<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): MARCH 3, 1999
HAWAIIAN NATURAL WATER COMPANY, INC.
(Exact name of registrant as specified in its charter)
HAWAII 0-29280 99-0314848
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
248 Mokauea Street
Honolulu, Hawaii 96819
(Address of principal executive offices)
(808) 832-4550
(Registrant's telephone number, including area code)
N/A
(Former name or address, if changed since last report)
<PAGE>
INFORMATION TO BE INCLUDED IN THE REPORT
ITEM 5. OTHER EVENTS.
On March 3, 1999, Hawaiian Natural Water Company, Inc., a Hawaii corporation
(the "Company"), completed the first $750,000 installment of an aggregate
$1.25 Million private offering of Series A Convertible Preferred Stock (the
"Preferred Stock") and warrant (the "Warrant") to purchase an additional
100,000 shares of Common Stock of the Company. The Warrant is exercisable for
three years at an exercise price of $3.625 per share. The offering was placed
with a single institutional investor. The investor has committed to purchase
an additional $500,000 in Preferred Stock, subject to certain closing
conditions, including the effectiveness of a registration statement covering
the shares of Common Stock underlying the Preferred Stock and the Warrant.
The Company has agreed to file a registration statement with the Securities
and Exchange Commission covering such shares and to use its best efforts to
cause the registration statement to become effective within 90 days.
The Preferred Stock is entitled to cumulative dividends at the annual rate of
4%, payable quarterly, commencing May 31, 1999, in cash or Common Stock, at
the election of the Company.
The Preferred Stock is convertible into Common Stock, in whole or in part at
the election of the holder, at a conversion price of $3.00 per share until
the closing of the investor's second ($500,000) investment. Thereafter, the
conversion price will be a variable price equal to 80% of the Market Price
(defined as the average of the three lowest closing bid prices for the Common
Stock during a period of 22 consecutive trading days ending immediately prior
to the date of conversion). The Preferred Stock will be convertible at such
variable price in increments (on a cumulative basis) commencing 90 days
following the initial closing, such that all of the Preferred Stock will be
convertible, at the election of the holder, within 180 days of the initial
closing. The Company will be entitled to require the holder to convert all
(but not less than all) of the shares of Preferred Stock outstanding on or
after March 1, 2001, into Common Stock or, at the Company's election, to
repurchase such shares for cash.
Since the Preferred Stock will be convertible into Common Stock at a price
determined by future market conditions, the precise number of shares of
Common Stock into which the Preferred Stock will be converted is currently
indeterminable and could be in excess of 20% of the number of shares of
Common Stock currently outstanding. Under applicable provisions of the Nasdaq
Stock Market's Corporate Governance Rules, any such issuance in excess of 20%
would require the approval of the Company's stockholders. The instrument
governing the Preferred Stock provides that, unless such stockholder approval
has previously been obtained, no shares of Common Stock may be issued upon
conversion of the Preferred Stock, if such issuance, together with all prior
issuances of Common Stock upon conversion of or as dividends on the Preferred
Stock, or upon exercise of the Warrant, would exceed 19.9% (approximately
800,690 shares) of the number of shares of Common Stock currently
1
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outstanding. The Company has agreed to submit the matter to a stockholder
vote at its 1999 Annual Meeting of Stockholders. In the event that
stockholder approval is not obtained, the Company will be required to honor
any conversion request in cash, to the extent that such conversion would
otherwise result in an impermissible issuance of Common Stock. The instrument
governing the Preferred Stock also provides that the holder will have no
right to convert any shares of Preferred Stock if and to the extent that any
such conversion would result in the holder being deemed the "beneficial
owner" of more than 9.9% of the then outstanding shares of Common Stock
within the meaning of Section 13(d) of the Securities Exchange Act.
The Preferred Stock is redeemable, at the election of the Company, at any
time or from time to time prior to conversion, provided that the Market Price
of the Common Stock does not exceed 150% of the Market Price on the date of
the initial closing.
The Company has agreed to pay certain financial advisors 6% of the gross
proceeds of the offering in cash and to issue to them an aggregate of 5,000
shares of Common Stock and warrants to purchase 25,000 shares of Common
Stock, exercisable at $2.50 per share.
The Company expects to use the net proceeds of the offering primarily for
working capital and general corporate purposes. A portion of the proceeds may
also be used to acquire other beverage assets or businesses.
2
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits
Exhibit
Number Description
------- -----------
4.1 Certificate of Amendment re Series A Convertible Preferred
Stock
4.2 Certificate representing Series A Convertible Preferred
Stock
4.3 Warrant issued to Amro International, S.A. (the "Investor")
10.1 Convertible Preferred Shares and Warrant Purchase
Agreement between the Registrant and the Investor
10.2 Registration Rights Agreement between the Registrant and the
Investor
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
HAWAIIAN NATURAL WATER COMPANY, INC.
(Registrant)
March 11, 1999 By: /s/ MARCUS BENDER
-----------------------------------
Marcus Bender
President & Chief Executive Officer
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EXHIBIT INDEX
Exhibit
Number Description
------ -----------
4.1 Certificate of Amendment re Series A Convertible Preferred
Stock
4.2 Certificate representing Series A Convertible Preferred
Stock
4.3 Warrant issued to Amro International, S.A. (the "Investor")
10.1 Convertible Preferred Shares and Warrant Purchase
Agreement between the Registrant and the Investor
10.2 Registration Rights Agreement between the Registrant and the
Investor
<PAGE>
EXHIBIT 4.1
Filing Fee - $50.00 DOMESTIC PROFIT
Dishonored Check - $15.00 Fee
Plus Interest Charges
State of Hawaii
DEPARTMENT OF COMMERCE AND CONSUMER AFFAIRS
BUSINESS REGISTRATION DIVISION
1010 Richards Street
Mailing Address: P.O. Box 40, Honolulu, HI 96810
STATEMENT OF ISSUANCE OF SHARES OF PREFERRED OR SPECIAL CLASSES IN SERIES
(SECTION 415-16, HAWAII REVISED STATUTES)
The undersigned, duly authorized officers of the corporation submitting
this Statement, certify as follows:
1. The name of the corporation is:
HAWAIIAN NATURAL WATER COMPANY, INC.
--------------------------------------------------------------------------
2. A copy of the resolution establishing and designating the series, and
fixing, and determining the relative rights and preferences of the new
shares is attached.
3. The resolution was adopted on: March 1, 1999 .
-------------------------------------------
(Month Day Year)
4. The resolution was adopted by the Board of Directors.
We certify under the penalties of Section 415-136, Hawaii Revised Statutes,
that we have read the above statements, and that the same are true and
correct.
Witness our hands this 1st day of March , 1999 .
------- -------- ------
Marcus Bender, Tate Robinson,
President Vice President
- ------------------------------------- --------------------------------------
(Type/Print Name & Title) (Type/Print Name & Title)
/s/ MARCUS BENDER /s/ TATE ROBINSON
- ------------------------------------- --------------------------------------
(Signature of Officer) (Signature of Officer)
(SEE REVERSE SIDE FOR INSTRUCTIONS)
<PAGE>
UNANIMOUS WRITTEN CONSENT
OF THE
BOARD OF DIRECTORS
OF
HAWAIIAN NATURAL WATER COMPANY, INC.
MARCH 1, 1999
The undersigned, being all of the directors of Hawaiian Natural
Water Company, Inc., a Hawaii corporation (the "Corporation"), do hereby
consent to and adopt the following resolutions by unanimous written consent,
without a meeting, pursuant to Section 415-44 of the Hawaii Business
Corporation Act.
