UNITED STATES

 SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

 

 

FORM 10

 

GENERAL FORM FOR REGISTRATION OF SECURITIES

Pursuant to Section 12(b) or (g) of The Securities Exchange Act of 1934

 

 

 

Celsius Holdings, Inc.

(Exact name of registrant as specified in its charter)

 

2424 North Federal Highway, Suite 208    
Boca Raton, Florida   33431
(Address of Principal Executive Offices)   (Zip Code)

 

Registrant’s telephone number, including area code: (561) 276-2239

 

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

 

Title of each class

To be so registered

  Name of exchange on which each class is to
be registered
     
None   Not applicable

 

Securities to be registered under Section 12(g) of the Act:

 

Common Stock, $0.001 par value

(Title of Class)

 

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 smaller reporting company)   Smaller reporting company     x

 

 

 

 

TABLE OF CONTENTS

 

  Page
Item 1. Business 3
Item 1A. Risk Factors 8
Item 2. Financial Information 15
Item 3. Properties 17
Item 4. Security Ownership of Certain Beneficial Owners and Management 18
Item 5. Directors and Executive Officers 19
Item 6. Executive Compensation 23
Item 7. Certain Relationships and Related Transactions, and Director Independence 25
Item 8. Legal Proceedings 25
Item 9. Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters 26
Item 10. Recent Sales of Unregistered Securities 27
Item 11. Description of Registrant’s Securities to be Registered 28
Item 12. Indemnification of Directors and Officers 29
Item 13. Financial Statements and Supplementary Data 30
Item 14. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 30
Item 15. Financial Statements and Exhibits 30

 

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When used in this Registration Statement, unless otherwise indicated, the terms “ the Company ,” “ Celsius ,” “ we ,” “us” and “ our ” refers to Celsius Holdings, Inc. and its subsidiaries.

 

NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Registration Statement contains forward-looking statements that reflect our current views about future events. We use the words “anticipate,” “assume,” “believe,” “estimate,” “expect,” “will,” “intend,” “may,” “plan,” “project,” “should,” “could,” “seek,” “designed,” “potential,” “forecast,” “target,” “objective,” “goal,” or the negatives of such terms or other similar expressions. These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These risks and other factors include described in “ Item 1A. Risk Factors ,” “ Item 2. Financial Information ” and elsewhere in this Registration Statement.

 

Item 1. Business

 

Overview

 

We are engaged in the development, marketing, sale and distribution of “ functional ” calorie-burning fitness beverages under the Celsius® brand name. According to multiple clinical studies we funded, a single serving of Celsius® burns 100 to 140 calories by increasing a consumer’s resting metabolism an average of 12% and providing sustained energy for up to a three-hour period. Our exercise focused studies show Celsius delivers additional benefits when consumed prior to exercise. The studies shows benefits such as increase in fat burn, increase in lean muscle mass and increased endurance.

 

We seek to combine nutritional science with mainstream beverages by using our proprietary thermogenic (calorie-burning) MetaPlus® formulation, while fostering the goal of healthier everyday refreshment by being as natural as possible without the artificial preservatives often found in many energy drinks and sodas. Celsius® has no artificial preservatives, aspartame or high fructose corn syrup and is very low in sodium. Celsius® uses good-for-you ingredients and supplements such as green tea (EGCG), ginger, calcium, chromium, B vitamins and vitamin C. The main Celsius line of products are sweetened with sucralose, a sugar-derived sweetener that is found in Splenda®, which makes our beverages low-calorie and suitable for consumers whose sugar intake is restricted.

 

We have undertaken significant marketing efforts aimed at building brand awareness, including a wide variety of marketing vehicles such as television, radio, digital, social media, sponsorships, and magazine advertising. We also undertake various promotions at the retail level such as coupons and other discounts in addition to in-store sampling.

 

We do not directly manufacture our beverages, but instead outsource the manufacturing process to established third-party co-packers. We do, however, provide our co-packers with flavors, ingredient blends, cans and other raw materials for our beverages purchased by us from various suppliers.

 

Corporate History

 

We were incorporated in Nevada on April 26, 2005 under the name “ Vector Ventures, Inc .” and originally we engaged in mineral exploration. Such business was unsuccessful. On January 26, 2007, we acquired the Celsius® beverage business of Elite FX, Inc., a Florida corporation engaged in the development of “functional” beverages since 2004 in a reverse merger, and subsequently changed our name to Celsius Holdings, Inc. In addition, on March 28, 2007, the Company established Celsius Netshipments, Inc. a Florida corporation as a wholly-owned subsidiary of the Company.

 

Our Products

 

Celsius® calorie-burning beverages were first introduced to the marketplace in 2005.

 

According to multiple clinical studies we funded, a single serving (12 ounce can) of Celsius® burns 100 to 140 calories by increasing a consumer’s metabolism an average of 12% for up to a three-hour period. In addition, these studies have indicated that drinking a single serving of Celsius ® prior to exercising may improve cardiovascular health and fitness and enhance the loss of fat and gain of muscle from exercise.

 

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We seek to combine nutritional science with mainstream beverages by using our proprietary thermogenic (calorie-burning) MetaPlus® formulation, while fostering the goal of healthier everyday refreshment by being as natural as possible without the artificial preservatives often found in many energy drinks or sodas. Celsius® has no chemical preservatives, aspartame or high fructose corn syrup and is very low in sodium. Celsius® uses good-for-you ingredients and supplements such as green tea (EGCG), ginger, calcium, chromium, B vitamins and vitamin C. Celsius is sweetened with sucralose, a sugar-derived sweetener that is found in Splenda®, which makes our beverages low-calorie and suitable for consumers whose sugar intake is restricted. Each 12 ounce can of Celsius® contains 200 milligrams of caffeine which is comparable to one 12 ounce cup of coffee from the leading coffeehouse.

 

We currently offer Celsius® in seven flavors: orange, wild berry, cola, grape, and watermelon (which are carbonated), and non-carbonated green tea raspberry/acai, and green tea/peach mango. Our beverages are sold in 12 ounce cans, and we have recently begun to market the active ingredients in powdered form in individual On-The-Go packets as well as multiple serving canisters.

 

Celsius® is packaged in a distinctive twelve ounce sleek can that uses vivid colors in abstract patterns to create a strong on-shelf impact. The cans are sold as singles or in four-packs.

 

We target a niche in the functional beverage segment of the beverage industry consisting of consumers seeking calorie-burning beverages to help them manage their weight and enhance their exercise regimen. Our target consumers are generally individuals that exercise two to five times a week and are concerned about their health.

 

Clinical Studies

 

It is our belief that clinical studies substantiating product claims will become more important as more and more beverages are marketed with health claims. Celsius® was one of the first functional beverages to be launched along with a clinical study. Celsius® is also one of very few functional beverages that has clinical research on the actual product itself. Some beverage companies that do mention studies backing their claims are actually referencing independent studies conducted on one or more of the ingredients in the product. We believe that it is important and will become more important to have studies on the actual product.

 

We have funded seven U.S. based clinical studies for Celsius®. Each was conducted by a research organization and each studied the total Celsius® formula. The first study was conducted by the Ohio Research Group of Exercise Science & Sports Nutrition. The remaining studies were conducted by the Applied Biochemistry & Molecular Physiology Laboratory of the University of Oklahoma. We funded all of the studies and provided Celsius® beverage for the studies. However, none of our directors, executive officers or principal shareholders is in any way affiliated with either of the two research organizations which conducted the studies.

 

The first study was conducted in 2005 by the Ohio Research Group of Exercise Science & Sports Nutrition www.ohioresearchgroup.com . The Ohio Research Group of Exercise Science & Sports Nutrition is a multidisciplinary clinical research team dedicated to exploring the relationship between exercise, nutrition, dietary supplements and health. This placebo-controlled, double-blind cross-over study compared the effects of Celsius® and the placebo on metabolic rate. Twenty-two participants were randomly assigned to ingest a twelve ounce serving of Celsius® and on a separate day a serving of twelve ounces of Diet Coke ® . All subjects completed both trials using a randomized, counterbalanced design. Randomized means that subjects were selected for each group randomly to ensure that the different treatments were statistically equivalent. Counterbalancing means that individuals in one group drank the placebo on the first day and drank Celsius® on the second day. The other group did the opposite. Counterbalancing is a design method that is used to control “order effects.” In other words this was done to make sure that the order that subjects were served does not impact the results and analysis.

 

Metabolic rate (via indirect calorimetry, measurements taken from breaths into and out of calorimeter) and substrate oxidation (via respiratory exchange ratios) were measured at baseline (pre-ingestion) and for ten minutes at the end of each hour for three hours post-ingestion. The results showed an average increase of metabolism of twelve percent over the three hour period, compared to a statistically insignificant change for the control group. Metabolic rate, or metabolism, is the rate at which the body expends energy. This is also referred to as the “caloric burn rate.” Indirect calorimetry calculates heat that living organisms produce from their production of carbon dioxide. It is called “indirect” because the caloric burn rate is calculated from a measurement of oxygen uptake. Direct calorimetry would involve the subject being placed inside the calorimeter for the measurement to determine the heat being produced. Respiratory Exchange Ratio is the ratio oxygen taken in a breath compared to the carbon dioxide breathed out in one breath or exchange. Measuring this ratio can be used for estimating which substrate (fuel such as carbohydrate or fat) is being metabolized or ‘oxidized’ to supply the body with energy.

 

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The second study was conducted by the Applied Biochemistry & Molecular Physiology Laboratory of University of Oklahoma in 2007. This blinded, placebo-controlled study was conducted on a total of 60 men and women of normal weight. An equal number of participants were separated into two groups to compare one serving (a single 12 ounce can) of Celsius to a placebo of the same amount. According to the study, those subjects consuming Celsius burned significantly more calories versus those consuming the placebo, over a three-hour period. The study confirmed that over the three-hour period, subjects consuming a single serving of Celsius® burned 65% more calories than those consuming the placebo beverage and burned an average of more than 100 to 140 calories compared to the placebo. These results were statistically significant.

 

The third study, conducted by the Applied Biochemistry & Molecular Physiology Laboratory of University of Oklahoma in 2007, extended our second study with the same group of 60 individuals and protocol for 28 days and showed the same statistical significance of increased calorie burn (minimal attenuation). While the University of Oklahoma study did extend for 28 days, more testing would be needed for long term analysis of the Celsius® calorie-burning effects. Also, although these studies were on relatively small numbers of subjects, they have statistically significant results. Additional studies on a larger number and wider range of body compositions can be considered to further the analysis.

 

Our fourth study, conducted by the Applied Biochemistry & Molecular Physiology Laboratory of University of Oklahoma in 2009, combined Celsius® use with exercise. This ten-week placebo-controlled, randomized and blinded study was conducted on a total of 37 subjects. Participants were randomly assigned into one of two groups: Group 1 consumed one serving of Celsius® per day, and Group 2 consumed one serving of an identically flavored and labeled placebo beverage. Both groups participated in ten weeks of combined aerobic and weight training, following the American College of Sports Medicine guidelines of training for previously sedentary adults. The results showed that consuming a single serving of Celsius® prior to exercising may enhance the positive adaptations of exercise on body composition, cardio-respiratory fitness and endurance performance. According to the preliminary findings, subjects consuming a single serving of Celsius® lost significantly more fat mass and gained significantly more muscle mass than those subjects consuming the placebo — a 93.75% greater loss in fat and 50% greater gain in muscle mass, respectively. The study also confirmed that subjects consuming Celsius® significantly improved measures of cardio-respiratory fitness and the ability to delay the onset of fatigue when exercising to exhaustion.

 

Our fifth study was conducted by the Applied Biochemistry & Molecular Physiology Laboratory of University of Oklahoma in 2009. This ten-week placebo-controlled, randomized and blinded study was conducted on a total of 27 previously sedentary overweight and obese female subjects. Participants were randomly assigned into groups that consumed identically tasting treatment beverages with exercise or without exercise. All participants consumed one drink, either placebo or Celsius, per day for 10 weeks. The exercise groups participated in ten weeks of combined aerobic and weight training, following the American College of Sports Medicine guidelines of training for previously sedentary adults. No changes were made to their diet. The results showed that consuming a single serving of Celsius® prior to exercising may improve cardiovascular health and fitness and enhance the positive adaptations of exercise on body composition. According to the preliminary findings, subjects consuming a single serving of Celsius® lost significantly more fat mass and gained significantly more muscle mass when compared to exercise alone — a 46% greater loss in fat, 27% greater gain in muscle mass, respectively. The study also confirmed that subjects consuming Celsius® significantly improved measures of cardio-respiratory fitness — 35% greater endurance performance with significant improvements to lipid profiles — total cholesterol decreases of 5 to 13% and bad LDL cholesterol 12 to 18%. Exercise alone had no effect on blood lipid levels.

 

Our sixth study was conducted by the Applied Biochemistry & Molecular Physiology Laboratory of University of Oklahoma in 2009. This ten-week placebo-controlled, randomized and blinded study was conducted on a total of 37 previously sedentary male subjects. Participants were randomly assigned into groups that consumed identically tasting treatment beverages with exercise or without exercise. All participants consumed one drink, either placebo or Celsius, per day for 10 weeks. The exercise groups participated in ten weeks of combined aerobic and weight training, following the American College of Sports Medicine guidelines of training for previously sedentary adults. No changes were made to their diet. The results showed that consuming a single serving of Celsius® prior to exercising may improve cardiovascular health and fitness and enhance the positive adaptations of exercise on body composition. Significantly greater decreases in fat mass and percentage body fat and increases in VO 2 were observed in the subjects that consumed Celsius before exercise versus those that consumed the placebo before exercise. Mood was not affected. Clinical markers for hepatic, renal, cardiovascular and immune function, as determined by pre and post blood work revealed no adverse effects.

 

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Our seventh study was conducted by Miami Research Institute in 2010 and demonstrated the efficacy and safety of the powders and the shots. This study allows the Company to make the same structure/function claims as the ready to drink beverages.

 

Manufacture and Supply of Our Products

 

Our beverages are produced by established third party beverage co-packers. A co-packer is a manufacturing plant that provides the service of filling bottles or cans for the brand owner. We believe one benefit of using co-packers is that we do not have to invest in the production facility and can focus our resources on brand development, sales and marketing. It also allows us produce in multiple locations strategically placed throughout the country. We purchase most of the ingredients and all packaging materials. The co-pack facility assembles our products and charges us a fee by the case. The shelf life of Celsius® is specified as 15 to 18 months.

 

Substantially all of the raw materials used in the preparation, bottling and packaging of our products are purchased by us or by our co-packers in accordance with our specifications. Generally, we obtain the ingredients used in our products from domestic suppliers and some ingredients have several reliable suppliers. The ingredients in Celsius® include green tea (EGCG), ginger (from the root), caffeine, B vitamins, vitamin C, taurine, guarana, chromium, calcium, glucuronolactone, sucralose, natural flavors and natural colorings. Celsius® is labeled with a supplements facts panel. We have no major supply contracts with any of our suppliers. We single-source all our ingredients for purchasing efficiency; however, we have identified a second source for our critical ingredients and there are many suppliers of flavors, colorings and sucralose. In case of a supply restriction or interruption from any of the flavor and coloring suppliers, we would have to test and qualify other suppliers that may disrupt our production schedules.

 

Packaging materials, except for our distinctive sleek aluminum cans, are easily available from multiple sources in the United States; however, due to efficiencies we utilize single source vendor relationships.

 

We believe that our co-packing arrangement and supply sources are adequate for our present needs.

 

Distribution

 

Celsius® is sold across many retail segments. They include supermarkets, convenience stores, drug stores, nutritional stores, and mass merchants. We also sell to health clubs, spas, gyms, the military, e-commerce websites and a limited number of international markets.

 

We distribute our products through a hybrid of direct-store delivery (DSD) distributors and as well as sales direct to retailers (DTR).

 

Seasonality of Sales

 

As is typical in the beverage industry, sales of our beverages are seasonal, with the highest sales volumes generally occurring in the second and third fiscal quarters, which correspond to the warmer months of the year in our major markets.

 

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Competition

 

We believe that we are one of the few calorie-burning fitness beverages whose effectiveness is supported by clinical studies, which gives us a unique position in the beverage market. However, our products do compete broadly with all categories of consumer beverages. The beverage market is highly competitive, and includes international, national, regional and local producers and distributors, most of whom have greater financial, management and other resources than us. Our direct competitors in the functional beverage market include, but are not limited to The Coca-Cola Company, Dr. Pepper Snapple Group, PepsiCo, Inc., Nestlé, Waters North America, Inc., Hansen Natural Corp., and Red Bull.

 

Proprietary Rights

 

We have registered the Celsius® and MetaPlus® trademarks with the United States Patent and Trademark Office, as well as a number of additional trademarks.

 

We have and will continue to take appropriate measures, such as entering into confidentiality agreements with our contract packers and ingredient suppliers, to maintain the secrecy and proprietary nature of our MetaPlus® formulation and product formulas.

 

We maintain our MetaPlus® formulation and product formulas as trade secrets. We believe that trade secrecy is a preferable method of protection for our formulas as patenting them might require their disclosure. Other than a company that is our outsourced production manager, no single member of the raw material supply chain or our co-packers has access to the complete formula.

 

We consider our trademarks and trade secrets to be of considerable value and importance to our business. No successful challenges to our registered trademarks have arisen and we have no reason to believe that any such challenges will arise in the future.

 

Government Regulation

 

The production, distribution and sale of our products in the United States is subject to the Federal Food, Drug and Cosmetic Act , the Dietary Supplement Health and Education Act of 1994 , the Occupational Safety and Health Act , various environmental statutes and various other federal, state and local statutes and regulations applicable to the production, transportation, sale, safety, advertising, labeling and ingredients of such products. California law requires that a specific warning appear on any product that contains a component listed by California as having been found to cause cancer or birth defects. The law exposes all food and beverage producers to the possibility of having to provide warnings on their products because the law recognizes no generally applicable quantitative thresholds below which a warning is not required. Consequently, even trace amounts of listed components can expose affected products to the prospect of warning labels. Products containing listed substances that occur naturally in the product or that are contributed to the product solely by a municipal water supply are generally exempt from the warning requirement. While none of our products are required to display warnings under this law, we cannot predict whether an important component of any of our products might be added to the California list in the future. We also are unable to predict whether or to what extent a warning under this law would have an impact on costs or sales of our products.

 

Measures have been enacted in various localities and states that require that a deposit be charged for certain non-refillable beverage containers. The precise requirements imposed by these measures vary. Other deposit, recycling or product stewardship proposals have been introduced in certain states and localities and in Congress, and we anticipate that similar legislation or regulations may be proposed in the future at the local, state and federal levels, both in the United States and elsewhere.

 

Our facilities in the United States are subject to federal, state and local environmental laws and regulations. Compliance with these provisions has not had, and we do not expect such compliance to have, any material adverse effect upon our business, financial condition and results of operations.

 

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Employees

 

As of the date of this Registration Statement, the Company employs 38 persons, including its executive officers.

 

Item 1A. Risk Factors

 

Our business faces certain risks. The risks described below may not be the only risks we face. Additional risks that we do not yet know of, or that we currently think as immaterial, may also impair our business.  If any of the events anticipated by the risks described below or elsewhere in this report occur, our results of operations and financial conditions could be adversely affected.

 

Risk Factors Relating to Our Business

 

We have a history of losses and we may experience additional losses in the futures.

 

The Company has a history of losses, including net losses available to common shareholders of $1,287,209 for the three months ended March 31, 2016 and $2,570,297 and $2,160,972 for the years ended December 31, 2015 and 2014, respectively. Our future operating results will depend on many factors, both in and out of our control, including the ability to increase and sustain demand for and acceptance of our products, the level of our competition, and our ability to attract and maintain key management and key employees. Accordingly, there can be no assurance that we can attain consistent profitability.

 

We rely on third party co-packers to manufacture our products. If we are unable to maintain good relationships with our co-packers and/or their ability to manufacture our products becomes constrained or unavailable to us, our business could suffer.

 

We do not directly manufacture our products, but instead outsource such manufacturing to established third party co-packers. These third party co-packers may not be able to fulfill our demand as it arises, could begin to charge rates that make using their services cost inefficient or may simply not be able to or willing to provide their services to us on a timely basis or at all. In the event of any disruption or delay, whether caused by a rift in our relationship or the inability of our co-packers to manufacture our products as required, we would need to secure the services of alternative co-packers.  We may be unable to procure alternative packing facilities at commercially reasonable rates and/or within a reasonably short time period and any such transition could be costly.  In such case, our business, financial condition and results of operations would be adversely affected.

 

We rely on distributors to distribute our products in the DSD sales channel. If we are unable to secure such distributors and/or we are unable to maintain good relationships with our existing distributors, our business could suffer.

 

We distribute Celsius® in the DSD sales channel by entering into agreements with direct-to-store delivery distributors having established sales, marketing and distribution organizations. Many of our distributors are affiliated with and manufacture and/or distribute other beverage products. In many cases, such products compete directly with our products. The marketing efforts of our distributors are important for our success. If Celsius® proves to be less attractive to our distributors and/or if we fail to attract distributors, and/or our distributors do not market and promote our products with greater focus in preference to the products of our competitors, our business, financial condition and results of operations could be adversely affected.

 

Our customers are material to our success. If we are unable to maintain good relationships with our existing customers, our business could suffer.

 

Unilateral decisions could be taken by our distributors, grocery chains, convenience chains, drug stores, nutrition stores, mass merchants, club warehouses and other customers to discontinue carrying all or any of our products that they are carrying at any time, which could cause our business to suffer.

 

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Increases in cost or shortages of raw materials or increases in costs of co-packing could harm our business .

 

The principal raw materials used by us are flavors and ingredient blends as well as aluminum cans, the prices of which are subject to fluctuations. We are uncertain whether the prices of any of the above or any other raw materials or ingredients we utilize will rise in the future and whether we will be able to pass any of such increases on to our customers. We do not use hedging agreements or alternative instruments to manage the risks associated with securing sufficient ingredients or raw materials. In addition, some of these raw materials, such as our distinctive sleek 12 ounce can, are available from a single or a limited number of suppliers. As alternative sources of supply may not be available, any interruption in the supply of such raw materials might materially harm us.

 

Our failure to accurately estimate demand for our products could adversely affect our business and financial results.

 

We may not correctly estimate demand for our products. If we materially underestimate demand for our products and are unable to secure sufficient ingredients or raw materials, we might not be able to satisfy demand on a short-term basis, in which case our business, financial condition and results of operations could be adversely affected.

 

We depend upon our trademarks and proprietary rights, and any failure to protect our intellectual property rights or any claims that we are infringing upon the rights of others may adversely affect our competitive position.

 

Our success depends, in large part, on our ability to protect our current and future brands and products and to defend our intellectual property rights. We cannot be sure that trademarks will be issued with respect to any future trademark applications or that our competitors will not challenge, invalidate or circumvent any existing or future trademarks issued to, or licensed by, us.

 

Our products are manufactured using our proprietary blends of ingredients. These blends are created by third-party suppliers to our specifications and then supplied to our co-packers. Although all of the third parties in our supply and manufacture chain execute confidentiality agreements, there can be no assurance that our trade secrets, including our proprietary ingredient blends will not become known to competitors.

 

We believe that our competitors, many of whom are more established and have greater financial and personnel resources than we do, may be able to replicate or reverse engineer our processes, brands, flavors, or our products in a manner that could circumvent our protective safeguards. Therefore, we cannot give you any assurance that our confidential business information will remain proprietary. Any such loss of confidentiality could diminish or eliminate any competitive advantage provided by our proprietary information.

 

We may incur material losses as a result of product recall and product liability .

 

We may be liable if the consumption of any of our products causes injury, illness or death. We also may be required to recall some of our products if they become contaminated or are damaged or mislabeled. A significant product liability judgment against us, or a widespread product recall, could have a material adverse effect on our business, financial condition and results of operations. The amount of the insurance we carry is limited, and that insurance is subject to certain exclusions and may or may not be adequate.

 

Our lack of product diversification and inability to timely introduce new or alternative products could cause us to cease operations.

 

Our business is centered on Celsius®. The risks associated with focusing on a limited product line are substantial. If consumers do not accept our products or if there is a general decline in market demand for, or any significant decrease in, the consumption of functional beverages, we are not financially or operationally capable of introducing alternative products within a short time frame. As a result, such lack of acceptance or market demand decline could cause us to cease operations.

 

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We are dependent on our key executives and employees and the loss of any of their services could materially adversely affect us which may have a material adverse effect on our Company.

 

Our future success will depend substantially upon the abilities of, and personal relationships developed by a limited number of key executives and employees, including Gerry David, our Chief Executive Officer and John Fieldly, our Chief Financial Officer. The loss of the services of Mr. David, Mr. Fieldly or any other key employee could materially adversely affect our business and our prospects for the future. We do not have key person insurance on the lives of such individuals and the loss of any of their services could materially adversely affect us.

 

We are dependent on our ability to attract and retain qualified technical, sales and managerial personnel .

 

Our future success depends in part on our continuing ability to attract and retain highly qualified technical, sales and managerial personnel. Competition for such personnel in the beverage industry is intense and we may not be able to retain our key managerial, sales and technical employees or attract and retain additional highly qualified technical, sales and managerial personnel in the future. Any inability to attract and retain the necessary technical, sales and managerial personnel could materially adversely affect us.

 

The FDA has not passed on the efficacy of our products or the accuracy of any claim we make related to our products.

 

Although six independent clinical studies have been conducted relating to the calorie-burning and related effects of our products, the results of these studies have not been submitted to or reviewed by the FDA.  Further, the FDA has not passed on the efficacy of any of our products nor has it reviewed or passed on any claims we make related to our products, including the claim that our products aid consumers in burning calories or enhancing their metabolism.

 

Risk Factors Relating to Our Industry

 

We are subject to significant competition in the beverage industry .

 

The beverage industry is highly competitive. The principal areas of competition are pricing, packaging, distribution channel penetration, development of new products and flavors and marketing campaigns. Our products compete with a wide range of drinks produced by a relatively large number of manufacturers, most of which have substantially greater financial, marketing and distribution resources and name recognition than we do.

 

Important factors affecting our ability to compete successfully include the taste and flavor of our products, trade and consumer promotions, rapid and effective development of new, unique cutting edge products, attractive and different packaging, branded product advertising and pricing. Our products compete with all liquid refreshments and with products of much larger and substantially better financed competitors, including the products of numerous nationally and internationally known producers, such as The Coca Cola Company, Dr. Pepper Snapple Group, PepsiCo, Inc., Nestle, Waters North America, Inc., Hansen Natural Corp. and Red Bull. We also compete with companies that are smaller or primarily local in operation. Our products also compete with private label brands such as those carried by supermarket chains, convenience store chains, drug store chains, mass merchants and club warehouses.

 

There can be no assurance that we will compete successfully in the functional beverage industry. The failure to do so would materially adversely affect our business, financial condition and results of operations.

 

We compete in an industry that is brand-conscious, so brand name recognition and acceptance of our products are critical to our success and significant marketing and advertising could be needed to achieve and sustain brand recognition.

 

Our business is substantially dependent upon awareness and market acceptance of our products and brands by our targeted consumers. Our business depends on acceptance by our independent distributors of our brand as one that has the potential to provide incremental sales growth rather than reduce distributors’ existing beverage sales. The development of brand awareness and market acceptance is likely to require significant marketing and advertising expenditures. There can be no assurance that Celsius® will achieve and maintain satisfactory levels of acceptance by independent distributors and retail consumers. Any failure of Celsius® brand to maintain or increase acceptance or market penetration would likely have a material adverse effect on business, financial condition and results of operations.

 

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Our sales are affected by seasonality.

 

As is typical in the beverage industry, our sales are seasonal. Our highest sales volumes generally occur in the second and third quarters, which correspond to the warmer months of the year in our major markets. Consumer demand for our products is also affected by weather conditions. Cool, wet spring or summer weather could result in decreased sales of our beverages and could have an adverse effect on our results of operations.

 

Our business is subject to many regulations and noncompliance is costly .

 

The production, marketing and sale of our beverage products are subject to the rules and regulations of various federal, state and local health agencies. If a regulatory authority finds that a current or future product or production run is not in compliance with any of these regulations, we may be fined, or production may be stopped, thus adversely affecting our business, financial condition and results of operations. Similarly, any adverse publicity associated with any noncompliance may damage our reputation and our ability to successfully market our products. Furthermore, the rules and regulations are subject to change from time to time and while we closely monitor developments in this area, we have no way of anticipating whether changes in these rules and regulations will impact our business adversely. Additional or revised regulatory requirements, whether labeling, environmental, tax or otherwise, could have an adverse effect on our business, financial condition and results of operations.

 

Risk Factors Relating to our Status as a Fully Reporting Public Company

 

Upon effectiveness of this registration statement, we will become subject to the periodic reporting requirements of the Securities Exchange Act of 1934 (the “Exchange Act”) that will require us to incur audit fees and legal fees in connection with the preparation of such reports. These additional costs could reduce or eliminate our ability to earn a profit.

 

Following effectiveness of this registration statement, we will be required to file periodic reports with the Securities and Exchange Commission (the “ SEC ”) pursuant to the Exchange Act and the rules and regulations promulgated thereunder. In order to comply with these requirements, our independent registered public accounting firm will have to review our financial statements on a quarterly basis and audit our financial statements on an annual basis. Moreover, our legal counsel will have to review and assist in the preparation of such reports. The costs charged by these professionals for such services cannot be accurately predicted at this time because factors such as the number and type of transactions that we engage in and the complexity of our reports cannot be determined at this time and will have a major effect on the amount of time to be spent by our auditors and attorneys. However, the incurrence of such costs will obviously be an expense to our operations and thus have a negative effect on our ability to meet our overhead requirements and earn a profit. If we cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial information, and the trading price of our common stock, if a market ever develops, could drop significantly.

 

Our internal controls may be inadequate, which could cause our financial reporting to be unreliable and lead to misinformation being disseminated to the public .

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. As defined in Rule 13a-15(f) under the Exchange Act, internal control over financial reporting is a process designed by, or under the supervision of, the principal executive and principal financial officers and effected by the board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

 

•           pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;

 

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•           provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and/or directors of the Company; and

 

•           provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

 

We will be required to include a report of management on the effectiveness of our internal control over financial reporting in certain of our periodic filings. We expect to incur additional expenses and diversion of management’s time as a result of performing the system and process evaluation, testing and remediation required in order to comply with the management certification requirements.

 

We do not have a sufficient number of employees to segregate responsibilities and may be unable to afford increasing our staff or engaging outside consultants or professionals to overcome our lack of employees. During the course of our testing, we may identify other deficiencies that we may not be able to timely remediate. Moreover, effective internal controls, particularly those related to revenue recognition, are necessary for us to produce reliable financial reports and are important to help prevent financial fraud. If we cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial information, and the trading price of our common stock could drop significantly.

 

The Jumpstart Our Business Startups Act of 2012 (the “Jobs Act”) has reduced the information that the Company will be is required to disclose.

 

Under the Jobs Act, the information that the Company will be required to disclose following effectiveness of this registration statement has been reduced in a number of ways.

 

As a company that had gross revenues of less than $1 billion during the Company’s last fiscal year, the Company is an “ emerging growth company ,” as defined in the Jobs Act (an “ EGC ”). The Company will retain that status until the earliest of (a) the last day of the fiscal year which the Company has total annual gross revenues of $1,000,000,000 (as indexed for inflation in the manner set forth in the Jobs Act) or more; (b) the last day of the fiscal year of following the fifth anniversary of the date of the first sale of the common stock pursuant to an effective registration statement under the Securities Act of 1933 (the “ Securities Act ”); (c) the date on which the Company has, during the previous three year period, issued more than $1,000,000,000 in non-convertible debt; or (d) the date on which the Company is deemed to be a “ large accelerated filer ,” as defined in Rule 12b-2 under the Exchange Act or any successor thereto. As an EGC, the Company is relieved from the following:

 

•           The Company is excluded from Section 404(b) of Sarbanes-Oxley Act (“ Sarbanes-Oxley ”), which otherwise would have required the Company’s auditors to attest to and report on the Company’s internal control over financial reporting. The JOBS Act also amended Section 103(a)(3) of Sarbanes-Oxley to provide that (i) any new rules that may be adopted by the PCAOB requiring mandatory audit firm rotation or changes to the auditor’s report to include auditor discussion and analysis (each of which is currently under consideration by the PCAOB) shall not apply to an audit of an EGC; and (ii) any other future rules adopted by the PCAOB will not apply to the Company’s audits unless the SEC determines otherwise.

 

•           The Jobs Act amended Section 7(a) of the Securities Act to provide that the Company need not present more than two years of audited financial statements in an initial public offering registration statement and in any other registration statement, need not present selected financial data pursuant to Item 301 of Regulation S-K for any period prior to the earliest audited period presented in connection with such initial public offering. In addition, the Company is not required to comply with any new or revised financial accounting standard until such date as a private company (i.e., a company that is not an “ issuer ” as defined by Section 2(a) of Sarbanes-Oxley) is required to comply with such new or revised accounting standard. Corresponding changes have been made to the Exchange Act, which relates to periodic reporting requirements, which would be applicable if the Company were required to comply with them.

 

•           As long as the Company is an EGC, the Company may comply with Item 402 of Regulation S-K, which requires extensive quantitative and qualitative disclosure regarding executive compensation, by disclosing the more limited information required of a “smaller reporting company.”

 

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•           In the event that the Company registers the common stock under the Exchange Act as it intends to do, the Jobs Act will also exempt the Company from the following additional compensation-related disclosure provisions that were imposed on U.S. public companies pursuant to the Dodd-Frank Act: (i) the advisory vote on executive compensation required by Section 14A(a) of the Exchange Act; (ii) the requirements of Section 14A(b) of the Exchange Act relating to shareholder advisory votes on “ golden parachute ” compensation; (iii) the requirements of Section 14(i) of the Exchange Act as to disclosure relating to the relationship between executive compensation and our financial performance; and (iv) the requirement of Section 953(b)(1)of the Dodd-Frank Act, which requires disclosure as to the relationship between the compensation of the Company’s chief executive officer and median employee pay.

 

Risk Factors Related to our Common Stock

 

We cannot guarantee the continued existence of an active established public trading market for our common stock.

 

Our common stock currently is listed for trading on the OTCQX tier of the over-the-counter market operated by OTC Markets Group, Inc. Trading in stock quoted on the OTCQX 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. Accordingly, OTCQX may provide less liquidity for holders of our common stock than a national securities exchange such as the Nasdaq Stock Market. Although we intend to list our common stock for trading on the Nasdaq Stock Market concurrent with or as soon as practicable after the effectiveness of this registration statement, there is no assurance that we can successfully do so or that in any event, we can maintain an active established trading market for our common stock.

 

Market prices for our common stock may also be influenced by a number of other factors, including:

 

the issuance of new equity securities pursuant to a public or private offering;

 

changes in interest rates;

 

competitive developments, including announcements by competitors of new products or services or significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments;

 

variations in quarterly operating results;

 

change in financial estimates by securities analysts;

 

the depth and liquidity of the market for our common stock;

 

investor perceptions of Celsius and the functional beverage industry generally; and

 

general economic and other national conditions.

 

Our common stock is currently deemed to be a “penny stock” and is restricted by the SEC’s penny stock regulations and FINRA’s sales practice requirements, which may limit a shareholder’s ability to buy and sell our common stock .

 

Our common stock is a “ penny stock .” The SEC has adopted Rule 15g-9 which generally defines “ penny stock ” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our common stock is 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 customer’s 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 customer’s 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 purchaser’s 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.

 

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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 customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, the FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. FINRA’s 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.

 

The market for penny stocks has experienced numerous frauds and abuses that could adversely impact investors in our common stock.

 

Company management believes that the market for penny stocks has suffered from patterns of fraud and abuse. Such patterns include:

 

control of the market for the security by one or a few broker-dealers that are often related to a promoter or issuer;

 

manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases;

 

“boiler room” practices involving high pressure sales tactics and unrealistic price projections by sales persons;

 

excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and

 

wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the inevitable collapse of those prices with consequent investor losses.

 

Our board of directors has the authority, without shareholder approval, to issue preferred stock with terms that may not be beneficial to common shareholders and with the ability to affect adversely shareholder voting power and perpetuate their control over us.

 

Our Articles of Incorporation allows us to issue shares of preferred stock without any vote or further action by our shareholders. Our board of directors has the authority to fix and determine the relative rights and preferences of preferred stock. As a result, our board of directors could authorize the issuance of a series of preferred stock that would grant to holders the preferred right to our assets upon liquidation, the right to receive dividend payments before dividends are distributed to the holders of common stock and the right to the redemption of the shares, together with a premium, prior to the redemption of our common stock.

 

The ability of our principal shareholders to control our business may limit or eliminate minority shareholders’ ability to influence corporate affairs.

 

Our principal shareholders own common stock and/or preferred stock which holds a majority of the voting power of our issued and outstanding capital. Accordingly, they will be able to effectively control the election of directors, as well as all other matters requiring shareholder approval. The interests of our principal shareholders may differ from the interests of other shareholders with respect to the issuance of shares, business transactions with or sales to other companies, selection of other directors and other business decisions. The minority shareholders have no way of overriding decisions made by our principal shareholders. This level of control may also have an adverse impact on the market value of our shares because our principal shareholders may institute or undertake transactions, policies or programs that result in losses, may not take any steps to increase our visibility in the financial community and / or may sell sufficient numbers of shares to significantly decrease our price per share.

 

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We do not expect to pay cash dividends in the foreseeable future .

 

We have never paid cash dividends on our common stock. We do not expect to pay cash dividends on our common stock at any time in the foreseeable future. The future payment of dividends directly depends upon our future earnings, capital requirements, financial requirements and other factors that our board of directors will consider. Since we do not anticipate paying cash dividends on our common stock, return on your investment, if any, will depend solely on an increase, if any, in the market value of our common stock.

 

The “market overhang” from our outstanding options, warrants and convertible securities could adversely impact the market price of our common stock .

 

We have 53,201,132 shares of common stock issuable upon exercise of outstanding options and warrants and conversion of outstanding convertible securities. Such “ market overhang ” could adversely impact the market price of our common stock as a result of the dilution which would result if such securities were exercised for or converted into shares of common stock.

 

Item 2.  Financial Information

 

Management's Discussion and Analysis of Financial Condition and Results of Operations

 

You should read the following discussion in conjunction with the audited financial statements and the corresponding notes, the unaudited financial statements and the corresponding notes included elsewhere in this information statement.  This Item 2 contains forward-looking statements.  The matters discussed in these forward-looking statements are subject to risk, uncertainties, and other factors that could cause actual results to differ materially from those made, projected or implied in the forward-looking statements.  Please refer to " Item 1.A. Risk Factors " for a discussion of the uncertainties, risks and assumptions associated with these statements.

 

Results of Operations

 

Three months ended March 31, 2016 compared to three months ended March 31, 2015

 

Revenue

 

For the three months ended March 31, 2016, revenue was approximately $3.68 million, a decrease of $0.97 million or 21% from $4.65 million in revenue for same period in the prior year. The revenue decrease of 21% was mainly associated with a 68% decrease in international revenue from our Swedish distribution partner, who was adversely affected by a rebalancing of inventory. This decrease was offset by a 79% growth in domestic revenues associated from blended growth rates of 103% in retail accounts mainly from convenience store expansion initiatives, 16% in health and fitness accounts and 43% in internet retailer accounts from the same period in 2015.

 

Gross profit

 

For the three months ended March 31, 2016, gross profit decreased by approximately $319,000 or 17.3% to $1.52 million compared to $1.84 million for the same period in 2015. Gross Profit margins improved 1.8% to 41.3% in the three months ended March 31, 2016 from same period in 2015.

 

Sales and marketing expenses

 

Sales and marketing expenses for the three months ended March 31, 2016 were approximately $1.79 million, an increase of $890,000, or 99% from $899,000 in the same period in 2015. The increase is due primarily to increases in investments in marketing programs of $483,000 and increases in human resource investments of $407,000.

 

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General and administrative expenses

 

General and administrative expenses for the three months ended March 31, 2016 were approximately $875,000, an increase of $313,000, or 56%, from $562,000 for the three months ended March 31, 2015. The increase was primarily due to increases in option expense of $82,000, investments in human resources of $68,000, travel of $55,000, professional fees of $68,000, research and development costs of $12,000, and office related costs of $34,000, offset by savings in depreciation and amortization of $6,000.

 

Other expense

 

Total other expense decreased to approximately $57,000 for three months ended March 31, 2016 from $132,000 for the same period in 2015, as a result of $75,000 in savings in interest expense.

 

Net Income (Loss)

 

As a result of the all above, for the three months ended March 31, 2016, Celsius had a net loss of $1,200,557, and after giving effect to preferred stock dividends of $86,652, a net loss available to common shareholders of $1,287,209 or $0.03 per share based on a weighted average of 38,380,380 shares outstanding. This compares to, for the three months ended March 31, 2015, net income of $245,707, and after giving effect to preferred stock dividends of $33,001, net income available to common shareholders of $212,706 or $0.01 per share based on a weighted average of 20,459,032 shares outstanding.

 

Year ended December 31, 2015 Compared to Year ended December 31, 2014

 

Revenue

 

For the year ended December 31, 2015, revenue was approximately $17.2 million, an increase of $2.6 million or 18% from $14.6 million in revenue for year ending December 31, 2014. The revenue growth of 18% from 2014 to the 2015 was mainly associated with blended growth rates of 13% growth in international revenue growth and 22% growth in domestic sales. The domestic sales growth of 22% was mainly associated from blended growth rates of 18% from in retail accounts, 21% in health and fitness accounts and 46% in Internet retailer accounts from 2014.

 

Gross profit

 

For the year ended December 31, 2015, gross profit increased by approximately $1.44 million or 25.8% to $7.04 million compared to $5.60 million for 2014. Gross Profit margins improved 2.6% to 40.9% in the fiscal year ended December 31, 2015 from 2014.

 

Sales and marketing expenses

 

Sales and marketing expenses for the year ended December 31, 2015 were approximately $5.70 million, an increase of $880,000, or 18.2% from $4.82 million in 2014. The increase is due primarily to increases in investments in marketing programs of $596,000, increases in human resource investments of $239,000 and increases in warehousing costs totaling $44,000.

 

General and administrative expenses

 

General and administrative expenses for the year ended December 31, 2015 were approximately $3.17 million, an increase of $860,000, or 37.3%, from $2.31 million for the year ended December 31, 2014. The increase was primarily due to increases in stock based compensation of $582,000, professional fees of $129,000, research and development costs of $46,000, office related costs of $47,000, commercial insurance of $19,000, investor relations of $17,000, human resources of $13,000, and other general administration expenses of $12,000, offset by savings in depreciation and amortization of $4,000.

 

Other expense

 

Total other expense decreased to approximately $322,000 for year ended December 31, 2015 from $497,000 for the same period in 2014, as a result of $175,000 in savings in interest expense.

 

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Net Income (Loss)

 

As a result of the all above, for the year ended December 31, 2015, Celsius had a net loss of $2,149,804, and after giving effect to preferred stock dividends of $420,493, a net loss available to common shareholders of $2,570,297 or $0.07 per share based on a weighted average of 33,175,826 shares outstanding. This compares to, for the year ended December 31, 2014, a net loss of $2,027,136, and after giving effect to preferred stock dividends of $133,836, a net loss available to common shareholders of $2,160,972 or $0.10 per share based on a weighted average of 20,392,594 shares outstanding.

 

Liquidity and Capital Resources

 

As of March 31, 2016, we had cash of approximately $9.2 million and working capital of $12.2 million. Cash used in operations during the three months ended March 31, 2016 totaled $887,000.

 

As of December 31, 2015, we had cash of approximately $10.1 million and working capital of $13.2 million. Cash used in operations during the year ended December 31, 2015 totaled $755,000. In April 2015, the Company issued a total of 12,921,348 shares of common stock at $0.89 per share to an investor group in a private transaction for gross proceeds of $11.5 million.

 

Our current operating plan for next twelve (12) months plans on a sufficient financial condition and we do not contemplate obtaining additional financing. However, if our sales volumes do not meet our projections, expenses exceed our expectations, or our plans change, we may be unable to generate enough cash flow from operations to cover our working capital requirements. In such case, we may be required to adjust our business plan, by reducing marketing and other expenses or seek additional financing. There can be no assurance that such financing, if required, will be available on commercially reasonable terms if at all.

 

Off Balance Sheet Arrangements

 

As of March 31, 2016 and December 31, 2015, we had no off-balance sheet arrangements.

 

Item 3. Properties

 

At present, we do not own any real property.  We currently lease our principal executive offices located at 2424 N Federal Hwy, Boca Raton, Florida 33431. Our premises are leased for a monthly cost of $$6,408. The current lease expires on October 2020. The Company has no warehouses or other facilities as we store our product at third party contract warehouse facilities.

 

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Item 4. Security Ownership of Certain Beneficial Owners and Management

 

The following table sets forth, as of July 15, 2016, the beneficial ownership of our common stock by each executive officer and director, by each person known by us to beneficially own 5% or more of our common stock and by executive officers and directors as a group.  Unless otherwise stated, the address of the persons set forth in the table is c/o the Company, 2424 North Federal Hwy, Suite 208, Boca Raton, Florida 33431.

 

    Number of        
Names and addresses of   shares        
beneficial owners   of common stock (1)     Percentage of class (%)  
             
Gerry David     716,667 (2)     1.9  
                 
John Fieldy     370,833 (2)     1.0  
                 
Nickolas Castaldo     161,111 (2)     *  
                 
Hal Kravitz     0       0  
                 
Kevin Harrington     161,111 (2)     *  
                 
Christopher Lai     0       0  
                 
Tim Leissner     3,539,826       9.2  
                 
Thomas E. Lynch     163,111 (2)     *  
                 
William H. Milmoe     19,842,434 (3)     51.7  
                 
all officers and directors as a group (nine (9) persons)     24,955,093 (4)     65.0  
                 
Other 5% or greater shareholders:                
                 
Carl De Santis     19,678,823 (5)     51.3  
                 
Li Ka Shing     6,910,113 (6)     18.0  
                 
Solina Chau Hoi Shuen     4,606,742 (7)     12.0  

 

 

*            Less than 1%

 

The persons named above have full voting and investment power with respect to the shares indicated.  Under the rules of the SEC, a person (or group of persons) is deemed to be a “ beneficial owner ” of a security if he or she, directly or indirectly, has or shares the power to vote or to direct the voting of such security, or the power to dispose of or to direct the disposition of such security.  Accordingly, more than one person may be deemed to be a beneficial owner of the same security.

 

(1)          Includes shares of our common stock that are issuable upon exercise of stock options or conversion of preferred stock as of the date of this registration statement or within sixty (60) days thereafter.

 

(2)          Represents shares of common stock issuable upon the exercise of stock options.

 

(3)          Represents (a) 500 shares of common stock held of record by Mr. Milmoe; (b) 163,111 shares of common stock issuable upon exercise of stock options; (c) 8,554,289 shares of common stock held of record by CDS Ventures, LLC (“ CDS Ventures ”); (d) 4,576,923 shares of common stock issuable upon conversion of Preferred C Shares held of record by CDS Ventures; (e)1,896,448 shares of common stock held of record by CD Financial, LLC (“ CD Financial ”); and (f) 4,651,163 shares of common stock issuable upon conversion of Preferred D Shares held of record by CD Financial. Mr. Milmoe and Carl DeSantis share voting power with respect to shares of common stock beneficially owned by CDS Ventures and CD Financial. Mr. Milmoe does not have dispositive power with respect to such shares.

 

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(4)          Includes (a) the shares of common stock issuable upon the exercise of stock options held and the conversion of preferred stock beneficially owned by Mr. Milmoe as set forth in footnote (3) above; and (b) 1,735,944 shares of common stock issuable upon the exercise of stock options held by the Company’s other officers and directors.

 

(5)          Represents (a) 8,554,289 shares of common stock held of record by CDS Ventures; (b) 4,576,923 shares of common stock issuable upon conversion of Preferred C Shares held of record by CDS Ventures; (c) 1,896,448 shares of common stock held of record by CD Financial; and (d) 4,651,163 shares of common stock issuable upon conversion of Preferred D Shares held of record by CD Financial. Voting power of shares of common stock beneficially owned by CDS Ventures and CD Financial is shared by Mr. DeSantis and William H. Milmoe. Mr. De Santis has sole dispositive power with respect to such shares.

 

(6)          Represents shares of common stock held of record by Charmnew Limited, over which shares Mr. Li has voting and dispositive power.

 

(7)          Represents shares of common stock held of record by Grieg International Limited, over which shares Ms. Solina has voting and dispositive power.

 

Item 5. Directors and Executive Officers

 

The following sets forth the name of each of our officers and, directors and control persons and their positions with Celsius. The address for each of such individuals is c/o Celsius, 2424 N Federal Highway, Boca Raton, Florida 33431.

 

Name   Age   Position with the Company
         
Gerry David   64   Chief Executive Officer
         
John Fieldly   36   Chief Financial Officer
         
Nickolas Castaldo   65   Director
         
Hal Kravitz   59   Director
         
Kevin Harrington   60   Director
         
Chris Lai   29   Director
         
Tim Leissner   47   Director
         
Thomas E. Lynch   69   Director
         
William H. Milmoe   68   Director

 

 

 

Gerry David joined Celsius in October 2011 as its Chief Executive Officer and has served in that position since that time. Prior to joining the Company, Mr. David served as Executive Vice President of Oragenics, Inc., a publicly held pharmaceutical development company based in Tampa, Florida, from September 2008 until October 2011.

 

John Fieldly joined Celsius in January 2012 as its Chief Financial Officer and has served in that position since that time. Mr. Fieldy joined the Company from Oragenics, Inc., where he served as corporate controller from April 2010 until January 2012.

 

Nickolas Castaldo became a director of Celsius in March 2013. Since September 2004 he has served as Senior Vice President and Chief Marketing Officer of Anthony’s Coal Fired Pizza, Inc., a Florida based chain of casual dining restaurants.

 

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Hal Kravitz became a director of Celsius in April 2016. Since November 2014, Mr. Kravitz has served as Chief Executive Officer of AQUAhydrate, Inc., a company engaged in the manufacture, distribution and marketing of bottled water. He also served as a consultant to AQUAhydrate from August to November 2014 and in 2013, Mr. Kravitz helped form InterContinental Beverage Capital, a New York-based merchant bank focused on investments in the beverage industry. For over thirty (30) years prior thereto, Mr. Kravitz served as an executive officer and in other management positions in various units of the Coca-Cola system

 

Kevin Harrington joined Celsius’ board of directors in March 2013. He has almost forty (40) years experience in product introduction and direct marketing, being one of the first to market products through infomercials. Since 2005, he has been Chief Executive Officer of Harrington Business Development, Inc., a privately-held consulting firm. A serial entrepreneur, Mr. Harrington appeared as one of the original panelists on the ABC television program, “ Shark Tank .” He currently also serves as Chairman of the Board of As Seen On TV, Inc., a public company which focuses on marketing products through infomercials and other direct marketing.

 

Chris Lai joined our board of directors in April 2015. Since September 2012, he has served as a Project Manager for Horizon Ventures, Limited (“ Horizon Ventures ”), a Hong Kong based private investment fund. From April 2011 to September 2012, Mr. Lai was an analyst with Mooreland Partners, LLC, another private investment concern. Mr. Lai serves on the Board as one of two designees of an investor group led by Horizon Ventures (the “ Investors ”), pursuant to an Investors’ Rights Agreement entered into in April 2015 (the “ Investors’ Rights Agreement ”) by among the Company, the Investors, CD Financial and CDS Ventures, both of which are affiliates of Carl De Santis, one of our principal shareholders. The terms of April 2015 investment by the Investors and related transactions with CD Financial and CDS Ventures, as well as the terms of the Investors’ Rights Agreement and other related agreements entered into in connection with those transactions are more fully set forth in Item 10 of this Registration Statement.

 

Tim Leissner joined Celsius’ board of directors in April 2016 as the second designee of the Investors pursuant to the Investors’ Rights agreement. From December 2002 to February 2016, Mr. Leissner was a partner at Goldman Sachs, Inc. Since that time, he has been acting a private investor and business consultant. Mr. Leissner serves as a member of the board of directors of All Def Digital, Inc. (“ All Def Digital ”).

 

Thomas E. Lynch became a director of the Company in November, 2009. For over forty (40) years, Mr. Lynch has served as President of the Plastridge Agency, Inc., a five-office insurance agency based in Delray Beach, Florida, which traces its origins to 1919. He also serves as a director of First United Bancorp, Inc.

 

William H. Milmoe has served as a director of Celsius since August. 2008. Since June 2000, Mr. Milmoe has served as President of CDS International Holdings, Inc., a privately-held holding company based in Boca Raton, Florida, which oversees the business investments and holdings of Carl De Santis, one of our principal shareholders.

 

Terms of Directors and Executive Officers

 

Our directors are appointed for a one-year term to hold office until the next annual meeting of our shareholders and until their successors are appointed and qualified, or until their removal, resignation, or death.  Pursuant to the Investors’ Rights Agreement, the number of directors is set at seven (7) and the Investors have the right to appoint two (2) designees to the board of directors. Officers of the Company serve at the pleasure of the board of directors.

 

Family Relationships

 

There are no familial relationships among our officers and directors.

 

Board Committees and Independence

 

Our board of directors has established three standing committees, an audit committee, a compensation committee and a nominating and corporate governance committee. The audit committee currently consists of Messrs. Lynch, Kravitz and Milmoe, the compensation committee currently consists of Messrs. Lai, Castaldo and Harrington and the nominating and corporate governance committee currently consists of Messrs. Milmoe, Leissner and Lai. Our board of directors has determined that each of our directors is “ independent ” within the meaning of the applicable rules and regulations of the SEC and the listing standards of the Nasdaq Stock Market.

 

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In addition, we believe each of Messrs. Lynch, Kravitz, and Milmoe qualifies an “ audit committee financial expert ” as the term is defined by the applicable rules and regulations of the SEC and the Nasdaq Stock Market listing standards, based on their respective business professional experience in the financial and accounting fields. At the time of the listing of our common stock on the Nasdaq Stock Market, we will be required to certify to the Nasdaq Stock Market, that our audit committee has, and will continue to have, at least one member who has past employment experience in finance or accounting, requisite professional certification in accounting, or other comparable experience or background that results in the individual’s financial sophistication.

 

Audit Committee

 

The audit committee assists our board of directors in its oversight of the company’s accounting and financial reporting processes and the audits of the company’s financial statements, including (i) the quality and integrity of the company’s financial statements, (ii) the company’s compliance with legal and regulatory requirements, (iii) the independent auditors’ qualifications and independence and (iv) the performance of our company’s internal audit functions and independent auditors, as well as other matters which may come before it as directed by the board of directors. Further, the audit committee, to the extent it deems necessary or appropriate, among its several other responsibilities, shall:

 

be responsible for the appointment, compensation, retention, termination and oversight of the work of any independent auditor engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for our company;

 

discuss the annual audited financial statements and the quarterly unaudited financial statements with management and the independent auditor prior to their filing with the Securities and Exchange Commission in our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q;

 

review with the company’s financial management on a period basis (a) issues regarding accounting principles and financial statement presentations, including any significant changes in our company’s selection or application of accounting principles, and (b) the effect of any regulatory and accounting initiatives, as well as off-balance sheet structures, on the financial statements of our company;

 

monitor our Company’s policies for compliance with federal, state, local and foreign laws and regulations and our company’s policies on corporate conduct;

 

maintain open, continuing and direct communication between the board of directors, the audit committee and our independent auditors; and

 

monitor our compliance with legal and regulatory requirements and shall have the authority to initiate any special investigations of conflicts of interest, and compliance with federal, state and local laws and regulations, including the Foreign Corrupt Practices Act, as may be warranted.

 

Mr. Lynch is the chairman of our audit committee.

