’s records, as may be updated in accordance with the provisions hereof; or

(b) if to the Company, to the attention of the General Counsel of the Company at 1700 East 68^th Avenue, Denver, Colorado 80229, or at such other current address as the Company shall have furnished to Indemnitee. Each such notice or other communication shall for all purposes of this Agreement be treated as effective or having been given (i) if delivered by hand, messenger or courier service, when delivered (or if sent via a nationally-recognized overnight courier service, freight prepaid, specifying next-business-day delivery, one business day after deposit with the courier), (ii) if sent via mail, at the earlier of its receipt or five days after the same has been deposited in a regularly- maintained receptacle for the deposit of the United States mail, addressed and mailed as aforesaid, or (iii) if sent via facsimile, upon confirmation of facsimile transfer or, if sent via electronic mail, upon confirmation of delivery when directed to the relevant electronic mail address, if sent during normal business hours of the recipient, or if not sent during normal business hours of the recipient, then on the recipient’s next business day.

25. Applicable Law and Consent to Jurisdiction.

or by the Company or Indemnitee pursuant to a written agreement between the Company and Indemnitee providing for such, the Company and Indemnitee hereby irrevocably and unconditionally (i) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Washington State District Courts, and not in any other state or federal court in the United States of America or any court in any other country, (ii) consent to submit to the exclusive jurisdiction of the Washington State District Courts for purposes of any action or proceeding arising out of or in connection with this Agreement, (iii) appoint, to the extent such party is not otherwise subject to service of process in the Washington State District Courts, as its agent in the State of Washington as such party’s agent for acceptance of legal process in connection personally within the State of Washington, (iv) waive any objection to the laying of venue of any such action or proceeding in with any such action or proceeding against such party with the same legal force and validity as if served upon such party the Washington State District Courts, and (v) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Washington State a District Courts has been brought in an improper or inconvenient forum.

26. Counterparts.

This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. This Agreement may also be executed and delivered by facsimile signature and in counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement.

27. Captions.

The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.

The parties are signing this Indemnification Agreement as of the date stated in the introductory sentence.

NEW AGE BEVERAGES CORPORATION		Indemnitee:

By:	/s/ Neil Fallon	By:	/s/ Brent Willis
	Neil Fallon
	Executive Chairman

	July 10, 2018		July 10, 2018

Exhibit 10.5

EMPLOYMENT AGREEMENT

This Employment Agreement (the “Agreement”) is made and entered into by and between Gregory A. Gould (“Employee”) and New Age Beverages Corporation (the “Company”), effective as of May 8, 2020 (the “Effective Date”). For convenience, Employee and the Company together may be referred to as the “Parties” or each individually as a “Party.”

RECITALS

A. The Company is in the business of manufacturing and distributing organic and natural healthy beverages and other lifestyle products (the “Business”).

B. Employee is an experienced employee with considerable skill and expertise valuable to the success of the Company.

C. The Company desires to employ Employee, and Employee wishes to provide Employee’s services to the Company, subject to the terms and conditions set forth in this Agreement.

AGREEMENT

3. Position and Duties.

(a) Position with the Company. While employed, Employee shall serve as the Chief Financial Officer of the Company and shall report to the Chief Executive Officer and the Board of Directors of the Company (the “Board”). As the Chief Financial Officer, Employee shall: (i) manage the day-to-day financial and administrative affairs and operations of the Company and each of its subsidiaries; (ii) have all of the duties and powers customarily associated with the office of the Chief Financial Officer of a significant business enterprise; and (iii) perform such responsibilities as the Chief Executive Officer or the Board may assign to him from time-to-time, which will be consistent with his position. Employee will also provide services to the Company, or any of its Affiliates, in such capacity as requested from time-to-time by the Chief Executive Officer or the Board.

(b) Performance of Duties and Responsibilities. While Employee is employed by the Company hereunder, Employee will serve the Company and its Affiliates faithfully and to the best of his ability and will devote his full time, attention and efforts to the business of the Company and its Affiliates. Employee will follow and comply with applicable policies and procedures adopted by the Board or the Company from time-to-time, including without limitation, policies relating to business ethics, conflict of interest, non-discrimination and non-harassment, confidentiality and protection of trade secrets. Employee must not accept other employment or engage in other material business activity that conflicts with Employee’s duties to the Company, except as approved in writing by the Board, but may participate in charitable and personal investment activities, including sitting on boards of charitable organizations and one board of a private or public company, so long as such activities do not interfere with the performance of his duties and responsibilities hereunder. The Board’s approval of Employee’s participation in any such activities will not be unreasonably withheld. Employee hereby represents and confirms that Employee is under no contractual or legal commitments that would prevent Employee from fulfilling Employee’s duties and responsibilities as set forth in this Agreement.

