UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
FORM S-8
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
The Alkaline Water Company Inc.
(Exact name of registrant as specified in its charter)
Nevada |
99-0367049 |
(State or other jurisdiction of incorporation or
organization) |
(I.R.S. Employer Identification No.)
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7730 E Greenway Road Ste. 203
Scottsdale, AZ
85260
(Address of Principal Executive Offices)(Zip Code)
2013 Equity Incentive Plan
(Full title of the
plan)
InCorp Services, Inc.
2360 Corporate Circle Ste.
400
Henderson, NV 89074-7722
(Name and address of
agent for service)
(702) 866-2500
(Telephone number, including
area code, of agent for service)
Copies of all communications to:
Clark Wilson LLP
Suite 900 - 885 West Georgia
Street
Vancouver, British Columbia V6C 3H1, Canada
Telephone: (604) 687-5700
Attention: Mr. Virgil Z. Hlus
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of large accelerated filer,
accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange
Act.
Large accelerated filer |
[ ] |
Accelerated filer |
[ ] |
Non-accelerated filer |
[ ] (Do not check if a smaller reporting
company) |
Smaller reporting company |
[X] |
CALCULATION OF REGISTRATION FEE
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Proposed |
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Proposed |
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maximum |
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maximum |
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Amount of |
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Title of securities to |
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Amount to be |
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offering price |
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aggregate offering |
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registration |
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be
registered |
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registered(1),(2) |
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per share(3) |
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price(3) |
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fee |
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Common Stock |
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7,000,000 |
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$0.90 |
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$6,300,000 |
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$634.41 |
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(1) |
An indeterminate number of additional shares of common
stock shall be issuable pursuant to Rule 416 under the Securities Act of
1933 to prevent dilution resulting from stock splits, stock dividends or
similar transactions and in such an event the number of shares registered
shall automatically be increased to cover the additional shares in
accordance with Rule 416. |
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(2) |
Consists of up to an additional 7,000,000 shares of our
common stock issuable pursuant to our 2013 Equity Incentive Plan. Our 2013
Equity Incentive Plan provides for the grant of awards covering a maximum
of 7,700,000 shares of our common stock, 300,000 of which (on a post-split
basis) have been previously registered under a registration statement on
Form S-8 (Registration No. 333-200837) filed on December 10, 2014, and
400,000 of which (on a post-split basis) have been previously registered
under a registration statement on Form S-8 (Registration No. 333-192601)
filed on November 27, 2013. |
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(3) |
Estimated in accordance with Rule 457 (h) under the
Securities Act of 1933 solely for the purpose of computing the amount of
the registration fee, and based on the closing price per share ($0.90) for
our common stock on January 19, 2016, as reported by OTC Markets Groups
OTCQB. |
EXPLANATORY NOTE
Effective as of October 7, 2013, our company adopted the 2013
Equity Incentive Plan, pursuant to which a total of 20,000,000 shares of our
common stock were issuable pursuant to the 2013 Equity Incentive Plan. Effective
as of October 31, 2014, our 2013 Equity Incentive Plan was amended to increase
the number of shares of common stock issuable under the 2013 Equity Incentive
Plan by 15,000,000 shares. Effective as of December 30, 2015, our company
effected a fifty for one reverse stock split of our authorized and issued and
outstanding shares of common stock which decreased the number of shares of our
common stock issuable pursuant to the 2013 Equity Incentive Plan from 35,000,000
shares to 700,000 shares.
Effective as of January 20, 2016, our 2013 Equity Incentive
Plan was amended to increase the number of shares of common stock issuable under
the 2013 Equity Incentive Plan by 7,000,000 shares.
We prepared this registration statement in accordance with the
requirements of Form S-8 under the Securities Act of 1933, to register an
aggregate of an additional 7,000,000 shares of our common stock that are
issuable pursuant to our 2013 Equity Incentive Plan. We have previously filed
registration statements on Form S-8 (Registration No. 333-200837 and
Registration No. 333-192601) to register 700,000 shares of our common stock (on
a post-split basis) that are issuable pursuant to our 2013 Equity Incentive
Plan.
The additional shares being registered in this registration
statement on Form S-8 are of the same class as securities covered by the
registration statement on Form S-8 (Registration No. 333-200837) filed on
December 10, 2014 and the registration statement on Form S-8 (Registration No.
333-192601) filed on November 27, 2013, the contents of which are incorporated
herein by reference in accordance with General Instruction E to Form S-8, to the
extent not otherwise amended or superseded by the content of this registration
statement.
The purpose of our 2013 Equity Incentive Plan is to (a) enable
our company and any of our affiliates to attract and retain the types of
employees, consultants and directors who will contribute to our companys long
range success; (b) provide incentives that align the interests of employees,
consultants and directors with those of the stockholders of our company; and (c)
promote the success of our companys business. A total of 7,700,000 shares of
our stock are available for the grant of awards under the 2013 Equity Incentive
Plan and awards that may be granted under the plan includes incentive stock options, non-qualified stock
options, stock appreciation rights, restricted awards and performance
compensation awards.
Pursuant to Rule 429 promulgated under the Securities Act of
1933, a prospectus relating to this registration statement is a combined
prospectus relating also to the registration statement on Form S-8 (Registration
No. 333-192601) filed on November 27, 2013, and the registration statement on
Form S-8 (Registration No. 333-200837) filed on December 10, 2014. In addition,
this registration statement, which is a new registration statement, also
constitutes a post-effective amendment to the registration statement on Form S-8
(Registration No. 333-192601) filed on November 27, 2013, and the registration
statement on Form S-8 (Registration No. 333-200837) filed on December 10,
2014.
The combined Section 10(a) prospectus for our 2013 Equity
Incentive Plan updates, among other things, certain information regarding our
equity incentive plan, including the increase in the number of shares issuable
under our equity incentive plan.
Under cover of this registration statement on Form S-8 is a
combined reoffer prospectus prepared in accordance with Part I of Form S-3 under
the Securities Act of 1933 (in accordance with Section C of the General
Instructions to Form S-8). The reoffer prospectus may be used for reoffers and
resales of up to an aggregate of 296,000 control securities (as such term is
defined in Form S-8) issuable upon exercise of the stock options granted
pursuant to our 2013 Equity Incentive Plan on a continuous or delayed basis in
the future. The combined reoffer prospectus updates, among other things, certain
information regarding the ownership of our common stock by the selling
stockholders and the number of shares of our common stock available for resale
by each selling shareholder.
Part I
INFORMATION REQUIRED IN THE SECTION 10(a)
PROSPECTUS
Item 1. Plan Information.*
Item 2. Registrant Information and Employee Plan Annual
Information.*
* The document(s) containing the information specified in Part
I of Form S-8 will be sent or given to participants of our 2013 Equity Incentive
Plan as specified by Rule 428(b)(1) under the Securities Act of 1933. Such
documents are not being filed with the Securities and Exchange Commission, but
constitute, along with the documents incorporated by reference into this
registration statement, a prospectus that meets the requirements of Section
10(a) of the Securities Act of 1933.
Reoffer Prospectus
296,000 Shares
The Alkaline Water Company Inc.
Common Stock
_________________________________
The selling stockholders identified in this reoffer prospectus
may offer and sell up to 296,000 shares of our common stock issuable upon
exercise of stock options. We granted the stock options to such selling
stockholders pursuant to our 2013 Equity Incentive Plan.
The selling stockholders may sell all or a portion of the
shares being offered pursuant to this reoffer prospectus at fixed prices, at
prevailing market prices at the time of sale, at varying prices or at negotiated
prices.
The selling stockholders and any brokers executing selling
orders on their behalf may be deemed to be underwriters within the meaning of
the Securities Act of 1933, in which event commissions received by such brokers
may be deemed to be underwriting commissions under the Securities Act of 1933.
We will not receive any proceeds from the sale of the shares of
our common stock by the selling stockholders. We may, however, receive proceeds
upon exercise of the stock options by the selling stockholders. We will pay for
expenses of this offering, except that the selling stockholders will pay any
broker discounts or commissions or equivalent expenses and expenses of their
legal counsel applicable to the sale of their shares.
Our common stock is quoted on the OTC Markets Groups OTCQB
under the symbol WTERD. On January 20, 2016, the closing price of our common
stock on the OTCQB was $0.76 per share.
_________________________________
Investing in our common stock involves risks. See Risk
Factors beginning on page 8.
_________________________________
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or
determined if this prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
_________________________________
The date of this reoffer prospectus is January 20, 2016.
5
Table of Contents
6
As used in this reoffer prospectus, the terms we, us our
and Alkaline refer to The Alkaline Water Company Inc., a Nevada corporation,
and its wholly-owned subsidiary, Alkaline Water Corp., and Alkaline Water
Corp.s wholly-owned subsidiary, Alkaline 88, LLC, unless otherwise specified.
All dollar amounts refer to U.S. dollars unless otherwise indicated.
Prospectus Summary
Our Business
Our company offers retail consumers bottled alkaline water in
500ml, 700ml, 1-liter, 3-liter and 1-gallon sizes under the trade name
Alkaline88. Our product is produced through an electrolysis process that uses
specialized electronic cells coated with a variety of rare earth minerals to
produce our 8.8 pH drinking water without the use of any chemicals. Our product
also incorporates 84 trace Himalayan salts. The main reason consumers drink our
product is for the perceived benefit that a proper pH balance helps fight
disease and boosts the immune system and the perception that alkaline water
helps to maintain a proper body pH and keeps cells young and hydrated.
Alkaline 88, LLC, our operating subsidiary, operates primarily
as a marketing and distribution company. Alkaline 88, LLC has entered into
exclusive arrangements with Water Engineering Solutions LLC, an entity that is
controlled and owned by our President, Chief Executive Officer, Director and
major stockholder, Steven P. Nickolas, and our Vice-President, Secretary,
Treasurer and Director, Richard A. Wright, for the manufacture and production of
our alkaline generating electrolysis system machines. Alkaline 88, LLC has
entered into one-year agreement(s) with six different bottling companies in
Ohio, Georgia, California, Texas and Arizona to act as co-packers for our
product. Our current capacity at all plants exceeds $2,000,000 per month
wholesale. Our branding is being coordinated through 602 Design, LLC and our
component materials are readily available through multiple vendors. Our
principal suppliers are Plastipack Packaging, Polyplastics Co., West Coast
Manufacturing and Cactus Containers.
Our product is currently at the expansion phase of its
lifecycle. In March 2012 Alkaline 88, LLC did market research on the demand for
a bulk alkaline product at the Natural Product Expo West in Anaheim, California.
In January 2013, we began the formal launching of our product in Southern
California and Arizona. Since then, we have begun to deliver product through
approximately 16,000 retail outlets throughout the United States. We are
presently in all 50 States and the District of Columbia, although over 50% of
our current sales are concentrated in the Southwest and Texas. We have
distribution agreements with large national distributors (UNFI, KeHe, Tree of
Life and Natures Best, CoreMark and C&S), representing over 150,000 retail
establishments. Our current stores include convenience stores, natural food
products stores, large ethnic markets and national retailers. Currently, we sell
all of our products to our retailers through brokers and distributors. Our
larger retail clients bring the water in through their own warehouse
distribution network. Our current retail clients are made up of a variety of the
following; convenience stores, including 7-11s; large national retailers,
including Albertsons/Safeway, Kroger companies, and regional grocery chains
such as Schnucks, Smart & Final, Jewel-Osco, Sprouts, Bashas, Bristol
Farms, Vallarta, Superior Foods, Brookshires, HEB and other companies
throughout the United States. In total we are now in 34 of the top 75 (by sales)
grocery retailers in the United States.
In April 2014 we entered into an exclusive territorial
distribution agreement with Kalil Bottling Co. on a new single serve 700ml
Bottle with a sport cap. This exclusivity is in Arizona and other areas in the
Southwestern United States. Kalil Bottling Co. is a direct to store distributor
(DSD). In the past fiscal year we have added a number of additional DSDs in the
Southwest and have expanded our product offering to include 500ml and 1 liter
bottles.
In order to continue our expansion, we anticipate that we will
be required, in most cases, to continue to give promotional deals throughout
2016 and in subsequent years on a quarterly basis ranging from a 5%-15% discount
similar to all other beverage company promotional programs. It has been our
experience that most of the retailers have requested some type of promotional
introductory program which has included either a $0.25 -$0.50 per unit discount
on an initial order; a buy one get one free program; or a free-fill program
which includes 1-2 cases of free product per store location. Slotting has only
been presented and negotiated in the larger national grocery chains and, in most
cases, is offset by product sales. Our slotting fees with our current national
retailers do not exceed $400,000 in the aggregate and are offset through product
sales. In addition we participate in promotional activities of our distributors,
but these fees are not in excess of $500,000 and are offset through product
sales.
7
We have not yet established an ongoing source of revenues
sufficient to cover our operating costs and to allow us to continue as a going
concern. As of September 30, 2015, we had an accumulated deficit of $14,201,657.
Our ability to continue as a going concern is dependent on our company obtaining
adequate capital to fund operating losses until we become profitable. If we are
unable to obtain adequate capital, we could be forced to significantly curtail
or cease operations. In its report on the financial statements for the year
ended March 31, 2015, our independent registered public accounting firm included
an explanatory paragraph regarding substantial doubt about our ability to
continue as a going concern. Our financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
The principal offices of our company are located at 7730 E
Greenway Road, Ste. 203, Scottsdale, AZ 85260. Our telephone number is (480)
656-2423.
The Offering
The selling stockholders identified in this reoffer prospectus
may offer and sell up to 296,000 shares of our common stock issuable upon
exercise of stock options. We granted the stock options to such selling
stockholders pursuant to our 2013 Equity Incentive Plan.
The selling stockholders may sell all or a portion of the
shares being offered pursuant to this reoffer prospectus at fixed prices, at
prevailing market prices at the time of sale, at varying prices or at negotiated
prices.
Number of Shares Outstanding
As of January 20, 2016, there were 3,819,039 shares of our
common stock issued and outstanding and 20,000,000 shares of our Series A
Preferred Stock issued and outstanding.
Use of Proceeds
We will not receive any proceeds from the sale of any shares of
our common stock by the selling stockholders. We may, however, receive proceeds
upon exercise of the stock options by the selling stockholders. If we receive
proceeds upon exercise of these stock options, we intend to use these proceeds
for working capital and general corporate purposes.
Risk Factors
An investment in our common stock involves a high degree of
risk. The risks described below include material risks to our company or to
investors purchasing shares of our common stock that are known to our company.
If any of the following risks actually occur, our business, financial condition
and results of operations could be materially harmed. As a result, the trading
price of our common stock could decline and you might lose all or part of your
investment. When determining whether to buy our common stock, you should also
refer to the other information contained in or incorporated by reference in this
reoffer prospectus.
Risks Related to Our Business
Because we have a limited operating history, our ability
to fully and successfully develop our business is unknown.
We were incorporated in June 6, 2011, and we have only begun
producing and distributing alkaline bottled water in 2013, and we have a limited
operating history from which investors can evaluate our business. Our ability to
successfully develop our products, and to realize consistent, meaningful
revenues and profit has not been established and cannot be assured. For us to
achieve success, our products must receive broad market acceptance by consumers.
Without this market acceptance, we will not be able to generate sufficient
revenue to continue our business operation. If our products are not widely
accepted by the market, our business may fail.
Our ability to achieve and maintain profitability and positive
cash flow is dependent upon our ability to generate revenues, manage development
costs and expenses, and compete successfully with our direct and indirect
competitors. We anticipate operating losses in upcoming future periods. This
will occur because there are expenses associated with the development,
production, marketing, and sales of our product.
8
Our independent registered public accounting firm has
expressed substantial doubt about our ability to continue as a going concern.
Our financial statements are prepared using generally accepted
accounting principles in the United States of America applicable to a going
concern, which contemplates the realization of assets and liquidation of
liabilities in the normal course of business. We have not yet established an
ongoing source of revenues sufficient to cover our operating costs and to allow
us to continue as a going concern. As of September 30, 2015, we had an
accumulated deficit of $14,201,657. Our ability to continue as a going concern
is dependent on our company obtaining adequate capital to fund operating losses
until we become profitable. If we are unable to obtain adequate capital, we
could be forced to significantly curtail or cease operations. In its report on
the financial statements for the year ended March 31, 2015, our independent
registered public accounting firm included an explanatory paragraph regarding
substantial doubt about our ability to continue as a going concern. Our
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
We will need additional funds to produce, market, and
distribute our product.
We will have to spend additional funds to produce, market and
distribute our product. If we cannot raise sufficient capital, we may have to
cease operations and you could lose your investment. We will need additional
funds to produce our product for distribution to our target market. Even after
we have produced our product, we will have to spend substantial funds on
distribution, marketing and sales efforts before we will know if we have
commercially viable and marketable/sellable products.
There is no guarantee that sufficient sale levels will be
achieved.
There is no guarantee that the expenditure of money on
distribution and marketing efforts will translate into sufficient sales to cover
our expenses and result in profits. Consequently, there is a risk that you may
lose all of your investment.
Our development, marketing, and sales activities are
limited by our size.
