Document:

EXHIBIT 10.1

 

DYNAMIC MATERIALS CORPORATION

 

NONQUALIFIED DEFERRED COMPENSATION PLAN

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
1.
    	
Establishment   of Plan
    	
1
    
	
 
    	
 
    	
 
    
	
2.
    	
Purpose of   Plan
    	
1
    
	
 
    	
 
    	
 
    
	
3.
    	
Definitions
    	
1
    
	
 
    	
3.1
    	
“Acceleration   Events
    	
1
    
	
 
    	
3.2
    	
“Account
    	
1
    
	
 
    	
3.3
    	
“Affiliate
    	
1
    
	
 
    	
3.4
    	
“Base   Salary
    	
1
    
	
 
    	
3.5
    	
“Beneficiary
    	
1
    
	
 
    	
3.6
    	
“Board
    	
1
    
	
 
    	
3.7
    	
“Bonus   Compensation
    	
1
    
	
 
    	
3.8
    	
“Change   in Control
    	
1
    
	
 
    	
3.9
    	
“Claimant
    	
3
    
	
 
    	
3.10
    	
“Code
    	
3
    
	
 
    	
3.11
    	
“Committee
    	
3
    
	
 
    	
3.12
    	
“Company
    	
3
    
	
 
    	
3.13
    	
“Compensation
    	
3
    
	
 
    	
3.14
    	
“Deferral   Election
    	
3
    
	
 
    	
3.15
    	
“Determination   Date
    	
3
    
	
 
    	
3.16
    	
“Director
    	
3
    
	
 
    	
3.17
    	
“Director’s   Fees
    	
3
    
	
 
    	
3.18
    	
“Disabled   or Disability
    	
3
    
	
 
    	
3.19
    	
“Distribution   Date
    	
3
    
	
 
    	
3.20
    	
“Effective   Date
    	
4
    
	
 
    	
3.21
    	
“Election   Notice
    	
4
    
	
 
    	
3.22
    	
“Election   Period
    	
4
    
	
 
    	
3.23
    	
“Elective   Deferrals
    	
5
    
	
 
    	
3.24
    	
“Elective   Deferral Account
    	
5
    
	
 
    	
3.25
    	
“Eligible   Employee
    	
5
    
	
 
    	
3.26
    	
“Employee
    	
5
    
	
 
    	
3.27
    	
“Employer
    	
5
    
	
 
    	
3.28
    	
“Entry   Date
    	
5
    
	
 
    	
3.29
    	
“ERISA
    	
5
    
	
 
    	
3.30
    	
“FICA   Amount
    	
6
    
	
 
    	
3.31
    	
“Incentive   Compensation
    	
6
    
	
 
    	
3.32
    	
“Investment   Option
    	
6
    
	
 
    	
3.33
    	
“Participant
    	
6
    
	
 
    	
3.34
    	
“Payment   Event
    	
6
    
	
 
    	
3.35
    	
“Plan
    	
6
    
	
 
    	
3.36
    	
“Plan   Year
    	
6
    
	
 
    	
3.37
    	
“Re-deferral   Election
    	
6
    

 

i

 

	
 
    	
3.38
    	
“Restricted   Stock Awards
    	
6
    
	
 
    	
3.39
    	
“Separation   from Service
    	
6
    
	
 
    	
3.40
    	
“Specified   Employee
    	
7
    
	
 
    	
3.41
    	
“Specified   Employee Payment Date
    	
7
    
	
 
    	
3.42
    	
“State,   Local and Foreign Tax Amount
    	
7
    
	
 
    	
3.43
    	
“Trust
    	
7
    
	
 
    	
3.44
    	
“Trust   Agreement
    	
7
    
	
 
    	
3.45
    	
“Unforeseeable   Emergency
    	
7
    
	
 
    	
3.46
    	
“Valuation   Date
    	
7
    
	
 
    	
 
    	
 
    	
 
    
	
4.
    	
Eligibility;   Participation
    	
7
    
	
 
    	
4.1
    	
Requirements   for Participation
    	
7
    
	
 
    	
4.2
    	
Election to   Participate; Benefits of Participation
    	
7
    
	
 
    	
4.3
    	
Cessation of   Participation
    	
7
    
	
 
    	
 
    	
 
    	
 
    
	
5.
    	
Election   Procedures
    	
8
    
	
 
    	
5.1
    	
Deferral   Election
    	
8
    
	
 
    	
5.2
    	
Base Salary   Deferrals
    	
8
    
	
 
    	
5.3
    	
Bonus   Compensation Deferrals
    	
8
    
	
 
    	
5.4
    	
Incentive   Compensation Deferrals
    	
8
    
	
 
    	
5.5
    	
Restricted   Stock Award Deferrals
    	
8
    
	
 
    	
5.6
    	
Re-deferrals   and Changing the Form of Payment
    	
8
    
	
 
    	
 
    	
 
    	
 
    
	
6.
    	
Company   Contributions
    	
9
    
	
 
    	
 
    	
 
    	
 
    
	
7.
    	
Accounts and   Investment Options
    	
9
    
	
 
    	
7.1
    	
Establishment   of Accounts
    	
9
    
	
 
    	
7.2
    	
Investment   Options
    	
9
    
	
 
    	
7.3
    	
Investment   Earnings
    	
9
    
	
 
    	
7.4
    	
Nature of   Accounts
    	
10
    
	
 
    	
7.5
    	
Statements
    	
10
    
	
 
    	
 
    	
 
    	
 
    
	
8.
    	
Vesting
    	
10
    
	
 
    	
 
    	
 
    	
 
    
	
9.
    	
Payment of   Participant Accounts
    	
10
    
	
 
    	
9.1
    	
In General
    	
10
    
	
 
    	
9.2
    	
Timing of   Valuation
    	
10
    
	
 
    	
9.3
    	
Timing of   Payments
    	
10
    
	
 
    	
9.4
    	
Timing of   Payments to Specified Employees
    	
10
    
	
 
    	
9.5
    	
Form of   Payment
    	
11
    
	
 
    	
9.6
    	
Medium of   Payment
    	
11
    
	
 
    	
9.7
    	
Cash   Distributions in Respect of Dividends on Deferred Restricted Stock Awards
    	
11
    
	
 
    	
 
    	
 
    	
 
    
	
10.
    	
Payments Due   to Unforeseeable Emergency
    	
11
    
	
 
    	
10.1
    	
Request for   Payment
    	
11
    
	
 
    	
10.2
    	
No Payment If   Other Relief Available
    	
11
    

 

ii

 

	
 
    	
10.3
    	
Limitation on   Payment Amount
    	
12
    
	
 
    	
10.4
    	
Timing of   Payment
    	
12
    
	
 
    	
10.5
    	
Cessation of   Deferrals
    	
12
    
	
 
    	
 
    	
 
    	
 
    
	
11.
    	
Acceleration   Events
    	
12
    
	
 
    	
11.1
    	
Permissible   Acceleration Events
    	
12
    
	
 
    	
 
    	
 
    	
 
    
	
12.
    	
Section 162(m) of   the Code
    	
13
    
	
 
    	
 
    	
 
    	
 
    
	
13.
    	
Plan   Administration
    	
14
    
	
 
    	
13.1
    	
Administration   By Committee
    	
14
    
	
 
    	
13.2
    	
Non-Uniform   Treatment
    	
14
    
	
 
    	
13.3
    	
Committee   Decisions Final
    	
15
    
	
 
    	
13.4
    	
Indemnification
    	
15
    
	
 
    	
 
    	
 
    	
 
    
	
14.
    	
Amendment and   Termination
    	
15
    
	
 
    	
 
    	
 
    	
 
    
	
15.
    	
Miscellaneous
    	
15
    
	
 
    	
15.1
    	
No Employment   or Other Service Rights
    	
15
    
	
 
    	
15.2
    	
Tax Withholding
    	
15
    
	
 
    	
15.3
    	
Governing Law
    	
15
    
	
 
    	
15.4
    	
Section 409A   of the Code
    	
15
    
	
 
    	
15.5
    	
Trust
    	
16
    
	
 
    	
15.6
    	
No Warranties
    	
16
    
	
 
    	
15.7
    	
Beneficiary   Designation
    	
16
    
	
 
    	
15.8
    	
No Assignment
    	
16
    
	
 
    	
15.9
    	
Expenses
    	
16
    
	
 
    	
15.10
    	
Severability
    	
16
    
	
 
    	
15.11
    	
Headings and   Subheadings
    	
16
    
	
 
    	
 
    	
 
    	
 
    
	
16.
    	
Claims   Procedures
    	
16
    
	
 
    	
16.1
    	
Filing a Claim
    	
16
    
	
 
    	
16.2
    	
Claim Decision
    	
16
    
	
 
    	
16.3
    	
Notice of   Denial
    	
17
    
	
 
    	
16.4
    	
Appeal   Procedures
    	
17
    
	
 
    	
16.5
    	
Notice of   Decision on Appeal
    	
17
    
	
 
    	
16.6
    	
Claims   Procedures Mandatory
    	
18
    

 

iii

 

Dynamic Materials Corporation

Nonqualified Deferred Compensation Plan

 

1.                                      Establishment of Plan. Dynamic Materials Corporation (the “Company”) hereby adopts this Dynamic Materials Corporation Nonqualified Deferred Compensation Plan (previously known as the Dynamic Materials Corporation 2012 Nonqualified Deferred Compensation Plan), which is an unfunded deferred compensation plan intended to benefit a select group of key management or highly compensated employees of the Company and its participating Affiliates.