4. Compensation.

(a) Base Salary. Employee’s base salary shall be $500,000.00 per annum (“Base Salary”), which shall be payable in equal installments during the year in accordance with the Company’s normal payroll schedule and shall be subject to deductions for customary withholdings, including, without limitation, federal and state withholding taxes and payroll taxes. The Base Salary of $500,000.00 per annum shall be subject to annual review beginning on or about January 1, 2021. In January of each year, the Compensation Committee of the Board of Directors (or the full Board of Directors, if there is no Compensation Committee) will determine if a salary increase is warranted for Employee.

(b) Annual Short-Term Incentives. In January of each year, the Compensation Committee of the Board of Directors shall establish the criteria for the payment of an incentive bonus to Employee with respect to the then current or completed fiscal year (the “Performance Bonus”), based on overall Company performance and outlook. The Performance Bonus will be based on a percentage of Base Salary, with target bonus at 50% of Base Salary. This bonus will be paid annually no later than March 15th of the year following the year in which the Targets were achieved. All bonuses are subject to overall Company performance and Board or the Compensation Committee of the Board approval.

(c) Annual Long-Term Incentives. Employee shall be eligible to participate in the Company’s performance stock option/share award plan. The Employee’s equity grant will be determined by the Board of Directors each year.

(e) Expenses. While Employee is employed by the Company hereunder, the Company shall reimburse Employee for all reasonable out-of-pocket business, travel and entertainment expenses incurred by Employee in the performance of the duties and responsibilities hereunder. Such reimbursement shall be subject to the Company’s normal policies and procedures for the senior executives of the Company for expense pre-approval and verification, documentation and reimbursement. In no event shall any such reimbursement compliant with company policy be paid later than two-and-a-half months after the end of the calendar year in which the expense was incurred.

5. Confidential Information.

6. Company Inventions.

7. Non-Competition and Non-Solicitation Covenants.

(a) Non-Competition. In order to protect the Company’s Confidential Information and trade secrets, which would cause irreparable harm to the Company if disclosed to a competitor, Employee covenants and agrees that during Employee’s employment with the Company and for one (1) year thereafter or the duration of the Severance 9 (i), whichever is greater (the “Restricted Period”), Employee will not, directly or indirectly, engage or participate in any business activity or enterprise, whether as a proprietor, owner, principal, agent, partner, officer, director, stockholder, employee, manager, member, consultant, independent contractor, joint venturer, agent, advisor, or otherwise that competes with the Company or any Affiliate of the Company in the Healthy Beverages Market (sports and performance beverages, energy drinks, RTD teas, enhanced fruit drinks, soy beverages, and enhanced water) skin care or health supplements (the “Company’s Business”) or engages in any services or other activity (or any substantially similar service, activity or line of business) that competes or interferes with the Company’s Business, has resulted, or threatens imminently to result in the disclosure or use of the Company’s Confidential Information in the Company’s Business (the “Restricted Business”). For purposes of this Section 7, the applicable geographical area of the Restricted Business is anywhere in the United States or any other area in which Employee knows, or reasonably should know, the Company or any Affiliate of the Company (as defined below) conducts the Restricted Business, including, but not limited to, any business that the Company or any Affiliate of the Company is actively engaged in or interested in pursuing, as of the Termination Date (the “Restricted Area”).

(b) Non-Solicitation. Employee covenants and agrees that during the Restricted Period, Employee will not on behalf of himself or directly or indirectly through another person or entity (including without limitation as a proprietor, owner, principal, agent, partner, officer, director, stockholder, employee, manager, member, consultant or otherwise):

8. Termination of Employment.

(a) Employee’s employment with the Company under this Agreement will terminate upon:

(i) Expiration of the Term based solely on the Company’s election not to renew the Term under Section 2 of this Agreement;

(ii) Employee’s actual receipt of notification by the Company that Employee’s employment has been terminated;

(iii) Employee’s resignation;

(iv) Employee’s Disability; or

(v) Employee’s death.

(e) Shares, Options, Warrants and Equivalents. Upon termination of Employee’s employment, all vested shares, options, warrants or share equivalents shall be retained by Employee. Subject to the terms of the applicable award agreement, Employee will have one (1) year from the Termination Date to exercise any vested options, provided, however, that in no event shall options be exercisable beyond their original term. Notwithstanding the foregoing, all outstanding unvested equity awards shall be forfeited immediately upon a termination for Cause.