Because we are small and do not have much capital, we must
limit our product development, marketing, and sales activities. As such we may
not be able to complete our production and business development program in a
manner that is as thorough as we would like. We may not ever generate sufficient
revenues to cover our operating and expansion costs and you may, therefore, lose
your entire investment.
Changes in the non-alcoholic beverage business
environment and retail landscape could adversely impact our financial results.
The non-alcoholic beverage business environment is rapidly
evolving as a result of, among other things, changes in consumer preferences,
including changes based on health and nutrition considerations and obesity
concerns; shifting consumer tastes and needs; changes in consumer lifestyles;
and competitive product and pricing pressures. In addition, the non-alcoholic
beverage retail landscape is very dynamic and constantly evolving, not only in
emerging and developing markets, where modern trade is growing at a faster pace
than traditional trade outlets, but also in developed markets, where discounters
and value stores, as well as the volume of transactions through e-commerce, are
growing at a rapid pace. If we are unable to successfully adapt to the rapidly
changing environment and retail landscape, our share of sales, volume growth and
overall financial results could be negatively affected.
Intense competition and increasing competition in the
commercial beverage market could hurt our business.
The commercial retail beverage industry, and in particular its
non-alcoholic beverage segment, is highly competitive. Market participants are
of various sizes, with various market shares and geographical reach, some of
whom have access to substantially more sources of capital.
We compete generally with all liquid refreshments, including
bottled water and numerous specialty beverages, such as: SoBe; Snapple; Arizona;
Vitamin Water; Gatorade; and Powerade.
We compete indirectly with major international beverage
companies including but not limited to: the Coca-Cola Company; PepsiCo, Inc.;
Nestlé; Dr Pepper Snapple Group; Groupe Danone; Kraft Foods Group, Inc.; and
Unilever. These companies have established market presence in the United States,
and offer a variety of beverages that are substitutes to our product.
9
We face potential direct competition from such companies,
because they have the financial resources, and access to manufacturing and
distribution channels to rapidly enter the alkaline water market. We compete
directly with other alkaline water producers and brands focused on the emerging
alkaline beverage market including: Eternal; Essentia; Icelandic; Real Water;
Aqua Hydrate; Mountain Valley; Qure; Penta; and Alka Power. These companies
could bolster their position in the alkaline water market through additional
expenditure and promotion.
As a result of both direct and indirect competition, our
ability to successfully distribute, market and sell our product, and to gain
sufficient market share in the United States to realize profits may be limited,
greatly diminished, or totally diminished, which may lead to partial or total
loss of your investments in our company.
Alternative non-commercial beverages or processes could
hurt our business.
The availability of non-commercial beverages, such as tap
water, and machines capable of producing alkaline water at the consumers home
or at store-fronts could hurt our business, market share, and profitability.
Expansion of the alkaline beverage market or sufficiency
of consumer demand in that market for operations to be profitable are not
guaranteed.
The alkaline water market is an emerging market and there is no
guarantee that this market will expand or that consumer demand will be
sufficiently high to allow our company to successfully market, distribute and
sell our product, or to successfully compete with current or future competition,
all of which may result in total loss of your investment.
Our growth and profitability depends on the performance
of third-parties and our relationship with them.
Our distribution network and its success depend on the
performance of third parties. Any non-performance or deficient performance by
such parties may undermine our operations, profitability, and result in total
loss to your investment. To distribute our product, we use a
broker-distributor-retailer network whereby brokers represent our products to
distributors and retailers who will in turn sell our product to consumers. The
success of this network will depend on the performance of the brokers,
distributors and retailers of this network. There is a risk that a broker,
distributor, or retailer may refuse to or cease to market or carry our product.
There is a risk that the mentioned entities may not adequately perform their
functions within the network by, without limitation, failing to distribute to
sufficient retailers or positioning our product in localities that may not be
receptive to our product. Furthermore, such third-parties financial position or
market share may deteriorate, which could adversely affect our distribution,
marketing and sale activities. We also need to maintain good commercial
relationships with third-party brokers, distributors and retailers so that they
will promote and carry our product. Any adverse consequences resulting from the
performance of third-parties or our relationship with them could undermine our
operations, profitability and may result in total loss of your investment.
The loss of one or more of our major customers or a
decline in demand from one or more of these customers could harm our business.
We have 3 major customers that together account for 59% (31%,
18%, 10%, respectively) of accounts receivable at September 30, 2015, and 4
customers that together account for 58% (19% 15%, 14%, and 10%, respectively) of
the total revenues earned for the three months ended September 30, 2015. There
can be no assurance that such customers will continue to order our products in
the same level or at all. A reduction or delay in orders from such customers,
including reductions or delays due to market, economic or competitive
conditions, could have a material adverse effect on our business, operating
results and financial condition.
Health benefits of alkaline water is not guaranteed or
proven, rather it is perceived by consumers.
Health benefits of alkaline water are not guaranteed and have
not been proven. There is a consumer perception that drinking alkaline water has
beneficial health effects. Consequently, negative changes in consumers
perception of the benefits of alkaline water or negative publicity surrounding
alkaline water may result in loss of market share or potential market share and
hence loss of your investment.
10
Water scarcity and poor quality could negatively impact
our production costs and capacity.
Water is the main ingredient in our product. It is also a
limited resource, facing unprecedented challenges from overexploitation,
increasing pollution, poor management, and climate change. As demand for water
continues to increase, as water becomes scarcer, and as the quality of available
water deteriorates, we may incur increasing production costs or face capacity
constraints that could adversely affect our profitability or net operating
revenues in the long run.
Increase in the cost, disruption of supply or shortage of
ingredients, other raw materials or packaging materials could harm our
business.
We and our bottlers will use water, 84 trace Himalayan salts,
packaging materials for bottles such as plastic and paper products. The prices
for these ingredients, other raw materials and packaging materials fluctuate
depending on market conditions. Substantial increases in the prices of our or
our bottlers ingredients, other raw materials and packaging materials, to the
extent they cannot be recouped through increases in the prices of finished
beverage products, would increase our operating costs and could reduce our
profitability. Increases in the prices of our finished products resulting from a
higher cost of ingredients, other raw materials and packaging materials could
affect the affordability of our product and reduce sales.
An increase in the cost, a sustained interruption in the
supply, or a shortage of some of these ingredients, other raw materials, or
packaging materials and containers that may be caused by a deterioration of our
or our bottlers relationships with suppliers; by supplier quality and
reliability issues; or by events such as natural disasters, power outages, labor
strikes, political uncertainties or governmental instability, or the like, could
negatively impact our net revenues and profits.
Changes in laws and regulations relating to beverage
containers and packaging could increase our costs and reduce demand for our
products.
We and our bottlers intend to offer our product in
nonrefillable, recyclable containers in the United States. Legal requirements
have been enacted in various jurisdictions in the United States requiring that
deposits or certain ecotaxes or fees be charged for the sale, marketing and use
of certain nonrefillable beverage containers. Other proposals relating to
beverage container deposits, recycling, ecotax and/or product stewardship have
been introduced in various jurisdictions in the United States and overseas, and
we anticipate that similar legislation or regulations may be proposed in the
future at local, state and federal levels in the United States. Consumers
increased concerns and changing attitudes about solid waste streams and
environmental responsibility and the related publicity could result in the
adoption of such legislation or regulations. If these types of requirements are
adopted and implemented on a large scale in the geographical regions in which we
operate or intend to operate, they could affect our costs or require changes in
our distribution model, which could reduce our net operating revenues or
profitability.
Significant additional labeling or warning requirements
or limitations on the availability of our product may inhibit sales of affected
products.
Various jurisdictions may seek to adopt significant additional
product labeling or warning requirements or limitations on the availability of
our product relating to the content or perceived adverse health consequences of
our product. If these types of requirements become applicable to our product
under current or future environmental or health laws or regulations, they may
inhibit sales of our product.
Unfavorable general economic conditions in the United
States could negatively impact our financial performance.
Unfavorable general economic conditions, such as a recession or
economic slowdown, in the United States could negatively affect the
affordability of, and consumer demand for, our product in the United States.
Under difficult economic conditions, consumers may seek to reduce discretionary
spending by forgoing purchases of our products or by shifting away from our
beverages to lower-priced products offered by other companies, including
non-alkaline water. Consumers may also cease purchasing bottled water and
consume tap water. Lower consumer demand for our product in the United States
could reduce our profitability.
11
Adverse weather conditions could reduce the demand for
our products.
The sales of our products are influenced to some extent by
weather conditions in the markets in which we operate. Unusually cold or rainy
weather during the summer months may have a temporary effect on the demand for
our product and contribute to lower sales, which could have an adverse effect on
our results of operations for such periods.
Changes in, or failure to comply with, the laws and
regulations applicable to our products or our business operations could increase
our costs or reduce our net operating revenues.
The advertising, distribution, labeling, production, safety,
sale, and transportation in the United States of our product will be subject to:
the Federal Food, Drug, and Cosmetic Act; the Federal Trade Commission Act; the
Lanham Act; state consumer protection laws; competition laws; federal, state,
and local workplace health and safety laws, such as the Occupational Safety and
Health Act; various federal, state and local environmental protection laws; and
various other federal, state, and local statutes and regulations. Legal
requirements also apply in many jurisdictions in the United States requiring
that deposits or certain ecotaxes or fees be charged for the sale, marketing,
and use of certain non-refillable beverage containers. The precise requirements
imposed by these measures vary. Other types of statutes and regulations relating
to beverage container deposits, recycling, ecotaxes and/or product stewardship
also apply in various jurisdictions in the United States. We anticipate that
additional, similar legal requirements may be proposed or enacted in the future
at the local, state and federal levels in the United States. Changes to such
laws and regulations could increase our costs or reduce our net operating
revenues.
In addition, failure to comply with environmental, health or
safety requirements and other applicable laws or regulations could result in the
assessment of damages, the imposition of penalties, suspension of production,
changes to equipment or processes, or a cessation of operations at our or our
bottlers facilities, as well as damage to our image and reputation, all of
which could harm our profitability.
Our products are considered premium and healthy beverages
and are being sold at premium prices compared to our competitors; we cannot
provide any assurances as to consumers continued market acceptance of our
current and future products.
We will compete directly with other alkaline water producers
and brands focused on the emerging alkaline beverage market including Eternal,
Essentia, Icelandic, Real Water, Aqua Hydrate, Mountain Valley, Qure, Penta, and
Alka Power. Products offered by our direct competitors are sold in various
volumes and prices with prices ranging from approximately $1.39 for a half-liter
bottle to $2.99 for a one-liter bottle, and volumes ranging from half-liter
bottles to one-and-a half liter bottles. We currently offer our product in a
three-liter bottle for an SRP of $3.99, one-gallon bottle for an SRP of $4.99,
700 milliliter single serving at an SRP of $1.29, 1 liter at an SRP of $1.79 and
a 500 milliliter at an SRP of $.99. Our competitors may introduce larger sizes
and offer them at an SRP that is lower than our product. We can provide no
assurances that consumers will continue to purchase our product or that they
will not prefer to purchase a competitive product.
We rely on key executive officers, and their knowledge of
our business would be difficult to replace.
We are highly dependent on our two executive officers, Steven
P. Nickolas and Richard A. Wright. We do not have key person life insurance
policies for any of our officers. The loss of management and industry expertise
of any of our key executive officers could result in delays in product
development, loss of any future customers and sales and diversion of management
resources, which could adversely affect our operating results.
Our executive officers are not subject to supervision or
review by an independent board or audit committee.
Our board of directors consists of Steven P. Nickolas and
Richard A. Wright, our executive officers. Accordingly, we do not have any
independent directors. Also we do not have an independent audit committee. As a
result, the activities of our executive officers are not subject to the review
and scrutiny of an independent board of directors or audit committee.
12
Risk Related to Our Stock
Because Steven P. Nickolas controls a large percentage of
our voting stock, he has the ability to influence matters affecting our
stockholders.
Steven P. Nickolas, our President, Chief Executive Officer and
a director, exercises voting and dispositive power with respect to 776,000
shares of our common stock, which are beneficially owned by WiN Investments, LLC
and Lifewater Industries, LLC, and owns 10,000,000 shares of our Series A
Preferred Stock, which has 0.2 votes per share upon any matter submitted to our
stockholders for a vote. Accordingly, he controls a large percentage of the
votes attached to our outstanding voting securities. As a result, he has the
ability to influence matters affecting our stockholders, including the election
of our directors, the acquisition or disposition of our assets, and the future
issuance of our securities. Because he controls such large percentage of votes,
investors may find it difficult to replace our management if they disagree with
the way our business is being operated. Because the influence by Mr. Nickolas
could result in management making decisions that are in the best interest of Mr.
Nickolas and not in the best interest of the investors, you may lose some or all
of the value of your investment in our common stock.
Because we can issue additional shares of common stock,
our stockholders may experience dilution in the future.
We are authorized to issue up to 22,500,000 shares of common
stock and 100,000,000 shares of preferred stock, of which 3,819,039 shares of
common stock are issued and outstanding and 20,000,000 shares of Series A
Preferred Stock are issued and outstanding as of January 20, 2016. Our board of
directors has the authority to cause us to issue additional shares of common
stock and preferred stock, and to determine the rights, preferences and
privileges of shares of our preferred stock, without consent of our
stockholders. Consequently, the stockholders may experience more dilution in
their ownership of our stock in the future.
Trading on the OTCQB may be volatile and sporadic, which
could depress the market price of our common stock and make it difficult for our
stockholders to resell their shares.
Our common stock is quoted on the OTCQB operated by the OTC
Markets Group. Trading in stock quoted on the OTCQB is often thin and
characterized by wide fluctuations in trading prices, due to many factors that
may have little to do with our operations or business prospects. This volatility
could depress the market price of our common stock for reasons unrelated to
operating performance. Moreover, the OTCQB is not a stock exchange, and trading
of securities on the OTCQB is often more sporadic than the trading of securities
listed on a national securities exchange like the NASDAQ or the NYSE.
Accordingly, stockholders may have difficulty reselling any of our shares.
A decline in the price of our common stock could affect
our ability to raise further working capital, it may adversely impact our
ability to continue operations and we may go out of business.
A prolonged decline in the price of our common stock could
result in a reduction in the liquidity of our common stock and a reduction in
our ability to raise capital. Because we plan to acquire a significant portion
of the funds we need in order to conduct our planned operations through the sale
of equity securities, a decline in the price of our common stock could be
detrimental to our liquidity and our operations because the decline may cause
investors not to choose to invest in our stock. If we are unable to raise the
funds we require for all our planned operations, we may be forced to reallocate
funds from other planned uses and may suffer a significant negative effect on
our business plan and operations, including our ability to develop new products
and continue our current operations. As a result, our business may suffer, and
not be successful and we may go out of business. We also might not be able to
meet our financial obligations if we cannot raise enough funds through the sale
of our equity securities and we may be forced to go out of business.
Because we do not intend to pay any cash dividends on our
shares of common stock in the near future, our stockholders will not be able to
receive a return on their shares unless they sell them.
We intend to retain any future earnings to finance the
development and expansion of our business. We do not anticipate paying any cash
dividends on our common stock in the near future. The declaration, payment and
amount of any future dividends will be made at the discretion of the board of
directors, and will depend upon, among other things, the results of operations,
cash flows and financial condition, operating and capital requirements, and
other factors as the board of directors considers relevant. There is no
assurance that future dividends will be paid, and if dividends are paid, there
is no assurance with respect to the amount of any such dividend.
Unless we pay dividends, our stockholders will not be able to receive a return
on their shares unless they sell them.
13
Our stock is a penny stock. Trading of our stock may be
restricted by the SECs penny stock regulations, which may limit a stockholders
ability to buy and sell our stock.
Our stock is a penny stock. The Securities and Exchange
Commission (SEC) has adopted Rule 15g-9 which generally defines penny stock
to be any equity security that has a market price (as defined in Rule 15g-9)
less than $5.00 per share or an exercise price of less than $5.00 per share,
subject to certain exceptions. Our securities are covered by the penny stock
rules, which impose additional sales practice requirements on broker-dealers who
sell to persons other than established customers and accredited investors. The
term accredited investor refers generally to institutions with assets in
excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or
annual income exceeding $200,000 or $300,000 jointly with their spouse. The
penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from the rules, to deliver a standardized risk
disclosure document in a form prepared by the SEC, which provides information
about penny stocks and the nature and level of risks in the penny stock market.
The broker-dealer also must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
salesperson in the transaction and monthly account statements showing the market
value of each penny stock held in the customers account. The bid and offer
quotations, and the broker-dealer and salesperson compensation information, must
be given to the customer orally or in writing prior to effecting the transaction
and must be given to the customer in writing before or with the customers
confirmation. In addition, the penny stock rules require that prior to a
transaction in a penny stock not otherwise exempt from these rules; the
broker-dealer must make a special written determination that the penny stock is
a suitable investment for the purchaser and receive the purchasers written
agreement to the transaction. These disclosure requirements may have the effect
of reducing the level of trading activity in the secondary market for the stock
that is subject to these penny stock rules. Consequently, these penny stock
rules may affect the ability of broker-dealers to trade our securities. We
believe that the penny stock rules discourage investor interest in and limit the
marketability of our common stock.