 

Compensation Committee

 

The compensation committee aids our board of directors in meeting its responsibilities relating to the compensation of our company’s executive officers and to administer all incentive compensation plans and equity-based plans of the company, including the plans under which company securities may be acquired by directors, executive officers, employees and consultants. Further, the compensation committee, to the extent it deems necessary or appropriate, among its several other responsibilities, shall:

 

review periodically our company’s philosophy regarding executive compensation to (i) ensure the attraction and retention of corporate officers; (ii) ensure the motivation of corporate officers to achieve our company’s business objectives, and (iii) align the interests of key management with the long-term interests of our company’s shareholders;

 

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review and approve corporate goals and objectives relating to Chief Executive Officer compensation and other executive officers of Celsius;

 

make recommendations to the board of directors regarding compensation for non-employee directors, and review periodically non-employee director compensation in relation to other comparable companies and in light of such factors as the compensation committee may deem appropriate; and

 

review periodically reports from management regarding funding our company’s pension, retirement, long-term disability and other management welfare and benefit plans.

 

Mr. Lai is the chairman of our compensation committee.

 

Nominating and Corporate Governance Committee

 

The nominating and corporate governance committee recommends to the board of directors individuals qualified to serve as directors and on committees of the board of directors to advise the board of directors with respect to the board of directors composition, procedures and committees to develop and recommend to the board of directors a set of corporate governance principles applicable to the Company; and to oversee the evaluation of the board of directors and Celsius’ management.

 

Further, the nominating and corporate governance committee, to the extent it deems necessary or appropriate, among its several other responsibilities shall:

 

recommend to the board of directors and for approval by a majority of independent directors for election by shareholders or appointment by the board of directors as the case may be, pursuant to our bylaws and consistent with the board of director’s evidence for selecting new directors;

 

review the suitability for continued service as a director of each member of the board of directors when his or her term expires or when he or she has a significant change in status;

 

review annually the composition of the board of directors and to review periodically the size of the board of directors;

 

make recommendations on the frequency and structure of board of directors meetings or any other aspect of procedures of the board of directors;

 

make recommendations regarding the chairmanship and composition of standing committees and monitor their functions;

 

review annually committee assignments and chairmanships;

 

recommend the establishment of special committees as may be necessary or desirable from time to time; and

 

develop and review periodically corporate governance procedures and consider any other corporate governance issue.

 

Messrs. Milmoe and Leissner are the co-chairman of our nominating and corporate governance committee.

 

Code of Ethics

 

We have adopted a code of ethics that applies to all of our executive officers, directors and employees. The code of ethics codifies the business and ethical principles that govern all aspects of our business. This document will be made available in print, free of charge, to any shareholder requesting a copy in writing from our Secretary at our executive offices in Boca Raton, Florida. A copy of our code of ethics is available on our website at www.celsius.com .

 

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Board of Directors Role in Risk Oversight

 

Members of the board of directors have periodic meetings with management and the Company’s independent auditors to perform risk oversight with respect to the Company’s internal control processes. The Company believes that the board’s role in risk oversight does not materially affect the leadership structure of the Company .

 

Item 6. Executive Compensation

 

Summary Compensation Table

 

The following table sets forth certain information concerning the compensation paid to our Chief Executive Officer, and Chief Financial Officer, who are our two executive officers, during the years ended December 31, 2015 and 2014.

 

                    Stock              
Name and Principal Position   Year   Salary ($)     Bonus ($)     Awards (#)     Other ($)     Total ($)  
                                   
Gerry David, CEO   2015     230,850       45,825       90,000 (1)     10,200 (2)     286,875  
    2014     225,000       56,025       100,000 (1)     20,400 (2)     301,425  
                                             
John Fieldly, CFO   2015     169,290       31,230       90,000 (1)     3,150 (2)     203,670  
    2014     165,000       36,630       100,000 (1)     10,800 (2)     212,430  

 

 

(1)           Represents stock options granted under our 2006 Stock Incentive Plan to purchase 90,000 shares of common stock at an exercise price of $1.05 per share and stock options granted to purchase 100,000 shares of common stock at an exercise price of $0.34 per share. The options vest in three annual installments commencing one year from the date of grant, subject to continued employment and expire ten (10) years from the date of grant.

 

(2)           Represents housing allowances.

 

In addition, Messrs. and Fieldy are entitled to participate in benefit plans maintained for employees of the Company generally.

 

Employment Agreements

 

Effective January 1, 2016, we entered into one-year employment agreements with each of Gerry David and John Fieldly, our Chief Executive Officer and Chief Financial Officer, respectively. The employment agreements provide for base annual salaries of $237,780 and $174,370 for Messrs. David and Fieldly, respectively, eligibility for performance-based incentive bonuses, pursuant to such criteria as may be established by our compensation committee, the grant of options to each executive officer to purchase 100,000 shares of our common stock and certain automobile and housing allowances. The employment agreements also provide for certain severance payments in the event of termination other than for “ cause ” (as defined therein and for “ golden parachute ” payments in the event of termination following a “ change in control ” (as defined therein). The employment agreements contain customary confidentiality and non-competition provisions.

 

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Compensation of Directors Table

 

The following table summarizes all compensation paid to our directors for the fiscal year ended December 31, 2015.

 

    Fees                                      
    Earned                       Non-Qualified              
    or                 Non-Equity     Deferred     All        
    Paid in     Stock     Option     Plan     Compensation     Other        
    Cash     Awards     Awards     Compensation     Earnings     Compensation     Total  
Name   ($)     ($)     (#) (1)     ($)     ($)     ($)     ($)  
                                           
Nickolas Castaldo     12,000             40,000                         12,000  
                                                         
Kathleen M. Dwyer (2)     12,000             40,000                         12,000  
                                                         
Kevin Harrington     12,000             40,000                         12,000  
                                                         
Thomas E. Lynch     12,000             40,000                         12,000  
                                                         
William H. Milmoe     12,000             40,000                         12,000  
                                                         
Timothy Leissner     9,000                                     9,000  
                                                         
Chris Lai                                          

 

 

(1) Represents options to purchase 40,000 shares of common stock at an exercise price of $1.05 per share granted under the 2006 Plan.

 

(2) Ms. Dwyer did not stand for reelection at the expiration of her term in April 2016.

 

Narrative Disclosure to the Director Compensation Table

 

Our non-employee directors will be compensated with options to purchase common stock or awards of common stock as determined by the Compensation Committee. Non-employee directors are also reimbursed for out-of-pocket costs incurred in connection with attending meetings.

 

Outstanding Equity Awards at Fiscal Year-End

 

The following table sets forth information with respect to stock awards and grants of options to purchase our common stock outstanding to the named executive officers at December 31, 2015.

 

    Number of securities
underlying unexercised
    Number of securities underlying     Weighted average      
    Options (#) (1)     unexercised unearned options     option exercise price     Option expiration
Name   Exercisable     Unexercisable     (#) (1)     ($) (1)     date
                             
Gerry David     716,667       73,333       73,333     $ 0.35     2021-2025
CEO                                    
                                     
John Fieldly     370,833       69,167       69,167     $ 0.44     2022-2025
CFO                                    

 

 

(1) Represents grants under our Amended 2006 Stock Incentive Plan.

 

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Amended 2006 Incentive Stock Plan

 

In January 2007, we adopted our 2006 Incentive Stock Plan, which was amended in July 2009 (as amended, the “ 2006 Plan ”). The 2006 Plan provided for equity incentives to be granted to our employees, officers or directors or to key advisers or consultants. Equity incentives may be in the form of stock options with an exercise price not less than the fair market value of the underlying shares as determined pursuant to the 2006 Plan, stock appreciation rights, restricted stock awards, stock bonus awards, other stock-based awards, or any combination of the foregoing. The 2006 Plan is administered by the compensation committee of the board of directors. Options to purchase 4,634,166 shares of common stock are outstanding under the 2006 Plan and awards covering up to an additional 321,275 shares may be granted under the 2006 Plan prior to its expiration in January 2017.

 

2015 Incentive Stock Plan

 

Our 2015 Incentive Stock Plan (the “ 2015 Plan ”), adopted in April 2015, provides for equity incentives to be granted to our employees, executive officers or directors or to key advisers or consultants. Equity incentives may be in the form of stock options with an exercise price not less than the fair market value of the underlying shares as determined pursuant to the 2015 Plan, restricted stock awards, other stock based awards, or any combination of the foregoing. The 2015 Plan is administered by the compensation committee of the board of directors. 5,000,000 shares of our common stock are reserved for issuance pursuant to the exercise of awards under the 2015 Plan. The number of shares so reserved automatically adjusts upward on January 1 of each year, so that the number of shares covered by the 2015 Plan is equal to 15% of our issued and outstanding common stock. Stock options to purchase an aggregate of 908,500 shares of our common stock are outstanding under the 2015 Plan as of the date of this report.

 

Compensation Committee Interlocks and Insider Participation

 

None.

 

Item 7. Certain Relationships and Related Transactions, and Director Independence

 

See “ Item 10. Recent Sales of Unregistered Securities ” with respect to the April 2015 investment by the Investors and related transactions with CD Financial and CDS Ventures.

 

The Company’s executive offices located at 2424 N Federal Hwy, Boca Raton, Florida 33431 are leased from a company affiliated with CD Financial. The lease expires in October 2020 and provides for monthly rent of $6,408. We believe that the monthly rent is commensurate with other properties available in the market.

 

In April 2015, the Company entered into a strategic marketing and advisory services agreement (the “ Advisory Services Agreement ”) with All Def Digital. Tim Leissner, a director of the Company is also a director of All Def Digital. As of December 31, 2015, the Company has paid All Def Digital $237,959, for services relating to the Advisory Services Agreement.

 

All related party transactions are subject to the review, approval or ratification of our board of directors or an appropriate committee thereof.

 

Item 8. Legal Proceedings

 

From time to time, we may become party to litigation or other legal proceedings that we consider to be a part of the ordinary course of our business.  We are not currently involved in any legal proceedings that could reasonably be expected to have a material adverse effect on our business, prospects, financial condition or results of operations.  We may become involved in material legal proceedings in the future.

 

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Item 9. Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters

 

Since January 11, 2016, our common stock has been on the OTCQX tier of the over-the-counter market maintained by OTC Markets Group, Inc., under the trading ticker “CELH.” Prior thereto, our common stock was quoted on the OTCPink tier of the over-the counter market maintained by OTC Markets Group, Inc. The trading price of our common stock has been volatile at times. Further, the stock market has from time to time experienced extreme volatility that has often been unrelated to the operating performance of particular companies. These kinds of broad market fluctuations may adversely affect the market price of our common stock. For additional information, see “ Item 1.A. Risk Factors ” above.

 

The following table sets forth the quarterly high and low sale prices of our common stock for the two most recent fiscal years, as reported on the OTC Market Group, INC. quotation system:

 

    High Sale     Low Sale  
Fiscal  Quarters   Price     Price  
2016                
First Quarter 2016   $ 2.40     $ 1.56  
                 
2015                
Fourth Quarter 2015   $ 2.48     $ 1.49  
Third Quarter 2015   $ 2.83     $ 1.71  
Second Quarter 2015   $ 3.55     $ 1.25  
First Quarter 2015   $ 1.25     $ 0.44  
                 
2014                
Fourth Quarter 2014   $ 0.61     $ 0.35  
Third Quarter 2014   $ 0.77     $ 0.44  
Second Quarter 2014   $ 0.94     $ 0.51  
First Quarter 2014   $ 1.20     $ 0.33  

 

Holders

 

As of July15, 2016, there were 52 holders of record of our common stock and in excess of 5,000 beneficial owners of our common stock.

 

Dividends

 

We have never declared or paid cash dividends on our common stock.  We anticipate that in the future we will retain any earnings for operation of our business. Accordingly, we do not anticipate declaring or paying any cash dividends in the foreseeable future.

 

Options, Warrants and Convertible Securities

 

As of the date of this report, there were:

 

·       4,412,775 shares of our common stock reserved for issuance upon exercise of outstanding options granted under the 2006 Plan and the 2015 Plan; and

 

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·       9,228,086 shares of our common stock reserved for issuance upon conversion of our outstanding convertible preferred stock.

 

Securities Authorized for Issuance under Equity Compensation Plans

 

Plan category   Number of securities to
be issued upon exercise of
outstanding options,
warrants and rights
    Weighted-average
exercise price of
outstanding options,
warrants and rights
    Number of securities
remaining
available for future
issuance under equity
compensation plans
(excluding securities
reflected in column (a))
 
                   
Equity compensation plans approved by security holders     5,542,666 shares (1)   $ 1.00       4,412,775 shares (1)
                         
Equity Compensation plans not approved by security holders     0 shares       n/a       0 shares  
                         
Total     5,542,666 shares (1)     None issued       4,412,775 shares (1)

 

 

(1) Represents shares of common stock reserved for issuance under the 2005 Plan and the 2015 Plan.

 

Item 10. Recent Sales of Unregistered Securities

 

April 2015 Transactions:

 

· On April 20, 2015, the Company entered into a common stock purchase agreement (the “ 2015 Purchase Agreement ”) with the Investors, pursuant to which the Company sold 12,921,348 shares of its common stock on a private placement basis (the “ Private Placement Shares ”) to the Investors for an aggregate consideration of $11,388,159, net of expenses. Certain of the Investors contemporaneously acquired an additional 5,000,000 shares of our common stock (the “ Conversion Shares ”) by purchasing an outstanding $1.5 million convertible note held by CDS Ventures (the “ CDS Note ”) and immediately converting the CDS Note into the Conversion Shares. In connection with the issuance of the Private Placement Shares and the Conversion Shares, Celsius relied upon the exemptions from registration afforded by Sections 4(a)(2) and 3(a)(9) of the Securities Act, respectively. The Private Placement Shares and the Conversion Shares are “ restricted securities ” of the Company. The certificates evidencing the Private Placement Shares and the Conversion Shares bear a legend (a) stating that the shares have not been registered under the Securities Act and applicable state securities laws; and (b) setting forth and referring to the restrictions on transferability and sale of the shares under the Securities Act and applicable state securities laws.

 

· We currently have shares of Series C Preferred Stock (the “ Preferred C Shares ”) and shares of Series D Preferred Stock (the “ Preferred D Shares ”) outstanding. On April 16, 2015, contemporaneously with the transactions with the Investors, the Company entered into an amendment to its existing Loan and Security Agreement (the “ Amendment ”) with CD Financial. Pursuant to the Amendment, the outstanding principal amount of the line of credit with CD Financial was reduced by $4.0 million, which amount was converted into 4,000 Preferred D Shares. Contemporaneously with the issuance of the Preferred D Shares, $180,000 of accrued but unpaid dividends on outstanding Preferred C Shares was paid through the issuance of an additional 180 Preferred C Shares (the “ Additional Preferred C Shares ”). In connection with the issuance of the Preferred D Shares and the Additional Preferred C Shares, Celsius relied upon the exemption from afforded by Section 4(a)(2) of the Securities Act. The Preferred D Shares and the Additional Preferred C Shares issued by Celsius are “ restricted securities ” of the Company. The certificates evidencing the Preferred D Shares and the Additional Preferred C Shares issued by Celsius bear a legend (i) stating that the shares have not been registered under the Securities Act and applicable state securities laws, and (ii) setting forth and referring to the restrictions on transferability and sale of the shares under the Securities Act and applicable state securities laws.

 

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· At closing of the April 20, 2015 transactions, Celsius, the Investors, CDS Ventures and CD Financial into the Investors’ Rights Agreement, pursuant to which, among matters, our board of directors was expanded to seven (7), two of whom shall be designated by the Investors, the shareholder parties were accorded certain registration rights for their respective shares of our common stock or underlying shares of common stock, as the case may be, under the Securities Act and the shareholder parties were granted certain participation rights as to future offerings of securities by Celsius. In order to effect the transactions, Celsius’ Amended and Restated Articles of Incorporation were amended as authorized by our board of directors, which amendment increased required), to increase the number of authorized shares of the which amendment increased the number of authorized shares of common stock from 50,000,000 to 75,000,000, increased the number of authorized Preferred C Shares from 2,200 to 3,000 and designated the newly created Preferred D Shares.

 

Other Issuances of Common Stock

 

During 2014, the Company issued a total of 280,000 “ restricted ” shares of its common stock as compensation pursuant to celebrity endorsement agreements at an aggregate fair value of $216,100, 250,000 shares were issued at $0.79 per share on March 11 , 2014 and 30,000 shares were issued at $0.62 per share on August 13 , 2014 with each per share valuation representing the closing stock price on the day of issuance.

 

On April 12, 2016, the Company issued a total 250,000 “ restricted ” shares of its common stock as compensation pursuant to celebrity endorsement agreements at a fair value of $560,000, or $2.24 per share representing, the closing stock price on that date.

 

Item 11. Description of Registrant’s Securities to be Registered

 

Capital Stock

 

Our authorized capital stock consists of 75,000,000 shares of common stock, par value $0.001 per share and 2,500,000 shares of preferred stock, par value $0.001 per share. Our shares of common stock are the securities covered by this registration statement.

 

Common Stock

 

As of the date of this report, we have 38,666,451 shares of our common stock issued and outstanding. All shares of our common stock that are presently issued and outstanding are fully paid and non-assessable. Holders of our common stock are entitled to one vote for each share on all matters submitted to a shareholder vote. Holders of common stock do not have cumulative voting rights. Therefore, holders of a majority of the shares of common stock, voting together with holders of our Preferred C Shares and Preferred D Shares as a single class, can elect all of the directors. Holders of our capital stock representing a majority of the voting power of our capital stock entitled to vote, represented in person or by proxy, are necessary to constitute a quorum at any meeting of our shareholders. A vote by the holders of a majority of our outstanding capital stock entitled to vote is required to effectuate certain fundamental corporate changes such as liquidation, merger or an amendment to our Articles of Incorporation.

 

Holders of common stock are entitled to share in all dividends that our board of directors, in its discretion, declares from legally available funds, subject to preferences granted to shares of preferred stock. In the event of liquidation, dissolution or winding up, each outstanding share entitles its holder to participate pro rata in all assets that remain after payment of liabilities and after providing for each class of stock, if any, having preference over the common stock, including shares of preferred stock. Holders of our common stock have no pre-emptive rights, no conversion rights and there are no redemption provisions applicable to our common stock.

 

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Preferred Stock

 

General

 

Our board of directors has the authority, without further action by the shareholders, to issue such shares of preferred stock in one or more series and to fix the rights, preferences and the number of shares constituting any series or the designation of such series. While our Articles and bylaws do not contain any provisions that may delay, defer or prevent a change in control, the issuance of preferred stock may have the effect of delaying or preventing a change in control or make removal of our management more difficult. Additionally, the issuance of preferred stock may have the effect of decreasing the market price of the common stock and may adversely affect the voting and other rights of the holders of common stock. We currently have 3,000 shares of preferred stock designated as Preferred C Shares designated, of which 2,380 Preferred C Shares are issued and outstanding and 4,000 shares of preferred stock designated as Preferred D Shares, all of which are issued and outstanding.

 

Preferred C Shares

 

The Preferred C Shares are convertible into our common stock at the option of the holder thereof at a conversion price of $0.52 per share at any time until December 31, 2018, at which time they will automatically convert into shares of our common stock determined by dividing the liquidation preference of $ 0.52 per Preferred C Share by the conversion price then in effect. The conversion price is subject to adjustment in the event of stock dividends, stock splits and similar events. The Preferred C Shares accrue cumulative annual dividends at the rate of 6% per annum, payable by the issuance of additional Preferred C Shares. The holder of Preferred C Shares votes on an “as converted” basis, together with holders of common stock as a single class on all matters presented to shareholders for a vote, except as required by law.

 

Preferred D Shares

 

The Preferred D Shares are convertible into our common stock at the option of the holder thereof at a conversion price of $0.86 per share until the earlier of the January 2, 2020 due date of our line of credit with CD Financial or such earlier date as the line of credit is satisfied (the “ Mandatory Redemption Date ”). The conversion price is subject to adjustment in the event of stock dividends, stock splits and similar events. The Preferred D Shares accrue cumulative annual cash dividends at the rate of 5% per annum, payable quarterly in cash and have a liquidation preference of $1,000 per share. On the Mandatory Redemption Date, the Preferred D Shares automatically convert into shares of our common stock in a number determined by dividing the $1,000 per Preferred D Share liquidation preference plus any accrued but unpaid dividends, by the conversion price then in effect. The Preferred D Shares may also be redeemed by us at any time on or after December 31, 2016, at a redemption price equal to 104% of the liquidation preference. The holder of the Preferred D Shares votes on an “as converted” basis, together with holders of common stock as a single class on all matters presented to shareholders for a vote, except as required by law.

 

Item 12. Indemnification of Directors and Officers

 

Pursuant to our Articles of Incorporation and Bylaws, we may indemnify an officer or director who is made a party to any proceeding, including a lawsuit, because of his or her position, if he or she acted in good faith and in a manner he or she reasonably believed to be in our best interest.  In certain cases, we may advance expenses incurred in defending any such proceeding.  To the extent that the officer or director is successful on the merits in any such proceeding as to which such person is to be indemnified, we must indemnify him or her against all expenses incurred, including attorney's fees.  With respect to a derivative action, indemnity may be made only for expenses actually and reasonably incurred in defending the proceeding, and if the officer or director is judged liable, only by a court order.  The indemnification is intended to be to the fullest extent permitted by the laws of the State of Nevada.

 

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Item 13. Financial Statements and Supplementary Data

 

The financial statements and supplementary data listed in “ Item 15 Financials Statements and Exhibits ” are included with this registration statement.

 

Item 14. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 

None.

 

Item 15. Financial Statements and Exhibits

 

(a) Financial Statements

 

The following consolidated financial statements of the Company are included herewith:

 

Report of Independent Registered Public Accounting Firm  
   
Consolidated Balance Sheets as of December 31, 2015 and 2014  
   
Consolidated Statements of Operations for the years ended December 31, 2015 and 2014  
   
Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the years ended December 31, 2015 and 2014  
   
Consolidated Statements of Cash Flows for the years ended December 31, 2015 and 2014  
   
Notes to Consolidated Financial Statements  
   
Consolidated Balance Sheets as of March 31, 2016 (unaudited) and December 31, 2015  
   
Consolidated Statements of Operations for the three months ended March 31, 2016 and 2015 (unaudited)  
   
Consolidated Statements of Cash Flows for the three months ended March 31, 2016 and 2015 (unaudited)  
   
Notes to Consolidated Financial Statements (unaudited)  

 

(b)

 

Exhibit No.   Description
     
3.1   Articles of Incorporation, as amended
     
3.2   Bylaws, as amended
     
10.1   Loan and Security Agreement with CD Financial, LLC, as amended
     
10.2   Investors’ Rights Agreement dated April 20, 2015
     
10.3   Amended 2006 Stock Incentive Plan*
     
10.4   2015 Stock Incentive Plan*
     
10.5   Code of Ethics
     
10.6   Audit Committee Charter
     
10.7   Compensation Committee Charter
     
10.8   Nominating and Corporate Governance Committee Charter
     
10.9   Employment Agreement with Gerry David*
     
10.10   Employment Agreement with John Fieldly*
     
21.1   Subsidiaries of Registrant
     
23.1   Consent of Independent Registered Public Accounting Firm

 

 

*Management compensation plan or arrangement.

 

  30  

 

 

SIGNATURES

 

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Date: July 22, 2016 CELSIUS HOLDINGS,, INC.
     
  By: /s/ Gerry David
    Gerry David, Chief Executive Officer
     
  By: /s/ John Fieldly
    John Fieldly, Chief Financial Officer

 

  31  

 

 

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 

  Page
   
Report of Independent Registered Public Accounting Firm F-2
   
Consolidated Balance Sheets as of December 31, 2015 and 2014 F-3
   
Consolidated Statements of Operations  
for the years ended December 31, 2015 and 2014 F-4
   
Consolidated Statements of Changes in Stockholders’ Equity (Deficit)  
for the years ended December 31, 2015 and 2014 F-5
   
Consolidated Statements of Cash Flows  
for the years ended December 31, 2015 and 2014 F-6
   
Notes to Consolidated Financial Statements F-7
   
Consolidated Balance Sheets  
as of March 31, 2016 (unaudited) and December 31, 2015 (audited) F-22
   
Consolidated Statements of Operations  
for the three months ended March 31, 2016 and 2015 (unaudited) F-23
   
Consolidated Statements of Cash Flows  
for the three months ended March 31, 2016 and 2015 (unaudited) F-24
   
Notes to Consolidated Financial Statements (unaudited) F-25

 

F- 1  

 

 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Stockholders and Board of Directors

Celsius Holdings, Inc. and Subsidiaries

 

We have audited the accompanying consolidated balance sheets of Celsius Holdings, Inc. and Subsidiaries as of December 31, 2015 and 2014 and the related consolidated statements of operations, changes in stockholders’ equity (deficit), and cash flows for each of the two years ended in the period December 31, 2015. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Celsius Holdings, Inc. and Subsidiaries as of December 31, 2015 and 2014 and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2015, in conformity with accounting principles generally accepted in the United States of America.

 

  /s/ D’Arelli Pruzansky, P.A.
   
  Certified Public Accountants

 

Coconut Creek, Florida

March 24, 2016

 

 

F- 2  

 

 

Celsius Holdings, Inc. and Subsidiaries

Consolidated Balance Sheets

 

    December 31,
2015
    December 31,
2014
 
ASSETS                
                 
Current assets:                
Cash   $ 10,128,320     $ 349,072  
Accounts receivable, net     2,127,060       2,612,191  
Inventories, net     2,322,904       1,686,935  
Prepaid expenses and other current assets     666,267       259,056  
Total current assets     15,244,551       4,907,254  
                 
Property and equipment, net     21,319       43,950  
Total Assets   $ 15,265,870     $ 4,951,204  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)                
                 
Current liabilities:                
Accounts payable and accrued expenses   $ 1,805,931     $ 828,049  
Accrued preferred dividend     190,847       180,403  
Deferred revenue and other current liabilities     25,057       356,602  
Total current liabilities     2,021,835       1,365,054  
                 
Long-term liabilities:                
Convertible note payable - related party     -       1,500,000  
Line of credit note payable-related party     4,500,000       9,250,000  
Total Liabilities     6,521,835       12,115,054  
                 
Stockholders’ Equity (Deficit):                
Preferred Stock, $0.001 par value; 2,500,000 shares authorized, 6,380 and 2,200 shares issued and outstanding at December 31, 2015 and December 31, 2014, respectively     6       2  
Common stock, $0.001 par value; 75,000,000 shares authorized, 38,380,380 and 20,459,032 shares issued and outstanding at December 31, 2015 and December 31, 2014, respectively     38,380       20,459  
Additional paid-in capital     58,626,212       40,165,955  
Accumulated deficit     (49,920,563 )     (47,350,266 )
Total Stockholders’ Equity (Deficit)     8,744,035       (7,163,850 )
Total Liabilities and Stockholders’ Equity (Deficit)   $ 15,265,870     $ 4,951,204  

 

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

 

F- 3  

 

 

Celsius Holdings, Inc. and Subsidiaries

Consolidated Statements of Operations

 

    For the year  
    ended December 31,  
    2015     2014  
Revenue   $ 17,217,944     $ 14,610,090  
Cost of revenue     10,177,986       9,011,923  
Gross profit     7,039,958       5,598,167  
                 
Selling and marketing expenses     5,701,845       4,823,014  
General and administrative expenses     3,165,573       2,305,086  
Total operating expense     8,867,418       7,128,100  
                 
Loss from operations     (1,827,460 )     (1,529,933 )
                 
Other Income (Expense):                
Interest expense     (322,344 )     (497,203 )
Total Other Income (Expense)     (322,344 )     (497,203 )
                 
Net Loss     (2,149,804 )     (2,027,136 )
Preferred stock dividend - beneficial conversion feature     (139,535 )        
Preferred stock dividend - other     (280,958 )     (133,836 )
Net Loss available to common stockholders   $ (2,570,297 )   $ (2,160,972 )
                 
Weighted average shares outstanding     33,175,826       20,392,594  
Loss per share, basic and diluted   $ (0.07 )   $ (0.10 )

 

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

 

F- 4  

 

 

Consolidated Statements of Changes in Stockholders’ Equity (Deficit)

For the Years Ended December 31, 2015 and 2014

 

                Additional              
    Preferred Stock     Common Stock     Paid-In     Accumulated        
    Shares     Amount     Shares     Amount     Capital     Deficit     Total  
                                           
Balance at December 31, 2013     2,200     $ 2       20,179,032     $ 20,179     $  39,263,208       (45,189,294 )   $  (5,905,905 )
                                                         
Issuance of common stock in exchange of service                     280,000       280       215,820               216,100  
Stock option expense                                     686,927               686,927  
Preferred stock dividend                                             (133,836 )     (133,836 )
Net loss                                             (2,027,136 )     (2,027,136 )
Balance at December 31, 2014     2,200       2       20,459,032       20,459       40,165,955       (47,350,266 )     (7,163,850 )
                                                         
Issuance of preferred stock in exchange of note     4,000       4                       3,999,996               4,000,000  
Issuance of preferred stock in exchange of accrued dividend     180       0.18                       180,000               180,000  
Issuance of common stock upon conversion of convertible note                     5,000,000       5,000       1,495,000               1,500,000  
Issuance of common stock pursuant to private placement                     12,921,348       12,921       11,375,238               11,388,159  
Stock option expense                                     1,270,488               1,270,488  
Preferred stock dividend - beneficial conversion feature                                     139,535       (139,535 )     -  
Preferred stock dividend - other                                             (280,958 )     (280,958 )
Net loss                                             (2,149,804 )     (2,149,804 )
Balance at December 31, 2015     6,380     $ 6       38,380,380     $ 38,380     $ 58,626,212       (49,920,563 )   $ 8,744,035  

 

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

 

F- 5  

 

 

Celsius Holdings, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

 

    For the year ended  
    December 31,
2015
    December 31,
2014
 
Cash flows from operating activities:                
Net Loss available to common stockholders   $ (2,570,297 )   $ (2,160,972 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Depreciation and amortization     33,043       37,256  
Stock-based compensation expense     1,270,488       903,027  
Preferred stock dividend –beneficial conversion feature     139,535       -  
Changes in operating assets and liabilities:                
Accounts receivable, net     485,131       (1,120,641 )
Inventory     (635,969 )     (865,664 )
Prepaid expenses and other current assets     (313,942 )     258,338  
Accounts payable and accrued expenses     1,168,400       121,828  
Deposits/deferred revenue and other current liabilities     (331,544 )     (92,389 )
Net cash used in operating activities     (755,155 )     (2,919,217 )
                 
Cash flows from investing activities:                
Purchase of property and equipment     (10,412 )     (12,493 )
                 
Net cash (used in) investing activities     (10,412 )     (12,493 )
                 
Cash flows from financing activities:                
Borrowing under revolving note payable, related-party     450,000       3,150,000  
Repayment on short term notes payable, related-party     (1,200,000 )     -  
Net proceeds from sale of common stock     11,388,084       -  
Payments on short term notes payable     (93,269 )     (91,124 )
Net cash provided by financing activities     10,544,815       3,058,876  
                 
Net increase in cash and cash equivalents     9,779,248       127,166  
                 
Cash and cash equivalents at beginning of the year     349,072       221,906  
                 
Cash and cash equivalents at end of the year   $ 10,128,320     $ 349,072  
Supplemental disclosures:                
Cash paid during period for:                
Interest   $ 401,808     $ 460,589  
Taxes   $ -     $ -  
Non-cash investing and financing activities:                
Borrowing under short term notes payable for prepaid expense   $ 93,269     $ 91,124  
Accrued preferred dividends   $ 280,958     $ 133,836  
Preferred stock issued in exchange for cancellation of revolving note payable - related party   $ 4,000,000     $ -  
Conversion of convertible note to common shares - related party   $ 1,500,000     $ -  
Conversion of accrued preferred dividend into preferred shares - related party   $ 180,000     $ -  

 

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

 

F- 6  

 

 

Celsius Holdings, Inc. and Subsidiaries

 

Notes to Consolidated Financial Statements

 

December 31, 2015

 

1. ORGANIZATION AND DESCRIPTION OF BUSINESS

 

Business —Celsius Holdings, Inc. (the “Company” or “Celsius Holdings”) was incorporated under the laws of the State of Nevada on April 26, 2005. On January 24, 2007, the Company entered into a merger agreement and plan of reorganization with Elite FX, Inc., a Florida corporation. Under the terms of the Merger Agreement, Elite FX, Inc. was merged into the Company’s subsidiary, Celsius, Inc. and became a wholly-owned subsidiary of the Company on January 26, 2007. In addition, on March 28, 2007 the Company established Celsius Netshipments, Inc. a Florida corporation as a wholly-owned subsidiary of the Company.

 

Since the merger, the Company is engaged in the development, marketing, sale and distribution of “functional” calorie-burning fitness beverages under the Celsius® brand name.

 

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”).

 

Consolidation Policy — The accompanying consolidated financial statements include the accounts of Celsius Holdings, Inc. and its subsidiaries. All material inter-company balances and transactions have been eliminated in consolidation.

 

Significant Estimates — The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses and disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates. Significant estimates include the allowance for doubtful accounts, reserves for inventory obsolescence, the useful lives and values of property, fixtures and equipment, valuation of stock based compensation, and deferred tax asset valuation allowance.

 

Concentrations of Risk — Substantially all of the Company’s revenue derives from the sale of Celsius ® beverages.

 

The Company uses single supplier relationships for its raw materials purchases and filling capacity, which potentially subjects the Company to a concentration of business risk. If these suppliers had operational problems or ceased making product available to the Company, operations could be adversely affected.

 

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. The Company places its cash and cash equivalents with high-quality financial institutions. At times, balances in the Company’s cash accounts may exceed the Federal Deposit Insurance Corporation limit. At December 31, 2015 the Company had approximately $10.0 million in excess of the Federal Deposit Insurance Corporation limit.

 

F- 7  

 

 

Celsius Holdings, Inc. and Subsidiaries

 

Notes to Consolidated Financial Statements

 

December 31, 2015

 

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

At December 31, 2015 and 2014, the Company had the following 10 percent or greater concentrations of revenue with its customers:

 

    2015     2014  
A*     48.3 %     49.8 %
B     9.1 %     10.0 %
All other     42.6 %     40.2 %
Total     100.0 %     100.0 %

 

At December 31, 2015 and 2014, the Company had the following 10 percent or greater concentrations of accounts receivable with its customers:

 

    2015     2014  
A*     50.0 %     68.0 %
B     11.8 %     8.5 %
All other     38.2 %     23.5 %
Total     100.0 %     100.0 %

 

*Revenues and receivables from customer A are derived from a distributor located in Sweden.

 

Cash Equivalents — The Company considers all highly liquid instruments with maturities of three months or less when purchased to be cash equivalents. At December 31, 2015 and December 31, 2014, the Company did not have any investments with maturities of three months or less.

 

Accounts Receivable — Accounts receivable are reported at net realizable value. The Company establishes an allowance for doubtful accounts based upon factors pertaining to the credit risk of specific customers, historical trends, and other information. Delinquent accounts are written-off when it is determined that the amounts are uncollectible. At December 31, 2015 and December 31, 2014, there was an allowance for doubtful accounts of $3,500 and $3,500, respectively.

 

F- 8  

 

 

Celsius Holdings, Inc. and Subsidiaries

 

Notes to Consolidated Financial Statements

 

December 31, 2015

 

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Inventories — Inventories include only the purchase cost and are stated at the lower of cost or market. Cost is determined using the FIFO method. Inventories consist of raw materials and finished products. The Company reserved against inventory during the period in which such materials and products are no longer usable or marketable. In 2015 and 2014, the Company recorded a reserve of $329,075 and $30,059, respectively. The changes in reserve are included in cost of revenue. Free Samples are recorded as cost of sales.

 

Property and Equipment — Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation of property and equipment is calculated using the straight-line method over the estimated useful life of the asset generally ranging from three to seven years.

 

Impairment of Long-Lived Assets — In accordance with ASC Topic 360, “Property, Plant, and Equipment” the Company reviews the carrying value of intangibles and other long-lived assets for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets is measured by comparison of its carrying amount to the undiscounted cash flows that the asset or asset group is expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the property, if any, exceeds its fair value.

 

Revenue Recognition — Revenue is derived from the sale of beverages. Revenue is recognized when persuasive evidence of an agreement exists, the products are delivered, sales price is fixed or determinable, and collectability is reasonably assured. Any discounts, slotting fees, sales incentives or similar arrangements with the customer are estimated at time of sale and deducted from revenue.

 

Deferred Revenue — From time to time the Company requires prepayments for deposits in advance of delivery of products and/or production runs. Such amounts are initially recorded as deferred revenue. The Company recognizes such revenue as it is earned in accordance with revenue recognition policies.

 

Advertising Costs — Advertising costs are expensed as incurred. The Company uses mainly radio, local sampling events, sponsorships, endorsements, and digital advertising. The Company incurred advertising expense of approximately $3.2 million and $2.2 million, during year ending December 31, 2015 and 2014, respectively.

 

Research and Development — Research and development costs are charged to operations as incurred and consist primarily of consulting fees, raw material usage and test productions of beverages. The Company incurred expenses of $71,166 and $25,510 during year ending December 31, 2015 and 2014, respectively.

 

Fair Value of Financial Instruments — The carrying value of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, and notes payable approximates fair value due to their relative short-term maturity and market interest rates.

 

F- 9  

 

 

Celsius Holdings, Inc. and Subsidiaries

 

Notes to Consolidated Financial Statements

 

December 31, 2015

 

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Fair Value Measurements - ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:

 

Level 1: Observable inputs such as quoted market prices in active markets for identical assets or liabilities.
   
Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.
   
Level 3: Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions.

 

The Company did not have any assets or liabilities measured at fair value at December 31, 2015 and December 31, 2014.

 

Income Taxes — The Company accounts for income taxes pursuant to the provisions of ASC 740-10, “Accounting for Income Taxes,” which requires, among other things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. A valuation allowance is provided to offset any net deferred tax assets for which management believes it is more likely than not that the net deferred asset will not be realized. The Company follows the provisions of the ASC 740 -10 related to, Accounting for Uncertain Income Tax Positions. When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any.

 

F- 10  

 

 

Celsius Holdings, Inc. and Subsidiaries

 

Notes to Consolidated Financial Statements

 

December 31, 2015

 

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Income Taxes (continued) — Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for uncertain tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination. The Company believes its tax positions are all highly certain of being upheld upon examination. As such, the Company has not recorded a liability for uncertain tax benefits.

 

The Company has adopted ASC 740-10-25 Definition of Settlement, which provides guidance on how an entity should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits and provides that a tax position can be effectively settled upon the completion of an examination by a taxing authority without being legally extinguished. For tax positions considered effectively settled, an entity would recognize the full amount of tax benefit, even if the tax position is not considered more likely than not to be sustained based solely on the basis of its technical merits and the statute of limitations remains open.

 

The Company files its tax returns on a fiscal year September 30 th tax year. The Company’s tax returns for tax years ended September 30, 2015 (although not yet filed), 2014, 2013, and 2012 remain subject to potential examination by the taxing authorities.

 

Earnings per Share — Basic earnings per share are calculated by dividing net income (loss) available to stockholders by the weighted-average number of common shares outstanding during each period. Diluted earnings per share are computed using the weighted average number of common and dilutive common share equivalents outstanding during the period. Dilutive common share equivalents consist of shares issuable upon conversion of convertible debt, exercise of stock options and warrants (calculated using the reverse treasury stock method). As of December 31, 2015 there were options outstanding to purchase 4.6 million shares, which exercise price averaged $0.80, Series C Preferred Stock warrants outstanding to convert to 4.6 million common shares at $0.52 price per share and Series D Preferred Stock warrants outstanding to convert to 4.7 million common shares at $0.86 price per share. There were no other dilutive common shares equivalents, including convertible notes and warrants, as no common share equivalents had an exercise price below the ending closing price of the year. The effects of dilutive instruments have not been presented as the effects would be anti-dilutive.

 

F- 11  

 

 

Celsius Holdings, Inc. and Subsidiaries

 

Notes to Consolidated Financial Statements

 

December 31, 2015

 

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Share-Based Payments —Effective January 1, 2006, the Company has fully adopted the provisions of ASC Topic 718 “Compensation — Stock Compensation” and related interpretations. As such, compensation cost is measured on the date of grant at the fair value of the share-based payments. Such compensation amounts, if any, are amortized over the respective vesting periods of the grants. On April 30, 2015, the Company adopted the 2015 Stock Incentive Plan, This plan is intended to provide incentives which will attract and retain highly competent persons at all levels as employees of the Company, as well as independent contractors providing consulting or advisory services to the Company, by providing them opportunities to acquire the Company's common stock or to receive monetary payments based on the value of such shares pursuant to Awards issued. The 2015 Plan permits the grant of options and shares for up to 5,000,000 shares. In addition, there is a provision for an annual increase of 15% to the shares included under the plan, with the shares to be added on the first day of each calendar year, beginning on January 1, 2016.

 

Shipping and Handling Costs — Shipping and handling costs for freight expense on goods shipped are included in cost of sales. Freight expense on goods shipped for year ended December 31, 2015 and 2014 was $1,161,088 and 1,007,054, respectively.

 

Recent Accounting Pronouncements

 

The Company adopts all applicable, new accounting pronouncements as of the specified effective dates.

 

In September 2015, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2015-16, Simplifying the Accounting for Measurement-Period Adjustments (“ASU 2015-16”). ASU 2015-16 simplifies the accounting for adjustments made to provisional amounts recognized in a business combination by requiring the acquirer to (i) recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amount is determined, (ii) record, in the same period, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date, and (iii) present separately or disclose the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. ASU 2015-16 is effective for fiscal years, and interim periods within, beginning after December 15, 2015. Early adoption is permitted. The Company is evaluating the impact of the adoption of ASU 2015-16 on January 1, 2016 to its consolidated financial position or results of operations.

 

In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”). ASU 2015-03 simplifies the presentation of debt issuance costs and requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability (consistent with debt discounts).  

 

F- 12  

 

 

Celsius Holdings, Inc. and Subsidiaries

 

Notes to Consolidated Financial Statements

 

December 31, 2015

 

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Recent Accounting Pronouncements (continued)

 

In August 2015, the FASB issued ASU No. 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements (Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting) (“ASU 2015-15”). ASU 2015-15 allows debt issuance costs related to line-of-credit agreements to be presented in the balance sheet as an asset. ASU 2015-03 and ASU 2015-15 are effective for fiscal years, and interim periods within, beginning after December 15, 2015. Early adoption is permitted. The Company plans to early adopt ASU 2015-03 and ASU 2015-15 as of December 31, 2015; the adoption is not expected to have a material impact on its consolidated financial position or results of operations.

 

All new accounting pronouncements issued but not yet effective are not expected to have a material impact on our results of operations, cash flows or financial position.

 

Liquidity — These financial statements have been prepared assuming the Company will be able to continue as a going concern. At December 31, 2015, the Company had an accumulated deficit of $49,920,563 which includes a net loss available to common stockholders of $2,570,297 for year ended December 31, 2015. While these factors alone may raise doubt as to the Company’s ability to continue as a going concern, the Company’s sale of common stock to an investor group on April 20, 2015 for a total of $11.5 million is deemed sufficient to alleviate substantial doubt regarding the Company’s ability to continue as a going concern.

 

3. INVENTORIES

 

Inventories consist of the following at:

 

    December 31,     December 31,  
    2015     2014  
Finished goods   $ 2,309,288     $ 1,570,201  
Raw Materials     342,691       146,793  
Less: Inventory Reserve     (329,075 )     (30,059 )
Inventories, net   $ 2,322,904     $ 1,686,935  

 

F- 13  

 

 

Celsius Holdings, Inc. and Subsidiaries

 

Notes to Consolidated Financial Statements

 

December 31, 2015

 

4. PREPAID EXPENSES AND OTHER CURRENT ASSETS

 

Prepaid expenses and other current assets total $666,267 and $259,056, at December 31, 2015 and December 31, 2014, respectively, and consist mainly of prepaid consulting agreement with D3M Licensing Group, advertising, prepaid insurance, prepaid slotting fees, deposits on purchases, and customer deposits.

 

5. PROPERTY AND EQUIPMENT

 

Property and equipment consist of the following at:

 

    December 31,     December 31,  
    2015     2014  
Furniture and equipment   $ 264,495     $ 254,083  
Less: accumulated depreciation     (243,176 )     (210,133 )
Total   $ 21,319     $ 43,950  

 

Depreciation expense amounted to $33,043 and $37,256 during year ended December 31, 2015 and 2014, respectively

 

6. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

 

Accounts payable and accrued expenses consist of the following at:

 

    December 31,     December 31,  
    2015     2014  
Accounts payable   $ 1,207,353     $ 360,062  
Accrued expenses     598,578       467,987  
Total   $ 1,805,931     $ 828,049  

 

F- 14  

 

 

Celsius Holdings, Inc. and Subsidiaries

 

Notes to Consolidated Financial Statements

 

December 31, 2015

 

7. DEFERRED REVENUE AND OTHER CURRENT LIABILITIES

 

Deferred revenue and other current liabilities consist of the following at:

 

    December 31,     December 31,  
    2015     2014  
Customer deposits   $ 13,063     $ 351,716  
State bottle bill liability     11,994       4,886  
Total   $ 25,057     $ 356,602  

 

8. LINE OF CREDIT NOTE PAYABLE - RELATED PARTIES

 

Line of credit note payable - related parties consists of the following as of:

 

    December 31,     December 31,  
Note Payable – line of credit   2015     2014  
In July 2010, the Company entered into a line of credit note payable with a related party which carries interest of five percent per annum. The Company can borrow up to $4,500,000. The Company has pledged all of its assets as security for the line of credit. The notes mature in January 2020, at which time the principal amount is due. During April 2015, the Company issued $4,000,000 of convertible series D preferred series in exchange for cancellation of $4,000,000 of this line.                
Long-term portion   $ 4,500,000     $ 9,250,000  

 

9. CONVERTIBLE NOTE PAYABLE - RELATED PARTIES

 

Convertible note payable   December 31,     December 31,  
    2015     2014  
Convertible note payable, related party   $ 0     $ 1,500,000  

 

In September 2009, the Company entered into a convertible note payable with a related party, a majority shareholder which carries interest at six percent per annum. The outstanding balance is convertible into the Company’s common stock at a conversion price of $0.30 per share. The Company is obligated to file a registration statement upon written notice from the creditor and such registration statement must be effective within 180 days of the date of notice. If after the 180 days the Company has not complied with the agreement it shall pay $65,000 per month in penalty, until the registration statement is effective.

 

F- 15  

 

 

Celsius Holdings, Inc. and Subsidiaries

 

Notes to Consolidated Financial Statements

 

December 31, 2015

 

9. CONVERTIBLE NOTE PAYABLE - RELATED PARTIES (CONTINUED)

 

The note matures in December 2016, at which time the principal amount is due. In April 2015, the note holder converted the outstanding portion of $1,500,000, into shares of common stock in accordance with the conversion terms of the agreement. The creditor also terminated all registration rights and waived any penalties that might have been incurred in connection therewith. The outstanding balance on the loan as of December 31, 2015 and December 31, 2014 was $0 and $1,500,000, respectively.

 

10. PREFERRED STOCK – RELATED PARTY

 

On August 26, 2013, the Company entered into a securities purchase agreement (the “2013 Purchase Agreement”) with CDS Ventures of South Florida, LLC (“CDS”) and CD Financial, LLC (“CD”). CDS and CD are limited liability companies which are affiliates of Carl DeSantis, the Company’s principal shareholder. The Company issued 2,200 shares of its Series C Preferred Stock (the “Preferred C Shares”) in exchange for the conversion of a $550,000 short term loan from CDS and the conversion of $1,650,000 in indebtedness under the Company’s line of credit with CD (the “CD Line of Credit”). The Preferred C Shares can be converted into Company common stock at any time until December 31, 2018 at a conversion price of $0.52 per share. The conversion price per share is based on the weighted average of the ten daily VWAPs for the 10 trading days immediately preceding the closing date of August 26, 2013. The Preferred C Shares accrue a 6% annual cumulative dividend, payable in additional Preferred C Shares. The Preferred C Shares are mandatorily redeemable on December 31, 2018 and are redeemable only in shares of the Company’s common stock. In April 2015, the Company issued 180 Preferred C Shares valued at $180,000 in settlement of $180,000 in accrued preferred C dividends. As of December 31, 2015, $139,736 of dividends has been accrued. The Preferred C Shares mature on December 31, 2018 and are redeemable only in exchange for shares of Company common stock.

 

On April 16, 2015, the Company entered into an amendment to its existing Loan and Security Agreement (the “Amendment”) with CD an affiliate of CDS Ventures and Mr. DeSantis. Pursuant to the Amendment, the outstanding principal amount of the CD Line of Credit was reduced by $4.0 million, which amount was converted into 4,000 shares of a newly-designated Series D Preferred Stock (the “Preferred D Shares”). This related party was given a conversion price of $0.86 per common share, whereas other investors purchased common shares at $0.89 in the private placement, as discussed in note 12. The difference of $0.03 per share, which resulted in $139,535, was recorded as a dividend in accordance with ASC 470-20-35, subsequent measurement for debt with conversion and other options. The Preferred D Shares can be converted into Company common stock at any time until the expiration date of the line of credit in 2020 or its earlier satisfaction in full, at a conversion price of $0.86 per share. The Preferred D Shares accrue a 5% annual cumulative cash dividend, payable quarterly and accords the holders thereof voting rights on an “as converted” basis. As of December 31, 2015, $51,111 of dividends has been accrued regarding these shares.

 

F- 16  

 

 

Celsius Holdings, Inc. and Subsidiaries

 

Notes to Consolidated Financial Statements

 

December 31, 2015

 

11. RELATED PARTY TRANSACTIONS

 

The Company’s office is rented from a company affiliated with CD which is controlled by our majority shareholder Carl DeSantis. Currently, the lease expires on October 2020 with monthly rent of $6,408. The rental fee is commensurate with other properties available in the market.

 

In April 2015, the Company entered into a strategic marketing and advisory services agreement with All Def Digital. Tim Leissner, a director and shareholder of the Company is also a director and shareholder in All Def Digital. As of December 31, 2015, the Company has paid All Def Digital $237,959, for services relating to the strategic marketing and advisory services agreement.

 

Other related party transactions are discussed in notes 8, 9, and 10,

 

12. STOCKHOLDERS’ EQUITY (DEFICIT)

 

Issuance of common stock pursuant to services performed

 

During 2014, the Company issued a total of 280,000 unregistered shares as compensation in connection with celebrity endorsement agreements at an aggregate fair value of $216,100, 250,000 shares were issued at $0.79 per share on March 11 th , 2014 and 30,000 shares were issued at $0.62 per share on August 13 th , 2014, with each per share valuation representing the closing stock price on the day of issuance.

 

Issuance of common stock pursuant to conversion of note

 

In April 2015, the Company issued 5,000,000 unregistered common shares upon conversion of $1,500,000 of convertible notes, at contractual terms.

 

Issuance of common stock pursuant to private placement

 

In April 2015, the Company issued a total of 12,921,348 shares of common stock at $0.89 per share for gross proceeds of $11.5 million (see note 10). Expenses incurred of $111,841 were charged to additional paid in capital and the Company received net proceeds of $11,388,159.

 

Issuance of preferred stock pursuant to private placement

 

Refer to note 10 for discussion on preferred stock issuances.

 

13. INCOME TAXES

 

Due to recurring losses for book and tax purposes, for the years ended December 31, 2015 and 2014, the Company’s net tax provision was zero.

 

F- 17  

 

 

Celsius Holdings, Inc. and Subsidiaries

 

Notes to Consolidated Financial Statements

 

December 31, 2015

 

13. INCOME TAXES (CONTINUED)

 

The difference between the effective income tax rate and the applicable statutory federal income tax rate is summarized as follows:

 

    2015     2014  
Statutory federal rate     (35.0 )%     (35.0 )%
State income tax rate, net of federal benefit     (3.5 )%     (3.5 )%
Permanent differences, including stock based compensation     25.3 %     18.5 %
Change in valuation allowance     13.5 %     20.0 %
Effective tax rate     0.0 %     0.0 %

 

At December 31, 2015 and 2014, the Company’s deferred tax assets were as follows:

 

Deferred Tax Assets   2015     2014  
             
Net operating loss carry forwards     16,029,000       16,303,000  
Less: Valuation allowance net deferred tax assets     (16,029,000 )     (16,303,000 )
Net deferred tax assets     0.0       0.0  

 

Due to taxable income before net operating loss carryforwards during tax year ending in 2015, the valuation allowance decreased by approximately $274,000 in 2015. Total net operating loss carry forwards at December 31, 2015 were approximately $41.6 million. The losses, if unused, expire through 2035.The Company’s net operating loss carry forwards may be limited due to ownership changes pursuant to Internal Revenue Code section 382.

 

14. STOCK-BASED COMPENSATION

 

The Company adopted an Incentive Stock Plan on January 18, 2007. This plan is intended to provide incentives which will attract and retain highly competent persons at all levels as employees of the Company, as well as independent contractors providing consulting or advisory services to the Company, by providing them opportunities to acquire the Company's common stock or to receive monetary payments based on the value of such shares pursuant to Awards issued. While the plan terminates 10 years after the adoption date, issued options have their own schedule of termination. During 2013 the majority of the shareholders approved to increase the total available shares in the plan from 2.5 million to 3.5 million shares of common stock. During May 2014, the majority of the shareholders approved to increase the total available shares in the plan from 3.5 million to 4.25 million shares of common stock, during February 2015, the majority of the shareholders approved to increase the total available shares in the plan from 4.25 million to 4.6 million shares of common stock and during April 2015, the majority of the shareholders approved to increase the total available shares in the plan from 4.6 million to 5.1 million shares of common stock. Until 2017, options to acquire shares of common stock may be granted at no less than fair market value on the date of grant. Upon exercise, shares of new common stock are issued by the Company.

 

F- 18  

 

 

Celsius Holdings, Inc. and Subsidiaries

 

Notes to Consolidated Financial Statements

 

December 31, 2015

 

14. STOCK-BASED COMPENSATION (CONTINUED)

 

The Company adopted the 2015 Stock Incentive Plan on April 30, 2015. This plan is intended to provide incentives which will attract and retain highly competent persons at all levels as employees of the Company, as well as independent contractors providing consulting or advisory services to the Company, by providing them opportunities to acquire the Company's common stock or to receive monetary payments based on the value of such shares pursuant to Awards issued. The 2015 Plan permits the grant of options and shares for up to 5,000,000 shares. In addition, there is a provision for an annual increase of 15% to the shares included under the plan, with the shares to be added on the first day of each calendar year, beginning on January 1, 2016.

 

Cumulatively since inception, the Company has issued options to purchase approximately 4.6 million shares at an average price of $0.81 with a fair value of $5.3 million. For the year 2015 and 2014, the Company issued options to purchase 1.3 million and 1.4 million shares. For the year ended December 31, 2015 and 2014, the Company recognized an expense of $1,270,488 and $686,927, respectively, of non-cash compensation expense (included in General and Administrative expense in the accompanying Consolidated Statement of Operations) determined by application of a Black Scholes option pricing model with the following inputs: exercise price, dividend yields, risk-free interest rate, and expected annual volatility. As of December 31, 2015, the Company had approximately $742,000 of unrecognized pre-tax non-cash compensation expense, which the Company expects to recognize, based on a weighted-average period of 0.5 years. The Company used straight-line amortization of compensation expense over the two to three year requisite service or vesting period of the grant. There are options to purchase approximately 4.3 million shares that have vested, of which 267,000 shares were exercised as of December 31, 2015.

 

The Company uses the Black-Scholes option-pricing model to estimate the fair value of its stock option awards and warrant issuances. The calculation of the fair value of the awards using the Black - Scholes option-pricing model is affected by the Company’s stock price on the date of grant as well as assumptions regarding the following:

 

    Year ended December 31,
    2015   2014
Expected volatility   306%   172% - 328%
Expected term   4 Years   3 - 5 Years
Risk-free interest rate   0.89%   0.91% - 1.69%
Forfeiture Rate   0.00%   0.00%
Expected dividend yield   0.00%   0.00%

 

F- 19  

 

 

Celsius Holdings, Inc. and Subsidiaries

 

Notes to Consolidated Financial Statements

 

December 31, 2015

 

14. STOCK-BASED COMPENSATION (CONTINUED)

 

The expected volatility was determined with reference to the historical volatility of the Company’s stock. The Company uses historical data to estimate option exercise and employee termination within the valuation model. The expected term of options granted represents the period of time that options granted are expected to be outstanding. The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury rate in effect at the time of grant.