 

2.                                      Purpose of Plan. The purpose of the Plan is to provide a select group of management or highly compensated employees (within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA) of the Company and any Employer with supplemental retirement income benefits through the deferral of Compensation.

 

3.                                      Definitions.

 

3.1                               “Acceleration Events” is defined in Section 11.1 hereof.

 

3.2                               “Account” means a hypothetical bookkeeping account established in the name of each Participant and maintained by the Company to reflect the Participant’s interests under the Plan.

 

3.3                               “Affiliate” means any corporation, limited liability, partnership or other entity of which the Company has the right to cast a majority of the votes through ownership of voting interests or by contractual right.

 

3.4                               “Base Salary” means the annual rate of base pay paid by the Company to or for the benefit of the Participant for services rendered.

 

3.5                               “Beneficiary” means any person or entity, designated in accordance with Section 15.7, entitled to receive benefits which are payable upon or after a Participant’s death pursuant to the terms of the Plan.

 

3.6                               “Board” means the Board of Directors of the Company, as constituted from time to time.

 

3.7                               “Bonus Compensation” means any cash compensation earned by a Participant for services rendered by a Participant under any bonus or cash incentive plan maintained by the Company.

 

3.8                               “Change in Control” means the occurrence of any of the following:

 

(a)                                 The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act ) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% of either (i) the then outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (ii) the combined voting power of the then outstanding voting 

 

 

securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change in Control:  (i) any acquisition directly from the Company, (ii) any acquisition by the Company, including any acquisition which, by reducing the number of shares outstanding, is the sole cause for increasing the percentage of shares beneficially owned by any such Person to more than the applicable percentage set forth above, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (iv) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of this definition.

 

(b)                                 Individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease for any reason within any period of 24 months to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board, shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board.

 

(c)                                  Consummation by the Company of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of assets of another corporation (a “Business Combination”), in each case, unless, following such Business Combination, (i) more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) is represented by Outstanding Company Common Stock and Outstanding Company Voting Securities, respectively, that were outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which such Outstanding Company Common Stock and Outstanding Company Voting Securities were converted pursuant to such Business Combination) and such ownership of common stock and voting power among the holders thereof is in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination)  beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination.

 

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(d)                                 Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.

 

3.9                               “Claimant” has the meaning set forth in Section 16.

 

3.10                        “Code” means the U.S. Internal Revenue Code of 1986, as amended, or any successor statute, and the Treasury Regulations and other authoritative guidance issued thereunder.

 

3.11                        “Committee” means the person or persons appointed by the Board to administer the Plan in accordance with Section 13.

 

3.12                        “Company” means Dynamic Materials Corporation, a Delaware corporation, or any successor thereto.

 

3.13                        “Compensation” means amounts eligible for deferral under this Plan, which includes Base Salary, Bonus Compensation, Director’s Fees, Incentive Compensation and Restricted Stock Awards.

 

3.14                        “Deferral Election” means an election by an Eligible Employee to defer Compensation for a Plan Year.

 

3.15                        “Determination Date” means the last Valuation Date reasonably preceding the payment date.

 

3.16                        “Director” means a member of the Board.

 

3.17                        “Director’s Fees” means compensation for services, including Restricted Stock Awards, as a member of the Board, excluding reimbursement of expenses or other nonregular forms of compensation, before reductions for contributions to or deferrals under any deferred compensation plan sponsored by the Company.

 

3.18                        “Disabled or Disability” means that a Participant is: (a) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months; or (b) by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Company; or (c) determined to be totally disabled by the Social Security Administration.

 

3.19                        “Distribution Date” means a date specified by a Participant in his or her Election Notice for the payment of all or a portion of such Participant’s Account.  A Distribution Date may be a specified date while the Participant remains an Eligible Employee, the attainment of a specific age, the Participant’s Separation from Service or the Participant’s Separation from Service within 12 months after a Change in Control.

 

3

 

3.20                        “Effective Date” means January 1, 2015.  The original Effective Date of the Plan was January 1, 2013, but no deferrals have been made to this Plan prior to January 1, 2015.

 

3.21                        “Election Notice” means the notice or notices established from time to time by the Committee for making Deferral Elections under the Plan. The Election Notice includes the amount or percentage of Compensation to be deferred (subject to any minimum or maximum amounts established by the Committee); the Distribution Date(s); the form of payment (lump sum or installments); and the selected Investment Options. Each Election Notice shall become irrevocable as of the last day of the Election Period.

 

3.22                        “Election Period” means the period established by the Committee with respect to each Plan Year during which Deferral Elections for such Plan Year must be made in accordance with the requirements of Section 409A of the Code, as follows:

 

(a)                                 General Rule. Except as provided in subsections (b), (c) and (d) below, the Election Period shall end no later than the last day of the Plan Year immediately preceding the Plan Year to which the Deferral Election relates.

 

(b)                                 Performance-based Compensation. If any Bonus Compensation or Incentive Compensation constitutes “performance-based compensation” within the meaning of Treas. Reg. Section 1.409A-1(e), then the Election Period for such amounts shall end no later than six months before the end of the Plan Year during which the Bonus Compensation or Incentive Compensation is earned (and in no event later than the date on which the amount of the Bonus Compensation or Incentive Compensation becomes readily ascertainable).

 

In order for an Eligible Employee to make a deferral election for Performance-Based Compensation in accordance with the Election Period described in this subsection(b), the Eligible Employee must have performed services continuously from the later of (i) the beginning of the performance period for such compensation, or (ii) the date upon which the performance criteria for such compensation are established, through the date upon which the Eligible Employee makes the Deferral Election for such Performance —Based Compensation.

 

(c)                                  Newly Eligible Employees. The Election Period for newly Eligible Employees shall end no later than 30 days after the Employee first becomes eligible to participate in the Plan and shall apply only with respect to Compensation earned after the date of the Deferral Election.

 

(d)                                 Restricted Stock Awards.  The Election Period for deferrals of Restricted Stock Awards shall be as follows, as determined by the Committee:

 

(1)                                 on or before December 31st of any Plan Year (or such earlier date established in the discretion of the Committee) with respect to Restricted Stock Awards granted to the Participant in the following Plan Year and any subsequent Plan Years as specified in the Deferred Election; provided, however, that no Deferral Election may be made under this subsection (1) with respect to any Restricted Stock Awards granted to an Eligible Employee with respect to any services performed by such Eligible Employee prior to the applicable December 31st; or

 

4

 

(2)                                 on or before the 30th day following the date of any Restricted Stock Award grant, provided, however, that no Deferral Election made pursuant to this subsection (2) shall be effective with respect to any Restricted Stock Award that vests prior to the date that that is twelve months after the date of such Deferral Election, unless the vesting of such Restricted Stock Award during such twelve-month period may only occur in the event of the Participant’s death, disability (as defined in Treas. Reg. §1.409A-3(i)(4)), or a change in control event (as defined in Treas. Reg. §1.409A-3(i)(5)).

 

3.23                        “Elective Deferrals” means deferrals of Compensation.

 

3.24                        “Elective Deferral Account” means a separate account maintained for each Participant to record the Elective Deferrals made to the Plan pursuant to Section 5 and all earnings and losses allocable thereto.

 

3.25                        “Eligible Employee”  means an Employee who is selected by the Committee to participate in the Plan and any member of the Board.  Participation in the Plan is limited to a select group of the Company’s key management or highly compensated employees.

 

3.26                        “Employee” means an employee of any Employer.

 

3.27                        “Employer” means the following:

 

(a)                                 Except as provided in subsection (b) below, “Employer” means the Company and any of its Affiliates that have been selected by the Board to participate in the Plan and have adopted the Plan as a participating employer.

 

(b)                                 For the purpose of determining whether a Participant has experienced a Separation from Service, the term “Employer” shall mean:

 

(i)                                     The entity for which the Participant performs services and with respect to which the legally binding right to compensation deferred under this Plan arises; and

 

(ii)                                  All other entities with which the entity described above would be aggregated and treated as a single employer under Code Section 414(b) (controlled group of corporations) and Code Section 414(c) (a group of trades or businesses, whether or not incorporated, under common control), as applicable.  In order to identify the group of entities described in the preceding sentence, the Committee shall use an ownership threshold of 50% as a substitute for the 80% minimum ownership threshold that appears in, and otherwise must be used when applying, the applicable provisions of (A) Code Section 1563 for determining a controlled group of corporations under Code Section 414(b), and (B) Treas. Reg. §1.414(c)-2 for determining the trades or businesses that are under common control under Code Section 414(c).