FINRA sales practice requirements may also limit a
stockholders ability to buy and sell our stock.
In addition to the penny stock rules promulgated by the SEC,
the Financial Industry Regulatory Authority (FINRA) has adopted rules that
require that in recommending an investment to a customer, a broker-dealer must
have reasonable grounds for believing that the investment is suitable for that
customer. Prior to recommending speculative low priced securities to their
non-institutional customers, broker-dealers must make reasonable efforts to
obtain information about the customers financial status, tax status, investment
objectives and other information. Under interpretations of these rules, FINRA
believes that there is a high probability that speculative low priced securities
will not be suitable for at least some customers. FINRA requirements make it
more difficult for broker-dealers to recommend that their customers buy our
common stock, which may limit your ability to buy and sell our stock.
Forward-Looking Statements
This reoffer prospectus contains forward-looking statements.
Forward-looking statements are projections in respect of future events or our
future financial performance. In some cases, you can identify forward-looking
statements by terminology such as may, should, intend, expect, plan,
anticipate, believe, estimate, predict, potential, or continue or
the negative of these terms or other comparable terminology. These statements
are only predictions and involve known and unknown risks, including the risks in
the section entitled Risk Factors, uncertainties and other factors, which may
cause our companys or our industrys actual results, levels of activity or
performance to be materially different from any future results, levels of
activity or performance expressed or implied by these forward-looking
statements. Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity or performance. Except as required by applicable law,
including the securities laws of the United States, we do not intend to update
any of the forward-looking statements to conform these statements to actual
results.
14
The Offering
The selling stockholders identified in this reoffer prospectus
may offer and sell up to 296,000 shares of our common stock issuable upon
exercise of stock options. We granted the stock options to such selling
stockholders pursuant to our 2013 Equity Incentive Plan.
Use of Proceeds
We will not receive any proceeds from the sale of the shares of
our common stock by the selling stockholders. We may, however, receive proceeds
upon exercise of the stock options granted to the selling stockholders. If we
receive proceeds upon exercise of stock options, we intend to use these proceeds
for working capital and general corporate purposes.
Determination of Offering Price
The selling stockholders may sell all or a portion of the
shares being offered pursuant to this reoffer prospectus at fixed prices, at
prevailing market prices at the time of sale, at varying prices or at negotiated
prices.
Selling Stockholders
The selling stockholders may offer and sell, from time to time,
any or all of shares of our common stock issuable upon exercise of the stock
options granted pursuant to our 2013 Equity Incentive Plan.
The following table identifies the selling stockholders and
indicates (i) the nature of any material relationship that such selling
stockholder has had with us for the past three years, (ii) the number of shares
of our common stock held by the selling stockholders, (iii) the amount to be
offered for each of the selling stockholders account, and (iv) the number of
shares of our common stock and percentage of outstanding shares of our common
stock to be owned by each selling stockholder after the sale of the shares of
our common stock offered by them pursuant to this offering. The selling
stockholders are not obligated to sell the shares offered in this reoffer
prospectus and may choose not to sell any of the shares or only a part of the
shares that they receive.
The information provided in the following table with respect to
the selling stockholders has been obtained from each of the selling
stockholders. Because the selling stockholders may offer and sell all or only
some portion of the shares of our common stock being offered pursuant to this
reoffer prospectus, the numbers in the table below representing the amount and
percentage of these shares of our common stock that will be held by the selling
stockholders upon termination of the offering are only estimates based on the
assumption that each selling stockholder will sell all of his or her shares of
our common stock being offered in the offering. In addition, the selling
stockholders may have sold, transferred or otherwise disposed of, or may sell,
transfer or otherwise dispose of, at any time or from time to time since the
date on which he or she provided the information regarding the shares of common
stock beneficially owned by them, all or some portion of the shares of common
stock beneficially owned by them in transactions exempt from the registration
requirements of the Securities Act of 1933.
None of the selling stockholders is a broker-dealer or an
affiliate of a broker-dealer. We may require the selling stockholders to suspend
the sales of the shares of our common stock being offered pursuant to this
reoffer prospectus upon the occurrence of any event that makes any statement in
this reoffer prospectus or the related registration statement untrue in any
material respect or that requires the changing of statements in those documents
in order to make statements in those documents not misleading.
15
Name of
Selling Stockholder |
Shares Owned
by the Selling Stockholder
before the Offering(1)
|
Total
Shares Offered in the Offering
|
Number of Shares to Be
Owned by Selling Stockholder and Percent of Total
Issued and Outstanding Shares After the Offering
(1) |
# of
Shares(2)
|
% of
Class(2),(3)
|
Steven P. Nickolas(4) |
924,000(5) |
148,000(6) |
776,000(7) |
18.9% |
Richard A. Wright(8) |
148,000(9) |
148,000(10) |
Nil |
* |
Totals |
1,072,000 |
296,000 |
776,000 |
18.9% |
Notes |
|
|
|
* |
Less than 1%. |
|
|
(1) |
Beneficial ownership is determined in accordance with
Securities and Exchange Commission rules and generally includes voting or
investment power with respect to shares of common stock. Shares of common
stock subject to options, warrants and convertible preferred stock
currently exercisable or convertible, or exercisable or convertible within
60 days, are counted as outstanding for computing the percentage of the
person holding such options, warrants or convertible preferred stock but
are not counted as outstanding for computing the percentage of any other
person. We believe that the selling stockholders have sole voting and
investment powers over their shares. |
|
|
(2) |
We have assumed that the selling stockholders will sell
all of the shares being offered in this offering. |
|
|
(3) |
Based on 3,819,039 shares of our common stock issued and
outstanding as of January 20, 2016. Shares of our common stock being
offered pursuant to this reoffer prospectus by a selling stockholder are
counted as outstanding for computing the percentage of that particular
selling stockholder but are not counted as outstanding for computing the
percentage of any other person. |
|
|
(4) |
Effective as of May 31, 2013, Steven P. Nickolas was
appointed as chairman, president, chief executive officer, secretary and a
director of our company. On August 7, 2013, our board of directors
replaced Mr. Nickolas as secretary of our company with Richard A. Wright.
|
|
|
(5) |
Consists of 148,000 shares of our common stock subject to
vested stock options exercisable within 60 days, 430,000 shares of our
common stock owned by WiN Investments, LLC and 346,000 shares of our
common stock owned by Lifewater Industries, LLC. Steven P. Nickolas
exercises voting and dispositive power with respect to the shares of our
common stock that are beneficially owned by WiN Investments, LLC and
Lifewater Industries, LLC. Does not include 10,000,000 shares of Series A
Preferred Stock. The Series A Preferred Stock has 0.2 votes per share and
is not convertible into shares of our common stock. |
|
|
(6) |
Consists of 60,000 shares of our common stock issuable at
an exercise price of $7.50 per share until October 9, 2023 upon exercise
of the stock options granted pursuant to the stock option agreement dated
October 9, 2013 as amended October 31, 2014, 12,000 shares of our common
stock issuable at an exercise price of $8.25 per share until May 12, 2019
upon exercise of the stock options granted pursuant to the stock option
agreement dated May 12, 2014, 60,000 shares of our common stock issuable
at an exercise price of $7.275 per share until May 21, 2024 upon exercise
of the stock options granted pursuant to the stock option agreement dated
May 21, 2014, and 16,000 shares of our common stock issuable at an
exercise price of $5.75 per share until February 18, 2020 upon exercise of
the stock options granted pursuant to the stock option agreement dated
February 18, 2015. We granted these stock options pursuant to our 2013
Equity Incentive Plan. |
16
(7) |
Consists of 430,000 shares of our common stock owned by
WiN Investments, LLC and 346,000 shares of our common stock owned by
Lifewater Industries, LLC. Steven P. Nickolas exercises voting and
dispositive power with respect to the shares of our common stock that are
beneficially owned by WiN Investments, LLC and Lifewater Industries, LLC.
Does not include 10,000,000 shares of Series A Preferred Stock. The Series
A Preferred Stock has 0.2 votes per share and is not convertible into
shares of our common stock. |
|
|
(8) |
Effective as of May 31, 2013, Richard A. Wright was
appointed as vice-president, treasurer and a director of our company. On
August 7, 2013, our board of directors appointed Mr. Wright as secretary
of our company. |
|
|
(9) |
Consists of 148,000 shares of our common stock subject to
vested stock options exercisable within 60 days. Does not include
10,000,000 shares of Series A Preferred Stock. The Series A Preferred
Stock has 0.2 votes per share and is not convertible into shares of our
common stock. |
|
|
(10) |
Consists of 60,000 shares of our common stock issuable at
an exercise price of $7.50 per share until October 9, 2023 upon exercise
of the stock options granted pursuant to the stock option agreement dated
October 9, 2013 as amended October 31, 2014, 12,000 shares of our common
stock issuable at an exercise price of $8.25 per share until May 12, 2019
upon exercise of the stock options granted pursuant to the stock option
agreement dated May 12, 2014, 60,000 shares of our common stock issuable
at an exercise price of $7.275 per share until May 21, 2024 upon exercise
of the stock options granted pursuant to the stock option agreement dated
May 21, 2014, and 16,000 shares of our common stock issuable at an
exercise price of $5.75 per share until February 18, 2020 upon exercise of
the stock options granted pursuant to the stock option agreement dated
February 18, 2015. We granted these stock options pursuant to our 2013
Equity Incentive Plan. |
Plan of Distribution
The selling stockholders may, from time to time, sell all or a
portion of the shares of our common stock on any market upon which our common
stock may be listed or quoted (currently the OTC Markets Groups OTCQB), in
privately negotiated transactions or otherwise. Such sales may be at fixed
prices prevailing at the time of sale, at prices related to the market prices or
at negotiated prices. The shares of our common stock being offered for resale
pursuant to this reoffer prospectus may be sold by the selling stockholders by
one or more of the following methods, without limitation:
|
1. |
block trades in which the broker or dealer so engaged
will attempt to sell the shares of our common stock as agent but may
position and resell a portion of the block as principal to facilitate the
transaction; |
|
|
|
|
2. |
purchases by broker or dealer as principal and resale by
the broker or dealer for its account pursuant to this reoffer
prospectus; |
|
|
|
|
3. |
an exchange distribution in accordance with the rules of
the applicable exchange or quotation system; |
|
|
|
|
4. |
ordinary brokerage transactions and transactions in which
the broker solicits purchasers; |
|
|
|
|
5. |
privately negotiated transactions; |
|
|
|
|
6. |
market sales (both long and short to the extent permitted
under the federal securities laws); |
|
|
|
|
7. |
at the market to or through market makers or into an
existing market for the shares; |
|
|
|
|
8. |
through transactions in options, swaps or other
derivatives (whether exchange listed or otherwise); |
|
|
|
|
9. |
a combination of any aforementioned methods of sale;
and |
|
|
|
|
10. |
Any other method permitted pursuant to applicable
law. |
In effecting sales, brokers and dealers engaged by the selling
stockholders may arrange for other brokers or dealers to participate. Brokers or dealers may receive commissions or
discounts from a selling stockholder or, if any of the broker-dealers act as an
agent for the purchaser of such shares, from a purchaser in amounts to be
negotiated which are not expected to exceed those customary in the types of
transactions involved. Broker-dealers may agree with a selling stockholder to
sell a specified number of the shares of our common stock at a stipulated price
per share. Such an agreement may also require the broker-dealer to purchase as
principal any unsold shares of our common stock at the price required to fulfill
the broker-dealer commitment to the selling stockholder if such broker-dealer is
unable to sell the shares on behalf of the selling stockholder. Broker-dealers
who acquire shares of our common stock as principal may thereafter resell the
shares of our common stock from time to time in transactions which may involve
block transactions and sales to and through other broker-dealers, including
transactions of the nature described above. Such sales by a broker-dealer could
be at prices and on terms then prevailing at the time of sale, at prices related
to the then-current market price or in negotiated transactions. In connection
with such resale, the broker-dealer may pay to or receive from the purchasers of
the shares commissions as described above.
17
The selling stockholders and any broker-dealers or agents that
participate with the selling stockholders in the sale of the shares of our
common stock may be deemed to be underwriters within the meaning of the
Securities Act of 1933 in connection with these sales. In that event, any
commissions received by the broker-dealers or agents and any profit on the
resale of the shares of common stock purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act of 1933.
From time to time, any of the selling stockholders may pledge
shares of our common stock pursuant to the margin provisions of customer
agreements with brokers. Upon a default by a selling stockholder, his or her
broker may offer and sell the pledged shares of our common stock from time to
time. Upon a sale of the shares of our common stock, we believe that the selling
stockholders will satisfy the prospectus delivery requirements under the
Securities Act of 1933. We intend to file any amendments or other necessary
documents in compliance with the Securities Act of 1933 which may be required in
the event any of the selling stockholders defaults under any customer agreement
with brokers.
To the extent required under the Securities Act of 1933, a
post-effective amendment to the registration statement of which this reoffer
prospectus forms a part will be filed disclosing the name of any broker-dealers,
the number of shares of our common stock involved, the price at which our common
stock is to be sold, the commissions paid or discounts or concessions allowed to
such broker-dealers, where applicable, that such broker-dealers did not conduct
any investigation to verify the information set out or incorporated by reference
in this reoffer prospectus and other facts material to the transaction.
We and the selling stockholders will be subject to applicable
provisions of the Securities Exchange Act of 1934 and the rules and regulations
under it, including, without limitation, Rule 10b-5 and, insofar as a selling
stockholder is a distribution participant and we, under certain circumstances,
may be a distribution participant, under Regulation M. All of the foregoing may
affect the marketability of our common stock.
All expenses for this reoffer prospectus and related
registration statement including legal, accounting, printing and mailing fees
are and will be borne by us. Any commissions, discounts or other fees payable to
brokers or dealers in connection with any sale of the shares of common stock
will be borne by the selling stockholders, the purchasers participating in such
transaction, or both.
Any shares of our common stock being offered pursuant to this
reoffer prospectus which qualify for sale pursuant to Rule 144 under the
Securities Act of 1933, may be sold under Rule 144 rather than pursuant to this
reoffer prospectus.
Under the Securities Exchange Act of 1934, any person engaged
in a distribution of the shares offered by this reoffer prospectus may not
simultaneously engage in market making activities with respect to our common
shares during the applicable cooling off periods prior to the commencement of
such distribution. In addition, and without limiting the foregoing, the selling
stockholders will be subject to applicable provisions of the Securities Exchange
Act of 1934 and the rules and regulations thereunder, which provisions may limit
the timing of purchases and sales of the shares by the selling stockholders.
18
Experts and Counsel
Our consolidated financial statements for the years ended March
31, 2015 and 2014 have been incorporated by reference in this reoffer prospectus
from our annual report on Form 10-K for the year ended March 31, 2015 filed with
the Securities and Exchange Commission on July 14, 2015 in reliance on the
report of Seale and Beers, CPAs, an independent registered public accounting
firm, which has also been incorporated by reference in this reoffer prospectus,
given on the authority of said firm as experts in auditing and accounting.
Clark Wilson LLP, of Suite 900 885 West Georgia Street,
Vancouver, British Columbia, Canada has provided an opinion on the validity of
the shares of our common stock being offered pursuant to this reoffer
prospectus.
Interest of Named Experts and Counsel
No expert named in the registration statement of which this
reoffer prospectus forms a part as having prepared or certified any part thereof
(or is named as having prepared or certified a report or valuation for use in
connection with such registration statement) or counsel named in this reoffer
prospectus as having given an opinion upon the validity of the securities being
offered pursuant to this reoffer prospectus or upon other legal matters in
connection with the registration or offering such securities was employed for
such purpose on a contingency basis. Also at the time of such preparation,
certification or opinion or at any time thereafter, through the date of
effectiveness of such registration statement or that part of such registration
statement to which such preparation, certification or opinion relates, no such
person had, or is to receive, in connection with the offering, a substantial
interest, direct or indirect, in our company or any of its parents or
subsidiaries. Nor was any such person connected with our company or any of its
parents or subsidiaries as a promoter, managing or principal underwriter, voting
trustee, director, officer or employee.
Material Changes
There have been no material changes to the affairs of our
company since March 31, 2015 which have not previously been described in a
report on Form 10-K, Form 10-Q or Form 8-K filed with the Securities and
Exchange Commission.