 

A summary of the status of the Company’s outstanding stock options as of December 31, 2015 and changes during the period ending on that date is as follows:

 

                            Weighted  
          Weighted Average     Aggregate     Average  
          Exercise     Fair     Intrinsic     Remaining  
    Shares     Price     Value     Value     Term (Yrs)  
Options                                        
At December 31, 2013     2,374     $ 0.44     $ 0.33     $ 366       8.5  
Granted     1,417       0.78       0.56                  
Exercised                                        
Forfeiture and cancelled     (295 )     0.42       0.38                  
At December 31, 2014     3,496     $ 0.49     $ 0.41     $ 588       6.5  
Granted     1,306       1.61       0.33                  
Exercised                                        
Forfeiture and cancelled     (168 )     0.52       0.38                  
At December 31, 2015     4,634     $ 0.81     $ 0.41     $ 5,300       5.49  
                                         
Exercisable at December 31, 2015     4,056     $ 0.73     $ 1.21     $ 477       6.1  

 

The following table summarizes information about employee stock options outstanding at December 31, 2015:

 

    Outstanding Options     Vested Options  
    Number                 Number              
    Outstanding     Weighted     Weighted     Exercisable     Weighted     Weighted  
Range of   at     Averaged     Averaged     at     Averaged     Averaged  
Exercise   December 31,     Remaining     Exercise     December 31,     Exercise     Remaining  
Price   2015 (000's)     Life     Price     2015 (000's)     Price     Life  
$0.20 - $0.42     2,522       5.90     $ 0.26       2,495     $ 0.26       5.96  
$0.53 - $1.42     1,431       5.37     $ 0.87       1,009     $ 0.80       7.61  
$1.80 - $3.80     637       4.30     $ 2.29       509     $ 2.26       5.39  
$4.25 - $9.40     30       3.89     $ 5.57       30       5.57       3.89  
$10.80 - $22.00     14       2.78     $ 14.87       14     $ 14.87       2.78  
Outstanding options     4,634       5.49     $ 0.81       2,707     $ 0.55       6.28  

 

F- 20  

 

 

Celsius Holdings, Inc. and Subsidiaries

 

Notes to Consolidated Financial Statements

 

December 31, 2015

 

15. COMMITMENTS AND CONTINGENCIES

 

The Company has entered into distribution agreements with liquidated damages in case the Company cancels the distribution agreements without cause. Cause has been defined in various ways. It is management’s belief that no such agreement has created any liability as of December 31, 2015.

 

The Company entered into an office lease with a related party (see note 11) effective October 2015. The monthly rent amounts to $6,408 per month and the lease terminates in October 2020. Future annual minimum payments required under operating lease obligations at December 31, 2015 are as follows:

 

Future Minimum Lease Payments

 

2016   $ 77,803  
2017   $ 82,792  
2018   $ 85,276  
2019   $ 87,834  
2020   $ 75,016  
Total   $ 408,721  

 

16. SUBSEQUENT EVENTS

 

We have evaluated events and transactions that occurred subsequent to December 31, 2015 through March 24, 2016, the date these financial statements were issued, for potential recognition or disclosure in the accompanying financial statements. We did not identify any events or transactions that should be recognized or disclosed in the accompanying financial statements.

 

F- 21  

 

 

Celsius Holdings, Inc. and Subsidiaries

Consolidated Balance Sheets

 

    March 31,
2016 (Unaudited)
    December 31,
2015 (1)
 
ASSETS                
                 
Current assets:                
Cash   $ 9,234,675     $ 10,128,320  
Accounts receivable, net     1,698,357       2,127,060  
Inventories, net     2,553,672       2,322,904  
Prepaid expenses and other current assets     993,135       666,267  
Total current assets     14,479,839       15,244,551  
                 
Property and equipment, net     24,333       21,319  
Total Assets   $ 14,504,172     $ 15,265,870  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY                
                 
Current liabilities:                
Accounts payable and accrued expenses   $ 1,842,161     $ 1,805,931  
Accrued preferred dividend     226,389       190,847  
Deferred revenue and other current liabilities     224,081       25,057  
Total current liabilities     2,292,631       2,021,835  
                 
Long-term liabilities:                
Line of credit note payable-related party     4,500,000       4,500,000  
Total Liabilities     6,792,631       6,521,835  
                 
Stockholders’ Equity:                
Preferred Stock, $0.001 par value; 2,500,000 shares authorized, 6,380 and 6,380 shares issued and outstanding at March 31, 2016 and December 31, 2015     6       6  
Common stock, $0.001 par value; 75,000,000 shares authorized, 38,380,380 shares issued and outstanding at March 31, 2016 and December 31, 2015     38,380       38,380  
Additional paid-in capital     58,880,927       58,626,212  
Accumulated deficit     (51,207,772 )     (49,920,563 )
Total Stockholders’ Equity     7,711,541       8,744,035  
Total Liabilities and Stockholders’ Equity   $ 14,504,172     $ 15,265,870  

 

(1) Derived from Audited Financial Statements

 

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

 

F- 22  

 

 

Celsius Holdings, Inc. and Subsidiaries

Consolidated Statements of Operations

(Unaudited)

 

    For the three months  
    ended March 31,  
    2016     2015  
Revenue   $ 3,678,606     $ 4,649,026  
Cost of revenue     2,158,742       2,810,425  
Gross profit     1,519,864       1,838,601  
                 
Selling and marketing expenses     1,788,268       898,490  
General and administrative expenses     875,278       562,235  
Total operating expense     2,663,546       1,460,725  
                 
Income (Loss) from operations     (1,143,682 )     377,876  
                 
Other Income (Expense):                
Interest expense     (56,875 )     (132,169 )
Total Other Income (Expense)     (56,875 )     (132,169 )
                 
Net Income (Loss)     (1,200,557 )     245,707  
                 
Preferred stock dividend     (86,652 )     (33,001 )
Net Income (Loss) available to common stockholders   $ (1,287,209 )   $ 212,706  
                 
Income (Loss) per share:                
Basic   $ (0.03 )   $ 0.01  
Diluted   $ (0.03 )   $ 0.01  
Weighted average shares outstanding:                
Basic     38,380,380       20,459,032  
Diluted     38,380,380       31,569,411  

 

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

 

F- 23  

 

 

Celsius Holdings, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

 

    For the three months ended  
    March 31,
2016
    March 31,
2015
 
Cash flows from operating activities:                
Net Income (Loss) available to common stockholders   $ (1,287,209 )   $ 212,706  
Adjustments to reconcile net income (loss) to net cash used in operating activities:                
Depreciation and amortization     3,394       9,118  
Stock-based compensation expense     254,715       172,274  
Changes in operating assets and liabilities:                
Accounts receivable, net     428,703       204,788  
Inventory     (230,768 )     236,735  
Prepaid expenses and other current assets     (326,868 )     (562,979 )
Accounts payable and accrued expenses     71,772       456,394  
Deferred revenue and other current liabilities     199,024       72,204  
Net cash provided by (used in) in operating activities     (887,237 )     801,240  
                 
Cash flows from investing activities:                
Purchase of property and equipment     (6,408 )     -  
                 
Net cash (used in) investing activities     (6,408 )     -  
                 
Cash flows from financing activities:                
Repayment on short term notes payable, related-party     -       (900,000 )
Payments on short term notes payable     -       (17,316 )
Net cash (used in) financing activities     -       (917,316 )
                 
Net decrease in cash and cash equivalents     (893,645 )     (116,076 )
                 
Cash at beginning of the period     10,128,320       349,072  
                 
Cash at end of the period   $ 9,234,675     $ 232,996  
Supplemental disclosures:                
Cash paid during period for:                
Interest   $ 56,875     $ 132,169  
Income Taxes   $ -     $ -  
Non-cash investing and financing activities:                
Borrowing under short term notes payable for prepaid expense   $ -     $ 91,099  
Accrued preferred dividends   $ 86,652     $ 33,001  

 

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

 

F- 24  

 

 

Celsius Holdings, Inc. and Subsidiaries

 

Notes to Consolidated Financial Statements (unaudited)

 

March 31, 2016

 

1. ORGANIZATION AND DESCRIPTION OF BUSINESS

 

Business —Celsius Holdings, Inc. (the “Company” or “Celsius Holdings”) was incorporated under the laws of the State of Nevada on April 26, 2005. On January 24, 2007, the Company entered into a merger agreement and plan of reorganization with Elite FX, Inc., a Florida corporation. Under the terms of the Merger Agreement, Elite FX, Inc. was merged into the Company’s subsidiary, Celsius, Inc. and became a wholly-owned subsidiary of the Company on January 26, 2007. In addition, on March 28, 2007 the Company established Celsius Netshipments, Inc. a Florida corporation as a wholly-owned subsidiary of the Company.

 

Since the merger, the Company is engaged in the development, marketing, sale and distribution of “functional” calorie-burning fitness beverages under the Celsius® brand name.

 

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”).

 

Consolidation Policy — The accompanying consolidated financial statements include the accounts of Celsius Holdings, Inc. and its subsidiaries. All material inter-company balances and transactions have been eliminated in consolidation.

 

Significant Estimates — The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses and disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates. Significant estimates include the allowance for doubtful accounts, reserves for inventory obsolescence, the useful lives and values of property and equipment, valuation of stock based compensation, and deferred tax asset valuation allowance.

 

Concentrations of Risk — Substantially all of the Company’s revenue derives from the sale of Celsius ® beverages.

 

The Company uses single supplier relationships for its raw materials purchases and filling capacity, which potentially subjects the Company to a concentration of business risk. If these suppliers had operational problems or ceased making product available to the Company, operations could be adversely affected.

 

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and accounts receivable. The Company places its cash with high-quality financial institutions. At times, balances in the Company’s cash accounts may exceed the Federal Deposit Insurance Corporation limit. At March 31, 2016 the Company had approximately $9.0 million in excess of the Federal Deposit Insurance Corporation limit but has incurred no losses with respect to there accounts.

 

F- 25  

 

 

Celsius Holdings, Inc. and Subsidiaries

 

Notes to Consolidated Financial Statements (unaudited)

 

March 31, 2016

 

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

At March 31, 2016 and 2015, the Company had the following 10 percent or greater concentrations of revenue with its customers:

 

    2016     2015  
A*     27.2 %     67.5 %
B     11.5 %     1.0 %
All other     61.3 %     31.5 %
Total     100.0 %     100.0 %

 

At March 31, 2015 and December 31, 2015, the Company had the following 10 percent or greater concentrations of accounts receivable with its customers:

 

    2016     2015  
A*     31.0 %     50.0 %
B     11.2 %     11.8 %
All other     57.8 %     38.2 %
Total     100.0 %     100.0 %

 

*Revenues and receivables from customer A are derived from a distributor located in Sweden.

 

Cash Equivalents — The Company considers all highly liquid instruments with maturities of three months or less when purchased to be cash equivalents. At March 31, 2016 and December 31, 2015, the Company did not have any investments with maturities of three months or less.

 

Accounts Receivable — Accounts receivable are reported at net realizable value. The Company establishes an allowance for doubtful accounts based upon factors pertaining to the credit risk of specific customers, historical trends, and other information. Delinquent accounts are written-off when it is determined that the amounts are uncollectible. At March 31, 2016 and December 31, 2015, there was an allowance for doubtful accounts of $3,500.

 

F- 26  

 

 

Celsius Holdings, Inc. and Subsidiaries

 

Notes to Consolidated Financial Statements (unaudited)

 

March 31, 2016

 

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Inventories — Inventories include only the purchase cost and are stated at the lower of cost or market. Cost is determined using the FIFO method. Inventories consist of raw materials and finished products. The Company reserved against inventory during the period in which such materials and products are no longer usable or marketable. In March 31, 2016 and December 31, 2015, the Company recorded a reserve of $350,757 and $329,075, respectively. The changes in reserve are included in cost of revenue. Free Samples are also recorded as cost of revenue.

 

Property and Equipment — Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation of property and equipment is calculated using the straight-line method over the estimated useful life of the asset generally ranging from three to seven years.

 

Impairment of Long-Lived Assets — In accordance with ASC Topic 360, “Property, Plant, and Equipment” the Company reviews the carrying value of long-lived assets for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets is measured by comparison of its carrying amount to the undiscounted cash flows that the asset or asset group is expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the property, if any, exceeds its fair value.

 

Revenue Recognition — Revenue is derived from the sale of beverages. Revenue is recognized when persuasive evidence of an agreement exists, the products are delivered, sales price is fixed or determinable, and collectability is reasonably assured. Any discounts, slotting fees, sales incentives or similar arrangements with the customer are estimated at time of sale and deducted from revenue.

 

Deferred Revenue — From time to time the Company requires prepayments for deposits in advance of delivery of products and/or production runs. Such amounts are initially recorded as deferred revenue. The Company recognizes such revenue as it is earned in accordance with revenue recognition policies.

 

Advertising Costs — Advertising costs are expensed as incurred. The Company uses mainly radio, local sampling events, sponsorships, endorsements, and digital advertising. The Company incurred advertising expense of approximately $0.9 million and $0.4 million during the three months ending March 31, 2016 and 2015, respectively.

 

Research and Development — Research and development costs are charged to operations as incurred and consist primarily of consulting fees, raw material usage and test productions of beverages. The Company incurred there expenses of $11,910 and $359 during the three months ending March 31, 2016 and 2015, respectively.

 

Fair Value of Financial Instruments — The carrying value of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, and notes payable approximates fair value due to their relative short-term maturity and market interest rates.

 

F- 27  

 

 

Celsius Holdings, Inc. and Subsidiaries

 

Notes to Consolidated Financial Statements (unaudited)

 

March 31, 2016

 

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Fair Value Measurements - ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:

 

Level 1: Observable inputs such as quoted market prices in active markets for identical assets or liabilities.
   
Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.
   
Level 3: Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions.

 

The Company did not have any assets or liabilities measured at fair value at March 31, 2016 and December 31, 2015.

 

Income Taxes — The Company accounts for income taxes pursuant to the provisions of ASC 740-10, “Accounting for Income Taxes,” which requires, among other things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. A valuation allowance is provided to offset any net deferred tax assets for which management believes it is more likely than not that the net deferred asset will not be realized. The Company follows the provisions of the ASC 740 -10 related to, Accounting for Uncertain Income Tax Positions. When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any.

 

F- 28  

 

 

Celsius Holdings, Inc. and Subsidiaries

 

Notes to Consolidated Financial Statements (unaudited)

 

March 31, 2016

 

3. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Income Taxes (continued) — Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for uncertain tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination. The Company believes its tax positions are all highly certain of being upheld upon examination. As such, the Company has not recorded a liability for uncertain tax benefits.

 

The Company has adopted ASC 740-10-25 Definition of Settlement, which provides guidance on how an entity should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits and provides that a tax position can be effectively settled upon the completion of an examination by a taxing authority without being legally extinguished. For tax positions considered effectively settled, an entity would recognize the full amount of tax benefit, even if the tax position is not considered more likely than not to be sustained based solely on the basis of its technical merits and the statute of limitations remains open.

 

The Company files its tax returns on a fiscal year September 30 th tax year. The Company’s tax returns for tax years ended September 30, 2015, 2014, 2013 and 2012 remain subject to potential examination by the taxing authorities.

 

Earnings per Share — Basic earnings per share are calculated by dividing net income (loss) available to common stockholders by the weighted-average number of common shares outstanding during each period. Diluted earnings per share are computed using the weighted average number of common and dilutive common share equivalents outstanding during the period. Dilutive common share equivalents consist of shares issuable upon conversion of convertible debt, exercise of stock options and warrants (calculated using the reverse treasury stock method). As of March 31, 2016 there were options outstanding to purchase 5.6 million shares, which exercise price averaged $1.00, Series C Preferred Stock warrants outstanding to convert to 4.6 million common shares at $0.52 price per share and Series D Preferred Stock warrants outstanding to convert to 4.7 million common shares at $0.86 price per share. There were no other dilutive common shares equivalents, including convertible notes and warrants, as no common share equivalents had an exercise price below the ending closing price of the year. The effects of dilutive instruments have not been presented for the three months ended March 31, 2016, as the effects would be anti-dilutive.

 

F- 29  

 

 

Celsius Holdings, Inc. and Subsidiaries

 

Notes to Consolidated Financial Statements (unaudited)

 

March 31, 2016

 

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Share-Based Payments —Effective January 1, 2006, the Company has fully adopted the provisions of ASC Topic 718 “Compensation — Stock Compensation” and related interpretations. As such, compensation cost is measured on the date of grant at the fair value of the share-based payments. Such compensation amounts, if any, are amortized over the respective vesting periods of the grants. On April 30, 2015, the Company adopted the 2015 Stock Incentive Plan, This plan is intended to provide incentives which will attract and retain highly competent persons at all levels as employees of the Company, as well as independent contractors providing consulting or advisory services to the Company, by providing them opportunities to acquire the Company's common stock or to receive monetary payments based on the value of such shares pursuant to Awards issued. The 2015 Plan permits the grant of options and shares for up to 5,147,000 shares. In addition, there is a provision for an annual increase of 15% of the issued shares under the plan to the shares included under the plan, with the shares to be added on the first day of each calendar year, beginning on January 1, 2016. On January 1 st , 2016, the permitted number of available option grants increased 147,000 (see also note 12).

 

Shipping and Handling Costs — Shipping and handling costs for freight expense on goods shipped are included in cost of sales. Freight expense on goods shipped for three months ended March 31, 2016 and 2015 was $408,488 and $225,130, respectively.

 

Recent Accounting Pronouncements

 

The Company adopts all applicable, new accounting pronouncements as of the specified effective dates.

 

In September 2015, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2015-16, Simplifying the Accounting for Measurement-Period Adjustments (“ASU 2015-16”). ASU 2015-16 simplifies the accounting for adjustments made to provisional amounts recognized in a business combination by requiring the acquirer to (i) recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amount is determined, (ii) record, in the same period, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date, and (iii) present separately or disclose the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. ASU 2015-16 is effective for fiscal years, and interim periods within, beginning after December 15, 2015. Early adoption is permitted. The Company is evaluating the impact of the adoption of ASU 2015-16 on January 1, 2016 to its consolidated financial position or results of operations.

 

F- 30  

 

 

Celsius Holdings, Inc. and Subsidiaries

 

Notes to Consolidated Financial Statements (unaudited)

 

March 31, 2016

 

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Recent Accounting Pronouncements (continued)

 

In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”). ASU 2015-03 simplifies the presentation of debt issuance costs and requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability (consistent with debt discounts).

 

In August 2015, the FASB issued ASU No. 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements (Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting) (“ASU 2015-15”). ASU 2015-15 allows debt issuance costs related to line-of-credit agreements to be presented in the balance sheet as an asset. ASU 2015-03 and ASU 2015-15 are effective for fiscal years, and interim periods within, beginning after December 15, 2015. Early adoption is permitted. The Company has adopted ASU 2015-03 and ASU 2015-15 as of December 31, 2015; the adoption is not expected to have a material impact on its consolidated financial position or results of operations.

 

All new accounting pronouncements issued but not yet effective are not expected to have a material impact on our results of operations, cash flows or financial position.

 

Liquidity — These financial statements have been prepared assuming the Company will be able to continue as a going concern. At March 31, 2016, the Company had an accumulated deficit of $51,207,772 which includes a net loss available to common stockholders of $1,287,209 for the three months ended March 31, 2016. While these factors alone may raise doubt as to the Company’s ability to continue as a going concern, the proceeds remaining from the Company’s sale of common stock to an investor group on April 20, 2015 for a total of $11.5 million (see note 11) is deemed sufficient to alleviate substantial doubt regarding the Company’s ability to continue as a going concern.

 

3. INVENTORIES

 

Inventories consist of the following at:

 

    March 31,     December 31,  
    2016     2015  
Finished goods   $ 2,334,962     $ 2,309,288  
Raw Materials     569,467       342,691  
Less: Inventory Reserve     (350,757 )     (329,075 )
Inventories, net   $ 2,553,672     $ 2,322,904  

 

F- 31  

 

 

Celsius Holdings, Inc. and Subsidiaries

 

Notes to Consolidated Financial Statements (unaudited)

 

March 31, 2016

 

4. PREPAID EXPENSES AND OTHER CURRENT ASSETS

 

Prepaid expenses and other current assets total $993,135 and $666,267, at March 31, 2016 and December 31, 2015, respectively, and consist mainly of prepaid consulting agreement with D3M Licensing Group, advertising, prepaid insurance, prepaid slotting fees, deposits on purchases, and customer deposits.

 

5. PROPERTY AND EQUIPMENT

 

Property and equipment consist of the following at:

 

    March 31,     December 31,  
    2016     2015  
Furniture and equipment   $ 270,903     $ 264,495  
Less: accumulated depreciation     (246,570 )     (243,176 )
Total   $ 24,333     $ 21,319  

 

Depreciation expense amounted to $3,394 and $9,118 during the three months ended March 31, 2016 and 2015, respectively

 

6. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

 

Accounts payable and accrued expenses consist of the following at:

 

    March 31,     December 31,  
    2016     2015  
Accounts payable   $ 1,253,192     $ 1,207,353  
Accrued expenses     588,969       598,578  
Total   $ 1,842,161     $ 1,805,931  

 

F- 32  

 

 

Celsius Holdings, Inc. and Subsidiaries

 

Notes to Consolidated Financial Statements (unaudited)

 

March 31, 2016

 

7. DEFERRED REVENUE AND OTHER CURRENT LIABILITIES

 

Deferred revenue and other current liabilities consist of the following at:

 

    March 31,     December 31,  
    2016     2015  
Customer deposits   $ 220,542     $ 13,063  
State bottle bill liability     3,539       11,994  
Total   $ 224,081     $ 25,057  

 

8. LINE OF CREDIT NOTE PAYABLE - RELATED PARTIES

 

Line of credit note payable - related parties consists of the following as of:

 

    March 31,     December 31,  
Note Payable – line of credit   2016     2015  
In July 2010, the Company entered into a line of credit note payable with a related party which carries interest of five percent per annum. The Company can borrow up to $4,500,000. The Company has pledged all of its assets as security for the line of credit. The notes mature in January 2020, at which time the principal amount is due. During April 2015, the Company issued $4,000,000 of convertible series D preferred series in exchange for cancellation of $4,000,000 of this line.                
Long-term portion   $ 4,500,000     $ 4,500,000  

 

F- 33  

 

 

Celsius Holdings, Inc. and Subsidiaries

 

Notes to Consolidated Financial Statements (unaudited)

 

March 31, 2016

 

9. PREFERRED STOCK – RELATED PARTY

 

On August 26, 2013, the Company entered into a securities purchase agreement (the “2013 Purchase Agreement”) with CDS Ventures of South Florida, LLC (“CDS”) and CD Financial, LLC (“CD”). CDS and CD are limited liability companies which are affiliates of Carl DeSantis, the Company’s principal shareholder. The Company issued 2,200 shares of its Series C Preferred Stock (the “Preferred C Shares”) in exchange for the conversion of a $550,000 short term loan from CDS and the conversion of $1,650,000 in indebtedness under the Company’s line of credit with CD (the “CD Line of Credit”). The Preferred C Shares can be converted into Company common stock at any time until December 31, 2018 at a conversion price of $0.52 per share. The conversion price per share is based on the weighted average of the ten daily VWAPs for the 10 trading days immediately preceding the closing date of August 26, 2013. The Preferred C Shares accrue a 6% annual cumulative dividend, payable in additional Preferred C Shares. The Preferred C Shares are mandatorily redeemable on December 31, 2018 and are redeemable only in shares of the Company’s common stock. In April 2015, the Company issued 180 Preferred C Shares valued at $180,000 in settlement of $180,000 in accrued preferred C dividends. As of March 31, 2016, $175,833 of dividends has been accrued. The Preferred C Shares mature on December 31, 2018 and are redeemable only in exchange for shares of Company common stock.

 

On April 16, 2015, the Company entered into an amendment to its existing Loan and Security Agreement (the “Amendment”) with CD an affiliate of CDS Ventures and Mr. DeSantis. Pursuant to the Amendment, the outstanding principal amount of the CD Line of Credit was reduced by $4.0 million, which amount was converted into 4,000 shares of a newly-designated Series D Preferred Stock (the “Preferred D Shares”). This related party was given a conversion price of $0.86 per common share, whereas other investors purchased common shares at $0.89 in the private placement, as discussed in note 12. The difference of $0.03 per share, which resulted in $139,535, was recorded as a dividend in accordance with ASC 470-20-35, subsequent measurement for debt with conversion and other options. The Preferred D Shares can be converted into Company common stock at any time until the expiration date of the line of credit in 2020 or its earlier satisfaction in full, at a conversion price of $0.86 per share. The Preferred D Shares accrue a 5% annual cumulative cash dividend, payable quarterly and accords the holders thereof voting rights on an “as converted” basis. As of March 31, 2016, $50,556 of dividends has been accrued regarding these shares.

 

F- 34  

 

 

Celsius Holdings, Inc. and Subsidiaries

 

Notes to Consolidated Financial Statements (unaudited)

 

March 31, 2016

 

10. RELATED PARTY TRANSACTIONS

 

The Company’s office is rented from a company affiliated with CD which is controlled by our majority shareholder Carl DeSantis (see note 13). Currently, the lease expires on October 2020 with monthly rent of $6,408. The rental fee is commensurate with other properties available in the market.

 

In April 2015, the Company entered into a strategic marketing and advisory services agreement with All Def Digital. Tim Leissner, a director and shareholder of the Company is also a director and shareholder in All Def Digital. For the three months ending as of March 31, 2016, the Company has paid All Def Digital $82,438, for services relating to the strategic marketing and advisory services agreement.

 

Other related party transactions are discussed in notes 8 and 9.

 

11. STOCKHOLDERS’ EQUITY (DEFICIT)

 

Issuance of common stock pursuant to conversion of note

 

In April 2015, the Company issued 5,000,000 unregistered common shares upon conversion of $1,500,000 of convertible notes, at contractual terms.

 

Issuance of common stock pursuant to private placement

 

In April 2015, the Company issued a total of 12,921,348 shares of common stock at $0.89 per share for gross proceeds of $11.5 million (see note 2). Expenses incurred of $111,841 were charged to additional paid in capital and the Company received net proceeds of $11,388,159.

 

Issuance of preferred stock pursuant to private placement

 

Refer to note 9 for discussion on preferred stock issuances.

 

F- 35  

 

 

Celsius Holdings, Inc. and Subsidiaries

 

Notes to Consolidated Financial Statements (unaudited)

 

March 31, 2016

 

12. STOCK-BASED COMPENSATION

 

The Company adopted an Incentive Stock Plan on January 18, 2007. This plan is intended to provide incentives which will attract and retain highly competent persons at all levels as employees of the Company, as well as independent contractors providing consulting or advisory services to the Company, by providing them opportunities to acquire the Company's common stock or to receive monetary payments based on the value of such shares pursuant to Awards issued. While the plan terminates 10 years after the adoption date, issued options have their own schedule of termination. During 2013 the majority of the shareholders approved to increase the total available shares in the plan from 2.5 million to 3.5 million shares of common stock. During May 2014, the majority of the shareholders approved to increase the total available shares in the plan from 3.5 million to 4.25 million shares of common stock, during February 2015, the majority of the shareholders approved to increase the total available shares in the plan from 4.25 million to 4.6 million shares of common stock and during April 2015, the majority of the shareholders approved to increase the total available shares in the plan from 4.6 million to 5.1 million shares of common stock. Until 2017, options to acquire shares of common stock may be granted at no less than fair market value on the date of grant. Upon exercise, shares of new common stock are issued by the Company.

 

The Company adopted the 2015 Stock Incentive Plan on April 30, 2015. This plan is intended to provide incentives which will attract and retain highly competent persons at all levels as employees of the Company, as well as independent contractors providing consulting or advisory services to the Company, by providing them opportunities to acquire the Company's common stock or to receive monetary payments based on the value of such shares pursuant to Awards issued. The 2015 Plan permits the grant of options and shares for up to 5,147,000 shares. In addition, there is a provision for an annual increase of 15% of the issued shares under the plan to the shares included under the plan, with the shares to be added on the first day of each calendar year, beginning on January 1, 2016. On January 1 st , 2016, the permitted number of available option grants increased 147,000 (see also note 2).

 

Cumulatively since inception, the Company has issued options to purchase approximately 5.6 million shares at an average price of $1.00 with a fair value of $1.1 million. For the three months ended March 31, 2016 and 2015, the Company recognized an expense of $254,715 and $172,274, respectively, of non-cash compensation expense (included in General and Administrative expense in the accompanying Consolidated Statement of Operations) determined by application of a Black Scholes option pricing model with the following inputs: exercise price, dividend yields, risk-free interest rate, and expected annual volatility. As of March 31, 2016, the Company had approximately $2,361,716 of unrecognized pre-tax non-cash compensation expense, which the Company expects to recognize, based on a weighted-average period of 3 years. The Company used straight-line amortization of compensation expense over the two to three year requisite service or vesting period of the grant. There are options to purchase approximately 1.1 million shares that have vested, of which 267,000 shares were exercised as of March 31, 2016.

 

F- 36  

 

 

Celsius Holdings, Inc. and Subsidiaries

 

Notes to Consolidated Financial Statements (unaudited)

 

March 31, 2016

 

12. STOCK-BASED COMPENSATION (CONTINUED)

 

The Company uses the Black-Scholes option-pricing model to estimate the fair value of its stock option awards and warrant issuances. The calculation of the fair value of the awards using the Black - Scholes option-pricing model is affected by the Company’s stock price on the date of grant as well as assumptions regarding the following:

 

    Three months ended March 31,
    2016   2015
Expected volatility   309%   306%
Expected term   4 Years   4 Years
Risk-free interest rate   0.89%   0.91% - 1.69%
Forfeiture Rate   0.00%   0.00%
Expected dividend yield   0.00%   0.00%

 

 

The expected volatility was determined with reference to the historical volatility of the Company’s stock. The Company uses historical data to estimate option exercise and employee termination within the valuation model. The expected term of options granted represents the period of time that options granted are expected to be outstanding. The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury rate in effect at the time of grant.

 

A summary of the status of the Company’s outstanding stock options as of March 31, 2016 and changes during the period ending on that date is as follows:

 

          Weighted Average     Aggregate     Average  
          Exercise     Intrinsic     Remaining  
    Shares     Price     Value     Term (Yrs)  
Options                                
Balance at December 31, 2015     4,634,166     $ 0.81     $ 5,346,349       5.49  
Granted     958,500     $ 1.96                  
Exercised     -       -                  
Forfeiture and cancelled     -       -                  
At March 31, 2016     5,592,666     $ 1.00     $ 1,060,472       6.22  
                                 
Exercisable at March 31, 2016     1,105,562     $ 1.40                  

 

F- 37  

 

 

Celsius Holdings, Inc. and Subsidiaries

 

Notes to Consolidated Financial Statements (unaudited)

 

March 31, 2016

     

13. COMMITMENTS AND CONTINGENCIES

 

The Company has entered into distribution agreements with liquidated damages in case the Company cancels the distribution agreements without cause. Cause has been defined in various ways. It is management’s belief that no such agreement has created any liability as of March 31, 2016.

 

The Company entered into an office lease with a related party (see note 10) effective October 2015. The monthly rent amounts to $6,408 per month and the lease terminates in October 2020. Future annual minimum payments required under operating lease obligations at March 31, 2016 are as follows:

 

Future Minimum Lease Payments

 

2016   $ 57,672  
2017   $ 82,792  
2018   $ 85,276  
2019   $ 87,834  
2020   $ 75,016  
Total   $ 388,590  

 

14. SUBSEQUENT EVENTS

 

We have evaluated events and transactions that occurred subsequent to March 31, 2016 through May 11, 2016, the date these financial statements were issued, for potential recognition or disclosure in the accompanying financial statements. We did not identify any events or transactions that should be recognized or disclosed in the accompanying financial statements.

 

F- 38  

Exhibit 3.1  

       

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 
 

 

 

 

EXHIBIT 3.2

 

BYLAWS

 

BYLAWS

 

OF

     

CELSIUS HOLDINGS, INC.

 

(A NEVADA CORPORATION)

 

 

 

 

INDEX

 

 

PAGE
NUMBER

   
ARTICLE ONE: OFFICES 1
Section 1. Principal Office  1
Section 2. Other Offices 1
   
ARTICLE TWO: MEETINGS OF SHAREHOLDERS  1
Section 1. Place 1
Section 2. Time of Annual Meeting 1
Section 3. Call of Special Meetings 1
Section 4. Conduct of Meetings 1
Section 5. Notice and Waiver of Notice 1
Section 6. Business and Nominations for Annual and Special Meetings 2
Section 7. Quorum 2
Section 8. Voting Rights Per Share 2
Section 9. Voting of Shares 2
Section 10. Proxies 3
Section 11. Shareholder List 3
Section 12. Action Without Meeting 3
Section 13. Fixing Record Date 3
Section 14. Inspectors and Judges 4
Section 15. Voting for Directors 4
   
ARTICLE THREE: DIRECTORS  4
Section 1. Number; Term; Election; Qualification 4
Section 2. Resignation; Vacancies; Removal 4
Section 3. Powers 4
Section 4. Place of Meetings 4
Section 5. Annual Meetings 4
Section 6. Regular Meetings 4
Section 7. Special Meetings and Notice 5
Section 8. Quorum and Required Vote 5
Section 9. Action Without Meeting 5
Section 10. Conference Telephone or Similar Communications Equipment Meetings 5
Section 11. Committees 5
Section 12. Compensation of Directors 6
   
ARTICLE FOUR: OFFICERS  6
Section 1. Positions 6
Section 2. Election of Specified Officers by Board 6
Section 3. Election or Appointment of Other Officers 6
Section 4. Compensation 6
Section 5. Term; Resignation; Removal; Vacancies 6
Section 6. Chairman of the Board 6
Section 7. Chief Executive Officer 6
Section 8. President 7
Section 9. Vice Presidents 7
Section 10. Secretary 7

 

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Section 11. Chief Financial Officer 7
Section 12. Treasurer 7
Section 13. Other Officers; Employees and Agents 7
   
ARTICLE FIVE: CERTIFICATES FOR SHARES 8
Section 1. Issue of Certificates 8
Section 2. Legends for Preferences and Restrictions on Transfer 8
Section 3. Facsimile Signatures 8
Section 4. Lost Certificates 8
Section 5. Transfer of Shares 8
Section 6. Registered Shareholders 8
   
ARTICLE SIX: GENERAL PROVISIONS 9
Section 1. Dividends 9
Section 2. Reserves 9
Section 3. Checks 9
Section 4. Fiscal Year 9
Section 5. Seal 9
Section 6. Gender 9
   
ARTICLE SEVEN: AMENDMENT OF BYLAWS 9

 

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BYLAWS

 

OF

 

CELSIUS HOLDINGS, INC.

 

ARTICLE ONE

 

OFFICES

 

Section 1. Principal Office . The principal office of Celsius Holdings, Inc., a Nevada corporation (the "Corporation"), shall be located at such place determined by the Board of Directors of the Corporation (the "Board of Directors") in accordance with applicable law.

 

Section 2. Other Offices . The Corporation may also have offices at such other places, either within or without the State of Nevada, as the Board of Directors may from time to time determine or as the business of the Corporation may require.

 

ARTICLE TWO

 

MEETINGS OF SHAREHOLDERS

 

Section 1. Place . All annual meetings of shareholders shall be held at such place, within or without the State of Nevada, as may be designated by the Board of Directors and stated in the notice of the meeting or in a duly executed waiver of notice thereof. Special meetings of shareholders may be held at such place, within or without the State of Nevada, and at such time as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof.

 

Section 2. Time of Annual Meeting . Annual meetings of shareholders shall be held on such date and at such time fixed, from time to time, by the Board of Directors, provided, that there shall be an annual meeting held every calendar year at which the shareholders shall elect a board of directors and transact such other business as may properly be brought before the meeting.

 

Section 3. Call of Special Meetings . Special meetings of the shareholders may be called for any purpose or purposes at any time by the Chairman of the Board or the President or by the Board of Directors and shall be called by the Secretary upon the written request of shareholders holding of record at least 50% of the outstanding shares of stock of the Corporation entitled to vote at such meeting. Such written request shall state the purpose or purposes for which such meeting is to be called.

 

Section 4. Conduct of Meetings . The Chairman of the Board of Directors (or in his absence, the President, or in his absence, such other designee of the Chairman of the Board of Directors) shall preside at the annual and special meetings of shareholders and shall be given full discretion in establishing the rules and procedures to be followed in conducting the meetings, except as otherwise provided by law or in these Bylaws.

 

Section 5. Notice and Waiver of Notice . Except as otherwise provided by law, written or printed notice stating the place, date and time of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten (10) nor more than sixty (60) days before the date of the meeting, either personally or by first-class mail or other legally sufficient means, by or at the direction of the Chairman of the Board, President, or the persons calling the meeting, to each shareholder of record entitled to vote at such meeting. If the notice is mailed at least thirty (30) days before the date of the meeting, it may be done by a class of United States mail other than first class. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail addressed to the shareholder at the address appearing on the stock transfer books of the Corporation, with postage thereon prepaid. If a meeting is adjourned to another time and/or place, and if an announcement of the adjourned time and/or place is made at the meeting, it shall not be necessary to give notice of the adjourned meeting unless the Board of Directors, after adjournment, fixes a new record date for the adjourned meeting. Whenever any notice is required to be given to any shareholder, a waiver thereof in writing signed by the person or persons entitled to such notice, whether signed before, during or after the time of the meeting stated therein, and delivered to the Corporation for inclusion in the minutes or filing with the corporate records, shall constitute an effective waiver of such notice. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the shareholders need be specified in any written waiver of notice. Attendance of a person at a meeting shall constitute a waiver of (a) lack of or defective notice of such meeting, unless the person objects at the beginning to the holding of the meeting or the transacting of any business at the meeting, or (b) lack of or defective notice of a particular matter at a meeting that is not within the purpose or purposes described in the meeting notice, unless the person objects to considering such matter when it is presented.

 

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Section 6. Business and Nominations for Annual and Special Meetings . Business transacted at any special meeting shall be confined to the purposes stated in the notice thereof. At any annual meeting of shareholders, only such business shall be conducted as shall have been properly brought before the meeting in accordance with the requirements and procedures set forth in the Bylaws. Only such persons who are nominated for election as directors of the Corporation in accordance with the requirements and procedures set forth in the Bylaws shall be eligible for election as directors of the Corporation.

 

Section 7. Quorum . Shares entitled to vote as a separate voting group may take action on a matter at a meeting only if a quorum of those shares exists with respect to that matter. Except as otherwise provided in the Articles of Incorporation or applicable law, shares representing a majority of the votes pertaining to outstanding shares which are entitled to be cast on the matter by the voting group constitute a quorum of that voting group for action on that matter. If less than a quorum of shares are represented at a meeting, the holders of a majority of the shares so represented may adjourn the meeting from time to time. After a quorum has been established at any shareholders' meeting, the subsequent withdrawal of shareholders, so as to reduce the number of shares entitled to vote at the meeting below the number required for a quorum, shall not affect the validity of any action taken at the meeting or any adjournment thereof. Once a share is represented for any purpose at a meeting, it is deemed present for quorum purposes for the remainder of the meeting and for any adjournment of that meeting unless a new record date is or must be set for that adjourned meeting.

 

Section 8. Voting Rights Per Share . Every shareholder of record who is entitled to vote shall at every meeting of the shareholders be entitled to one vote for each share of stock held on the record date, except to the extent that the voting rights of the shares of any class are limited or denied by or pursuant to the Articles of Incorporation or the Nevada Corporations Code.

 

Section 9. Voting of Shares . A shareholder may vote at any meeting of shareholders of the Corporation, either in person or by proxy. Shares standing in the name of another corporation, domestic or foreign, may be voted by the officer, agent or proxy designated by the bylaws of such corporate shareholder or, in the absence of any applicable bylaw, by such person or persons as the board of directors of the corporate shareholder may designate. In the absence of any such designation, or, in case of conflicting designation by the corporate shareholder, the chairman of the board, the president, any vice president, the secretary and the treasurer of the corporate shareholder, in that order, shall be presumed to be fully authorized to vote such shares. Shares held by an administrator, executor, guardian, personal representative, or conservator may be voted by such person, either in person or by proxy, without a transfer of such shares into his name. Shares standing in the name of a trustee may be voted by such person, either in person or by proxy, but no trustee shall be entitled to vote shares held by such person without a transfer of such shares into his name or the name of his nominee. Shares held by or under the control of a receiver, a trustee in bankruptcy proceedings, or an assignee for the benefit of creditors may be voted by such person without the transfer thereof into his name. If shares stand of record in the names of two or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety or otherwise, or if two or more persons have the same fiduciary relationship respecting the same shares, unless the Secretary of the Corporation is given notice to the contrary and is furnished with a copy of the instrument or order appointing them or creating the relationship wherein it is so provided, then acts with respect to voting shall have the following effect: (a) if only one votes, in person or by proxy, his act binds all; (b) if more than one vote, in person or by proxy, the act of the majority so voting binds all; (c) if more than one vote, in person or by proxy, but the vote is evenly split on any particular matter, each faction is entitled to vote the share or shares in question proportionally; or (d) if the instrument or order so filed shows that any such tenancy is held in unequal interest, a majority or a vote evenly split for purposes hereof shall be a majority or a vote evenly split in interest. The principles of this paragraph shall apply, insofar as possible, to execution of proxies, waivers, consents, or objections and for the purpose of ascertaining the presence of a quorum.

 

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Section 10. Proxies . Any shareholder of the Corporation, other person entitled to vote on behalf of a shareholder pursuant to law, or attorney-in-fact for such persons may vote the shareholder's shares in person or by proxy. Any shareholder of the Corporation may appoint a proxy to vote or otherwise act for such person by signing an appointment form, either personally or by his attorney-in-fact. An executed telegram or cablegram appearing to have been transmitted by such person, or a photographic, photostatic, or equivalent reproduction of an appointment form, shall be deemed a sufficient appointment form. An appointment of a proxy is effective when received by the Secretary of the Corporation (the "Secretary") or such other officer or agent which is authorized to tabulate votes, and shall be valid for up to 11 months, unless a longer period is expressly provided in the appointment form. The death or incapacity of the shareholder appointing a proxy does not affect the right of the Corporation to accept the proxy's authority unless notice of the death or incapacity is received by the Secretary or other officer or agent authorized to tabulate votes before the proxy authority under the appointment is exercised. An appointment of a proxy is revocable by the shareholder unless the appointment form conspicuously states that it is irrevocable and the appointment is coupled with an interest.

 

Section 11. Shareholder List . After fixing a record date for a meeting of shareholders, the Corporation shall prepare an alphabetical list of the names of all its shareholders who are entitled to notice of the meeting, arranged by voting group with the address of, and the number and class and series, if any, of shares held by each. The shareholders' list must be available for inspection by any shareholder for a period of ten (10) days prior to the meeting or such shorter time as exists between the record date and the meeting and continuing through the meeting at the Corporation's principal office, at a place identified in the meeting notice in the city where the meeting will be held, or at the office of the Corporation's transfer agent or registrar. Any shareholder of the Corporation or such person's agent or attorney is entitled on written demand to inspect the shareholders' list (subject to the requirements of law), during regular business hours and at his expense, during the period it is available for inspection. The Corporation shall make the shareholders' list available at the meeting of shareholders, and any shareholder or agent or attorney of such shareholder is entitled to inspect the list at any time during the meeting or any adjournment. The shareholders' list is prima facie evidence of the identity of shareholders entitled to examine the shareholders' list or to vote at a meeting of shareholders.

 

Section 12. Action Without Meeting . Any action required or permitted by law to be taken at a meeting of shareholders may be taken without a meeting or notice if a consent, or consents, in writing, setting forth the action so taken, shall be dated and signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all voting groups and shares entitled to vote thereon were present and voted with respect to the subject matter thereof.

 

Section 13. Fixing Record Date . For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purposes, the Board of Directors may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than seventy (70) days, and, in case of a meeting of shareholders, not less than ten (10) days, before the meeting or action requiring such determination of shareholders. If no record date is fixed for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders or the determination of shareholders entitled to receive payment of a dividend, the date before the day on which the first notice of the meeting is mailed or the date on which the resolutions of the Board of Directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of shareholders. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this Section, such determination shall apply to any adjournment thereof, except where the Board of Directors fixes a new record date for the adjourned meeting.

 

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Section 14. Inspectors and Judges . The Board of Directors in advance of any meeting may, but need not, appoint one or more inspectors of election or judges of the vote, as the case may be, to act at the meeting or any adjournment thereof. If any inspector or inspectors, or judge or judges, are not appointed, the person presiding at the meeting may, but need not, appoint one or more inspectors or judges. In case any person who may be appointed as an inspector or judge fails to appear or act, the vacancy may be filled by the Board of Directors in advance of the meeting, or at the meeting by the person presiding thereat. The inspectors or judges, if any, shall determine the number of shares of stock outstanding and the voting power of each, the shares of stock represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes, ballots and consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate votes, ballots and consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all shareholders. On request of the person presiding at the meeting, the inspector or inspectors or judge or judges, if any, shall make a report in writing of any challenge, question or matter determined by him or them, and execute a certificate of any fact found by him or them.

 

Section 15. Voting for Directors . Unless otherwise provided in the Articles of Incorporation, directors shall be elected by a plurality of the votes cast by the shares entitled to vote in the election at a meeting at which a quorum is present.

 

ARTICLE THREE

 

DIRECTORS

 

Section 1. Powers . The business and affairs of the Corporation shall be managed by the Board of Directors, which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Articles of Incorporation or by these Bylaws directed or required to be exercised and done by the shareholders.

 

Section 2. Number; Term; Election; Qualification . The number of directors of the Corporation shall be fixed from time to time, within the limits specified by the Articles of Incorporation, by resolution of the Board of Directors. Directors shall be elected in the manner and hold office for a one year term which shall terminate at the conclusion of the next annual meeting of the stockholders at which their successors shall be elected and qualified or until such director's earlier resignation, removal from office, death or incapacity. Notwithstanding any stated term, all directors shall continue in office until the election and qualification of their respective successors in office or the expiration of the term of the directorship held by the director. Directors must be natural persons who are 18 years of age or older but need not be residents of the State of Nevada, shareholders of the Corporation or citizens of the United States.

 

Section 3. Resignation; Vacancies; Removal . Any director may resign at any time by giving written notice to the Board of Directors or the Chairman of the Board. Such resignation shall take effect at the date of receipt of such notice or at any later time specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. In the event the notice of resignation specifies a later effective date, the Board of Directors may fill the pending vacancy (subject to the provisions of the Articles of Incorporation) before the effective date if they provide that the successor does not take office until the effective date. Any director may be removed, with or without cause, at any time, by action of the holders of record of the majority of the issued and outstanding stock of the Corporation, and the vacancy or vacancies in the Board of Directors caused by any such removal may be filled by action of such a majority at such meeting or at any subsequent meeting or by consent. Any newly created directorships and vacancies occurring in the Board of Directors by reason of death, resignation, retirement, disqualification or removal, with or without cause, may be filled by the action of the holders of record of the majority of the issued and outstanding voting stock of the Corporation. The director so chosen, whether filling an existing vacancy or elected to a new directorship, shall hold office until the next meeting of stockholders at which the election of directors is in the regular order of business, and until his successor has been elected and qualifies, or until he sooner dies, resigns or is removed.

 

Section 4. Place of Meetings . Meetings of the Board of Directors, regular or special, may be held either within or without the State of Nevada.

 

Section 5. Annual Meetings . Unless scheduled for another time by the Board of Directors, the first meeting of each newly elected Board of Directors shall be held, without call or notice, immediately following each annual meeting of shareholders.

 

Section 6. Regular Meetings . Regular meetings of the Board of Directors may also be held without notice at such time and at such place as shall from time to time be determined by the Board of Directors.

 

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Section 7. Special Meetings and Notice . Special meetings of the Board of Directors may be called by the President or Chairman of the Board and shall be called by the Secretary on the request of a majority of the directors. At least forty-eight (48) hours' prior written notice of the date, time and place of special meetings of the Board of Directors shall be given to each director. Except as required by law, neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting. Notices to directors shall be in writing and delivered to the directors at their addresses appearing on the books of the Corporation by personal delivery, mail or other legally sufficient means. Subject to the provisions of the preceding sentence, notice to directors may also be given by telegram, teletype or other form of electronic communication. Notice by mail shall be deemed to be given at the time when the same shall be received. Whenever any notice is required to be given to any director, a waiver thereof in writing signed by the person or persons entitled to such notice, whether before, during or after the meeting, shall constitute an effective waiver of such notice. Attendance of a director at a meeting shall constitute a waiver of notice of such meeting and a waiver of any and all objections to the place of the meeting, the time of the meeting and the manner in which it has been called or convened, except when a director states, at the beginning of the meeting or promptly upon arrival at the meeting, any objection to the transaction of business because the meeting is not lawfully called or convened.

 

Section 8. Quorum and Required Vote . A majority of the prescribed number of directors determined as provided in the Articles of Incorporation shall constitute a quorum for the transaction of business and the act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors, unless a greater number is required by the Articles of Incorporation. Whenever, for any reason, a vacancy occurs in the Board of Directors, a quorum shall consist of a majority of the remaining directors until the vacancy has been filled. If a quorum shall not be present at any meeting of the Board of Directors, a majority of the directors present thereat may adjourn the meeting to another time and place, without notice other than announcement at the time of adjournment. At such adjourned meeting at which a quorum shall be present, any business may be transacted that might have been transacted at the meeting as originally notified and called.

 

Section 9. Action Without Meeting . Any action required or permitted to be taken at a meeting of the Board of Directors or committee thereof may be taken without a meeting if a consent in writing, setting forth the action taken, is signed by all of the members of the Board of Directors or the committee, as the case may be, and such consent shall have the same force and effect as a unanimous vote at a meeting. Action taken under this Section 9 is effective when the last director signs the consent, unless the consent specifies a different effective date. A consent signed under this Section 9 shall have the effect of a meeting vote and may be described as such in any document.

 

Section 10. Conference Telephone or Similar Communications Equipment Meetings . Directors and committee members may participate in and hold a meeting by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. Participation in such a meeting shall constitute presence in person at the meeting, except where a person participates in the meeting for the express purpose of objecting to the transaction of any business on the ground the meeting is not lawfully called or convened.

 

Section 11. Committees . The Board of Directors, by resolution adopted by a majority of the whole Board of Directors, may designate from among its members an executive committee and one or more other committees, each of which, to the extent provided in such resolution, shall have and may exercise all of the authority of the Board of Directors in the business and affairs of the Corporation except where the action of the full Board of Directors is required by applicable law. Each committee must have two or more members who serve at the pleasure of the Board of Directors. The Board of Directors, by resolution adopted in accordance with this Article Three, may designate one or more directors as alternate members of any committee, who may act in the place and stead of any absent member or members at any meeting of such committee. Vacancies in the membership of a committee may be filled only by the Board of Directors at a regular or special meeting of the Board of Directors. The executive committee shall keep regular minutes of its proceedings and report the same to the Board of Directors when required. The designation of any such committee and the delegation thereto of authority shall not operate to relieve the Board of Directors, or any member thereof, of any responsibility imposed upon it or such member by law.

 

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Section 12. Compensation of Directors . The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefore. Similarly, members of special or standing committees may be allowed compensation for attendance at committee meetings or a stated salary as a committee member and payment of expenses for attending committee meetings. Directors may receive such other compensation as may be approved by the Board of Directors.

 

ARTICLE FOUR

 

OFFICERS

 

Section 1. Positions . The officers of the Corporation may consist of a Chairman of the Board, a Chief Executive Officer, a President, one or more Vice Presidents (any one or more of whom may be given the additional designation of rank of Executive Vice President or Senior Vice President), a Secretary, a Chief Financial Officer and a Treasurer. Any two or more offices may be held by the same person. Officers other than the Chairman of the Board need not be members of the Board of Directors. The Chairman of the Board must be a member of the Board of Directors.

 

Section 2. Election of Specified Officers by Board . The Board of Directors at its first meeting after each annual meeting of shareholders shall elect a Chairman of the Board, a Chief Executive Officer, a President, one or more Vice Presidents (including any Senior or Executive Vice Presidents), a Secretary, a Chief Financial Officer and a Treasurer.

 

Section 3. Election or Appointment of Other Officers . Such other officers and assistant officers and agents as may be deemed necessary may be elected or appointed by the Board of Directors, or, unless otherwise specified herein, appointed by the Chairman of the Board. The Board of Directors shall be advised of appointments by the Chairman of the Board at or before the next scheduled Board of Directors meeting.

 

Section 4. Compensation . The salaries, bonuses and other compensation of the Chairman of the Board and all officers of the Corporation to be elected by the Board of Directors pursuant to Section 2 of this Article Four shall be fixed from time to time by the Board of Directors or pursuant to its direction. The salaries of all other elected or appointed officers of the Corporation shall be fixed from time to time by the Chairman of the Board or pursuant to his direction.

 

Section 5. Term; Resignation; Removal; Vacancies . The officers of the Corporation shall hold office until their successors are chosen and qualified. Any officer or agent may be removed, with or without cause, at any time, by resolution adopted by the Board of Directors, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise shall be filled by the Board of Directors, or, in the case of an officer appointed by the Chairman of the Board, by the Chairman of the Board or the Board of Directors. Any officer of the Corporation may resign from his respective office or position by delivering notice to the Corporation, and such resignation shall be effective upon receipt of such notice or at any later time specified therein, and the acceptance of such notice shall not be necessary to make it effective. If a resignation is made effective at a later date and the Corporation accepts the future effective date, the Board of Directors may fill the pending vacancy before the effective date if the Board provides that the successor does not take office until such effective date.

 

Section 6. Chairman of the Board . The Chairman of the Board shall preside at all meetings of the shareholders and the Board of Directors. The Chairman of the Board shall also serve as the chairman of any executive committee.

 

Section 7. Chief Executive Officer . Subject to the control of the Board of Directors, the Chief Executive Officer, in conjunction with the President, shall have general and active management of the business of the Corporation, shall see that all orders and resolutions of the Board of Directors are carried into effect and shall have such powers and perform such duties as may be prescribed by the Board of Directors. In the absence of the Chairman of the Board or in the event the Board of Directors shall not have designated a Chairman of the Board, the Chief Executive Officer shall preside at meetings of the shareholders and the Board of Directors. The Chief Executive Officer shall also serve as the vice-chairman of any executive committee.

 

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Section 8. President . Subject to the control of the Board of Directors, the President, in conjunction with the Chief Executive Officer, shall have general and active management of the business of the Corporation and shall have such powers and perform such duties as may be prescribed by the Board of Directors. In the absence of the Chairman of the Board and the Chief Executive Officer or in the event the Board of Directors shall not have designated a Chairman of the Board and a Chief Executive Officer shall not have been elected, the President shall preside at meetings of the shareholders and the Board of Directors. The President shall also serve as the vice-chairman of any executive committee.

 

Section 9. Vice Presidents . The Vice Presidents, in the order of their seniority, unless otherwise determined by the Board of Directors, shall, in the absence or disability of the President and the Chief Executive Officer, perform the duties and exercise the powers of the President. They shall perform such other duties and have such other powers as the Board of Directors, the Chairman of the Board or the Chief Executive Officer shall prescribe or as the President may from time to time delegate. Executive Vice Presidents shall be senior to Senior Vice Presidents, and Senior Vice Presidents shall be senior to all other Vice Presidents.

 

Section 10. Secretary . The Secretary shall attend all meetings of the shareholders and all meetings of the Board of Directors and record all the proceedings of the meetings of the shareholders and of the Board of Directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. The Secretary shall give, or cause to be given, notice of all meetings of the shareholders and special meetings of the Board of Directors and shall keep in safe custody the seal of the Corporation and, when authorized by the Board of Directors, affix the same to any instrument requiring it. The Secretary shall perform such other duties as may be prescribed by the Board of Directors, the Chairman of the Board, the Chief Executive Officer or the President.

 

Section 11. Chief Financial Officer . The Chief Financial Officer shall be responsible for maintaining the financial integrity of the Corporation, shall prepare the financial plans for the Corporation and shall monitor the financial performance of the Corporation and its subsidiaries, as well as performing such other duties as may be prescribed by the Board of Directors, the Chairman of the Board, the Chief Executive Officer or the President.