 

3.28                        “Entry Date” means, with respect to an Eligible Employee, the first day of the pay period following the effective date of such Eligible Employee’s participation in the Plan.

 

3.29                        “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time.

 

5

 

3.30                        “FICA Amount” has the meaning set forth in Section 11.1(c).

 

3.31                        “Incentive Compensation” shall mean any portion of the compensation attributable to a Plan Year that is earned by a Participant under a long-term incentive plan or any other long-term incentive arrangement designated by the Committee, before reductions for contributions to or deferrals under any pension, deferred compensation or benefit plans sponsored by the Company.

 

3.32                        “Investment Option” means an investment fund, index or vehicle selected by the Committee and made available to Participants for the deemed investment of their Accounts.

 

3.33                        “Participant” means an Eligible Employee who elects to participate in the Plan by filing an Election Notice in accordance with Section 5.1 and any former Eligible Employee who continues to be entitled to a benefit under the Plan.

 

3.34                        “Payment Event” has the meaning set forth in Section 9.1.

 

3.35                        “Plan” means this Dynamic Materials Corporation Nonqualified Deferred Compensation Plan, as amended from time to time.

 

3.36                        “Plan Year” means the twelve consecutive month period which begins on January 1 and ends on the following December 31.

 

3.37                        “Re-deferral Election” has the meaning set forth in Section 5.6.

 

3.38                        “Restricted Stock Awards” shall mean awards of equity securities of the Company that are unvested and forfeitable when granted.

 

3.39                        “Separation from Service” has the meaning set forth in Section 409A(a)(2)(A)(i) of the Code and Treas. Reg. Section 1.409A-1(h) including the default presumptions thereunder.

 

(a)                                 For a Participant who provides services to an Employer as an employee, a Separation from Service shall occur when such Participant has experienced a termination of employment with the Employer.  A Participant shall be considered to have experienced a termination of employment when the facts and circumstances indicate that the Participant and his or her Employer reasonably anticipate that either (i) no further services will be performed for the Employer after a certain date, or (ii) that the level of bona fide services the Participant will perform for the Employer after such date (whether as an employee or as an  independent contractor) will permanently decrease to no more than 20% of the average level of bona fide services performed by such Participant (whether as an employee or an independent contractor) over the immediately preceding 36-month period (or the full period of services to the employer if the Participant has been providing services to the Employer less than 36 months).

 

(b)                                 If a Participant is on military leave, sick leave, or other bona fide leave of absence, the employment relationship between the Participant and the Employer shall be treated as continuing intact, provided that the period of such leave does not exceed 6 months, or 

 

6

 

if longer, so long as the Participant retains a right to reemployment with the Employer under an applicable statute or by contract.  If the period of a military leave, sick leave, or other bona fide leave of absence exceeds 6 months and the Participant does not retain a right to reemployment under an applicable statute or by contract, the employment relationship shall be considered to be terminated for purposes of this Plan as of the first day immediately following the end of such 6-month period.  In applying the provisions of this paragraph, a leave of absence shall be considered a bona fide leave of absence only if there is a reasonable expectation that the Participant will return to perform services for the Employer.

 

(c)                                  For a Participant who is a Director, a Separation from Service shall occur when such Participant ceases to be a Director.

 

3.40                        “Specified Employee” has the meaning set forth in Section 409A(a)(2)(B)(i) of the Code and Treas. Reg. Section 1.409A-1(i).

 

3.41                        “Specified Employee Payment Date” has the meaning set forth in Section 9.4.

 

3.42                        “State, Local and Foreign Tax Amount” has the meaning set forth in Section 11.1(f).

 

3.43                        “Trust” has the meaning set forth in Section 15.5.

 

3.44                        “Trust Agreement” has the meaning set forth in Section 15.5.

 

3.45                        “Unforeseeable Emergency” means a severe financial hardship of the Participant resulting from (a) an illness or accident of the Participant, the Participant’s spouse, or the Participant’s dependent; (b) a loss of the Participant’s property due to casualty; or (c) such other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant, all as determined in the sole discretion of the Committee.

 

3.46                        “Valuation Date” means each business day of the Plan Year.

 

4.                                      Eligibility; Participation.

 

4.1                               Requirements for Participation. Before the beginning of each Plan Year, the Committee shall select those Employees who shall be Eligible Employees for such Plan Year. Any Eligible Employee may participate in the Plan commencing as of the Entry Date occurring on or after the date on which they become an Eligible Employee.

 

4.2                               Election to Participate; Benefits of Participation. An Eligible Employee may become a Participant in the Plan by making a Deferral Election in accordance with Section 5.

 

4.3                               Cessation of Participation. If a Participant ceases to be an Eligible Employee for a Plan Year, then the Participant’s Deferral Elections shall no longer be effective. However, such Participant’s Account shall continue to be credited with earnings and losses until the applicable Determination Date.

 

7

 

5.                                      Election Procedures.

 

5.1                               Deferral Election. An Eligible Employee may elect to defer Compensation by completing an Election Notice and filing it with the Committee during the Election Period. The Election Notice must specify:

 

(a)                                 The amount or percentage of Compensation to be deferred (subject to any minimum established in the Plan);

 

(b)                                 The Distribution Date for the Participant’s Account (subject to the provisions of the Plan);

 

(c)                                  The form of payment for the Participant’s Account (lump sum or annual installments); and

 

(d)                                 The percentage or amount of the Participant’s Account to be allocated to each Investment Option available under the Plan.

 

5.2                               Base Salary Deferrals. A Participant may elect to defer up to 100% of the Participant’s Base Salary for any Plan Year by making a Deferral Election in accordance with this Section 5. Base Salary deferrals shall be credited to a Participant’s Elective Deferral Account as of the date the Base Salary otherwise would have been paid.

 

5.3                               Bonus Compensation Deferrals. A Participant may elect to defer up to 100% of the Participant’s Bonus Compensation for any Plan Year by making a Deferral Election in accordance with this Section 5. Bonus Deferrals shall be credited to the Participant’s Elective Deferral Account as of the date the deferred Bonus Compensation otherwise would have been paid.

 

5.4                               Incentive Compensation Deferrals. A Participant may elect to defer up to 100% of the Participant’s Incentive Compensation for any Plan Year by making a Deferral Election in accordance with this Section 5. Incentive Compensation Deferrals shall be credited to the Participant’s Elective Deferral Account as of the date the deferred Incentive Compensation otherwise would have been paid.

 

5.5                               Restricted Stock Award Deferrals. A Participant may elect to defer up to 100% of the Participant’s Restricted Stock Awards granted in any Plan Year by making a Deferral Election in accordance with this Section 5; provided, however, that the Committee, in its discretion, may require that a deferral of a Restricted Stock Award may be permitted only if 100% of a grant of Restricted Stock Awards is deferred under this Plan. Restricted Stock Award Deferrals shall be credited to the Participant’s Elective Deferral Account as of the date the Restricted Stock Award is granted.

 

5.6                               Re-deferrals and Changing the Form of Payment. The Participant may make an election to re-defer all or a portion of the amounts in his or her Account until a later Distribution Date or to change the form of a payment (a “Re-deferral Election”); provided that, the following requirements are met:

 

8

 

(a)                                 The re-deferral election is made at least 12 months before the original Distribution Date;

 

(b)                                 The Distribution Date for the re-deferred amounts is at least five years later than the original Distribution Date; and

 

(c)                                  The re-deferral election will not take effect for at least 12 months after the re-deferral election is made.

 

For purposes of this Section 5.6, all payments, including installment payments, shall be treated as separate payments under Section 409A of the Code.

 

6.                                      Company Contributions. The Company may make contributions to the Plan on behalf of any Participant in its sole discretion.

 

7.                                      Accounts and Investment Options.

 

7.1                               Establishment of Accounts. The Company shall establish and maintain an Account for each Participant. The Company may establish more than one Account on behalf of any Participant as deemed necessary by the Committee for administrative purposes.

 

7.2                               Investment Options. The Committee shall select the Investment Options to be made available to Participants for the deemed investment of their Accounts under the Plan. The Committee may change, discontinue, or add to the Investment Options made available under the Plan at any time in its sole discretion. A Participant must select the Investment Options for his or her Account in the Participant’s Election Notice and may make changes to his or her selections in accordance with procedures established by the Committee.

 

(a)                                 Notwithstanding any other provision of the Plan, the amount credited to an Account with respect to the deferral of Restricted Stock Awards shall be deemed to be invested in the common stock of the Company until such time as the Participant elects to change such deemed investment to the extent permitted under procedures established by the Committee, and the earnings and losses with respect to such deemed investments shall be the earnings or losses attributable to the Company’s common stock.  In no event will a Participant be permitted to change the deemed investment of deferred Restricted Stock Awards prior to the time such Restricted Stock Awards are vested.

 

(b)                                 If any change shall occur in or affect shares of Company common stock on account of a merger, consolidation, reorganization, stock dividend, stock split or combination, reclassification, recapitalization, distribution to holders of shares of Company common stock (other than cash dividends) or such similar event (as determined by the Committee in its discretion), the Committee shall make such adjustments, if any, that it deems necessary or equitable in each Participant’s Account holding deferred Restricted Stock Awards in order to prevent the dilution or enlargement of the Participant’s benefits under the Plan.