Incorporation of Certain Information by Reference
The following documents filed by our company with the
Securities and Exchange Commission are incorporated into this reoffer prospectus
by reference:
1. |
our annual report on Form 10-K filed on July 14,
2015; |
|
|
2. |
our quarterly reports on Form 10-Q filed on August 18,
2015 and November 23, 2015; |
|
|
3. |
our current reports on Form 8-K filed on April 14, 2015,
June 26, 2015, July 15, 2015, December 1, 2015, December 4, 2015 and
December 30, 2015; and |
|
|
4. |
the description of our common stock contained in our
registration statement on Form 8-A filed on October 25, 2013, including
any amendments or reports filed for the purpose of updating such
description. |
In addition to the foregoing, all documents that we
subsequently file pursuant to Sections 13(a), 13(c), 14 and 15(d) of the
Securities Exchange Act of 1934, prior to the filing of a post-effective
amendment indicating that all of the securities offered pursuant to the
registration statement of which this reoffer prospectus forms a part have been
sold or deregistering all securities then remaining unsold, will be deemed to be
incorporated by reference into this reoffer prospectus and to be part hereof
from the date of filing of such documents. Any statement contained in a document
incorporated by reference in this reoffer prospectus will be deemed to be
modified or superseded for purposes of this reoffer prospectus to the extent
that a statement contained in this reoffer prospectus or in any subsequently
filed document that is also incorporated by reference in this reoffer prospectus
modifies or supersedes such statement. Any statement so modified or superseded
will not be deemed, except as so modified or superseded, to constitute a part of
this reoffer prospectus.
19
Where You Can Find More Information
We will provide to each person, including any beneficial owner,
to whom this reoffer prospectus is delivered, at no cost, upon written or oral
request, a copy of any or all of the information that has been incorporated by
reference in this reoffer prospectus but not delivered with this reoffer
prospectus. Requests for documents should be directed to The Alkaline Water
Company Inc., 7730 E Greenway Road, Ste. 203, Scottsdale, Arizona 85260,
Attention: President, telephone number (480) 656-2423. Exhibits to these filings
will not be sent unless those exhibits have been specifically incorporated by
reference in such filings.
We file annual, quarterly and current reports, proxy statements
and other information with the Securities and Exchange Commission. Such filings
are available to the public over the internet at the Securities and Exchange
Commissions website at http://www.sec.gov. The public may also read and copy
any materials we file with the Securities and Exchange Commission at its public
reference room at 100 F Street, N.E. Washington, D.C. 20549. The public may
obtain information on the operation of the public reference room by calling the
Securities and Exchange Commission at 1-800-SEC-0330.
We have filed with the Securities and Exchange Commission a
registration statement on Form S-8 under the Securities Act of 1933 with respect
to the securities offered under this reoffer prospectus. This reoffer
prospectus, which forms a part of that registration statement, does not contain
all information included in the registration statement. Certain information is
omitted and you should refer to the registration statement and its exhibits.
You should only rely on the information incorporated by
reference or provided in this reoffer prospectus or any supplement. We have not
authorized anyone else to provide you with different information. This reoffer
prospectus does not constitute an offer to sell or a solicitation of an offer to
buy any of the securities offered hereby by anyone in any jurisdiction in which
such offer or solicitation is not authorized or in which the person making such
offer or solicitation is not qualified to do so or to any person to whom it is
unlawful to make such offer or solicitation. You should not assume that the
information in this reoffer prospectus or any supplement is accurate as of any
date other than the date of this reoffer prospectus.
20
296,000 Shares
The Alkaline Water Company Inc.
Common Stock
_______________________________
Reoffer Prospectus
_________________________________
January 20, 2016
21
Part II
INFORMATION REQUIRED IN THE REGISTRATION
STATEMENT
Item 3. Incorporation of Documents by Reference.
The following documents filed by our company with the
Securities and Exchange Commission are incorporated into this registration
statement by reference:
1. |
our annual report on Form 10-K filed on July 14,
2015; |
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2. |
our quarterly reports on Form 10-Q filed on August 18,
2015 and November 23, 2015; |
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3. |
our current reports on Form 8-K filed on April 14, 2015,
June 26, 2015, July 15, 2015, December 1, 2015, December 4, 2015 and
December 30, 2015; and |
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4. |
the description of our common stock contained in our
registration statement on Form 8-A filed on October 25, 2013, including
any amendments or reports filed for the purpose of updating such
description. |
In addition to the foregoing, all documents that we
subsequently file pursuant to Sections 13(a), 13(c), 14 and 15(d) of the
Securities Exchange Act of 1934, prior to the filing of a post-effective
amendment indicating that all of the securities offered pursuant to this
registration statement have been sold or deregistering all securities then
remaining unsold, will be deemed to be incorporated by reference into this
registration statement and to be part hereof from the date of filing of such
documents. Any statement contained in a document incorporated by reference in
this registration statement will be deemed to be modified or superseded for
purposes of this registration statement to the extent that a statement contained
in this registration statement or in any subsequently filed document that is
also incorporated by reference in this registration statement modifies or
supersedes such statement. Any statement so modified or superseded will not be
deemed, except as so modified or superseded, to constitute a part of this
registration statement.
Item 4. Description of Securities.
Not applicable.
Item 5. Interests of Named Experts and Counsel.
No expert named in this registration statement as having
prepared or certified any part thereof (or is named as having prepared or
certified a report or valuation for use in connection with this registration
statement) or counsel named in this registration statement as having given an
opinion upon the validity of the securities being offered pursuant to this
registration statement or upon other legal matters in connection with the
registration or offering such securities was employed for such purpose on a
contingency basis. Also at the time of such preparation, certification or
opinion or at any time thereafter, through the date of effectiveness of such
registration statement or that part of such registration statement to which such
preparation, certification or opinion relates, no such person had, or is to
receive, in connection with the offering, a substantial interest, direct or
indirect, in our company or any of its parents or subsidiaries. Nor was any such
person connected with our company or any of its parents or subsidiaries as a
promoter, managing or principal underwriter, voting trustee, director, officer
or employee.
Item 6. Indemnification of Directors and Officers.
The Nevada Revised Statutes provide that:
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a corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, except an action by or in the right of
the corporation, by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise, against expenses, including attorneys fees, judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with the action, suit or proceeding if he or she acted 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 corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful; |
22
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a corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure
a judgment in its favor by reason of the fact that he or she is or was a
director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or
other enterprise against expenses, including amounts paid in settlement
and attorneys fees actually and reasonably incurred by him or her in
connection with the defense or settlement of the action or suit if he or
she acted 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 corporation.
Indemnification may not be made for any claim, issue or matter as to which
such a person has been adjudged by a court of competent jurisdiction,
after exhaustion of all appeals therefrom, to be liable to the corporation
or for amounts paid in settlement to the corporation, unless and only to
the extent that the court in which the action or suit was brought or other
court of competent jurisdiction determines upon application that in view
of all the circumstances of the case, the person is fairly and reasonably
entitled to indemnity for such expenses as the court deems proper; and
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to the extent that a director, officer, employee or agent
of a corporation has been successful on the merits or otherwise in defense
of any action, suit or proceeding, or in defense of any claim, issue or
matter therein, the corporation must indemnify him or her against
expenses, including attorneys fees, actually and reasonably incurred by
him or her in connection with the defense. |
The Nevada Revised Statutes provide that we may make any
discretionary indemnification only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or agent
is proper in the circumstances. The determination must be made:
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by our stockholders; |
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by our board of directors by majority vote of a
quorum consisting of directors who were not parties to the action, suit or
proceeding; |
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if a majority vote of a quorum consisting of
directors who were not parties to the action, suit or proceeding so
orders, by independent legal counsel in a written opinion; |
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if a quorum consisting of directors who were
not parties to the action, suit or proceeding cannot be obtained, by
independent legal counsel in a written opinion; or |
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by court order. |
Our bylaws provide for the mandatory indemnification of our
directors and officers to the fullest extent legally permissible under the
Nevada Revised Statutes from time to time against all expenses, liability and
loss reasonably incurred or suffered by such person in connection with he or she
having been or being a party to, threatening to be made a party to, or involved
in any action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he or she is or was a director or an
officer of the company. Advance payment of expenses by the company to such
director or officer, as these expenses are incurred in defending a civil or
criminal action, suit or proceeding, are subject to an undertaking by or on
behalf of the director or officer to repay the amount of such payment if it is
ultimately determined by a court of competent jurisdiction that he or she is not
entitled to be indemnified by our company. The right of indemnification under
our bylaws is not exclusive of any other right to indemnification a director or
an officer may have.
Our bylaws allow us to purchase and maintain insurance on
behalf of any person who is or was a director or officer of our company against
any liability asserted against such person and incurred in any such capacity or
arising out of such status, whether or not we would have the power to indemnify
such person. We have not purchased such insurance.
Item 7. Exemption from Registration Claimed.
Not applicable.
23
Item 8. Exhibits.
Exhibit |
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Number |
Description |
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(4) |
Instruments Defining the
Rights of Security Holders, including Indentures |
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4.1 |
Articles of Incorporation
(incorporated by reference from our Form S-1 Registration Statement, filed
on October 28, 2011) |
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4.2 |
Certificate of Change
(incorporated by reference from our Quarterly Report on Form 10-Q, filed
on August 13, 2013) |
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4.3 |
Articles of Merger
(incorporated by reference from our Quarterly Report on Form 10-Q, filed
on August 13, 2013) |
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4.4 |
Certificate of Amendment
(incorporated by reference from our Current Report on Form 8-K, filed on
October 11, 2013) |
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4.5 |
Certificate of Designation
(incorporated by reference from our Current Report on Form 8-K, filed on
October 11, 2013) |
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4.6 |
Certificate of Designation
(incorporated by reference from our Current Report on Form 8-K, filed on
November 12, 2013) |
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4.7 |
Certificate of Change
(incorporated by reference from our Current Report on Form 8-K, filed on
December 30, 2015) |
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4.8 |
Amended and Restated Bylaws
(incorporated by reference from our Current Report on Form 8-K, filed on
March 15, 2013) |
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4.9* |
2013 Equity Incentive Plan |
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4.10 |
Stock Option Agreement dated
October 9, 2013 with Steven P. Nickolas (incorporated by reference from
our Quarterly Report on Form 10-Q, filed on November 13, 2013) |
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4.11 |
Stock Option Agreement dated
October 9, 2013 with Richard A. Wright (incorporated by reference from our
Quarterly Report on Form 10-Q, filed on November 13, 2013) |
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4.12 |
Stock Option Agreement dated
May 12, 2014 with Steven P. Nickolas (incorporated by reference from our
Current Report on Form 8-K, filed on May 14, 2014) |
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4.13 |
Stock Option Agreement dated
May 12, 2014 with Richard A. Wright (incorporated by reference from our
Current Report on Form 8-K, filed on May 14, 2014) |
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4.14 |
Stock Option Agreement dated
May 21, 2014 with Steven P. Nickolas (incorporated by reference from our
Current Report on Form 8-K, filed on May 23, 2014) |
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4.15 |
Stock Option Agreement dated
May 21, 2014 with Richard A. Wright (incorporated by reference from our
Current Report on Form 8-K, filed on May 23, 2014) |
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4.16 |
Form of Amending Agreement to
Stock Option Agreement (incorporated by reference from our Current Report
on Form 8-K, filed on November 4, 2014) |
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4.17 |
Stock Option Agreement dated
February 18, 2015 with Steven P. Nickolas (incorporated by reference from
our Current Report on Form 8-K, filed on April 14, 2015)
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24
*Filed herewith.
25
Item 9. Undertakings.
The undersigned registrant hereby undertakes:
1. to
file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
i.
to include any prospectus required by Section 10(a)(3) of the Securities Act of
1933;
ii. to reflect in the
prospectus any facts or events arising after the effective date of the
registration statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental change in the
information set forth in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Securities and Exchange Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than 20% change in the maximum
aggregate offering price set forth in the Calculation of Registration Fee
table in the effective registration statement; and
iii. to include any material
information with respect to the plan of distribution not previously disclosed in
the registration statement or any material change to such information in the
registration statement;
provided, however, that
paragraphs (1)(i) and (1)(ii) do not apply if the information required to be
included in a post-effective amendment by those paragraphs is contained in
reports filed with or furnished to the Securities and Exchange Commission by the
registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange
Act of 1934 that are incorporated by reference in the registration statement;
2.
that, for the purpose of determining any liability under the Securities Act of
1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof; and
3.
to remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
The undersigned registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933, each filing of
the registrants annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plans annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
26
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Scottsdale, State of Arizona on January 20, 2016.
The Alkaline Water Company Inc.
By:
/s/ Steven P.
Nickolas |
Steven P. Nickolas |
President, Chief Executive Officer and Director |
(Principal Executive Officer) |
Pursuant to the requirements of the Securities Act of 1933,
this registration statement has been signed by the following persons in the
capacities and on the dates indicated.
/s/ Steven P.
Nickolas |
Steven P. Nickolas |
President, Chief Executive Officer and Director |
(Principal Executive Officer) |
Date: January 20, 2016 |
/s/ Richard A.
Wright |
Richard A. Wright |
Vice-President, Secretary, Treasurer and Director |
(Principal Financial Officer and Principal Accounting
Officer) |
Date: January 20, 2016 |
27
THE ALKALINE WATER COMPANY INC.
2013 EQUITY
INCENTIVE PLAN
1.
Purpose; Eligibility.
1.1
General Purpose. The name of this plan is The Alkaline Water
Company Inc. 2013 Equity Incentive Plan (the Plan). The purposes of the
Plan are to (a) enable The Alkaline Water Company Inc., a Nevada corporation
(the Company), and any Affiliate to attract and retain the types of
Employees, Consultants and Directors who will contribute to the Companys long
range success; (b) provide incentives that align the interests of Employees,
Consultants and Directors with those of the shareholders of the Company; and (c)
promote the success of the Companys business.
1.2
Eligible Award Recipients. The persons eligible to receive
Awards are the Employees, Consultants and Directors of the Company and its
Affiliates and such other individuals designated by the Committee who are
reasonably expected to become Employees, Consultants and Directors after the
receipt of Awards.
1.3
Available Awards. Awards that may be granted under the Plan
include: (a) Incentive Stock Options, (b) Non-qualified Stock Options, (c) Stock
Appreciation Rights, (d) Restricted Awards and (e) Performance Compensation
Awards.
2.
Definitions.
Affiliate means a corporation or other entity that, directly
or through one or more intermediaries, controls, is controlled by or is under
common control with, the Company.
Applicable Laws means the requirements related to or
implicated by the administration of the Plan under applicable state corporate
law, United States federal and state securities laws, the Code, any stock
exchange or quotation system on which the shares of Common Stock are listed or
quoted, and the applicable laws of any foreign country or jurisdiction where
Awards are granted under the Plan.
Award means any right granted under the Plan, including an
Incentive Stock Option, a Non-qualified Stock Option, a Stock Appreciation
Right, a Restricted Award, or a Performance Compensation Award.
Award Agreement means a written agreement, contract,
certificate or other instrument or document evidencing the terms and conditions
of an individual Award granted under the Plan which may, in the discretion of
the Company, be transmitted electronically to any Participant. Each Award
Agreement shall be subject to the terms and conditions of the Plan.
Beneficial Owner has the meaning assigned to such term in Rule
13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the
beneficial ownership of any particular person (as that term is used in Section
13(d)(3) of the Exchange Act), such person shall be deemed to have beneficial
ownership of all securities that such person has the right to acquire by
conversion or exercise of other securities, whether such right is currently
exercisable or is exercisable only after the passage of time. The terms
Beneficially Owns and Beneficially Owned have a corresponding meaning.
Board means the Board of Directors of the Company, as
constituted at any time.
- 2 -
Cause means:
With respect to any Employee or Consultant:
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(a) |
If the Employee or Consultant is a party to an employment
or service agreement with the Company or its Affiliates and such agreement
provides for a definition of Cause or other similar term, the definition
contained therein; or |
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(b) |
If no such agreement exists, or if such agreement does
not define Cause or other similar term: (i) the commission of, or plea of
guilty or no contest to, a felony or a crime involving moral turpitude or
the commission of any other act involving willful malfeasance or material
fiduciary breach with respect to the Company or an Affiliate; (ii) conduct
that results in or is reasonably likely to result in harm to the
reputation or business of the Company or any of its Affiliates; (iii)
gross negligence or willful misconduct with respect to the Company or an
Affiliate; or (iv) material violation of state or federal securities
laws. |
With respect to any Director, a
determination by a majority of the disinterested Board members that the Director
has engaged in any of the following:
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(a) |
malfeasance in office; |
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(b) |
gross misconduct or neglect; |
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(c) |
false or fraudulent misrepresentation inducing the
directors appointment; |
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(d) |
wilful conversion of corporate funds; or |
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(e) |
repeated failure to participate in Board meetings on a
regular basis despite having received proper notice of the meetings in
advance. |
The Committee, in its absolute
discretion, shall determine the effect of all matters and questions relating to
whether a Participant has been discharged for Cause.