 

Section 12. Treasurer . The Treasurer shall have the custody of corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. The Treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the Chairman of the Board and the Board of Directors at its regular meetings or when the Board of Directors so requires an account of all his transactions as Treasurer and of the financial condition of the Corporation. The Treasurer shall perform such other duties as may be prescribed by the Board of Directors, the Chairman of the Board, the Chief Executive Officer or the President.

 

Section 13. Other Officers; Employees and Agents . Each and every other officer, employee and agent of the Corporation shall possess, and may exercise, such power and authority, and shall perform such duties, as may from time to time be assigned to such person by the Board of Directors, the officer so appointing such person or such officer or officers who may from time to time be designated by the Board of Directors to exercise such supervisory authority.

 

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ARTICLE FIVE

 

CERTIFICATES FOR SHARES

 

Section 1. Issue of Certificates . The shares of the Corporation shall be represented by certificates, provided that the Board of Directors of the Corporation may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation. Notwithstanding the adoption of such a resolution by the Board of Directors, every holder of stock represented by certificates (and upon request every holder of uncertificated shares) shall be entitled to have a certificate signed by or in the name of the Corporation by the Chairman of the Board or a Vice Chairman of the Board, or the Chief Executive Officer, President or Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation, representing the number of shares registered in certificate form.

 

Section 2. Legends for Preferences and Restrictions on Transfer . The designations, relative rights, preferences and limitations applicable to each class of shares and the variations in rights, preferences and limitations determined for each series within a class (and the authority of the Board of Directors to determine variations for future series) shall be summarized on the front or back of each certificate. Alternatively, each certificate may state conspicuously on its front or back that the Corporation will furnish the shareholder a full statement of this information on request and without charge. Every certificate representing shares that are restricted as to the sale, disposition, or transfer of such shares shall also indicate that such shares are restricted as to transfer, and there shall be set forth or fairly summarized upon the certificate, or the certificate shall indicate that the Corporation will furnish to any shareholder upon request and without charge, a full statement of such restrictions. If the Corporation issues any shares that are not registered under the Securities Act of 1933, as amended, or not registered or qualified under the applicable state securities laws, the transfer of any such shares shall be restricted substantially in accordance with the following legend:

 

"THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER ANY APPLICABLE STATE LAW. THEY MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR PLEDGED WITHOUT (1) REGISTRATION UNDER THE SECURITIES ACT OF 1933 AND ANY APPLICABLE STATE LAW, OR (2) AT HOLDER'S EXPENSE, AN OPINION (SATISFACTORY TO THE CORPORATION) OF COUNSEL (SATISFACTORY TO THE CORPORATION) THAT REGISTRATION IS NOT REQUIRED."

 

Section 3. Facsimile Signatures . Any and all signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue.

 

Section 4. Lost Certificates . The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost or destroyed. When authorizing such issue of a new certificate or certificates, the Corporation may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost or destroyed.

 

Section 5. Transfer of Shares . Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books.

 

Section 6. Registered Shareholders . The Corporation shall be entitled to recognize the exclusive rights of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Nevada.

 

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ARTICLE SIX

 

GENERAL PROVISIONS

 

Section 1. Dividends . The Board of Directors may from time to time declare, and the Corporation may pay, dividends on its outstanding shares in cash, property, stock (including its own shares) or otherwise pursuant to law and subject to the provisions of the Articles of Incorporation.

 

Section 2. Reserves . The Board of Directors may by resolution create a reserve or reserves out of earned surplus for any proper purpose or purposes, and may abolish any such reserve in the same manner.

 

Section 3. Checks . All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate.

 

Section 4. Fiscal Year . The fiscal year of the Corporation shall end on December 31 of each year, unless otherwise fixed by resolution of the Board of Directors.

 

Section 5. Seal . The Board of Directors may adopt a seal by resolution of the board. The corporate seal shall have inscribed thereon the name and state of incorporation of the Corporation. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced.

 

Section 6. Gender . All words used in these Bylaws in the masculine gender shall extend to and shall include the feminine and neuter genders.

 

ARTICLE SEVEN

 

AMENDMENT OF BYLAWS

 

Except as otherwise set forth herein, these Bylaws may be altered, amended or repealed or new Bylaws may be adopted at any meeting of the Board of Directors at which a quorum is present, by the affirmative vote of a majority of the directors present at such meeting.

 

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SECRETARY'S CERTIFICATE OF ADOPTION OF

 

THE BYLAWS OF CELSIUS HOLDINGS, INC.

 

I hereby certify:

 

That the foregoing Bylaws, constitute the Bylaws of said corporation as duly adopted by the Board of Directors of the Corporation on December ____, 2006.

 

IN WITNESS WHEREOF, I have hereunder subscribed my name this _____ day of December, 2006.

 

   
Kristian Kostovski, Secretary  

 

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Exhibit 10.1

   

 

LOAN AND SECURITY AGREEMENT

 

This Loan and Security Agreement (hereinafter called "Agreement") is between CELSIUS HOLDINGS, INC. , a Nevada corporation, authorized to do business in Florida as CELSIUS PRODUCTS HOLDINGS, INC. whose address is 140 N.E. 4 th Avenue, Suite C, Delray Beach, Florida 33483 (hereinafter called "Debtor") and CD FINANCIAL, LLC , a Florida limited liability company (hereinafter called "Secured Party").

 

1.           Grant of Security Interest . Subject to the terms and conditions of the Note (as hereinafter defined) and this Agreement, Debtor, for consideration as defined herein, and to secure the full and prompt payment, observance and performance when due of all present and future obligations and indebtedness of Debtor to Secured Party, whether at the stated time, by acceleration or otherwise, howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, whether or not of the same or similar class or of like kind to any indebtedness incurred contemporaneously with the execution of this Agreement, and whether now or hereafter existing, or due or to become due, and whether such indebtedness from time to time is reduced and thereafter increased, or entirely extinguished and thereafter reincurred, including without limitation, the following:

 

(a)          Any and all amounts owed by Debtor, under, in connection with, and/or pursuant to the indebtedness evidenced by that certain Promissory Note of even date herewith, in the original principal sum of THREE MILLION AND NO/100THS DOLLARS ( $3,000,000.00 ) (the "Note"), with interest thereon according to the provisions thereof, and all obligations thereunder, in connection therewith and/or pursuant to any and all agreements and other documents in connection therewith; and

 

(b)          All sums advanced or expenses or costs paid or incurred (including without limitation reasonable attorneys' fees and other legal expenses) by Secured Party pursuant to or in connection with the Note or any other agreements and documents in connection therewith plus applicable interest on such sums, expenses or costs; and

 

(c)          Any extensions, modifications, changes, substitutions, restatements, renewals or increases or decreases of any or all of the indebtedness referenced above.

 

hereby grants to Secured Party a security interest in the collateral described in Schedule 1, same being attached to this Agreement and made a part hereof (hereinafter collectively called the "Collateral").

 

2. Definitions. The following terms shall have the following meanings

 

"Accounts" means all Accounts as that term is defined in Article 9 of the UCC;

 

"Chattel Paper" means all Chattel Paper as that term is defined in Article 9 of the UCC;

 

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"Commercial Tort Claims" means all Commercial Tort Claims as that term is defined in Article 9 of the UCC;

 

" Consignments " means all Consignments as that term is define in Article 9 of the UCC;

 

"Contracts" means all contracts, undertakings, franchise agreements or other agreements ( other than rights evidenced by Chattel Paper, Documents or Instruments, as those terms are defined above and below) in or under which the Debtor may now or hereafter have any right, title or interest, including, without limitation, with respect to an Account, and any agreement relating to the terms of payment or the terms of performance thereof;

 

"Copyrights" means (a) all copyrights of the United States or any other country; (b) all copyright registrations filed in the United States or in any other country; and (c) all proceeds thereof;

 

"Copyright License" means all agreements, whether written or oral, providing for the grant by the Debtor of any right to use any Copyright;

 

"Deposit Accounts" means all Deposit Accounts at that term is defined in Article 9 of the UCC; "Documents" means all Documents as that term is defined in Article 9 of the UCC; " Encumbrance (s)" means all Encumbrance(s) as that term is defined in Article 9 of the UCC; "Equipment" means all Equipment as that term is defined in Article 9 of the UCC;

 

"Fixtures" means all Fixtures as that term is defined in Article 9 of the UCC;

 

"General Intangibles " means all General Intangibles as that term is defined in Article 9 of the UCC;

 

"Goods" means all Goods as that term is defined in Article 9 of the UCC;

 

"Health-Care- Insurance Receivables" means all Health-Care-Insurance Receivables as that term is defined in Article 9 of the UCC;

 

"Instruments" means all Instruments as that term is defined in Article 9 of the UCC;

 

"Inventory" means all Inventory as that term is defined in Article 9 of the UCC;

 

"Investment Property " means all Investment Property as that term is defined in Article 9 of the UCC;

 

"Letters of Credit" means all Letters of Credit as that term is defined in the Article 5 of the UCC;

 

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"Letter-of-Credit Rights" means all Letter-of-Credit Rights as that term is defined in Article 9 of the UCC;

 

"Patents" means (a) all letters patent of the United States and all reissues and extensions thereof, (b) all applications for letters patent of the United States and all divisions, continuations and continuations-in-part thereof or any other country, including, without limitation, any thereof referred to in any schedule attached hereto and (c) all proceeds thereof, including the goodwill of the business connected with the use of and symbolized by the Patents;

 

"Patent License" means all agreements, whether written or oral, providing for the grant by the Debtor of any right to manufacture, use or sell any invention covered by a Patent, including, without limitation, any thereof referred to in any schedule attached hereto;

 

"Payment Intangibles" means all Payment Intangibles as that term is defined in Article 9 of the UCC;

 

"Proceeds" means all Proceeds as that term is defined in Article 9 of the UCC;

 

"Promissory Note(s)" means as that term is defined in Article 9 of the UCC;

 

"Software" means all Software as that term is defined in Article 9 of the UCC;

 

"Supporting Obligations" means all Supporting Obligations as that term is defined in Article 9 of the UCC;

 

"Tangible Chattel Paper" means all Tangible Chattel Paper as that term is defined in Article 9 of the UCC;

 

" Trademarks " means (a) all trademarks, trade names, corporate names, company names, business names, fictitious business names, trade styles, service marks, logos and other source or business identifiers and the goodwill associated therewith, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all applications in connection therewith, whether registered in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof or any other country or any political subdivision thereof or otherwise, including, without limitation, any thereof referred to in any schedule attached hereto; (b) all renewals thereof; and (c) all proceeds thereof, including the goodwill of the business connected with the use of and symbolized by the Trademarks;

 

"Trademark License" means any agreement, written or oral, providing for the grant by the Debtor of any right to use any Trademark.

 

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"UCC" means the Uniform Commercial Code as in effect from time-to-time in the State of

Florida and State of Nevada.

 

3.           Representations, Warranties and Covenants of Debtor. Debtor expressly represents, warrants and covenants as follows:

 

(a)          The address appearing with Debtor's signature below is the address of Debtor's principal office. If any part of the Collateral is not located at Debtor's principal office, it will be located at such other locations as Debtor, or any other entity affiliated with Debtor, may utilize in its business from time to time, and Debtor hereby covenants to notify Secured Party of any such additional location(s).

 

(b)          If Debtor does not keep the records concerning the Collateral and concerning accounts, general intangibles, mobile goods and contract rights at Debtor's principal office, same will be located at such other locations as Debtor, or any other entity affiliated with Debtor, may utilize in its business from time to time, and Debtor hereby covenants to notify Secured Party of any such additional location(s).

 

(c)          Debtor will give Secured Party sixty (60) days prior written notice of any change in (i) Debtor's principal office, the location of the Collateral or the location of the records described above, or (ii) the Ownership of Debtor's business, (iii) the principals responsible for the management of Debtor's business, (iv) Debtor's company structure or identity, or (v) Debtor's name or trade name, or prior to commencing to use an assumed name not set forth in this Agreement.

 

(d)           If any of the Collateral is to be or has been attached to real estate, the legal description of the real estate is attached to this Agreement as Schedule 2 and made a part hereof.

 

(e)          If Debtor does not have a record interest in the real estate described above, the record

Owner is indicated on the attached Schedule 2.

 

(f)           Without the prior written consent of Secured Party, Debtor will not move, sell, lease, permit any encumbrance on or otherwise dispose of the Collateral, other than its inventory in the ordinary course of its business. Debtor represents and warrants that Debtor is the owner of the Collateral, free and clear of all liens, charges, interests, and encumbrances, other than in favor of Secured Party, that no other person or other entity has any interest in the Collateral whatsoever, and that Debtor will defend same against all adverse claims and demands.

 

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(g)          Debtor will keep the Collateral insured by such companies, in such amounts and against such risks as shall be acceptable to Secured Party, and the Secured Party hereby acknowledges that the current levels of insurance maintained by Debtor are acceptable for the first year of the Loan, with loss payable and additional insured clauses in favor of Secured Party as are satisfactory to Secured Party. Debtor will deposit such insurance policies with Secured Party. Debtor hereby assigns to Secured Party and grants to Secured Party a security interest in any return of unearned premium due upon cancellation of any such insurance and directs the insurer thereunder to pay to Secured Party all amounts so due. All amounts received by Secured Party in payment of insurance losses or return of unearned premium may, at Secured Party's option, be applied to the indebtedness by Secured Party, or all or any part thereof may be used for the purpose of repairing, replacing or restoring the Collateral. Notwithstanding the foregoing, if there is no default under the Loan, at the request of the Debtor, and upon the approval of Secured Party in its sole discretion, amounts received by Secured Party in payment of insurance losses or return of unearned premium shall be used for the purpose of repairing, replacing or restoring the Collateral. If Debtor fails to maintain satisfactory insurance, Secured Party shall have the option, but not the obligation, to obtain such insurance in such amounts as Secured Party deems necessary, and Debtor agrees to repay, with interest at the highest rate applicable to any indebtedness which this Agreement secures, all amounts so expended by Secured Party.

 

(h)           Debtor represents and warrants to Secured Party that all financial statements, income tax returns and credit information delivered by Debtor to Secured Party accurately reflect the financial condition and operations of Debtor at the times and for the periods therein stated. So long as this Agreement is in force and effect, Debtor agrees to deliver to Secured Party within one hundred twenty (120) calendar days after the end of each of Debtor's fiscal years, a complete and accurate copy of the consolidated audited financial statements (with notes) of Debtor prepared by an independent certified public accountant acceptable to Secured party ("CPA"), including statements of cash flow, and a balance sheet and statement of income, together with all schedules, all prepared in accordance with generally accepted accounting principles ("GAAP"). Debtor shall provide Secured Party with a copy of its federal income tax return within fifteen (15) days of filing (including all schedules and extensions). Debtor shall also provide internally prepared condensed monthly statements without notes but otherwise meeting all the requirements of the annual statements no later than thirty (30) days after each month end and internally prepared condensed quarterly financial statements with partial notes (which are included included in the Form 10-Q) but otherwise meeting all the requirements of the annual statements no later than forty five (45) days after the end of each fiscal quarter end or such other date as requested by Seemed Party for statements other than the quarterly statements, acceptable to Security Party and its accountants as well as financial statements at such other times as requested by Security Party.

 

(i)           Secured Party shall not be deemed to have waived any of its rights in any Collateral unless such waiver is in writing and signed by an authorized representative of Secured Party. No delay or omission by Secured Party in exercising any of Secured Party's rights shall operate as a waiver thereof or of any other rights. Secured Party shall have, in addition to all other rights and remedies provided by this Agreement or applicable law, the rights and remedies of a secured party under the Uniform Commercial Code.

 

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(j)          Debtor will maintain the Collateral in good condition and repair, reasonable wear and tear excepted, and will pay promptly all taxes, levies, and encumbrances and all repair, maintenance and preservation costs pertaining to the Collateral. If Debtor fails to make such payments, Secured Party shall have the option, but not the obligation, to pay the same and Debtor agrees to repay, with interest at the highest rate applicable to any indebtedness which this Agreement secures, all amounts so expended by Secured Party. Debtor will at any time and from time to time, upon request of Secured Party, give any representative of Secured Party access during normal business hours to inspect the Collateral or the books and records thereof.

 

(k)          Debtor agrees to pay to Secured Party on demand all expenses, including reasonable attorney fees and expenses, incurred by Secured Party in protecting or enforcing its rights in the Collateral or otherwise under this Agreement. After deducting all said expenses, the remainder of any proceeds of sale or other disposition of the Collateral shall be applied to the indebtedness due Secured Party in such order of preference as Secured Party shall determine.

 

(1)          Debtor hereby agrees to faithfully preserve and protect Secured Party's security interest in the Collateral at all times, and further agrees to execute and deliver, from time to time, any and all further, or other, documents, instruments, continuation statements and perform or refrain from performing such acts, as Secured Party may reasonably request to effect the purposes of this Agreement and to secure to Secured Party the benefits of all the rights, authorities and remedies conferred upon Secured Party by the terms of this Agreement. Debtor shall permit, or cause to be permitted, at Debtor's expense, representatives of Secured Party to inspect and make copies of the books and records of Debtor relating to the Collateral at any reasonable time or times upon prior notice.

 

4.             Loan Disbursements . Disbursements under the Note shall be made directly by the Secured Party to Debtor upon no less than seven (7) business days of written request from Debtor to Secured Party. All disbursements hereunder shall be for the purpose of providing funding for a mutually agreeable written plan between the Secured Party and the Debtor for marketing and advertising of the Debtor's and/or its wholly-owned subsidiaries' products which may include reimbursement to the Debtor for marketing and advertising expenses prepaid by the Debtor.

 

5.           Defaults . The occurrence of any of the following events shall constitute a default hereunder:

 

(a)          the Debtor shall default in the payment of principal of or interest on the Note or any other obligation to Secured Party as and when the same shall be due and payable and, in the case of an interest payment default, such default shall continue for five (5) Business Days after the date such interest payment was due, or the Debtor shall fail to perform or observe any other covenant, agreement, term, provision, undertaking or commitment under the Note, this Loan Agreement or any other agreement or document secured hereby or any other encumbrance or agreement securing the Note which remains uncured for ten (10) Business Days after the delivery to the Debtor of written notice that the Debtor is in default hereunder or thereunder;

 

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(b)          The breach of or failure to perform promptly any obligation or covenant set forth in this Agreement, the Note or any other agreement secured hereby or securing the Note unless otherwise approved in advance by Secured Party.

 

(c)          The suspension of business, insolvency, failure generally to pay debts as they became due, or the commission of any act constituting or resulting in a business failure, in each case on the part of the business of Debtor; the concealment or removal of any substantial portion of Debtor's property with the intent to hinder, delay or defraud any one or more creditors, or the making of any other transfer which is fraudulent or otherwise voidable under the Bankruptcy Code or other applicable federal or state law; the existence or creation of any lien, including without limitation any tax or judgment lien, upon the Collateral or any substantial part of Debtor's property; an assignment for the benefit of creditors; the commencement of any proceedings by or against Debtor (under the Bankruptcy Code or otherwise) seeking to adjudicate it bankrupt or insolvent, or seeking reorganization, arrangement, adjustment or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors or seeking the appointment of a receiver, trustee or custodian for Debtor or for the Collateral or a substantial part of the property of Debtor; or the institution by Debtor or any other person or entity of any liquidation, dissolution or reorganization proceedings with respect to Debtor;

 

(d)          The failure to effectively and promptly discharge, stay or indemnify against, to Secured Party's satisfaction, any lien or attachment against any of Debtor's property or the Collateral;

 

(e)          Any representation or warranty contained herein or in any other document delivered by or on behalf of Debtor to Secured Party shall be false or misleading when made;

 

(f)           If Secured Party, in good faith, believes the prospect of payment secured by this Agreement is impaired, or believes that any of the Collateral is in danger of loss, misuse, seizure or confiscation;

 

(g)          The occurrence of any of the following without the Secured Party's written consent, which consent shall be in Secured Party's sole discretion: the transfer of any of the Debtor's assets not in the ordinary course of business; the merger or consolidation of Debtor with another company or entity; the change of the Debtor's name; the liquidation of Debtor.

 

6.           Remedies.

 

(a) Upon the occurrence of any default under this Agreement, Secured Party is authorized in its discretion to declare any or all of the indebtedness to be immediately due and payable without demand or notice to Debtor, and may exercise any one or more of the rights and remedies granted pursuant to this Agreement or given to a secured party under applicable law, including without limitation the Uniform Commercial Code, such rights and remedies to include without limitation the right to take possession and sell, lease or otherwise dispose of the Collateral. If reasonable notice of any disposition of Collateral or other enforcement is required, such requirement will be met if such notice is mailed, postage pre-paid, to the address of Debtor shown below Debtor's signature on this Agreement at least fifteen (15) days prior to the time of disposition or other enforcement. Debtor agrees that upon demand by Secured Party after default, Debtor will promptly assemble the Collateral and make the Collateral available to Secured Party at a place convenient to Secured Party.

 

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(b) Debtor agrees that all of the Collateral and all of the other security which may be granted to Secured Party in connection with the obligations secured hereby constitute equal security for all of the obligations secured hereby, and agrees that Secured Party shall be entitled to sell, retain or otherwise deal with any or all of the Collateral, in any order or simultaneously as Secured Party shall determine in its sole and absolute discretion, free of any requirement for the marshaling of assets or other restriction upon Secured Party in dealing with the Collateral or such other security.

 

(c) Upon the occurrence of any default under this Agreement, Debtor hereby irrevocably constitute and appoints Secured Party (and any employee or agent of Secured Party) as Debtor's true and lawful attorney-in-fact with full power of substitution, in Secured Party's name or Debtor's name or otherwise, for Secured Party's sole use and benefit, at Debtor's cost and expense, to exercise the following powers with respect to the Collateral:

 

(1)          To demand, sue for collection, receive, and give acquittance for any and all monies due or owing with respect to the Collateral;

 

(2)          To receive, take, endorse Debtor's name on, assign and deliver any checks, notes, drafts, documents or other instruments taken or received by Secured Party in connection with the Collateral;

 

(3)          To settle, compromise, prosecute, or defend any action or proceeding with respect to the Collateral;

 

(4)          To sell, transfer, assign or otherwise deal in or with the Collateral or the proceeds thereof, as fully as if Secured Party were the absolute Debtor thereof.

 

(5)          To sign Debtor's name to and file financing statements or such other documents and instruments as Secured Party may deem appropriate.

 

(6)          To take any and all action that Secured Party deems necessary or proper to preserve its interest in the Collateral, including without limitation, the payment of debts of Debtor that might impair the Collateral or Secured Party's security interest therein, the purchase of insurance on the Collateral, the repair or safeguard of the Collateral, or the payment of taxes thereon.

 

(7)          To notify account debtors of Secured Party's security interest in Debtor's accounts and to instruct them to make payment directly to Secured Party.

 

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(8)           To assume management (by Secured Party or by an affiliate of Secured Party) of the Debtor's business.

 

(d) Debtor agrees that the powers of attorney granted herein are coupled with an interest and shall be irrevocable until full, final and irrevocable payment and performance of the indebtedness secured hereby; and that neither Secured Party nor any officer, director, employee or agent of Secured Party shall be liable for any act or omission, or for any mistake or error of judgment, in connection with any such powers.

 

(e) Notwithstanding the foregoing, Secured Party shall be under no duty to exercise any such powers, or to collect any amount due on the Collateral, to realize on the Collateral, to keep the Collateral, to make any presentment, demand or notice of protest in connection with the Collateral, or to perform any other act relating to the enforcement, collection or protection of the Collateral.

 

(f) This Agreement shall not prejudice the right of Secured Party at its option to enforce the collection of any indebtedness secured hereby or any other instrument executed in connection with this transaction, by suit or in any other lawful manner. No right or remedy is intended to be exclusive of any other right or remedy, but every such right or remedy shall be cumulative to every other right or remedy herein or conferred in any other agreement or document for the benefit of Secured Party, or now or hereafter existing at law or in equity.

 

7.           Miscellaneous.

 

(a) This Agreement and the security interest in the Collateral created hereby shall terminate when the indebtedness has been fully, finally and irrevocably paid and all other obligations of Debtor to Secured Party have been performed in full. Prior to such termination, this shall be a continuing agreement.

 

(b) TIDS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA IN ALL RESPECTS, INCLUDING MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, EXCEPT TO THE EXTENT THE LAWS OF ANOTHER JURISDICTION ARE MANDATORILY APPLICABLE. DEBTOR CONSENTS TO THE NON-EXCLUSIVE PERSONAL JURISDICTION OF THE COURTS OF THE STATE OF FLORIDA AND THE FEDERAL COURTS LOCATED IN FLORIDA SO THAT SECURED PARTY MAY SUE DEBTOR IN FLORIDA TO ENFORCE THIS AGREEMENT. DEBTOR AGREES NOT TO CLAIM THAT FLORIDA IS AN INCONVENIENT PLACE FOR TRIAL. AT SECURED PARTY'S OPTION, THE VENUE (LOCATION) OF ANY SUIT TO ENFORCE THIS AGREEMENT MAY BE IN PALM BEACH COUNTY, FLORIDA. DEBTOR HEREBY IRREVOCABLY AGREES AND CONSENTS THAT, IN ADDITION TO ANY METHODS OF SERVICE OF PROCESS PROVIDED FOR UNDER APPLICABLE LAW, ALL SERVICE OF PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO DEBTOR AT THE ADDRESS PROVIDED FOR NOTICES UNDER THIS AGREEMENT.

 

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(c) DEBTOR AND SECURED PARTY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY AND ALL RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION (INCLUDING BUT NOT LIMITED TO) ANY CLAIMS, CROSS-CLAIMS OR THIRD PARTY CLAIMS ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREIN. DEBTOR ALSO HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES, TO THE EXTENT PERMITTED BY LAW, ANY RIGHT IT MAY HAVE TO ANY SPECIAL INCIDENTIAL OR CONSEQUENTIAL DAMAGES. DEBTOR ACKNOWLEDGES THAT THE SECURED PARTY HAS BEEN INDUCED TO ENTER INTO THIS LOAN, INCLUDING THIS AGREEMENT, BY, INTER ALIA, THE PROVISIONS OF THIS PARAGRAPH.

 

(d) This Agreement shall inure to the benefit of Secured Party, its successors and assigns and to any other holder who derives from Secured Party title to or an interest in the indebtedness which this Agreement secures, and shall be binding upon Debtor, its successors and assigns.

 

(e) In case any one or more of the provisions of this Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision hereof, but this Agreement shall be construed as if such invalid, illegal or unenforceable provision had not been included.

 

(f) The Debtor agrees to cooperate promptly with the Secured Party and its agent in the correction or completion of the loan closing documents if deemed necessary or desirable by Secured Party. Debtor understands that this may include correction or execution of a new note and mortgage to reflect the agreed terms.

 

(g) Any provision to the contrary notwithstanding contained herein or in the Note or in any other instrument now or hereafter evidencing, securing or otherwise relating to any secured indebtedness, neither Secured Party nor any other holder of the secured indebtedness shall be entitled to receive or collect, nor shall Debtor be obligated to pay, interest on any of the secured indebtedness in excess of the maximum rate of interest at the particular time in question, if any, which, under applicable law, may be charged to Debtor (herein the "Maximum Rate"), provided that the Maximum Rate shall be automatically increased or decreased, as the case may be, without notice to Debtor from time to time as of the effective time of each change in the Maximum Rate, and if any provision herein or in the Note or in such other instrument shall ever be construed or held to permit the collection or to require the payment of any amount of interest in excess of that permitted by applicable law, the provisions of this paragraph shall control and shall override any contrary or inconsistent provision herein or in the Note or in such other instrument. The intention of the parties being to conform strictly to the usury limitations under applicable law, the Note, this Agreement, and each other instrument now or hereafter evidencing or relating to any secured indebtedness shall be held subject to reduction to the amount allowed under said applicable law as now or hereafter construed by the courts having jurisdiction.

 

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(h) All notices pursuant to this Security Agreement shall be in writing and shall be directed to the addresses set forth below or such other address as may be specified in writing, by certified or registered mail, return receipt requested by the party to which or whom notices are to be given. Notices shall be deemed to be given upon sender's obtaining a receipt (or refusal of receipt) from the U.S. Postal Service for such certified or registered mail delivery, upon personal delivery to an officer of the Debtor, or the day following prepaid delivery to a recognized overnight commercial carrier.

 

(i) The singular used herein shall include the plural.

 

G) If more than one party shall execute this Agreement as "Debtor", the term "Debtor" shall mean all such parties executing this Agreement, and all such parties shall be jointly and severally obligated hereunder.

 

(k) A photocopy or other reproduction of this Agreement or of any financing statement is sufficient as a financing statement and may be filed as a financing statement in any government office.

 

[balance of this page left intentionally blank]

 

  11

 

 

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date written below.

 

Dated: July 12, 2010.

 

Signed sealed and delivered      
in the  presence of:   DEBTOR:  
       
       
    CELSIUS  HOLDINGS,  INC., a Nevada corporation, authorized to do business in Florida as CELSIUS PRODUCTS HOLDINGS, INC.
       
    By:    
    Name: Geary Cotton  
    Title: CFO  

 

    (Corporate Seal)
     
  Address:   140 N.E. 4 th Avenue, Suite C
    Delray Beach, Florida 33483

 

STATE OF FLORIDA )
ss:  
 COUNTY OF )

 

The foregoing instrument was acknowledged before me this _________________, 2010, by GEARY COTTON as CFO of CELSIUS HOLDINGS, INC. , a Nevada corporation, authorized to do business in Florida as CELSIUS PRODUCTS HOLDINGS, INC. on behalf of the corporation. He is personally known to me or has produced a Florida driver's license as identification.

 

   
Notary Public, State of Florida  
My Commission Expires:      {Seal}  

 

  12

 

 

  SECURED PARTY:  
       
  CD FINANCIAL, LLC, a Florida limited liability company  
       
  By:    
  William H. Milmoe, Manager  
     
  Address: 3299 N.W. 2 nd Avenue  
  Boca Raton, FL 33431  

 

STATE OF FLORIDA )
ss:  
COUNTY OF )

 

The foregoing instrument was acknowledged before me this _________________, 2010, by WILLIAM H. MILMOE as Manager of CD FINANCIAL, LLC, a Florida limited liability company, on behalf of the company. He is personally known to me or has produced a Florida driver's license as identification.

 

   
Notary Public, State of Florida  
My Commission Expires:     {Seal}  

 

  13

 

 

SCHEDULE 1

(Description of Personal Property)

 

This is Schedule 1 to the Security Agreement dated effective July           , 2010 between CELSIUS HOLDINGS, INC., a Nevada corporation, authorized to do business in Florida as CELSIUS PRODUCTS HOLDINGS, INC. (hereinafter called "Debtor") and CD FINANCIAL, LLC, a Florida limited liability company (hereinafter called "Secured Party").

 

A continuing security interest in all properties, assets and rights of the Debtor now owned or at any time hereafter acquired by the Debtor or in which the Debtor now has or at any time in the future may acquire any right, title or interest, wherever located or situated (hereinafter, collectively called the "Collateral").

 

Without limitation of the foregoing, the Collateral includes the following:

 

(i) all Accounts;
(ii) all Chattel Paper;
(iii) all Commercial Tort Claims;
(iv) all Consignments;
(v) all Contracts;
(vi) all Copyrights;
(vii) all Copyright Licenses;
(viii) all Deposit Accounts;
(ix) all Documents;
(x) all Encumbrance(s);
 (xi) all Equipment;
(xii) all Fixtures;
(xiii) all Goods;
(xiv) all General Intangibles;
(xv) all Health-Care-Insurance Receivables;
(xvi) all Instruments;
(xvii) all Inventory;
(xviii) all Investment Property;
(xix) all Letter-of-Credit Rights;
(xx) all Letters of Credit;
(xxi) all Patents;
(xxii) all Patent Licenses;
(xxiii) all Payment Intangibles;
(xxiv) all Promissory Note(s);
(xxv) all Software;
(xxvi) all Supporting Obligations;
(xxvii) all Tangible Chattel Paper;
(xxviii) all Trademarks;
(xxix) all Trademark Licenses; and
(xxxii)   to the extent not otherwise included, all Proceeds (including condemnation proceeds), all Accessions and additions thereto and all substitutions and replacements therefore and products of any and all of the foregoing.

 

  14

 

 

SCHEDULE 2

(Description of Real Property)

 

This is Schedule 2 to the Security Agreement dated effective July _____   , 2010 between CELSIUS HOLDINGS, INC., a Nevada corporation, authorized to do business in Florida as CELSIUS PRODUCTS HOLDINGS, INC. (hereinafter called "Debtor") and CD FINANCIAL, LLC, a Florida limited liability company (hereinafter called "Secured Party").

 

NONE

  15

 

 

 

EXECUTION COPY

 

AMENDMENT TO LOAN AND SECURITY AGREEMENT

 

This Amendment to Loan and Security Agreement, dated April 16, 2015 (the “ Amendment ”), amends and modifies that certain Loan and Security Agreement, dated as July 12, 2010 (the “Loan Agreement”), between CELSIUS HOLDINGS, INC . , a Nevada corporation authorized to do business as Celsius Products Holdings, Inc. (“ Borrower ”), and CD FINANCIAL, LLC, a Florida limited liability company (“the “ Lender ”).

 

Preliminary Statements

 

A.           Pursuant to the Loan Agreement, Borrower was authorized to borrow, on a non-revolving basis, up to $3,000,000 and in connection therewith entered in to a Promissory Note, of even date therewith (the “ Original Note ”).

 

B.           Subsequent to entering into the Loan Agreement and Original Note, Borrower and Lender entered into numerous amendments and restatements of the Original Note (collectively, the “ Note ”) increasing the principal amount available for borrowings under the Loan Agreement and Note to $9,800,000 and extending the Maturity Date to December 31, 2016.

 

C.           As of the date hereof, the principal amount of $8,800,000 is due and owing by Borrower to Lender under the Note.

 

D.           Pursuant to the Loan Agreement, amounts outstanding under the Loan Agreement and Note are secured by the grant by Borrower of a blanket lien and encumbrance on the Borrower’s assets.

 

E.           As a condition to the consummation of the sale by Borrower of up to $11,500,000 of equity securities pursuant to the terms and conditions of a Common Stock Purchase Agreement, dated as of the date hereof, among the Borrower and the various purchasers thereunder, the Borrower is required to cause the amendment of the Loan Agreement and Note for purposes of (i) permanently reducing the principal amount available for borrowing under the Loan Agreement and Note from $9,800,000 to $4,500,000 and (ii) extend the maturity date of Loan Agreement and Note to January 2, 2020.

 

F.           In order to accomplish the foregoing, Borrower and Lender have agreed that contemporaneously with the execution of this Amendment, Borrower shall pay Lender $300,000 and cause the conversion of $4,000,000 principal amount outstanding to be converted into shares of newly created Series D Convertible Preferred Stock of the Borrower (the “ Series D Preferred Stock ”), in accordance with the terms and conditions herein described.

 

G.           Other than as described in this Amendment, the terms and conditions of the Loan Agreement and Note shall remain in full force and effect.

 

H.           The Borrower and Lender desire to amend the Loan Agreement and Note in accordance with the foregoing.

 

 

 

 

Agreement

 

FOR AND IN CONSIDERATION of the mutual covenants and agreements set forth in this Amendment, and for other good and valuable consideration, the receipt, and sufficiency of which are hereby acknowledged, the parties do hereby agree as follows:

 

1.            Preliminary Statements .  The foregoing Preliminary Statements are confirmed by the parties as true and correct and are incorporated herein by reference.  The Preliminary Statements are a substantive part of this Amendment.

 

2.            Payments and Conversion; Reduction of Borrowing Cap.

 

a.            Contemporaneously with the execution of this Amendment,

 

i.            the Borrower shall pay Lender $300,000 to be applied to reduce the principal balance owed under the Note; and

 

ii.         the Lender shall convert $4,000,000 of the outstanding principal amount of the Note into 4,000 shares (the “ Preferred Shares ”) of the Borrower’s Series D Preferred Stock.  A copy of the Certificate of Designation with respect to the Series D Preferred Stock and a copy of the certificate representing the Preferred Shares are attached hereto as Exhibits A and B, respectively.   The foregoing conversion shall be deemed a payment by Borrower of $4,000,000 of the outstanding principal amount of the Note in full.

 

b.           Following the payment and conversion referred to in subsection (a) above, the maximum borrowing available to Borrower under the Loan Agreement will be permanently reduced to $4,500,000.

 

3.            Amended and Restated Promissory Note .  In connection with the payment and conversion described in Section 2 above, contemporaneously with the execution hereof, Borrower shall execute and deliver to Lender an Amended and Restated Promissory Note, a copy of which is attached hereto as Exhibit C (the “ A&R Note ”).  Pursuant to the A&R Note, the principal amount thereof plus accrued and unpaid interest thereon shall become due and payable on January 2, 2020 (the “ Maturity Date ”).  In no event shall the Borrower’s execution and delivery of the A&R Note constitute a repayment, satisfaction or novation of the Note.

 

  2  

 

 

4.            No Waiver .  The execution, delivery and performance of this Amendment by the Lender and the acceptance by Lender of the performance of the Borrower under this Amendment (a) shall not constitute a waiver or release by Lender of any default that may now or hereafter exist under the Loan Agreement and Note (including the A&R Note), and (b) shall be without prejudice to, and is not a waiver or release of, Lender’s rights at any time in the future to exercise any and all rights conferred upon Lender by the Loan Agreement or otherwise at law or in equity, including, but not limited to, the right to institute foreclosure proceedings against any collateral and/or institute collection proceedings against the Borrower. The Borrower acknowledges and agrees that the amounts payable under the A&R Note are payable without defense, offset, withholding, counterclaim, or deduction of any kind. The Borrower hereby further acknowledges and agrees that:  (i) it does not have any claim or cause of action against the Lender in connection with the Note, the A&R Note, the Loan Agreement, this Amendment or otherwise, and (ii) the Lender has heretofore properly performed and satisfied in a timely manner all of its obligations to the Borrower that are required to have been performed on or prior to the date hereof.

 

5.            Conditions Precedent .  Lender’s willingness to enter into this Amendment, and the effectiveness hereof, is subject to following:

 

(a)          Borrower shall have delivered to Lender an executed copy of this Amendment;

 

(b)          Borrower shall have executed and delivered the A&R Note to Lender;

 

(c)          Borrower shall have delivered to Lender a certificate representing the Preferred Shares;

 

(d)          Borrower shall have delivered a copy of the resolutions authorizing the execution, delivery and performance of this Amendment;

 

(e)          The representations and warranties of the Borrower contained herein shall be true, correct and complete in all material respects; and

 

(f)           No default under the Loan Agreement and Note shall have occurred and be continuing.

 

6.            Acknowledgement of Security Interest .  Borrower acknowledges the validity of Lender’s security interest in the Collateral (as defined in the Loan Agreement) and acknowledges and agrees that the Collateral shall secure the indebtedness as evidenced by the A&R Note.

 

7.            Representations and Warranties .  In order to induce the Lender to execute, deliver and perform this Amendment, Borrower represents and warrants to the Lender as follows:

 

a.            Borrower is a corporation, duly incorporated, validly existing and in good standing under the laws of the State of Nevada, with the requisite corporate power and authority to own and use its properties and assets and to carry on its business as currently conducted.

 

  3  

 

 

b.           Borrower has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Amendment, and otherwise to carry out its obligations hereunder.  The execution and delivery of this Amendment by Borrower and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary action on the part of Borrower and no further action is required by Borrower.  This Amendment has been duly executed by Borrower and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligations of Borrower enforceable against Borrower in accordance with its terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors’ rights; and (b) as limited by general principles of equity that restrict the availability of equitable remedies.

 

c.           The Preferred Shares are duly authorized, and when issued and paid for in accordance with the terms hereof, shall be duly and validly issued, fully paid and nonassessable, and free and clear of all liens, encumbrances and rights of first refusal of any kind.  Based in part upon the representations of Lender set forth in Section 8 below, the Preferred Shares will be issued in compliance with all applicable federal and state securities laws.  

 

d.           The Borrower’s execution, delivery and performance of this Amendment and the consummation by Borrower of the transactions contemplated hereby do not and will not (i) conflict with or violate any provision of Borrower’s Articles of Incorporation or bylaws (each as amended through the date hereof); (ii) conflict with, or constitute a default (or an event which with notice or lapse of time, or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time, or both) of, any agreement, credit facility, indenture or instrument (evidencing an the Company debt or otherwise) to which Borrower is a party or by which any property or asset of Borrower is bound or affected; or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which Borrower is subject (including federal and state securities laws and regulations), or by which any property or asset of Borrower is bound or affected, except in the case of each of clauses (ii) and (iii), as could not, individually or in the aggregate, reasonably be expected to result in a material adverse effect.

 

e.            Borrower is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other U.S. or foreign federal, state, local or other governmental authority or other person in connection with the execution, delivery and performance by Borrower of this Amendment, other than filings which may be required under federal and state securities laws.

 

  4  

 

 

8.            Representations and Warranties of the Lender .  The Lender hereby represents and warrants to Borrower as follows:

 

a .             Lender has all necessary power and authority (corporate or otherwise) to execute and deliver this Amendment and to carry out its provisions.  All action on Lender’s part required for the lawful execution and delivery of this Amendment has been taken.  Upon its execution and delivery, this Amendment will be a valid and binding obligation of Lender, enforceable in accordance with its terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors’ rights; and (b) as limited by general principles of equity that restrict the availability of equitable remedies.

 

b.            Lender is acquiring the Preferred Shares for the Lender’s own account.  Lender is acquiring the Preferred Shares for investment purposes only and not with a view to or for distributing or reselling the Preferred Shares or any part thereof or interest therein, without prejudice, however, to Lender’s right at all times to sell or otherwise dispose of all or any part of the Preferred Shares pursuant to an effective registration statement under the Securities Act of 1933, as amended (the “Securities Act” ) and in compliance with applicable state securities laws or under an exemption from such registration.

 

c.            Lender is an “accredited investor” as defined in Rule 501(a) under the Securities Act.

 

d.            Lender has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Preferred Shares, and has so evaluated the merits and risks of such investment.

 

e.            Lender is able to bear the economic risk of an investment in the Preferred Shares and, at the present time, is able to afford a complete loss of such investment.

 

f.             Lender acknowledges that it has been afforded (i) the opportunity to ask such questions as Lender has deemed necessary of, and to receive answers from, representatives of Borrower concerning the terms and conditions of the issuance of the Preferred Shares and the merits and risks of investing in the Preferred Shares; (ii) access to information about Borrower and Borrower’s financial condition, results of operations, business, properties, management and prospects sufficient to enable Lender to evaluate the investment; and (iii) the opportunity to obtain such additional information that Borrower possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment and to verify the accuracy and completeness of the information contained herein.

 

g.            Lender understands and acknowledges that (i) the Preferred Shares are being issued to Lender without registration under the Securities Act and applicable state securities laws in a private placement that is exempt from the registration provisions of the Securities Act and applicable state securities laws; and (ii) the availability of such exemption depends in part on, and Borrower will rely upon the accuracy and truthfulness of, the foregoing Lender representations and Lender hereby consents to such reliance.

 

  5  

 

 

h.            Lender understands that the certificates evidencing the Preferred Shares will bear the following or similar legends for as long as required by the Securities Act and applicable state securities laws:

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.  NO SUCH TRANSFER MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933 .

 

THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR THE SECURITIES LAWS OF ANY STATE AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS.  THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THE OFFER AND SALE OF THE SECURITIES. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.”

 

9.            Miscellaneous .  

 

a.            In the event of any conflict or inconsistency between the terms of this Amendment and the Loan Agreement, this Amendment shall govern and prevail.

 

b.            This Amendment shall be binding upon and shall inure to the benefit of the parties hereto, their heirs, executors, administrators, successors, legal representatives, and assigns.

 

c.            The headings of sections and paragraphs in this Amendment are for convenience of reference only and shall not in any way affect the interpretation or construction of this Amendment.  

 

d.            THIS AMENDMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF FLORIDA WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES THAT MAY CAUSE THE LAWS OF ANOTHER JURISDICTION TO APPLY, AND FEDERAL LAW, AS APPLICABLE.  THE PARTIES AGREE THAT VENUE OF ANY ACTION OR CLAIM SHALL BE IN ANY FEDERAL OR STATE COURT LOCATED IN PALM BEACH COUNTY, FLORIDA.

 

  6  

 

 

e.            The representations and warranties of the parties in this Agreement shall survive the execution and delivery hereof.

 

f.             The terms and conditions set forth in this Amendment are the product of joint draftsmanship by all parties, each being represented by counsel, and any ambiguities in this Amendment or any documentation prepared pursuant to or in connection with this Amendment shall not be construed against any of the parties because of draftsmanship.

 

g.            Time is of the essence of this Agreement.  

 

h.            No provision of this Amendment shall be construed against or interpreted to the disadvantage of any party hereto by any court or other governmental or judicial authority by reason of such party’s having or being deemed to have structured, drafted or dictated such provision.

 

10.          THIS AMENDMENT, THE A&R NOTE AND THE LOAN AGREEMENT REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF AND THEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR ORAL OR WRITTEN, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS AMONG THE PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.

 

11.          This Amendment may be executed in one or more counterparts (including by way of electronic transmission), each of which will be deemed to be an original copy of this Amendment and all of which, when taken together, will be deemed to constitute one and the same agreement.  Delivery of an executed counterpart of a signature page to this Amendment by facsimile shall be effective as delivery of a manually executed counterpart of this Amendment. In making proof of this Amendment, it shall not be necessary to produce or account for more than one such counterpart executed by the party to be charged.

 

[ Signature page follows ]

 

  7  

 

 

IN WITNESS WHEREOF , the undersigned have duly executed this Agreement as of the day and year first above written.

 

  BORROWER:
   
  CELSIUS HOLDINGS, INC.
   
  By:  
  Name: Gerry David
  Title: CEO
   
  LENDER:
   
  CD FINANCIAL, LLC
   
  By:  
  Name: William H. Milmoe
  Title: Manager

 

  8  

Exhibit 10.2

     

INVESTORS’ RIGHTS AGREEMENT

 

 

 

  

INVESTORS’ RIGHTS AGREEMENT

 

THIS INVESTORS’ RIGHTS AGREEMENT (this “ Agreement ”), is made as of the 20 th day of April, 2015, by and among Celsius Holdings, Inc., a Nevada corporation (the “ Company ”), each of the investors listed on Schedule A hereto, each of which is referred to in this Agreement as an “ Investor ,” and each of the stockholders listed on Schedule B hereto, each of whom is referred to herein as a “ Key Holder .”

 

RECITALS

 

WHEREAS , the Company and the Investors are parties to the Common Stock Purchase Agreement of even date herewith (the “ Purchase Agreement ”); and

 

WHEREAS , in order to induce the Company to enter into the Purchase Agreement and to induce the Investors to invest funds in the Company pursuant to the Purchase Agreement, the Investors and the Company hereby agree that this Agreement shall govern the rights of the Investors to cause the Company to register shares of Common Stock issuable to the Investors, to receive certain information from the Company, and to participate in future equity offerings by the Company, and shall govern certain other matters as set forth in this Agreement.

 

Agreement

 

NOW, THEREFORE , the parties hereby agree as follows:

 

1.           Definitions . For purposes of this Agreement, in addition to capitalized terms otherwise defined herein:

 

1.1           “ Affiliate ” means, with respect to any specified Person, any other Person who, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with such Person, including without limitation any general partner, managing member, officer or director of such Person or any venture capital fund now or hereafter existing that is controlled by one or more general partners or managing members of, or shares the same management company with, such Person. For the avoidance of doubt, Charmnew Limited and Grieg International Limited (together, “ Horizons ”) and their respective beneficial owners shall all be deemed Affiliates of one another.

 

1.2           “ Common Stock ” means shares of the Company’s common stock, par value $0.001 per share.

 

 

 

  

1.3           “ Change of Control ” means the existence, occurrence, public announcement or entering into an agreement contemplating of any of the following: (a) the sale, conveyance or disposition of all or substantially all of the assets of the Company to any Person; (b) the sale, conveyance or disposition of all or substantially all of the assets of any Company subsidiary to a Person other than the Company or another Company subsidiary; (c) the effectuation of a transaction or series of transactions in which more than fifty percent (50%) of the equity or voting power of the Company is disposed of; (d) the effectuation of a transaction or series of transactions in which any of the equity or voting power of any Company subsidiary is disposed to a Person other than the Company or another Company subsidiary; (e) the consolidation, merger or other business combination of the Company with or into any other entity, immediately following which the prior stockholders of the Company fail to own, directly or indirectly, at least fifty percent (50%) of the surviving entity; (f) the consolidation, merger or other business combination of any Company subsidiary with or into any other entity other than the Company or another Company subsidiary; (g) a transaction or series of transactions in which any Person or group (other than pursuant to an agreement between current affiliates of the Company) acquires more than fifty percent (50%) of the equity or voting power of the Company; and (h) a transaction or series of transactions in which any Person or group (other than the Company or a Company subsidiary) acquires any of the voting equity of a Company subsidiary.

 

1.4           “ Damages ” means any loss, damage, claim or liability (joint or several) to which a party hereto may become subject under the Securities Act, the Exchange Act, or other federal or state law, insofar as such loss, damage, claim or liability (or any action in respect thereof) arises out of or is based upon: (i) any untrue statement or alleged untrue statement of a material fact contained in any registration statement of the Company, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto; (ii) an omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading; or (iii) any violation or alleged violation by the indemnifying party (or any of its agents or Affiliates) of the Securities Act, the Exchange Act, any state securities law, or any rule or regulation promulgated under the Securities Act, the Exchange Act, or any state securities law.

 

1.5           “ Derivative Securities ” means any securities or rights convertible into, or exercisable or exchangeable for (in each case, directly or indirectly), Common Stock, including options and warrants.

 

1.6           “ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

1.7            Excluded Registration ” means (i) a registration relating to the sale of securities to employees of the Company or a subsidiary pursuant to a stock option, stock purchase, or similar plan; (ii) a registration relating to an SEC Rule 145 transaction; (iii) a registration on any form that does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities; or (iv) a registration in which the only Common Stock being registered is Common Stock issuable upon conversion of debt securities that are also being registered.

 

1.8           “ Form S-1 ” means such form under the Securities Act as in effect on the date hereof or any successor registration form under the Securities Act subsequently adopted by the SEC.

 

  2  

 

  

1.9           “ Form S-3 ” means such form under the Securities Act as in effect on the date hereof or any registration form under the Securities Act subsequently adopted by the SEC that permits incorporation of substantial information by reference to other documents filed by the Company with the SEC.

 

1.10         “ GAAP ” means generally accepted accounting principles in the United States.

 

1.11         “ Holder ” means any holder of Registrable Securities who is a party to this Agreement.

 

1.12         “ Immediate Family Member ” means a child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including, adoptive relationships, of a natural person referred to herein.

 

1.13         “ Initiating Holders ” means, collectively, Holders who properly initiate a registration request under this Agreement.

 

1.14         “ Offering ” means the Company’s first underwritten public offering of its Common Stock under the Securities Act after the date hereof.

 

1.15         “ Investor Directors ” means the directors of the Company that the Investors are entitled to elect pursuant to Section 5.11 hereof and designated as such by the Investors.

 

1.16          Key Employee ” means any executive-level employee (including, division director and vice president-level positions) as well as any employee who, either alone or in concert with others, develops, invents, programs, or designs any Company Intellectual Property (as defined in the Purchase Agreement).

 

1.17         “ Major Investor ” means any Investor that, individually, or together with such Investor’s Affiliates, holds at least 112,000 shares of Registrable Securities (as adjusted for any stock split, stock dividend, combination, or other recapitalization effected after the date hereof).

 

1.18         “ New Securities ” means, collectively, equity securities of the Company, whether or not currently authorized, as well as rights, options, or warrants to purchase such equity securities, or securities of any type whatsoever that are, or may become, convertible or exchangeable into or exercisable for such equity securities.

 

1.19          Person ” means any individual, corporation, partnership, trust, limited liability company, association or other entity .

 

  3  

 

  

1.20         “ Registrable Securities ” means (i) the Common Stock initially issued to the Investors pursuant to the Purchase Agreement; (ii) the Common Stock issued upon conversion of the convertible notes acquired by the Investors pursuant to that certain Secondary Convertible Promissory Note Purchase Agreement dated April 20, 2015; (iii) the shares of Common Stock held by CD Financial, LLC or its Affiliates (“ CDF ”); (iv) any Common Stock, or any Common Stock issued or issuable (directly or indirectly) upon conversion and/or exercise of any other securities of the Company, held by the Investors or CDF; and (v) any Common Stock issued as (or issuable upon the conversion or exercise of any warrant right, or other security that is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, the shares referenced in clauses (i), (ii) , (iii) and (iv) above; excluding in all cases, however, any Registrable Securities sold by a Person in a transaction in which the applicable rights under this Agreement are not assigned pursuant to Section 6.1 , and excluding for purposes of Section 2 any shares for which registration rights have terminated pursuant to Section 2.13 of this Agreement.

 

1.21         “ Registrable Securities then outstanding ” means the number of shares determined by adding the number of shares of outstanding Common Stock that are Registrable Securities and the number of shares of Common Stock issuable (directly or indirectly) pursuant to then exercisable and/or convertible securities that are Registrable Securities.

 

1.22         “ Restricted Securities ” means the securities of the Company required to be notated with the legend set forth in Subsection 2.12(b) hereof.

 

1.23         “ SEC ” means the Securities and Exchange Commission.

 

1.24         “ SEC Rule 144 ” means Rule 144 promulgated by the SEC under the Securities Act.

 

1.25         “ SEC Rule 145 ” means Rule 145 promulgated by the SEC under the Securities Act.

 

1.26         “ Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

1.27         “ Selling Expenses ” means all underwriting discounts, selling commissions, and stock transfer taxes applicable to the sale of Registrable Securities, and fees and disbursements of counsel for any Holder, except for the fees and disbursements of the Selling Holder Counsel borne and paid by the Company as provided in Section 2.6 .

 

2.           Registration Rights . The Company covenants and agrees as follows:

 

2.1            Demand Registration .

  

(a)           Form S-1 Demand . If at any time after the date of this Agreement, the Company receives a request from Holders of at least twenty-five percent (25%) of the Registrable Securities then outstanding that the Company file a Form S-1 registration statement with respect to at least twenty-five percent (25%) of the Registrable Securities then outstanding (or a lesser percent if the anticipated aggregate offering price, net of Selling Expenses, would exceed $10 million), then the Company shall (x) within ten (10) days after the date such request is given, give notice thereof (the “ Demand Notice ”) to all Holders other than the Initiating Holders; and (y) as soon as practicable, and in any event within sixty (60) days after the date such request is given by the Initiating Holders, file a Form S-1 registration statement under the Securities Act covering all Registrable Securities that the Initiating Holders requested to be registered and any additional Registrable Securities requested to be included in such registration by any other Holders, as specified by notice given by each such Holder to the Company within twenty (20) days of the date the Demand Notice is given, and in each case, subject to the limitations of Subsection 2.1(c) and Section 2.3 .

 

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(b)           Form S-3 Demand . If at any time when it is eligible to use a Form S-3 registration statement, the Company receives a request from Holders of at least ten percent (10%) of the Registrable Securities then outstanding that the Company file a Form S-3 registration statement with respect to outstanding Registrable Securities of such Holders having an anticipated aggregate offering price, net of Selling Expenses, of at least $5 million, then the Company shall (i) within ten (10) days after the date such request is given, give a Demand Notice to all Holders other than the Initiating Holders; and (ii) as soon as practicable, and in any event within forty-five (45) days after the date such request is given by the Initiating Holders, or ninety (90) days after the date such request is given, if made within sixty (60) days after the Company’s fiscal year end, file a Form S-3 registration statement under the Securities Act covering all Registrable Securities requested to be included in such registration by any other Holders, as specified by notice given by each such Holder to the Company within twenty (20) days of the date the Demand Notice is given, and in each case, subject to the limitations of Subsection 2.1(c) and Section 2.3 .