RESOLVED: That pursuant to the authority vested in the Board of Directors
of the Corporation by Article IV, Section 1 of the Corporation's Articles of
Incorporation, as amended (the "Articles of Incorporation"), a series of
Preferred Stock of the Corporation be, and it hereby is, created out of the
authorized but unissued shares of the capital stock of the Corporation, such
series to be designated Series A Convertible Preferred Stock (the "Series A
Convertible Preferred Stock"), to consist of 1,250 shares, par value $1.00 per
share, of which the preferences and relative and other rights, and the
qualifications, limitations or restrictions thereof, shall be as set forth
below:
1. NUMBER OF SHARES OF SERIES A CONVERTIBLE PREFERRED STOCK. Of the
5,000,000 shares of authorized but unissued Preferred Stock, $1.00 par value
("Preferred Stock") of the Corporation, one thousand two hundred fifty (1,250)
shares shall be designated and known as Series A Convertible Preferred Stock,
par value $1.00 per share ("Series A Convertible Preferred Stock"). Seven
hundred fifty (750) of such shares shall be issued and outstanding on the date
(the "Original Issuance Date") this resolution is filed with the Hawaii
Department of Commerce and Consumer Affairs and is made part of the
Corporation's Articles of Incorporation or such later date as such shares are
issued and paid for pursuant to Section 2.1(a) of that certain Convertible
Preferred Shares and Warrant Purchase Agreement dated as of March 1, 1999 among
the Corporation and the other persons signatory thereto (the "Purchase
Agreement"). An additional five hundred (500) of such shares shall be issued and
outstanding on the date (the "Deferred Issuance Date") that such shares are
issued and paid for in accordance with Section 2.1(c) of the Purchase Agreement.
2. VOTING.
(a) Unless required by law, no holder of any shares of Series A
Convertible Preferred Stock shall be entitled to vote at any meeting of
stockholders of the Corporation (or any written actions of stockholders in lieu
of meetings) with respect to any matters presented to the stockholders of the
Corporation for their action or consideration. Notwithstanding the foregoing,
the Corporation shall provide each holder of record of Series A Convertible
Preferred
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Stock with timely notice of every meeting of stockholders of the Corporation
and shall provide each holder with copies of all proxy materials distributed
in connection therewith.
(b) So long as shares of Series A Convertible Preferred Stock are
outstanding, the Corporation shall not, without first obtaining the approval
(by vote or written consent, as provided by the Hawaii General Corporation
Law) of the holders of at least a majority in interest of the then
outstanding shares of Series A Convertible Preferred Stock:
(i) alter or change the rights, preferences or privileges of
the Series A Convertible Preferred Stock;
(ii) create any new class or series of capital stock having
parity with or a preference over the Series A Convertible Preferred Stock as
to distribution of assets upon liquidation, dissolution or winding up of the
Corporation ("Senior Securities") or alter or change the rights, preferences
or privileges of any Senior Securities so as to affect adversely the Series A
Convertible Preferred Stock;
(iii) increase the authorized number of shares of Series A
Convertible Preferred Stock; or
(iv) do any act or thing not authorized or contemplated by this
resolution which would result in taxation of the holders of shares of the Series
A Convertible Preferred Stock under Section 305 of the Internal Revenue Code of
1986, as amended (or any comparable provision of the Internal Revenue Code as
hereafter from time to time amended).
In the event holders of at least a majority in interest of the then
outstanding shares of Series A Convertible Preferred Stock agree to allow the
Corporation to alter or change the rights, preferences or privileges of the
shares of Series A Convertible Preferred Stock, pursuant to subsection (b)
above, so as to affect the Series A Convertible Preferred Stock, then the
Corporation will deliver notice of such approved change to the holders of the
Series A Convertible Preferred Stock that did not agree to such alteration or
change (the "Dissenting Holders") and Dissenting Holders shall have the right
for a period of thirty (30) days to convert any and all shares of then held
Series A Convertible Preferred Stock pursuant to the terms of this
Certificate of Designation as in effect prior to such alteration or change,
or else to continue to hold their shares of Series A Convertible Preferred
Stock.
3. DIVIDENDS.
The holders of shares of Series A Convertible Preferred Stock shall
be entitled to receive, before any cash dividend shall be declared and paid
upon or set aside for the Common Stock in any fiscal year of the Corporation,
out of funds legally available for that purpose, cumulative dividends payable
in cash or Common Stock (at the sole election of the Corporation) in an
amount per share for such fiscal year equal to $40.00. Such dividends shall
be payable quarterly on May 31, August 31, November 30 and February 28 of
each year. In the event that the Corporation shall elect to pay any such
dividend payment in the form of Common Stock, such Common Stock shall be
valued at the Market Price on the dividend payment date, as defined in
Section 5 below.
<PAGE>
4. LIQUIDATION. If the Corporation shall commence a voluntary case
under the Federal bankruptcy laws or any other applicable Federal or State
bankruptcy, insolvency or similar law, or consent to the entry of an order
for relief in an involuntary case under any law or to the appointment of a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Corporation or of any substantial part of its
property, or make an assignment for the benefit of its creditors, or admit in
writing its inability to pay its debts generally as they become due, or if a
decree or order for relief in respect of the Corporation shall be entered by
a court having jurisdiction in the premises in an involuntary case under the
Federal bankruptcy laws or any other applicable Federal or State bankruptcy,
insolvency or similar law resulting in the appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or other similar
official) of the Corporation or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and any such decree or
order shall be unstayed and in effect for a period of thirty (30) consecutive
days and, on account of any such event, the Corporation shall liquidate,
dissolve or wind up, or if the Corporation shall otherwise liquidate,
dissolve or wind up (each such event being considered a "Liquidating Event"),
no distribution shall be made to the holders of any shares of capital stock
of the Corporation other than Senior Securities upon liquidation, dissolution
or winding up unless prior thereto, the holders of shares of Series A
Convertible Preferred Stock shall have received the Liquidation Preference
(as defined in Section 4(c)) with respect to each share. If upon the
occurrence of a Liquidation Event, the assets and funds available for
distribution among the holders of the Series A Convertible Preferred Stock
and holders of securities ranking pari passu as to preference upon
liquidation with the Series A Convertible Preferred Stock shall be
insufficient to permit the payment to such holders of the preferential
amounts payable thereon, then the entire assets and funds of the Corporation
legally available for distribution to the Series A Convertible Preferred
Stock and such pari passu securities shall be distributed ratably among such
shares in proportion to the ratio that that Liquidation Preference payable on
each such share bears to the aggregate Liquidation Preference payable on all
such shares.
(a) At the option of each holder, the sale, conveyance of
disposition of all or substantially all of the assets of the Corporation, the
effectuation by the Corporation of a transaction or series or related
transactions in which more than 50% of the voting power of the Corporation is
disposed of, or the consolidation, merger or other business combination of
the Corporation with or into any other person or persons when the Corporation
is not the survivor shall be deemed to be a liquidation, dissolution or
winding up of the Corporation pursuant to which the Corporation shall be
required to distribute, upon consummation of and as a condition to such
transaction an amount equal to the Liquidation Preference with respect to
each outstanding share of Series A Convertible Preferred Stock held by such
holder in accordance with and subject to the terms of this Section 4.
(b) The Liquidation Preference shall be the Stated Value of $1,000
per share of Series A Convertible Preferred Stock plus all accrued but unpaid
dividends.