Change in Control
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(a) |
The direct or indirect sale, transfer, conveyance or
other disposition (other than by way of merger or consolidation), in one
or a series of related transactions, of all or substantially all of the
properties or assets of the Company and its subsidiaries, taken as a
whole, to any Person that is not a subsidiary of the Company; |
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(b) |
The Incumbent Directors cease for any reason to
constitute at least a majority of the Board; |
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(c) |
The date which is 10 business days prior to the
consummation of a complete liquidation or dissolution of the
Company; |
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(d) |
The acquisition by any Person of Beneficial Ownership of
50% or more (on a fully diluted basis) of either (i) the then outstanding
shares of Common Stock of the Company, taking into account as outstanding for this purpose such Common Stock
issuable upon the exercise of options or warrants, the conversion of convertible
stock or debt, and the exercise of any similar right to acquire such Common
Stock (the Outstanding Company Common Stock) or (ii) the combined
voting power of the then outstanding voting securities of the Company entitled
to vote generally in the election of directors (the Outstanding Company
Voting Securities); provided, however, that for purposes of this Plan, the
following acquisitions shall not constitute a Change in Control: (A) any
acquisition by the Company or any Affiliate, (B) any acquisition by any employee
benefit plan sponsored or maintained by the Company or any subsidiary, (C) any
acquisition which complies with clauses, (i), (ii) and (iii) of subsection (e)
of this definition or (D) in respect of an Award held by a particular
Participant, any acquisition by the Participant or any group of persons
including the Participant (or any entity controlled by the Participant or any
group of persons including the Participant); or |
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(e) |
The consummation of a reorganization, merger,
consolidation, statutory share exchange or similar form of corporate
transaction involving the Company that requires the approval of the
Companys shareholders, whether for such transaction or the issuance of
securities in the transaction (a Business Combination), unless
immediately following such Business Combination: (i) more than 50% of the
total voting power of (A) the entity resulting from such Business
Combination (the Surviving Company), or (B) if applicable, the
ultimate parent entity that directly or indirectly has beneficial
ownership of sufficient voting securities eligible to elect a majority of
the members of the board of directors (or the analogous governing body) of
the Surviving Company (the Parent Company), is represented by the
Outstanding Company Voting Securities that were outstanding immediately
prior to such Business Combination (or, if applicable, is represented by
shares into which the Outstanding Company Voting Securities were converted
pursuant to such Business Combination), and such voting power among the
holders thereof is in substantially the same proportion as the voting
power of the Outstanding Company Voting Securities among the holders
thereof immediately prior to the Business Combination; (ii) no Person
(other than any employee benefit plan sponsored or maintained by the
Surviving Company or the Parent Company) is or becomes the Beneficial
Owner, directly or indirectly, of 50% or more of the total voting power of
the outstanding voting securities eligible to elect members of the board
of directors of the Parent Company (or the analogous governing body) (or,
if there is no Parent Company, the Surviving Company); and (iii) at least
a majority of the members of the board of directors (or the analogous
governing body) of the Parent Company (or, if there is no Parent Company,
the Surviving Company) following the consummation of the Business
Combination were Board members at the time of the Boards approval of the
execution of the initial agreement providing for such Business
Combination. |
Code means the Internal Revenue Code of 1986, as it may be
amended from time to time. Any reference to a section of the Code shall be
deemed to include a reference to any regulations promulgated thereunder.
Committee means the Board or a committee of one or more
members of the Board appointed by the Board to administer the Plan in accordance
with Section 3.3 and Section 3.4.
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Common Stock means the common stock, $0.001 par value per
share, of the Company, the preferred stock, $0.001 par value per share, of the
Company, or such other securities of the Company as may be designated by the
Committee from time to time in substitution thereof.
Company means The Alkaline Water Company Inc., a Nevada
corporation, and any successor thereto.
Consultant means any individual who is engaged by the Company
or any Affiliate to render consulting or advisory services.
Continuous Service means that the Participants service with
the Company or an Affiliate, whether as an Employee, Consultant or Director, is
not interrupted or terminated. The Participants Continuous Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the Participant renders service to the Company or an Affiliate as an Employee,
Consultant or Director or a change in the entity for which the Participant
renders such service, provided that there is no interruption or termination of
the Participants Continuous Service; provided further that if any Award is
subject to Section 409A of the Code, this sentence shall only be given effect to
the extent consistent with Section 409A of the Code. For example, a change in
status from an Employee of the Company to a Director of an Affiliate will not
constitute an interruption of Continuous Service. The Committee or its delegate,
in its sole discretion, may determine whether Continuous Service shall be
considered interrupted in the case of any leave of absence approved by that
party, including sick leave, military leave or any other personal or family
leave of absence.
Covered Employee has the same meaning as set forth in Section
162(m)(3) of the Code, as interpreted by Internal Revenue Service.
Director means a member of the Board.
Disability means that the Participant is unable to engage in
any substantial gainful activity by reason of any medically determinable
physical or mental impairment; provided, however, for purposes of determining
the term of an Incentive Stock Option pursuant to Section 6.9 hereof, the term
Disability shall have the meaning ascribed to it under Section 22(e)(3) of the
Code. The determination of whether an individual has a Disability shall be
determined under procedures established by the Committee. Except in situations
where the Committee is determining Disability for purposes of the term of an
Incentive Stock Option pursuant to Section 6.9 hereof within the meaning of
Section 22(e)(3) of the Code, the Committee may rely on any determination that a
Participant is disabled for purposes of benefits under any long-term disability
plan maintained by the Company or any Affiliate in which a Participant
participates.
Disqualifying Disposition has the meaning set forth in Section
14.11.
Effective Date shall mean the date as of which this Plan is
adopted by the Board.
Employee means any person, including an Officer or Director,
employed by the Company or an Affiliate; provided, that, for purposes of
determining eligibility to receive Incentive Stock Options, an Employee shall
mean an employee of the Company or a parent or subsidiary corporation within the
meaning of IRC Section 424. Mere service as a Director or payment of a
directors fee by the Company or an Affiliate shall not be sufficient to
constitute employment by the Company or an Affiliate.
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Exchange Act means the Securities Exchange Act of 1934, as
amended.
Fair Market Value means, as of any date, the value of the
Common Stock as determined below. If the Common Stock is listed or quoted on any
established stock exchange or public market, including without limitation, the
New York Stock Exchange, the NASDAQ Stock Market, the OTC Bulletin Board
operated by the Financial Industry Regulatory Authority, or one of marketplaces
operated by the OTC Markets Group, the Fair Market Value shall be the closing
price of a share of Common Stock (or if no sales were reported the closing price
on the date immediately preceding such date) as quoted on such exchange or
public market on the day of determination, as reported in the source as the
Committee deems reliable. In the absence of an established market for the Common
Stock, the Fair Market Value shall be determined in good faith by the Committee
and such determination shall be conclusive and binding on all persons.
Free Standing Rights has the meaning set forth in Section
7.1(a) .
Good Reason means:
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(a) |
If an Employee or Consultant is a party to an employment
or service agreement with the Company or its Affiliates and such agreement
provides for a definition of Good Reason or other similar term, the
definition contained therein; or |
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(b) |
If no such agreement exists or if such agreement does not
define Good Reason, the occurrence of one or more of the following without
the Participants express written consent, which circumstances are not
remedied by the Company within thirty (30) days of its receipt of a
written notice from the Participant describing the applicable
circumstances (which notice must be provided by the Participant within
ninety (90) days of the Participants knowledge of the applicable
circumstances): (i) any material, adverse change in the Participants
duties, responsibilities, authority, title, status or reporting structure;
(ii) a material reduction in the Participants base salary or bonus
opportunity; or (iii) a geographical relocation of the Participants
principal office location by more than fifty (50)
miles. |
Grant Date means the date on which the Committee adopts a
resolution, or takes other appropriate action, expressly granting an Award to a
Participant that specifies the key terms and conditions of the Award or, if a
later date is set forth in such resolution, then such date as is set forth in
such resolution.
Incentive Stock Option means an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code.
Incumbent Directors means individuals who, on the Effective
Date, constitute the Board, provided that any individual becoming a Director
subsequent to the Effective Date whose election or nomination for election to
the Board was approved by a vote of at least two- thirds of the Incumbent
Directors then on the Board (either by a specific vote or by approval of the
proxy statement of the Company in which such person is named as a nominee for
Director without objection to such nomination) shall be an Incumbent Director.
No individual initially elected or nominated as a director of the Company as a
result of an actual or threatened election contest with respect to Directors or
as a result of any other actual or threatened solicitation of proxies by or on
behalf of any person other than the Board shall be an Incumbent Director.
- 6 -
Negative Discretion means the discretion authorized by the
Plan to be applied by the Committee to eliminate or reduce the size of a
Performance Compensation Award in accordance with Section 7.3(d)(iv) of the
Plan; provided, that, the exercise of such discretion would not cause the
Performance Compensation Award to fail to qualify as performance- based
compensation under Section 162(m) of the Code.
Non-Employee Director means a Director who is a non-employee
director within the meaning of Rule 16b-3.
Non-qualified Stock Option means an Option that by its terms
does not qualify or is not intended to qualify as an Incentive Stock Option.
Officer means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
Option means an Incentive Stock Option or a Non-qualified
Stock Option granted pursuant to the Plan.
Optionholder means a person to whom an Option is granted
pursuant to the Plan or, if applicable, such other person who holds an
outstanding Option.
Option Exercise Price means the price at which a share of
Common Stock may be purchased upon the exercise of an Option.
Outside Director means a Director who is an outside director
within the meaning of Section 162(m) of the Code and Treasury Regulations
Section 1.162 -27(e)(3) or any successor to such statute and regulation.
Participant means an eligible person to whom an Award is
granted pursuant to the Plan or, if applicable, such other person who holds an
outstanding Award.
Performance Compensation Award means any Award designated by
the Committee as a Performance Compensation Award pursuant to Section 7.3 of the
Plan.
Performance Criteria means the criterion or criteria that the
Committee shall select for purposes of establishing the Performance Goal(s) for
a Performance Period with respect to any Performance Compensation Award under
the Plan. The Performance Criteria that will be used to establish the
Performance Goal(s) shall be based on the attainment of specific levels of
performance of the Company (or Affiliate, division, business unit or operational
unit of the Company) and shall be limited to the following:
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(a) |
net earnings or net income (before or after
taxes); |
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(b) |
basic or diluted earnings per share (before or after
taxes); |
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(c) |
net revenue or net revenue growth; |
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(d) |
gross revenue; |
- 7 -
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(e) |
gross profit or gross profit growth; |
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(f) |
net operating profit (before or after taxes); |
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(g) |
return on assets, capital, invested capital, equity, or
sales; |
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(h) |
cash flow (including, but not limited to, operating cash
flow, free cash flow, and cash flow return on capital); |
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(i) |
earnings before or after taxes, interest, depreciation
and/or amortization; |
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(j) |
gross or operating margins; |
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(k) |
improvements in capital structure; |
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(l) |
budget and expense management; |
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(m) |
productivity ratios; |
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(n) |
economic value added or other value added
measurements; |
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(o) |
share price (including, but not limited to, growth
measures and total shareholder return); |
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(p) |
expense targets; |
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(q) |
margins; |
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(r) |
operating efficiency; |
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(s) |
working capital targets; |
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(t) |
enterprise value; |
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(u) |
safety record; and |
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(v) |
completion of acquisitions or business
expansion. |
Any one or more of the Performance Criteria may be used on an
absolute or relative basis to measure the performance of the Company and/or an
Affiliate as a whole or any division, business unit or operational unit of the
Company and/or an Affiliate or any combination thereof, as the Committee may
deem appropriate, or as compared to the performance of a group of comparable
companies, or published or special index that the Committee, in its sole
discretion, deems appropriate, or the Committee may select Performance Criterion
(o) above as compared to various stock market indices. The Committee also has
the authority to provide for accelerated vesting of any Award based on the
achievement of Performance Goals pursuant to the Performance Criteria specified
in this paragraph. To the extent required under Section 162 (m) of the Code, the
Committee shall, within the first 90 days of a Performance Period (or, if longer
or shorter, within the maximum period allowed under Section 162(m) of the Code),
define in an objective fashion the manner of calculating the Performance
Criteria it selects to use for such Performance Period. In the event that
applicable tax and/or securities laws change to permit the Committee discretion to alter the governing
Performance Criteria without obtaining shareholder approval of such changes, the
Committee shall have sole discretion to make such changes without obtaining
shareholder approval.
- 8 -
Performance Formula means, for a Performance Period, the one
or more objective formulas applied against the relevant Performance Goal to
determine, with regard to the Performance Compensation Award of a particular
Participant, whether all, some portion but less than all, or none of the
Performance Compensation Award has been earned for the Performance Period.
Performance Goals means, for a Performance Period, the one or
more goals established by the Committee for the Performance Period based upon
the Performance Criteria. The Committee is authorized at any time during the
first 90 days of a Performance Period (or, if longer or shorter, within the
maximum period allowed under Section 162(m) of the Code), or at any time
thereafter (but only to the extent the exercise of such authority after such
period would not cause the Performance Compensation Awards granted to any
Participant for the Performance Period to fail to qualify as performance-based
compensation under Section 162(m) of the Code), in its sole and absolute
discretion, to adjust or modify the calculation of a Performance Goal for such
Performance Period to the extent permitted under Section 162(m) of the Code in
order to prevent the dilution or enlargement of the rights of Participants based
on the following events:
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(a) |
asset write-downs; |
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(b) |
litigation or claim judgments or settlements; |
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(c) |
the effect of changes in tax laws, accounting principles,
or other laws or regulatory rules affecting reported results; |
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(d) |
any reorganization and restructuring programs; |
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(e) |
extraordinary nonrecurring items as described in
Accounting Principles Board Opinion No. 30 (or any successor or
pronouncement thereto) and/or in managements discussion and analysis of
financial condition and results of operations appearing in the Companys
annual report to shareholders for the applicable year; |
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(f) |
acquisitions or divestitures; |
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(g) |
any other specific unusual or nonrecurring events, or
objectively determinable category thereof; |
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(h) |
foreign exchange gains and losses; and |
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(i) |
a change in the Companys fiscal
year. |
Performance Period means the one or more periods of time not
less than one fiscal quarter in duration, as the Committee may select, over
which the attainment of one or more Performance Goals will be measured for the
purpose of determining a Participants right to and the payment of a Performance
Compensation Award.
- 9 -
Permitted Transferee means:
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(a) |
a member of the Optionholders immediate family (child,
stepchild, grandchild, parent, stepparent, grandparent, spouse, former
spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law, or sister-in-law, including adoptive
relationships), any person sharing the Optionholders household (other
than a tenant or employee), a trust in which these persons have more than
50% of the beneficial interest, a foundation in which these persons (or
the Optionholder) control the management of assets, and any other entity
in which these persons (or the Optionholder) own more than 50% of the
voting interests; |
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(b) |
third parties designated by the Committee in connection
with a program established and approved by the Committee pursuant to which
Participants may receive a cash payment or other consideration in
consideration for the transfer of a Non-qualified Stock Option;
and |
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(c) |
such other transferees as may be permitted by the
Committee in its sole discretion. |
Plan means this The Alkaline Water Company Inc. 2013 Equity
Incentive Plan, as amended and/or amended and restated from time to time.
Related Rights has the meaning set forth in Section 7.1(a) .
Restricted Award means any Award granted pursuant to Section
7.2(a) .
Restricted Period has the meaning set forth in Section 7.2(a)
.
Rule 16b-3 means Rule 16b-3 promulgated under the Exchange Act
or any successor to Rule 16b-3, as in effect from time to time.
Securities Act means the Securities Act of 1933, as
amended.
Stock Appreciation Right means the right pursuant to an Award
granted under Section 7.1 to receive, upon exercise, an amount payable in cash
or shares equal to the number of shares subject to the Stock Appreciation Right
that is being exercised multiplied by the excess of (a) the Fair Market Value of
a share of Common Stock on the date the Award is exercised, over (b) the
exercise price specified in the Stock Appreciation Right Award Agreement.
Stock for Stock Exchange has the meaning set forth in Section
6.3.
Ten Percent Shareholder means a person who owns (or is deemed
to own pursuant to Section 424(d) of the Code) stock possessing more than 10% of
the total combined voting power of all classes of stock of the Company or of any
of its Affiliates.
3.
Administration.