 

7.3                               Investment Earnings. Each Account shall be adjusted for earnings or losses based on the performance of the Investment Options selected. Earnings and losses shall be 

 

9

 

computed on each Valuation Date. The amount paid to a Participant on the payment date shall be determined as of the applicable Determination Date.

 

7.4                               Nature of Accounts. Accounts are not actually invested in the Investment Options available under the Plan and Participants do not have any real or beneficial ownership in any Investment Option. A Participant’s Account is solely a device for the measurement and determination of the amounts to be paid to the Participant pursuant to the Plan and shall not constitute or be treated as a trust fund of any kind.

 

7.5                               Statements. Each Participant shall be provided with statements setting out the amounts in his or her Account which shall be delivered at such intervals determined by the Committee.

 

8.                                      Vesting.  Participants shall be fully vested at all times in their Compensation deferrals and any earnings thereon; provided, however, that deferrals of Restricted Stock Awards shall become vested only when the underlying Restricted Stock Award otherwise becomes vested pursuant to the terms of such award.

 

9.                                      Payment of Participant Accounts.

 

9.1                               In General . Payment of a Participant’s vested Account shall be made (or commence, in the case of installments) on the earliest to occur of the following events (each a “Payment Event”):

 

(a)                                 The Distribution Date specified in the Participant’s Deferral Election; provided that, the Participant must select from among the available Distribution Date(s) designated by the Committee and set forth in the Election Notice;

 

(b)                                 The Participant’s Separation from Service;

 

(c)                                  The Participant’s death; and

 

(d)                                 The Participant’s Disability.

 

9.2                               Timing of Valuation. The value of a Participant’s Account on the payment date shall be determined as of the applicable Determination Date.

 

9.3                               Timing of Payments. Except as otherwise provided in this Section 9, payments shall be made or commence within 90 days following a Payment Event, except that, for any payment that is triggered upon the Participant’s Separation from Service or Disability, such payments shall be made or commence on or about the first payroll date of the seventh (7th) month following such Separation from Service or Disability.  At the time a Participant makes a Deferral Election, the Participant also may elect to have his or her Account paid on the earlier of a Payment Event or a Change in Control.

 

9.4                               Timing of Payments to Specified Employees. Notwithstanding anything in the Plan to the contrary, if a Participant is a Specified Employee as of the date of his or her Separation from Service, then no distribution of such Participant’s Account shall be made upon 

 

10

 

the Participant’s Separation from Service until the first payroll date of the seventh month following the Participant’s Separation from Service (or, if earlier, upon the date of the Participant’s death) (the “Specified Employee Payment Date”). Any payments to which a Specified Employee otherwise would have been entitled under the Plan during the period between the Participant’s Separation from Service and the Specified Employee Payment date shall be made or shall commence on the Specified Employee Payment Date.

 

9.5                               Form of Payment. Each Participant shall specify in his or her Election Notice the form of payment (lump sum or installments) for amounts in his or her Account that are covered by the election; provided that, if the Participant elects to have amounts paid in installments, the Participant must select from among the permissible installment schedules selected by the Committee and set forth in the Election Notice. In the absence of a valid election with respect to form of payment, amounts will be paid in a single lump sum.

 

(a)                                 Limit on Installment Payments. Notwithstanding the above, a Participant may not elect installment payments over a period that exceeds five (5) years for payments commencing on a specified date while a Participant is an Eligible Employee and may not exceed ten (10) years for payments commencing upon the Participant’s Separation from Service.

 

9.6                               Medium of Payment. Any payment from a Participant’s Account shall be made in cash; provided, however, that the payment of any portion of an Account that is deemed invested in common stock of the Company shall be paid in the form of whole shares of common stock of the Company.

 

9.7                               Cash Distributions in Respect of Dividends on Deferred Restricted Stock Awards.  With respect to each deferred Restricted Stock Award in a Participant’s Account on the record date (the “Record Date”) of any cash dividend or other distribution paid with respect to shares of common stock of the Company, the Company shall pay to each Participant an amount of cash or other property equal to the cash payment or other property that would have been paid to the Participant in respect of such cash dividend or other distribution under the terms of the applicable Restricted Stock Award agreement.  Any amount payable pursuant to this Section 9.7 shall be paid to the Participant at the time the respective cash dividend or other distribution is paid to the holders of Company common stock, but in no event later than March 15 of the year following the year in which the Record Date with respect to such cash dividend or other distribution falls.

 

10.                               Payments Due to Unforeseeable Emergency.

 

10.1                        Request for Payment. If a Participant suffers an Unforeseeable Emergency, he or she may submit a written request to the Committee for payment of his or her vested Account.

 

10.2                        No Payment If Other Relief Available. The Committee will evaluate the Participant’s request for payment due to an Unforeseeable Emergency taking into account the Participant’s circumstances and the requirements of Section 409A of the Code. In no event will payments be made pursuant to this Section 10 to the extent that the Participant’s hardship can be 

 

11

 

relieved: (a) through reimbursement or compensation by insurance or otherwise; or (b) by liquidation of the Participant’s assets, to the extent that liquidation of the Participant’s assets would not itself cause severe financial hardship.

 

10.3                        Limitation on Payment Amount. The amount of any payment made on account of an Unforeseeable Emergency shall not exceed the amount reasonably necessary to satisfy the Participant’s financial need, including amounts necessary to pay any Federal, state or local income taxes or penalties reasonably anticipated to result from the payment, as determined by the Committee.

 

10.4                        Timing of Payment. Payment shall be made from a Participant’s Account in one lump sum payment as soon as practicable and in any event within 30 days following the Committee’s determination that an Unforeseeable Emergency has occurred and authorization of payment from the Participant’s Account.

 

10.5                        Cessation of Deferrals. If a Participant receives payment on account of an Unforeseeable Emergency, the Participant’s Elective Deferrals for the remainder of the Plan Year will be cancelled.

 

11.                               Acceleration Events.

 

11.1                        Permissible Acceleration Events. Notwithstanding anything in the Plan to the contrary, the Committee, in its sole discretion, may accelerate payment of all or a portion of a Participant’s Account upon the occurrence of any of the events (“Acceleration Events”) set forth in this Section 11. The Committee’s determination of whether payment may be accelerated in accordance with this Section 11 shall be made in accordance with Treas. Reg. Section 1.409A-3(j)(4).

 

(a)                                 Domestic Relations Orders. The Committee may accelerate payment of a Participant’s Account to the extent necessary to comply with a domestic relations order (as defined in Section 414(p)(1)(B) of the Code).

 

(b)                                 Limited Cashouts. The Committee may accelerate payment of a Participant’s Account to the extent that (i) the aggregate amount in the Participant’s Account does not exceed the applicable dollar amount under Section 402(g)(1)(B) of the Code, (ii) the payment results in the termination of the Participant’s entire interest in the Plan and any plans that are aggregated with the Plan pursuant to Treas. Reg. Section 1.409A-1(c)(2), and (iii) the Committee’s decision to cash out the Participant’s Account is evidenced in writing no later than the date of payment.

 

(c)                                  Payment of Employment Taxes. The Committee may accelerate payment of all or a portion of a Participant’s Account (i) to pay the Federal Insurance Contributions Act (FICA) tax imposed under Sections 3010, 3121(a) and 3121(v)(2) of the Code (the “FICA Amount”), or (ii) to pay the income tax at source on wages imposed under Section 3401 of the Code or the corresponding withholding provisions of applicable state, local or foreign tax laws as a result of the payment of the FICA Amount and the additional income tax at source on wages attributable to the pyramiding Section 3401 wages and taxes; provided, 

 

12

 

however, that the total payment under this Section 11.1(c) shall not exceed the FICA Amount and the income tax withholding related to the FICA Amount.

 

(d)                                 Payment Upon Income Inclusion. The Committee may accelerate payment of all or a portion of a Participant’s Account to the extent that the Plan fails to meet the requirements of Section 409A of the Code; provided that, the amount accelerated shall not exceed the amount required to be included in income as a result of the failure to comply with Section 409A of the Code.

 

(e)                                  Termination of the Plan. The Committee may accelerate payment of all or a portion of a Participant’s Account upon termination of the Plan in accordance with Treas. Reg. Section 1.409A-3(j)(4)(ix).

 

(f)                                   Payment of State, Local or Foreign Taxes. The Committee may accelerate payment of all or a portion of a Participant’s Account for:

 

(i)                                     the payment of state, local or foreign tax obligations arising from participation in the Plan that relate to an amount deferred under the Plan before the amount is paid or made available to the Participant (the “State, Local and Foreign Tax Amount”); provided, however, the accelerated payment amount shall not exceed the taxes due as a result of participation in the Plan; and/or

 

(ii)                                  the payment of income tax at source on wages imposed under Section 3401 of the Code as a result of such payment and the payment of the additional income tax at source on wages imposed under Section 3401 of the Code attributable to the additional Section 3401 wages and taxes; provided however, the accelerated payment amount shall not exceed the aggregate of the State, Local and Foreign Tax Amount and the income tax withholding related to such amount.