<PAGE>
5. OPTIONAL CONVERSION. The holders of shares of Series A Convertible
Preferred Stock shall have the following conversion rights:
(a) RIGHT TO CONVERT; CONVERSION PRICE. Subject to the terms,
conditions, and restrictions of this Section 5, the holder of any shares of
Series A Convertible Preferred Stock shall have the right to convert each such
share of Series A Convertible Preferred Stock (except that upon any liquidation
of the Corporation, the right of conversion shall terminate at the close of
business on the business day fixed for payment of the amount distributable on
the Series A Convertible Preferred Stock) into an amount of shares of Common
Stock equal to the Stated Value of such share or shares of Series A Convertible
Preferred Stock divided by (i) the average of the three lowest closing bid
prices, as reported by Bloomberg L.P., on the principal market for the
Corporation's Common Stock based on trading volume (the "Principal Market")
during the period of 22 consecutive trading days ending with the last trading
day prior to the date of conversion (the "Conversion Date") (the "Market
Price"), after (ii) discounting the Market Price by 20% to determine the
conversion price (the "Conversion Price"); provided, however, that in no event
shall the Conversion Price be greater than $4.00 per share of Common Stock; and,
provided further, that until the Deferred Issuance Date, the Conversion Price
shall be $3.00 per share of Common Stock. To illustrate, following the Deferred
Issuance Date, if the Market Price as of the Conversion Date is $6.00 and 100
shares of Series A Convertible Preferred Stock are being converted, the Stated
Value for which would be $100,000, then the Conversion Price shall be $4.80 per
share of Common Stock ($6.00 x .80), whereupon the Stated Value of $100,000 of
Series A Convertible Preferred Stock would entitle the holder thereof to convert
the 100 shares of Series A Convertible Preferred Stock into 20,833 shares of
Common Stock ($100,000 divided by $4.80 equals 20,833). In addition, if the
Conversion Price on any Conversion Date is less than $4.00, then the Corporation
shall have the option, prior to receipt of a Conversion Notice from the holder
and upon prior written notice to the holder, to pay the holder in shares of
Common Stock as set forth above, or else in cash in an amount equal to (i) the
closing price (or closing ask price, if the closing price is not reported) on
the Principal Market on the day prior to the Conversion Date multiplied by (ii)
the number of shares of Common Stock which would otherwise be issuable to the
holder upon such conversion, or any combination of cash and Common Stock. If
notice of the Corporation's election to pay the holder in cash is not received
by the holder prior to the receipt by the Corporation of a Conversion Notice,
the Corporation shall pay the holder in shares of Common Stock. Unless the
Corporation shall have obtained the approval of its voting stockholders to such
issuance in accordance with the rules of the Principal Market, the Corporation
shall not issue shares of Common Stock upon conversion of any shares of Series A
Convertible Preferred Stock if such issuance of Common Stock, when added to the
number of shares of Common Stock previously issued by the Corporation upon
conversion of or as dividends on shares of the Series A Convertible Preferred
Stock together with any shares of Common Stock previously issued upon exercise
of the Stock Purchase Warrants issued by the Corporation on the Original
Issuance Date to the original purchasers of the Series A Convertible Preferred
Stock, would exceed 19.9% of the number of shares of the Corporation's Common
Stock which were issued and outstanding on the Original Issuance Date. The
Corporation covenants with the holders that it shall present such matter to a
meeting of its stockholders to be held no later than June 10, 1999, with the
recommendation of its Board of Directors that such proposal be approved. In the
event that the Corporation has not obtained
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stockholder approval of such issuance by June 10, 1999 (or such later date as
an issuance in excess of 19.9% would occur), the Corporation shall honor such
conversion request (resulting in an issuance in excess of 19.9%) in cash in
accordance with the next previous sentence, irrespective of the Conversion
Price.
(b) CONVERSION DATE. The holder of any shares of Series A
Convertible Preferred Stock may convert: (i) until the Deferred Issuance
Date, any or all of the outstanding shares of Series A Convertible Preferred
Stock held by such holder; provided however, that any such conversion shall
be at a Conversion Price of $3.00 per share; and (ii) after the Deferred
Issuance Date and (A) within 90 days of the Original Issuance Date, 25% of
the total amount of shares of Series A Convertible Preferred Stock purchased
by such holder from the Corporation (or such greater amount as may have been
converted pursuant to the immediately preceding clause (i)); provided
however, that any such conversion made shall be at a Market Price no lower
than the Market Price on the Original Issuance Date, and in no event at a
Market Price lower than $3.00 per share; (B) within 120 days after the
Original Issuance Date, 50% of the total amount of shares of Series A
Convertible Preferred Stock purchased by such holder from the Corporation (or
such greater amount as may have been converted pursuant to the immediately
preceding clause (i)); (C) within 150 days after the Original Issuance Date,
75% of the total amount of shares of Series A Convertible Preferred Stock
purchased by such holder from the Corporation; and (D) within 180 days after
the Original Issuance Date, 100% of the total amount of shares of Series A
Convertible Preferred Stock purchased by such holder from the Corporation.
(i) The holder shall not have the right, and the Company shall
not have any obligation, to convert all or any portion of the Series A
Convertible Preferred Stock if and to the extent that the issuance to the
holder of Common Shares upon such conversion would result in the holder being
deemed the "beneficial owner" of more than 9.9% of the then outstanding
shares of Common Stock within the meaning of Section 13(d) of the Securities
Exchange Act of 1934, as amended, and the rules promulgated thereunder. If
any court of competent jurisdiction shall determine that the foregoing
limitation is ineffective to prevent a holder from being deemed the
beneficial owner of more than 9.9% of the then outstanding shares of Common
Stock, then the Corporation shall redeem so many of such holder's shares of
Series A Convertible Preferred Stock pursuant to Section 7(a) hereof as are
necessary to cause such holder to be deemed the beneficial owner of not more
than 9.9% of the then outstanding shares of Common Stock.
(c) NOTICE OF CONVERSION. The right of conversion shall be exercised
by the holder thereof by giving written notice (the "Conversion Notice") to
the Corporation, by facsimile or by registered mail or overnight delivery
service, with a copy by facsimile to the Corporation's then transfer agent
for its Common Stock, as designated by the Corporation from time to time,
that the holder elects to convert a specified number of shares of Series A
Convertible Preferred Stock representing a specified Stated Value thereof
into Common Stock and, if such conversion will result in the conversion of
all of such holder's shares of Series A Convertible Preferred Stock, by
surrender of a certificate or certificates for the shares so to be converted
to the Corporation at its principal office (or such other office or agency of
the Corporation as the Corporation may designate by notice in writing to the
holders of the Series A Convertible Preferred Stock) at any time during its
usual business hours on the date set forth in
<PAGE>
the Conversion Notice, together with a statement of the name or names (with
address) in which the certificate or certificates for shares of Common Stock
shall be issued. The Conversion Notice shall include therein the Stated Value
of shares of Series A Convertible Preferred Stock to be converted, and a
calculation (i) of the Market Price, (ii) the Conversion Price, and (iii) the
number of shares of Common Stock to be issued in connection with such
conversion.
(d) ISSUANCE OF CERTIFICATES; TIME CONVERSION EFFECTED. Promptly,
but in no event more than three business days, after the receipt of the
Conversion Notice referred to in Section 5(c) and surrender of the
certificate or certificates for the share or shares of Series A Convertible
Preferred Stock to be converted (if required), the Corporation shall issue
and deliver, or cause to be issued and delivered, to the holder, registered
in such name or names as such holder may direct, a certificate or
certificates for the number of whole shares of Common Stock into which such
shares of Series A Convertible Preferred Stock are converted. To the extent
permitted by law, such conversion shall be deemed to have been effected on
the date on which such Conversion Notice shall have been received by the
Corporation and at the time specified in such Conversion Notice, which must
be during the calendar day of such notice, and at such time the rights of the
holder of such share or shares of Series A Convertible Preferred Stock shall
cease, and the person or persons in whose name or names any certificate or
certificates for shares of Common Stock shall be issuable upon such
conversion shall be deemed to have become the holder or holders of record of
the shares represented thereby. Issuance of shares of Common Stock issuable
upon conversion which are requested to be registered in a name other than
that of the registered holder shall be subject to compliance with all
applicable federal and state securities laws.