3.1
Authority of Committee. The Plan shall be administered initially
by the Board, except that the Board may, in its discretion, establish a
committee composed of two (2) or more members of the Board to administer the
Plan, which committee may be an executive, compensation or other committee, including a separate committee especially created
for this purpose. Subject to the terms of the Plan, the Committees charter and
Applicable Laws, and in addition to other express powers and authorization
conferred by the Plan, the Committee shall have the authority:
- 10 -
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(a) |
to construe and interpret the Plan and apply its
provisions; |
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(b) |
to promulgate, amend, and rescind rules and regulations
relating to the administration of the Plan; |
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(c) |
to authorize any person to execute, on behalf of the
Company, any instrument required to carry out the purposes of the
Plan; |
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(d) |
to delegate its authority to one or more Officers of the
Company with respect to Awards that do not involve Covered Employees or
insiders within the meaning of Section 16 of the Exchange Act; |
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(e) |
to determine when Awards are to be granted under the Plan
and the applicable Grant Date; |
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(f) |
from time to time to select, subject to the limitations
set forth in this Plan, those Participants to whom Awards shall be
granted; |
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(g) |
to determine the number of shares of Common Stock to be
made subject to each Award; |
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(h) |
to determine whether each Option is to be an Incentive
Stock Option or a Non-qualified Stock Option; |
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(i) |
to prescribe the terms and conditions of each Award,
including, without limitation, the exercise price and medium of payment
and vesting provisions, and to specify the provisions of the Award
Agreement relating to such grant; |
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(j) |
to designate an Award (including a cash bonus) as a
Performance Compensation Award and to select the Performance Criteria that
will be used to establish the Performance Goals; |
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(k) |
to amend any outstanding Awards, including for the
purpose of modifying the time or manner of vesting, or the term of any
outstanding Award; provided, however, that if any such amendment impairs a
Participants rights or increases a Participants obligations under his or
her Award or creates or increases a Participants federal income tax
liability with respect to an Award, such amendment shall also be subject
to the Participants consent; |
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(l) |
to determine the duration and purpose of leaves of
absences which may be granted to a Participant without constituting
termination of their employment for purposes of the Plan, which periods
shall be no shorter than the periods generally applicable to Employees
under the Companys employment policies; |
- 11 -
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(m) |
to make decisions with respect to outstanding Awards that
may become necessary upon a change in corporate control or an event that
triggers anti-dilution adjustments; |
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(n) |
to interpret, administer, reconcile any inconsistency in,
correct any defect in and/or supply any omission in the Plan and any
instrument or agreement relating to, or Award granted under, the Plan;
and |
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(o) |
to exercise discretion to make any and all other
determinations which it determines to be necessary or advisable for the
administration of the Plan. |
The Committee also may modify the purchase price or the
exercise price of any outstanding Award, provided that shareholder approval
shall be required before the repricing is effective if such shareholder approval
is necessary to satisfy any Applicable Laws.
3.2
Committee Decisions Final. All decisions made by the Committee
pursuant to the provisions of the Plan shall be final and binding on the Company
and the Participants, unless such decisions are determined by a court having
jurisdiction to be arbitrary and capricious.
3.3
Delegation. The Committee, or if no Committee has been
appointed, the Board, may delegate administration of the Plan to a committee or
committees of one or more members of the Board, and the term Committee
shall apply to any person or persons to whom such authority has been delegated.
The Committee shall have the power to delegate to a subcommittee any of the
administrative powers the Committee is authorized to exercise (and references in
this Plan to the Board or the Committee shall thereafter be to the committee or
subcommittee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan. The members of the Committee shall be appointed by
and serve at the pleasure of the Board. From time to time, the Board may
increase or decrease the size of the Committee, add additional members to,
remove members (with or without cause) from, appoint new members in substitution
therefor, and fill vacancies, however caused, in the Committee. The Committee
shall act pursuant to a vote of the majority of its members or, in the case of a
Committee comprised of only two members, the unanimous consent of its members,
whether present or not, or by the written consent of the majority of its members
and minutes shall be kept of all of its meetings and copies thereof shall be
provided to the Board. Subject to the limitations prescribed by the Plan and the
Board, the Committee may establish and follow such rules and regulations for the
conduct of its business as it may determine to be advisable.
3.4
Committee Composition. If the Board establishes a committee to administer
the Plan, except as otherwise determined by the Board, the Committee shall
consist solely of two or more Non-Employee Directors who are also Outside
Directors. The Board shall have discretion to determine whether or not it
intends to comply with the exemption requirements of Rule 16b-3 and/or Section
162(m) of the Code. However, if the Board intends to satisfy such exemption
requirements, with respect to Awards to any Covered Employee and with respect to
any insider subject to Section 16 of the Exchange Act, the Committee shall be a
compensation committee of the Board that at all times consists solely of two or
more Non-Employee Directors who are also Outside Directors. Within the scope of
such authority, the Board or the Committee may (a) delegate to a committee of
one or more members of the Board who are not Outside Directors the authority to
grant Awards to eligible persons who are either (i) not then Covered Employees
and are not expected to be Covered Employees at the time of recognition of
income resulting from such Award or (ii) not persons with respect to whom the
Company wishes to comply with Section 162(m) of the Code or (b) delegate to a
committee of one or more members of the Board who are not Non-Employee Directors
the authority to grant Awards to eligible persons who are not then subject to
Section 16 of the Exchange Act. Nothing herein shall create an inference that an
Award is not validly granted under the Plan in the event Awards are granted
under the Plan by a compensation committee of the Board that does not at all
times consist solely of two or more Non-Employee Directors who are also Outside
Directors.
- 12 -
3.5
Indemnification. In addition to such other rights of indemnification as
they may have as Directors or members of the Committee, and to the extent
allowed by Applicable Laws, the Committee shall be indemnified by the Company
against the reasonable expenses, including attorneys fees, actually incurred in
connection with any action, suit or proceeding or in connection with any appeal
therein, to which the Committee may be party by reason of any action taken or
failure to act under or in connection with the Plan or any Award granted under
the Plan, and against all amounts paid by the Committee in settlement thereof
(provided, however, that the settlement has been approved by the Company, which
approval shall not be unreasonably withheld) or paid by the Committee in
satisfaction of a judgment in any such action, suit or proceeding, except in
relation to matters as to which it shall be adjudged in such action, suit or
proceeding that such Committee did not act in good faith and in a manner which
such person reasonably believed to be in the best interests of the Company, or
in the case of a criminal proceeding, had no reason to believe that the conduct
complained of was unlawful; provided, however, that within 60 days after
institution of any such action, suit or proceeding, such Committee shall, in
writing, offer the Company the opportunity at its own expense to handle and
defend such action, suit or proceeding.
4.
Shares Subject to the Plan.
4.1 Subject to adjustment in accordance with Section 11, a total of
7,700,000 shares of Common Stock shall be available for the grant of Awards
under the Plan. During the terms of the Awards, the Company shall keep available
at all times the number of shares of Common Stock required to satisfy such
Awards.
4.2
Shares of Common Stock available for distribution under the Plan may consist, in
whole or in part, of authorized and unissued shares, treasury shares or shares
reacquired by the Company in any manner.
4.3
Any shares of Common Stock subject to an Award that is canceled,
forfeited or expires prior to exercise or realization, either in full or in
part, shall again become available for issuance under the Plan. Notwithstanding
anything to the contrary contained herein: shares subject to an Award under the
Plan shall not again be made available for issuance or delivery under the Plan
if such shares are (a) shares tendered in payment of an Option, (b) shares
delivered or withheld by the Company to satisfy any tax withholding obligation,
or (c) shares covered by a stock-settled Stock Appreciation Right or other
Awards that were not issued upon the settlement of the Award.
5.
Eligibility.
5.1
Eligibility for Specific Awards. Incentive Stock Options may be
granted only to Employees. Awards other than Incentive Stock Options may be
granted to Employees, Consultants and Directors and those individuals whom the
Committee determines are reasonably expected to become Employees, Consultants
and Directors following the Grant Date.
- 13 -
5.2
Ten Percent Shareholders. A Ten Percent Shareholder shall not be
granted an Incentive Stock Option unless the Option Exercise Price is at least
110% of the Fair Market Value of the Common Stock at the Grant Date and the
Option is not exercisable after the expiration of five years from the Grant
Date.
6.
Option Provisions.
Each Option granted under the Plan shall be evidenced by an Award
Agreement. Each Option so granted shall be subject to the conditions set forth
in this Section 6, and to such other conditions not inconsistent with the Plan
as may be reflected in the applicable Award Agreement. All Options shall be
separately designated Incentive Stock Options or Non-qualified Stock Options at
the time of grant, and, if certificates are issued, a separate certificate or
certificates will be issued for shares of Common Stock purchased on exercise of
each type of Option. Notwithstanding the foregoing, the Company shall have no
liability to any Participant or any other person if an Option designated as an
Incentive Stock Option fails to qualify as such at any time or if an Option is
determined to constitute nonqualified deferred compensation within the meaning
of Section 409A of the Code and the terms of such Option do not satisfy the
requirements of Section 409A of the Code. The provisions of separate Options
need not be identical, but each Option shall include (through incorporation of
provisions hereof by reference in the Option or otherwise) the substance of each
of the following provisions:
6.1
Term. Subject to the provisions of Section 5.2 regarding Ten
Percent Shareholders, no Incentive Stock Option shall be exercisable after the
expiration of 10 years from the Grant Date. The term of a Non-qualified Stock
Option granted under the Plan shall be determined by the Committee; provided,
however, no Non-qualified Stock Option shall be exercisable after the expiration
of 10 years from the Grant Date.
6.2
Exercise Price of an Incentive Stock Option. Subject to the
provisions of Section 5.2 regarding Ten Percent Shareholders, the Option
Exercise Price of each Incentive Stock Option shall be not less than 100% of the
Fair Market Value of the Common Stock subject to the Option on the Grant Date.
Notwithstanding the foregoing, an Incentive Stock Option may be granted with an
Option Exercise Price lower than that set forth in the preceding sentence if
such Option is granted pursuant to an assumption or substitution for another
option in a manner satisfying the provisions of Section 424(a) of the Code.
6.3
Consideration. The Option Exercise Price of Common Stock
acquired pursuant to an Option shall be paid, to the extent permitted by
applicable statutes and regulations, either (a) in cash or by certified or bank
check at the time the Option is exercised or (b) in the discretion of the
Committee, upon such terms as the Committee shall approve, the Option Exercise
Price may be paid: (i) by delivery to the Company of other Common Stock, duly
endorsed for transfer to the Company, with a Fair Market Value on the date of
delivery equal to the Option Exercise Price (or portion thereof) due for the
number of shares being acquired, or by means of attestation whereby the
Participant identifies for delivery specific shares of Common Stock that have an
aggregate Fair Market Value on the date of attestation equal to the Option
Exercise Price (or portion thereof) and receives a number of shares of Common
Stock equal to the difference between the number of shares thereby purchased and
the number of identified attestation shares of Common Stock (a Stock for
Stock Exchange); (ii) a cashless exercise program established with a
broker; (iii) by reduction in the number of shares of Common Stock otherwise
deliverable upon exercise of such Option with a Fair Market Value equal to the
aggregate Option Exercise Price at the time of exercise; (iv) any combination of
the foregoing methods; or (v) in any other form of legal consideration that may be acceptable to
the Committee. Unless otherwise specifically provided in the Option, the
exercise price of Common Stock acquired pursuant to an Option that is paid by
delivery (or attestation) to the Company of other Common Stock acquired,
directly or indirectly from the Company, shall be paid only by shares of the
Common Stock of the Company that have been held for more than six months (or
such longer or shorter period of time required to avoid a charge to earnings for
financial accounting purposes). Notwithstanding the foregoing, during any period
for which the Common Stock is publicly traded an exercise by a Director or
Officer that involves or may involve a direct or indirect extension of credit or
arrangement of an extension of credit by the Company, directly or indirectly, in
violation of Section 402(a) of the Sarbanes-Oxley Act of 2002 shall be
prohibited with respect to any Award under this Plan.
- 14 -
6.4
Transferability of an Incentive Stock Option. An Incentive Stock
Option shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Optionholder
only by the Optionholder. Notwithstanding the foregoing, the Optionholder may,
by delivering written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of the
Optionholder, shall thereafter be entitled to exercise the Option.
6.5
Transferability of a Non-qualified Stock Option. A Non-qualified
Stock Option may, in the sole discretion of the Committee, be transferable to a
Permitted Transferee, upon written approval by the Committee to the extent
provided in the Award Agreement. If the Non- qualified Stock Option does not
provide for transferability, then the Non-qualified Stock Option shall not be
transferable except by will or by the laws of descent and distribution and shall
be exercisable during the lifetime of the Optionholder only by the Optionholder.
Notwithstanding the foregoing, the Optionholder may, by delivering written
notice to the Company, in a form satisfactory to the Company, designate a third
party who, in the event of the death of the Optionholder, shall thereafter be
entitled to exercise the Option.
6.6
Vesting of Options. Each Option may, but need not, vest and
therefore become exercisable in periodic installments that may, but need not, be
equal. The Option may be subject to such other terms and conditions on the time
or times when it may be exercised (which may be based on performance or other
criteria) as the Committee may deem appropriate. The vesting provisions of
individual Options may vary. No Option may be exercised for a fraction of a
share of Common Stock. The Committee may, but shall not be required to, provide
for an acceleration of vesting and exercisability in the terms of any Award
Agreement upon the occurrence of a specified event.
6.7
Termination of Continuous Service. Unless otherwise provided in
an Award Agreement or in an employment agreement the terms of which have been
approved by the Committee, in the event an Optionholders Continuous Service
terminates (other than upon the Optionholders death or Disability), the
Optionholder may exercise his or her Option (to the extent that the Optionholder
was entitled to exercise such Option as of the date of termination) but only
within such period of time ending on the earlier of (a) the date three months
following the termination of the Optionholders Continuous Service or (b) the
expiration of the term of the Option as set forth in the Award Agreement;
provided that, if the termination of Continuous Service is by the Company for
Cause, all outstanding Options (whether or not vested) shall immediately
terminate and cease to be exercisable. If, after termination, the Optionholder
does not exercise his or her Option within the time specified in the Award
Agreement, the Option shall terminate.
- 15 -
6.8
Extension of Termination Date. An Optionholders Award Agreement
may also provide that if the exercise of the Option following the termination of
the Optionholders Continuous Service for any reason would be prohibited at any
time because the issuance of shares of Common Stock would violate the
registration requirements under the Securities Act or any other state or federal
securities law or the rules of any securities exchange or interdealer quotation
system, then the Option shall terminate on the earlier of (a) the expiration of
the term of the Option in accordance with Section 6.1 or (b) the expiration of a
period after termination of the Participants Continuous Service that is three
months after the end of the period during which the exercise of the Option would
be in violation of such registration or other securities law requirements.
6.9 Disability of Optionholder. Unless otherwise provided in an
Award Agreement, in the event that an Optionholders Continuous Service
terminates as a result of the Optionholders Disability, the Optionholder may
exercise his or her Option (to the extent that the Optionholder was entitled to
exercise such Option as of the date of termination), but only within such period
of time ending on the earlier of (a) the date 12 months following such
termination or (b) the expiration of the term of the Option as set forth in the
Award Agreement. If, after termination, the Optionholder does not exercise his
or her Option within the time specified herein or in the Award Agreement, the
Option shall terminate.
6.10
Death of Optionholder. Unless otherwise provided in an Award
Agreement, in the event an Optionholders Continuous Service terminates as a
result of the Optionholders death, then the Option may be exercised (to the
extent the Optionholder was entitled to exercise such Option as of the date of
death) by the Optionholders estate, by a person who acquired the right to
exercise the Option by bequest or inheritance or by a person designated to
exercise the Option upon the Optionholders death, but only within the period
ending on the earlier of (a) the date 12 months following the date of death or
(b) the expiration of the term of such Option as set forth in the Award
Agreement. If, after the Optionholders death, the Option is not exercised
within the time specified herein or in the Award Agreement, the Option shall
terminate.
6.11
Incentive Stock Option $100,000 Limitation. To the extent that the
aggregate Fair Market Value (determined at the time of grant) of Common Stock
with respect to which Incentive Stock Options are exercisable for the first time
by any Optionholder during any calendar year (under all plans of the Company and
its Affiliates) exceeds $100,000, the Options or portions thereof which exceed
such limit (according to the order in which they were granted) shall be treated
as Non-qualified Stock Options.
7.
Provisions of Awards Other Than Options.