9. Payments upon Termination of Employment.

(i) One (1) year of Base Salary plus target bonus;

(ii) Employee’s COBRA health care premiums for a period of one (1) year following termination; and

(iii) all unvested equities, including but not limited to restricted stock, stock options, restricted stock units, and any other equities scheduled to vest in the next twelve (12) months following the termination date, shall immediately vest prior to termination: provided, however, that any equity awards that vest relative to performance shall vest in accordance with the applicable award agreement.

In the event of a termination described in Section 9(a) within two months prior or twenty four (24) months following a Change in Control of the Company, the Company will pay Employee (i) one and one half (1.5) years of Base Salary plus target bonus ; (ii) Employee’s COBRA health care premiums for a period of eighteen (18) months following termination; and (iii) and all unvested equities, including but not limited to restricted stock, stock options, warrants, and any other equities, shall immediately vest prior to termination: provided, however, that any equity awards that vest relative to performance shall vest in accordance with the applicable award agreement.

(d) No Severance. If Employee’s employment with the Company is terminated by reason of:

(i) Employee’s resignation without Good Reason;

(ii) Termination of Employee’s employment by the Company for Cause;

(iii) Employee’s Disability; or

(iv) Employee’s death;

There shall be no termination of Employee by the Company for Cause without Employee first being given actual written notice of the basis for termination for Cause, a 30-day period to cure any items identified in the written notice, and an opportunity to be heard by the Board of Directors and the Chief Executive Officer of the Company to determine whether a preponderance of evidence supports a finding of Cause by the Board of Directors.

(e) “Cause” means:

(ii) Unlawful, gross misconduct that is willful and deliberate on Employee’s part and that is materially injurious to the Company;

(iii) the conviction of Employee in any jurisdiction for (or pleading of no contest to or nolo contendere to) any crime that constitutes a felony;

(iv) failure or refusal to attempt to follow the lawful written directions of the Chief Executive Officer or Board of Directors, excluding for this purpose an action not taken in bad faith and which is remedied by Employee within 30 days after actual receipt of written notice of a failure to follow such directions is delivered to Employee;

(v) material nonfeasance with regard to Employee’s duties as defined in 3(b), excluding for this purpose an action not taken in bad faith and which is remedied by Employee within 30 days after actual receipt of written notice thereof given by the Company;

(vi) willful and deliberate breach by Employee of Employee’s fiduciary obligations as an officer or director of the Company or any of its Affiliates; or

(vii) the commission of any act or acts of dishonesty, theft, destruction of property, fraud or embezzlement undertaken by the Employee and intended to result in substantial gain or substantial personal enrichment of Employee and that is materially injurious to the Company, whether financially or otherwise.

(i) a material diminution in Employee’s authority, duties, responsibilities, Base Salary or target bonus opportunity;

(ii) any other action or inaction that constitutes a material breach by the Company of this Agreement, except where there is a general reduction applicable to the management team generally; or

(iii) moving the Employee’s principal office, place of business, more than forty (40) miles away from the Colorado State Capitol Building in Denver, Colorado, prior to June 30, 2023.

(h) “Change in Control” shall mean any of the following:

(iii) the sale or other disposition of all or substantially all of the assets of the Company in one transaction or series of related transactions; or

(iv) appointment of a majority of new directors within a one (1) year period.

11. Indemnification. See Schedule 2 “Indemnification Agreement”.

16. Miscellaneous.

(f) Amendments. No amendment or modification of this Agreement shall be deemed effective unless made in writing and signed by the Parties hereto.

(n) Counterparts. This Agreement may be executed in any number of counterparts, and such counterparts executed and delivered, each as an original, shall constitute but one and the same instrument.

IN WITNESS WHEREOF, Employee and the Company have executed this Agreement as of the date set forth in the first paragraph.

[The rest of this page intentionally left blank.]

NEW AGE BEVERAGES CORPORATION:		GREGORY A. GOULD:

By:	/s/ Brent D. Willis	/s/ Gregory A. Gould
Name:	Brent D. Willis	Date: May 8, 2020
Title:	Chief Executive Officer
Date:	May 8, 2020

Schedule 1

None

Schedule 2

Indemnification Agreement

NEW AGE BEVERAGES CORPORATION

Indemnification Agreement

This Indemnification Agreement (this “Agreement”) is dated as of [December 31, 2019] (the “Effective Date”), and is between New Age Beverages Corporation, a Washington corporation (the “Company”), and Gregory A. Gould (“Indemnitee”).