(i) The Corporation understands that a delay in the issuance of
the shares of Common Stock beyond three business days could result in
economic loss to the holder. As compensation to the holder for such loss, the
Corporation agrees to pay late payments to the holder for late issuance of
shares of Common Stock upon conversion in accordance with the following
schedule (where "NO. BUSINESS DAYS LATE" is defined as the number of business
days beyond three (3) business days from the date of receipt by the
Corporation of the Conversion Notice):
<TABLE>
<CAPTION>
Late Payment For Each
$5,000 of Liquidation Preference
No. Business Days Late Amount Being Converted
- -------------------------------- -----------------------------------------
<S> <C>
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Late Payment For Each
$5,000 of Liquidation Preference
No. Business Days Late Amount Being Converted
- -------------------------------- -----------------------------------------
<S> <C>
>10 $1,000 + $200 for each Business Day
Late beyond 10 days
</TABLE>
The Corporation shall pay any payments incurred under this Section in
immediately available funds upon demand. Nothing herein shall limit holder's
right to pursue injunctive relief and/or actual damages for the Corporation's
failure to issue and deliver Common Stock to the holder. Furthermore, in
addition to any other remedies which may be available to the holder, in the
event that the Corporation fails for any reason to effect delivery of such
shares of Common Stock within five business days the date of receipt of the
Conversion Notice, the holder will be entitled to revoke the relevant
Conversion Notice by delivering a notice to such effect to the Corporation
whereupon the Corporation and the holder shall each be restored to their
respective positions immediately prior to delivery of such Conversion Notice.
(ii) If, at any time (a) the Corporation challenges, disputes
or denies the right of the holder to effect the conversion of the Series A
Convertible Preferred Stock into Common Shares or otherwise dishonors or
rejects any Conversion Notice delivered in accordance with this Section 5 or
(b) any third party who is not and has never been an Affiliate (as defined in
Rule 405 under the Securities Act of 1933, as amended) of the holder
commences any lawsuit or proceeding or otherwise asserts any claim before any
court or public or governmental authority which seeks to challenge, deny,
enjoin, limit, modify, delay or dispute the right of the holder hereof to
effect the conversion of the Series A Convertible Preferred Stock into Common
Shares, then the holder shall have the right, by written notice to the
Corporation, to require the Corporation to promptly redeem the Series A
Convertible Preferred Stock for cash at a redemption price equal to one
hundred twenty percent (120%) of the Stated Value thereof (the "Mandatory
Purchase Amount"). Under any of the circumstances set forth above, the
Corporation shall be responsible for the payment of all costs and expenses of
the holder, including reasonable legal fees and expenses, as and when
incurred in disputing any such action or pursuing its rights hereunder (in
addition to any other rights of the holder).
(iii) The holder shall be entitled to exercise its conversion
privilege notwithstanding the commencement of any case under 11 U.S.C.
Section 101 ET SEQ. (the "Bankruptcy Code"). In the event the Corporation is
a debtor under the Bankruptcy Code, the Corporation hereby waives to the
fullest extent permitted any rights to relief it may have under 11 U.S.C.
Section 362 in respect of the holder's conversion privilege. The Corporation
hereby waives to the fullest extent permitted any rights to relief it may
have under 11 U.S.C. Section 362 in respect of the conversion of the Series A
Convertible Preferred Stock. The Corporation agrees, without cost or expense
the holder, to take or consent to any and all action necessary to effectuate
relief under 11 U.S.C. Section 362.
(e) FRACTIONAL SHARES. No fractional shares shall be issued upon
conversion of Series A Convertible Preferred Stock into Common Stock. All
fractional shares shall be rounded up to the nearest whole share.
<PAGE>
(f) REORGANIZATION OR RECLASSIFICATION. If any capital
reorganization or reclassification of the capital stock of the Corporation
shall be effected in such a way that holders of Common Stock shall be
entitled to receive stock, securities or assets with respect to or in
exchange for Common Stock, or, in the case of any consolidation, merger or
mandatory share exchange of the Corporation into any other company, then, as
a condition of such reorganization, reclassification or exchange, lawful and
adequate provisions shall be made whereby each holder of a share or shares of
Series A Convertible Preferred Stock shall thereupon have the right to
receive, upon the basis and upon the terms and conditions specified herein
and in lieu of the shares of Common Stock immediately theretofore receivable
upon the conversion of such share or shares of Series A Convertible Preferred
Stock, such shares of stock, securities or assets as may be issued or payable
with respect to or in exchange for a number of outstanding shares of such
Common Stock equal to the number of shares of such Common Stock immediately
theretofore receivable upon such conversion had such reorganization,
reclassification or exchange not taken place, and in any such case
appropriate provisions shall be made with respect to the rights and interests
of such holder to the end that the provisions hereof (including without
limitation provisions for adjustments of the conversion rights) shall
thereafter be applicable, as nearly as may be, in relation to any shares of
stock, securities or assets thereafter deliverable upon the exercise of such
conversion rights.
(g) ADJUSTMENTS FOR SPLITS, COMBINATIONS, ETC. The Conversion Price
and the number of shares of Common Stock into which the Series A Convertible
Preferred Stock shall be convertible shall be adjusted for stock splits,
stock dividends, combinations or other similar events. No adjustment to the
Conversion Price will be made for dividends (other than stock dividends), if
any, paid on the Common Stock or for securities issued pursuant to exercise
for fair value of options, warrants or restricted stock.
6. MANDATORY CONVERSION.
(a) MANDATORY CONVERSION DATE. If on or after March 1, 2001 (such
date as selected by the Corporation being the "Mandatory Conversion Date"),
there remain issued and outstanding any shares of Series A Convertible
Preferred Stock, then the Corporation shall be entitled to require all (but
not less than all) holders of shares of Series A Convertible Preferred Stock
then outstanding to convert their shares of Series A Convertible Preferred
Stock into shares of Common Stock or, at the option of the Corporation, to
buy out all such holders in cash, at the then effective Conversion Price
pursuant to Section 5(a). The Corporation shall provide written notice (the
"Mandatory Conversion Notice") to the holders of shares of Series A
Convertible Preferred Stock of such mandatory conversion or such mandatory
buy-out. The Mandatory Conversion Notice shall include (i) the Stated Value
of the shares of Series A Convertible Preferred Stock to be converted or
bought out, (ii) the Conversion Price at the Mandatory Conversion Date, and
(iii) the number of shares of the Corporation's Common Stock to be issued (or
the amount of cash to be paid in the event of a buy-out) upon such mandatory
conversion or such mandatory buy-out at the then applicable Conversion Price.
Notwithstanding the foregoing, in no event shall the Corporation convert that
portion of the Series A Convertible Preferred Stock to the extent that the
issuance of Common Stock upon the conversion of such Series A Convertible
Preferred Stock, when combined with shares of Common Stock received upon
other conversions of Series A Convertible Preferred Stock by such holder and
any other holders of Series A Convertible Preferred Stock or upon exercise of
the Stock Purchase Warrants
<PAGE>
referred to in Section 5(a), would exceed 19.9% of the Common Stock
outstanding on the Original Issuance Date (unless stockholder approval has
been obtained as described in Section 5(a)), or as to any individual holder,
make such holder the beneficial owner of 9.9% or more of the Company's
then-outstanding Common Stock.
(b) SURRENDER OF CERTIFICATES. On or before the Mandatory Conversion
Date, each holder of shares of Series A Convertible Preferred Stock shall
surrender his or its certificate or certificates for all such shares to the
Corporation at the place designated in such Mandatory Conversion Notice (or
an affidavit of lost certificate in form and content reasonably satisfactory
to the Corporation), and shall thereafter receive certificates for the number
of shares of Common Stock to which such holder is entitled or, in the event
of a buy-out by the Corporation, the amount of cash such holder is entitled
within three business days. On the Mandatory Conversion Date, all rights with
respect to the Series A Convertible Preferred Stock so converted, including
the rights, if any, to receive notices and vote, will terminate. All
certificates evidencing shares of Series A Convertible Preferred Stock that
are required to be surrendered for conversion in accordance with the
provisions hereof, from and after the Mandatory Conversion Date, shall be
deemed to have been retired and cancelled, notwithstanding the failure of the
holder or holders thereof to surrender such certificates on or prior to such
date. The Corporation may thereafter take such appropriate action as may be
necessary to reduce the authorized Series A Convertible Preferred Stock
accordingly.