 

(g)                                  Certain Offsets. The Committee may accelerate payment of all or a portion of the Participant’s Account to satisfy a debt of the Participant to the Company or an Affiliate incurred in the ordinary course of the service relationship between the Company and the  Participant; provided, however, the amount accelerated shall not exceed $5,000 and the payment shall be made at the same time and in the same amount as the debt otherwise would have been due and collected from the Participant.

 

(h)                                 Bona Fide Disputes as to Right to Payment. The Committee may accelerate payment of all or a portion of a Participant’s Account where the payment is part of a settlement between the Company and the Participant of an arm’s length, bona fide dispute as to the Participant’s right to the deferred amount.

 

12.                               Section 162(m) of the Code. If the Committee reasonably anticipates that if a payment were made as scheduled under the Plan it would result in a loss of the Company’s tax deduction due to the application of Section 162(m) of the Code, such payment can be delayed and paid (a) during the Participant’s first taxable year in which the Committee reasonably anticipates that the Company’s tax deduction will not be limited or eliminated by the application of Section 162(m) of the Code or (b) subject to Section 9.4, during the period beginning with the Participant’s Separation from Service and ending on the later of the last day of the Company’s 

 

13

 

taxable year in which the Participant separates from service or the 15th day of the third month following the Participant’s Separation from Service. Notwithstanding the foregoing, no payment under the Plan may be deferred in accordance with this Section 12 unless all scheduled payments to the Participant that could be delayed in accordance with Treas. Reg. Section 1.409A-2(b)(7)(i) are also delayed.

 

13.                               Plan Administration.

 

13.1                        Administration By Committee. The Plan shall be administered by the Committee, the members of which shall be appointed by the Board and which shall have the authority to:

 

(a)                                 construe and interpret the Plan and apply its provisions;

 

(b)                                 promulgate, amend and rescind rules and regulations relating to the administration of the Plan;

 

(c)                                  authorize any person to execute, on behalf of the Company, any instrument required to carry out the purposes of the Plan;

 

(d)                                 determine minimum or maximum amounts that Participants may elect to defer under the Plan;

 

(e)                                  select the Investment Options that will be available for the deemed investment of Accounts under the Plan and establish procedures for permitting Participants to change their selected Investment Options;

 

(f)                                   select, subject to the limitations set forth in the Plan, those Employees who shall be Eligible Employees;

 

(g)                                  evaluate whether a Participant who has requested payment from his or her Account on account of an Unforeseeable Emergency has experienced an  Unforeseeable Emergency and the amount of any payment necessary to satisfy the Participant’s emergency need;

 

(h)                                 calculate deemed investment earnings and losses;

 

(i)                                     interpret, administer, reconcile any inconsistency in, correct any defect in and/or supply any omission in the Plan and any instrument, Election Notice or agreement relating to the Plan;

 

(j)                                    exercise discretion to make any and all other determinations which it determines to be necessary or advisable for the administration of the Plan; and

 

(k)                                 approve and adopt any amendment to the Plan.

 

13.2                        Non-Uniform Treatment. The Committee’s determinations under the Plan need not be uniform and any such determinations may be made selectively among 

 

14

 

Participants. Without limiting the generality of the foregoing, the Committee shall be entitled, among other things, to make non-uniform and selective determinations with regard to the terms or conditions of any Elective Deferral.

 

13.3                        Committee Decisions Final. Subject to Section 16, all decisions made by the Committee pursuant to the provisions of the Plan shall be final and binding on the Company and the Participants, unless such decisions are determined by a court having jurisdiction to be arbitrary and capricious.

 

13.4                        Indemnification. No member of the Committee or any designee shall be liable for any action, failure to act, determination or interpretation made in good faith with respect to the Plan except for any liability arising from his or her own willful malfeasance, gross negligence or reckless disregard of his or her duties.

 

14.                               Amendment and Termination.  The Committee may, at any time, and in its discretion, alter, amend, modify, suspend or terminate the Plan or any portion thereof; provided, however, that no such amendment, modification, suspension or termination shall, without the consent of a Participant, adversely affect such Participant’s rights with respect to amounts credited to or accrued in his or her Account and provided, further, that, no payment of benefits shall occur upon termination of the Plan unless the requirements of Section 409A of the Code have been met.

 

15.                               Miscellaneous.

 

15.1                        No Employment or Other Service Rights. Nothing in the Plan or any instrument executed pursuant thereto shall confer upon any Participant any right to continue to serve the Company or an Employer or interfere in any way with the right of the Company or any Employer to terminate the Participant’s employment or service at any time with or without notice and with or without cause.

 

15.2                        Tax Withholding. The Company and any Employer shall have the right to deduct from any amounts otherwise payable under the Plan any federal, state, local, or other applicable taxes required to be withheld.

 

15.3                        Governing Law. The Plan shall be administered, construed and governed in all respects under and by the laws of Delaware, without reference to the principles of conflicts of law (except and to the extent preempted by applicable Federal law).

 

15.4                        Section 409A of the Code. The Company intends that the Plan comply with the requirements of Section 409A of the Code and shall be operated and interpreted consistent with that intent. Notwithstanding the foregoing, the Company makes no representation that the Plan complies with Section 409A of the Code and shall have no liability to any Participant for any failure to comply with Section 409A of the Code.

 

This Plan shall constitute an “account balance plan” as defined in Treas. Reg. Section 31.3121(v)(2)-1(c)(1)(ii)(A). For purposes of Section 409A of the Code, all amounts deferred under this Plan shall be aggregated with amounts deferred under other account balance plans.

 

15

 

15.5                        Trust.  The Company may, in its discretion, enter into an agreement (“Trust Agreement”) with a financial institution selected by Company management for purposes of this Plan pursuant to which such financial intuition would serve as the trustee under an irrevocable trust (“Trust”) to be used in connection with the Plan.  Any such Trust is intended to be a rabbi trust and the assets of the Trust shall at all times be subject to the claims of the Company’s general creditors.  Notwithstanding the existence of any such Trust, the Plan is intended to be “unfunded” for purposes of ERISA and shall not be construed as providing income to Participants prior to the date that amounts deferred under the Plan are paid.

 

15.6                        No Warranties. Neither the Company nor the Committee warrants or represents that the value of any Participant’s Account will increase. Each Participant assumes the risk in connection with the deemed investment of his or her Account.

 

15.7                        Beneficiary Designation. Each Participant under the Plan may from time to time name any beneficiary or beneficiaries to receive the Participant’s interest in the Plan in the event of the Participant’s death. Each designation will revoke all prior designations by the same Participant, shall be in a form reasonably prescribed by the Committee and shall be effective only when filed by the Participant in writing with the Company during the Participant’s lifetime. If a Participant fails to designate a beneficiary, then the Participant’s designated beneficiary shall be deemed to be the Participant’s estate.

 

15.8                        No Assignment. Neither a Participant nor any other person shall have any right to sell, assign, transfer, pledge, anticipate or otherwise encumber, transfer, hypothecate or convey any amounts payable hereunder prior to the date that such amounts are paid (except for the designation of beneficiaries pursuant to Section 15.7).

 

15.9                        Expenses. The costs of administering the Plan shall be paid by the Company.

 

15.10                 Severability. If any provision of the Plan is held to be invalid, illegal or unenforceable, whether in whole or in part, such provision shall be deemed modified to the extent of such invalidity, illegality or unenforceability and the remaining provisions shall not be affected.

 

15.11                 Headings and Subheadings. Headings and subheadings in the Plan are for convenience only and are not to be considered in the construction of the provisions hereof.

 

16.                               Claims Procedures.

 

16.1                        Filing a Claim. Any Participant or other person claiming an interest in the Plan (the “Claimant”) may file a claim in writing with the Committee. The Committee shall review the claim itself or appoint an individual or entity to review the claim.

 

16.2                        Claim Decision. The Claimant shall be notified within ninety (90) days after the claim is filed whether the claim is approved or denied, unless the Committee determines that special circumstances beyond the control of the Plan require an extension of time, in which case the Committee may have up to an additional ninety (90) days to process the claim. If the Committee determines that an extension of time for processing is required, the Committee shall 

 

16

 

furnish written or electronic notice of the extension to the Claimant before the end of the initial ninety (90) day period. Any notice of extension shall describe the special circumstances necessitating the additional time and the date by which the Committee expects to render its decision.

 

16.3                        Notice of Denial. If the Committee denies the claim, it must provide to the Claimant, in writing or by electronic communication, a notice which includes:

 

(a)                                 The specific reason(s) for the denial;

 

(b)                                 Specific reference to the pertinent Plan provisions on which such denial is based;

 

(c)                                  A description of any additional material or information necessary for the Claimant to perfect his or her claim and an explanation of why such material or information is necessary;

 

(d)                                 A description of the Plan’s appeal procedures and the time limits applicable to such procedures, including a statement of the Claimant’s right to bring a civil action under Section 502(a) of ERISA following a denial of the claim on appeal; and

 

(e)                                  If an internal rule was relied on to make the decision, either a copy of the internal rule or a statement that this information is available at no charge upon request.