RECITALS:

A. Indemnitee’s service to the Company substantially benefits the Company.

The parties therefore agree as follows:

1. Definitions.

(a) A “Change in Control” shall be deemed to occur upon the earliest to occur after the date of this Agreement of any of the following events:

For purposes of this Section 1(a), the following terms shall have the following meanings:

(1) “Person” shall have the meaning as set forth in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended; provided, however, that “ Person “ shall exclude (i) the Company, (ii) any trustee or other fiduciary holding securities under an employee benefit plan of the Company, and (iii) any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company.

(2) “Beneficial Owner” shall have the meaning given to such term in Rule 13d-3 under the Securities Exchange Act of 1934, as amended; provided, however, that “ Beneficial Owner “ shall exclude any Person otherwise becoming a Beneficial Owner by reason of (i) the stockholders of the Company approving a merger of the Company with another entity or (ii) the Company’s board of directors approving a sale of securities by the Company to such Person.

(4) “Disinterested Director” means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.

(7) “Independent Counsel” means a law firm, or a partner or member of a law firm, that is experienced in matters of corporation law and neither currently is, as of the time the request for indemnification is made nor in the previous five (5) years has been, retained to represent (i) the Company or Indemnitee in any matter material to either such party (other than as Independent Counsel with respect to matters concerning Indemnitee under this Agreement, or other indemnitees under similar indemnification agreements), or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “ Independent Counsel “ shall not include any person who, under the applicable standards of professional conduct then-prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement.

(9) “Subsidiary” means any entity of which more than 50% of the outstanding voting securities is owned directly or indirectly by the Company.

(10) Reference to “other enterprises” shall include employee benefit plans; references to “fines” shall include any excise taxes assessed on a person with respect to any employee benefit plan (excluding any “parachute payments” within the meanings of Sections 280G and 4999 of the Internal Revenue Code of 1986, as amended); references to “ serving at the request of the Company “ shall include any service as a director, officer, employee or agent of the Company or of a Subsidiary which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries, including as a deemed fiduciary thereto; and a person who acted in good faith and in a manner he or she reasonably believed to be in the best interests of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “ not opposed to the best interests of the Company “ as referred to in this Agreement.

2. Indemnity in Third-Party Proceedings.

3. Indemnity in Proceedings by or in the Right of the Company.

4. Indemnification for Expenses of a Party Who is Wholly or Partly Successful.

5. Indemnification for Expenses of a Witness.

6. Additional Indemnification.

7. Exclusions.

(c) for any reimbursement of the Company by Indemnitee of any bonus or other incentive-based or equity-based compensation or of any profits realized by Indemnitee from the sale of securities of the Company, as required in each case under the Securities Exchange Act of 1934, as amended (including any such reimbursements that arise from an accounting restatement of the Company pursuant to Section 304 of the Sarbanes-Oxley Act of 2002 (the “ Sarbanes-Oxley Act “), or the payment to the Company of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 306 of the Sarbanes-Oxley Act), if Indemnitee is held liable therefor (including pursuant to any settlement arrangements);

8. Advances of Expenses.

9. Procedures for Notification and Defense of Claim.

(d) Indemnitee shall give the Company such information and cooperation in connection with the Proceeding as may be reasonably appropriate.

10. Procedures upon Application for Indemnification.

11. Presumptions and Effect of Certain Proceedings.

12. Remedies of Indemnitee.

(e) Notwithstanding anything in this Agreement to the contrary, no determination as to entitlement to indemnification shall be required to be made prior to the final disposition of the Proceeding.

13. Contribution.

14. Non-exclusivity; No Limitation on Indemnity Rights.

15. No Duplication of Payments.

16. Insurance.

17. Services to the Company.

18. Duration.

19. Successors.

20. Severability.

21. Enforcement.

22. Entire Agreement.

23. Modification and Waiver.

24. Notices.

(b) if to the Company, to the attention of the General Counsel of the Company at 1700 East 68th Avenue, Denver, Colorado 80229, or at such other current address as the Company shall have furnished to Indemnitee. Each such notice or other communication shall for all purposes of this Agreement be treated as effective or having been given (i) if delivered by hand, messenger or courier service, when delivered (or if sent via a nationally-recognized overnight courier service, freight prepaid, specifying next-business-day delivery, one business day after deposit with the courier), (ii) if sent via mail, at the earlier of its receipt or five days after the same has been deposited in a regularly- maintained receptacle for the deposit of the United States mail, addressed and mailed as aforesaid, or (iii) if sent via facsimile, upon confirmation of facsimile transfer or, if sent via electronic mail, upon confirmation of delivery when directed to the relevant electronic mail address, if sent during normal business hours of the recipient, or if not sent during normal business hours of the recipient, then on the recipient’s next business day.