 

(c)           Notwithstanding the foregoing obligations, if the Company furnishes to Holders requesting a registration pursuant to this Section 2.1 a certificate signed by the Company’s chief executive officer stating that in the good faith judgment of the Company’s Board of Directors it would be materially detrimental to the Company and its stockholders for such registration statement to either become effective or remain effective for as long as such registration statement otherwise would be required to remain effective, because such action would (i) materially interfere with a significant acquisition, corporate reorganization, or other similar transaction involving the Company; (ii) require premature disclosure of material information that the Company has a bona fide business purpose for preserving as confidential; or (iii) render the Company unable to comply with requirements under the Securities Act or Exchange Act, then the Company shall have the right to defer taking action with respect to such filing for a period of not more than one hundred twenty (120) days after the request of the Initiating Holders is given; provided , however , that the Company may not invoke this right more than once in any twelve (12) month period; and provided further that the Company shall not register any securities for its own account or that of any other stockholder during such one hundred twenty (120) day period other than an Excluded Registration.

 

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(d)          The Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to Subsection 2.1(a) : (i) during the period that is sixty (60) days before the Company’s good faith estimate of the date of filing of, and ending on a date that is one hundred eighty (180) days after the effective date of, a Company-initiated registration, provided that the Company is actively employing in good faith commercially reasonable efforts to cause such registration statement to become effective; (ii) after the Company has effected two registrations pursuant to Subsection 2.1(a) ; or (iii) if the Initiating Holders propose to dispose of shares of Registrable Securities that may be immediately registered on Form S-3 pursuant to a request made pursuant to Subsection 2.1(b) . The Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to Subsection 2.1(b) during the period that is thirty (30) days before the Company’s good faith estimate of the date of filing of, and ending on a date that is ninety (90) days after the effective date of, a Company-initiated registration, provided that the Company is actively employing in good faith commercially reasonable efforts to cause such registration statement to become effective. A registration shall not be counted as “effected” for purposes of this Subsection 2.1(d) until such time as the applicable registration statement has been declared effective by the SEC, unless the Initiating Holders withdraw their request for such registration, elect not to pay the registration expenses therefor, and forfeit their right to one demand registration statement pursuant to Section 2.6 , in which case such withdrawn registration statement shall be counted as “effected” for purposes of this Subsection 2.1(d) .

 

2.2            Company Registration . If the Company proposes to register (including, for this purpose, a registration effected by the Company for stockholders other than the Holders) any of its securities under the Securities Act in connection with the public offering of such securities solely for cash (other than in an Excluded Registration), the Company shall, at such time, promptly give each Holder notice of such registration. Upon the request of each Holder given within twenty (20) days after such notice is given by the Company, the Company shall, subject to the provisions of Section 2.3 , cause to be registered all of the Registrable Securities that each such Holder has requested to be included in such registration. The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 2.2 before the effective date of such registration, whether or not any Holder has elected to include Registrable Securities in such registration. The expenses (other than Selling Expenses) of such withdrawn registration shall be borne by the Company in accordance with Section 2.6 .

 

2.3            Underwriting Requirements .

 

(a)          If, pursuant to Section 2.1 , the Initiating Holders intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to Section 2.1 , and the Company shall include such information in the Demand Notice. The underwriter(s) will be selected by the Initiating Holders, subject only to the reasonable approval of the Company. In such event, the right of any Holder to include such Holder’s Registrable Securities in such registration shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall (together with the Company as provided in Subsection 2.4(e) ) enter into an underwriting agreement in customary form with the underwriter(s) selected for such underwriting. Notwithstanding any other provision of this Section 2.3 , if the underwriter(s) advise(s) the Initiating Holders in writing that marketing factors require a limitation on the number of shares to be underwritten, then the Initiating Holders shall so advise all Holders of Registrable Securities that otherwise would be underwritten pursuant hereto, and the number of Registrable Securities that may be included in the underwriting shall be allocated among such Holders of Registrable Securities, including the Initiating Holders, in proportion (as nearly as practicable) to the number of Registrable Securities owned by each Holder or in such other proportion as shall mutually be agreed to by all such selling Holders; provided , however , that the number of Registrable Securities held by the Holders to be included in such underwriting shall not be reduced unless all other securities are first entirely excluded from the underwriting.

 

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(b)          In connection with any offering involving an underwriting of shares of the Company’s capital stock pursuant to Section 2.2 , the Company shall not be required to include any of the Holders’ Registrable Securities in such underwriting unless the Holders accept the terms of the underwriting as agreed upon between the Company and its underwriters, and then only in such quantity as the underwriters in their sole discretion determine will not jeopardize the success of the offering by the Company. If the total number of securities, including Registrable Securities, requested by stockholders to be included in such offering exceeds the number of securities to be sold (other than by the Company) that the underwriters in their reasonable discretion determine is compatible with the success of the offering, then the Company shall be required to include in the offering only that number of such securities, including Registrable Securities, which the underwriters and the Company in their sole discretion determine will not jeopardize the success of the offering. If the underwriters determine that less than all of the Registrable Securities requested to be registered can be included in such offering, then the Registrable Securities that are included in such offering shall be allocated among the selling Holders in proportion (as nearly as practicable to) the number of Registrable Securities owned by each selling Holder or in such other proportions as shall mutually be agreed to by all such selling Holders. Notwithstanding the foregoing, in no event shall (i) the number of Registrable Securities included in the offering be reduced unless all other securities (other than securities to be sold by the Company) are first entirely excluded from the offering, or (ii) the number of Registrable Securities included in the offering be reduced below thirty percent (30%) of the total number of securities included in such offering. For purposes of the provision in this Subsection 2.3(b) concerning apportionment, for any selling Holder that is a partnership, limited liability company, or corporation, the partners, members, retired partners, retired members, stockholders, and Affiliates of such Holder, or the estates and Immediate Family Members of any such partners, retired partners, members, and retired members and any trusts for the benefit of any of the foregoing Persons, shall be deemed to be a single “selling Holder,” and any pro rata reduction with respect to such “selling Holder” shall be based upon the aggregate number of Registrable Securities owned by all Persons included in such “selling Holder,” as defined in this sentence.

 

(c)          For purposes of Section 2.1 , a registration shall not be counted as “effected” if, as a result of an exercise of the underwriter’s cutback provisions in Subsection 2.3(a) , fewer than fifty percent (50%) of the total number of Registrable Securities that Holders have requested to be included in such registration statement are actually included.

 

2.4            Obligations of the Company . Whenever required under this Section 2 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible:

 

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(a)          prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its commercially reasonable efforts to cause such registration statement to become effective and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for a period of up to one hundred twenty (120) days or, if earlier, until the distribution contemplated in the registration statement has been completed; provided , however , that (i) such one hundred twenty (120) day period shall be extended for a period of time equal to the period the Holder refrains, at the request of an underwriter of Common Stock (or other securities) of the Company, from selling any securities included in such registration, and (ii) in the case of any registration of Registrable Securities on Form S-3 that are intended to be offered on a continuous or delayed basis, subject to compliance with applicable SEC rules, such one hundred twenty (120) day period shall be extended for up to thirty (30) days, if necessary, to keep the registration statement effective until all such Registrable Securities are sold;

 

(b)          prepare and file with the SEC such amendments and supplements to such registration statement, and the prospectus used in connection with such registration statement, as may be necessary to comply with the Securities Act in order to enable the disposition of all securities covered by such registration statement;

 

(c)          furnish to the selling Holders such numbers of copies of a prospectus, including a preliminary prospectus, as required by the Securities Act, and such other documents as the Holders may reasonably request in order to facilitate their disposition of their Registrable Securities;

 

(d)          use its commercially reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or blue-sky laws of such jurisdictions as shall be reasonably requested by the selling Holders; provided that the Company shall not be required to qualify to do business or to file a general consent to service of process in any such states or jurisdictions, unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act;

 

(e)          in the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the underwriter(s) of such offering;

 

(f)          use its commercially reasonable efforts to cause all such Registrable Securities covered by such registration statement to be listed on a national securities exchange or trading system and each securities exchange and trading system (if any) on which similar securities issued by the Company are then listed;

 

(g)          provide a transfer agent and registrar for all Registrable Securities registered pursuant to this Agreement and provide a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration;

 

(h)          promptly make available for inspection by the selling Holders, any underwriter(s) participating in any disposition pursuant to such registration statement, and any attorney or accountant or other agent retained by any such underwriter or selected by the selling Holders, all financial and other records, pertinent corporate documents, and properties of the Company, and cause the Company’s officers, directors, employees, and independent accountants to supply all information reasonably requested by any such seller, underwriter, attorney, accountant, or agent, in each case, as necessary or advisable to verify the accuracy of the information in such registration statement and to conduct appropriate due diligence in connection therewith;

 

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(i)          notify each selling Holder, promptly after the Company receives notice thereof, of the time when such registration statement has been declared effective or a supplement to any prospectus forming a part of such registration statement has been filed; and

 

(j)          after such registration statement becomes effective, notify each selling Holder of any request by the SEC that the Company amend or supplement such registration statement or prospectus.

 

In addition, the Company shall ensure that, at all times after any registration statement covering a public offering of securities of the Company under the Securities Act shall have become effective, its insider trading policy shall provide that the Company’s directors may implement a trading program under Rule 10b5-1 of the Exchange Act.

 

2.5            Furnish Information . It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 2 with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as is reasonably required to effect the registration of such Holder’s Registrable Securities.

 

2.6            Expenses of Registration . All expenses (other than Selling Expenses) incurred in connection with registrations, filings, or qualifications pursuant to Section 2 , including all registration, filing, and qualification fees; printers’ and accounting fees; fees and disbursements of counsel for the Company; and the reasonable fees and disbursements of one counsel for the selling Holders up to a maximum of twenty thousand dollars ($20,000) (“ Selling Holder Counsel ”), shall be borne and paid by the Company; provided , however , that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 2.1 if the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Securities to be registered (in which case all selling Holders shall bear such expenses pro rata based upon the number of Registrable Securities that were to be included in the withdrawn registration), unless the Holders of a majority of the Registrable Securities agree to forfeit their right to one registration pursuant to Subsections 2.1(a) or 2.1(b) , as the case may be; provided further that if, at the time of such withdrawal, the Holders shall have learned of a material adverse change in the condition, business, or prospects of the Company from that known to the Holders at the time of their request and have withdrawn the request with reasonable promptness after learning of such information then the Holders shall not be required to pay any of such expenses and shall not forfeit their right to one registration pursuant to Subsections 2.1(a) or 2.1(b) . All Selling Expenses relating to Registrable Securities registered pursuant to this Section 2 shall be borne and paid by the Holders pro rata on the basis of the number of Registrable Securities registered on their behalf.

 

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2.7            Delay of Registration . No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any registration pursuant to this Agreement as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 2 .

 

2.8            Indemnification . If any Registrable Securities are included in a registration statement under this Section 2 :

 

(a)          To the extent permitted by law, the Company will indemnify and hold harmless each selling Holder, and the partners, members, officers, directors, and stockholders of each such Holder; legal counsel and accountants for each such Holder; any underwriter (as defined in the Securities Act) for each such Holder; and each Person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, against any Damages, and the Company will pay to each such Holder, underwriter, controlling Person, or other aforementioned Person any legal or other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are incurred; provided , however , that the indemnity agreement contained in this Subsection 2.8(a) shall not apply to amounts paid in settlement of any such claim or proceeding if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld, nor shall the Company be liable for any Damages to the extent that they arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of any such Holder, underwriter, controlling Person, or other aforementioned Person expressly for use in connection with such registration.

 

(b)          To the extent permitted by law, each selling Holder, severally and not jointly, will indemnify and hold harmless the Company, and each of its directors, each of its officers who has signed the registration statement, each Person (if any), who controls the Company within the meaning of the Securities Act, legal counsel and accountants for the Company, any underwriter (as defined in the Securities Act), any other Holder selling securities in such registration statement, and any controlling Person of any such underwriter or other Holder, against any Damages, in each case only to the extent that such Damages arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of such selling Holder expressly for use in connection with such registration; and each such selling Holder will pay to the Company and each other aforementioned Person any legal or other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are incurred; provided , however , that the indemnity agreement contained in this Subsection 2.8(b) shall not apply to amounts paid in settlement of any such claim or proceeding if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; and provided further that in no event shall the aggregate amounts payable by any Holder by way of indemnity or contribution under Subsections 2.8(b) and 2.8(d) exceed the proceeds from the offering received by such Holder (net of any Selling Expenses paid by such Holder), except in the case of fraud or willful misconduct by such Holder.

 

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(c)          Promptly after receipt by an indemnified party under this Section 2.8 of notice of the commencement of any action (including any governmental action) for which a party may be entitled to indemnification hereunder, such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 2.8 , give the indemnifying party notice of the commencement thereof. The indemnifying party shall have the right to participate in such action and, to the extent the indemnifying party so desires, participate jointly with any other indemnifying party to which notice has been given, and to assume the defense thereof with counsel mutually satisfactory to the parties; provided , however , that an indemnified party (together with all other indemnified parties that may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such action.

 

(d)          To provide for just and equitable contribution to joint liability under the Securities Act in any case in which either: (i) any party otherwise entitled to indemnification hereunder makes a claim for indemnification pursuant to this Section 2.8 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case, notwithstanding the fact that this Section 2.8 provides for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of any party hereto for which indemnification is provided under this Section 2.8 , then, and in each such case, such parties will contribute to the aggregate losses, claims, damages, liabilities, or expenses to which they may be subject (after contribution from others) in such proportion as is appropriate to reflect the relative fault of each of the indemnifying party and the indemnified party in connection with the statements, omissions, or other actions that resulted in such loss, claim, damage, liability, or expense, as well as to reflect any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or allegedly untrue statement of a material fact, or the omission or alleged omission of a material fact, relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission; provided , however , that, in any such case (x) no Holder will be required to contribute any amount in excess of the public offering price of all such Registrable Securities offered and sold by such Holder pursuant to such registration statement, and (y) no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation; and provided further that in no event shall a Holder’s liability pursuant to this Subsection 2.8(d) , when combined with the amounts paid or payable by such Holder pursuant to Subsection 2.8(b) , exceed the proceeds from the offering received by such Holder (net of any Selling Expenses paid by such Holder), except in the case of willful misconduct or fraud by such Holder.

 

(e)          Unless otherwise superseded by an underwriting agreement entered into in connection with the underwritten public offering, the obligations of the Company and Holders under this Section 2.8 shall survive the completion of any offering of Registrable Securities in a registration under this Section 2 , and otherwise shall survive the termination of this Agreement.

 

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2.9            Reports Under Exchange Act . With a view to making available to the Holders the benefits of SEC Rule 144 and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company shall:

 

(a)          use its reasonable best efforts to make and keep available adequate current public information, as those terms are understood and defined in SEC Rule 144, at all times after the effective date of the first registration statement filed by the Company and declared effective by the SEC under the Securities Act or filing with the SEC and effectiveness of a Form 10 registration statement under the Exchange Act, following the date of this Agreement;

 

(b)          use commercially reasonable efforts to file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act (at any time after the Company has become subject to such reporting requirements); and

 

(c)          use its reasonable best efforts to furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) to the extent accurate, a written statement by the Company that it has complied with the reporting requirements of SEC Rule 144 pursuant to Subsection 2.9(a) above, the Securities Act, and the Exchange Act (at any time after the Company has become subject to such reporting requirements), or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3 (at any time after the Company so qualifies); and (ii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC that permits the selling of any such securities without registration (at any time after the Company has become subject to the reporting requirements under the Exchange Act) or pursuant to Form S-3 (at any time after the Company so qualifies to use such form).

 

2.10          Limitations on Subsequent Registration Rights . From and after the date of this Agreement, the Company shall not, without the prior written consent of the Holders of at least sixty-six and two-thirds (66 2/3) of the Registrable Securities then outstanding enter into any agreement with any holder or prospective holder of any securities of the Company that (i) would provide to such holder the right to include securities in any registration on other than either a pro rata basis with respect to the Registrable Securities or on a subordinate basis after all Holders have had the opportunity to include in the registration and offering all shares of Registrable Securities that they wish to so include; or (ii) allow such holder or prospective holder to initiate a demand for registration of any securities held by such holder or prospective holder.

 

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2.11          “Market Stand-off” Agreement . Each Holder hereby agrees that it will not, if requested by the managing underwriter in connection with the Offering, without the prior written consent of the managing underwriter, during the period commencing on the date of the final prospectus relating to the registration by the Company for its own behalf in connection with the Offering of shares of its Common Stock on a registration statement on Form S-1, and ending on the date specified by the Company and the managing underwriter (such period not to exceed one hundred eighty (180) days, or such other period as may be requested by the Company or an underwriter to accommodate regulatory restrictions on (1) the publication or other distribution of research reports, and (2) analyst recommendations and opinions, including, but not limited to, the restrictions contained in FINRA Rule 2711(f)(4) or NYSE Rule 472(f)(4), or any successor provisions or amendments thereto), (i) lend; offer; pledge; sell; contract to sell; sell any option or contract to purchase; purchase any option or contract to sell; grant any option, right, or warrant to purchase; or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable (directly or indirectly) for Common Stock held immediately before the effective date of the registration statement for such offering or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of such securities, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or other securities, in cash, or otherwise. The foregoing provisions of this Section 2.11 shall not apply to the sale of any shares to an underwriter pursuant to an underwriting agreement, or the transfer of any shares to any trust for the direct or indirect benefit of the Holder or the immediate family of the Holder, provided that the trustee of the trust agrees to be bound in writing by the restrictions set forth herein, and provided further that any such transfer shall not involve a disposition for value, and shall be applicable to the Holders only if all officers and directors are subject to the same restrictions and the Company uses commercially reasonable efforts to obtain a similar agreement from all stockholders individually owning more than one percent (1%) of the Company’s outstanding Common Stock. The underwriters in connection with such registration are intended third-party beneficiaries of this Section 2.11 and shall have the right, power and authority to enforce the provisions hereof as though they were a party hereto. Each Holder further agrees to execute such agreements as may be reasonably requested by the underwriters in connection with such registration that are consistent with this Section 2.11 or that are necessary to give further effect thereto.

 

2.12          Restrictions on Transfer .

 

(a)          The Registrable Securities shall not be sold, pledged, or otherwise transferred, and the Company shall not recognize and shall issue stop-transfer instructions to its transfer agent with respect to any such sale, pledge, or transfer, except upon the conditions specified in this Agreement, which conditions are intended to ensure compliance with the provisions of the Securities Act. A transferring Holder will cause any proposed purchaser, pledgee, or transferee of the Registrable Securities held by such Holder to agree to take and hold such securities subject to the provisions and upon the conditions specified in this Agreement.

 

(b)          Each certificate, instrument, or book entry representing (i) the Registrable Securities, and any other securities issued in respect of Registrable Securities, upon any stock split, stock dividend, recapitalization, merger, consolidation, or similar event, shall (unless otherwise permitted by the provisions of Subsection 2.12(c) ) be notated with a legend substantially in the following form:

 

THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH SHARES MAY NOT BE SOLD, PLEDGED, OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR A VALID EXEMPTION FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT.

 

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THE SECURITIES REPRESENTED HEREBY MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.

  

The Holders consent to the Company making a notation in its records and giving instructions to any transfer agent of the Restricted Securities in order to implement the restrictions on transfer set forth in this Section 2.12 .

 

(c)          The holder of such Restricted Securities, by acceptance of ownership thereof, agrees to comply in all respects with the provisions of this Section 2.12 . Before any proposed sale, pledge, or transfer of any Restricted Securities, unless there is in effect a registration statement under the Securities Act covering the proposed transaction, the Holder thereof shall give notice to the Company of such Holder’s intention to effect such sale, pledge, or transfer. Each such notice shall describe the manner and circumstances of the proposed sale, pledge, or transfer in sufficient detail. Each certificate, instrument, or book entry representing the Restricted Securities transferred as above provided shall be notated with, except if such transfer is made pursuant to SEC Rule 144, the appropriate restrictive legend set forth in Subsection 2.12(b) , except that such certificate instrument, or book entry shall not be notated with such restrictive legend if, in the opinion of counsel for such Holder and the Company, such legend is not required in order to establish compliance with any provisions of the Securities Act.

 

2.13          Termination of Registration Rights . The right of any Holder to request registration or inclusion of Registrable Securities in any registration pursuant to Sections 2.1 or 2.2 shall terminate upon the fifth (5 th ) anniversary of the date of this Agreement. Moreover, the registration rights hereunder shall not be exercisable, if at the time thereof, the Registrable Securities may be publicly sold under SEC Rule 144 without restriction.

 

3.           Information Rights .

 

3.1            Delivery of Financial Statements . Upon request of any Major Investor or CDF, the Company shall deliver to such Major Investor or CDF, as the case may be, the following provided that such information is (i) not publicly available and (ii) reasonably necessary to protect or otherwise manage such Major Investor’s or CDF’s, as the case may be, interest in the Company as determined in good faith by such Major Investor or CDF, as the case may be:

 

(a)          as soon as practicable, but in any event within ninety (90) days after the end of each fiscal year of the Company (i) a balance sheet as of the end of such year, (ii) statements of income and of cash flows for such year, and a comparison between (x) the actual amounts as of and for such fiscal year and (y) the comparable amounts for the prior year and as included in the Budget (as defined in Subsection 3.1(d) ) for such year, with an explanation of any material differences between such amounts and a schedule as to the sources and applications of funds for such year, and (iii) a statement of stockholders’ equity as of the end of such year;

 

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(b)          as soon as practicable, but in any event within forty-five (45) days after the end of each of the first three (3) quarters of each fiscal year of the Company, unaudited statements of income and cash flows for such fiscal quarter, and an unaudited balance sheet and a statement of stockholders’ equity as of the end of such fiscal quarter, all prepared in accordance with GAAP (except that such financial statements may (i) be subject to normal year-end audit adjustments; and (ii) not contain all notes thereto that may be required in accordance with GAAP);

 

(c)          as soon as practicable, but in any event within forty-five (45) days after the end of each of the first three (3) quarters of each fiscal year of the Company, a statement showing the number of shares of each class and series of capital stock and securities convertible into or exercisable for shares of capital stock outstanding at the end of the period, the Common Stock issuable upon conversion or exercise of any outstanding securities convertible or exercisable for Common Stock and the exchange ratio or exercise price applicable thereto, and the number of shares of issued stock options and stock options not yet issued but reserved for issuance, if any, all in sufficient detail as to permit such Major Investor or CDF, as the case may be, to calculate their respective percentage equity ownership in the Company, and certified by the chief financial officer or chief executive officer of the Company as being true, complete, and correct;

 

(d)          as soon as practicable, but in any event thirty (30) days before the end of each fiscal year, a budget and business plan for the next fiscal year (collectively, the “ Budget ”), approved by the Board of Directors and prepared on a monthly basis, including balance sheets, income statements, and statements of cash flow for such months and, promptly after prepared, any other budgets or revised budgets prepared by the Company;

 

(e)           copies of all materials sent to the Company’s stockholders at the same time as such materials are delivered to such stockholders and copies of all OTC Pink basic disclosure documents prepared by the Company and all related financial statements and officer certifications when filed with OTC Markets, Inc., provided that such disclosure documents and financial information when filed with OTC Markets, Inc. shall satisfy the information requirements of Sections 3.1 (a), (b) and (c); and

 

(f)          such other publicly available information relating to the financial condition, business, prospects, or corporate affairs of the Company as any such Major Investor or CDF may from time to time reasonably request; provided , however , that the Company shall not be obligated under this Section 3.1 to provide information (i) that the Company reasonably determines in good faith to be a trade secret or confidential information (unless covered by an enforceable confidentiality agreement, in a form acceptable to the Company); or (ii) the disclosure of which would adversely affect the attorney-client privilege between the Company and its counsel.

 

If, for any period, the Company has any subsidiary whose accounts are consolidated with those of the Company, then in respect of such period the financial statements delivered pursuant to the foregoing Sections shall be the consolidated and consolidating financial statements of the Company and all such consolidated subsidiaries.

 

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Notwithstanding anything else in this Section 3.1 to the contrary, the Company may cease providing the information set forth in this Section 3.1 during the period starting with the date thirty (30) days before the Company’s good-faith estimate of the date of filing of a registration statement if it reasonably concludes it must do so to comply with the SEC rules applicable to such registration statement and related offering; provided that the Company’s covenants under this Section 3.1 shall be reinstated at such time as the Company is no longer actively employing its commercially reasonable efforts to cause such registration statement to become effective. The Company agrees that it will not provide any material non-public information to any such Major Investor or CDF in response to a request for information pursuant to this Section 3.1 without first obtaining the consent from such Investor or CDF, as the case may be.

 

3.2            Inspection . The Company shall permit each Major Investor or CDF, at such Major Investor’s or CDF’s expense, to visit and inspect the Company’s properties; examine its books of account and records; and discuss the Company’s affairs, finances, and accounts with its officers, during normal business hours of the Company as may be reasonably requested by such Major Investor or CDF but only if reasonably necessary to protect or otherwise manage such Major Investor’s or CDF’s, as the case may be, interest in the Company; provided , however , that the Company shall not be obligated pursuant to this Section 3.2 to provide access to any information that it reasonably and in good faith considers to be a trade secret or confidential information (unless covered by an enforceable confidentiality agreement, in form acceptable to the Company) or the disclosure of which would adversely affect the attorney-client privilege between the Company and its counsel.

 

3.3            Termination of Information Rights; Limitation on Assignment; Waiver . The covenants set forth in Section 3.1 and Section 3.2 shall terminate and be of no further force or effect upon the earliest to occur: (i) immediately before the consummation of any Offering, (ii) when the Company first becomes subject to the periodic reporting requirements of Section 12(g) or 15(d) of the Exchange Act, whichever event occurs first, or (iii) when the Investors or their Affiliates cease to hold at least fifty percent (50%) of the Common Stock originally issued pursuant to the Purchase Agreement (subject to appropriate adjustment for all stock splits, dividends, combinations, recapitalizations and the like) (the “ Original Shares ”). The rights of a Major Investor in this Section 3 may not be assigned to any Person who holds less than 112,000 shares of Registrable Securities (as adjusted for any stock split, stock dividend, combination, or other recapitalization effected after the date hereof). Any information and inspection rights under this Section 3 may be waived with respect to any particular Major Investor or all Major Investors with the written consent of the Holders of at least sixty-six and two-thirds (66 2/3) of the Registrable Securities then outstanding

 

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3.4            Confidentiality . Each Investor and CDF, as the case may be, agrees that such Investor or CDF, as applicable, will keep confidential and will not disclose, divulge, or use for any purpose (other than to monitor its investment in the Company) any confidential information obtained from the Company pursuant to the terms of this Agreement or otherwise (including notice of the Company’s intention to file a registration statement), unless such confidential information (a) is known or becomes known to the public in general (other than as a result of a breach of this Section 3.4 by such Investor or CDF, as applicable), (b) is or has been independently developed or conceived by the Investor or CDF, as applicable, without use of the Company’s confidential information, or (c) is or has been made known or disclosed to the Investor by a third party without a breach of any obligation of confidentiality such third party may have to the Company; provided , however , that an Investor or CDF, as applicable, may disclose confidential information (i) to its attorneys, accountants, consultants, and other professionals to the extent necessary to obtain their services in connection with monitoring its investment in the Company; (ii) to any prospective purchaser of any Registrable Securities from such Investor or CDF, as applicable, if such prospective purchaser agrees to be bound by the provisions of this Section 3.4 ; (iii) to any existing or prospective Affiliate, partner, member, stockholder, beneficial owner, director, officer or wholly owned subsidiary of such Investor or CDF, as applicable, in the ordinary course of business, provided that such Investor or CDF, as the case may be, informs such Person that such information is confidential and directs such Person to maintain the confidentiality of such information; or (iv) as may otherwise be required by law, provided that the Investor or CDF, as the case may be, promptly notifies the Company of such disclosure and takes reasonable steps to minimize the extent of any such required disclosure. Moreover, the Investors and CDF acknowledge that the Company’s Common Stock is publicly traded on the OTC Pink Market and accordingly must comply with applicable securities laws.

 

4.           Rights to Future Stock Issuances .

 

4.1            Right of First Offer . Subject to the terms and conditions of this Section 4.1 and applicable securities laws, if the Company proposes to offer or sell any New Securities, the Company shall first offer such New Securities to each Major Investor and CDF. Each Major Investor and CDF shall be entitled to apportion the right of first offer hereby granted to it. in such proportions as it deems appropriate, among (i) itself, (ii) its Affiliates and (iii) its beneficial interest holders, such as limited partners, members or any other Person having “beneficial ownership,” as such term is defined in Rule 13d-3 promulgated under the Exchange Act, of such Major Investor or CDF, as the case may be (“ Beneficial Owners ”); provided that each such Affiliate or Beneficial Owner agrees to enter into this Agreement.

 

(a)          The Company shall give notice (the “ Offer Notice ”) to each Major Investor and CDF, stating (i) its bona fide intention to offer such New Securities, (ii) the number of such New Securities to be offered, and (iii) the price and terms, if any, upon which it proposes to offer such New Securities.

 

(b)          By notification to the Company within twenty (20) days after the Offer Notice is given, each Major Investor or CDF, as the case may be, may elect to purchase or otherwise acquire, at the price and on the terms specified in the Offer Notice, up to that portion of such New Securities which equals the proportion that the Common Stock then held by such Major Investor or CDF, as the case may be (including all shares of Common Stock then issuable upon conversion or exercise of any Derivative Securities then held by such Major Investor or CDF, as applicable, bears to the Common Stock of the Company then outstanding (including all shares of Common Stock then issuable upon conversion or exercise of any then outstanding Derivative Securities). At the expiration of such twenty (20) day period, the Company shall promptly notify each Major Investor and CDF, in each case that elects to purchase or acquire all the shares available to it (each, a “ Fully Exercising Investor ”) of any other Major Investor’s (or CDF’, as the case may be) failure to do likewise. During the ten (10) day period commencing after the Company has given such notice, each Fully Exercising Investor may, by giving notice to the Company, elect to purchase or acquire, in addition to the number of shares specified above, up to that portion of the New Securities for which Major Investors and CDF, as applicable, were entitled to subscribe but that were not subscribed for by such Major Investors or CDF which is equal to the proportion that the Common Stock issued and held, and issuable upon conversion or exercise of any other Derivative Securities then held, by such Fully Exercising Investor bears to the Common Stock issued and held, and any other Common Stock then issuable upon conversion or exercise of all Derivative Securities then held, by all Fully Exercising Investors who wish to purchase such unsubscribed shares. The closing of any sale pursuant to this Subsection 4.1(b) shall occur within the later of thirty (30) days of the date that the Offer Notice is given and the date of initial sale of New Securities pursuant to Subsection 4.1(c) .

 

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(c)          If all New Securities referred to in the Offer Notice are not elected to be purchased or acquired as provided in Subsection 4.1(b) , the Company may, during the thirty (30) day period following the expiration of the periods provided in Subsection 4.1(b) , offer and sell the remaining unsubscribed portion of such New Securities to any Person or Persons at a price not less than, and upon terms no more favorable to the offeree than, those specified in the Offer Notice. If the Company does not enter into an agreement for the sale of the New Securities within such period, or if such agreement is not consummated within thirty (30) days of the execution thereof, the right provided hereunder shall be deemed to be revived and such New Securities shall not be offered unless first reoffered to the Major nvestors and CDF in accordance with this Section 4.1 .

 

(d)          The right of first offer in this Section 4.1 shall not be applicable to:

 

(i)          shares of Common Stock or Derivative Securities issued by reason of a dividend, stock split, split-up or other distribution on shares of Common Stock;

 

(ii)         shares of Common Stock or Derivative Securities issued to employees or directors of, or consultants or advisors to, the Company or any of its subsidiaries pursuant to a plan, agreement or arrangement approved by the Board of Directors;

 

(iii)        shares of Common Stock actually issued upon the exercise of Derivative Securities outstanding as of the date hereof, in each case provided such issuance is pursuant to the terms of such Derivative Security;

 

(iv)        shares of Common Stock or Derivative Securities issued to banks, equipment lessors or other financial institutions, or to real property lessors, pursuant to a debt financing, equipment leasing or real property leasing transaction approved by the Board of Directors;

 

(v)         shares of Common Stock or Derivative Securities issued in connection with sponsored research, collaboration, technology license, development, OEM, marketing or other similar agreements or strategic partnerships approved by the Board of Directors;

 

(vi)        shares of Common Stock issued pursuant to a registration statement; or

 

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(vii)       shares of Common Stock or Derivative Securities which the holders of at least sixty-six and two-thirds (66 2/3) of the Registrable Securities then outstanding agree shall not be subject to the right of first refusal in this Section 4.1 .

 

4.2            Termination . The covenants set forth in Section 4.1 shall terminate and be of no further force or effect (i) immediately before the consummation of the Offering, or (ii) when the Company first becomes subject to the periodic reporting requirements of Section 12(g) or 15(d) of the Exchange Act, whichever event occurs first.

 

5.           Additional Covenants .

 

5.1            Insurance . The Company shall use its commercially reasonable efforts to obtain, within ninety (90) days of the date hereof, from financially sound and reputable insurers Directors and Officers liability insurance and term “key-person” insurance in an amount and on terms and conditions satisfactory to the Board of Directors, including at least one (1) Investor Director, and will use commercially reasonable efforts to cause such insurance policy to be maintained until such time as the Board of Directors determines that such insurance should be discontinued. Notwithstanding any other provision of this Section 5.1 to the contrary, for so long as at least one (1) Investor Director is serving on the Board of Directors, the Company shall not cease to maintain a Directors and Officers liability insurance policy in an amount of at least two million dollars ($2,000,000) unless approved by at least one (1) Investor Director, and the Company shall annually, within one hundred twenty (120) days after the end of each fiscal year of the Company, deliver to the Investor Directors a certification that such a Directors and Officers liability insurance policy remains in effect.

 

5.2            Employee Agreements . The Company will cause (i) each person now or hereafter employed by it or by any subsidiary (or engaged by the Company or any subsidiary as a consultant/independent contractor) with access to confidential information and/or trade secrets to enter into a nondisclosure and proprietary rights assignment agreement; and (ii) each Key Employee to enter into a one (1) year noncompetition and nonsolicitation agreement, each of the foregoing agreements substantially in the form approved by the Board of Directors, including at least one (1) Investor Director. In addition, the Company shall not amend, modify, terminate, waive, or otherwise alter, in whole or in part, any of the above-referenced agreements or any restricted stock agreement between the Company and any employee, without the consent of at least one (1) Investor Director.

 

5.3            Employee Stock . Unless otherwise approved by the Board of Directors, including at least one (1) Investor Director, all future employees and consultants of the Company who purchase, receive options to purchase, or receive awards of shares of the Company’s capital stock after the date hereof shall be required to execute restricted stock or option agreements, as applicable, providing for (i) vesting of shares over a three (3) or four (4) year period, with the first twenty-five percent (25%) of such shares vesting following twelve (12) months of continued employment or service, and the remaining shares vesting in equal monthly installments thereafter, and (ii) a market stand-off provision substantially similar to that in Section 2.11 . In addition, unless otherwise approved by the Board of Directors, including the Director, the Company shall retain a “right of first refusal” on employee transfers until the Company’s Offering or other earlier registration of its Common Stock pursuant to a registration statement and shall have the right to repurchase unvested shares at cost upon termination of employment of a holder of restricted stock.

 

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5.4            Matters Requiring Investor Director Approval . So long as the Investors are entitled to elect an Investor Director, the Company hereby covenants and agrees with each of the Investors that it shall not, without approval of the Board of Directors, which approval must include the affirmative vote of at least one (1) Investor Director:

 

(a)          liquidate, dissolve or wind-up the business and affairs of the Company, effect any Change of Control or consent to any of the foregoing;

 

(b)          amend, alter or repeal any provision of the Articles of Incorporation or Bylaws of the Company in a manner that adversely affects the powers, preferences or rights of the Investors hereunder or under the Purchase Agreement;

 

(c)          purchase or redeem (or permit any subsidiary to purchase or redeem) or pay or declare any dividend or make any distribution on, any shares of capital stock of the Company other than (i) redemptions of or dividends or distributions on the Series C Preferred Stock or Series D Preferred Stock as expressly authorized in the Certificate of Designation for the Series C Preferred Stock or the Certificate of Designation for the Series D Preferred Stock, as applicable provided , however , the Company has adequate cash flow for payment of such redemption or distribution and such redemption or distribution is not effected earlier than eighteen (18) months following the date of this Agreement (and for the avoidance of doubt, for purposes of this proviso, a distribution does not include a dividend), (ii) dividends or other distributions payable on the Common Stock solely in the form of additional shares of Common Stock, and (iii) repurchases of stock from former employees, officers, directors, consultants or other persons who performed services for the Company or any subsidiary in connection with the cessation of such employment or service at the lower of the original purchase price or the then-current fair market value thereof;

 

(d)          create, or authorize the creation of, or issue, or authorize the issuance of any debt security, or permit any subsidiary to take any such action with respect to any debt security, if the aggregate indebtedness of the Company and its subsidiaries for borrowed money following such action would exceed $1,000,000, other than up to $4,500,000 of indebtedness under the line of credit note payable to CDF;

 

(e)          increase or decrease the authorized number of directors constituting the Board of Directors;

 

(f)          (i) enter into or materially amend any exclusive distribution agreement for the Company’s products for any material territory unless approved by the Board of Directors, which approval shall not require (other than with respect to any territories contemplated by the proposed JV (as defined in the Purchase Agreement)) the affirmative vote of either Investor Director, or (ii) enter into or materially amend any distribution or other commercialization agreement for the Company’s products for any territory contemplated by the proposed JV. Notwithstanding the foregoing, the affirmative vote of either Investor Director shall not be required for any territory if the proposed JV is not consummated in accordance with the Purchase Agreement by mutual agreement of the parties to the proposed JV;

 

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(g)          make, or permit any subsidiary to make, any loan or advance to, or own any stock or other securities of, any subsidiary or other corporation, partnership, or other entity unless it is wholly owned by the Company;

 

(h)          make, or permit any subsidiary to make, any loan or advance to any Person, including, without limitation, any employee or director of the Company or any subsidiary, except advances and similar expenditures in the ordinary course of business or under the terms of an employee stock or option plan approved by the Board of Directors;

 

(i)          guarantee, directly or indirectly, or permit any subsidiary to guarantee, directly or indirectly, any indebtedness except for indebtedness of the Company or any subsidiary;

 

(j)          otherwise enter into or be a party to any transaction with any director, officer, or employee of the Company or any “associate” (as defined in Rule 12b-2 promulgated under the Exchange Act) of any such Person, including without limitation any “management bonus” or similar plan providing payments to employees in connection with a Change of Control, except for transactions contemplated by this Agreement, the Purchase Agreement, and the Secondary Convertible Promissory Note Purchase Agreement dated as of April __, 2015; or transactions made in the ordinary course of business and pursuant to reasonable requirements of the Company’s business and upon fair and reasonable terms that are approved by a majority of the Board of Directors;

 

(k)          hire, terminate, or change the compensation of the executive officers, including approving any option grants or stock awards to executive officers unless approved by the Board of Directors, which approval shall not require the affirmative vote of either Investor Director;

 

(l)          materially change the fundamental direction of the principal business of the Company away from functional beverages;

 

(m)          sell, assign, license, pledge, or encumber material technology or intellectual property, other than licenses granted in the ordinary course of business; or

 

(n)          enter into any corporate strategic relationship involving the payment, contribution, or assignment by the Company or to the Company of money or assets greater than $1,000,000.

 

5.5            Board Matters . Unless otherwise determined by the vote of a majority of the directors then in office, the Board of Directors shall meet at least quarterly in accordance with an agreed-upon schedule. The Company shall reimburse the nonemployee directors for all reasonable out-of-pocket travel expenses incurred (consistent with the Company’s travel policy) in connection with attending meetings of the Board of Directors. Further, each director shall be entitled to compensation for his services as a director to the Company in the amount of $3,000 per calendar quarter.

 

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5.6            Successor Indemnification . If the Company or any of its successors or assignees consolidates with or merges into any other Person and is not the continuing or surviving corporation or entity of such consolidation or merger, then to the extent necessary, proper provision shall be made so that the successors and assignees of the Company assume the obligations of the Company with respect to indemnification of members of the Board of Directors as in effect immediately before such transaction, whether such obligations are contained in the Company’s Bylaws, its Articles of Incorporation, or elsewhere, as the case may be.

 

5.7            Indemnification Matters . The Company hereby acknowledges that any director nominated to serve on the Board of Directors by the Investors (each a “ Fund Director ”) may have certain rights to indemnification, advancement of expenses and/or insurance provided by one or more of the Investors and certain of their affiliates (collectively, the “ Fund Indemnitors ”). The Company hereby agrees (a) that it is the indemnitor of first resort ( i.e. , its obligations to any such Fund Director are primary and any obligation of the Fund Indemnitors to advance expenses or to provide indemnification for the same expenses or liabilities incurred by such Fund Director are secondary), (b) that it shall be required to advance the full amount of expenses incurred by such Fund Director and shall be liable for the full amount of all expenses, judgments, penalties, fines and amounts paid in settlement by or on behalf of any such Fund Director to the extent legally permitted and as required by the Company’s Articles of Incorporation or Bylaws of the Company (or any agreement between the Company and such Fund Director), without regard to any rights such Fund Director may have against the Fund Indemnitors, and, (c) that it irrevocably waives, relinquishes and releases the Fund Indemnitors from any and all claims against the Fund Indemnitors for contribution, subrogation or any other recovery of any kind in respect thereof. The Company further agrees that no advancement or payment by the Fund Indemnitors on behalf of any such Fund Director with respect to any claim for which such Fund Director has sought indemnification from the Company shall affect the foregoing and the Fund Indemnitors shall have a right of contribution and/or be subrogated to the extent of such advancement or payment to all of the rights of recovery of such Fund Director against the Company.

 

5.8            Right to Conduct Activities . The Company hereby agrees and acknowledges that each of the Investors (together with its Affiliates) is a professional investment fund, and as such invests in numerous portfolio companies, some of which may be deemed competitive with the Company’s business (as currently conducted or as currently propose to be conducted). The Company hereby agrees that, to the extent permitted under applicable law, such Investor shall not be liable to the Company for any claim arising out of, or based upon, (i) the investment by such Investor or its Affiliates in any entity competitive with the Company, or (ii) actions taken by any partner, officer or other representative of such Investor or its Affiliates to assist any such competitive company, whether or not such action was taken as a member of the board of directors of such competitive company or otherwise, and whether or not such action has a detrimental effect on the Company; provided, however, that the foregoing shall not relieve (x) any of the Investors from liability associated with the unauthorized disclosure of the Company’s confidential information obtained pursuant to this Agreement or otherwise, or (y) any director or officer of the Company from any liability associated with his or her fiduciary duties to the Company.

 

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5.9            FCPA . The Company represents that it shall not (and shall not permit any of its subsidiaries or affiliates or any of its or their respective directors, officers, managers, employees, independent contractors, representatives or agents to) promise, authorize or make any payment to, or otherwise contribute any item of value to, directly or indirectly, to any third party, including any Non-U.S. Official (as (as such term is defined in the U.S. Foreign Corrupt Practices Act of 1977, as amended (the “ FCPA ”)), in each case, in violation of the FCPA, the U.K. Bribery Act, or any other applicable anti-bribery or anti-corruption law. The Company further represents that it shall (and shall cause each of its subsidiaries and affiliates to) cease all of its or their respective activities, as well as remediate any actions taken by the Company, its subsidiaries or affiliates, or any of their respective directors, officers, managers, employees, independent contractors, representatives or agents in violation of the FCPA, the U.K. Bribery Act, or any other applicable anti-bribery or anti-corruption law. The Company further represents that it shall (and shall cause each of its subsidiaries and affiliates to) maintain systems of internal controls (including, but not limited to, accounting systems, purchasing systems and billing systems) to ensure compliance with the FCPA, the U.K. Bribery Act, or any other applicable anti-bribery or anti-corruption law. Upon request, the Company agrees to provide responsive information and/or certifications concerning its compliance with applicable anti-corruption laws. The Company shall promptly notify each Investor if the Company becomes aware of any enforcement or other legal action related to a violation or alleged violation of the FCPA, the U.K. Bribery Act, or any other applicable anti-bribery or anti-corruption law. The Company shall, and shall cause any direct or indirect subsidiary or entity controlled by it, whether now in existence or formed in the future, to comply with the FCPA. The Company shall use its best efforts to cause any direct or indirect subsidiary, whether now in existence or formed in the future, to comply in all material respects with all applicable laws.

 

5.10          Certain Affirmative Covenants of the Company . The Company shall, and shall cause each Company’s subsidiaries to: (i) maintain its corporate existence in good standing; (ii) comply with all governmental requirements and laws applicable to the operation of its business, except for any instances of noncompliance that would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on the consolidated business, properties, assets, operations, results of operations, financial condition, credit worthiness or prospects of the Company and the Company’s subsidiaries taken as a whole (“ Material Adverse Effect ”); (iii) comply with all agreements, documents and instruments binding on it or affecting its properties or business, including, without limitation, all material contracts, except for instances of noncompliance that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect;

 

5.11          Board Composition . For so long as the Investors or their Affiliates continue to hold at least fifty percent (50%) of the shares of Common Stock originally issued pursuant to the Purchase Agreement (subject to appropriate adjustment for all stock splits, dividends, combinations, recapitalizations and the like), each Investor and Key Holder agrees to vote, or cause to be voted, all shares of Common Stock and other Derivative Securities owned by such Investor or Key Holder, as the case may be, or over which such Investor or Key Holder has voting control, from time to time and at all times, in whatever manner as shall be necessary to ensure that at each annual or special meeting of shareholders at which an election of directors is held or pursuant to any written consent of the shareholders, the following person(s) shall be elected to the Board of Directors:

 

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(a)          (i) three (3) persons who shall be designated by the Investors and shall be reasonably satisfactory to the Board of Directors, one of whom shall be designated by the holders of the Original Shares, which individual shall initially be Tim Leissner, and one of whom shall be designated by Horizons (such two directors are referred to herein as “ Investor Directors ”) and a third person who shall also be designated by Horizons but who shall not be designated as an Investor Director hereunder (the “ Additional Investor Director ”), and (ii) four (4) persons who shall be designated by CDF (the “ CDF Directors ”), one of whom shall initially be the current Chief Executive Officer of the Company. For the avoidance of doubt, the Additional Investor Director shall not be counted as an Investor Director for any purpose hereunder, including for purposes of determining whether any approval has been obtained from an Investor Director under this Agreement (including without limitation Section 5.4 ).

 

(b)           Failure to Designate a Board Member . In the absence of any designation from the Persons or groups with the right to designate a director as specified in Subsection 5.11(a) above, the director previously designated by them and then serving shall be reelected if still eligible to serve as provided herein.

 

(c)           Removal of Board Members . Each Investor and Key Holder also agrees to vote, or cause to be voted, all shares of Common Stock and other Derivative Securities owned by such Investor or Key Holder, as the case may be, or over which such Investor or Key Holder has voting control, from time to time and at all times, in whatever manner as shall be necessary to ensure that:

 

(i)          no director elected pursuant to Subsection 5.11(a) of this Agreement may be removed from office other than for cause as determined under applicable laws unless (i) such removal is directed or approved by the affirmative vote of the Person, or of the holders of at least a majority of the shares of stock, entitled under Subsection 5.11(a) to designate that director; or (ii) the Person(s) originally entitled to designate or approve such director pursuant to Subsection 5.11(a) is no longer so entitled to designate or approve such director;

 

(ii)         any vacancies created by the resignation, removal or death of a director elected pursuant to Subsections 5.11(a) shall be filled pursuant to the provisions of this Section 5.11 ; and

 

(iii)        upon the request of any party entitled to designate a director as provided in Subsection 5.11(a) to remove such director, such director shall be removed.

 

(d)           Cooperation . All Investors and Key Holders agree to execute any written consents required to perform the obligations of this Agreement, and the Company agrees at the request of any party entitled to designate directors to call a special meeting of stockholders for the purpose of electing directors.

 

(e)           No Liability for Election of Recommended Directors . No Investor, nor any Affiliate of any Investor, shall have any liability as a result of designating a person for election as a director for any act or omission by such designated person in his or her capacity as a director of the Company, nor shall any Investor or Key Holder have any liability as a result of voting for any such designee in accordance with the provisions of this Agreement.

 

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(f)           Size of the Board . Each Investor and Key Holder agrees to vote, or cause to be voted, all shares of Common Stock and other Derivative Securities owned by such Investor or Key Holder, as the case may be, or over which such Investor or Key Holder has voting control, from time to time and at all times, in whatever manner as shall be necessary to ensure that the size of the Board of Directors shall be set and remain at seven (7) directors except only with the approval of the Board, including the approval of at least one (1) Investor Director and at least one CDF Director.

  

5.12          Termination of Covenants . The covenants set forth in this Section 5 , except for Sections 5.7 and 5.8 , shall terminate and be of no further force or effect upon the earliest to occur: (i) immediately before the consummation of the Offering , (ii) when the Company first becomes subject to the periodic reporting requirements of Section 12(g) or 15(d) of the Exchange Act, whichever event occurs first, or (iii) when the Investors or their Affiliates cease to hold at least fifty percent (50%) of the Original Shares.

 

6.           Miscellaneous .

 

6.1            Successors and Assigns . The rights under this Agreement may be assigned ( but only with all related obligations ) by a Holder to a transferee of Registrable Securities that (i) is an Affiliate of a Holder; (ii) is a Holder’s Immediate Family Member or trust for the benefit of an individual Holder or one or more of such Holder’s Immediate Family Members; or (iii) after such transfer, holds at least ten thousand (10,000) shares of Registrable Securities (subject to appropriate adjustment for stock splits, stock dividends, combinations, and other recapitalizations); provided , however , that (x) the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee and the Registrable Securities with respect to which such rights are being transferred; and (y) such transferee agrees in a written instrument delivered to the Company to be bound by and subject to the terms and conditions of this Agreement, including the provisions of Section 2.11 . For the purposes of determining the number of shares of Registrable Securities held by a transferee, the holdings of a transferee (1) that is an Affiliate or stockholder of a Holder; (2) who is a Holder’s Immediate Family Member; or (3) that is a trust for the benefit of an individual Holder or such Holder’s Immediate Family Member shall be aggregated together and with those of the transferring Holder; provided further that all transferees who would not qualify individually for assignment of rights shall have a single attorney-in-fact for the purpose of exercising any rights, receiving notices, or taking any action under this Agreement. The terms and conditions of this Agreement inure to the benefit of and are binding upon the respective successors and permitted assignees of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and permitted assignees any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided herein.

 

6.2            Governing Law . This Agreement shall be governed by the internal law of the State of New York.

 

  25  

 

 

6.3            Counterparts . This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Counterparts may be delivered via facsimile, electronic mail (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g. , www.docusign.com ) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.

 

6.4            Titles and Subtitles . The titles and subtitles used in this Agreement are for convenience only and are not to be considered in construing or interpreting this Agreement.

 

6.5            Notices . All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given upon the earlier of actual receipt or (i) personal delivery to the party to be notified; (ii) when sent, if sent by electronic mail or facsimile during the recipient’s normal business hours, and if not sent during normal business hours, then on the recipient’s next business day; (iii) five (5) days after having been sent by certified mail, return receipt requested, postage prepaid; or (iv) one (1) business day after the business day of deposit with a nationally recognized overnight courier, freight prepaid, specifying next-day delivery, with written verification of receipt. All communications shall be sent to the respective parties at their addresses as set forth on Schedule A hereto, or to the principal office of the Company and to the attention of the Chief Executive Officer, in the case of the Company, or to such email address, facsimile number, or address as subsequently modified by written notice given in accordance with this Section 6.5 . If notice is given to the Company, a copy, which shall not constitute notice, shall also be given to Gutierrez Bergman Boulris, PLLC, 100 Almeria Avenue, Suite 340, Coral Gables, Florida 33134 and if notice is given to the Holders, a copy, which shall not constitute notice, shall also be given to Cooley LLP, attention Patrick Loofbourrow, IFC – Tower 2, Level 35, Unit 3510, 8 Century Avenue Pudong New Area, Shanghai, 200120, China.

 

6.6            Amendments and Waivers . Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance, and either retroactively or prospectively) only with the written consent of the Company, the Key Holders and the holders of at least sixty-six and two-thirds (66 2/3) of the Registrable Securities then outstanding, including the holders of a majority of the Original Shares; provided that the Company may in its sole discretion waive compliance with Subsection 2.12(c) (and the Company’s failure to object promptly in writing after notification of a proposed assignment allegedly in violation of Subsection 2.12(c) shall be deemed to be a waiver) ; and provided further that any provision hereof may be waived (either generally or in a particular instance, and either retroactively or prospectively) by any waiving party on such party’s own behalf, without the consent of any other party . Notwithstanding the foregoing, this Agreement may not be amended or terminated and the observance of any term hereof may not be waived with respect to any Investor without the written consent of such Investor, unless such amendment, termination, or waiver applies to all Investors in the same fashion (it being agreed that a waiver of the provisions of Section 4 with respect to a particular transaction shall be deemed to apply to all Investors in the same fashion if such waiver does so by its terms, notwithstanding the fact that certain Investors may nonetheless, by agreement with the Company, purchase securities in such transaction). Any amendment to Section 5.11 shall require the prior written consent of Horizons. The Company shall give prompt notice of any amendment or termination hereof or waiver hereunder to any party hereto that did not consent in writing to such amendment, termination, or waiver. Any amendment, termination, or waiver effected in accordance with this Section 6.6 shall be binding on all parties hereto, regardless of whether any such party has consented thereto. No waivers of or exceptions to any term, condition, or provision of this Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such term, condition, or provision.

 

  26  

 

 

6.7            Severability . In case any one or more of the provisions contained in this Agreement is for any reason held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision of this Agreement, and such invalid, illegal, or unenforceable provision shall be reformed and construed so that it will be valid, legal, and enforceable to the maximum extent permitted by law.

 

6.8            Aggregation of Stock . All shares of Registrable Securities held or acquired by Affiliates shall be aggregated together for the purpose of determining the availability of any rights under this Agreement and such Affiliated persons may apportion such rights as among themselves in any manner they deem appropriate.

 

6.9            Entire Agreement . This Agreement (including any Schedules and Exhibits hereto) constitutes the full and entire understanding and agreement among the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the parties is expressly canceled.

 

6.10          Arbitration . Any unresolved controversy or claim arising out of or relating to this Agreement, except as otherwise provided in this Agreement, shall be submitted to arbitration by one arbitrator mutually agreed upon by the parties, and if no agreement can be reached within thirty (30) days after names of potential arbitrators have been proposed by the American Arbitration Association (the “ AAA ”), then by one arbitrator having reasonable experience in corporate finance transactions of the type provided for in this Agreement and who is chosen by the AAA. The arbitration shall take place in New York, in accordance with the AAA rules then in effect, and judgment upon any award rendered in such arbitration will be binding and may be entered in any court having jurisdiction thereof. There shall be limited discovery prior to the arbitration hearing as follows: (a) exchange of witness lists and copies of documentary evidence and documents relating to or arising out of the issues to be arbitrated, (b) depositions of all party witnesses, and (c) such other depositions as may be allowed by the arbitrators upon a showing of good cause. Depositions shall be conducted in accordance with the New York Code of Civil Procedure, the arbitrator shall be required to provide in writing to the parties the basis for the award or order of such arbitrator and a court reporter shall record all hearings, with such record constituting the official transcript of such proceedings . Notwithstanding anything in this Agreement to the contrary, in no event shall a party hereto be liable for punitive, consequential or special damages of any kind or nature in any action arising from this Agreement, regardless of the form of action through which such damages are sought.

 

6.11          Delays or Omissions . No delay or omission to exercise any right, power, or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power, or remedy of such nonbreaching or nondefaulting party, nor shall it be construed to be a waiver of or acquiescence to any such breach or default, or to any similar breach or default thereafter occurring, nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. All remedies, whether under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.

 

  27  

 

 

6.12          Acknowledgment . The Company acknowledges that the Investors are in the business of venture capital investing and therefore review the business plans and related proprietary information of many enterprises, including enterprises which may have products or services which compete directly or indirectly with those of the Company. Nothing in this Agreement shall preclude or in any way restrict the Investors from investing or participating in any particular enterprise whether or not such enterprise has products or services which compete with those of the Company.

 

[Remainder of Page Intentionally Left Blank]

 

  28  

 

 

IN WITNESS WHEREOF, the parties have executed this Investors’ Rights Agreement as of the date first written above.

 

  Celsius Holdings, Inc.
     
  By:  
     
  Name:  
     
  Title:  

 

[Signature Page to Celsius Holdings, Inc.