7. REDEMPTION OF SERIES A CONVERTIBLE PREFERRED STOCK.
(a) RIGHT TO REDEEM SERIES A CONVERTIBLE PREFERRED STOCK. At any
time, and from time to time, so long as the Market Price on the date of the
Redemption Notice does not exceed 150% of the Market Price on the Original
Issuance Date, the Corporation may, in its sole discretion, but shall not be
obligated to, redeem, in whole or in part, the then issued and outstanding
shares of Series A Convertible Preferred Stock, at a price equal to (i) 110%
of the Stated Value, plus all accrued but unpaid dividends, if the Redemption
Date is within 122 days of the Original Issuance Date; (ii) 115% of the
Stated Value, plus all accrued but unpaid dividends, if the Redemption Date
is more than 122 days but less than or equal to 244 days from the Original
Issuance Date; and (iii) 120% of the Stated Value, plus all accrued but
unpaid dividends, if the Redemption Date is more than 244 days from the
Original Issuance Date.
(b) NOTICE OF REDEMPTION. The Corporation shall provide each holder
of record of the Series A Convertible Preferred Stock being redeemed with
written notice of redemption (the "Redemption Notice") not less than 10 days
prior to any date stipulated by the Corporation for the redemption of the
Series A Convertible Preferred Stock (the "Redemption Date"). The Redemption
Notice shall contain (i) the Redemption Date, (ii) the number of shares of
Series A Convertible Preferred Stock to be redeemed from the holder to whom
the Redemption Notice is delivered, (iii) instructions for surrender to the
Corporation of the certificate or certificates representing the shares of
Series A Convertible Preferred Stock to be redeemed, and (iv) a procedure for
the holder to specify the number of shares of Series A Convertible Preferred
Stock to be converted into Common Stock pursuant to Section 5, subject to the
limitation set forth in Section 7(c).
<PAGE>
(c) RIGHT TO CONVERT SERIES A CONVERTIBLE PREFERRED STOCK UPON
RECEIPT OF REDEMPTION NOTICE. Upon receipt of the Redemption Notice, the
recipient thereof shall have the option, at its sole election, to specify
what portion of the Series A Convertible Preferred Stock called for
redemption in the Redemption Notice shall be redeemed as provided in this
Section 7 or converted into Common Stock in the manner provided in Section 5
and limited to those shares which would otherwise be convertible pursuant to
Section 5(b). If the holder of the Series A Convertible Preferred Stock
called for redemption elects to convert any of such shares then eligible for
conversion, then such conversion shall take place on the Conversion Date
specified by the holder, but in no event after the Redemption Date, in
accordance with the terms of Section 5.
(d) SURRENDER OF CERTIFICATES; PAYMENT OF REDEMPTION PRICE. On or
before the Redemption Date, each holder of the shares of Series A Convertible
Preferred Stock to be redeemed shall surrender the required certificate or
certificates representing such shares to the Corporation, in the manner and
at the place designated in the Redemption Notice, and upon payment to the
holder of the Redemption Price, each such surrendered certificate shall be
cancelled and retired. If payment of such redemption price is not made in
full by the Redemption Date the Holder shall again have the right to convert
the Series A Convertible Preferred Stock as provided in Section 5 hereof. If
a certificate is surrendered and all the shares evidenced thereby are not
being redeemed, the Corporation shall issue new certificates to be registered
in the names of the person(s) whose name(s) appear(s) as the owners on the
respective surrendered certificates and deliver such certificate to such
person(s).
8. NOTICES. In case at any time:
(a) the Corporation shall declare any dividend upon its Common Stock
payable in cash or stock or make any other pro rata distribution to the
holders of its Common Stock; or
(b) the Corporation shall offer for subscription pro rata to the
holders of its Common Stock any additional shares of stock of any class or
other rights; or
(c) there shall be any capital reorganization or reclassification of
the capital stock of the Corporation, or a consolidation or merger of the
Corporation with or into, or a sale of all or substantially all its assets
to, another entity or entities; or
(d) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
then, in any one or more of said cases, the Corporation shall give, by first
class mail, postage prepaid, or by telex or facsimile or by recognized
overnight delivery service to non-U.S. residents, addressed to each holder of
any shares of Series A Convertible Preferred Stock at the address of such
holder as shown on the books of the Corporation, (i) at least five (5)
business days' prior written notice of the date on which the books of the
Corporation shall close or a record shall be taken for such dividend,
distribution or subscription rights or for determining rights to vote in
respect of any such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding up and (ii) in the case of any such
reorganization,
<PAGE>
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, at least five (5) business days' prior written notice of the date
when the same shall take place. Such notice in accordance with the foregoing
clause (i) shall also specify, in the case of any such dividend, distribution
or subscription rights, the date on which the holders of Common Stock shall
be entitled thereto and (ii) shall also specify the date on which the holders
of Common Stock shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, as the case may be.
9. STOCK TO BE RESERVED. The Corporation, upon the effective date of
this resolution, has a sufficient number of shares of Common Stock available
to reserve for issuance upon the conversion of all outstanding shares of
Series A Convertible Preferred Stock. The Corporation will at all times
reserve and keep available out of its authorized Common Stock, solely for the
purpose of issuance upon the conversion of Series A Convertible Preferred
Stock as herein provided, such number of shares of Common Stock as shall then
be issuable upon the conversion of all outstanding shares of Series A
Convertible Preferred. The Corporation covenants that all shares of Common
Stock which shall be so issued shall be duly and validly issued, fully paid
and non-assessable. The Corporation will take all such action as may be so
taken without violation of any applicable law or regulation, or of any
requirement of any national securities exchange upon which the Common Stock
may be listed to have a sufficient number of authorized but unissued shares
of Common Stock to issue upon conversion of the Series A Convertible
Preferred Stock. The Corporation will not take any action which results in
any adjustment of the conversion rights if the total number of shares of
Common Stock issued and issuable after such action upon conversion of the
Series A Convertible Preferred Stock would exceed the total number of shares
of Common Stock then authorized by the Corporation's Articles of
Incorporation, as amended.
10. NO REISSUANCE OF SERIES A CONVERTIBLE PREFERRED STOCK. Shares of
Series A Convertible Preferred Stock which are converted into shares of
Common Stock as provided herein shall not be reissued.
11. ISSUE TAX. The issuance of certificates for shares of Common Stock
upon conversion of Series A Convertible Preferred Stock shall be made without
charge to the holder for any United States issuance tax in respect thereof,
provided that the Corporation shall not be required to pay any tax which may
be payable in respect of any transfer involved in the issuance and delivery
of any certificate in a name other than that of the holder of the Series A
Convertible Preferred Stock which is being converted.
12. CLOSING OF BOOKS. The Corporation will at no time close its
transfer books against the transfer of any Series A Convertible Preferred
Stock or of any shares of Common Stock issued or issuable upon the conversion
of any shares of Series A Convertible Preferred Stock in any manner which
interferes with the timely conversion of such Series A Convertible Preferred
Stock, except as may otherwise be required to comply with applicable
securities laws.