25. Applicable Law and Consent to Jurisdiction.

26. Counterparts.

27. Captions.

The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.

The parties are signing this Indemnification Agreement as of the date stated in the introductory sentence.

Signed for and on behalf of:		Signed for and on behalf of:

NEW AGE BEVERAGES CORPORATION

By:	/s/ Brent Willis	By:	/s/ Gregory A. Gould
Print Name:	Brent Willis	Print Name:	Gregory A. Gould
Title:	Chief Executive Officer	Title:	Chief Financial Officer
Date:	December 28, 2019	Date:	February 22, 2020

Exhibit 10.6

EMPLOYMENT AGREEMENT

This Employment Agreement (the “Agreement”) is made and entered into by and between David Vanderveen (“Employee”) and New Age Beverages Corporation (the “Company”), effective as of May 8, 2020 (the “Effective Date”). For convenience, Employee and the Company together may be referred to as the “Parties” or each individually as a “Party.”

RECITALS

A. The Company is in the business of manufacturing and distributing organic and natural healthy beverages and other lifestyle products (the “Business”).

B. Employee is an experienced employee with considerable skill and expertise valuable to the success of the Company.

C. The Company desires to employ Employee, and Employee wishes to provide Employee’s services to the Company, subject to the terms and conditions set forth in this Agreement.

AGREEMENT

3. Position and Duties.

(a) Position with the Company. While employed, Employee shall serve as the Chief Operating Officer of the Company and shall report to the Chief Executive Officer of the Company (the “CEO”). As the Chief Operating Officer, Employee shall: (i) manage the day-to-day financial and administrative affairs and operations of the Company and each of its subsidiaries; (ii) have all of the duties and powers customarily associated with the office of the Chief Operating Officer of a significant business enterprise; and (iii) perform such responsibilities as the Chief Operating Officer or the Board may assign to him from time-to-time, which will be consistent with his position. Employee will also provide services to the Company, or any of its Affiliates, in such capacity as requested from time-to-time by the Chief Executive Officer or the Board.

(b) Performance of Duties and Responsibilities. While Employee is employed by the Company hereunder, Employee will serve the Company and its Affiliates faithfully and to the best of his ability and will devote his full time, attention and efforts to the business of the Company and its Affiliates. Employee will follow and comply with applicable policies and procedures adopted by the Board or the Company from time-to-time, including without limitation, policies relating to business ethics, conflict of interest, non-discrimination and non-harassment, confidentiality and protection of trade secrets. Employee must not accept other employment or engage in other material business activity that conflicts with Employee’s duties to the Company, except as approved in writing by the Board, but may participate in charitable and personal investment activities, including sitting on boards of charitable organizations and one board of a private or public company, so long as such activities do not interfere with the performance of his duties and responsibilities hereunder. The Board’s approval of Employee’s participation in any such activities will not be unreasonably withheld. Employee hereby represents and confirms that Employee is under no contractual or legal commitments that would prevent Employee from fulfilling Employee’s duties and responsibilities as set forth in this Agreement.

4. Compensation.

(a) Base Salary. Employee’s base salary shall be $550,000 per annum (“Base Salary”), which shall be payable in equal installments during the year in accordance with the Company’s normal payroll schedule and shall be subject to deductions for customary withholdings, including, without limitation, federal and state withholding taxes and payroll taxes. The Base Salary of $550,000.00 per annum shall be subject to annual review beginning on or about January 1, 2021. In January of each year, the Compensation Committee of the Board of Directors (or the full Board of Directors, if there is no Compensation Committee) will determine if a salary increase is warranted for Employee.

(b) Annual Short-Term Incentives. In January of each year, the Compensation Committee of the Board of Directors shall establish the criteria for the payment of an incentive bonus to Employee with respect to the then current or completed fiscal year (the “Performance Bonus”), based on overall Company performance and outlook. The Performance Bonus will be based on a percentage of Base Salary, with target bonus at 50% of Base Salary. This bonus will be paid annually no later than March 15th of the year following the year in which the Targets were achieved. All bonuses are subject to overall Company performance and Board or the Compensation Committee of the Board approval.