7.1
Stock Appreciation Rights.
|
(a) |
General. Each Stock Appreciation Right granted
under the Plan shall be evidenced by an Award Agreement. Each Stock
Appreciation Right so granted shall be subject to the conditions set forth
in this Section 7.1, and to such other conditions not inconsistent with
the Plan as may be reflected in the applicable Award Agreement. Stock
Appreciation Rights may be granted alone (Free Standing Rights)
or in tandem with an Option granted under the Plan (Related
Rights). |
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(b) |
Grant Requirements. Any Related Right that relates
to a Non-qualified Stock Option may be granted at the same time the Option
is granted or at any time thereafter but before the exercise or expiration of the Option. Any Related
Right that relates to an Incentive Stock Option must be granted at the same time
the Incentive Stock Option is granted. |
- 16 -
|
(c) |
Term of Stock Appreciation Rights. The term of a
Stock Appreciation Right granted under the Plan shall be determined by the
Committee; provided, however, no Stock Appreciation Right shall be
exercisable later than the tenth anniversary of the Grant Date. |
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(d) |
Vesting of Stock Appreciation Rights. Each Stock
Appreciation Right may, but need not, vest and therefore become
exercisable in periodic installments that may, but need not, be equal. The
Stock Appreciation Right may be subject to such other terms and conditions
on the time or times when it may be exercised as the Committee may deem
appropriate. The vesting provisions of individual Stock Appreciation
Rights may vary. No Stock Appreciation Right may be exercised for a
fraction of a share of Common Stock. The Committee may, but shall not be
required to, provide for an acceleration of vesting and exercisability in
the terms of any Stock Appreciation Right upon the occurrence of a
specified event. |
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(e) |
Exercise and Payment. Upon exercise of a Stock
Appreciation Right, the holder shall be entitled to receive from the
Company an amount equal to the number of shares of Common Stock subject to
the Stock Appreciation Right that is being exercised multiplied by the
excess of (i) the Fair Market Value of a share of Common Stock on the date
the Award is exercised, over (ii) the exercise price specified in the
Stock Appreciation Right or related Option. Payment with respect to the
exercise of a Stock Appreciation Right shall be made on the date of
exercise. Payment shall be made in the form of shares of Common Stock
(with or without restrictions as to substantial risk of forfeiture and
transferability, as determined by the Committee in its sole discretion),
cash or a combination thereof, as determined by the Committee. |
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(f) |
Exercise Price. The exercise price of a Free
Standing Stock Appreciation Right shall be determined by the Committee. A
Related Right granted simultaneously with or subsequent to the grant of an
Option and in conjunction therewith or in the alternative thereto shall
have the same exercise price as the related Option, shall be transferable
only upon the same terms and conditions as the related Option, and shall
be exercisable only to the same extent as the related Option; provided,
however, that a Stock Appreciation Right, by its terms, shall be
exercisable only when the Fair Market Value per share of Common Stock
subject to the Stock Appreciation Right and related Option exceeds the
exercise price per share thereof and no Stock Appreciation Rights may be
granted in tandem with an Option unless the Committee determines that the
requirements of Section 7.1(b) are satisfied. |
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(g) |
Reduction in the Underlying Option Shares. Upon
any exercise of a Related Right, the number of shares of Common Stock for
which any related Option shall be exercisable shall be reduced by the
number of shares for which the Stock Appreciation Right has been
exercised. The number of shares of Common Stock for which a Related Right
shall be exercisable shall be reduced upon any exercise of any related
Option by the number of shares of Common Stock for which such Option has
been exercised. |
- 17 -
7.2
Restricted Awards.
|
(a) |
General. A Restricted Award is an Award of actual
shares of Common Stock (Restricted Stock) or hypothetical Common
Stock units (Restricted Stock Units) having a value equal to the
Fair Market Value of an identical number of shares of Common Stock, which
may, but need not, provide that such Restricted Award may not be sold,
assigned, transferred or otherwise disposed of, pledged or hypothecated as
collateral for a loan or as security for the performance of any obligation
or for any other purpose for such period (the Restricted Period)
as the Committee shall determine. Each Restricted Award granted under the
Plan shall be evidenced by an Award Agreement. Each Restricted Award so
granted shall be subject to the conditions set forth in this Section 7.2,
and to such other conditions not inconsistent with the Plan as may be
reflected in the applicable Award Agreement. |
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(b) |
Restricted Stock and Restricted Stock
Units. |
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(i) |
Each Participant granted Restricted Stock shall execute
and deliver to the Company an Award Agreement with respect to the
Restricted Stock setting forth the restrictions and other terms and
conditions applicable to such Restricted Stock. If the Committee
determines that the Restricted Stock shall be held by the Company or in
escrow rather than delivered to the Participant pending the release of the
applicable restrictions, the Committee may require the Participant to
additionally execute and deliver to the Company (A) an escrow agreement
satisfactory to the Committee, if applicable and (B) the appropriate blank
stock power with respect to the Restricted Stock covered by such
agreement. If a Participant fails to execute an agreement evidencing an
Award of Restricted Stock and, if applicable, an escrow agreement and
stock power, the Award shall be null and void. Subject to the restrictions
set forth in the Award, the Participant generally shall have the rights
and privileges of a shareholder as to such Restricted Stock, including the
right to vote such Restricted Stock and the right to receive dividends;
provided that, any cash dividends and stock dividends with respect to the
Restricted Stock shall be withheld by the Company for the Participants
account, and interest may be credited on the amount of the cash dividends
withheld at a rate and subject to such terms as determined by the
Committee. The cash dividends or stock dividends so withheld by the
Committee and attributable to any particular share of Restricted Stock
(and earnings thereon, if applicable) shall be distributed to the
Participant in cash or, at the discretion of the Committee, in shares of
Common Stock having a Fair Market Value equal to the amount of such
dividends, if applicable, upon the release of restrictions on such share
and, if such share is forfeited, the Participant shall have no right to
such dividends. |
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(ii) |
The terms and conditions of a grant of Restricted Stock
Units shall be reflected in an Award Agreement. No shares of Common Stock
shall be issued at the time a Restricted Stock Unit is granted, and the
Company will not be required to set aside a fund for the payment of any
such Award. A Participant shall have no voting rights with respect to any
Restricted Stock Units granted hereunder. At the discretion of the
Committee, each Restricted Stock Unit (representing
one share of Common Stock) may be credited with cash and stock
dividends paid by the Company in respect of one share of Common Stock
(Dividend Equivalents). Dividend Equivalents shall be withheld by the
Company for the Participants account, and interest may be credited on the
amount of cash Dividend Equivalents withheld at a rate and subject to such terms
as determined by the Committee. Dividend Equivalents credited to a Participants
account and attributable to any particular Restricted Stock Unit (and earnings
thereon, if applicable) shall be distributed in cash or, at the discretion of
the Committee, in shares of Common Stock having a Fair Market Value equal to the
amount of such Dividend Equivalents and earnings, if applicable, to the
Participant upon settlement of such Restricted Stock Unit and, if such
Restricted Stock Unit is forfeited, the Participant shall have no right to such
Dividend Equivalents. |
- 18 -
|
(i) |
Restricted Stock awarded to a Participant shall be
subject to the following restrictions until the expiration of the
Restricted Period, and to such other terms and conditions as may be set
forth in the applicable Award Agreement: (A) if an escrow arrangement is
used, the Participant shall not be entitled to delivery of the stock
certificate; (B) the shares shall be subject to the restrictions on
transferability set forth in the Award Agreement; (C) the shares shall be
subject to forfeiture to the extent provided in the applicable Award
Agreement; and (D) to the extent such shares are forfeited, the stock
certificates shall be returned to the Company, and all rights of the
Participant to such shares and as a shareholder with respect to such
shares shall terminate without further obligation on the part of the
Company. |
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(ii) |
Restricted Stock Units awarded to any Participant shall
be subject to (A) forfeiture until the expiration of the Restricted
Period, and satisfaction of any applicable Performance Goals during such
period, to the extent provided in the applicable Award Agreement, and to
the extent such Restricted Stock Units are forfeited, all rights of the
Participant to such Restricted Stock Units shall terminate without further
obligation on the part of the Company and (B) such other terms and
conditions as may be set forth in the applicable Award
Agreement. |
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(iii) |
The Committee shall have the authority to remove any or
all of the restrictions on the Restricted Stock and Restricted Stock Units
whenever it may determine that, by reason of changes in Applicable Laws or
other changes in circumstances arising after the date the Restricted Stock
or Restricted Stock Units are granted, such action is
appropriate. |
|
(d) |
Restricted Period. With respect to Restricted
Awards, the Restricted Period shall commence on the Grant Date and end at
the time or times set forth on a schedule established by the Committee in
the applicable Award Agreement. |
- 19 -
No Restricted Award may be granted or settled for a fraction of
a share of Common Stock. The Committee may, but shall not be required to,
provide for an acceleration of vesting in the terms of any Award Agreement upon
the occurrence of a specified event.
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(e) |
Delivery of Restricted Stock and Settlement of
Restricted Stock Units. Upon the expiration of the Restricted Period
with respect to any shares of Restricted Stock, the restrictions set forth
in Section 7.2(c) and the applicable Award Agreement shall be of no
further force or effect with respect to such shares, except as set forth
in the applicable Award Agreement. If an escrow arrangement is used, upon
such expiration, the Company shall deliver to the Participant, or his or
her beneficiary, without charge, the stock certificate evidencing the
shares of Restricted Stock which have not then been forfeited and with
respect to which the Restricted Period has expired (to the nearest full
share) and any cash dividends or stock dividends credited to the
Participants account with respect to such Restricted Stock and the
interest thereon, if any. Upon the expiration of the Restricted Period
with respect to any outstanding Restricted Stock Units, the Company shall
deliver to the Participant, or his or her beneficiary, without charge, one
share of Common Stock for each such outstanding Restricted Stock Unit
(Vested Unit) and cash equal to any Dividend Equivalents credited
with respect to each such Vested Unit in accordance with Section
7.2(b)(ii) hereof and the interest thereon or, at the discretion of the
Committee, in shares of Common Stock having a Fair Market Value equal to
such Dividend Equivalents and the interest thereon, if any; provided,
however, that, if explicitly provided in the applicable Award Agreement,
the Committee may, in its sole discretion, elect to pay cash or part cash
and part Common Stock in lieu of delivering only shares of Common Stock
for Vested Units. If a cash payment is made in lieu of delivering shares
of Common Stock, the amount of such payment shall be equal to the Fair
Market Value of the Common Stock as of the date on which the Restricted
Period lapsed with respect to each Vested Unit. |
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(f) |
Stock Restrictions. Each certificate representing
Restricted Stock awarded under the Plan shall bear a legend in such form
as the Company deems appropriate. |
7.3
Performance Compensation Awards.
|
(a) |
General. The Committee shall have the authority,
at the time of grant of any Award described in this Plan (other than
Options and Stock Appreciation Rights granted with an exercise price equal
to or greater than the Fair Market Value per share of Common Stock on the
Grant Date), to designate such Award as a Performance Compensation Award
in order to qualify such Award as performance-based compensation under
Section 162(m) of the Code. In addition, the Committee shall have the
authority to make an Award of a cash bonus to any Participant and
designate such Award as a Performance Compensation Award in order to
qualify such Award as performance- based compensation under Section
162(m) of the Code. |
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(b) |
Eligibility. The Committee will, in its sole
discretion, designate within the first 90 days of a Performance Period
(or, if longer or shorter, within the maximum period allowed under Section
162(m) of the Code) which Participants will be eligible to receive
Performance Compensation Awards in respect of such Performance Period.
However, designation of a Participant eligible to receive an Award
hereunder for a Performance Period shall not in any manner entitle the Participant to
receive payment in respect of any Performance Compensation Award for such
Performance Period. The determination as to whether or not such Participant
becomes entitled to payment in respect of any Performance Compensation Award
shall be decided solely in accordance with the provisions of this Section 7.3.
Moreover, designation of a Participant eligible to receive an Award hereunder
for a particular Performance Period shall not require designation of such
Participant eligible to receive an Award hereunder in any subsequent Performance
Period and designation of one person as a Participant eligible to receive an
Award hereunder shall not require designation of any other person as a
Participant eligible to receive an Award hereunder in such period or in any
other period. |
- 20 -
|
(c) |
Discretion of Committee with Respect to Performance
Compensation Awards. With regard to a particular Performance Period,
the Committee shall have full discretion to select the length of such
Performance Period (provided any such Performance Period shall be not less
than one fiscal quarter in duration), the type(s) of Performance
Compensation Awards to be issued, the Performance Criteria that will be
used to establish the Performance Goal(s), the kind(s) and/or level(s) of
the Performance Goal(s) that is (are) to apply to the Company and the
Performance Formula. Within the first 90 days of a Performance Period (or,
if longer or shorter, within the maximum period allowed under Section
162(m) of the Code), the Committee shall, with regard to the Performance
Compensation Awards to be issued for such Performance Period, exercise its
discretion with respect to each of the matters enumerated in the
immediately preceding sentence of this Section 7.3(c) and record the same
in writing. |
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(d) |
Payment of Performance Compensation
Awards |
|
(i) |
Condition to Receipt of Payment. Unless otherwise
provided in the applicable Award Agreement, a Participant must be employed
by the Company on the last day of a Performance Period to be eligible for
payment in respect of a Performance Compensation Award for such
Performance Period. |
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(ii) |
Limitation. A Participant shall be eligible to
receive payment in respect of a Performance Compensation Award only to the
extent that: (A) the Performance Goals for such period are achieved; and
(B) the Performance Formula as applied against such Performance Goals
determines that all or some portion of such Participants Performance
Compensation Award has been earned for the Performance Period. |
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|
(iii) |
Certification. Following the completion of a
Performance Period, the Committee shall review and certify in writing
whether, and to what extent, the Performance Goals for the Performance
Period have been achieved and, if so, calculate and certify in writing the
amount of the Performance Compensation Awards earned for the period based
upon the Performance Formula. The Committee shall then determine the
actual size of each Participants Performance Compensation Award for the
Performance Period and, in so doing, may apply Negative Discretion in
accordance with Section 7.3(d)(iv) hereof, if and when it deems
appropriate. |
- 21 -
|
(iv) |
Use of Discretion. In determining the actual size
of an individual Performance Compensation Award for a Performance Period,
the Committee may reduce or eliminate the amount of the Performance
Compensation Award earned under the Performance Formula in the Performance
Period through the use of Negative Discretion if, in its sole judgment,
such reduction or elimination is appropriate. The Committee shall not have
the discretion to (A) grant or provide payment in respect of Performance
Compensation Awards for a Performance Period if the Performance Goals for
such Performance Period have not been attained or (B) increase a
Performance Compensation Award above the maximum amount payable under
Section 7.3(d)(i) of the Plan. |
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(v) |
Timing of Award Payments. Performance Compensation
Awards granted for a Performance Period shall be paid to Participants as
soon as administratively practicable following completion of the
certifications required by this Section 7.3. |
8.
Securities Law Compliance.
Each Award Agreement shall provide that no shares of Common Stock shall
be purchased or sold thereunder unless and until (a) any then applicable
requirements of state or federal laws and regulatory agencies have been fully
complied with to the satisfaction of the Company and its counsel and (b) if
required to do so by the Company, the Participant has executed and delivered to
the Company a letter of investment intent in such form and containing such
provisions as the Committee may require. The Company shall use reasonable
efforts to seek to obtain from each regulatory commission or agency having
jurisdiction over the Plan such authority as may be required to grant Awards and
to issue and sell shares of Common Stock upon exercise of the Awards; provided,
however, that this undertaking shall not require the Company to register under
the Securities Act the Plan, any Award or any Common Stock issued or issuable
pursuant to any such Award. If, after reasonable efforts, the Company is unable
to obtain from any such regulatory commission or agency the authority which
counsel for the Company deems necessary for the lawful issuance and sale of
Common Stock under the Plan, the Company shall be relieved from any liability
for failure to issue and sell Common Stock upon exercise of such Awards unless
and until such authority is obtained.
9.
Use of Proceeds from Stock.
Proceeds from the sale of Common Stock pursuant to Awards, or upon
exercise thereof, shall constitute general funds of the Company.
10.
Miscellaneous.
10.1
Acceleration of Exercisability and Vesting. The Committee shall
have the power to accelerate the time at which an Award may first be exercised
or the time during which an Award or any part thereof will vest in accordance
with the Plan, notwithstanding the provisions in the Award stating the time at
which it may first be exercised or the time during which it will vest.
10.2
Shareholder Rights. Except as provided in the Plan or an Award
Agreement, no Participant shall be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares of Common Stock subject to
such Award unless and until such Participant has satisfied all requirements for
exercise of the Award pursuant to its terms and no adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash,
securities or other property) or distributions of other rights for which the
record date is prior to the date such Common Stock certificate is issued, except
as provided in Section 11 hereof.
- 22 -
10.3
No Employment or Other Service Rights. Nothing in the Plan or
any instrument executed or Award granted pursuant thereto shall confer upon any
Participant any right to continue to serve the Company or an Affiliate in the
capacity in effect at the time the Award was granted or shall affect the right
of the Company or an Affiliate to terminate (a) the employment of an Employee
with or without notice and with or without Cause or (b) the service of a
Director pursuant to the By-laws of the Company or an Affiliate, and any
applicable provisions of the corporate law of the state in which the Company or
the Affiliate is incorporated, as the case may be.
10.4
Transfer; Approved Leave of Absence. For purposes of the Plan, no
termination of employment by an Employee shall be deemed to result from either
(a) a transfer to the employment of the Company from an Affiliate or from the
Company to an Affiliate, or from one Affiliate to another, or (b) an approved
leave of absence for military service or sickness, or for any other purpose
approved by the Company, if the Employees right to reemployment is guaranteed
either by a statute or by contract or under the policy pursuant to which the
leave of absence was granted or if the Committee otherwise so provides in
writing, in either case, except to the extent inconsistent with Section 409A of
the Code if the applicable Award is subject thereto.
10.5
Withholding Obligations. To the extent provided by the terms of
an Award Agreement and subject to the discretion of the Committee, the
Participant may satisfy any federal, state or local tax withholding obligation
relating to the exercise or acquisition of Common Stock under an Award by any of
the following means (in addition to the Companys right to withhold from any
compensation paid to the Participant by the Company) or by a combination of such
means: (a) tendering a cash payment; (b) authorizing the Company to withhold
shares of Common Stock from the shares of Common Stock otherwise issuable to the
Participant as a result of the exercise or acquisition of Common Stock under the
Award, provided, however, that no shares of Common Stock are withheld with a
value exceeding the minimum amount of tax required to be withheld by law; or (c)
delivering to the Company previously owned and unencumbered shares of Common
Stock of the Company.
11.
Adjustments Upon Changes in Stock.