 

16.4                        Appeal Procedures. A request for appeal of a denied claim must be made in writing to the Committee within sixty (60) days after receiving notice of denial. The decision on appeal will be made within sixty (60) days after the Committee’s receipt of a request for appeal, unless special circumstances require an extension of time for processing, in which case a decision will be rendered not later than one hundred twenty (120) days after receipt of a request for appeal. A notice of such an extension must be provided to the Claimant within the initial sixty (60) day period and must explain the special circumstances and provide an expected date of decision. The reviewer shall afford the Claimant an opportunity to review and receive, without charge, all relevant documents, information and records and to submit issues and comments in writing to the Committee. The reviewer shall take into account all comments, documents, records and other information submitted by the Claimant relating to the claim regardless of whether the information was submitted or considered in the initial benefit determination.

 

16.5                        Notice of Decision on Appeal. If the Committee denies the appeal, it must provide to the Claimant, in writing or by electronic communication, a notice which includes:

 

(a)                                 The specific reason(s) for the denial;

 

(b)                                 Specific references to the pertinent Plan provisions on which such denial is based;

 

(c)                                  A statement that the Claimant may receive on request all relevant records at no charge;

 

17

 

(d)                                 A description of the Plan’s voluntary procedures and deadlines, if any;

 

(e)                                  A statement of the Claimant’s right to sue under Section 502(a) of ERISA; and

 

(f)                                   If an internal rule was relied on to make the decision, either a copy of the internal rule or a statement that this information is available at no charge upon request.

 

16.6                        Claims Procedures Mandatory. The internal claims procedures set forth in this Section 16 are mandatory. If a Claimant fails to follow these claims procedures, or to timely file a request for appeal in accordance with this Section 16, the denial of the Claim shall become final and binding on all persons for all purposes.

 

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, Dynamic Materials Corporation has adopted this Plan as of the Effective Date written above.

 

	
 
    	
DYNAMIC MATERIALS CORPORATION
    
	
 
    	
 
    	
 
    
	
 
    	
By  
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    

 

19SECURITIES PURCHASE AGREEMENT

 

This SECURITIES PURCHASE AGREEMENT (the
“Agreement”) dated October 29, 2014, by and between Alkame Holdings, Inc., a Nevada corporation, with headquarters
located at 3651 Lindell Road, Suite D # 356, Las Vegas, NV 89103 (the “Company”), and Union Capital, LLC, a
New York Limited Liability Company, with its address 338 Crown Street, Brooklyn, NY 11225 (the “Buyer”).

 

WHEREAS:

 

A.                 
The Company and Buyer are executing and delivering the Agreement in reliance upon the exemption
from securities registration afforded by the rules and regulations as promulgated by the United States Securities and Exchange
Commission (the “SEC”) under the Securities Act of 1933, as amended ( the “1933 Act”)

 

B.                 
Buyer desires to purchase and the Company desires to issue and sell, upon the terms and conditions
set forth in the Agreement two 8% convertible notes of the Company, in the forms attached hereto as Exhibit A and B in aggregate
principle amount of $110,000.00 (with the first not being in the amount of $55,000.00 and the second note being the amount of $55,000.00
(together with any note(s) issued in replacement thereof or as a dividend thereon or otherwise with respect thereto in accordance
with the terms thereof, the “Note”), convertible into shares of into shares of common stock, $0.001 par value per share,
of the Company (the “Common Stock”), upon the terms and subject to the limitations and conditions set forth in such
Note. The first of the two notes (the “First Note”) shall be paid for by the Buyer as set forth herein. The second
note (the “Second Note”) shall initially be paid for by the issuance of an offsetting $50,000.00 secured notes issued
to the Company by the Buyer (“Buyer Note”) provided that prior to conversion of the Second Note the Buyer must have
paid off the Buyer Note in cash such that the Second Note may not be converted until it has been paid forth in cash. Both notes
have a 10% OID such that the purchase price of each note shall be $50,000.00

 

C.                 
The Buyer wishes to purchase, upon the terms and conditions stated in the Agreement, such
principal amount of Note as is set forth immediately below its name on the signature pages hereto, and

 

NOW THEREFORE, the
Company and the Buyer severally (and not jointly) hereby agree as follows:

 

1.                  
Purchase and Sale of Note.

 

a.                  
Purchase of Note. On the Closing Date (as defined below), the Company shall issue and
sell to the Buyer and the Buyer agrees to purchase from the Company such principal amount of Note as is set forth immediately below
the Buyer’s name on the signature pages hereto. 

 

b.                  
Form of Payment. On the Closing Date (as defined below), (i) the Buyer shall pay the
purchase price for the Note to be issued and sold to it at the Closing (as defined below) (the “Purchase Price”) by
wire transfer of immediately available funds to the Company, in accordance with the Company’s written wiring instructions,
against delivery of the Note in the principle amount equal to the Purchase Price as is set forth immediately below the Buyer’s
name on the signature pages hereto, and (ii) the Company shall deliver such duly executed Note on behalf of the Company, to the
Buyer, against delivery of such Purchase Price. 

 

c.                   
Closing Date. The date and time of the issuance and sale of the Note pursuant to the
Agreement (the “Closing Date”) shall be on or about October 29, 2014, or such other mutually agreed upon time. The
closing of the transactions contemplated by this Agreement (the “Closing”) shall occur on the Closing Date at such
location as may be agreed to by the parties. Subsequent Closing shall occur when the Buyer Note is repaid. Notwithstanding the
foregoing, the Company may elect to opt out of closing the Second Note by giving the Buyer 60 days prior written notice (which
must occur no later than day 120) that it does not desire to have the Buyer fund the Buyer Note. 

 

2.                  
Buyer’s Representations and Warranties. The Buyer represents and warrants to
the Company that: 

 

a.                  
Investment Purpose. As of the date hereof the buyer is purchasing the Note and the
shares of Common Stock issuable upon conversion of or otherwise pursuant to the Note, such shares of Common Stock being collectively
referred to herein as the “Conversion Shares” and collectively with the Note the “Securities” for its own
account and not with a present view towards the public sale or distribution thereof, except pursuant to sales registered or exempted
view towards the public sale or distribution thereof, except pursuant to sales registered or exempted from registration under the
1933 Act; provided, however, that by making the representations herein, the Buyer doesn’t agree to hold any
of the Securities for any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance
with or pursuant to a registration statement or an exemption under the 1933 Act. 

 

b.                  
Accredited Investor Status. The Buyer is an “accredited Investor” as that
term is defined in Rule 501(a) of Regulation D (an ‘Accredited Investor”).

 

c.                   
Reliance on Exemptions. The Buyer understands that the Securities are being offered
and sold to it in reliance upon specific exemptions from the registration requirements of United Stated federal and state securities
laws and that the Company is relying upon the truth and accuracy of, and the Buyer’s compliance with, the representations,
warranties, agreements, acknowledgements, and understandings of the Buyer set forth herein in order to determine the availability
of such exemptions and the eligibility of the Buyer to acquire the Securities.

 

    	 

    	 

    

 

d.                  
Information. The Buyer and its advisors, if any, have been, and for so long as the
Note remain outstanding will continue to be, furnished with all materials relating to the business, finances and operations of
the Company and materials relating to the offer and sale advisors, if any, have been, and for so long as the Note remain outstanding
will continue to be, afforded the opportunity to ask questions of the Company. Notwithstanding the foregoing, the Company has not
disclosed to the Buyer any material nonpublic information and will not disclose such information unless such information is disclosed
to the public prior to or promptly following such disclosure to the Buyer. Neither such inquires nor any other due diligence investigation
conducted by Buyer or any of its advisors or representatives shall modify, amend or affect Buyer’s right to rely on the Company’s
representations and warranties contained in Section 3 below. The Buyer understands that its investment in the Securities involves
a significant degree of risk. The Buyer is not aware of any facts that may constitute a breach of any of the Company’s representations
and warranties made herein.

e.                   
Governmental Review. The Buyer understands that no United States federal or state agency
or any other government or governmental agency has passed upon or made any recommendation or endorsement of the Securities. 