(e) Expenses. While Employee is employed by the Company hereunder, the Company shall reimburse Employee for all reasonable out-of-pocket business, travel and entertainment expenses incurred by Employee in the performance of the duties and responsibilities hereunder. Such reimbursement shall be subject to the Company’s normal policies and procedures for the senior executives of the Company for expense pre-approval and verification, documentation and reimbursement. In no event shall any such reimbursement compliant with company policy be paid later than two-and-a-half months after the end of the calendar year in which the expense was incurred.

5. Confidential Information.

6. Company Inventions.

7. Non-Competition and Non-Solicitation Covenants.

(a) Non-Competition. In order to protect the Company’s Confidential Information and trade secrets, which would cause irreparable harm to the Company if disclosed to a competitor, Employee covenants and agrees that during Employee’s employment with the Company and for one (1) year thereafter or the duration of the Severance 9 (i), whichever is greater (the “Restricted Period”), Employee will not, directly or indirectly, engage or participate in any business activity or enterprise, whether as a proprietor, owner, principal, agent, partner, officer, director, stockholder, employee, manager, member, consultant, independent contractor, joint venturer, agent, advisor, or otherwise that competes with the Company or any Affiliate of the Company in the Healthy Beverages Market (sports and performance beverages, energy drinks, RTD teas, enhanced fruit drinks, soy beverages, and enhanced water) skin care or health supplements (the “Company’s Business”) or engages in any services or other activity (or any substantially similar service, activity or line of business) that competes or interferes with the Company’s Business, has resulted, or threatens imminently to result in the disclosure or use of the Company’s Confidential Information in the Company’s Business (the “Restricted Business”). For purposes of this Section 7, the applicable geographical area of the Restricted Business is anywhere in the United States or any other area in which Employee knows, or reasonably should know, the Company or any Affiliate of the Company (as defined below) conducts the Restricted Business, including, but not limited to, any business that the Company or any Affiliate of the Company is actively engaged in or interested in pursuing, as of the Termination Date (the “Restricted Area”).

(f) Remedies. Employee acknowledges and affirms that a breach of Section 7(a) or 7(b) by Employee cannot be adequately compensated in an action for damages at law, and equitable relief would be necessary to protect the Company and its Affiliates from a violation of this Agreement and from the harm which this Agreement is intended to prevent. Accordingly, Employee agrees that in the event of any actual or threatened breach of such provisions, the Company and its Affiliates shall (in addition to any other remedies which they may have) be entitled to enforce their rights and Employee’s obligations under this Section 7 not only by an action or actions for damages, but also by an action or actions for specific performance, temporary or permanent injunctive relief, or other equitable relief, or a combination of such forms of relief, in order to enforce or prevent any violations (whether anticipatory, continuing or future) of the provisions of this Section 7. The prevailing Party in such a proceeding shall be entitled to recover his or its attorneys’ fees and costs from the other Party for the same.

8. Termination of Employment.

(a) Employee’s employment with the Company under this Agreement will terminate upon:

(i) Expiration of the Term based solely on the Company’s election not to renew the Term under Section 2 of this Agreement, in which case the Termination Date shall be the end of the Term, provided the requisite notice was provided;

(ii) Employee’s actual receipt of notification by the Company that Employee’s employment has been terminated for Cause;

(iii) Employee’s resignation;

(iv) Employee’s Disability; or

(v) Employee’s death.

(e) Shares, Options, Warrants and Equivalents. Upon termination of Employee’s employment, all vested shares, options, warrants or share equivalents shall be retained by Employee. Subject to the terms of the applicable award agreement, Employee will have one (1) year from the Termination Date to exercise any vested options, provided, however, that in no event shall options be exercisable beyond their original term. Notwithstanding the foregoing, all outstanding unvested equity awards shall be forfeited immediately upon a termination for Cause.

9. Payments upon Termination of Employment.

(a) Severance. If the Company terminates Employee’s employment without Cause at the end of the Term (and any renewals thereof) by providing the notification to Employee under Section 2, or if Employee resigns with Good Reason the Company will pay Employee:

(i) Nine (9) months of Base Salary plus target bonus with one additional month of base salary for every full year of service up to a maximum of twelve (12) months;

(ii) Employee’s COBRA health care premiums for a period of nine (9) months with one additional month for every full year of service up to twelve (12) months following termination; and

In the event of a termination described in Section 9(a) within two months prior or twenty four (24) months following a Change in Control of the Company, the Company will pay Employee (i) one and one half (1.5) years of Base Salary plus target bonus ; (ii) Employee’s COBRA health care premiums for a period of eighteen (18) months following termination; and (iii) and all unvested equities, including but not limited to restricted stock, stock options, warrants, and any other equities, shall immediately vest prior to termination: provided, however, that any equity awards that vest relative to performance shall vest in accordance with the applicable award agreement.