<PAGE>
13. DEFINITIONS. As used in this resolution, the term "Common Stock"
shall mean and include the Corporation's authorized Common Stock, no par
value, as constituted on the date of filing of this resolution, and shall
also include any capital stock of any class of the Corporation thereafter
authorized which shall neither be limited to a fixed sum or percentage of par
value in respect of the rights of the holders thereof to participate in
dividends nor entitled to a preference in the distribution of assets upon the
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation; provided that the shares of Common Stock receivable upon
conversion of shares of Series A Convertible Preferred Stock shall include
only shares designated as Common Stock of the Corporation on the date of
filing of this resolution, or in case of any reorganization,
reclassification, or stock split of the outstanding shares thereof, the
stock, securities or assets provided for in Subparagraph 5(f) and (g). Any
capitalized terms used in this resolution but not defined herein shall have
the meanings assigned to them in the Purchase Agreement. A copy of the
Purchase Agreement will be provided to any stockholder of the Corporation
upon request to the Secretary of the Corporation, without charge.
14. LOSS, THEFT, DESTRUCTION OF PREFERRED STOCK. Upon receipt of
evidence satisfactory to the Corporation of the loss, theft, destruction or
mutilation of certificates representing shares of Series A Convertible
Preferred Stock and, in the case of any such loss, theft or destruction, upon
receipt of indemnity or security reasonably satisfactory to the Corporation,
or, in the case of any such mutilation, upon surrender and cancellation of
the Series A Convertible Preferred Stock certificate, the Corporation shall
make, issue and deliver, in lieu of such lost, stolen, destroyed or mutilated
certificates for Series A Convertible Preferred Stock, new certificates for
Series A Convertible Preferred Stock of like tenor. The Series A Convertible
Preferred Stock shall be held and owned upon the express condition that the
provisions of this Section 14 are exclusive with respect to the replacement
of mutilated, destroyed, lost or stolen shares of Series A Preferred Stock
and shall preclude any and all other rights and remedies notwithstanding any
law or statue existing or hereafter enacted to the contrary with respect to
the replacement of negotiable instruments or other securities without the
surrender thereof.
15. WHO DEEMED ABSOLUTE OWNER. The Corporation may deem the person in
whose name the Series A Convertible Preferred Stock shall be registered upon
the registry books of the Corporation to be, and may treat it as, the
absolute owner of the Series A Convertible Preferred Stock for the purpose of
conversion of the Series A Convertible Preferred Stock and for all other
purposes, and the Corporation shall not be affected by any notice to the
contrary. All such payments and such conversion shall be valid and effectual
to satisfy and discharge the liability upon the Series A Convertible
Preferred Stock to the extent of the sum or sums so paid or the conversion so
made.
16. REGISTER. The Corporation shall maintain a transfer agent, which
may be the transfer agent for the Common Stock, for the registration of the
Series A Convertible Preferred Stock. Upon any transfer of the Series A
Convertible Preferred Stock in accordance with the provisions hereof, the
Corporation shall register or cause the transfer agent to register such
transfer on the Series A Convertible Preferred Stock register.
<PAGE>
17. WITHHOLDING. To the extent required by applicable law, the
Corporation may withhold amounts for or on account of any taxes imposed or
levied by or on behalf of any taxing authority in the United States having
jurisdiction over the Corporation from any payments made pursuant to the
Series A Convertible Preferred Stock.
18. HEADINGS. The headings of the Sections of this resolution are
inserted for convenience only and do not constitute a part of this resolution.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Unanimous Written
Consent as of the date first above written.
-------------------------------
Marcus Bender
-------------------------------
Brian Barbata
-------------------------------
Michael Chagami
-------------------------------
Keijiro Sorimachi
<PAGE>
EXHIBIT 4.2
INCORPORATED UNDER THE LAWS OF
Hawaii
No. 1 Series A Convertible SHARES 750
Preferred Stock
HAWAIIAN NATURAL WATER COMPANY, INC.
Series A Convertible Preferred Stock.
This Certifies that AMRO INTERNATIONAL, S.A. is the owner of Seven Hundred
Fifty (750) Series A Convertible Preferred Shares of the Capital Stock of
HAWAIIAN NATURAL WATER COMPANY, INC. transferable only on the Books of the
Corporation by the holder hereof in person or by duly authorized Attorney on
surrender of this Certificate properly endorsed.
IN WITNESS WHEREOF the duly authorized officers of this Corporation have
hereunto subscribed their names and caused the Corporate Seal to be hereto
affixed at_____________________________ this___________day of ____________A.D.
_____________________________________ _____________________________________
BRIAN BARBATA, Secretary MARCUS BENDER, President
SHARES EACH.
<PAGE>
EXHIBIT 4.3
NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN
REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION (THE
"COMMISSION") OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"). NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE
HEREOF MAY BE SOLD, PLEDGED, TRANSFERRED OR ASSIGNED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND UNDER APPLICABLE
STATE SECURITIES LAWS, OR IN A TRANSACTION WHICH IS EXEMPT FROM REGISTRATION
UNDER THE PROVISIONS OF THE SECURITIES ACT AND UNDER PROVISIONS OF APPLICABLE
STATE SECURITIES LAWS.
STOCK PURCHASE WARRANT
TO PURCHASE 100,000 SHARES OF COMMON STOCK OF
HAWAIIAN NATURAL WATER COMPANY, INC.
THIS CERTIFIES that, for value received, AMRO International, S.A.
(the "Holder"), is entitled, upon the terms and subject to the conditions
hereinafter set forth, at any time after March 1, 1999 (the "Initial Exercise
Date") and on or prior to the close of business on February 28, 2002 (the
"Termination Date") but not thereafter, to subscribe for and purchase from
HAWAIIAN NATURAL WATER COMPANY, INC., a corporation incorporated in Hawaii
(the "Company"), up to One Hundred Thousand (100,000) shares (the "Warrant
Shares") of Common Stock, no par value per share of the Company (the "Common
Stock"). The purchase price of one share of Common Stock (the "Exercise
Price") under this Warrant shall be $3.625 per share. The Exercise Price and
the number of shares for which the Warrant is exercisable shall be subject to
adjustment as provided herein. This Warrant is being issued in connection
with the Convertible Preferred Shares and Warrant Purchase Agreement between
the Holder and the Company dated as of March 1, 1999 (the "Purchase
Agreement") and is subject to its terms and conditions. In the event of any
conflict between the terms of this Warrant and the Purchase Agreement, the
Purchase Agreement shall control. Capitalized terms used and not otherwise
defined herein shall have the meanings set forth for such terms in the
Purchase Agreement.
1. TITLE OF WARRANT. Prior to the expiration hereof and subject to
compliance with applicable laws, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company by the
holder hereof in person or by duly authorized attorney, upon surrender of this
Warrant together with the Assignment Form annexed hereto properly endorsed.
<PAGE>
2. AUTHORIZATION OF SHARES. The Company covenants that all shares of
Common Stock which may be issued upon the exercise of rights represented by this
Warrant will, upon exercise of the rights represented by this Warrant, be duly
authorized, validly issued, fully paid and nonassessable and free from all
taxes, liens and charges in respect of the issue thereof (other than taxes in
respect of any transfer occurring contemporaneously with such issue).
3. EXERCISE OF WARRANT. Except as provided in Section 4 herein,
exercise of the purchase rights represented by this Warrant may be made at any
time or times on or after the Initial Exercise Date, and before the close of
business on the Termination Date, by the delivery of the Notice of Exercise Form
annexed hereto duly executed, at the office of the Company (or such other office
or agency of the Company as it may designate by notice in writing to the
registered holder hereof at the address of such holder appearing on the books of
the Company) and upon payment of the Exercise Price of the shares thereby
purchased by wire transfer or cashier's check drawn on a United States bank to
the Escrow Agent as provided in the Escrow Agreement, the holder of this Warrant
shall be entitled to receive a certificate for the number of shares of Common
Stock so purchased. Certificates for shares purchased hereunder shall be
delivered to the holder hereof within three (3) business days after the date on
which this Warrant shall have been exercised as aforesaid. This Warrant shall be
deemed to have been exercised and such certificate or certificates shall be
deemed to have been issued, and Holder or any other person so designated to be
named therein shall be deemed to have become a holder of record of such shares
for all purposes, as of the date the Warrant has been exercised by payment to
the Company of the Exercise Price and all taxes required to be paid by Holder,
if any, pursuant to Section 5 prior to the issuance of such shares, have been
paid.