 

f.                   
Transfer or Re-sale. The Buyer understands that (i) the sale or re-sale of the Securities
has not been and is not being registered under the 1933 Act or any applicable state securities laws, and the Securities may not
be transferred unless (a) the Securities are sold pursuant to an effective registration statement under the 1933 Act. (b) the Buyer
shall have delivered to the Company, at the cost of the Buyer, an opinion of counsel that shall be in form, substance and scope
customary for opinions of counsel in comparable transactions to the effect that the Securities to be sold or transferred may be
sold or transferred pursuant to an exemption from such registration, which opinion shall be accepted by the Company, (c) the Securities
are sold or transferred to an “affiliate” (as defined in Rule 144 promulgated under the 1933 Act (or a successor rule)
(“Rule 144”)) of the Buyer who agrees to sell or otherwise transfer the Securities only in accordance with this Section
2(f) and who is an Accredited Investor. (d) the Securities are sold pursuant to Rule 144, or (e) the Securities are sold pursuant
to Regulations A under the 1933 Act (or a successor rule) (“Regulation S”), and the Buyer shall have delivered to the
Company, at the cost of the Buyer, an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel
in corporate transactions, which opinion shall be accepted by the Company; (ii) any sale of such Securities made in reliance on
Rule 144 may be made only in accordance with the terms of said Rule and further, if said Rule is not applicable, any re-sale of
such Securities under circumstances in which the seller (or the person through whom the sale is made) may be deemed to be an underwriter
(as that term is defined in the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC thereunder; and (iii) neither the Company nor any other person is under any obligation to register such
Securities under the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder
(in each case). Notwithstanding the foregoing or anything else contained herein to the contrary, the Securities may be pledged
as collateral in connection with a bona fide margin account or other lending arrangement.

 

g.                   
Legends. The Buyer understands that the Note, and until such time as the Conversion
Shares have been registered under the 1933 Act may be sold pursuant to Rule 144 or Regulations A without any restriction as to
the number of securities as of a particular date that can then be immediately sold, the Conversion Shares may bear a restrictive
legend in substantially the following form ( and a stop-transfer order may be placed against transfer of the certificates for such
Securities): (“Regulation S”), and the Buyer shall have delivered to the Company, at the cost of the Buyer, an opinion
of counsel that shall be in form, substance and scope customary for opinions of counsel in corporate transactions, which opinion
shall be accepted by the Company

 

“NEITHER THE ISSUANCE AND
SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED
FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”

 

The legend set forth above
shall be removed and the Company shall issue a certificate without such legend to the holder of any Security upon which it is stamped,
if, unless otherwise required by applicable state securities laws, (a) such Security is registered for sale under an effective
registration statement filed under the 1933 Act or otherwise may be sold pursuant to Rule 144 or Regulation S without any restriction
as to the number of securities as of a particular date that can then be immediately sold, or (b) such holder provides the Company
with an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect
that a public sale or transfer of such Security may be made without registration under the 1933 Act, which opinion shall be accepted
by the Company so that the sale or transfer is effected. The Buyer agrees to sell all Securities, including those represented by
a certificate(s) from which the legend has been removed, in compliance with applicable prospectus delivery requirements, if any.
In the event that the Company does not accept the opinion of counsel provided by the Buyer with respect to the transfer of Securities
pursuant to an exemption from registration, such as Rule 144 or Regulation S, at the Deadline, it will be considered an Event of
Default pursuant to Section 3.2 of the Note.

 

h.                  
Authorization; Enforcement. This Agreement has been duly and validly authorized. This
Agreement has been duly executed and delivered on behalf of the Buyer, and this Agreement constitutes a valid and binding agreement
of the Buyer enforceable in accordance with its terms.

 

i.                    
Residency. The Buyer is a resident of the jurisdiction set forth immediately below
the Buyer’s name on the signature pages hereto. 

 

    	2

    	 

    

 

3.                  
Representations And Warranties Of The Company. The Company represents
and warrants to the Buyer that:

 

a.                  
Organization and Qualification. The Company and each of its Subsidiaries (as defined
below), if any, is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction in which
it is incorporated, with full power and authority (corporate and other) to own, lease, use and operate its properties and to carry
on its business as and where now owned, leased, used, operated and conducted. Schedule 3(a) sets forth a list of all of the Subsidiaries
of the Company and the jurisdiction in which each is incorporated. The Company and each of its Subsidiaries is duly qualified as
a foreign corporation to do business and is in good standing in every jurisdiction in which its ownership or use of property or
the nature of the business conducted by it makes such qualification necessary except where the failure to be so qualified or in
good standing would not have a Material Adverse Effect. “Material Adverse Effect” means any material adverse effect
on the business, operations, assets, financial condition or prospects of the Company or its Subsidiaries, if any, taken as a whole,
or on the transactions contemplated hereby or by the agreements or instruments to be entered into in connection herewith. “Subsidiaries”
means any corporation or other organization, whether incorporated or unincorporated, in which the Company owns, directly or indirectly,
any equity or other ownership interest

 

b.                  
Authorization; Enforcement. (i) The Company has all requisite corporate power and authority
to enter into and perform this Agreement, the Note and to consummate the transactions contemplated hereby and thereby and to issue
the Securities, in accordance with the terms hereof and thereof, (ii) the execution and delivery of this Agreement, the Note by
the Company and the consummation by it of the transactions contemplated hereby and thereby (including without limitation, the issuance
of the Note and the issuance and reservation for issuance of the Conversion Shares issuable upon conversion or exercise thereof)
have been duly authorized by the Company’s Board of Directors and no further consent or authorization of the Company, its
Board of Directors, or its shareholders is required, (iii) this Agreement has been duly executed and delivered by the Company by
its authorized representative, and such authorized representative is the true and official representative with authority to sign
this Agreement and the other documents executed in connection herewith and bind the Company accordingly, and (iv) this Agreement
constitutes, and upon execution and delivery by the Company of the Note, each of such instruments will constitute, a legal, valid
and binding obligation of the Company enforceable against the Company in accordance with its terms.

 

c.                   
Issuance of Shares. The Conversion Shares are duly authorized and reserved for issuance
and, upon conversion of the Note in accordance with its respective terms, will be validly issued, fully paid and non-assessable,
and free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive
rights or other similar rights of shareholders of the Company and will not impose personal liability up the holder thereof.

 

d.                  
Acknowledgment of Dilution. The Company understands and acknowledges the potentially
dilutive effect to the Common Stock upon the issuance of the Conversion Shares upon conversion of the Note. The Company further
acknowledges that its obligation to issue Conversion Shares upon conversion of the Note in accordance with this Agreement, the
Note is absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of
other shareholders of the Company. 

 

e.                   
No Conflicts. The execution, delivery and performance of this Agreement, the Note by
the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation,
the issuance and reservation for issuance of the Conversion Shares) will not (i) conflict with or result in a violation of any
provision of the Certificate of Incorporation or By-laws, or (ii) violate or conflict with, or result in a breach of any provision
of, or constitute a default (or an event which with notice or lapse of time or both could become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture, patent, patent license or instrument
to which the Company or any of its subsidiaries is a party, or (iii) result in a violation of any law, rule, regulation, order,
judgment or decree (including federal and state securities laws and regulations and regulations of any self-regulatory organizations
to which the Company or its securities are subject) applicable to the Company or any of its subsidiaries or by which any property
or assets of the Company or any of its subsidiaries is bound or affected (expect for such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations as would not, individually or in the aggregate have a material adverse effect). All
consents authorizations orders filings and registrations which the Company is required to obtain pursuant to the preceding sentence
have been obtained or effected on or prior to the date hereof. The Company is not in violation of the listing requirements of the
National Quotations Bureau (the “OTCQB”) and does note reasonably anticipate that the Common Stock will be delisted
by the OTCQB in the foreseeable future, nor are the Company’s securities “chilled” by FINRA. The Company and
its subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing. 

f.                   
Absence of Litigation. There is no action, suit, claim, proceeding, inquiry or investigation
before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the
Company or any of its subsidiaries, threatened against or affecting the Company or any of its subsidiaries, or their officers or
directors in their capacity as such, that could have a material adverse effect. Schedule 3(f) contains a complete list and summary
description of any pending or, to the knowledge of the Company, threated proceeding against or affecting the Company or any of
its subsidiaries without regard to whether it would have a material adverse effect. The Company and its subsidiaries are unware
of any facts or circumstances which might give rise to any of the foregoing. 

 

g.                   
Acknowledgement Regarding Buyer’s Purchase of Securities. The Company acknowledges
and agrees that the Buyer is acting solely in the capacity of arm’s length purchasers with respect to this Agreement and
the transactions contemplated hereby. The Company further acknowledges that the Buyer is not acting as a financial advisor or fiduciary
of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereby and any statement
made by the Buyer or any of its respective representatives or agents in connection with this Agreement and the transactions contemplated
hereby is not advice or a recommendation and is merely incidental to the Buyer’ purchase of the Securities. The Company further
represents to the Buyer that the Company’s decision to enter into this Agreement has been based solely on the independent
evaluation of the Company and its representatives.

 

    	3

    	 

    

 

h.                  
No Integrated Offering. Neither the Company, nor any of its affiliates, nor any person
acting on its or their behalf, has directly or indirectly made any offers or sales in any security or solicited any offers to buy
any security under circumstances that would require registration under the 1933 Act of the issuance of the Securities to the Buyer.
The issuance of the Securities to the Buyer will not be integrated with any other issuance of the Company’s securities (past,
current or future) that are other than accredited investors for purposes of any shareholder approval provisions applicable to the
Company or its securities.

 

i.                    
Title to Property. The Company and its subsidiaries have good and marketable title
in fee simple to all real property and good and marketable title to all personal property owned by them which is material to the
business of the Company and its subsidiaries, in each case free and clear of all liens, encumbrances and defects except such as
are described in Schedule 3(i) or such as would not have a material adverse effect. Any real property and facilities held under
lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions
as would not have a material adverse effect.