(d) No Severance. If Employee’s employment with the Company is terminated by reason of:

(i) Employee’s resignation without Good Reason;

(ii) Termination of Employee’s employment by the Company for Cause;

(iii) Employee’s Disability; or

(iv) Employee’s death;

There shall be no termination of Employee by the Company for Cause without Employee first being given actual written notice of the basis for termination for Cause, a 30-day period to cure any items identified in the written notice, and an opportunity to be heard by the Board of Directors and the Chief Executive Officer of the Company to determine whether a preponderance of evidence supports a finding of Cause by the Board of Directors.

(e) “Cause” means:

(ii) Unlawful, gross misconduct that is willful and deliberate on Employee’s part and that is materially injurious to the Company;

(iii) the conviction of Employee in any jurisdiction for (or pleading of no contest to or nolo contendere to) any crime that constitutes a felony;

(vi) willful and deliberate breach by Employee of Employee’s fiduciary obligations as an officer or director of the Company or any of its Affiliates; or

(vii) the commission of any act or acts of dishonesty, theft, destruction of property, fraud, or embezzlement undertaken by the Employee and intended to result in substantial gain or substantial personal enrichment of Employee and that is materially injurious to the Company, whether financially or otherwise.

(i) a material diminution in Employee’s authority, duties, responsibilities, Base Salary, or target bonus opportunity;

(ii) any other action or inaction that constitutes a material breach by the Company of this Agreement,; or

(h) “Change in Control” shall mean any of the following:

(iii) the sale or other disposition of all or substantially all of the assets of the Company in one transaction or series of related transactions; or

11. Indemnification. See Schedule 2 “Indemnification Agreement”.

16. Miscellaneous.

(f) Amendments. No amendment or modification of this Agreement shall be deemed effective unless made in writing and signed by the Parties hereto.

(n) Counterparts. This Agreement may be executed in any number of counterparts, and such counterparts executed and delivered, each as an original, shall constitute but one and the same instrument.

IN WITNESS WHEREOF, Employee and the Company have executed this Agreement as of the date set forth in the first paragraph.

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NEW AGE BEVERAGES CORPORATION:		DAVID VANDERVEEN:

By:	/s/ Brent Willis	/s/ David Vanderveen
Name:	Brent Willis	Date:	May 8, 2020
Title:	Chief Executive Officer
Date:	May 8, 2020

Schedule 1

None

Schedule 2

Indemnification Agreement

NEW AGE BEVERAGES CORPORATION

Indemnification Agreement

This Indemnification Agreement (this “Agreement”) is dated as of [December 28, 2019] (the “Effective Date”), and is between New Age Beverages Corporation, a Washington corporation (the “Company”), and David Vanderveen (“Indemnitee”).

RECITALS:

A. Indemnitee’s service to the Company substantially benefits the Company.

The parties therefore agree as follows:

1. Definitions.

(a) A “Change in Control” shall be deemed to occur upon the earliest to occur after the date of this Agreement of any of the following events:

For purposes of this Section 1(a), the following terms shall have the following meanings:

(4) “Disinterested Director” means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.

(7) “Independent Counsel” means a law firm, or a partner or member of a law firm, that is experienced in matters of corporation law and neither currently is, as of the time the request for indemnification is made nor in the previous five (5) years has been, retained to represent (i) the Company or Indemnitee in any matter material to either such party (other than as Independent Counsel with respect to matters concerning Indemnitee under this Agreement, or other indemnitees under similar indemnification agreements), or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “ Independent Counsel “ shall not include any person who, under the applicable standards of professional conduct then-prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement.

(9) “Subsidiary” means any entity of which more than 50% of the outstanding voting securities is owned directly or indirectly by the Company.

(10) Reference to “other enterprises” shall include employee benefit plans; references to “fines” shall include any excise taxes assessed on a person with respect to any employee benefit plan (excluding any “parachute payments” within the meanings of Sections 280G and 4999 of the Internal Revenue Code of 1986, as amended); references to “ serving at the request of the Company “ shall include any service as a director, officer, employee or agent of the Company or of a Subsidiary which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries, including as a deemed fiduciary thereto; and a person who acted in good faith and in a manner he or she reasonably believed to be in the best interests of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “ not opposed to the best interests of the Company “ as referred to in this Agreement.