Investors’ Rights Agreement]

 

 

 

 

IN WITNESS WHEREOF, the parties have executed this Investors’ Rights Agreement as of the date first written above.

 

  INVESTORS:
   
  CHARMNEW LIMITED
     
  By:  
     
  Name:  
     
  Title:  
     
  Address: 7/F, Cheung Kong Center
  2 Queen’s Road Central
  Hong Kong
  Attn. : Ms. Ezra Pau/Ms. Eirene Yeung
  Phone #: +852 21288888
  Fax #: +852 21288001
  Email: ezra.pau@ckh.com.hk
             eirene.yeung@ckh.com.hk

 

  GRIEG INTERNATIONAL LIMITED
     
  By:  
     
  Name:  
     
  Title:  
     
  Address: 29th Floor, Harbour Centre,
  25 Harbour Road, Wanchai,
  Hong Kong
  Attention: Jason Wong
  Phone #: +852 21863873
  Fax #: +852 37411011
 

Email: jason.wong@horizons.com.hk

           raymond.ng@horizons.com.hk

           chris.lai@horizons.com.hk

 

[Signature Page to Celsius Holdings, Inc.

Investors’ Rights Agreement]

 

 

 

 

IN WITNESS WHEREOF, the parties have executed this Investors’ Rights Agreement as of the date first written above.

 

  INVESTORS:
     
  Name:  
     
  By:  
     
  Name:  
     
  Title:  

 

[Signature Page to Celsius Holdings, Inc.

Investors’ Rights Agreement]

 

 

 

 

IN WITNESS WHEREOF, the parties have executed this Investors’ Rights Agreement as of the date first written above.

 

  KEY HOLDERS:
   
  CD Financial LLC
     
  By:  
     
  Name:  
     
  Title:  
     
  CDS Ventures of South Florida LLC
     
  By:  
     
  Name:  
     
  Title:  

 

[Signature Page to Celsius Holdings, Inc.

Investors’ Rights Agreement]

 

 

 

 

IN WITNESS WHEREOF, the parties have executed this Investors’ Rights Agreement as of the date first written above.

 

  KEY HOLDERS:
     
  Name:  
     
  By:  
     
  Name:  
     
  Title:  

 

[Signature Page to Celsius Holdings, Inc.

Investors’ Rights Agreement]

 

 

 

SCHEDULE A

 

Investors

 

CHARMNEW LIMITED

Address:

7/F, Cheung Kong Center,

2 Queen’s Road Central, Hong Kong

Phone Number: +852 21288888

Fax Number: +852 21288001

Email: ezra.pau@ckh.com.hk / eirene.yeung@ckh.com.hk

Attention: Ms. Ezra Pau/Ms. Eirene Yeung

 

GRIEG INTERNATIONAL LIMITED

Address: 29th Floor, Harbour Centre,

25 Harbour Road,

Wanchai, Hong Kong

Phone Number: +852 21863873

Fax Number: +852 37411011

Email: jason.wong@horizons.com.hk / raymond.ng@horizons.com.hk

           chris.lai@horizons.com.hk

Attention: Jason Wong

 

NU HORIZONS INVESTMENT GROUP, LLC

Address: Rush Communications

512 Seventh Avenue, 43rd Floor

New York, NY 10018

Phone Number: +852 9742 9229

Email: tim_leissner@yahoo.com

Attention: Tim Leissner

 

XYXY HOLDINGS LTD.

Address: Flat B, 45/F, Block 8, Phase 2, Residence Bel-Air, Pokfulam, Hong Kong

Phone Number: +85292683074

Email: stong@boyucapital.com

Attention: Xiaomeng Tong

 

SINO ELECT INVESTMENTS LIMITED

Address: Kum Hing Court,28 Tomlinson Road 10-32, Singapore 247854

Phone Number: +65 97843406

Email: awy.julianto@gmail.com

Attention: Awy Julianto

 

 

 

 

OSCAR TIME LIMITED

Address: 29th Floor, Harbour Centre,

25 Harbour Road, Wanchai,

Hong Kong

Email: jason.wong@horizons.com.hk / raymond.ng@horizons.com.hk

Attention: Jason Wong / Raymond Ng

 

BEYOND MERITS LIMITED

Address: 29th Floor, Harbour Centre,

25 Harbour Road, Wanchai,

Hong Kong

Email: jason.wong@horizons.com.hk / raymond.ng@horizons.com.hk

Attention: Jason Wong / Raymond Ng

 

HELLO WARRIOR FAMILY TRUST DTD 2/27/09

c/o ICONIQ Capital

394 Pacific Ave 2nd Floor

San Francisco, CA 94111

Phone Number: 415-967-7483

Fax Number: 415-321-3960

Email: fundadmin@iconiqcapital.com

Attention: Grace Nam

 

HUGO BARRA

601 4th Street

San Francisco, CA 94107

Phone Number: 617-592-7676

Email: hbarra@gmail.com

 

HELVETICO LIMITED

Address: Flat A 

31 Parkside

Wimbledon

SW19 5NB

UK

Email: lou.montilla@yahoo.com.au

Attention: Lou Montilla

 

LUKE NOLAN

Address: Flat 1901, Block 6, 9 Maoming South Road

Huangpu District, Shanghai, China

Phone Number: +44 7771 685 068 (UK) +86 135 1215 7147 (China)

Email: luke@overseasstudentliving.com

Attention: Luke Nolan

 

 

 

 

WINNIE YU

Address: No. 3, Broadcast Drive, Kowloon, Hong Kong SAR

Phone Number: +852 91039103

Email:  yt@9103.hk

Attention: Winnie Yu

 

SHOUBIN CHEN

 

Address: Flat F 25/F, Tower 3, Island Place, Tanner Road,
North Point, Hong Kong

Phone Number: +852 5578-1830

Email: johnc@horizons.com.hk

Attention: Shoubin Chen

 

JUMBO EAGLE INVESTMENTS LIMITED

Address: 6/f Shun Feng International Centre, 182 Queens Road East, WanChai, Hong Kong 

Phone Number: +852 69018136

Email: tommy.hbc@gmail.com

Attention: IP MAN KIT

 

ICQ INVESTMENTS 26, LP

Address: 394 Pacific Ave, 2nd Floor, San Francisco, CA 94111

Phone Number: (415)967-7757

Email: kevin@iconiqcapital.com

Attention: Kevin Foster

 

RISEJOY SERVICES LIMITED

Address: 19th Floor, Tower B Fang Heng International Building No.6 Futong East Avenue, Chaoyang District, Beijing 100102, China

Phone Number:  +8613601003336

Fax:  +861063720333

Email:  lilywangrui@126.com

Attention: Rui Wang

 

 

 

 

SCHEDULE B

 

Key Holders

 

CD Financial LLC

Address:

3299 NW Boca Raton Boulevard

Boca Raton, FL 33431

 

CDS Ventures of South Florida LLC

Address:

3299 NW Boca Raton Boulevard

Boca Raton, FL 33431

 

 

 

Exhibit 10.3

      

CELSIUS HOLDINGS, INC.

 

2006 INCENTIVE STOCK PLAN

 

1. Purpose. The Celsius Holdings, Inc. 2006 Incentive Stock Plan (the "Plan"), being assumed and adopted by Celsius Holdings, Inc., a Florida corporation, is intended to provide incentives which will attract and retain highly competent persons at all levels as employees of Celsius Holdings, Inc. and its subsidiaries (the "Company"), as well as independent contractors providing consulting or advisory services to the Company, by providing them opportunities to acquire the Company's common stock ("Common Shares") or to receive monetary payments based on the value of such shares pursuant to the Awards described in Paragraph 4 below.

 

2. Administration.

 

(a) The Plan will be administered by a Compensation Committee (the "Committee") appointed by the Board of Directors (the "Board") of the Company from among its members; provided, however, that, as long as Common Shares are registered under the Securities Exchange Act of 1933 (the "Act"), members of the Committee must qualify as "non-employee directors" within the meaning of Securities and Exchange Commission Regulation ss. 240.16b-3. Once appointed, the Committee shall continue to serve until otherwise directed by the Board. From time to time the Board may increase the size of the Committee and appoint additional members thereof, remove members (with or without cause), and appoint new members in substitution therefor, and fill vacancies however caused; provided, however, that at no time shall a Committee of less than two members of the Board administer the Plan. The Committee is authorized, subject to the provisions of the Plan, to establish such rules and regulations as it deems necessary for the proper administration of the Plan and to make such determinations and interpretations and to take such action in connection with the Plan and any Awards (as hereinafter defined) granted hereunder as it deems necessary or advisable. All determinations and interpretations made by the Board and Committee shall be binding and conclusive on all participants and their legal representatives. No member of the Board, no member of the Committee and no employee of the Company shall be liable for any act or failure to act hereunder, by any other member or employee or by any agent to whom duties in connection with the administration of this Plan have been delegated or, except in circumstances involving such person's bad faith, gross negligence or fraud, for any act or failure to act by the member or employee.

 

(b) Pursuant to its administrative duties described in Section 2(a) above and notwithstanding anything to the contrary contained herein, the Compensation Committee may, by a resolution adopted at a meeting of the Compensation Committee duly convened and called or by a unanimous written consent in lieu of a meeting, delegate to the persons or persons who serve as Chief Executive Officer of the Company the authority to determine the identities of employees who are not officers or directors of the Company who shall receive Stock Options under the Plan and the terms, conditions, limitations and restrictions upon which such Stock Options shall be granted; provided, however, that the per share exercise price of any Stock Option awarded by the Chief Executive Officer of the Company pursuant to any delegation of authority permitted hereunder shall not be less than the Fair Market Value (as hereinafter defined) of the Common Shares on the date the Stock Option is granted. The terms and conditions of, and any limitation or restriction on, any such delegation shall be at the sole discretion of the Compensation Committee and shall be set forth in the resolution of the Compensation Committee establishing such delegation. Any delegation pursuant to this Section 2(b) may be revoked by the Compensation Committee at any time.

 

3. Participants. Participants will consist of such employees or prospective employees (conditioned upon, and effective not earlier than his becoming an employee) of the Company, and independent contractors (including persons other than individuals) providing consulting or advisory services to the Company, as the Committee in its sole discretion determines to be responsible for the success and future growth and profitability of the Company and whom the Committee may designate from time to time to receive Awards under the Plan. Designation of a participant in any year shall not require the Committee to designate such person to receive an Award in any other year or, once designated, to receive the same type or amount of Awards as granted to the participant in any year. The Committee shall consider such factors as it deems pertinent in selecting participants and in determining the type and amount of their respective Awards.

 

     

 

 

4. Types of Awards. Awards under the Plan may be granted in any one or a combination of (a) Stock Options, (b) Stock Appreciation Rights, (c) Stock Awards, (d) Performance Shares, and (e) Performance Units, all as described below (collectively "Awards").

 

5. Shares Reserved under the Plan. Subject to the following provisions of this Section 5, there is hereby reserved for issuance under the Plan an aggregate of 50,000 ,000 Common Shares, which may be authorized but unissued shares. Any shares subject to Stock Options or Stock Appreciation Rights or issued under such options or rights or as Stock Awards may thereafter be subject to new options, rights or awards under this Plan if there is a lapse, expiration or termination of any such options or rights prior to issuance of the shares or the payment of the equivalent or if shares are issued under such options or rights or as such awards and thereafter are reacquired by the Company pursuant to rights reserved by the Company upon issuance thereof.

 

6. Stock Options. Stock Options will consist of awards from the Company, in the form of agreements, which will enable the holder to purchase a specific number of Common Shares, at set terms and at a fixed purchase price. Stock Options may be "incentive stock options" ("Incentive Stock Options") within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") or Stock Options which do not constitute Incentive Stock Options ("Nonqualified Stock Options"). The Committee will have the authority to grant to any participant one or more Incentive Stock Options, Nonqualified Stock Options, or both types of Stock Options (in each case with or without Stock Appreciation Rights). Each Stock Option shall be subject to such terms and conditions consistent with the Plan as the Committee may impose from time to time, subject to the following limitations:

 

(a ) Exercise Price . Each Stock Option granted hereunder shall have such per-share exercise price as the Committee may determine at the date of grant provided, however, that the per-share exercise price for Incentive Stock Options shall not be less than 100% of the Fair Market Value (as hereinafter defined) of the Common Shares on the date the option is granted.

 

(b) Payment of Exercise Price . The option exercise price may be paid by cash, or upon approval from the Committee in its sole discretion, broker-assisted cashless exercise, net-share exercise, delivery of Common Shares of the Company then owned by the participant, or by promissory note, with additional approval from the Board or the CEO.  Notwithstanding any contrary provision, the Committee may require that payment by any method other than cash may be made only if such payment does not result in a charge to earnings for financial accounting purposes as determined by the Committee. Net-cash exercises are not permitted under the Plan.

 

  A broker-assisted cashless exercise involves the simultaneous exercise by an employee of a share option and sale of sufficient Common Shares through a broker to cover the payment and any necessary withholding.  Broker-assisted cashless exercise is typically only available if the Common Shares are readily tradeable on a national securities exchange or other market system at the time of option exercise.  Payment in a broker-assisted exercise is made by delivering a properly executed exercise notice to the Company together with a copy of irrevocable instructions to a broker to deliver promptly to the Company the amount of sale or loan proceeds to pay the exercise price. To facilitate the foregoing, the Company may enter into agreements for coordinated procedures with one or more brokerage firms. In a net-share exercise, the Company holds back from the Common Shares to be issued upon exercise of an option that number of Commons Shares having a value (based on the previous business day’s closing price) equal to the minimum amount required to satisfy the exercise price and any necessary withholding, unless the Company determines that such taxes must be in cash by the holder.

 

(c) Exercise Period . Stock Options granted under the Plan will be exercisable at such times and subject to such terms and conditions as shall be determined by the Committee. In addition, Nonqualified Stock Options shall not be exercisable later than fifteen (15) years after the date they are granted and Incentive Stock Options shall not be exercisable later than ten (10) years after the date they are granted. All Stock Options shall terminate at such earlier times and upon such conditions or circumstances as the Committee shall in its discretion set forth in such option at the date of grant.

 

     

 

 

(d) Limitations on Incentive Stock Options . Incentive Stock Options may be granted only to participants who are employees of the Company or one of its subsidiaries (within the meaning of Section 424(f) of the Code) at the date of grant. The aggregate Fair Market Value (determined as of the time the option is granted) of the Common Shares with respect to which Incentive Stock Options are exercisable for the first time by a participant during any calendar year (under all option plans of the Company) shall not exceed $100,000. Incentive Stock Options may not be granted to any participant who, at the time of grant, owns stock possessing (after the application of the attribution rules of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company, unless the option price is fixed at not less than 110% of the Fair Market Value of the Common Shares on the date of grant and the exercise of such option is prohibited by its terms after the expiration of five years from the date of grant of such option.

 

(e) Re-designation as Nonqualified Stock Options . Options designated as Incentive Stock Options that fail to continue to meet the requirements of Section 422 of the Code shall be re-designated as Nonqualified Stock Options for Federal income tax purposes automatically without further action by the Committee on the date of such failure to continue to meet the requirements of Section 422 of the Code.

 

(f) Limitation of Rights in Shares . The recipient of a Stock Option shall not be deemed for any purpose to be a shareholder of the Company with respect to any of the shares subject thereto except to the extent that the Stock Option shall have been exercised and, in addition, a certificate shall have been issued and delivered to the participant.

 

7. Stock Appreciation Rights. The Committee may, in its discretion, grant Stock Appreciation Rights to the holders of any Stock Options granted hereunder. In addition, Stock Appreciation Rights may be granted independently of and without relation to Stock Options. Each Stock Appreciation Right shall be subject to such terms and conditions consistent with the Plan as the Committee shall impose from time to time, including the following:

 

(a) A Stock Appreciation Right relating to a Nonqualified Stock Option may be made part of such option at the time of its grant or at any time thereafter up to six months prior to its expiration, and a Stock Appreciation Right relating to an Incentive Stock Option may be made part of such option only at the time of its grant.

 

(b) Each Stock Appreciation Right will entitle the holder to elect in lieu of exercising the Stock Option to receive the appreciation in the Fair Market Value of the shares subject thereto up to the date the right is exercised. In the case of a right issued in relation to a Stock Option, such appreciation shall be measured from not less than the option price and in the case of a right issued independently of any Stock Option, such appreciation shall be measured from not less than 85% of the Fair Market Value of the Common Shares on the date the right is granted. Payment of such appreciation shall be made in cash or in Common Shares, or a combination thereof, as set forth in the Award, but no Stock Appreciation Right shall entitle the holder to receive, upon exercise thereof, more than the number of Common Shares (or cash of equal value) with respect to which the right is granted.

 

(c) Each Stock Appreciation Right will be exercisable at the times and to the extent set forth therein, but no Stock Appreciation Right may be exercisable earlier than six months after the date it was granted or later than the earlier of (i) the term of the related Stock Option, if any, and (ii) fifteen years after it was granted. Exercise of a Stock Appreciation Right shall reduce the number of shares issuable under the Plan (and the related Stock Option, if any) by the number of shares with respect to which the right is exercised.

 

8. Stock Awards. Stock Awards will consist of Common Shares transferred to participants without other payment therefor or payment at less than Fair Market Value as additional compensation for services to the Company. Stock Awards shall be subject to such terms and conditions as the Committee determines appropriate, including, without limitation, restrictions on the sale or other disposition of such shares and rights of the Company to reacquire such shares for no consideration upon termination of the participant's employment or other contractual arrangement within specified periods. The Committee may require the participant to deliver a duly signed stock power, endorsed in blank, relating to the Common Shares covered by such an Award. The Committee may also require that the stock certificates evidencing such shares be held in custody until the restrictions thereon shall have lapsed. The participant shall have, with respect to the Common Shares subject to a Stock Award, all of the rights of a holder of Common Shares of the Company, including the right to receive dividends and to vote the shares.

 

     

 

 

9. Performance Shares.

 

(a) Performance Shares may be awarded either alone or in addition to other Awards granted under this Plan and shall consist of the right to receive Common Shares or cash of an equivalent value at the end of a specified Performance Period (defined below). The Committee shall determine the participants to whom and the time or times at which Performance Shares shall be awarded, the number of Performance Shares to be awarded to any person, the duration of the period (the "Performance Period") during which, and the conditions under which, receipt of the Common Shares will be deferred, and the other terms and conditions of the Award in addition to those set forth in this Section 9. The Committee may condition the grant of Performance Shares upon the attainment of specified performance goals or such other factors or criteria as the Committee shall determine.

 

(b) Performance Shares awarded pursuant to this Section 9 shall be subject to the following terms and conditions:

 

  (i) Unless otherwise determined by the Committee at the time of the grant of the Award, amounts equal to any dividends declared during the Performance Period with respect to the number of Common Shares covered by a Performance Share Award will not be paid to the participant.

 

(ii) Subject to the provisions of the Performance Share Award and this Plan, at the expiration of the Performance Period, share certificates and/or cash of an equivalent value (as the Committee may determine) shall be delivered to the participant, or his, her or its legal representative, in a number equal to the vested shares covered by the Performance Share Award.

 

  (iii) Subject to the applicable provisions of the Performance Share Award and this Plan, upon termination of a participant's employment or contractual relationship with the Company for any reason during the Performance Period for a given Performance Share Award, the Performance Shares in question will vest or be forfeited in accordance with the terms and conditions established by the Committee.

 

10. Performance Units.

 

(a) Performance Units may be awarded either alone or in addition to other Awards granted under this Plan and shall consist of the right to receive a fixed dollar amount, payable in cash or Common Shares or a combination of both. The Committee shall determine the participants to whom and the time or times at which Performance Units shall be awarded, the duration of Performance Units to be awarded to any person, the duration of the period (the "Performance Cycle") during which, and the conditions under which, a participant's right to Performance Units will be vested, the ability of participants to defer the receipt of payment of such Performance Units, and the other terms and conditions of the Award in addition to those set forth in this Section 10. The Committee may condition the vesting of Performance Units upon the attainment of specified performance goals or such other factors or criteria as the Committee shall determine.

 

(b)  The Performance Units awarded pursuant to this Section 10 shall be subject to the following terms and conditions:

 

  (i) At the expiration of the Performance Cycle, the Committee shall determine the extent to which the performance goals have been achieved, and the percentage of the Performance Units of each participant that have vested.

 

     

 

 

  (ii) Subject to the applicable provisions of the Performance Unit Award and this Plan, at the expiration of the Performance Cycle, cash and/or share certificates of an equivalent value (as the Committee may determine) shall be delivered to the participant, or his, her or its legal representative, in payment of the vested Performance Units covered by the Performance Unit Award.

 

  (iii) Subject to the applicable provisions of the Performance Unit Award and this Plan, upon termination of a participant's employment or contractual relationship with the Company for any reason during the Performance Cycle for a given Performance Unit Award, the Performance Units in question will vest or be forfeited in accordance with the terms and conditions established by the Committee.

 

11. Adjustment Provisions.

 

(a) If the Company shall at any time change the number of issued Common Shares without new consideration to the Company (such as by stock dividend, stock split, recapitalization, reorganization, exchange of shares, liquidation, combination or other change in corporate structure affecting the Common Shares other than as contemplated under Section 5 hereof) or make a distribution of cash or property which has a substantial impact on the value of issued Common Shares, the total number of shares available for Awards under this Plan shall be appropriately adjusted and the number of shares covered by each outstanding Award and the reference price or Fair Market Value for each outstanding Award shall be adjusted so that the net value of such Award shall not be changed.

 

(b) In the case of any sale of assets, merger, consolidation, combination or other corporate reorganization or restructuring of the Company with or into another corporation which results in the outstanding Common Shares being converted into or exchanged for different securities, cash or other property, or any combination thereof (an "Acquisition"), subject to the provisions of this Plan and any limitation applicable to the Award:

 

  (i) any participant to whom a Stock Option has been granted shall have the right thereafter and during the term of the Stock Option to receive upon exercise thereof the Acquisition Consideration (as defined below) receivable upon the Acquisition by a holder of the number of Common Shares which might have been obtained upon exercise of the Stock Option or portion thereof, as the case may be, immediately prior to the Acquisition;

 

(ii) any participant to whom a Stock Appreciation Right has been granted shall have the right thereafter and during the term of such right to receive upon exercise thereof the difference on the exercise date between the aggregate Fair Market Value of the Acquisition Consideration receivable upon such acquisition by a holder of the number of Common Shares which are covered by such right and the aggregate reference price of such right; and

 

  (iii) any participant to whom Performance Shares or Performance Units have been awarded shall have the right thereafter and during the term of the Award, upon fulfillment of the terms of the Award, to receive on the date or dates set forth in the Award, the Acquisition Consideration receivable upon the Acquisition by a holder of the number of Common Shares which are covered by the Award.

 

The term "Acquisition Consideration" shall mean the kind and amount of securities, cash or other property or any combination thereof receivable in respect of one Common Share upon consummation of an Acquisition.

 

(c) Notwithstanding any other provision of this Plan, the Committee may authorize the issuance, continuation or assumption of Awards or provide for other equitable adjustments after changes in the Common Shares resulting from any other merger, consolidation, sale of assets, acquisition of property or stock, recapitalization, reorganization or similar occurrence upon such terms and conditions as it may deem equitable and appropriate.

 

(d) In the event that another corporation or business entity is being acquired by the Company, and the Company assumes outstanding stock options and/or stock appreciation rights and/or the obligation to make future grants of options or rights to employees or other persons affiliated with the acquired entity, the aggregate number of Common Shares available for Awards under this Plan shall be increased accordingly.

 

     

 

 

12. Non-transferability.

 

(a) Each Award granted under the Plan to a participant shall not be transferable by such participant otherwise than as required by law or by will or the laws of descent and distribution, and shall be exercisable, in the case of an individual, only by him during his lifetime. In the event of the death of a participant while the participant is rendering services to the Company, each Stock Option or Stock Appreciation Right theretofore granted to him shall be exercisable during such period after his death as the Committee shall in its discretion set forth in such option or right at the date of grant (but not beyond the stated duration of the option or right) and then only:

 

    (i)  By the executor or administrator of the estate of the deceased participant or the person or persons to whom the deceased participant's rights under the Stock Option or Stock Appreciation Right shall pass by will or the laws of descent and distribution; and

 

  (ii) To the extent that the deceased participant was entitled to do so at the date of his death.

 

(b) Notwithstanding Section 12(a), in the discretion of the Committee, Awards granted hereunder may be transferred to members of the participant's immediate family (which for purposes of this Plan shall be limited to the participant's children, grandchildren and spouse), or to one or more trusts for the benefit of such immediate family members or partnerships in which such immediate family members and/or trusts are the only partners, but only if the Award expressly so provides. In the case of a participant who is not an individual, transferability shall be determined by the Committee in its sole and absolute discretion.

 

13. Other Provisions. Awards under the Plan may also be subject to such other provisions (whether or not applicable to any other Awards under the Plan) as the Committee determines appropriate, including without limitation, provisions for the installment purchase of Common Shares under Stock Options, provisions for the installment exercise of Stock Appreciation Rights, provisions to assist the participant in financing the acquisition of Common Shares, provisions for the forfeiture of, or restrictions on resale or other disposition of, Shares acquired under any form of Award, provisions for the acceleration of the right to exercise or vesting of Awards in the event of a change of control of the Company or other reasons, provisions for the payment of the value of Awards to participants in the event of a change of control of the Company or other reasons, or provisions to comply with Federal and state securities laws, or setting forth understandings or conditions as to the participant's employment or contractual relationship in addition to those specifically provided for under the Plan.

 

14. Fair Market Value. For purposes of this Plan and any Awards hereunder, Fair Market Value of Common Shares shall be the mean between the highest and lowest sale prices for the Company's Common Shares as reported on the Nasdaq National Market (or such other consolidated transaction reporting system on which such Common Shares are primarily traded) on the date immediately preceding the date of grant (or on the next preceding trading date if Common Shares were not traded on the date immediately preceding the date of grant); provided, however, that until the Company's Common Shares are readily tradeable on a national securities exchange or market system, or if the Company's Common Shares are not at the applicable time readily tradeable on a national securities exchange or other market system, Fair Market Value shall mean the amount determined in good faith by the Committee as the fair market value of the Common Shares of the Company.

 

15. Withholding. All payments or distributions made pursuant to the Plan shall be net of any amounts required to be withheld pursuant to applicable federal, state and local tax withholding requirements. If the Company proposes or is required to distribute Common Shares pursuant to the Plan, it may require the recipient to remit to it an amount sufficient to satisfy such tax withholding requirements prior to the delivery of any certificates for such Common Shares. The Committee may, in its discretion and subject to such rules as it may adopt, permit an optionee or Award or right holder to pay all or a portion of the federal, state and local withholding taxes arising in connection with (a) the exercise of a Nonqualified Stock Option or a Stock Appreciation Right, (b) the receipt or vesting of Stock Awards, or (c) the receipt of Common Shares upon the expiration of the Performance Period or the Performance Cycle, respectively, with respect to any Performance Shares or Performance Units, by electing to have the Company withhold Common Shares having a Fair Market Value equal to the amount to be withheld.

 

     

 

 

16. Tenure. A participant's right, if any, to continue to serve the Company as an officer, employee, independent contractor, or otherwise, shall not be enlarged or otherwise affected by such person's designation as a participant under the Plan, nor shall this Plan in any way interfere with the right of the Company, subject to the terms of any separate employment agreement to the contrary, at any time to terminate such employment or to increase or decrease the compensation of the participant from the rate in existence at the time of the grant of an Award.

 

17. Effective Date, Amendment and Termination. The Plan shall become effective on the date it is approved by the holders of a majority of the shares of Common Shares then outstanding.  The Plan shall terminate (10) ten years later, subject to earlier termination by the Board; provided, however, that the terms and conditions applicable to any Award granted prior to such date may thereafter be amended or modified by mutual agreement between the Company and the participant or such other persons as may then have an interest therein. Also, by mutual agreement between the Company and a participant hereunder, under this Plan or under any other present or future plan of the Company, Awards may be granted to such participant in substitution and exchange for, and in cancellation of, any Awards previously granted such participant under this Plan, or any other present or future plan of the Company. The Board may amend the Plan from time to time or terminate the Plan at any time. However, no action authorized by this Section 17 shall reduce the amount of any existing Award or change the terms and conditions thereof without the participant's consent. The approval of the Company's shareholders will be required for any amendment to the Plan which (i) would change the class of persons eligible for the grant of Stock Options as specified in Section 3 or otherwise materially modify the requirements as to eligibility for participation in the Plan, or (ii) would increase the maximum number of shares subject to Stock Options, as specified in Section 5 (unless made pursuant to the provisions of Section 11) or (iii) is required to be approved by the shareholders pursuant to the Code, Section 16 of the Act or by any stock market or exchange on which the Common Shares are listed. With respect to persons subject to Section 16 of the Act, transactions under the Plan are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the Act. To the extent any provision of the Plan or action by the Committee fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Committee. Moreover, in the event the Plan does not include a provision required by Rule 16b-3 to be stated therein, such provision (other than one relating to eligibility requirements, or the price and amount of Awards) shall be deemed automatically to be incorporated by reference into the Plan insofar as participants subject to Section 16 of the Act are concerned.

 

18. Governing Law. This Plan and actions taken in connection herewith shall be governed and construed in accordance with the laws of the State of Florida (regardless of the law that might otherwise govern under applicable Florida principles of conflict of laws).

 

     

 

 

Exhibit 10.4

     

CELSIUS HOLDINGS, INC.

 

2015 STOCK INCENTIVE PLAN

 

1.           Purposes of the Plan . The purposes of this Plan are to attract and retain the best available personnel, to provide additional incentives to Employees, Directors and Consultants and to promote the success of the Company’s business.

 

2.           Definitions . The following definitions shall apply as used herein and in the individual Award Agreements except as defined otherwise in an individual Award Agreement. In the event a term is separately defined in an individual Award Agreement, such definition shall supersede the definition contained in this Section 2 .

 

(a)          “ Administrator ” means the Board or any of the Committees appointed to administer the Plan.

 

(b)          “ Affiliate ” and “ Associate ” shall have the respective meanings ascribed to such terms in Rule 12b-2 promulgated under the Exchange Act.

 

(c)          “ Applicable Laws ” means the legal requirements relating to the Plan and the Awards under applicable provisions of federal securities laws, state corporate and securities laws, the Code, the rules of any applicable stock exchange or national market system, and the rules of any non-U.S. jurisdiction applicable to Awards granted to residents therein.

 

(d)          “ Assumed ” means that pursuant to a Corporate Transaction either (i) the Award is expressly affirmed by the Company or (ii) the contractual obligations represented by the Award are expressly assumed (and not simply by operation of law) by the successor entity or its Parent in connection with the Corporate Transaction with appropriate adjustments to the number and type of securities of the successor entity or its Parent subject to the Award and the exercise or purchase price thereof which at least preserves the compensation element of the Award existing at the time of the Corporate Transaction as determined in accordance with the instruments evidencing the agreement to assume the Award.

 

(e)          “ Award ” means the grant of an Option, SAR, Dividend Equivalent Right, Restricted Stock, Restricted Stock Unit or other right or benefit under the Plan.

 

(f)          “ Award Agreement ” means the written agreement evidencing the grant of an Award executed by the Company and the Grantee, including any amendments thereto.

 

(g)          “ Board ” means the Board of Directors of the Company.

 

(h)          “ Cause ” means, with respect to the termination by the Company or a Related Entity of the Grantee’s Continuous Service, that such termination is for “ Cause ” as such term (or word of like import) is expressly defined in a then-effective written agreement between the Grantee and the Company or such Related Entity, or in the absence of such then-effective written agreement and definition, is based on, in the determination of the Administrator, the Grantee’s: (i) performance of any act or failure to perform any act in bad faith and to the detriment of the Company or a Related Entity; (ii) dishonesty, intentional misconduct or material breach of any agreement with the Company or a Related Entity; or (iii) commission of a crime involving dishonesty, breach of trust, or physical or emotional harm to any person; provided, however, that with regard to any agreement that defines “ Cause ” on the occurrence of or in connection with a Corporate Transaction or a Change in Control, such definition of “ Cause ” shall not apply until a Corporate Transaction or a Change in Control actually occurs.

 

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(i)          “ Change in Control means a change in ownership or control of the Company after the Registration Date effected through either of the following transactions:

 

(i)          the direct or indirect acquisition by any person or related group of persons (other than an acquisition from or by the Company or by a Company-sponsored employee benefit plan or by a person that directly or indirectly controls, is controlled by, or is under common control with, the Company) of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities pursuant to a tender or exchange offer made directly to the Company’s stockholders which a majority of the Continuing Directors who are not Affiliates or Associates of the offeror do not recommend such stockholders accept, or

 

(ii)         a change in the composition of the Board over a period of twelve (12) months or less such that a majority of the Board members (rounded up to the next whole number) ceases, by reason of one or more contested elections for Board membership, to be comprised of individuals who are Continuing Directors.

 

(j)          “ Code ” means the Internal Revenue Code of 1986, as amended.

 

(k)          “ Committee ” means any committee composed of members of the Board appointed by the Board to administer the Plan.

 

(l)           “ Common Stock ” means the common stock of the Company.

 

(m)         “ Company ” means Celsius Holdings, Inc., a Nevada corporation, or any successor entity that adopts the Plan in connection with a Corporate Transaction.

 

(n)          “ Consultant ” means any person (other than an Employee or a Director, solely with respect to rendering services in such person’s capacity as a Director) who is engaged by the Company or any Related Entity to render consulting or advisory services to the Company or such Related Entity.

 

(o)          “ Continuing Directors ” means members of the Board who either (i) have been Board members continuously for a period of at least twelve (12) months or (ii) have been Board members for less than twelve (12) months and were elected or nominated for election as Board members by at least a majority of the Board members described in clause (i) who were still in office at the time such election or nomination was approved by the Board.

 

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(p)          “ Continuous Service ” means that the provision of services to the Company or a Related Entity in any capacity of Employee, Director or Consultant is not interrupted or terminated. In jurisdictions requiring notice in advance of an effective termination as an Employee, Director or Consultant, Continuous Service shall be deemed terminated upon the actual cessation of providing services to the Company or a Related Entity notwithstanding any required notice period that must be fulfilled before a termination as an Employee, Director or Consultant can be effective under Applicable Laws. A Grantee’s Continuous Service shall be deemed to have terminated either upon an actual termination of Continuous Service or upon the entity for which the Grantee provides services ceasing to be a Related Entity. Continuous Service shall not be considered interrupted in the case of (i) any approved leave of absence, (ii) transfers among the Company, any Related Entity, or any successor, in any capacity of Employee, Director or Consultant, or (iii) any change in status as long as the individual remains in the service of the Company or a Related Entity in any capacity of Employee, Director or Consultant (except as otherwise provided in the Award Agreement). Notwithstanding the foregoing, except as otherwise determined by the Administrator, in the event of any spin-off of a Related Entity, service as an Employee, Director or Consultant for such Related Entity following such spin-off shall be deemed to be Continuous Service for purposes of the Plan and any Award under the Plan. An approved leave of absence shall include sick leave, military leave, or any other authorized personal leave. For purposes of each Incentive Stock Option granted under the Plan, if such leave exceeds three months, and reemployment upon expiration of such leave is not guaranteed by statute or contract, then the Incentive Stock Option shall be treated as a Non-Qualified Stock Option on the day three months and one day following the expiration of such three month period.

 

(q)          “ Corporate Transaction ” means any of the following transactions, provided, however, that the Administrator shall determine under parts (iv) and (v) whether multiple transactions are related, and its determination shall be final, binding and conclusive:

 

(i)          a merger or consolidation in which the Company is not the surviving entity, except for a transaction the principal purpose of which is to change the state in which the Company is incorporated;

 

(ii)         the sale, transfer or other disposition of all or substantially all of the assets of the Company;

 

(iii)        the complete liquidation or dissolution of the Company;

 

(iv)        any reverse merger or series of related transactions culminating in a reverse merger (including, but not limited to, a tender offer followed by a reverse merger) in which the Company is the surviving entity but (A) the shares of Common Stock outstanding immediately prior to such merger are converted or exchanged by virtue of the merger into other property, whether in the form of securities, cash or otherwise, or (B) in which securities possessing more than forty percent (40%) of the total combined voting power of the Company’s outstanding securities are transferred to a person or persons different from those who held such securities immediately prior to such merger or the initial transaction culminating in such merger, but excluding any such transaction or series of related transactions that the Administrator determines shall not be a Corporate Transaction; or

 

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(v)         acquisition in a single or series of related transactions by any person or related group of persons (other than the Company or by a Company-sponsored employee benefit plan) of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities but excluding any such transaction or series of related transactions that the Administrator determines shall not be a Corporate Transaction.

 

(r)          “ Covered Employee ” means an Employee who is a “covered employee” under Section 162(m) (3) of the Code.

 

(s)          “ Director ” means a member of the Board or the board of directors of any Related Entity.

 

(t)          “ Disability ” means as defined under the long-term disability policy of the Company or the Related Entity to which the Grantee provides services regardless of whether the Grantee is covered by such policy. If the Company or the Related Entity to which the Grantee provides service does not have a long-term disability plan in place, “Disability” means that a Grantee is unable to carry out the responsibilities and functions of the position held by the Grantee by reason of any medically determinable physical or mental impairment for a period of not less than ninety (90) consecutive days. A Grantee will not be considered to have incurred a Disability unless he or she furnishes proof of such impairment sufficient to satisfy the Administrator in its discretion.

 

(u)          “ Dividend Equivalent Right ” means a right entitling the Grantee to compensation measured by dividends paid with respect to Common Stock.

 

(v)         “ Employee ” means any person, including an Officer or Director, who is in the employ of the Company or any Related Entity, subject to the control and direction of the Company or any Related Entity as to both the work to be performed and the manner and method of performance. The payment of a Director’s fee by the Company or a Related Entity shall not be sufficient to constitute “ employment ” by the Company.

 

(w)          “ Exchange Act ” means the Securities Exchange Act of 1934, as amended.

 

(x)          “ Fair Market Value ” means, as of any date, the value of Common Stock determined as follows:

 

(i)          If the Common Stock is listed on one or more established stock exchanges or national market systems, including without limitation The NASDAQ Global Select Market, The NASDAQ Global Market, The NASDAQ Capital Market of The NASDAQ Stock Market LLC, the New York Stock Exchange or the New York MKT, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on the principal exchange or system on which the Common Stock is listed (as determined by the Administrator) on the date of determination (or, if no closing sales price or closing bid was reported on that date, as applicable, on the last trading date such closing sales price or closing bid was reported), as reported in The Wall Street Journal or such other source as the Administrator deems reliable;

 

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(ii)         If the Common Stock is regularly quoted on an automated quotation system (including the OTC Bulletin Board) or by a recognized securities dealer, its Fair Market Value shall be the closing sales price for such stock as quoted on such system or by such securities dealer on the date of determination or the average of any such prices for such period as determined by the Administrator in good faith not to exceed thirty (30) trading days prior to the date of determination, but if selling prices are not reported, the Fair Market Value of a share of Common Stock shall be the mean between the high bid and low asked prices for the Common Stock on the date of determination (or, if no such prices were reported on that date, on the last date such prices were reported) or the average thereof for such period prior to the date of determination as established by the Administrator above, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or

 

(iii)        In the absence of an established market for the Common Stock of the type described in (i) and (ii), above, the Fair Market Value thereof shall be determined by the Administrator in good faith.

 

(y)           Good Reason means the occurrence after a Corporate Transaction or Change in Control of any of the following events or conditions unless consented to by the Grantee (and the Grantee shall be deemed to have consented to any such event or condition unless the Grantee provides written notice of the Grantee’s non-acquiescence within thirty (30) days of the effective time of such event or condition):

 

(i)          a change in the Grantee’s responsibilities or duties that represents a material and substantial diminution in the Grantee’s responsibilities or duties as in effect immediately preceding the consummation of a Corporate Transaction or Change in Control;

 

(ii)         a reduction in the Grantee’s base salary to a level below that in effect at any time within six months preceding the consummation of a Corporate Transaction or Change in Control or at any time thereafter; provided that an across-the-board reduction in the salary level of substantially all other individuals in positions similar to the Grantee’s by substantially the same percentage amount shall not constitute such a salary reduction; or

 

(iii)        requiring the Grantee to be based at any place outside a 50-mile radius from the Grantee’s job location or residence prior to the Corporate Transaction or Change in Control except for reasonably required travel on business that is not materially greater than such travel requirements prior to the Corporate Transaction or Change in Control.

 

(z)          “ Grantee ” means an Employee, Director or Consultant who receives an Award under the Plan.

 

(aa)         “ Incentive Stock Option ” means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code.

 

(bb)         “ Non-Qualified Stock Option ” means an Option not intended to qualify as an Incentive Stock Option.

 

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(cc)         “ Officer ” means a person who is an officer of the Company or a Related Entity within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.

 

(dd)         “ Option ” means an option to purchase Shares pursuant to an Award Agreement granted under the Plan.

 

(ee)         “ Parent ” means a “parent corporation”, whether now or hereafter existing, as defined in Section 424(e) of the Code.

 

(ff)         “ Performance-Based Compensation ” means compensation qualifying as “performance-based compensation” under Section 162(m) of the Code.

 

(gg)         “ Plan ” means this 2015 Stock Incentive Plan.

 

(hh)         “ Registration Date ” means the first to occur of (i) the closing of the first sale, subsequent to the date this Plan is adopted, to the general public pursuant to a registration statement filed with and declared effective by the Securities and Exchange Commission under the Securities Act of 1933, as amended, of (A) the Common Stock or (B) the same class of securities of a successor corporation (or its Parent) issued pursuant to a Corporate Transaction in exchange for or in substitution of the Common Stock; (ii) the date the Common Stock is otherwise registered under and the Company becomes subject to the reporting requirements of Sections 13 or 15 (d) or the Exchange Act; and (iii) in the event of a Corporate Transaction, the date of the consummation of the Corporate Transaction if the same class of securities of the successor corporation (or its Parent) issuable in such Corporate Transaction shall have been sold to the general public pursuant to a registration statement filed with and declared effective by the Securities and Exchange Commission under the Securities Act of 1933, as amended, on or prior to the date of consummation of such Corporate Transaction.

 

(ii)           “ Related Entity ” means any Parent or Subsidiary of the Company.

 

(jj)           “ Replaced ” means that pursuant to a Corporate Transaction the Award is replaced with a comparable stock award or a cash incentive program of the Company, the successor entity (if applicable) or Parent of either of them which preserves the compensation element of such Award existing at the time of the Corporate Transaction and provides for subsequent payout in accordance with the same (or a more favorable) vesting schedule applicable to such Award. The determination of Award comparability shall be made by the Administrator and its determination shall be final, binding and conclusive.

 

(kk)         “ Restricted Stock ” means Shares issued under the Plan to the Grantee for such consideration, if any, and subject to such restrictions on transfer, rights of first refusal, repurchase provisions, forfeiture provisions, and other terms and conditions as established by the Administrator.

 

(ll)           “ Restricted Stock Units ” means an Award that may be earned in whole or in part upon the passage of time or the attainment of performance criteria established by the Administrator and that may be settled for cash, Shares or other securities or a combination of cash, Shares or other securities as established by the Administrator.

 

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(mm)        “ Rule 16b-3 ” means Rule 16b-3 promulgated under the Exchange Act or any successor thereto.

 

(nn)         “ SAR ” means a stock appreciation right entitling the Grantee to Shares or cash compensation, as established by the Administrator, measured by appreciation in the value of Common Stock.

 

(oo)         “ Share ” means a share of the Common Stock.

 

(pp)         “ Subsidiary ” means a “subsidiary corporation”, whether now or hereafter existing, as defined in Section 424(f) of the Code.

 

3.           Stock Subject to the Plan .

 

(a)          Subject to the provisions of Section 10 , below, the maximum aggregate number of Shares that may be issued pursuant to all Awards is 5,000,000 Shares, plus an annual increase to be added on the first day of the calendar year beginning January 1, 2016, equal to 15% of the number of Shares outstanding as of such date or a lesser number of Shares determined by the Administrator. Notwithstanding the foregoing, subject to the provisions of Section 10 , below, of the number of Shares specified above, the maximum aggregate number of Shares available for grant of Incentive Stock Options shall be 1,000,000 Shares, plus an annual increase to be added on the first day of the calendar year beginning January 1, 2016, equal to the least of (x) 250,000 Shares, (y) 2% of the number of Shares outstanding as of such date, or (z) a lesser number of Shares determined by the Administrator. The Shares to be issued pursuant to Awards may be authorized, but unissued or reacquired Common Stock.

 

(b)          Any Shares covered by an Award (or portion of an Award) that is forfeited, canceled or expires (whether voluntarily or involuntarily) shall be deemed not to have been issued for purposes of determining the maximum aggregate number of Shares that may be issued under the Plan. Shares that actually have been issued under the Plan pursuant to an Award shall not be returned to the Plan and shall not become available for future issuance under the Plan, except that if unvested Shares are forfeited, or repurchased by the Company at the lesser of their original purchase price or their Fair Market Value at the time of repurchase, such Shares shall become available for future grant under the Plan

 

(c)          To the extent not prohibited by the listing requirements of The NASDAQ Stock Market LLC (or other established stock exchange or national market system on which the Common Stock is traded) or Applicable Law, any Shares covered by an Award that are surrendered (i) in payment of the Award exercise or purchase price (including pursuant to the “net exercise” of an option pursuant to Section 7(b)(v)) or (ii) in satisfaction of tax withholding obligations incident to the exercise of an Award shall be deemed not to have been issued for purposes of determining the maximum number of Shares that may be issued pursuant to all Awards under the Plan, unless otherwise determined by the Administrator.

 

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4.           Administration of the Plan .

 

(a)           Plan Administrator .

 

(i)           Administration with Respect to Directors and Officers . With respect to grants of Awards to Directors or Employees who are also Officers or Directors of the Company, the Plan shall be administered by (A) the Board or (B) a Committee designated by the Board, which Committee shall be constituted in such a manner as to satisfy the Applicable Laws and to permit such grants and related transactions under the Plan to be exempt from Section 16(b) of the Exchange Act in accordance with Rule 16b-3. Once appointed, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board.

 

(ii)          Administration With Respect to Consultants and Other Employees . With respect to grants of Awards to Employees or Consultants who are neither Directors nor Officers of the Company, the Plan shall be administered by (A) the Board or (B) a Committee designated by the Board, which Committee shall be constituted in such a manner as to satisfy the Applicable Laws. Once appointed, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board. The Board may authorize one or more Officers to grant such Awards and may limit such authority as the Board determines from time to time.

 

(iii)         Administration With Respect to Covered Employees . Notwithstanding the foregoing, as of and after the date that the exemption for the Plan under Section 162(m) of the Code expires, as set forth in Section 18 below, grants of Awards to any Covered Employee intended to qualify as Performance-Based Compensation shall be made only by a Committee (or subcommittee of a Committee) that is comprised solely of two or more Directors eligible to serve on a committee making Awards qualifying as Performance-Based Compensation. In the case of such Awards granted to Covered Employees, references to the “ Administrator ” or to a “ Committee ” shall be deemed to be references to such Committee or subcommittee.

 

(iv)         Administration Errors . In the event an Award is granted in a manner inconsistent with the provisions of this subsection (a) , such Award shall be presumptively valid as of its grant date to the extent permitted by the Applicable Laws.

 

(b)           Powers of the Administrator . Subject to Applicable Laws and the provisions of the Plan (including any other powers given to the Administrator hereunder), and except as otherwise provided by the Board, the Administrator shall have the authority, in its discretion:

 

(i)          to select the Employees, Directors and Consultants to whom Awards may be granted from time to time hereunder;

 

(ii)         to determine whether and to what extent Awards are granted hereunder;

 

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(iii)        to determine the number of Shares or the amount of other consideration to be covered by each Award granted hereunder;

 

(iv)        to approve forms of Award Agreements for use under the Plan;

 

(v)         to determine the terms and conditions of any Award granted hereunder;

 

(vi)        to amend the terms of any outstanding Award granted under the Plan, provided that

 

(A)         any amendment that would adversely affect the Grantee’s rights under an outstanding Award shall not be made without the Grantee’s written consent, provided , however , that an amendment or modification that may cause an Incentive Stock Option to become a Non-Qualified Stock Option shall not be treated as adversely affecting the rights of the Grantee;

 

(B)         the reduction of the exercise price of any Option awarded under the Plan and the base appreciation amount of any SAR awarded under the Plan shall be subject to stockholder approval; and

 

(C)         canceling an Option or SAR at a time when its exercise price or base appreciation amount (as applicable) exceeds the Fair Market Value of the underlying Shares, in exchange for another Option, SAR, Restricted Stock, or other Award or for cash shall be subject to stockholder approval, unless the cancellation and exchange occurs in connection with a Corporate Transaction. Notwithstanding the foregoing, canceling an Option or SAR in exchange for another Option, SAR, Restricted Stock, or other Award or for cash with an exercise price, purchase price or base appreciation amount (as applicable) that is equal to or greater than the exercise price or base appreciation amount (as applicable) of the original Option or SAR shall not be subject to stockholder approval;

 

(vii)       to construe and interpret the terms of the Plan and Awards, including without limitation, any notice of award or Award Agreement, granted pursuant to the Plan;

 

(viii)      to grant Awards to Employees, Directors and Consultants employed outside the United States on such terms and conditions different from those specified in the Plan as may, in the judgment of the Administrator, be necessary or desirable to further the purpose of the Plan; and

 

(ix)         to take such other action, not inconsistent with the terms of the Plan, as the Administrator deems appropriate.

 

The express grant in the Plan of any specific power to the Administrator shall not be construed as limiting any power or authority of the Administrator; provided that the Administrator may not exercise any right or power reserved to the Board. Any decision made, or action taken, by the Administrator or in connection with the administration of this Plan shall be final, conclusive and binding on all persons having an interest in the Plan.

 

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(c)           Indemnification . In addition to such other rights of indemnification as they may have as members of the Board or as Officers or Employees of the Company or a Related Entity, members of the Board and any Officers or Employees of the Company or a Related Entity to whom authority to act for the Board, the Administrator or the Company is delegated shall be defended and indemnified by the Company to the extent permitted by law on an after-tax basis against all reasonable expenses, including attorneys’ fees, actually and necessarily incurred in connection with the defense of any claim, investigation, action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan, or any Award granted hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by the Company) or paid by them in satisfaction of a judgment in any such claim, investigation, action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such claim, investigation, action, suit or proceeding that such person is liable for gross negligence, bad faith or intentional misconduct; provided, however, that within 30 days after the institution of such claim, investigation, action, suit or proceeding, such person shall offer to the Company, in writing, the opportunity at the Company’s expense to defend the same.

 

5.           Eligibility . Awards other than Incentive Stock Options may be granted to Employees, Directors and Consultants. Incentive Stock Options may be granted only to Employees of the Company or a Parent or a Subsidiary of the Company. An Employee, Director or Consultant, who has been granted an Award may, if otherwise eligible, be granted additional Awards. Awards may be granted to such Employees, Directors or Consultants who are residing in non-U.S. jurisdictions as the Administrator may determine from time to time.

 

6.           Terms and Conditions of Awards .

 

(a)           Types of Awards . The Administrator is authorized under the Plan to award any type of arrangement to an Employee, Director or Consultant that is not inconsistent with the provisions of the Plan and that by its terms involves or might involve the issuance of (i) Shares, (ii) cash, (iii) an Option, (iv) a SAR, or (v) a similar right with a fixed or variable price related to the Fair Market Value of the Shares and with an exercise or conversion privilege related to the passage of time, the occurrence of one or more events, or the satisfaction of performance criteria or other conditions. Such awards include, without limitation, Options, SARs, sales or bonuses of Restricted Stock, Restricted Stock Units or Dividend Equivalent Rights, and an Award may consist of one such security or benefit, or two or more of them in any combination or alternative.

 

(b)           Designation of Award . Each Award shall be designated in the Award Agreement. In the case of an Option, the Option shall be designated as either an Incentive Stock Option or a Non-Qualified Stock Option. However, notwithstanding such designation, an Option will qualify as an Incentive Stock Option under the Code only to the extent the $100,000 limitation of Section 422(d) of the Code is not exceeded. The $100,000 limitation of Section 422(d) of the Code is calculated based on the aggregate Fair Market Value of the Shares subject to Options designated as Incentive Stock Options that become exercisable for the first time by a Grantee during any calendar year (under all plans of the Company or any Parent or Subsidiary of the Company). For purposes of this calculation, Incentive Stock Options shall be taken into account in the order in which they were granted, and the Fair Market Value of the Shares shall be determined as of the grant date of the relevant Option. In the event that the Code or the regulations promulgated thereunder are amended after the date the Plan becomes effective to provide for a different limit on the Fair Market Value of Shares permitted to be subject to Incentive Stock Options, then such different limit will be automatically incorporated herein and will apply to any Options granted after the effective date of such amendment.

 

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(c)           Conditions of Award . Subject to the terms of the Plan, the Administrator shall determine the provisions, terms, and conditions of each Award including, but not limited to, the Award vesting schedule, repurchase provisions, rights of first refusal, forfeiture provisions, form of payment (cash, Shares, or other consideration) upon settlement of the Award, payment contingencies, and satisfaction of any performance criteria. The performance criteria established by the Administrator may be based on any one of, or combination of, the following: (i) increase in share price, (ii) earnings per share, (iii) total stockholder return, (iv) operating margin, (v) gross margin, (vi) return on equity, (vii) return on assets, (viii) return on investment, (ix) operating income, (x) net operating income, (xi) pre-tax profit, (xii) cash flow, (xiii) revenue, (xiv) expenses, (xv) earnings before interest, taxes and depreciation, (xvi) economic value added and (xvii) market share. The performance criteria may be applicable to the Company, Related Entities and/or any individual business units of the Company or any Related Entity. Partial achievement of the specified criteria may result in a payment or vesting corresponding to the degree of achievement as specified in the Award Agreement. In addition, the performance criteria shall be calculated in accordance with generally accepted accounting principles, but excluding the effect (whether positive or negative) of any change in accounting standards and any extraordinary, unusual or nonrecurring item, as determined by the Administrator, occurring after the establishment of the performance criteria applicable to the Award intended to be performance-based compensation. Each such adjustment, if any, shall be made solely for the purpose of providing a consistent basis from period to period for the calculation of performance criteria in order to prevent the dilution or enlargement of the Grantee’s rights with respect to an Award intended to be performance-based compensation.

 

(d)           Acquisitions and Other Transactions . The Administrator may issue Awards under the Plan in settlement, assumption or substitution for, outstanding awards or obligations to grant future awards in connection with the Company or a Related Entity acquiring another entity, an interest in another entity or an additional interest in a Related Entity whether by merger, stock purchase, asset purchase or other form of transaction.

 

(e)           Deferral of Award Payment . The Administrator may establish one or more programs under the Plan to permit selected Grantees 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 Grantee to payment or receipt of Shares or other consideration under an Award. The Administrator 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 Administrator deems advisable for the administration of any such deferral program.

 

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(f)           Separate Programs . The Administrator may establish one or more separate programs under the Plan for the purpose of issuing particular forms of Awards to one or more classes of Grantees on such terms and conditions as determined by the Administrator from time to time.

 

(g)           Individual Limitations on Awards .

 

(i)           Individual Limit for Options and SARs . Following the date that the exemption from application of Section 162(m) of the Code described in Section 18 (or any exemption having similar effect) ceases to apply to Awards, the maximum number of Shares with respect to which Options and SARs may be granted to any Grantee in any calendar year shall be 100,000 Shares. In connection with a Grantee’s commencement of Continuous Service, a Grantee may be granted Options and SARs for up to an additional 150,000 Shares that shall not count against the limit set forth in the previous sentence. The foregoing limitations shall be adjusted proportionately in connection with any change in the Company’s capitalization pursuant to Section 10 , below. To the extent required by Section 162(m) of the Code or the regulations thereunder, in applying the foregoing limitations with respect to a Grantee, if any Option or SAR is canceled, the canceled Option or SAR shall continue to count against the maximum number of Shares with respect to which Options and SARs may be granted to the Grantee. For this purpose, the repricing of an Option (or in the case of a SAR, the base amount on which the stock appreciation is calculated is reduced to reflect a reduction in the Fair Market Value of the Common Stock) shall be treated as the cancellation of the existing Option or SAR and the grant of a new Option or SAR.