In the event of changes in the outstanding Common Stock or in the
capital structure of the Company by reason of any stock or extraordinary cash
dividend, stock split, reverse stock split, an extraordinary corporate
transaction such as any recapitalization, reorganization, merger, consolidation,
combination, exchange, or other relevant change in capitalization occurring
after the Grant Date of any Award, Awards granted under the Plan and any Award
Agreements, the exercise price of Options and Stock Appreciation Rights and the
maximum number of shares of Common Stock subject to all Awards stated in Section
4 will be equitably adjusted or substituted, as to the number, price or kind of
a share of Common Stock or other consideration subject to such Awards to the
extent necessary to preserve the economic intent of such Award. In the case of
adjustments made pursuant to this Section 11, unless the Committee specifically
determines that such adjustment is in the best interests of the Company or its
Affiliates, the Committee shall, in the case of Incentive Stock Options, ensure
that any adjustments under this Section 11 will not constitute a modification,
extension or renewal of the Incentive Stock Options within the meaning of
Section 424(h)(3) of the Code and in the case of Non-qualified Stock Options,
ensure that any adjustments under this Section 11 will not constitute a
modification of such Non-qualified Stock Options within the meaning of Section 409A
of the Code. Any adjustments made under this Section 11 shall be made in a
manner which does not adversely affect the exemption provided pursuant to Rule
16b-3 under the Exchange Act. Further, with respect to Awards intended to
qualify as performance-based compensation under Section 162(m) of the Code,
any adjustments or substitutions will not cause the Company to be denied a tax
deduction on account of Section 162(m) of the Code. The Company shall give each
Participant notice of an adjustment hereunder and, upon notice, such adjustment
shall be conclusive and binding for all purposes.
- 23 -
12.
Effect of Change in Control.
12.1
Unless otherwise provided in an Award Agreement, notwithstanding any provision
of the Plan to the contrary:
|
(a) |
In the event of a Change in Control, all Options and
Stock Appreciation Rights shall become immediately exercisable with
respect to 100% of the shares subject to such Options or Stock
Appreciation Rights, and/or the Restricted Period shall expire immediately
with respect to 100% of the shares of Restricted Stock or Restricted Stock
Units. |
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(b) |
With respect to Performance Compensation Awards, in the
event of a Change in Control, all Performance Goals or other vesting
criteria will be deemed achieved at 100% of target levels and all other
terms and conditions will be deemed met. |
To the extent practicable, any actions taken by the Committee
under the immediately preceding clauses (a) and (b) shall occur in a manner and
at a time which allows affected Participants the ability to participate in the
Change in Control with respect to the shares of Common Stock subject to their
Awards.
12.2
In addition, in the event of a Change in Control, the Committee may in its
discretion and upon at least 10 days advance notice to the affected persons,
cancel any outstanding Awards and pay to the holders thereof, in cash or stock,
or any combination thereof, the value of such Awards based upon the price per
share of Common Stock received or to be received by other shareholders of the
Company in the event. In the case of any Option or Stock Appreciation Right with
an exercise price (or SAR Exercise Price in the case of a Stock Appreciation
Right) that equals or exceeds the price paid for a share of Common Stock in
connection with the Change in Control, the Committee may cancel the Option or
Stock Appreciation Right without the payment of consideration therefor.
12.3
The obligations of the Company under the Plan shall be binding upon any
successor corporation or organization resulting from the merger, consolidation
or other reorganization of the Company, or upon any successor corporation or
organization succeeding to all or substantially all of the assets and business
of the Company and its Affiliates, taken as a whole.
13.
Amendment of the Plan and Awards.
13.1
Amendment of Plan. The Board at any time, and from time to time,
may amend or terminate the Plan. However, except as provided in Section 11
relating to adjustments upon changes in Common Stock and Section 13.3, no
amendment shall be effective unless approved by the shareholders of the Company
to the extent shareholder approval is necessary to satisfy any Applicable Laws.
At the time of such amendment, the Board shall determine, upon advice
from counsel, whether such amendment will be contingent on shareholder approval.
- 24 -
13.2
Shareholder Approval. The Board may, in its sole discretion,
submit any other amendment to the Plan for shareholder approval, including, but
not limited to, amendments to the Plan intended to satisfy the requirements of
Section 162(m) of the Code and the regulations thereunder regarding the
exclusion of performance-based compensation from the limit on corporate
deductibility of compensation paid to certain executive officers.
13.3
Contemplated Amendments. It is expressly contemplated that the Board may
amend the Plan in any respect the Board deems necessary or advisable to provide
eligible Employees, Consultants and Directors with the maximum benefits provided
or to be provided under the provisions of the Code and the regulations
promulgated thereunder relating to Incentive Stock Options or to the
nonqualified deferred compensation provisions of Section 409A of the Code and/or
to bring the Plan and/or Awards granted under it into compliance therewith.
13.4
No Impairment of Rights. Rights under any Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(a) the Company requests the consent of the Participant and (b) the Participant
consents in writing.
13.5
Amendment of Awards. The Committee at any time, and from time to
time, may amend the terms of any one or more Awards; provided, however, that the
Committee may not affect any amendment which would otherwise constitute an
impairment of the rights under any Award unless (a) the Company requests the
consent of the Participant and (b) the Participant consents in writing.
14.
General Provisions.
14.1
Forfeiture Events. The Committee may specify in an Award
Agreement that the Participants rights, payments and benefits with respect to
an Award shall be subject to reduction, cancellation, forfeiture or recoupment
upon the occurrence of certain events, in addition to applicable vesting
conditions of an Award. Such events may include, without limitation, breach of
non-competition, non-solicitation, confidentiality, or other restrictive
covenants that are contained in the Award Agreement or otherwise applicable to
the Participant, a termination of the Participants Continuous Service for
Cause, or other conduct by the Participant that is detrimental to the business
or reputation of the Company and/or its Affiliates.
14.2
Clawback. Notwithstanding any other provisions in this Plan, any
Award which is subject to recovery under any law, government regulation or stock
exchange listing requirement, will be subject to such deductions and clawback as
may be required to be made pursuant to such law, government regulation or stock
exchange listing requirement (or any policy adopted by the Company pursuant to
any such law, government regulation or stock exchange listing requirement).
14.3
Other Compensation Arrangements. Nothing contained in this Plan
shall prevent the Board from adopting other or additional compensation
arrangements, subject to shareholder approval if such approval is required; and
such arrangements may be either generally applicable or applicable only in
specific cases.
14.4
Sub-plans. The Committee may from time to time establish sub-plans under
the Plan for purposes of satisfying blue sky, securities, tax or other laws of
various jurisdictions in which the Company intends to grant Awards. Any sub-plans shall contain
such limitations and other terms and conditions as the Committee determines are
necessary or desirable. All sub- plans shall be deemed a part of the Plan, but
each sub-plan shall apply only to the Participants in the jurisdiction for which
the sub-plan was designed.
- 25 -
14.5
Deferral of Awards. The Committee may establish one or more
programs under the Plan to permit selected Participants the opportunity to elect
to defer receipt of consideration upon exercise of an Award, satisfaction of
performance criteria, or other event that absent the election would entitle the
Participant to payment or receipt of shares of Common Stock or other
consideration under an Award. The Committee may establish the election
procedures, the timing of such elections, the mechanisms for payments of, and
accrual of interest or other earnings, if any, on amounts, shares or other
consideration so deferred, and such other terms, conditions, rules and
procedures that the Committee deems advisable for the administration of any such
deferral program.
14.6
Unfunded Plan. The Plan shall be unfunded. Neither the Company,
the Board nor the Committee shall be required to establish any special or
separate fund or to segregate any assets to assure the performance of its
obligations under the Plan.
14.7
Delivery. Upon exercise of a right granted under this Plan, the
Company shall issue Common Stock or pay any amounts due within a reasonable
period of time thereafter. Subject to any statutory or regulatory obligations
the Company may otherwise have, for purposes of this Plan, 30 days shall be
considered a reasonable period of time.
14.8
No Fractional Shares. No fractional shares of Common Stock shall
be issued or delivered pursuant to the Plan. The Committee shall determine
whether cash, additional Awards or other securities or property shall be issued
or paid in lieu of fractional shares of Common Stock or whether any fractional
shares should be rounded, forfeited or otherwise eliminated.
14.9
Other Provisions. The Award Agreements authorized under the Plan
may contain such other provisions not inconsistent with this Plan, including,
without limitation, restrictions upon the exercise of the Awards, as the
Committee may deem advisable.
14.10
Section 409A. The Plan is intended to comply with Section 409A of the
Code to the extent subject thereto, and, accordingly, to the maximum extent
permitted, the Plan shall be interpreted and administered to be in compliance
therewith. Any payments described in the Plan that are due within the
short-term deferral period as defined in Section 409A of the Code shall not be
treated as deferred compensation unless Applicable Laws require otherwise.
Notwithstanding anything to the contrary in the Plan, to the extent required to
avoid accelerated taxation and tax penalties under Section 409A of the Code,
amounts that would otherwise be payable and benefits that would otherwise be
provided pursuant to the Plan during the six (6) month period immediately
following the Participants termination of Continuous Service shall instead be
paid on the first payroll date after the six-month anniversary of the
Participants separation from service (or the Participants death, if earlier).
Notwithstanding the foregoing, neither the Company nor the Committee shall have
any obligation to take any action to prevent the assessment of any excise tax or
penalty on any Participant under Section 409A of the Code and neither the
Company nor the Committee will have any liability to any Participant for such
tax or penalty.
14.11
Disqualifying Dispositions. Any Participant who shall make a
disposition (as defined in Section 424 of the Code) of all or any portion of
shares of Common Stock acquired upon exercise of an Incentive Stock Option within two years from the Grant Date of
such Incentive Stock Option or within one year after the issuance of the shares
of Common Stock acquired upon exercise of such Incentive Stock Option (a
Disqualifying Disposition) shall be required to immediately advise the
Company in writing as to the occurrence of the sale and the price realized upon
the sale of such shares of Common Stock.
- 26 -
14.12
Section 16. It is the intent of the Company that the Plan satisfy, and be
interpreted in a manner that satisfies, the applicable requirements of Rule
16b-3 as promulgated under Section 16 of the Exchange Act so that Participants
will be entitled to the benefit of Rule 16b-3, or any other rule promulgated
under Section 16 of the Exchange Act, and will not be subject to short-swing
liability under Section 16 of the Exchange Act. Accordingly, if the operation of
any provision of the Plan would conflict with the intent expressed in this
Section 14.12, such provision to the extent possible shall be interpreted and/or
deemed amended so as to avoid such conflict.
14.13
Section 162(m). To the extent the Committee issues any Award that is
intended to be exempt from the deduction limitation of Section 162(m) of the
Code, the Committee may, without shareholder or grantee approval, amend the Plan
or the relevant Award Agreement retroactively or prospectively to the extent it
determines necessary in order to comply with any subsequent clarification of
Section 162(m) of the Code required to preserve the Companys federal income tax
deduction for compensation paid pursuant to any such Award.
14.14
Beneficiary Designation. Each Participant under the Plan may
from time to time name any beneficiary or beneficiaries by whom any right under
the Plan is to be exercised in case of such Participants death. Each
designation will revoke all prior designations by the same Participant, shall be
in a form reasonably prescribed by the Committee and shall be effective only
when filed by the Participant in writing with the Company during the
Participants lifetime.
14.15
Expenses. The costs of administering the Plan shall be paid by
the Company.
14.16
Severability. If any of the provisions of the Plan or any Award
Agreement is held to be invalid, illegal or unenforceable, whether in whole or
in part, such provision shall be deemed modified to the extent, but only to the
extent, of such invalidity, illegality or unenforceability and the remaining
provisions shall not be affected thereby.
14.17
Plan Headings. The headings in the Plan are for purposes of convenience
only and are not intended to define or limit the construction of the provisions
hereof.
14.18
Non-Uniform Treatment. The Committees determinations under the
Plan need not be uniform and may be made by it selectively among persons who are
eligible to receive, or actually receive, Awards. Without limiting the
generality of the foregoing, the Committee shall be entitled to make non-uniform
and selective determinations, amendments and adjustments, and to enter into
nonuniform and selective Award Agreements.
15.
Effective Date of Plan.
The Plan shall become effective as of the Effective Date, but no Award
shall be exercised (or, in the case of a stock Award, shall be granted) unless
and until the Plan has been approved by the shareholders of the Company, which
approval shall be within twelve (12) months before or after the date the Plan is
adopted by the Board.
- 27 -
16.
Termination or Suspension of the Plan.
The Plan shall terminate automatically on October 7, 2023. No Award
shall be granted pursuant to the Plan after such date, but Awards theretofore
granted may extend beyond that date. The Board may suspend or terminate the Plan
at any earlier date pursuant to Section 13.1 hereof. No Awards may be granted
under the Plan while the Plan is suspended or after it is terminated. Unless the
Company determines to submit Section 7.3 of the Plan and the definition of
Performance Goal and Performance Criteria to the Companys shareholders at
the first shareholder meeting that occurs in the fifth year following the year
in which the Plan was last approved by shareholders (or any earlier meeting
designated by the Board), in accordance with the requirements of Section 162(m)
of the Code, and such shareholder approval is obtained, then no further
Performance Compensation Awards shall be made to Covered Employees under Section
7.3 after the date of such annual meeting, but the Plan may continue in effect
for Awards to Participants not in accordance with Section 162(m) of the Code.
17.
Choice of Law.
The law of the State of Nevada shall govern all questions concerning
the construction, validity and interpretation of this Plan, without regard to
such states conflict of law rules.
As adopted by the Board of Directors of The Alkaline Water
Company Inc. on October 7, 2013.
As approved by the shareholders of The Alkaline Water Company
Inc. on October 7, 2013.
As amended by the Board of Directors of The Alkaline Water
Company Inc. on October 31, 2014 and January 20, 2016.
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January 20, 2016
The Alkaline Water Company Inc.
7730 E Greenway Road Ste.
203
Scottsdale, AZ 85260
U.S.A.
Dear Sirs:
|
Re: |
The Alkaline Water Company Inc. |
|
|
Registration Statement on Form S-8 |
We are counsel to The Alkaline Water Company Inc. (the
Company), a corporation incorporated under the laws of the State of
Nevada. In such capacity, we have assisted in the preparation of the Companys
registration statement on Form S-8 (the Registration Statement) in
connection with the registration under the Securities Act of 1933, as
amended, of an aggregate of 7,000,000 shares (the Registered Shares) of
common stock of the Company issuable pursuant to the Companys 2013 Equity
Incentive Plan (the Plan).
We have examined originals or copies, certified or otherwise
identified to our satisfaction of the resolutions of the directors of the
Company with respect to the matters herein. We have also examined such statutes
and public and corporate records of the Company, and have considered such
questions of law as we have deemed relevant and necessary as a basis for the
opinion expressed herein. We have, for the purposes of this opinion, assumed the
genuineness of all signatures examined by us, the authenticity of all documents
and records submitted to us as originals and the conformity to all original
documents of all documents submitted to us as certified, photostatic or
facsimile copies. As to all questions of fact material to this opinion which
have not been independently established, we have relied upon the statements or a
certificate of an officer of the Company.
Based upon the foregoing and the examination of such legal
authorities as we have deemed relevant, and subject to the qualifications and
further assumptions set forth herein, we are of the opinion that the Registered
Shares will be, when issued pursuant to the terms of the Plan and any award
agreement entered into pursuant to the Plan, duly and validly authorized and
issued as fully paid and non-assessable shares in the capital of the Company.
This opinion letter is opining upon and is limited to the
current federal laws of the United States and Nevada law including the statutory
provisions, all applicable provisions of the Nevada constitution and reported
judicial decisions interpreting those laws, as such laws presently exist and to
the facts as they presently exist. We express no opinion with respect to the
effect or applicability of the laws of any other jurisdiction. We assume no
obligation to revise or supplement this opinion letter should the laws of such
jurisdiction be changed after the date hereof by legislative action, judicial
decision or otherwise.
www.cwilson.com
- 2 -
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement. In giving this consent, we do not admit that we
are within the category of persons whose consent is required under Section 7 of
the Securities Act of 1933, as amended, or rules and regulations of the
Securities and Exchange Commission.
Yours truly,
/s/ Clark Wilson LLP
SEALE AND BEERS, CPAs
PCAOB & CPAB REGISTERED AUDITORS
www.sealebeers.com
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
We consent to the incorporation by reference, in this
registration statement on Form S-8 of The Alkaline Water Company Inc., of our
report dated July 13, 2015 on our audit of the financial statements of The
Alkaline Water Company Inc. as of March 31, 2015 and 2014, and the related
statements of operations, stockholders equity and cash flows for each of the
years in the period ended March 31, 2015, which appears in the annual report on
Form 10-K of The Alkaline Water Company Inc. for the fiscal year ended March 31,
2015 and the reference to us under the caption Experts and Counsel.
/s/ Seale & Beers, CPAs
Seale and Beers, CPAs
Las Vegas, Nevada
January 20, 2016
Seale and Beers, CPAs |
PCAOB & CPAB Registered
Auditors |
8250 W.
Charleston Blvd. Suite 100 - Las Vegas, NV |
89145 Phone: (888)727-8251 Fax: (888)782-2351
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