The foregoing notwithstanding, no exercise of this Warrant may be made, and
this Warrant shall not be deemed exercisable to the extent that such exercise
would cause the Holder to be deemed the beneficial owner of 9.9% or more of the
Company's Common Stock for purposes of Section 16(b) under the Exchange Act, or
any rules or court interpretations thereunder, whether in existence on the date
of issuance of this Warrant or coming into existence at any time thereafter
through the Termination Date.
4. NO FRACTIONAL SHARES OR SCRIP. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. As to any fraction of a share which Holder would otherwise be entitled
to purchase upon such exercise, the Company shall pay a cash adjustment in
respect of such final fraction in an amount equal to the Exercise Price.
5. CHARGES, TAXES AND EXPENSES. Issuance of certificates for shares of
Common Stock upon the exercise of this Warrant shall be made without charge to
the holder hereof for any issue or transfer tax or other incidental expense in
respect of the issuance of such certificate, all of which taxes and expenses
shall be paid by the Company, and such certificates shall be issued in the name
of the holder of this Warrant or in such name or names as may be directed by the
holder of this Warrant; provided, however, that in the event certificates for
shares of Common Stock are to be issued in a name other than the name of the
holder of this Warrant, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached
2
<PAGE>
hereto duly executed by the holder hereof and the Company may require, as a
condition thereto, the payment of a sum sufficient to reimburse it for any
transfer tax incidental thereto.
6. CLOSING OF BOOKS. The Company will not close its shareholder books
or records in any manner which prevents the timely exercise of this Warrant.
7. TRANSFER, DIVISION AND COMBINATION. (a) Subject to compliance with
any applicable securities laws, transfer of this Warrant and all rights
hereunder, in whole or in part, shall be registered on the books of the Company
to be maintained for such purpose, upon surrender of this Warrant at the
principal office of the Company, together with a written assignment of this
Warrant substantially in the form attached hereto duly executed by Holder or its
agent or attorney and funds sufficient to pay any transfer taxes payable upon
the making of such transfer. Upon such surrender and, if required, such payment,
the Company shall execute and deliver a new Warrant or Warrants in the name of
the assignee or assignees and in the denomination specified in such instrument
of assignment, and shall issue to the assignor a new Warrant evidencing the
portion of this Warrant not so assigned, and this Warrant shall promptly be
cancelled. A Warrant, if properly assigned, may be exercised by a new Holder for
the purchase of shares of Common Stock without having a new Warrant issued.
(b) This Warrant may be divided or combined with other Warrants
upon presentation hereof at the aforesaid office of the Company, together with a
written notice specifying the names and denominations in which new Warrants are
to be issued, signed by Holder or its agent or attorney. Subject to compliance
with Section 7(a), as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice.
(c) The Company agrees to maintain, at its aforesaid office, books
for the registration and the registration of transfer of the Warrants.
8. NO RIGHTS AS SHAREHOLDER UNTIL EXERCISE. This Warrant does not
entitle the holder hereof to any voting rights or other rights as a shareholder
of the Company prior to the exercise hereof. Upon the surrender of this Warrant
and the payment of the aggregate Exercise Price, the Warrant Shares so purchased
shall be and be deemed to be issued to such holder as the record owner of such
shares as of the close of business on the later of the date of such surrender or
payment.
9. LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT. The Company
represents and warrants that upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this Warrant
certificate or any stock certificate relating to the Warrant Shares, and in case
of loss, theft or destruction, of indemnity or security reasonably satisfactory
to it, and upon surrender and cancellation of such Warrant or stock certificate,
if mutilated, the Company will make and deliver a new Warrant or stock
certificate of like tenor and dated as of such cancellation, in lieu of such
Warrant or stock certificate.
3
<PAGE>
10. SATURDAYS, SUNDAYS, HOLIDAYS, ETC. If the last or appointed day for
the taking of any action or the expiration of any right required or granted
herein shall be a Saturday, Sunday or a legal holiday, then such action may be
taken or such right may be exercised on the next succeeding day not a Saturday,
Sunday or legal holiday.
11. ADJUSTMENTS OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. (a)
STOCK SPLITS, ETC. The number and kind of securities purchasable upon the
exercise of this Warrant and the Exercise Price shall be subject to adjustment
from time to time upon the happening of any of the following. In case the
Company shall (i) pay a dividend in shares of Common Stock or make a
distribution in shares of Common Stock to holders of its outstanding Common
Stock, (ii) subdivide its outstanding shares of Common Stock into a greater
number of shares of Common Stock, (iii) combine its outstanding shares of Common
Stock into a smaller number of shares of Common Stock or (iv) issue any shares
of its capital stock in a reclassification of the Common Stock, then the number
of Warrant Shares purchasable upon exercise of this Warrant immediately prior
thereto shall be adjusted so that the holder of this Warrant shall be entitled
to receive the kind and number of Warrant Shares or other securities of the
Company which he would have owned or have been entitled to receive had such
Warrant been exercised in advance thereof. Upon each such adjustment of the kind
and number of Warrant Shares or other securities of the Company which are
purchasable hereunder, the holder of this Warrant shall thereafter be entitled
to purchase the number of Warrant Shares or other securities resulting from such
adjustment at an Exercise Price per such Warrant Share or other security
obtained by multiplying the Exercise Price in effect immediately prior to such
adjustment by the number of Warrant Shares purchasable pursuant hereto
immediately prior to such adjustment and dividing by the number of Warrant
Shares or other securities of the Company resulting from such adjustment. An
adjustment made pursuant to this paragraph shall become effective immediately
after the effective date of such event retroactive to the record date, if any,
for such event.
(b) REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION OR
DISPOSITION OF ASSETS. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where there
is a change in or distribution with respect to the Common Stock of the Company),
or sell, transfer or otherwise dispose of all or substantially all its property,
assets or business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of common stock of the successor or acquiring corporation, or any
cash, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("Other
Property"), are to be received by or distributed to the holders of Common Stock
of the Company, then Holder shall have the right thereafter to receive, upon
exercise of this Warrant, the number of shares of common stock of the successor
or acquiring corporation or of the Company, if it is the surviving corporation,
and Other Property receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a holder of
the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such event.
4
<PAGE>
In case of any such reorganization, reclassification, merger, consolidation
or disposition of assets, the successor or acquiring corporation (if other
than the Company) shall expressly assume the due and punctual observance and
performance of each and every covenant and condition of this Warrant to be
performed and observed by the Company and all the obligations and liabilities
hereunder, subject to such modifications as may be deemed appropriate (as
determined by resolution of the Board of Directors of the Company) in order
to provide for adjustments of shares of Common Stock for which this Warrant
is exercisable which shall be as nearly equivalent as practicable to the
adjustments provided for in this Section 11. For purposes of this Section 11,
"common stock of the successor or acquiring corporation" shall include stock
of such corporation of any class which is not preferred as to dividends or
assets over any other class of stock of such corporation and which is not
subject to redemption and shall also include any evidences of indebtedness,
shares of stock or other securities which are convertible into or
exchangeable for any such stock, either immediately or upon the arrival of a
specified date or the happening of a specified event and any warrants or
other rights to subscribe for or purchase any such stock. The foregoing
provisions of this Section 11 shall similarly apply to successive
reorganizations, reclassifications, mergers, consolidations or disposition of
assets.
12. VOLUNTARY ADJUSTMENT BY THE COMPANY. The Company may at any time
during the term of this Warrant, reduce the then current Exercise Price to any
amount and for any period of time deemed appropriate by the Board of Directors
of the Company.