 

(ii)          Individual Limit for Restricted Stock and Restricted Stock Units . Following the date that the exemption from application of Section 162(m) of the Code described in Section 18 (or any exemption having similar effect) ceases to apply to Awards, for awards of Restricted Stock and Restricted Stock Units that are intended to be Performance-Based Compensation, the maximum number of Shares with respect to which such Awards may be granted to any Grantee in any calendar year shall be 250,000 Shares. The foregoing limitation shall be adjusted proportionately in connection with any change in the Company’s capitalization pursuant to Section 10 .

 

(h)           Deferral . If the vesting or receipt of Shares under an Award is deferred to a later date, any amount (whether denominated in Shares or cash) paid in addition to the original number of Shares subject to such Award will not be treated as an increase in the number of Shares subject to the Award if the additional amount is based either on a reasonable rate of interest or on one or more predetermined actual investments such that the amount payable by the Company at the later date will be based on the actual rate of return of a specific investment (including any decrease as well as any increase in the value of an investment).

 

(i)           Early Exercise . The Award Agreement may, but need not, include a provision whereby the Grantee may elect at any time while an Employee, Director or Consultant to exercise any part or all of the Award prior to full vesting of the Award. Any unvested Shares received pursuant to such exercise may be subject to a repurchase right in favor of the Company or a Related Entity or to any other restriction the Administrator determines to be appropriate.

 

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(j)           Term of Award . The term of each Award shall be the term stated in the Award Agreement, provided, however, that the term of an Award shall be no more than ten years from the date of grant thereof. However, in the case of an Incentive Stock Option granted to a Grantee who, at the time the Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary of the Company, the term of the Incentive Stock Option shall be five (5) years from the date of grant thereof or such shorter term as may be provided in the Award Agreement. Notwithstanding the foregoing, the specified term of any Award shall not include any period for which the Grantee has elected to defer the receipt of the Shares or cash issuable pursuant to the Award.

 

(k)           Transferability of Awards . Incentive Stock Options may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Grantee, only by the Grantee. Other Awards shall be transferable (i) by will and by the laws of descent and distribution and (ii) during the lifetime of the Grantee, to the extent and in the manner authorized by the Administrator but only to the extent such transfers are made to family members, to family trusts, to family controlled entities, to charitable organizations, and pursuant to domestic relations orders or agreements, in all cases without payment for such transfers to the Grantee. Notwithstanding the foregoing, the Grantee may designate one or more beneficiaries of the Grantee’s Award in the event of the Grantee’s death on a beneficiary designation form provided by the Administrator.

 

(l)           Time of Granting Awards . The date of grant of an Award shall for all purposes be the date on which the Administrator makes the determination to grant such Award, or such other later date as is determined by the Administrator.

 

7.           Award Exercise or Purchase Price, Consideration and Taxes .

 

(a)           Exercise or Purchase Price . The exercise or purchase price, if any, for an Award shall be as follows:

 

(i)          In the case of an Incentive Stock Option:

 

(A)         granted to an Employee who, at the time of the grant of such Incentive Stock Option owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary of the Company, the per Share exercise price shall be not less than one hundred ten percent (110%) of the Fair Market Value per Share on the date of grant; or

 

(B)         granted to any Employee other than an Employee described in the preceding paragraph, the per Share exercise price shall be not less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.

 

(ii)         In the case of a Non-Qualified Stock Option, the per Share exercise price shall be not less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.

 

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(iii)        In the case of Awards intended to qualify as Performance-Based Compensation, the exercise or purchase price, if any, shall be not less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.

 

(iv)        In the case of SARs, the base appreciation amount shall not be less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.

 

(v)         In the case of other Awards, such price as is determined by the Administrator.

 

(vi)        Notwithstanding the foregoing provisions of this Section 7(a) , in the case of an Award issued pursuant to Section 6(d) , above, the exercise or purchase price for the Award shall be determined in accordance with the provisions of the relevant instrument evidencing the agreement to issue such Award.

 

(b)           Consideration . Subject to Applicable Laws, the consideration to be paid for the Shares to be issued upon exercise or purchase of an Award including the method of payment shall be determined by the Administrator. In addition to any other types of consideration the Administrator may determine, the Administrator is authorized to accept as consideration for Shares issued under the Plan the following, provided that the portion of the consideration equal to the par value of the Shares must be paid in cash or other legal consideration permitted by the Nevada Business Corporations Law:

 

(i)          cash;

 

(ii)         check;

 

(iii)        surrender of Shares, or delivery of a properly executed form of attestation of ownership of Shares as the Administrator may require, that have a Fair Market Value on the date of surrender or attestation equal to the aggregate exercise price of the Shares as to which said Award shall be exercised;

 

(iv)        with respect to Options, if the exercise occurs on or after the Registration Date, payment through a broker-dealer sale and remittance procedure pursuant to which the Grantee (A) shall provide written instructions to a Company designated brokerage firm to effect the immediate sale of some or all of the purchased Shares and remit to the Company sufficient funds to cover the aggregate exercise price payable for the purchased Shares and (B) shall provide written directives to the Company to deliver the certificates for the purchased Shares directly to such brokerage firm in order to complete the sale transaction;

 

(v)         with respect to Options, payment through a “ net exercise ” such that, without the payment of any funds, the Grantee may exercise the Option and receive the net number of Shares equal to (i) the number of Shares as to which the Option is being exercised, multiplied by (ii) a fraction, the numerator of which is the Fair Market Value per Share (on such date as is determined by the Administrator) less the exercise price per Share, and the denominator of which is such Fair Market Value per Share (the number of net Shares to be received shall be rounded down to the nearest whole number of Shares); or

 

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(vi)        any combination of the foregoing methods of payment.

 

The Administrator may at any time or from time to time, by adoption of or by amendment to the standard forms of Award Agreement described in Section 4(b) (iv) , or by other means, grant Awards that do not permit all of the foregoing forms of consideration to be used in payment for the Shares or that otherwise restrict one or more forms of consideration.

 

(c)           Taxes . No Shares shall be delivered under the Plan to any Grantee or other person until such Grantee or other person has made arrangements acceptable to the Administrator for the satisfaction of any non-U.S., federal, state, or local income and employment tax withholding obligations, including, without limitation, obligations incident to the receipt of Shares. Upon exercise or vesting of an Award the Company shall withhold or collect from the Grantee an amount sufficient to satisfy such tax obligations, including, but not limited to, by surrender of the whole number of Shares covered by the Award sufficient to satisfy the minimum applicable tax withholding obligations incident to the exercise or vesting of an Award (reduced to the lowest whole number of Shares if such number of Shares withheld would result in withholding a fractional Share with any remaining tax withholding settled in cash).

 

8.            Exercise of Award .

 

(a)           Procedure for Exercise; Rights as a Shareholder .

 

(i)          Any Award granted hereunder shall be exercisable at such times and under such conditions as determined by the Administrator under the terms of the Plan and specified in the Award Agreement.

 

(ii)         An Award shall be deemed to be exercised when written notice of such exercise has been given to the Company in accordance with the terms of the Award by the person entitled to exercise the Award and full payment for the Shares with respect to which the Award is exercised has been made, including, to the extent selected, use of the broker-dealer sale and remittance procedure to pay the purchase price as provided in Section 7(b) (iv) .

 

(b)           Exercise of Award Following Termination of Continuous Service . In the event of termination of a Grantee’s Continuous Service for any reason other than Disability or death (but not in the event of a Grantee’s change of status from Employee to Consultant or from Consultant to Employee), such Grantee may, but only during the post-termination exercise period (but in no event later than the expiration date of the term of such Award as set forth in the Award Agreement), exercise the portion of the Grantee’s Award that was vested at the date of such termination or such other portion of the Grantee’s Award as may be determined by the Administrator. The Grantee’s Award Agreement may provide that upon the termination of the Grantee’s Continuous Service for Cause, the Grantee’s right to exercise the Award shall terminate concurrently with the termination of Grantee’s Continuous Service. In the event of a Grantee’s change of status from Employee to Consultant, an Employee’s Incentive Stock Option shall convert automatically to a Non-Qualified Stock Option on the day three months and one day following such change of status. To the extent that the Grantee’s Award was unvested at the date of termination, or if the Grantee does not exercise the vested portion of the Grantee’s Award within the post-termination exercise period, the Award shall terminate.

 

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(c)           Disability of Grantee . In the event of termination of a Grantee’s Continuous Service as a result of his or her Disability, such Grantee may, but only within six months from the date of such termination (or such longer period as specified in the Award Agreement but in no event later than the expiration date of the term of such Award as set forth in the Award Agreement), exercise the portion of the Grantee’s Award that was vested at the date of such termination; provided, however, that if such Disability is not a “disability” as such term is defined in Section 22(e)(3) of the Code, in the case of an Incentive Stock Option such Incentive Stock Option shall automatically convert to a Non-Qualified Stock Option on the day three months and one day following such termination. To the extent that the Grantee’s Award was unvested at the date of termination, or if Grantee does not exercise the vested portion of the Grantee’s Award within the time specified herein, the Award shall terminate.

 

(d)           Death of Grantee . In the event of a termination of the Grantee’s Continuous Service as a result of his or her death, or in the event of the death of the Grantee during the post-termination exercise period or during the six month period following the Grantee’s termination of Continuous Service as a result of his or her Disability, the Grantee’s estate or a person who acquired the right to exercise the Award by bequest or inheritance may exercise the portion of the Grantee’s Award that was vested as of the date of termination, within six months from the date of death (or such longer period as specified in the Award Agreement but in no event later than the expiration of the term of such Award as set forth in the Award Agreement). To the extent that, at the time of death, the Grantee’s Award was unvested, or if the Grantee’s estate or a person who acquired the right to exercise the Award by bequest or inheritance does not exercise the vested portion of the Grantee’s Award within the time specified herein, the Award shall terminate.

 

(e)           Extension if Exercise Prevented by Law . Notwithstanding the foregoing, if the exercise of an Award within the applicable time periods set forth in this Section 8 is prevented by the provisions of Section 9 below, the Award shall remain exercisable until one month after the date the Grantee is notified by the Company that the Award is exercisable, but in any event no later than the expiration of the term of such Award as set forth in the Award Agreement and only in a manner and to the extent permitted under Code Section 409A.

 

9.            Conditions Upon Issuance of Shares .

 

(a) If at any time the Administrator determines that the delivery of Shares pursuant to the exercise, vesting or any other provision of an Award is or may be unlawful under Applicable Laws, the vesting or right to exercise an Award or to otherwise receive Shares pursuant to the terms of an Award shall be suspended until the Administrator determines that such delivery is lawful and shall be further subject to the approval of counsel for the Company with respect to such compliance. The Company shall have no obligation to effect any registration or qualification of the Shares under federal or state laws.

 

(b) As a condition to the exercise of an Award, the Company may require the person exercising such Award to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required by any Applicable Laws.

 

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10.          Adjustments Upon Changes in Capitalization . Subject to any required action by the stockholders of the Company and Section 11 hereof, the number of Shares covered by each outstanding Award, and the number of Shares that have been authorized for issuance under the Plan but as to which no Awards have yet been granted or that have been returned to the Plan, the exercise or purchase price of each such outstanding Award, the maximum number of Shares with respect to which Awards may be granted to any Grantee in any calendar year, as well as any other terms that the Administrator determines require adjustment shall be proportionately adjusted for (i) any increase or decrease in the number of issued Shares resulting from a stock split, reverse stock split, stock dividend, recapitalization, combination or reclassification of the Shares, or similar transaction affecting the Shares; (ii) any other increase or decrease in the number of issued Shares effected without receipt of consideration by the Company; or (iii)  any other transaction with respect to Common Stock including a corporate merger, consolidation, acquisition of property or stock, separation (including a spin-off or other distribution of stock or property), reorganization, liquidation (whether partial or complete) or any similar transaction; provided , however that conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.” In the event of any distribution of cash or other assets to stockholders other than a normal cash dividend, the Administrator shall also make such adjustments as provided in this Section 10 or substitute, exchange or grant Awards to effect such adjustments (collectively “ adjustments ”). Any such adjustments to outstanding Awards will be effected in a manner that precludes the enlargement of rights and benefits under such Awards. In connection with the foregoing adjustments, the Administrator may, in its discretion, prohibit the exercise of Awards or other issuance of Shares, cash or other consideration pursuant to Awards during certain periods of time. Except as the Administrator determines, no issuance by the Company of shares of any class, or securities convertible into shares of any class, shall affect, and no adjustment by reason hereof shall be made with respect to, the number or price of Shares subject to an Award.

 

11.          Corporate Transactions and Changes in Control .

 

(a)           Termination of Award to Extent Not Assumed in Corporate Transaction . Effective upon the consummation of a Corporate Transaction, all outstanding Awards under the Plan shall terminate. However, all such Awards shall not terminate to the extent they are Assumed in connection with the Corporate Transaction.

 

(b)           Acceleration of Award Upon Corporate Transaction or Change in Control . The Administrator shall have the authority, exercisable either in advance of any actual or anticipated Corporate Transaction or Change in Control or at the time of an actual Corporate Transaction or Change in Control and exercisable at the time of the grant of an Award under the Plan or any time while an Award remains outstanding, to provide for the full or partial automatic vesting and exercisability of one or more outstanding unvested Awards under the Plan and the release from restrictions on transfer and repurchase or forfeiture rights of such Awards in connection with a Corporate Transaction or Change in Control, on such terms and conditions as the Administrator may specify. The Administrator also shall have the authority to condition any such Award vesting and exercisability or release from such limitations upon the subsequent termination of the Continuous Service of the Grantee within a specified period following the effective date of the Corporate Transaction or Change in Control. The Administrator may provide that any Awards so vested or released from such limitations in connection with a Change in Control, shall remain fully exercisable until the expiration or sooner termination of the Award.

 

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(c)           Effect of Acceleration on Incentive Stock Options . Any Incentive Stock Option accelerated under this Section 11 in connection with a Corporate Transaction or Change in Control shall remain exercisable as an Incentive Stock Option under the Code only to the extent the $100,000 dollar limitation of Section 422(d) of the Code is not exceeded.

 

12.          Effective Date and Term of Plan . The Plan shall become effective upon the earlier to occur of its adoption by the Board or its approval by the shareholders of the Company. It shall continue in effect for a term of ten years unless sooner terminated. Subject to Section 17 , below, and Applicable Laws, Awards may be granted under the Plan upon its becoming effective.

 

13.          Amendment, Suspension or Termination of the Plan .

 

(a)          The Board may at any time amend, suspend or terminate the Plan; provided, however, that no such amendment shall be made without the approval of the Company’s stockholders to the extent such approval is required by Applicable Laws.

 

(b)          No Award may be granted during any suspension of the Plan or after termination of the Plan.

 

(c)          No suspension or termination of the Plan (including termination of the Plan under Section 11 , above) shall adversely affect any rights under Awards already granted to a Grantee.

 

14.          Reservation of Shares .

 

(a)          The Company, during the term of the Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan.

 

(b)          The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.

 

15.          No Effect on Terms of Employment/Consulting Relationship . The Plan shall not confer upon any Grantee any right with respect to the Grantee’s Continuous Service, nor shall it interfere in any way with his or her right or the right of the Company or any Related Entity to terminate the Grantee’s Continuous Service at any time, with or without cause, including, but not limited to, Cause, and with or without notice. The ability of the Company or any Related Entity to terminate the employment of a Grantee who is employed at will is in no way affected by its determination that the Grantee’s Continuous Service has been terminated for Cause for the purposes of this Plan.

 

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16.          No Effect on Retirement and Other Benefit Plans . Except as specifically provided in a retirement or other benefit plan of the Company or a Related Entity, Awards shall not be deemed compensation for purposes of computing benefits or contributions under any retirement plan of the Company or a Related Entity, and shall not affect any benefits under any other benefit plan of any kind or any benefit plan subsequently instituted under which the availability or amount of benefits is related to level of compensation. The Plan is not a “Pension Plan” or “Welfare Plan” under the Employee Retirement Income Security Act of 1974, as amended.

 

17.          Shareholder Approval . The grant of Incentive Stock Options under the Plan shall be subject to approval of the Plan by the shareholders of the Company within twelve (12) months before or after the date the Plan is adopted excluding Incentive Stock Options issued in substitution for outstanding Incentive Stock Options pursuant to Section 424(a) of the Code. Such stockholder approval shall be obtained in the degree and manner required under Applicable Laws. The Administrator may grant Incentive Stock Options under the Plan prior to approval by the stockholders, but until such approval is obtained, no such Incentive Stock Option shall be exercisable. In the event that stockholder approval is not obtained within the twelve (12) month period provided above, all Incentive Stock Options previously granted under the Plan shall be exercisable as Non-Qualified Stock Options.

 

18.          Effect of Section 162(m) of the Code . Section 162(m) of the Code does not apply to the Plan prior to the Registration Date. Following the Registration Date, the Plan, and all Awards issued thereunder, are intended to be exempt from the application of Section 162(m) of the Code, which restricts under certain circumstances the Federal income tax deduction for compensation paid by a public company to named executives in excess of $1 million per year. The exemption is based on Treasury Regulation Section 1.162-27 (f), in the form existing on the effective date of the Plan, with the understanding that such regulation generally exempts from the application of Section 162(m) of the Code compensation paid pursuant to a plan that existed before a company becomes publicly held. Under such Treasury Regulation, this exemption is available to the Plan for the duration of the period that lasts until the earlier of (i) the expiration of the Plan; (ii) the material modification of the Plan; (iii) the exhaustion of the maximum number of shares of Common Stock available for Awards under the Plan, as set forth in Section 3(a) ; (iv) the first meeting of shareholders at which Directors are to be elected that occurs after the close of the third calendar year following the calendar year in which the Company first becomes subject to the reporting obligations of Section 13 or 15(d) of the Exchange Act; or (v) such other date required by Section 162(m) of the Code and the rules and regulations promulgated thereunder. To the extent that the Administrator determines as of the date of grant of an Award that (i) the Award is intended to qualify as Performance-Based Compensation; and (ii) the exemption described above is no longer available with respect to such Award, such Award shall not be effective until any stockholder approval required under Section 162(m) of the Code has been obtained.

 

19  | Page  

 

 

19.          Unfunded Obligation . Grantees shall have the status of general unsecured creditors of the Company. Any amounts payable to Grantees pursuant to the Plan shall be unfunded and unsecured obligations for all purposes, including, without limitation, Title I of the Employee Retirement Income Security Act of 1974, as amended. Neither the Company nor any Related Entity shall be required to segregate any monies from its general funds, or to create any trusts, or establish any special accounts with respect to such obligations. The Company shall retain at all times beneficial ownership of any investments, including trust investments, which the Company may make to fulfill its payment obligations hereunder. Any investments or the creation or maintenance of any trust or any Grantee account shall not create or constitute a trust or fiduciary relationship between the Administrator, the Company or any Related Entity and a Grantee, or otherwise create any vested or beneficial interest in any Grantee or the Grantee’s creditors in any assets of the Company or a Related Entity. The Grantees shall have no claim against the Company or any Related Entity for any changes in the value of any assets that may be invested or reinvested by the Company with respect to the Plan.

 

20.          Construction . Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of the Plan. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term “ or ” is not intended to be exclusive, unless the context clearly requires otherwise.

 

21.          Nonexclusivity of the Plan . Neither the adoption of the Plan by the Board, the submission of the Plan to the stockholders of the Company for approval, nor any provision of the Plan will be construed as creating any limitations on the power of the Board to adopt such additional compensation arrangements as it may deem desirable, including, without limitation, the granting of Awards otherwise than under the Plan, and such arrangements may be either generally applicable or applicable only in specific cases.

 

20   | Page  

Exhibit 10.5
     
CODE OF ETHICAL CONDUCT










 
Celsius Holdings, Inc. and subsidiaries




To All Celsius Employees:
 


 
At Celsius, we are committed to conducting our business with integrity. This Code of Ethical Conduct is a guide for every Company employee in applying legal and ethical practices to their everyday work. The Code describes not only our standards of integrity but also some of the specific principles and areas of the law that are most likely to affect us.
 
There is no quality more important than integrity. This applies to a business just as it does to an individual. Integrity is a core value in our Code of Ethical Conduct.
 
Celsius is a good corporate citizen not just because we comply with the law, but because our employees are also expected to act according to our ethical principles. We are committed to go beyond mere compliance – beyond simply "doing things right." We aspire to "do the right thing" by being faithful to and executing the principles and guidelines cited in this Code of Ethical Conduct and to act in ways that exceed the minimum standards set by law. Each of us is personally responsible for meeting this obligation.
 
Certain situations may arise that are not covered in our Code of Ethical Conduct. If you have any questions concerning the legality or propriety of an action, or the meaning of the Code, you should contact (1) your immediate supervisor, (2) Celsius’ Chief Financial Officer, our Compliance Director, or (3) Roger Shaffer of Baritz & Colman LLP, our outside counsel, at 1075 Broken Sound Parkway, NW, Suite 102, Boca Raton, Florida 33487, phone: (561) 864-5100, fax: (561) 864-5101, email: rshaffer@baritzcolman.com .
 
Compliance with the law and honesty and integrity in our dealings with others are not to be sacrificed in the name of profits. We do not and will not condone any such action. We will attain our success through compliance with the law, dealings evidencing fairness and integrity, and a commitment to quality. We expect your wholehearted support of these Company values and principles.
 
You will discover that many of the guidelines in this Code of Ethical Conduct are simple common sense and good business practice; others reflect our desire to emphasize integrity and compliance with the law. Our business mission will only be successful if every Celsius employee follows this Code.
 

 

 
/s/ Gerry David
 
Gerry David, CEO
 

 

 
This Code of Ethical Conduct is a summary of Celsius business practice policies and guidelines, which must be followed as a condition of employment.
 
 
ii

 
 
 
TABLE OF CONTENTS

   
Page
I.
PURPOSE OF THE CODE OF ETHICAL CONDUCT / POLICY STATEMENT
1
II.
GENERAL POLICY REGARDING LAWS AND BUSINESS CONDUCT
1
III.
DISCRIMINATION AND HARASSMENT
1
IV.
ETHICAL BUSINESS PRACTICES
1
 
Accuracy of Books and Records
2
 
Fraud and Similar Irregularities
2
V.
GIFTS, BUSINESS COURTESIES AND BRIBES
2
VI.
CONFLICTS OF INTEREST
3
VII.
USE OF CELSIUS ASSETS AND RESOURCES
4
 
Corporate Opportunities
5
VIII.
CONFIDENTIAL INFORMATION
5
 
Insider Trading
5
IX
INTERNATIONAL OPERATIONS
5
 
Foreign Corrupt Practices and the OECD Anti-Bribery Convention
6
X
IMPLEMENTATION
6
 
Scope of Application
6
 
Communication Responsibilities
6
 
Waiver of the Code of Ethical Conduct
6
 
Potential Violations
6
XI.
WHISTLE BLOWER POLICY
6
XII.
COMPLIANCE PROCEDURES
7
XIII.
VIOLATIONS
8
 
 
 
iii

 
 
 
 
I.           PURPOSE OF THE CODE OF ETHICAL CONDUCT / POLICY STATEMENT
 
This Code of Ethical Conduct sets forth the standards for business conduct at Celsius Holdings, Inc. and its affiliated companies (“Celsius”). It is intended to guide each employee in making business decisions to ensure that Celsius achieves its mission and its commitment to integrity.
 
Celsius strives to comply with all laws and regulations that are applicable to its business worldwide. Though customs vary country by country and standards may vary by business environment, Celsius emphasizes good faith efforts to follow the spirit and intent of the law. Good business results do not justify a violation of business ethics, the law, or regulations. Ethical business behavior should exist at a level well above what the law requires. Celsius’ reputation for integrity is one of its most valued assets, and integrity is expected of everyone.
 
Neither this Code of Ethical Conduct nor any book of rules can provide all the answers. A Celsius employee must consider each situation carefully to ensure that he or she is acting ethically and in the best interest of the Company. Employees should consider whether their actions would withstand full examination by friends and associates or public disclosure in the press. If questions arise, employees should discuss the circumstances with our Compliance Director or their immediate supervisor.
 
Each employee is responsible for adhering to the Code of Ethical Conduct as a condition of continued employment; however, compliance with the Code of Ethical Conduct shall in no way alter your employment-at-will status. In addition, employees in Finance, Purchasing, or other specialized areas must comply with their own functional policies and requirements.
 
Violations of the Code may result in sanctions imposed by Celsius up to and including immediate termination of employment. Violations of the Code may also subject the individual employee to civil and criminal sanctions and shall be considered as an act outside of the scope of your employment.
 
II.           GENERAL POLICY REGARDING LAWS AND BUSINESS CONDUCT
 
Celsius operates within the bounds of the laws, rules, and regulations that are relevant to our business. The rule of law is fundamental to civil society, to the democratic process, and to the conduct of business in a dynamic global marketplace. However, today's market demands that companies meet higher standards – simply obeying the law is not enough. To achieve higher standards of behavior, we need to make business decisions that are aligned with our ethical principles.
 
Supervisors must ensure that employees understand the values and are informed of the requirements relating to their jobs. They must also be available to answer employee questions or concerns and to guide them to other Celsius subject-matter experts when necessary. There are serious consequences for failing to follow these laws, up to and including termination of employment. Laws and regulations are sometimes ambiguous and difficult to interpret. In such situations, contact our Compliance Director for assistance.
 
III.           DISCRIMINATION AND HARASSMENT
 
The diversity of the Company’s employees is a tremendous asset. The Company is firmly committed to providing equal opportunity in all aspects of employment and will not tolerate any illegal discrimination or harassment of any kind. Examples include derogatory comments based on racial or ethnic characteristics and unwelcome sexual advances.
 
IV.           ETHICAL BUSINESS PRACTICES
 
Our success in the marketplace is based on the quality of our products and services, the value our products and services provide our customers, and the competence and honesty of our product and sales presentations. Celsius prospers only to the degree that we serve our customers well – and treat them, our suppliers, partners, teammates, and competitors fairly and honestly. When we fail to negotiate, perform, or market in good faith, we seriously damage our reputation and lose the loyalty of our customers.
 
 
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Fair competition is the hallmark of our relationships – our business dealings will be frank and respectful, and we strive to generate mutually advantageous, long-term relationships.
 
Accuracy of Books and Records
 
The Company requires honest and accurate recording and reporting of information in order to make responsible business decisions. Many employees regularly use business expense accounts, which must be documented and recorded accurately. If an employee is not sure whether a certain expense is legitimate, the employee should ask his or her supervisor or the Company’s CFO. All of the Company’s books, records, accounts and financial statements must be maintained in reasonable detail, must appropriately reflect the Company’s transactions and must conform both to applicable legal requirements and to the Company’s system of internal controls. Unrecorded or “off the books” funds or assets should not be maintained.
 
Fraud and Similar Irregularities
 
Celsius prohibits fraud and has established procedures to be followed concerning the recognition, reporting, and investigation of suspected fraud. Fraud includes, but is not limited to
 
·  
Dishonest or fraudulent acts:
 
·  
Embezzlement;
 
·  
Forgery or alteration of negotiable instruments such as Celsius checks and drafts;
 
·  
Misappropriation of Celsius, employee, customer, partner, or supplier assets;
 
·  
Personal use of cash, securities, supplies, or any other Celsius assets;
 
·  
Unauthorized handling and reporting of Celsius transactions; and
 
·  
Falsification of Celsius records or financial statements for personal or other reasons.
 
·  
Use of illegal, not licensed, software programs.
 
Any employee or agent who suspects that any fraudulent activity may have occurred should report such concern to our Compliance Director, or Roger Shaffer of Baritz & Colman LLP, our outside counsel, at 1075 Broken Sound Parkway, NW, Suite 102, Boca Raton, Florida 33487, phone: (561) 864-5100, fax: (561) 864-5101, email: rshaffer@baritzcolman.com .
 
V.           GIFTS, BUSINESS COURTESIES AND BRIBES
 
To maintain trust in our business relationships, we must always act with integrity. We must steer clear of giving or receiving gifts that are intended to influence, or appear to influence, business decisions. When we accept or give such gifts, it can undermine customer relationships, hurt our reputation, and put Celsius in legal jeopardy.
 
Celsius recognizes that gifts, gratuities, and other business courtesies may occasionally be appropriate in building and maintaining business relationships with customers, suppliers, and other stakeholders. However, our employees, representatives, and agents must avoid even the perception of favorable treatment or the appearance of impropriety when offering or accepting any item of value in conducting our business.
 
When considering whether to accept or offer a gift, gratuity, or other business courtesy, Celsius employees are expected to use moderation and prudent judgment. Begin by assuring yourself that any offer you would make or courtesy that you would accept would leave you feeling comfortable if known by your manager, coworker, family member, or the public.
 
 
2

 
 
If you are a buyer, influence buying, or are involved in procurement transactions in any way (e.g., determine specifications, evaluate bids, etc.), you must be especially careful not to create the appearance of special treatment. In other words, you must refrain from accepting gifts or business courtesies that could be perceived as affecting your objectivity or influencing your decisions. If the "right thing to do" is not obvious, seek guidance from your supervisor or the Compliance Director. In addition, each Celsius employee should promptly advise his or her immediate supervisor upon receipt of any cash gift from a Celsius supplier or other business partner, or upon the receipt of any gift (other than customary business meals) with a value of more than $100.
 
A number of laws and regulations, including the Anti-Kickback Act and the Foreign Corrupt Practices Act, have been created to ensure that business decisions are free from unfair influence. Bribes and other corrupt offers not only violate Celsius policy; they are illegal – subjecting both Celsius and the individual to civil and criminal penalties. When dealing with government customers or officials, whether domestic or international, we must be especially mindful because these laws and regulations have been put in place to protect the public's interests. Any offer of money or gifts intended to influence a business decision should be reported to your the Compliance Director or our outside counsel.
 
VI.           CONFLICTS OF INTEREST
 
Integrity in a business relationship means that all participants are working together for the common good, and are not making decisions based on self-interest. When we act with integrity, we earn trust and build long-term customer relationships. When we act, or appear to be acting in our own self-interest, we lose trust and damage our reputation.
 
Except as specifically authorized in this section, Celsius expects that our business will be conducted free from any actual or potential conflict that might arise when one's loyalty is split between personal interests or friendships and the interests of the company. Judgment can be affected in any transaction or relationship where an individual might find that Celsius’ interest competes with his or her own. Celsius wants loyalty to come easily, and we will work together to resolve disclosed conflicts in a mutually satisfactory manner. Our customers and suppliers can expect to be dealt with fairly and impartially, free from any conflicting interests.
 
Except as specifically authorized in this section, Celsius employees have a duty to avoid financial, business, or other relationships that might interfere with this commitment. Each of us will scrupulously avoid even the appearance of a conflict between personal interests and those of Celsius in matters of importance to Celsius’ business, and we expect those with whom we deal to support us in this endeavor.
 
You must disclose any matter that casts doubt on your ability to act objectively and in Celsius’ best interest. Employees, representatives, and agents of Celsius who may have an actual or potential conflict should report all pertinent details in writing to their supervisor or the Compliance Director.
 
Any of the following situations could present a conflict of interest and must be disclosed:
 
·  
Ownership of, or substantial interest in, a company that is a competitor of or does business with Celsius.
 
·  
Employment by a competitor or any organization that does business with Celsius, regardless of the nature of the employment, while also employed by Celsius.
 
·  
Placement of business with a firm in which an employee or close family members has a substantial ownership or management interest.
 
·  
Acting independently as a consultant to a Celsius customer, supplier, or other business partner.
 
·  
As more fully described in Section IV above, acceptance of anything of value – such as gifts, discounts, or compensation – from an individual or entity that does or seeks to do business with Celsius.
 
 
3

 
 
 
·  
Employing or discussing employment with current or former government employees, or using them as consultants or subcontractors in violation of relevant law or regulation.
 
·  
Hiring friends or relatives to work directly for you at Celsius, especially when you have control or influence over their work assignments, compensation, or promotion opportunities.
 
In certain instances, senior management, the Audit Committee or the Board may determine that notwithstanding an actual or potential conflict of interest, a particular relationship or transaction is in the best interest of Celsius. Any such relationship or transaction must be approved in advance by senior management of Celsius not having a direct or indirect interest in the relationship or transaction. If the interested party is an officer or director of the Company, further approval must be obtained from of a majority of the Audit Committee of the Board of Directors of Celsius or the Board of Directors, provided that only those that do not have a relationship or an interest in the transaction are eligible to cast a vote. In each such case, the full scope of the conflict of interest must be disclosed to senior management and the Audit Committee or the Board, and must also be publicly disclosed to the extent required by applicable securities laws.
 
VII.           USE OF CELSIUS ASSETS AND RESOURCES
 
Effective use of our resources is critical to our bottom line. When we use Celsius resources wisely, we demonstrate our efficiency. When we waste our resources, we increase costs and reduce productivity.
 
Our employees should demonstrate good judgment and discretion when utilizing Celsius or customer-owned resources. Such resources include computers, telephones, Internet access, electronic mail (e-mail), voice mail, reproduction equipment, facsimile systems, production and operational materials, vehicles, and other equipment and facilities. Likewise, we will exercise prudence in our expenditures, pursuing best value and return on our investments.
 
Employees must use Celsius or customer-owned assets first and foremost for business purposes and to advance Celsius’ strategic objectives. However, occasional limited personal use may occur when it does not compromise Celsius’ interests. Each of us is responsible for safeguarding these assets – never borrowing or removing them from Celsius’ premises without proper authorization and always being mindful not to deplete their value, add significant cost for Celsius, or use them in a manner that adversely affects Celsius’ reputation.
 
When using Celsius’ assets for personal reasons, follow these guidelines, unless previously authorized by Celsius’ senior management to perform any of the following, provided that is lawful:
 
·  
Do not sell, loan, give away, or dispose of Celsius materials, designs, ideas, data, or other property without proper authorization. Any improper transfer of Celsius property, even though it may not be apparent that an employee has personally gained by such action, constitutes unacceptable conduct.
 
·  
Limit the time spent on personal business to reasonable duration and frequency – always incidental to your workday and never charged to Celsius or a customer. Private use of computers and telephones must not interfere with or adversely affect your job performance or that of any other person or organizational requirements.
 
·  
Do not use Celsius assets in support of a personal business, consulting effort, or similar private venture, or to support the business of another company or firm, outside fund raising activity, political activity, or lobbying.
 
·  
Do not use Celsius assets to support any illegal or other purpose that could cause embarrassment to Celsius or otherwise adversely affect its interests.
 
 
4

 
 
·  
Do not use Celsius assets to be disruptive or offensive (e.g., involving sexually explicit materials, or materials that are discriminatory, hateful, or threatening) to others.
 
·  
When unsure of what constitutes appropriate use of Celsius assets, talk to your supervisor or the Compliance Director.

Corporate Opportunities
 
Employees, officers and directors are prohibited from taking for themselves personally opportunities that are discovered through the use of corporate property, information or position without the consent of the Board of Directors. No employee may use corporate property, information or position for improper personal gain and no employee may compete with the Company directly or indirectly. Employees, officers and directors owe a duty to the Company to advance its legitimate interests when the opportunity to do so arises.
 
VIII.           CONFIDENTIAL INFORMATION
 
The protection of the confidential business information and trade secrets of Celsius and its customers is vital to the interests and the success of Celsius. Such confidential information includes, but is not limited to, the following examples:
 
·    compensation data of other employees
·    computer programs and codes
·    customer lists
·    financial information
·    labor relations strategies
·    minutes of the Board of Directors or any of its committees
·    new materials research
·    pending projects and proposals
·    proprietary production processes
·    research and development strategies
·    scientific data
·    scientific prototypes
·    technological data
·    technological prototypes
 
All employees may be required to sign a non-disclosure agreement as a condition of employment. Employees who improperly use or disclose trade secrets or confidential business information will be subject to disciplinary action, up to and including termination of employment, even if they do not actually benefit from the disclosed information.
 
Insider Trading
 
Employees who have access to confidential information are not permitted to use or share that information for stock trading purposes or for any other purpose, except the conduct of the Company’s business. All non-public information about the Company should be considered confidential information. To use non-public information for personal financial benefit or to “tip” others who might make an investment decision on the basis of this information is not only unethical, but also illegal. If a question arises, the employee should consult the Company’s Chief Financial Officer.
 
IX.           INTERNATIONAL OPERATIONS
 
Success in global business depends on our compliance with country-specific constraints and conditions, and sensitivity to local customs. Laws, regulations, and conventions governing business relationships vary from country to country.
 
 
5

 
 
However, Celsius’ obligation to comply with U.S. law and regulation does not end when we or our products exit the United States nor does our commitment to treat our customers, suppliers, and community stakeholders with concern and respect.
 
Foreign Corrupt Practices and the OECD Anti-Bribery Convention
 
Corruption undermines trust, impedes the pursuit of democracy, erodes social and economic development, and destroys the concept of fair play in a competitive global marketplace. In accordance with the U.S. Foreign Corrupt Practices Act (FCPA), the Organization for Economic Cooperation and Development's Anti-Bribery Convention (to which the U.S. is a signatory), and similar laws and regulations of other countries, our employees, agent, and representatives generally may not offer anything of value for the purpose of influencing a government official to make an improper decision in their official capacity. Likewise, we are committed to transparency in our record-keeping, accounting, and other business transactions.
 
X.           IMPLEMENTATION
 
Scope of Application
 
The Code of Ethical Conduct applies to all employees of Celsius. The Code will be circulated annually to each officer, director, and manager, who will be responsible for ensuring that employees under his or her supervision understand and will comply with this Code.
 
Communication Responsibilities
 
Senior management should always be informed of matters that in any way could damage Celsius’ reputation. Failure to disclose such matters may be interpreted, wrongly, as an indication that Celsius policies and rules are to be ignored. Accordingly, any employee who discovers events of a questionable, fraudulent, or illegal nature that could potentially violate this Code should promptly discuss them with (1) his or her supervisor, (2) Celsius’ Compliance Director, or (3) Dale S. Bergman, Esq. of Gutiérrez Bergman Boulris, P.L.L.C., our outside counsel at 100 Almeria Avenue, Suite 340, Coral Gables, Florida 33134, phone: (305) 358-5100 fax: (888) 281-1829, email: dale.bergman@gbbpl.com . Likewise, no information may be concealed from internal or independent external auditors. You may report ethical violations in confidence and without fear of retaliation, in particular to the Compliance Director or the outside counsel. If your situation requires that your identity be kept secret, your anonymity will be protected. The Company does not permit retaliation of any kind against employees for good faith reports of ethical violations.
 
Waiver of the Code of Ethical Conduct
 
Any waiver of this Code for executive officers or directors may be made only by the Board or a Board committee and will be promptly disclosed to stockholders as required by law or stock exchange regulation.
 
Potential Violations
 
The Compliance Director is responsible for investigating potential violations of the Code of Ethical Conduct. Any substantive instances or matters called to his or her attention will be reported to the Board of Directors. A record of all communications and investigations will be retained on file for five years.
 
XI.  
WHISTLE BLOWER POLICY
 
a.  
Reporting of Concerns or Complaints Regarding Accounting, Internal Controls, or Auditing Matters.
 
Taking action to prevent problems is part of the Company's culture.  If you observe possible unethical or illegal conduct, you are encouraged to report your concerns.
 
 
6

 
 
Employees and others involved with the Company are urged to come forward with any such information, without regard to the identity of position of the suspected offender.
 
Employees and others may choose any of the following modes of communicating suspected violations of law, policy, or other wrongdoing, as well as any concerns regarding questionable accounting or auditing matters (including deficiencies in internal controls):
 
·  
Report the matter to your supervisor; or
 
·  
Report the matter to the Company's CEO or CFO; or
 
·  
Report the matter to the Chairman of the Audit Committee.
 
b.  
Confidentiality.
 
The Company will treat all communications under this Policy in a confidential manner, except to the extent necessary (a) to conduct a complete and fair investigation, or (b) for reviews of Company operations by the Company's Board of Directors, its Audit Committee, and the Company's independent public accountants.
 
Moreover, if your situation requires that your identity be protected, please submit an anonymous report as set forth in the attached Schedule.  Please be aware that the address identified for the Chairman of the Audit Committee is under the complete control of the Audit Committee Chairman.
 
c.  
Retaliation.
 
Any individual who in good faith reports a possible violation of the Company's Code of Business Conduct and Ethics, the Code of Ethics for the Chief Executive Officer and Chief Financial Officer, or of law, or any concerns regarding questionable accounting or auditing matters, even if the report is mistaken, or who assists in the investigation of a reported violation, will be protected by the Company.  Retaliation in any form against these individuals will not be tolerated.  Any act of retaliation should be reported immediately and will be disciplined appropriately.
 
Specifically, the Company will not discharge, demote, suspend, threaten, harass, or in any other manner discriminate or retaliate against any employee in the terms and conditions of the employee's employment because of any lawful act done by that employee to either (a) provide information, cause information to be provided, or otherwise assist in any investigation regarding any conduct that the employee reasonably believes constitutes a violation of any Company code of conduct, law, rule, or regulation, including any rule or regulation of the Securities and Exchange Commission or any provision of Federal law relating to fraud against shareholders, or (b) file, cause to be filed, testify, participate in, or otherwise assist in a proceeding filed or, to the employee's knowledge, about to be filed relating to an alleged violation of any such law, rule, or regulation.

XII           COMPLIANCE PROCEDURES
 
We must all work to ensure prompt and consistent action against violations of this Code. However, in some situations it is difficult to know right from wrong. Since we cannot anticipate every situation that will arise, it is important that we have a way to approach a new question or problem. These are the steps to keep in mind:
 
·  
Ask yourself: What specifically am I being asked to do? Does it seem unethical or improper ? This will enable you to focus on the specific question you are faced with and the alternatives you have. Use your judgment and common sense; if something seems unethical or improper, it probably is.
 
·  
Discuss the problem with your supervisor . This is the basic guidance for all situations. In many cases, your supervisor will be more knowledgeable about the question and will appreciate being brought into the decision-making process. Remember that it is your supervisor’s responsibility to help solve problems.
 
 
7

 
 
·  
Seek help from Company resources . In the rare case where it may not be appropriate to discuss an issue with your supervisor or where you do not feel comfortable approaching your supervisor with your question, discuss it locally with your office manager or island manager. If that also is not appropriate, call the Compliance Director, which will put you in direct contact with the appropriate people at Company headquarters. If you prefer to write, address your concerns to the Company’s Chief Executive Officer or Chief Financial Officer.
 
·  
You must at all times comply with the Foreign Corrupt Practices Act (“FCPA”) and also any FCPA policy that the Company may have in effect.
 
XIII           VIOLATIONS
 
Any violation of the code of ethical conduct, or by not following the compliance procedures in item XII, will have serious consequences, up to and including termination of employment for cause. Violations of the Code may also subject the individual employee to civil and criminal sanctions and shall be considered as an act outside of the scope of your employment.
 

8
 
 

 
EXHIBIT 10.6
 
CELSIUS HOLDINGS, INC.
 
AUDIT COMMITTEE CHARTER
 
November 6, 2009
 
Purpose
 
 
The Audit Committee is appointed by the Board of Directors (the “ Board ”) of Celsius Holdings, Inc. (the “ Corporation ”) to assist the Board in overseeing (1) the accounting and financial reporting processes of the Corporation, the audits of the Corporation’s financial statements and the integrity of the Corporation’s financial statements, (2) the independent auditor’s qualifications and independence, (3) the performance of the Corporation’s internal audit function and independent auditors, (4) the effectiveness of the Corporation’s internal control structure, and (5) the compliance by the Corporation with significant legal and regulatory requirements.
 
The Audit Committee shall prepare the report required by the rules of the Securities and Exchange Commission (the “ Commission ”) to be included in the Corporation’s annual proxy statement.
 
Guiding Principles and Limitation of Committee’s Role
 
The Audit Committee is dedicated to fostering a proper control structure in the Corporation, from the environment in which the controls operate to the activities that are performed on a daily basis. The Audit Committee will support management and the Corporation's internal audit function to assess, develop, implement and monitor controls over critical business processes to promote effective and efficient operations, reliable financial reporting, compliance with laws and regulations and the safeguarding of the Corporation's assets.
 
With regard to financial reporting, the guiding principles to be considered by the Audit Committee in carrying out its responsibilities in reviewing a particular matter shall include consideration of (1) whether the financial statements fairly present the results of operations of the Corporation in accordance with generally accepted accounting principles; (2) whether the treatment of the matter is consistent with the Corporation's practices in prior accounting periods; (3) whether the presentation of the matter is reasonably comprehensive under the circumstances; (4) whether the disclosure regarding the matter contains any material misstatement or fails to disclose a matter which reasonably would be considered material to the Corporation's stakeholders; and (5) whether the presentation varies in a material way from principles of convention or conservatism.
 
While the Audit Committee has the responsibilities and powers set forth in this Charter, it is not the duty of the Audit Committee to plan or conduct audits or to determine that the Corporation’s financial statements and disclosures are complete and accurate and are in accordance with generally accepted accounting principles and applicable rules and regulations. These are the responsibilities of management and the independent auditor.
 
Committee Membership
 
The Audit Committee shall consist of no fewer than three members. The members of the Audit Committee shall satisfy the independence requirements of the NASDAQ Stock Market (“ NASDAQ ”)
 
 
 
 

 
 
and the Securities Exchange Act of 1934 (the “ Exchange Act ”) and the rules and regulations of the Commission, in each case with respect to audit committees. All members of the Audit Committee shall be able to read and understand fundamental financial statements. In addition, members of the Audit Committee may not have participated in the preparation of the financial statements of the Corporation or any current subsidiary of the Corporation at any time during the past three years. At least one member of the Audit Committee shall be an “audit committee financial expert” as defined by the Commission. The name of such audit committee financial expert shall be disclosed in the Corporation’s filings with the Commission.
 
The members of the Audit Committee shall be appointed by the Board. Audit Committee members may be replaced by the Board.
 
Meetings
 
The Audit Committee shall meet as often as it determines necessary, but not less frequently than quarterly. The Audit Committee shall meet periodically with management, the internal auditors and the independent auditor in separate executive sessions, and shall meet no less frequently than twice per year in executive sessions composed solely of members of the Audit Committee. The Audit Committee may request any officer or employee of the Corporation or the Corporation’s outside counsel or independent auditor to attend a meeting of the Committee or to meet with any members of, or consultants to, the Committee.
 
Committee Authority and Responsibilities
 
The Audit Committee shall have the sole authority to appoint, determine funding for, retain, terminate and oversee the outside auditors (subject, if applicable, to shareholder ratification). The Audit Committee shall be directly responsible for the compensation and oversight of the work of the independent auditor (including resolution of disagreements between management and the independent auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or related work. The independent auditor shall report directly to the Audit Committee.
 
The Audit Committee shall pre-approve all auditing services and permitted non-audit services (including the fees and terms thereof) to be performed for the Corporation by its independent auditor, as required by applicable law and Commission rules. The Audit Committee may form and delegate authority to subcommittees consisting of one or more members when appropriate, including the authority to grant pre-approvals of audit and permitted non-audit services, provided that decisions of such subcommittee to grant pre-approvals shall be presented to the full Audit Committee at its next scheduled meeting.
 
The Audit Committee shall have the authority, to the extent it deems necessary or appropriate, to engage and determine funding for independent legal, accounting or other advisors. The Corporation shall provide for appropriate funding, as determined by the Audit Committee, for payment of compensation to the independent auditor for the purpose of rendering or issuing an audit report or performing other audit, review or attest services for the Corporation and to any advisors employed by the Audit Committee, as well as funding for the payment of ordinary administrative expenses of the Audit Committee that are necessary or appropriate in carrying out its duties.
 
 
 
 

 
 
The Audit Committee shall make regular reports to the Board. The Audit Committee shall review and reassess the adequacy of this Charter annually and recommend any proposed changes to the Board for approval.
 
The Audit Committee, to the extent it deems necessary or appropriate, shall:
 
Financial Statement and Disclosure Matters
 
1.  
Review and discuss with management and the independent auditor the annual audited financial statements, including disclosures made in management’s discussion and analysis, and recommend to the Board whether the audited financial statements should be included in the Corporation’s Form 10-K.
 
2.  
Review and discuss with management and the independent auditor the Corporation’s quarterly financial statements prior to the filing of its Form 10-Q, including the results of the independent auditor’s review of the quarterly financial statements.
 
3.  
Discuss with management and the independent auditor significant financial reporting issues and judgments made in connection with the preparation of the Corporation’s financial statements, including any significant changes in the Corporation’s selection or application of accounting principles.
 
4.  
Review and discuss quarterly reports from the independent auditors on:
 
(a) All critical accounting policies and practices to be used.
 
(b) All alternative treatments of financial information within generally accepted accounting principles related to material items that have been discussed with management, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the independent auditor.
 
(c) Other material written communications between the independent auditor and management, such as any management letter or schedule of unadjusted differences.
 
5.  
Discuss with management the Corporation’s earnings press releases, including the use of “pro forma” or “adjusted” non-GAAP information, as well as financial information and earnings guidance provided to analysts and rating agencies. Such discussion may be done generally (consisting of discussing the types of information to be disclosed and the types of presentations to be made).
 
6.  
Discuss with management and the independent auditor the effect of regulatory and accounting initiatives as well as off-balance sheet structures on the Corporation’s financial statements.
 
7.  
Discuss with management the Corporation’s major financial risk exposures and the steps management has taken to monitor and control such exposures, including the Corporation’s risk assessment and risk management policies.
 
8.  
Discuss with the independent auditor the matters required to be discussed by Statement on Auditing Standards No. 61 relating to the conduct of the audit, including any difficulties encountered in the course of the audit work, any restrictions on the scope of activities or access to requested information, and any significant disagreements with management.
 
 
 
 

 
 
9.  
Ensure that a public announcement of the Corporation’s receipt of an audit opinion that contains a going concern qualification is made promptly.
 
10.  
Review and discuss with management and the independent auditor the Corporation’s disclosure controls and procedures.
 
11.  
Review significant new, or changes to existing, accounting, financial, external reporting and asset-safeguarding policies and practices.
 
Oversight of the Corporation’s Relationship with the Independent Auditor
 
12.  
Review and evaluate the lead partner of the independent auditor team.
 
 
13.  
Obtain and review a report from the independent auditor at least annually regarding (a) the independent auditor’s internal quality-control procedures, (b) any material issues raised by the most recent internal quality-control review, or Public Corporation Accounting Oversight Board (“PCAOB”) review, of the firm, or by any inquiry or investigation by governmental or professional authorities within the preceding five years respecting one or more independent audits carried out by the firm, (c) any steps taken to deal with any such issues, and (d) all relationships between the independent auditor and the Corporation. Evaluate the qualifications, performance and independence of the independent auditor, including considering whether the auditor’s quality controls are adequate and the provision of permitted non-audit services is compatible with maintaining the auditor’s independence, taking into account the opinions of management and internal auditors. The Audit Committee shall present its conclusions with respect to the independent auditor to the Board.
 
14.  
Obtain from the independent auditor a formal written statement delineating all relationships between the independent auditor and the Corporation. It is the responsibility of the Audit Committee to actively engage in a dialogue with the independent auditor with respect to any disclosed relationships or services that may impact the objectivity and independence of the auditor and for purposes of taking, or recommending that the full board take, appropriate action to oversee the independence of the outside auditor.
 
15.  
Ensure the rotation of the audit partners if and as required by law, and consider whether, in order to assure continuing auditor independence, it is appropriate to adopt a policy of rotating the independent auditing firm on a regular basis.
 
16.  
Recommend to the Board policies for the Corporation’s hiring of employees or former employees of the independent auditor who participated in any capacity in the audit of the Corporation.
 
17.  
Discuss with the independent auditor material issues on which the national office of the independent auditor was consulted by the Corporation’s audit team.
 
18.  
Meet with the independent auditor prior to the audit to discuss the planning and staffing of the audit.
 
 
 
 

 
 
Effectiveness of Internal Controls
 
19.  
Review and discuss with management, the senior internal auditing executive and the independent auditor management’s plan for establishing and maintaining internal controls, the framework used to evaluate its control structure and management’s subsequent assessment of the effectiveness of the internal controls.
 
20.  
Review and discuss with management, the senior internal auditing executive and the independent auditor disclosures made to the Audit Committee by the Corporation’s CEO and CFO during their certification process for the Form 10-K and Form 10-Q about any significant deficiencies in the design or operation of internal controls or material weaknesses therein and any fraud involving management or other employees who have a significant role in the Corporation’s internal controls.
 
21.  
Review and discuss with management and the independent auditor any major issues as to the adequacy of the Corporation’s internal controls, any special steps adopted in light of material or significant control deficiencies and the adequacy of disclosures about changes in internal control over financial reporting.
 
22.  
Review and discuss with management and the independent auditor the Corporation’s internal controls report prior to the filing of the Corporation’s Form 10-K.
 
Compliance Oversight Responsibilities
 
26.  
Obtain from the independent auditor assurance that Section 10A (b) of the Exchange Act has not been implicated.
 
27.  
Obtain reports from management, the Corporation’s senior internal auditing executive and the independent auditor that the Corporation and its subsidiary/foreign affiliated entities are in conformity with applicable legal requirements and the Corporation’s Code of Conduct Advise the Board with respect to the Corporation’s policies and procedures regarding compliance with applicable laws and regulations and with the Corporation’s Code of Conduct.
 
28.  
To the extent required by NASDAQ rules, approve all related party transactions.
 
29.  
Establish procedures for the receipt, retention and treatment of complaints received by the Corporation regarding accounting, internal accounting controls or auditing matters, and the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters.
 
30.  
Discuss with management and the independent auditor any correspondence with regulators or governmental agencies and any published reports which raise material issues regarding the Corporation’s financial statements or accounting policies.
 
31.  
Discuss with the Corporation’s General Counsel legal matters that may have a material impact on the financial statements or the Corporation’s compliance policies.
 
 
     
 
 
 
 
 
 
Exhibit 10.7
 
CELSIUS HOLDINGS, INC.
 
COMPENSATION COMMITTEE CHARTER
 
NOVEMBER 6, 2009
 
Purpose
 
The purpose of the Compensation Committee (the " Committee ") of the Board of Directors (the " Board ") of Celsius Holdings, Inc. (the " Corporation ") shall be to evaluate and approve and recommend officer and director compensation arrangements, plans, policies and programs of the Corporation, and to administer the Corporation's equity-based compensation plans for employees, whether adopted prior to or after the date of adoption of this Charter.
 
Composition of the Compensation Committee
 
The Committee will be appointed by, and shall serve at the discretion of, the Board, and will consist of not fewer than two members of the Board, with the exact number being determined by the Board. Each of the members of the Committee will be:
 
·  
an "independent director" as defined under the applicable rules and regulations of The NASDAQ Stock Market, as amended from time to time (the " Rules "), except as may otherwise be permitted by such Rules;
 
·  
a "non-employee director," as defined in Rule 16b-3 under Section 16 of the Securities Exchange Act of 1934, as amended (the " Exchange Act "); and
 
·  
an "outside director" under Regulation Section 1.162-27 promulgated under Section 162(m) of the Internal Revenue Code of 1986, as amended.
 
Unless a Chairperson of this Committed is elected by the Board, the members of this Committee may designate a Chairperson.
 
Responsibilities
 
The following shall be the principal recurring duties of the Committee in carrying out its responsibilities. These duties are set forth as a guide with the understanding that the Committee may supplement them as appropriate and may establish policies and procedures from time to time that it deems necessary or advisable in fulfilling its responsibilities under this Charter, the Corporation's By-Laws and governing law.
 
1.  
The Committee will have the authority to determine and approve and recommend the form and amount of compensation to be paid or awarded to the Corporation's officers, including executive officers as defined under Section 16 of the Exchange Act and the rules promulgated thereunder (" Executive Officers "). Without limiting the foregoing, the Committee will annually review and approve the corporate goals and objectives relevant to the compensation of the Chief Executive Officer (" CEO ") and the Corporation's other Executive Officers. The Committee shall have the authority to make decisions respecting (i) CEO and Executive Officer employment and severance contracts and arrangements, (ii) salary paid to the CEO and Executive Officers, (iii) the grant of all cash-based bonuses and equity-based compensation to the CEO and Executive Officers, (iv) the entering into or amendment or extension of any employment contract or similar arrangement with the CEO and Executive Officers, (v) any
 
 
 
 

 
 
 
  
CEO and Executive Officers severance or change in control arrangement, and (vi) any other CEO and Executive Officers compensation matters as from time to time directed by the Board. The Committee shall take account of the recommendations of the Corporation's CEO for other Executive Officers with respect to each of the foregoing items. The Committee may delegate authority to subcommittees of the Committee or to Executive Officers with respect to compensation determinations for persons who are not Executive Officers.
 