2. Indemnity in Third-Party Proceedings.

3. Indemnity in Proceedings by or in the Right of the Company.

4. Indemnification for Expenses of a Party Who is Wholly or Partly Successful.

5. Indemnification for Expenses of a Witness.

6. Additional Indemnification.

7. Exclusions.

(c) for any reimbursement of the Company by Indemnitee of any bonus or other incentive-based or equity-based compensation or of any profits realized by Indemnitee from the sale of securities of the Company, as required in each case under the Securities Exchange Act of 1934, as amended (including any such reimbursements that arise from an accounting restatement of the Company pursuant to Section 304 of the Sarbanes-Oxley Act of 2002 (the “ Sarbanes-Oxley Act “), or the payment to the Company of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 306 of the Sarbanes-Oxley Act), if Indemnitee is held liable therefor (including pursuant to any settlement arrangements);

8. Advances of Expenses.

9. Procedures for Notification and Defense of Claim.

(d) Indemnitee shall give the Company such information and cooperation in connection with the Proceeding as may be reasonably appropriate.

10. Procedures upon Application for Indemnification.

11. Presumptions and Effect of Certain Proceedings.

12. Remedies of Indemnitee.

(e) Notwithstanding anything in this Agreement to the contrary, no determination as to entitlement to indemnification shall be required to be made prior to the final disposition of the Proceeding.

13. Contribution.

14. Non-exclusivity; No Limitation on Indemnity Rights.

15. No Duplication of Payments.

16. Insurance.

17. Services to the Company.

18. Duration.

19. Successors.

20. Severability.

21. Enforcement.

22. Entire Agreement.

23. Modification and Waiver.

24. Notices.

25. Applicable Law and Consent to Jurisdiction.

This Agreement and the legal relations among the parties shall be governed by, and construed and enforced in accordance with, the laws of the State of Washington, without regard to its conflict of laws rules. Except with respect to any arbitration commenced by Indemnitee pursuant to Section 12(a), above, or by the Company or Indemnitee pursuant to a written agreement between the Company and Indemnitee providing for such, the Company and Indemnitee hereby irrevocably and unconditionally (i) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Washington State District Courts, and not in any other state or federal court in the United States of America or any court in any other country, (ii) consent to submit to the exclusive jurisdiction of the Washington State District Courts for purposes of any action or proceeding arising out of or in connection with this Agreement, (iii) appoint, to the extent such party is not otherwise subject to service of process in the Washington State District Courts, as its agent in the State of Washington as such party’s agent for acceptance of legal process in connection personally within the State of Washington, (iv) waive any objection to the laying of venue of any such action or proceeding in with any such action or proceeding against such party with the same legal force and validity as if served upon such party the Washington State District Courts, and (v) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Washington State a District Courts has been brought in an improper or inconvenient forum.

26. Counterparts.

27. Captions.

The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.

The parties are signing this Indemnification Agreement as of the date stated in the introductory sentence.

Signed for and on behalf of:		Signed for and on behalf of:

NEW AGE BEVERAGES CORPORATION

By:	/s/ Brent Willis	By:	/s/ David Vanderveen
Print Name:	Brent Willis	Print Name:	David Vanderveen
Title:	Chief Executive Officer	Title:	Chief Operating Officer
Date:	December 28, 2019	Date:	January 10, 2020

EXHIBIT 31.1

CERTIFICATION OF PERIODIC REPORT UNDER SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Brent Willis, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of New Age Beverages Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 11, 2020

	/s/ Brent Willis
	Brent Willis
	Title: Chief Executive Officer
	(Principal Executive Officer)

EXHIBIT 31.2

CERTIFICATION OF PERIODIC REPORT UNDER SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Gregory A. Gould, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of New Age Beverages Corporation;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 11, 2020

	/s/ Gregory A. Gould
	Gregory A. Gould
	Title: Chief Financial Officer
	(Principal Financial and Accounting Officer)

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. 1350

(SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002)

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Brent Willis, Chief Executive Officer of New Age Beverages Corporation (the “Company”), certify, that, to the best of my knowledge:

1. The Quarterly Report on Form 10-Q of the Company for the quarterly period ended March 31, 2020 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: May 11, 2020	By:	/s/ Brent Willis
		Brent Willis
		Title: Chief Executive Officer
		(Principal Executive Officer)

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. 1350

(SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002)

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Gregory A. Gould, Chief Financial Officer of New Age Beverages Corporation (the “Company”), certify, that, to the best of my knowledge:

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: May 11, 2020	By:	/s/ Gregory A. Gould
		Gregory A. Gould
		Title: Chief Financial Officer
		(Principal Financial and Accounting Officer)

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Form 10-Q New Age Beverages Corp For: Mar 31

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