 

j.                    
Bad Actor. No officer or director of the Company would be disqualified under Rule 506(d)
of the Securities Act as amended on the basis of being a “bad actor’ as that term is established in the September 19,
2013 Small Entity Compliance Guide published by the Securities and Exchange Commission. 

 

k.                  
Breach of Representations and Warranties by the Company. If the Company breaches any
of the representations or warranties set forth in this Section 3, and in addition to any other remedies available to the Buyer
pursuant to this Agreement, it will be considered an Event of default under the Note.

 

4.                  
COVENANTS.

 

a.                  
Expenses. At the Closing, the Company shall reimburse Buyer for expenses incurred by
them in connection with the negotiation, preparation, execution, delivery and performance of this Agreement and the other agreements
to be executed in connection herewith (“Documents”), including, without limitation, reasonable attorneys’ and
consultants’ fees and expenses, transfer agent fees, fees for stock quotation services, fees relating to any amendments or
modifications of the Documents or any consents or waivers of provisions in the Documents, fees for the preparation of opinions
of counsel, escrow fees, and costs of restructuring the transactions contemplated by the Documents. When possible, the Company
must pay these fees directly, otherwise the Company must make immediate payment for reimbursement to the Buyer for all fees and
expenses immediately upon written notice by the Buyer or the submission of an invoice by the Buyer. The Company’s obligation
with respect to this transaction is to reimburse Buyer’ expenses shall be $2,500 in legal fees (an similar amounts for the
Second Note) which shall be deduced from each Note when funded.

 

b.                  
Listing. The Company shall promptly secure the listing of the Conversion Shares upon
each national securities exchange or automated quotation system, if any, upon when shares of common stock are then used subject
to official notice of issuance and, so long as the Buyer owns any of the Securities, shall maintain, so long as any other shares
of Common Stock shall be so listed, such listing of all Conversion Shares from time to time issuable upon conversion of the Note.
The Company will obtain and so long as the Buyer owns any of the Securities maintain the listing and trading of its Common Stock
on the OTCOB or any equivalent replacement exchange the Nasdaq National Market (“Nasdaq”) the Nasdaq SmallCap Market
(“Nasdaq SmallCap”), the New York Stock Exchange (“NYSE”), or the American Stock Exchange (‘AMEX’)
and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the
Financial Industry Regulatory Authority (“FINRA’) and such exchanges as applicable. The Company shall promptly provide
to the Buyer copies of any notices it receives from the OTCOB and any other exchanges or quotation systems on which the Common
Stock is then listed regarding the continued eligibility of the Common Stock for listing on such exchanges and quotation systems.

 

c.                   
Corporate Existence. So long as the Buyer beneficially owns any Note, the Company shall
maintain its corporate existence and shall not sell all or substantially all of the Company’s assets, except in the event
of a merger or consolidation or sale of all or substantially all of the Company’s assets, where the surviving or successor
entity in such transaction (i) assumes the Company’s obligations hereunder and under the agreements and instruments entered
into in connection herewith and (ii) is a publicly traded corporation whose Common Stock is listed for trading on the OTCQB, Nasdaq,
Nasdaq SmallCap, NYSE or AMEX.

 

d.                  
No Integration. The Company shall not make any offers or sales of any security (other
than the Securities) under circumstances that would require registration of the Securities being offered or sold hereunder under
the 1933 Act or cause the offering of the Securities to be integrated with any other offering of securities by the Company for
the purpose of any stockholder approval provision applicable to the Company or its securities.

 

e.                   
Breach of Covenants. If the Company breaches any of the covenants set forth in this
Section 4, and in addition to any other remedies available to the Buyer pursuant to this Agreement it will considered an event
of default under the Note.

 

    	4

    	 

    

 

5.                  
Governing Law: Miscellaneous

 

a.                  
Governing Law. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York without regard to principles of conflicts of laws. Any action brought by either party against
the other concerning the transactions contemplated by this Agreement shall be brought only in the state courts of New York or in
the federal courts located in the state and county of New York. The parties to this Agreement hereby irrevocably waive any objection
to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or
venue or based upon forum non conveniens. The Company and Buyer waive trial by jury. The prevailing party shall be entitled
to recover from the other party its reasonable attorney’s fees and costs. In the even that any provision of this Agreement
or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law,
then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform
with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the
validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process
and consents to process being served in any suit, action or proceeding in connection with this Agreement by mailing a copy thereof
via registered or certified mail or overnight deliver (with evidence of delivery) to such party at the address in effect for notices
to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. 

 

b.                  
Counterparts: Signature by Facsimile. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement and shall
become effective when counterparts have been signed by each party and delivered to the other party. This Agreement, once executed
by a party may be delivered to the other party hereto by facsimile transmission of a copy of the Agreement bearing the signature
of the part so delivering this Agreement.

 

c.                   
Headings. The headings of this Agreement are for convenience of reference only and
shall not form part of, or affect the interpretation of, this Agreement.

 

d.                  
Severability. In the event that any provision of this Agreement is invalid or unenforceable
under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of law. Any provision hereof which may prove invalid
or unenforceable under any law shall not affect the validity or enforceability of any other provision shall be deemed inoperative
to the extent that it may conflict therewith and shall be deemed modified to conform with such statue or rule of law. Any provision
hereof which may provide invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision
hereof.

 

e.                   
Entire Agreement Amendments. This Agreement and the instruments referenced herein contain
the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set
for herein or therein, within respect to such matters. No provision of this Agreement may be waived or amended other than by an
instrument in writing signed by the majority in interest of the Buyer.

 

f.                   
Notices. All notices, demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii)
deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier
service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to
such other address as such party shall have specified most recently by written notice. Any notice or other communication required
or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation
generated by the transmitting facsimile machine at the address or number designated below (if delivered on a business day during
normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other
than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following
the date of mailing by express courier services, fully prepaid, addressed to such address or upon actual receipt of such mailing
whichever shall first occur. The addresses for such communication shall be:

 

If to the Company

 

Alkame Holdings, Inc

3651 Lindell Road, Suite
D #356

Las Vegas, NV 89103

Attn: Robert Eakle, CEO

 

If to the Buyer:

 

UNION CAPITAL, LLC

338 Crown Street

Brooklyn, NY 11225

Attn: Yakov Borenstein,
Manager

 

Each party shall provide
notice to the other party of any change in address.

 

    	5

    	 

    

 

g.Successors and
Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns. Neither
the Company nor the Buyer shall assign this Agreement or any rights or obligations hereunder without the prior written consent
of the other. Notwithstanding the foregoing, the Buyer may assign its rights hereunder to any person that purchases Securities
in a private transaction from the Buyer or to any of its “affiliates,” as that term is defined under the 1934 Act,
without the consent of the Company.

 

h.Third Party Beneficiaries.
This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is
not for the benefit of, nor may any provision hereof be enforced by, any other person.

 

i.Survival.
The representation and warranties of the Company and the agreements and covenants set forth in this Agreement shall survive the
closing hereunder notwithstanding any due diligence investigation conducted by or on behalf of the Buyer. The Company agrees to
indemnify and hold harmless the Buyer and all their officers, directors, employees and agents for loss or damage arising as a result
of or related to any breach or alleged breach by the Company of any of its representations, warranties and covenants set forth
in this Agreement or any of it covenants and obligations under this Agreement, including advancement of expenses as they are incurred.

 

j.Further Assurances.
Each party shall do and perform or cause to be done and performed all such further acts and things and shall execute and deliver
all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry
out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

k.No Strict Construction.
The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and
no rules of strict construction will be applied against any party.

 

l.Remedies.
The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer by vitiating
the intent and purpose of the transaction contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for
a breach of its obligations under this Agreement will be inadequate and agrees, in the event of a breach or threatened breach by
the Company of the provisions of this Agreement, that the Buyer shall be entitled, in addition to all other available remedies
at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing
or curing any breach of this Agreement and to enforce specifically the terms and provisions hereof, without the necessity of showing
economic loss and without any bond or other security being required.

 

IN WITNESS WHEREOF, the undersigned Buyer and
the Company have caused this Agreement to be duly executed as of the date first above written.

 

ALKAME HOLDINGS, INC.

 

By: /s/ Robert Eakle

Name Robert Eakle,

Title CEO

 

UNION CAPITAL, LLC

 

By: /s/ Yakov Borenstein

Name: Yakov Borenstein

Title: Manager

 

	AGGREGATE SUBSCRIPTION AMOUNT:	 
	Aggregate Principal Amount of Note:	$110,000.00
	Aggregate Purchase Price:	 
	Note 1: $55,000.00 less $5,000 in OID and $2,500.00 in legal 	 
	feesNote 2: $55,000.00 less $5,000 in OID and $2,500.00 in legal fees	 

 

    	6

    	 

    

 

EXHIBIT A

144 NOTE - $55,000

 

    	7

    	 

    

 

EXHIBIT B

BACK END NOTE 1

$5,000

 

    	8

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