2.  
The Committee will have the authority to determine the form and amount of cash and equity compensation to be paid or awarded to the Corporation's non-employee directors, including compensation for service on the Board or on committees of the Board.
 
3.  
The Committee will annually review and make recommendations to the Board with respect to adoption and approval of, or amendments to, all cash-based and equity-based incentive compensation plans and arrangements, and the amounts and shares reserved thereunder after taking into consideration the Corporation's strategies with respect to short and long-term cash and equity-based compensation.
 
4.  
The Committee will: (i) approve grants of stock, stock options or stock purchase rights to individuals eligible for such grants (including grants in compliance with Rule 16b-3 promulgated under the Exchange Act to Executive Officers); (ii) interpret the Corporation's equity-based compensation plans and agreements thereunder; and (iii) determine acceptable forms of consideration for stock acquired pursuant to the Corporation's equity-based incentive compensation plans. The Committee may delegate to the Corporation's Chief Executive Officer the authority to approve options to employees of the Corporation or of any subsidiary of the Corporation who are not directors of the Corporation or Executive Officers, provided that such options are to purchase fewer than 100,001 shares in any one year period, and provided further, that the price per share is no less than the fair market value of the Corporation's common stock on the date of grant.
 
5.  
The Committee will periodically review the Corporation's procedures with respect to employee loans, and will not approve any arrangement in which the Corporation, directly or indirectly, extends or maintains credit, arranges for the extension of credit or renews an extension of credit, in the form of a personal loan to or for any director of the Corporation or any Executive Officer (or equivalent thereof) of the Corporation. The Committee will assist the Board and management of the Corporation in complying with this prohibition.
 
6.  
The Committee will meet with the Corporation's Chief Executive Officer within 90 days after the commencement of each fiscal year to discuss the incentive compensation programs to be in effect for the Corporation's Executive Officers for such fiscal year and the corporate goals and objectives relevant to those programs.
 
7.  
The Committee will prepare an annual report on executive compensation to the Corporation's stockholders for inclusion in the proxy statement for the Corporation's annual meeting in accordance with the rules and regulations of the Securities and Exchange Commission.
 
8.  
The Committee will review this Charter periodically and recommend to the Board any changes it determines are appropriate.
 
9.  
The Committee will have the authority and right, at the expense of the Corporation, to retain and terminate compensation consultants, legal counsel and other advisors of its choosing to assist the Committee in connection with its functions. The Committee shall have the sole
 
 
 
 

 
      
 
  
authority to approve the fees and other retention terms of such consultants and advisors. The Corporation shall provide for appropriate funding, as determined by the Committee, for payment of compensation to any such advisors employed by the Committee pursuant to this Charter or the commission of any necessary studies or surveys concerning the levels of executive compensation payable in the industry in which the Corporation is engaged and in other related industries and to obtain recommendations from outside consultants concerning compatible pay programs, as appropriate.
 
10.  
The Committee will perform any other activities required by applicable law, rules or regulations, including the rules of the Securities and Exchange Commission and any exchange or market on which the Corporation's capital stock is traded, and perform other activities that are consistent with this Charter, the Corporation's Certificate of Incorporation and Bylaws, and applicable laws, rules or regulations as the Committee, any other committee of the Board or the Board deems necessary or appropriate.
 
Proxy Statement Disclosures
 
The Committee will be responsible for annually providing a report in the Corporation's proxy statement in accordance with the requirements of Schedule 14A of the proxy rules.
 
Meetings, Minutes and Reports to the Board
 
The Committee will meet in response to the needs of the Board or as otherwise determined by the Chairperson of the Committee.
 
The Committee will maintain written minutes of its meetings. The Committee will make regular reports to the Board.
 

Exhibit 10.8

    

CHARTER OF THE NOMINATING AND

CORPORATE GOVERNANCE COMMITTEE

OF THE BOARD OF DIRECTORS OF CELSIUS HOLDINGS, INC.

ADOPTED AS OF NOVEMBER 6, 2009

 

I. PURPOSE OF THE COMMITTEE

 

The purposes of the Nominating and Corporate Governance Committee (the "Committee") of the Board of Directors (the "Board") of Celsius Holdings, Inc. (the "Company") shall be to recommend to the Board individuals qualified to serve as directors of the Company and on committees of the Board; to advise the Board with respect to the Board composition, procedures and committees; to develop and recommend to the Board a set of corporate governance principles applicable to the Company; and to oversee the evaluation of the Board and the Company's management.

 

II. COMPOSITION OF THE COMMITTEE

 

The Committee shall be comprised of three or more directors who qualify as independent directors ("Independent Directors") under the listing standards of NASDAQ.

 

The members of the Committee shall be determined from time to time by resolution of the Board. Vacancies on the Committee shall be filled by majority vote of the Board at the next meeting of the Board following the occurrence of the vacancy. No member of the Committee shall be removed except by majority vote of the Independent Directors then in office.

 

III. MEETINGS AND PROCEDURES OF THE COMMITTEE

 

The Committee shall meet at least once annually or more frequently as circumstances require. The Board shall designate one member of the Committee as its Chairperson. The Chairperson of the Committee or a majority of the members of the Committee may call a special meeting of the Committee. A majority of the members of the Committee present in person or by means of a conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other shall constitute a quorum.

 

The Committee may form subcommittees for any purpose that the Committee deems appropriate and may delegate to such subcommittees such power and authority as the Committee deems appropriate; provided, however, that no subcommittee shall consist of fewer than two members; and provided further that the Committee shall not delegate to a subcommittee any power or authority required by any law, regulation or listing standard to be exercised by the Committee as a whole.

 

The Committee may request that any directors, officers or employees of the Company, or other persons whose advice and counsel are sought by the Committee, attend any meeting of the Committee to provide such pertinent information as the Committee requests.

 

Following each of its meetings, the Committee shall deliver a report on the meeting to the Board, including a description of all actions taken by the Committee at the meeting. The Committee shall keep written minutes of its meetings, which minutes shall be maintained with the books and records of the Company.

 

 

 

  

IV. DUTIES OF THE COMMITTEE

 

A. Board Candidates and Nominees

 

The Committee shall have the following goals and responsibilities with respect to Board candidates and nominees:

 

(a) To recommend to the Board and for approval by a majority of Independent Directors the director nominees for election by the stockholders or appointment by the Board, as the case may be, pursuant to the Bylaws of the Company, which recommendations shall be consistent with the Board's criteria for selecting new directors. Such criteria include the possession of such knowledge, experience, skills, expertise and diversity so as to enhance the Board's ability to manage and direct the affairs and business of the Company, including, when applicable, to enhance the ability of committees of the Board to fulfill their duties and/or to satisfy any independence requirements imposed by law, regulation or NASDAQ listing requirements.

 

(b) To review the suitability for continued service as a director of each Board member when his or her term expires and when he or she has a significant change in status, including but not limited to an employment change, and to recommend whether or not the director should be re-nominated.

 

B. Board Composition and Procedures

 

The Committee shall have the following goals and responsibilities with respect to the composition and procedures of the Board as a whole:

 

(a) To review annually with the Board the composition of the Board as a whole and to recommend, if necessary, measures to be taken so that the Board reflects the appropriate balance of knowledge, experience, skills, expertise and diversity required for the Board as a whole and contains at least the minimum number of Independent Directors required by NASDAQ.

 

(b) To review periodically the size of the Board and to recommend to the Board any appropriate changes.

 

(c) To make recommendations on the frequency and structure of Board meetings.

 

(d) To make recommendations concerning any other aspect of the procedures of the Board that the Committee considers warranted, including but not limited to procedures with respect to the waiver by the Board of any Company rule, guideline, procedure or corporate governance principle.

 

 

C. Board Committees

 

The following shall be the goals and responsibilities of the Committee with respect to the committee structure of the Board:

 

(a) To make recommendations to the Board regarding the size and composition of each standing committee of the Board of Directors, including the identification of individuals qualified to serve as members of a committee, including the Committee, and to recommend individual directors to fill any vacancy that might occur on a committee, including the Committee.

 

(b) To monitor the functioning of the committees of the Board and to make recommendations for any changes, including the creation and elimination of committees.

  

 

 

  

(c) To review annually committee assignments and the policy with respect to the rotation of committee memberships and/or chairpersonships, and to report any recommendations to the Board.

 

(d) To recommend that the Board establish such special committees as may be desirable or necessary from time to time in order to address ethical, legal or other matters that may arise. The Committee's power to make such a recommendation under this Charter shall be without prejudice to the right of any other committee of the Board, or any individual director, to make such a recommendation at any time.

 

D. Corporate Governance

 

The following shall be the goals and responsibilities of the Committee with respect to corporate governance:

 

(a) To develop and review periodically, and at least annually, the corporate governance principles adopted by the Board to assure that they are appropriate for the Company and comply with the requirements of the NASDAQ, and to recommend any desirable changes to the Board.

 

(b) To consider any other corporate governance issues that arise from time to time, and to develop appropriate recommendations for the Board.

 

V. EVALUATION OF THE BOARD

 

The Committee shall be responsible for overseeing the evaluation of individual directors and the Board as a whole. The Committee shall establish procedures to allow it to exercise this oversight function.

 

VI. EVALUATION OF THE COMMITTEE

 

The Committee shall, on an annual basis, evaluate its performance under this Charter. In conducting this review, the Committee shall evaluate whether this Charter appropriately addresses the matters that are or should be within its scope. The Committee shall address all matters that the Committee considers relevant to its performance, including at least the following: the adequacy, appropriateness and quality of the information and recommendations presented by the Committee to the Board, the manner in which they were discussed or debated, and whether the number and length of meetings of the Committee were adequate for the Committee to complete its work in a thorough and thoughtful manner.

 

The Committee shall deliver to the Board a report setting forth the results of its evaluation, including any recommended amendments to this Charter and any recommended changes to the Company's or the Board's policies or procedures.

 

VII. INVESTIGATIONS AND STUDIES; OUTSIDE ADVISERS

 

The Committee may conduct or authorize investigations into or studies of matters within the Committee's scope of responsibilities, and may retain, at the Company's expense, such independent counsel or other advisers as it deems necessary. The Committee shall have the sole authority to retain or terminate any search firm to be used to identify director candidates, including sole authority to approve the search firm's fees and other retention terms, such fees to be borne by the Company.

 

 

 

 

Exhibit 10.9

    

EMPLOYMENT AGREEMENT

 

This Employment Agreement is effective as of the 1 st day of January, 2016 between Celsius Holdings, Inc. (“Employer”) and Gerry David (“Employee”).

 

WHEREAS, Employer is actively engaged in the business of manufacturing and distributing functional supplements in various delivery systems; and,

 

WHEREAS, Employee desires to be employed pursuant to the terms of this Employment Agreement.

 

NOW THEREFORE, in consideration of the mutual covenants and agreements contained in this Employment Agreement, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties, intending to be legally bound, agree as follows:

 

Article 1

Employment of Employee

 

Employer agrees to employ Employee, and Employee accepts employment with Employer, on and subject to the terms and conditions set forth in this Employment Agreement.

 

Article 2

Duties of Employee

 

Section 2.1. Position and Duties . Employer agrees to employ Employee to act as Chief Executive Officer for Employer. Employee shall be responsible for performing the following duties: executive management, overseeing business development and other duties typically performed by persons employed in a similar capacity.

 

Section 2.2. Time Devoted to Work . Employee agrees to devote Employee’s entire business time, attention, and energies to the business of Employer in accordance with Employer’s instructions and directions and shall not be engaged in any other business activity, whether or not the activity is pursued for gain, profit, or other pecuniary advantage, during the term of this Employment Agreement without Employer’s prior written consent.

 

Article 3

Place of Employment

 

Section 3.1. Place of Employment . Employee shall be based at Employer’s principal office at 2424 N. Federal Highway, Suite 208 Boca Raton, FL 33431; excluding reasonable travel commensurate with Employee’s position and duties. Employer agrees that during the term of this Employment Agreement it shall not assign Employee to work at any location which is more than 100 miles from said principal office without Employee’s consent.

 

 

 

 

Section 3.2. Moving Expenses . If Employer relocates its principal office more than 100 miles from its current principal office, or requests that Employee relocate to one of its offices which is more than 100 miles from its current principal office, and Employee consents to relocate to that new location, Employer shall promptly pay or reimburse Employee for all reasonable moving expenses incurred by Employee in connection with the relocation plus an amount to reimburse Employee for any federal and state income taxes that it has to pay on amounts reimbursed. Employer also shall indemnify Employee against any loss incurred in connection with the sale of Employee’s principal residence. The amount of any loss shall be determined by taking the difference between the average of two appraisal prices set by two independent appraisers agreed to by Employer and Employee and the actual sales price of Employee’s principal residence.

 

Article 4

Compensation of Employee

 

Section 4.1. Base Salary . For all services rendered by Employee under this Employment Agreement, Employer agrees to pay Employee an annual base salary of $237,780, which shall be payable to Employee in such installments, but not less frequently than monthly, as are consistent with Employee’s practice for its other Employees. Employee’s base salary shall be reviewed at least once a year by Employer’s Board of Directors or its Compensation Committee.

 

Section 4.2. Incentive Compensation . In addition to the base salary, Employee shall be entitled to receive incentive compensation according to a pre-established bonus plan specific for the Employee, as determined by Employer’s Board of Directors.

 

Section 4.3 Reimbursement for Business Expenses . Employer shall promptly pay or reimburse Employee for all reasonable business expenses incurred by Employee in performing Employee’s duties and obligations under this Employment Agreement, but only if Employee properly accounts for expenses in accordance with Employer’s policies. Employer agrees to provide a monthly living allowance of $850 per month in the Boca Raton, Florida area for up to twelve months from the date of this Employment Agreement.

 

Section 4.4. Stock Options and Other Stock Awards. . Employee shall be granted 100.000 stock option grants to be issued on January 4, 2016 with 25,000 to vest at the end of each calendar quarter pursuant to the Employer's 2006 Amended Incentive Stock Plan, as amended, and all rules and regulations of the Securities and Exchange Commission applicable to stock option plans then in effect. The Options will vest over three years.

 

Article 5

Vacations and Other Paid Absences

 

Section 5.1. Vacation Days . Employee shall be entitled to 15 days paid vacation each calendar year during the term of this Employment Agreement. All vacation is accrued during the calendar year of work, should Employee not take all vacation days in any calendar year, up to 10 days will be carried over to the next year. If the agreement is terminated during a calendar year, any accrued and not taken vacation will be paid at the base salary rate, any vacation taken but previously not earned will not be deducted from any amount due to the Employee.

 

  2  

 

 

Section 5.2. Holidays . Employee shall be entitled to the same paid holidays as authorized by Employer for its other Employees.

 

Section 5.3. Sick Days and Personal Absence Days . Employee shall be entitled to the same number of paid sick days and personal absence days authorized by Employer for its other Employees.

 

Article 6

Life Insurance

 

Employer may, in its sole discretion, maintain in effect during the term of Employee’s employment a life insurance policy on the life of Employee in such amount as Employer shall in its sole discretion decide to maintain during the term of this Employment Agreement. Any proceeds payable under the policy shall be paid to the beneficiary or beneficiaries designated in writing from time to time by Employee.

 

Article 7

Fringe Benefits

 

Section 7.1. Employer Employee Benefit Plans . Employee shall be entitled to participate in and receive benefits from all of Employer’s Employee benefit plans that currently are maintained by Employer for its Employees. Employee shall be entitled to participate in and receive benefits under any retirement plan, profit-sharing plan, or other Employee benefit plan that Employer establishes for the benefit of its Employees after the date of this Employment Agreement. No amounts paid to Employee from an Employee benefit plan shall count as compensation due Employee as base salary or incentive compensation. Nothing in this Employment Agreement shall prohibit Employer from modifying or terminating any of its Employee benefit plans in a manner that does not discriminate between Employee and other Employees of Employer.

 

Section 7.2. Motor Vehicle . Employer may, in its sole discretion, provide Employee with the use of a motor vehicle to be selected in the reasonable discretion of Employer, or pay a monthly car allowance. If Employer does provide Employee with the use of a motor vehicle, Employer shall procure, maintain, and pay for appropriate insurance on the motor vehicle, including liability insurance of at least $250,000.00 per person and $500,000.00 per occurrence for personal injury and $300,000.00 for property damage.

 

Article 8

Disability

 

Section 8.1. Termination Because of a Disability . Except as may otherwise be required or prohibited by state or federal law, if because of illness or injury Employee becomes unable to work full time for Employer for more than one hundred and eighty (180) days in any twelve month period (excluding vacation days and holidays), Employer may, in its sole discretion at any time after the accumulation of such time terminate Employee’s employment upon written notice to Employee.

 

  3  

 

 

Section 8.2. Compensation During Periods of Disability .

 

(a)          Employee shall continue to receive Employee’s base salary and incentive compensation while Employee is unable to work full time, until the earlier of: (i) the accumulation of 90 days of disability in any 12 month period; (ii) the date Employee begins receiving disability insurance benefits equal to Employee’s base salary and incentive compensation; or (iii) the date Employee terminates Employee’s employment with Employer because Employee’s health becomes so impaired that continued performance of Employee’s duties under this Employment Agreement would be hazardous to Employee’s physical or mental health. Notwithstanding anything to the contrary contained herein, if Employee becomes disabled while performing his duties for the Employer described in Section 2.1, the Employee will receive Employee’s base salary and incentive compensation for 180 days from the date of such disability.

 

(b)          While Employee is unable to work full time because of illness or injury and through the full term of this Employment Agreement, including extensions, Employer shall maintain for Employee’s benefit all Employee benefit plans in which Employee was participating at the time Employee was terminated. If Employee is barred from participating in any Employee benefit plan because of Employee’s disability, Employer shall pay Employee an amount equal to what Employer would have contributed on Employee’s behalf to the Employee benefit plan if Employee’s participation had not been barred.

 

(c)          Employee is not required to seek other employment to mitigate any amounts payable under this Employment Agreement. Nor will amounts due Employee under this Employment Agreement be reduced by any amounts received by Employee for other employment.

 

Section 8.3. Disability Insurance . Employer may, in its sole discretion, purchase and maintain disability insurance in force for the benefit of Employee throughout the term of this Employment Agreement, including extensions.

 

Article 9

Termination of Employment

 

Section 9.1. Term of Employment .

 

Employee’s employment shall commence January 1, 2016 and shall continue until December 31, 2016 (“end-of-employment date”), unless extended or terminated sooner, as provided by this article of the Employment Agreement. The end-of-employment date shall be deemed December 31, 2016. For the avoidance of doubt, failure to extend the term of employment beyond the end-of-employment date shall not be deemed to be a termination by Employer, and neither party shall be obligated to negotiate or enter into any subsequent agreement or extension of this Employment Agreement.

 

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Section 9.2. Left blank intentionally

 

Section 9.3. Termination at Employee’s Death . Employee’s employment with Employer shall terminate at Employee’s death.

 

Section 9.4. Termination by Employee . Employee may, but is not obligated to, terminate this Employment Agreement at any time under the following circumstances:

 

(a)          Employee’s fringe benefits or other compensation are materially reduced.

 

(b)          Employer fails to have a successor assume this Employment Agreement and Employee does not enter into a subsequent employment, consulting, or similar agreement with such successor.

 

(c)          There is a change in control of Employer, excluding control acquired by CD Financial, LLC and its affiliates. For purposes of this Agreement, the term “Change of Control” shall mean:

 

(i) Approval by Employer’s shareholders of (x) a reorganization, merger, consolidation or other form of corporate transactions or series of transactions, in each case, with respect to which persons who were Employer’s shareholders immediately prior to such reorganization, merger, consolidation or other transactions do not, immediately thereafter, own more than 50% of the combined voting power entitled to vote generally in the election of directors of the reorganized, merged, or consolidated company’s then outstanding voting securities, in substantially the same proportions as their ownership immediately prior to such reorganization, merger, consolidation or other transactions, or (y) the sale of all or substantially all of the Employer’s assets (unless such reorganization, merger, consolidation or other corporate transaction, liquidation, dissolution or sale is subsequently abandoned); or

 

(ii) Individuals who, as of the date of this Agreement, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the date of this Agreement whose election, or nomination for election by Employer’s shareholders, was approved by a vote by a controlling shareholder owning in excess 50% of the then voting shares, shall be, for purposes of this Agreement, considered as though such person were a member of the Incumbent Board.

 

Section 9.5. Termination by Employer .

 

(a)           Termination with or without Cause . Employer may terminate Employee’s employment for Cause or without Cause (as hereinafter defined).

 

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(b)          For purposes of this Agreement, the term “Cause” shall mean (i) an action or omission of the Employee which constitutes a willful and material breach of, or failure or refusal (other than by reason of his disability) to perform his duties under, this Agreement which is not cured within fifteen (15) days after receipt by the Employee of written notice of same, (ii) fraud, embezzlement, misappropriation of funds or breach of trust in connection with his services hereunder, (iii) conviction of any crime which involves dishonesty or a breach of trust, or (iv) gross negligence in connection with the performance of the Employee’s duties hereunder, which is not cured within fifteen (15) days after written receipt by the Employee of written notice of same, or (v) Employee violates Article 10 or Article 11 of this Employment Agreement.

 

Section 9.6. Notice of Termination . Any termination of Employee’s employment by Employer or Employee, other than by reason of the expiration of the term of this Employment Agreement, must be communicated to the other party by a written notice of termination. The notice must specify the provision of this Employment Agreement authorizing the termination and must set forth in reasonable detail the facts and circumstances providing the basis for termination of Employee’s employment. The Employee shall have the right to address the Board regarding the acts set forth in the notice of termination.

 

Section 9.7. Date Termination Is Effective . If Employee’s employment terminates because this Employment Agreement expires, then Employee’s employment will be considered to have terminated on that expiration date. If Employee’s employment terminates because of Employee’s death, then Employee’s employment will be considered to have terminated on the date of Employee’s death. If Employee’s employment is terminated by Employee, then Employee’s employment will be considered to have terminated on the date that notice of termination is given. If Employee’s employment is terminated by Employer for Cause, then Employee’s employment will be considered to have terminated on the date specified by the notice of termination.

 

Section 9.8. Compensation Following Termination .

 

(a)          If Employee’s employment terminates because of Employee’s death, Employer shall pay a lump sum death benefit to the person or persons designated in a written notice filed with Employer by Employee or, if no person has been designated, to Employee’s estate. The amount of the lump sum death benefit will equal the amount of Employee’s then current annual base salary plus the annualized amount of incentive compensation paid Employee most recently prior to Employee’s death, multiplied by the number of months remaining in the term of this Employment Agreement not to exceed two months. This lump sum death benefit shall be in addition to any life insurance payable pursuant to Article 6 and/or any other amounts that Employee’s beneficiaries and estate may be entitled to receive under any Employee benefit plan maintained by Employer.

 

(b)          If Employee’s employment is terminated by Employer for Cause, or by Employee other than pursuant to Section 9.4(a), (b), or (c), Employer shall pay Employee Employee’s then current base salary through the date employment is terminated, and Employer shall have no further obligations to Employee under this Employment Agreement.

 

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(c)           If Employee’s employment is terminated by Employer other than for Cause and prior to a Change of Control, or by Employee pursuant Section 9.4(a), Employer shall pay Employee Employee’s then current base salary through the date employment is terminated and any legal fees and expenses incurred by Employee to enforce Employee’s rights under this Employment Agreement. In addition, Employer shall pay Employee as liquidated damages an amount equal to the sum of Employee’s then current base salary over six months plus any approved and unpaid incentive bonus; this time period hereafter referred to as the Liquidated Damage Period. In addition, all employee benefits according to sections 6 and 7 will be maintained through the Liquidated Damage Period. If by law any benefit cannot be maintained due to termination of employment, the cash value of said benefit will be paid to Employee over the Liquidated Damage Period.

 

(d)           As an incentive for the retention of Employee following a Change of Control or an event described in Section 9.4(b), if Employee’s employment is terminated by Employer without Cause and following a Change of Control, or by Employee pursuant to Section 9.4(b) Employer shall pay Employee’s then current base salary through the date employment is terminated and any legal fees and expenses incurred by Employee to enforce Employee’s rights under this Employment Agreement. In addition, Employer shall pay Employee as liquidated damages an amount equal to two times Employee’s then current annual base salary.

 

(e)           If Employee’s employment is terminated by Employee pursuant to Section 9.4(c) Employer shall pay Employee’s then current base salary through the date employment is terminated and any legal fees and expenses incurred by Employee to enforce Employee’s rights under this Employment Agreement. In addition, Employer shall pay Employee as liquidated damages an amount equal to the sum of Employee’s then current salary plus approved and unpaid incentive compensation from the date of termination through December 31, 2017.

 

Article 10

Confidential Information

 

Section 10.1. Confidential Information Defined . “Confidential Information” as used in this Employment Agreement shall mean any and all technical and non-technical information belonging to, or in the possession of, Employer or its officers, directors, Employees, affiliates, subsidiaries, clients, vendors, or Employees, including without limitation, patent, trade secret, and proprietary information; techniques, sketches, drawings, models, inventions, know-how, processes, apparatus, equipment, algorithms, source codes, object codes, software programs, software source documents, and formulae related to Employer’s business or any other current, future and/or proposed business, product or service contemplated by Employer; and includes, without limitation, all information concerning research, experimental work, development, design details and specifications, engineering, financial information, procurement requirements, purchasing, manufacturing, customer lists, vendor lists, business forecasts, sales and merchandising, and marketing plans or similar information.

 

Section 10.2 Disclosures . Employee agrees that it shall, at no time during or after termination of this Employment Agreement, directly or indirectly make use of, disseminate, or in any way disclose Confidential Information to any person, firm or business, except to the extent necessary for performance of this Employment Agreement. Employee agrees that it shall disclose Confidential Information only to Employer’s other Employees who need to know such information and who have previously agreed to be bound by the terms and conditions of a substantially similar confidentiality provision and shall be liable for damages for the intentional or negligent disclosure of Confidential Information. Employee’s obligations with respect to any portion of Confidential Information shall terminate only when Employee has documented to Employer that (a) such information was lawfully in the public domain at the time it was communicated to Employee by Employer; or (b) the communication was in response to a valid order by a court of competent jurisdiction or was necessary to establish the rights of Employer under this Employment Agreement, provided, however that Employee shall promptly notify Employer of its notice of any such order and cooperate reasonably with Employer in an attempt to limit or avoid such disclosure.

 

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Section 10.3. Survival . This Article 10 shall survive any termination of this Agreement and all extended periods.

 

Article 11

Noncompetition Agreement

 

Section 11.1. Agreement Not To Compete . For the greater period of (i) the Liquidated Damage Period; and (ii) the one year period following the date on which Employee’s employment with Employer terminates, Employee agrees not to directly or indirectly own, manage, control, or operate; serve as an officer, director, partner or employee of; have any direct or indirect financial interest in; or assist in any way; any person or entity that competes with any business conducted by Employer or any of Employer’s affiliates or subsidiaries in any geographic region in which Employer conducts business.

 

Section 11.2. Competitive Businesses . For purposes of this Article 11, a competitive business shall be any person or entity directly or indirectly engaged in the manufacturing, import, export, sale or distribution of calorie-burning beverages or supplements.

 

Section 11.3. Ownership of Public Corporation No Violation . Employee will not be considered to have violated this provision merely because Employee owns no more than five percent (5%) of the stock of any publicly held corporation.

 

Section 11.4. Survival . This Article 11 shall survive any termination of this Agreement and all extended periods.

 

Section 11.5. Extension of Agreement Not To Compete. At Employer’s discretion, the Employer can cause Employee to extend the period of the agreement not to compete by paying in advance the Employee 30% of the Employee’s last annual base salary and bonuses per year of extension. The Employer can cause the extension for a total of 3 annual periods.

 

Article 12

Notices

 

Any notice given under this Employment Agreement to either party shall be made in writing. Notices shall be deemed given when delivered by hand or when mailed by registered or certified mail, return receipt requested, postage prepaid, and addressed to the party at the address set forth below.

 

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Employee’s address: Gerry David
  3615 5 th Avenue NE
  Bradenton, Fl 34208
   
Employer’s address: Celsius Holdings, Inc.
  Att: W.H. Milmoe, Chairman of the Board
  2424 N. Federal Highway, Suite 208
  Boca Raton, FL 33431

 

Each party may designate a different address for receiving notices by giving written notice of the different address to the other party. The written notice of the different address will be deemed given when it is received by the other party.

 

Article 13

Binding Agreement

 

Section 13.1. Employer’s Successors .

 

(a)          The rights and obligations of Employer under this Employment Agreement shall inure to the benefit of and shall be binding in all respects upon the successors and assigns of Employer.

 

(b)          Employer shall require any direct or indirect successor (by purchase, merger, consolidation, or otherwise) of all or substantially all of Employer’s stock, business and/or assets to expressly agree to assume Employer’s obligations under this Employment Agreement and perform them in the same manner and to the same extent as Employer would have been required to do if no succession had occurred. The agreement must be in a form and substance satisfactory to Employee.

 

(c)          If Employer fails to obtain such an agreement before the effective date of the succession, Employer’s failure will be considered a breach of this Employment Agreement, and Employee shall be entitled to the immediate payment of the amount of money that Employee would have been entitled to if Employer had terminated Employee’s employment other than for Cause in accordance with the terms of Section 9.8(d) of this Employment Agreement, calculated as though Employee’s employment had terminated on the effective date of the succession. However, Employer’s failure to obtain such agreement shall not affect said successor’s obligations pursuant to paragraph 13.1(a) above.

 

Section 13.2. Employee’s Successors . This Employment Agreement shall inure to the benefit and be enforceable by and upon Employee’s personal representatives, legatees, and heirs. If Employee dies while amounts are still owed, such amounts shall be paid to Employee’s legatees or, if no such person or persons have been designated, to Employee’s estate.

 

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Article 14

Waivers

 

The waiver by either party of a breach of any provision of this Employment Agreement shall not operate or be construed as a waiver of any subsequent breach.

 

Article 15

Entire Agreement

 

Section 15.1. No Other Agreements . This instrument contains the entire agreement of the parties. The parties have not made any agreements or representations, oral or otherwise, express or implied, pertaining to the subject matter of this Employment Agreement other than those specifically included in this Employment Agreement.

 

Section 15.2. Prior Agreements . This Employment Agreement supersedes any prior agreements pertaining to or connected with or arising in any manner out of the employment of Employee by Employer. All such prior agreements are terminated and are of no force or effect whatsoever.

 

Article 16

Amendment of Agreement

 

No change or modification of this Employment Agreement shall be valid unless it is in writing and signed by the party against whom the change or modification is sought to be enforced. No change or modification by Employer shall be effective unless it is approved by Employer’s Board of Directors and signed by an officer specifically authorized to sign such documents.

 

Article 17

Severability of Provisions

 

If any provision of this Employment Agreement is invalidated or held unenforceable, the invalidity or unenforceability of that provision or provisions shall be deemed modified or severed only to the minimum extent necessary to make said provision(s) valid and enforceable while maintaining the intent of said provision(s). No such modification shall affect the validity or enforceability of any other provision of this Employment Agreement.

 

Article 18

Assignment of Agreement

 

Employer shall not assign this Employment Agreement other than to a successor without Employee’s prior written consent. 

 

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Article 19

Governing Law, Venue & Attorneys Fees

 

All questions regarding the validity and interpretation of this Employment Agreement shall be governed by and construed and enforced in all respects in accordance with the laws of the State of Florida (without regard to the conflicts of laws provisions thereof). Venue for any action arising in any manner out of the Employee’s employment, this Employment Agreement, or any of the terms contained herein shall be the Federal and or State courts located in Palm Beach County, Florida, regardless of where this Employment Agreement is to be performed. In the event either party engages legal counsel to enforce any provision contained in this Employment Agreement, the prevailing party shall be entitled to all reasonable attorneys fees, investigative expenses, costs, and court costs, whether or not a suit is actually filed, but including all levels of appeal.

 

Article 20

Construction

 

The parties hereto have participated jointly in the negotiation and drafting of this Employment Agreement and, in the event an ambiguity or question of intent or interpretation arises, this Employment Agreement shall be construed as jointly drafted by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Employment Agreement.

 

Article 21

Counterpart Execution

 

This Employment Agreement may be executed in multiple counterparts and delivered by facsimile, e-mail or portable document format (.pdf) transmission, each of which shall be deemed an original, but all of which shall constitute one and the same Agreement.

 

[signature page follows]

 

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IN WITNESS WHEREOF, the parties have executed this Employment Agreement in duplicate as of the date and year first above written.

 

  EMPLOYEE:
   
  /s/ Gerry David
  Gerry David
   
  EMPLOYER:
   
  Celsius Holdings Inc.
     
  By: /s/ W.H. Milmoe 
    W.H. Milmoe
    Chairman of the Board

 

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Exhibit 10.10

     

EMPLOYMENT AGREEMENT

 

This Employment Agreement is effective as of the 1 st day of January, 2016 between Celsius Holdings, Inc. (“Employer”) and John Fieldly (“Employee”).

 

WHEREAS, Employer is actively engaged in the business of manufacturing and distributing functional supplements in various delivery systems; and,

 

WHEREAS, Employee desires to be employed pursuant to the terms of this Employment Agreement.

 

NOW THEREFORE, in consideration of the mutual covenants and agreements contained in this Employment Agreement, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties, intending to be legally bound, agree as follows:

 

Article 1

Employment of Employee

 

Employer agrees to employ Employee, and Employee accepts employment with Employer, on and subject to the terms and conditions set forth in this Employment Agreement.

 

Article 2

Duties of Employee

 

Section 2.1. Position and Duties . Employer agrees to employ Employee to act as Chief Financial Officer for Employer. Employee shall be responsible for performing the following duties: executive management, overseeing business development and other duties typically performed by persons employed in a similar capacity.

 

Section 2.2. Time Devoted to Work . Employee agrees to devote Employee’s entire business time, attention, and energies to the business of Employer in accordance with Employer’s instructions and directions and shall not be engaged in any other business activity, whether or not the activity is pursued for gain, profit, or other pecuniary advantage, during the term of this Employment Agreement without Employer’s prior written consent.

 

Article 3

Place of Employment

 

Section 3.1. Place of Employment . Employee shall be based at Employer’s principal office at 2424 N. Federal Highway, Suite 208 Boca Raton, FL 33431; excluding reasonable travel commensurate with Employee’s position and duties. Employer agrees that during the term of this Employment Agreement it shall not assign Employee to work at any location which is more than 100 miles from said principal office without Employee’s consent.

 

 

 

  

Section 3.2. Moving Expenses . If Employer relocates its principal office more than 100 miles from its current principal office, or requests that Employee relocate to one of its offices which is more than 100 miles from its current principal office, and Employee consents to relocate to that new location, Employer shall promptly pay or reimburse Employee for all reasonable moving expenses incurred by Employee in connection with the relocation plus an amount to reimburse Employee for any federal and state income taxes that it has to pay on amounts reimbursed. Employer also shall indemnify Employee against any loss incurred in connection with the sale of Employee’s principal residence. The amount of any loss shall be determined by taking the difference between the average of two appraisal prices set by two independent appraisers agreed to by Employer and Employee and the actual sales price of Employee’s principal residence.

 

Article 4

Compensation of Employee

 

Section 4.1. Base Salary . For all services rendered by Employee under this Employment Agreement, Employer agrees to pay Employee an annual base salary of $174,370, which shall be payable to Employee in such installments, but not less frequently than monthly, as are consistent with Employee’s practice for its other Employees. Employee’s base salary shall be reviewed at least once a year by Employer’s Board of Directors or its Compensation Committee.

 

Section 4.2. Incentive Compensation . In addition to the base salary, Employee shall be entitled to receive incentive compensation according to a pre-established bonus plan specific for the Employee, as determined by Employer’s Board of Directors.

 

Section 4.3 Reimbursement for Business Expenses . Employer shall promptly pay or reimburse Employee for all reasonable business expenses incurred by Employee in performing Employee’s duties and obligations under this Employment Agreement, but only if Employee properly accounts for expenses in accordance with Employer’s policies. Employer agrees to provide temporary living accommodations in the Boca Raton, Florida area for up to twelve months from the date of this Employment Agreement at a cost not to exceed $450 per month.

 

Section 4.4. Stock Options and Other Stock Awards. . Employee shall be granted 100,000 stock option grants to be issued on January 4, 2016 with 25,000 options to vest at the end of each calendar quarter pursuant to the Employer's 2006 Amended Incentive Stock Plan, as amended, and all rules and regulations of the Securities and Exchange Commission applicable to stock option plans then in effect. The Options will vest over three years.

 

Article 5

Vacations and Other Paid Absences

 

Section 5.1. Vacation Days . Employee shall be entitled to 15 days paid vacation each calendar year during the term of this Employment Agreement. All vacation is accrued during the calendar year of work, should Employee not take all vacation days in any calendar year, up to 10 days will be carried over to the next year. If the agreement is terminated during a calendar year, any accrued and not taken vacation will be paid at the base salary rate, any vacation taken but previously not earned will not be deducted from any amount due to the Employee.

 

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Section 5.2. Holidays . Employee shall be entitled to the same paid holidays as authorized by Employer for its other Employees.

 

Section 5.3. Sick Days and Personal Absence Days . Employee shall be entitled to the same number of paid sick days and personal absence days authorized by Employer for its other Employees.

 

Article 6

Life Insurance

 

Employer may, in its sole discretion, maintain in effect during the term of Employee’s employment a life insurance policy on the life of Employee in such amount as Employer shall in its sole discretion decide to maintain during the term of this Employment Agreement. Any proceeds payable under the policy shall be paid to the beneficiary or beneficiaries designated in writing from time to time by Employee.

 

Article 7

Fringe Benefits

 

Section 7.1. Employer Employee Benefit Plans . Employee shall be entitled to participate in and receive benefits from all of Employer’s Employee benefit plans that currently are maintained by Employer for its Employees. Employee shall be entitled to participate in and receive benefits under any retirement plan, profit-sharing plan, or other Employee benefit plan that Employer establishes for the benefit of its Employees after the date of this Employment Agreement. No amounts paid to Employee from an Employee benefit plan shall count as compensation due Employee as base salary or incentive compensation. Nothing in this Employment Agreement shall prohibit Employer from modifying or terminating any of its Employee benefit plans in a manner that does not discriminate between Employee and other Employees of Employer.

 

Section 7.2. Motor Vehicle . Employer may, in its sole discretion, provide Employee with the use of a motor vehicle to be selected in the reasonable discretion of Employer, or pay a monthly car allowance. If Employer does provide Employee with the use of a motor vehicle, Employer shall procure, maintain, and pay for appropriate insurance on the motor vehicle, including liability insurance of at least $250,000.00 per person and $500,000.00 per occurrence for personal injury and $300,000.00 for property damage.

 

Article 8

Disability

 

Section 8.1. Termination Because of a Disability . Except as may otherwise be required or prohibited by state or federal law, if because of illness or injury Employee becomes unable to work full time for Employer for more than one hundred and eighty (180) days in any twelve month period (excluding vacation days and holidays), Employer may, in its sole discretion at any time after the accumulation of such time terminate Employee’s employment upon written notice to Employee.

 

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Section 8.2. Compensation During Periods of Disability .

 

(a)          Employee shall continue to receive Employee’s base salary and incentive compensation while Employee is unable to work full time, until the earlier of: (i) the accumulation of 90 days of disability in any 12 month period; (ii) the date Employee begins receiving disability insurance benefits equal to Employee’s base salary and incentive compensation; or (iii) the date Employee terminates Employee’s employment with Employer because Employee’s health becomes so impaired that continued performance of Employee’s duties under this Employment Agreement would be hazardous to Employee’s physical or mental health. Notwithstanding anything to the contrary contained herein, if Employee becomes disabled while performing his duties for the Employer described in Section 2.1, the Employee will receive Employee’s base salary and incentive compensation for 180 days from the date of such disability.

 

(b)          While Employee is unable to work full time because of illness or injury and through the full term of this Employment Agreement, including extensions, Employer shall maintain for Employee’s benefit all Employee benefit plans in which Employee was participating at the time Employee was terminated. If Employee is barred from participating in any Employee benefit plan because of Employee’s disability, Employer shall pay Employee an amount equal to what Employer would have contributed on Employee’s behalf to the Employee benefit plan if Employee’s participation had not been barred.

 

(c)          Employee is not required to seek other employment to mitigate any amounts payable under this Employment Agreement. Nor will amounts due Employee under this Employment Agreement be reduced by any amounts received by Employee for other employment.

 

Section 8.3. Disability Insurance . Employer may, in its sole discretion, purchase and maintain disability insurance in force for the benefit of Employee throughout the term of this Employment Agreement, including extensions.

 

Article 9

Termination of Employment

 

Section 9.1. Term of Employment .

 

Employee’s employment shall commence January 1, 2016 and shall continue until December 31, 2016 (“end-of-employment date”), unless extended or terminated sooner, as provided by this article of the Employment Agreement. The end-of-employment date shall be deemed December 31, 2016. For the avoidance of doubt, failure to extend the term of employment beyond the end-of-employment date shall not be deemed to be a termination by Employer, and neither party shall be obligated to negotiate or enter into any subsequent agreement or extension of this Employment Agreement.

 

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Section 9.2. Left blank intentionally

 

Section 9.3. Termination at Employee’s Death . Employee’s employment with Employer shall terminate at Employee’s death.

 

Section 9.4. Termination by Employee . Employee may, but is not obligated to, terminate this Employment Agreement at any time under the following circumstances:

 

(a)          Employee’s fringe benefits or other compensation are materially reduced.

 

(b)          Employer fails to have a successor assume this Employment Agreement and Employee does not enter into a subsequent employment, consulting, or similar agreement with such successor.

 

(c)          There is a change in control of Employer, excluding control acquired by CD Financial, LLC and its affiliates. For purposes of this Agreement, the term “Change of Control” shall mean:

 

(i) Approval by Employer’s shareholders of (x) a reorganization, merger, consolidation or other form of corporate transactions or series of transactions, in each case, with respect to which persons who were Employer’s shareholders immediately prior to such reorganization, merger, consolidation or other transactions do not, immediately thereafter, own more than 50% of the combined voting power entitled to vote generally in the election of directors of the reorganized, merged, or consolidated company’s then outstanding voting securities, in substantially the same proportions as their ownership immediately prior to such reorganization, merger, consolidation or other transactions, or (y) the sale of all or substantially all of the Employer’s assets (unless such reorganization, merger, consolidation or other corporate transaction, liquidation, dissolution or sale is subsequently abandoned); or

 

(ii) Individuals who, as of the date of this Agreement, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the date of this Agreement whose election, or nomination for election by Employer’s shareholders, was approved by a vote by a controlling shareholder owning in excess 50% of the then voting shares, shall be, for purposes of this Agreement, considered as though such person were a member of the Incumbent Board.

 

Section 9.5. Termination by Employer .

 

(a)           Termination with or without Cause . Employer may terminate Employee’s employment for Cause or without Cause (as hereinafter defined).

 

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(b)          For purposes of this Agreement, the term “Cause” shall mean (i) an action or omission of the Employee which constitutes a willful and material breach of, or failure or refusal (other than by reason of his disability) to perform his duties under, this Agreement which is not cured within fifteen (15) days after receipt by the Employee of written notice of same, (ii) fraud, embezzlement, misappropriation of funds or breach of trust in connection with his services hereunder, (iii) conviction of any crime which involves dishonesty or a breach of trust, or (iv) gross negligence in connection with the performance of the Employee’s duties hereunder, which is not cured within fifteen (15) days after written receipt by the Employee of written notice of same, or (v) Employee violates Article 10 or Article 11 of this Employment Agreement.

 

Section 9.6. Notice of Termination . Any termination of Employee’s employment by Employer or Employee, other than by reason of the expiration of the term of this Employment Agreement, must be communicated to the other party by a written notice of termination. The notice must specify the provision of this Employment Agreement authorizing the termination and must set forth in reasonable detail the facts and circumstances providing the basis for termination of Employee’s employment. The Employee shall have the right to address the Board regarding the acts set forth in the notice of termination.

 

Section 9.7. Date Termination Is Effective . If Employee’s employment terminates because this Employment Agreement expires, then Employee’s employment will be considered to have terminated on that expiration date. If Employee’s employment terminates because of Employee’s death, then Employee’s employment will be considered to have terminated on the date of Employee’s death. If Employee’s employment is terminated by Employee, then Employee’s employment will be considered to have terminated on the date that notice of termination is given. If Employee’s employment is terminated by Employer for Cause, then Employee’s employment will be considered to have terminated on the date specified by the notice of termination.

 

Section 9.8. Compensation Following Termination .

 

(a)          If Employee’s employment terminates because of Employee’s death, Employer shall pay a lump sum death benefit to the person or persons designated in a written notice filed with Employer by Employee or, if no person has been designated, to Employee’s estate. The amount of the lump sum death benefit will equal the amount of Employee’s then current annual base salary plus the annualized amount of incentive compensation paid Employee most recently prior to Employee’s death, multiplied by the number of months remaining in the term of this Employment Agreement not to exceed two months. This lump sum death benefit shall be in addition to any life insurance payable pursuant to Article 6 and/or any other amounts that Employee’s beneficiaries and estate may be entitled to receive under any Employee benefit plan maintained by Employer.

 

(b)          If Employee’s employment is terminated by Employer for Cause, or by Employee other than pursuant to Section 9.4(a), (b), or (c), Employer shall pay Employee Employee’s then current base salary through the date employment is terminated, and Employer shall have no further obligations to Employee under this Employment Agreement.

 

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(c)          If Employee’s employment is terminated by Employer other than for Cause and prior to a Change of Control, or by Employee pursuant Section 9.4(a), Employer shall pay Employee Employee’s then current base salary through the date employment is terminated and any legal fees and expenses incurred by Employee to enforce Employee’s rights under this Employment Agreement. In addition, Employer shall pay Employee as liquidated damages an amount equal to the sum of Employee’s then current base salary over six months plus any approved and unpaid incentive bonus; this time period hereafter referred to as the Liquidated Damage Period. In addition, all employee benefits according to sections 6 and 7 will be maintained through the Liquidated Damage Period. If by law any benefit cannot be maintained due to termination of employment, the cash value of said benefit will be paid to Employee over the Liquidated Damage Period.

 

(d)          As an incentive for the retention of Employee following a Change of Control or an event described in Section 9.4(b), if Employee’s employment is terminated by Employer without Cause and following a Change of Control, or by Employee pursuant to Section 9.4(b) Employer shall pay Employee’s then current base salary through the date employment is terminated and any legal fees and expenses incurred by Employee to enforce Employee’s rights under this Employment Agreement. In addition, Employer shall pay Employee as liquidated damages an amount equal to two times Employee’s then current annual base salary.

 

(e)          If Employee’s employment is terminated by Employee pursuant to Section 9.4(c) Employer shall pay Employee’s then current base salary through the date employment is terminated and any legal fees and expenses incurred by Employee to enforce Employee’s rights under this Employment Agreement. In addition, Employer shall pay Employee as liquidated damages an amount equal to the sum of Employee’s then current salary plus approved and unpaid incentive compensation from the date of termination through December 31, 2017.

 

Article 10

Confidential Information

 

Section 10.1. Confidential Information Defined . “Confidential Information” as used in this Employment Agreement shall mean any and all technical and non-technical information belonging to, or in the possession of, Employer or its officers, directors, Employees, affiliates, subsidiaries, clients, vendors, or Employees, including without limitation, patent, trade secret, and proprietary information; techniques, sketches, drawings, models, inventions, know-how, processes, apparatus, equipment, algorithms, source codes, object codes, software programs, software source documents, and formulae related to Employer’s business or any other current, future and/or proposed business, product or service contemplated by Employer; and includes, without limitation, all information concerning research, experimental work, development, design details and specifications, engineering, financial information, procurement requirements, purchasing, manufacturing, customer lists, vendor lists, business forecasts, sales and merchandising, and marketing plans or similar information.

 

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Section 10.2 Disclosures . Employee agrees that it shall, at no time during or after termination of this Employment Agreement, directly or indirectly make use of, disseminate, or in any way disclose Confidential Information to any person, firm or business, except to the extent necessary for performance of this Employment Agreement. Employee agrees that it shall disclose Confidential Information only to Employer’s other Employees who need to know such information and who have previously agreed to be bound by the terms and conditions of a substantially similar confidentiality provision and shall be liable for damages for the intentional or negligent disclosure of Confidential Information. Employee’s obligations with respect to any portion of Confidential Information shall terminate only when Employee has documented to Employer that (a) such information was lawfully in the public domain at the time it was communicated to Employee by Employer; or (b) the communication was in response to a valid order by a court of competent jurisdiction or was necessary to establish the rights of Employer under this Employment Agreement, provided, however that Employee shall promptly notify Employer of its notice of any such order and cooperate reasonably with Employer in an attempt to limit or avoid such disclosure.

 

Section 10.3. Survival . This Article 10 shall survive any termination of this Agreement and all extended periods.

 

Article 11

Noncompetition Agreement

 

Section 11.1. Agreement Not To Compete . For the greater period of (i) the Liquidated Damage Period; and (ii) the one year period following the date on which Employee’s employment with Employer terminates, Employee agrees not to directly or indirectly own, manage, control, or operate; serve as an officer, director, partner or employee of; have any direct or indirect financial interest in; or assist in any way; any person or entity that competes with any business conducted by Employer or any of Employer’s affiliates or subsidiaries in any geographic region in which Employer conducts business.

 

Section 11.2. Competitive Businesses . For purposes of this Article 11, a competitive business shall be any person or entity directly or indirectly engaged in the manufacturing, import, export, sale or distribution of calorie-burning beverages or supplements.

 

Section 11.3. Ownership of Public Corporation No Violation . Employee will not be considered to have violated this provision merely because Employee owns no more than five percent (5%) of the stock of any publicly held corporation.

 

Section 11.4. Survival . This Article 11 shall survive any termination of this Agreement and all extended periods.

 

Section 11.5. Extension of Agreement Not To Compete. At Employer’s discretion, the Employer can cause Employee to extend the period of the agreement not to compete by paying in advance the Employee 30% of the Employee’s last annual base salary and bonuses per year of extension. The Employer can cause the extension for a total of 3 annual periods.

 

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Article 12

Notices

 

Any notice given under this Employment Agreement to either party shall be made in writing. Notices shall be deemed given when delivered by hand or when mailed by registered or certified mail, return receipt requested, postage prepaid, and addressed to the party at the address set forth below.

 

Employee’s address: John Fieldly
  20991 Woodspring Ave.
  Boca Raton, Fl 34428
   
Employer’s address: Celsius Holdings, Inc.
  Att: Mr. Gerry David, President
  2424 N. Federal Highway, Suite 208
  Boca Raton, FL 33431

 

Each party may designate a different address for receiving notices by giving written notice of the different address to the other party. The written notice of the different address will be deemed given when it is received by the other party.

 

Article 13

Binding Agreement

 

Section 13.1. Employer’s Successors .

 

(a)          The rights and obligations of Employer under this Employment Agreement shall inure to the benefit of and shall be binding in all respects upon the successors and assigns of Employer.

 

(b)          Employer shall require any direct or indirect successor (by purchase, merger, consolidation, or otherwise) of all or substantially all of Employer’s stock, business and/or assets to expressly agree to assume Employer’s obligations under this Employment Agreement and perform them in the same manner and to the same extent as Employer would have been required to do if no succession had occurred. The agreement must be in a form and substance satisfactory to Employee.

 

(c)          If Employer fails to obtain such an agreement before the effective date of the succession, Employer’s failure will be considered a breach of this Employment Agreement, and Employee shall be entitled to the immediate payment of the amount of money that Employee would have been entitled to if Employer had terminated Employee’s employment other than for Cause in accordance with the terms of Section 9.8(d) of this Employment Agreement, calculated as though Employee’s employment had terminated on the effective date of the succession. However, Employer’s failure to obtain such agreement shall not affect said successor’s obligations pursuant to paragraph 13.1(a) above.

 

Section 13.2. Employee’s Successors . This Employment Agreement shall inure to the benefit and be enforceable by and upon Employee’s personal representatives, legatees, and heirs. If Employee dies while amounts are still owed, such amounts shall be paid to Employee’s legatees or, if no such person or persons have been designated, to Employee’s estate.

 

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Article 14

Waivers

 

The waiver by either party of a breach of any provision of this Employment Agreement shall not operate or be construed as a waiver of any subsequent breach.

 

Article 15

Entire Agreement

 

Section 15.1. No Other Agreements . This instrument contains the entire agreement of the parties. The parties have not made any agreements or representations, oral or otherwise, express or implied, pertaining to the subject matter of this Employment Agreement other than those specifically included in this Employment Agreement.

 

Section 15.2. Prior Agreements . This Employment Agreement supersedes any prior agreements pertaining to or connected with or arising in any manner out of the employment of Employee by Employer. All such prior agreements are terminated and are of no force or effect whatsoever.

 

Article 16

Amendment of Agreement

 

No change or modification of this Employment Agreement shall be valid unless it is in writing and signed by the party against whom the change or modification is sought to be enforced. No change or modification by Employer shall be effective unless it is approved by Employer’s Board of Directors and signed by an officer specifically authorized to sign such documents.

 

Article 17

Severability of Provisions

 

If any provision of this Employment Agreement is invalidated or held unenforceable, the invalidity or unenforceability of that provision or provisions shall be deemed modified or severed only to the minimum extent necessary to make said provision(s) valid and enforceable while maintaining the intent of said provision(s). No such modification shall affect the validity or enforceability of any other provision of this Employment Agreement.

 

Article 18

Assignment of Agreement

 

Employer shall not assign this Employment Agreement other than to a successor without Employee’s prior written consent.

 

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Article 19

Governing Law, Venue & Attorneys Fees

 

All questions regarding the validity and interpretation of this Employment Agreement shall be governed by and construed and enforced in all respects in accordance with the laws of the State of Florida (without regard to the conflicts of laws provisions thereof). Venue for any action arising in any manner out of the Employee’s employment, this Employment Agreement, or any of the terms contained herein shall be the Federal and or State courts located in Palm Beach County, Florida, regardless of where this Employment Agreement is to be performed. In the event either party engages legal counsel to enforce any provision contained in this Employment Agreement, the prevailing party shall be entitled to all reasonable attorneys fees, investigative expenses, costs, and court costs, whether or not a suit is actually filed, but including all levels of appeal.

 

Article 20

Construction

 

The parties hereto have participated jointly in the negotiation and drafting of this Employment Agreement and, in the event an ambiguity or question of intent or interpretation arises, this Employment Agreement shall be construed as jointly drafted by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Employment Agreement.

 

Article 21

Counterpart Execution

 

This Employment Agreement may be executed in multiple counterparts and delivered by facsimile, e-mail or portable document format (.pdf) transmission, each of which shall be deemed an original, but all of which shall constitute one and the same Agreement.

 

[signature page follows]

 

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IN WITNESS WHEREOF, the parties have executed this Employment Agreement in duplicate as of the date and year first above written.

 

  EMPLOYEE:
     
  /s/ John Fieldly
  John Fieldly
     
  EMPLOYER:
     
  Celsius Holdings Inc.
     
  By:  /s/ Gerry David
    Gerry David
    Chief Executive Officer
     
  BOARD APPROVAL:
     
  By: /s/ William H. Milmoe
    William H. Milmoe
    Chairman of the Board

 

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Exhibit 21.1

 

Subsidiaries of Celsius Holdings, Inc.

 

Entity Jurisdiction of Organization
   
Celsius Netshipments, Inc. Florida
   
Celsius, Inc. Nevada

     

Exhibit 23.1

 

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

We hereby consent to the use in this Form 10 General Form for Registration of Securities Pursuant to Section 12(b) or (g) of the Securities Exchange Act of 1934 of our report dated March 24, 2016 for the two years in the period ended December 31, 2015, relating to the consolidated financial statements of Celsius Holdings, Inc. and Subsidiaries, which appear in such General Form for Registration of Securities for the registration of Celsius Holdings, Inc. common stock.

 

  /s/ D’Arelli Pruzansky, P.A.
   
  D’Arelli Pruzansky, P.A.
  Certified Public Accountants

Coconut Creek, Florida

July 22, 2016