13. NOTICE OF ADJUSTMENT. Whenever the number of Warrant Shares or
number or kind of securities or other property purchasable upon the exercise of
this Warrant or the Exercise Price is adjusted, as herein provided, the Company
shall promptly mail by registered or certified mail, return receipt requested,
to the holder of this Warrant notice of such adjustment or adjustments setting
forth the number of Warrant Shares (and other securities or property)
purchasable upon the exercise of this Warrant and the Exercise Price of such
Warrant Shares (and other securities or property) after such adjustment, setting
forth a brief statement of the facts requiring such adjustment and setting forth
the computation by which such adjustment was made. Such notice, in absence of
manifest error, shall be conclusive evidence of the correctness of such
adjustment.
14. NOTICE OF CORPORATE ACTION. If at any time:
(a) the Company shall take a record of the holders of its Common
Stock for the purpose of entitling them to receive a dividend or other
distribution, or any right to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or
property, or to receive any other right, or
(b) there shall be any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or any
consolidation or merger of the Company with, or any sale, transfer or other
disposition of all or substantially all the property, assets or business of the
Company to, another corporation or,
5
<PAGE>
(c) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of such cases, the Company shall give to Holder (i) at
least five (5) business days' prior written notice of the date on which a record
date shall be selected for such dividend, distribution or right or for
determining rights to vote in respect of any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
liquidation or winding up, and (ii) in the case of any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up, at least five (5) business days' prior
written notice of the date when the same shall take place. Such notice in
accordance with the foregoing clause also shall specify (i) the date on which
any such record is to be taken for the purpose of such dividend, distribution or
right, the date on which the holders of Common Stock shall be entitled to any
such dividend, distribution or right, and the amount and character thereof, and
(ii) the date on which any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up is to take place and the time, if any such time is to be fixed, as of which
the holders of Common Stock shall be entitled to exchange their shares of Common
Stock for securities or other property deliverable upon such disposition,
dissolution, liquidation or winding up. Each such written notice shall be
sufficiently given if addressed to Holder at the last address of Holder
appearing on the books of the Company and delivered in accordance with Section
16(d).
15. AUTHORIZED SHARES. The Company covenants that during the period the
Warrant is outstanding, it will reserve from its authorized and unissued Common
Stock a sufficient number of shares to provide for the issuance of the Warrant
Shares upon the exercise of any purchase rights under this Warrant. The Company
further covenants that its issuance of this Warrant shall constitute full
authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for the Warrant
Shares upon the exercise of the purchase rights under this Warrant. The Company
will take all such reasonable action as may be necessary to assure that such
Warrant Shares may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of Nasdaq or any domestic
securities exchange upon which the Common Stock may be listed.
The Company shall not by any action, including, without
limitation, amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to protect the
rights of Holder against impairment. Without limiting the generality of the
foregoing, the Company will (a) not increase the par value of any shares of
Common Stock receivable upon the exercise of this Warrant above the amount
payable therefor upon such exercise immediately prior to such increase in par
value, (b) take all such action as may be necessary or appropriate in order that
the Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant, and (c) use its best efforts to
obtain all such authorizations, exemptions or consents from any public
regulatory body having jurisdiction thereof as may be necessary to enable the
Company to perform its obligations under this Warrant.
6
<PAGE>
Before taking any action which would cause an adjustment reducing
the current Exercise Price below the then par value, if any, of the shares of
Common Stock issuable upon exercise of the Warrants, the Company shall take any
corporate action which may be necessary in order that the Company may validly
and legally issue fully paid and non-assessable shares of such Common Stock at
such adjusted Exercise Price.
Before taking any action which would result in an adjustment in
the number of shares of Common Stock for which this Warrant is exercisable or in
the Exercise Price, the Company shall obtain all such authorizations or
exemptions thereof, or consents thereto, as may be necessary from any public
regulatory body or bodies having jurisdiction thereof.
16. MISCELLANEOUS.
(a) JURISDICTION. This Warrant shall be binding upon any
successors or assigns of the Company. This Warrant shall constitute a contract
under the laws of New York without regard to its conflict of law, principles or
rules, and be subject to arbitration pursuant to the terms set forth in the
Agreement.
(b) RESTRICTIONS. The holder hereof acknowledges that the Warrant
Shares acquired upon the exercise of this Warrant, if not registered, will have
restrictions upon resale imposed by state and federal securities laws and by the
Agreement.
(c) NONWAIVER AND EXPENSES. No course of dealing or any delay or
failure to exercise any right hereunder on the part of Holder shall operate as a
waiver of such right or otherwise prejudice Holder's rights, powers or remedies,
notwithstanding all rights hereunder terminate on the Termination Date. If the
Company fails to make, when due, any payments provided for hereunder, or fails
to comply with any other provision of this Warrant, the Company shall pay to
Holder such amounts as shall be sufficient to cover any costs and expenses
including, but not limited to, reasonable attorneys' fees, including those of
appellate proceedings, incurred by Holder in collecting any amounts due pursuant
hereto or in otherwise enforcing any of its rights, powers or remedies
hereunder.
(d) NOTICES. Any notice, request or other document required or
permitted to be given or delivered to the holder hereof by the Company shall be
delivered in accordance with the notice provisions of the Agreement.
(e) LIMITATION OF LIABILITY. No provision hereof, in the absence
of affirmative action by Holder to purchase shares of Common Stock, and no
enumeration herein of the rights or privileges of Holder hereof, shall give rise
to any liability of Holder for the purchase price of any Common Stock or as a
stockholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.
(f) REMEDIES. Holder, in addition to being entitled to exercise
all rights granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Warrant. The Company agrees that
monetary damages would not be adequate compensation for any loss incurred by
reason of a breach by it of the provisions of this Warrant
7
<PAGE>
and hereby agrees to waive the defense in any action for specific performance
that a remedy at law would be adequate.
(g) SUCCESSORS AND ASSIGNS. Subject to applicable securities laws,
this Warrant and the rights and obligations evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company and the successors
and permitted assigns of Holder. The provisions of this Warrant are intended to
be for the benefit of all Holders from time to time of this Warrant and shall be
enforceable by any such Holder or holder of Warrant Stock.
(h) COOPERATION. The Company shall cooperate with Holder in
supplying such information as may be reasonably necessary for Holder to complete
and file any information reporting forms presently or hereafter required by the
SEC as a condition to the availability of an exemption from the Securities Act
for the sale of any Warrant or Restricted Common Stock.
(i) INDEMNIFICATION. The Company agrees to indemnify and hold
harmless Holder from and against any liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, attorneys' fees, expenses
and disbursements of any kind which may be imposed upon, incurred by or asserted
against Holder in any manner relating to or arising out of any failure by the
Company to perform or observe in any material respect any of its covenants,
agreements, undertakings or obligations set forth in this Warrant; provided,
however, that the Company will not be liable hereunder to the extent that any
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, attorneys' fees, expenses or disbursements are found in a final
non-appealable judgment by a court to have resulted from Holder's negligence,
bad faith or willful misconduct in its capacity as a stockholder or
warrantholder of the Company.
(j) AMENDMENT. This Warrant may be modified or amended or the
provisions hereof waived with the written consent of the Company and the Holder.
8
<PAGE>
(k) SEVERABILITY. Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provisions or the remaining provisions of this Warrant.
(l) HEADINGS. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officer thereunto duly authorized.
Dated: March 1, 1999
HAWAIIAN NATURAL WATER COMPANY, INC.
By: /s/ MARCUS BENDER
----------------------------------------
Marcus Bender,
Chief Executive Officer
9
<PAGE>
NOTICE OF EXERCISE
To: HAWAIIAN NATURAL WATER COMPANY, INC.
(1) The undersigned hereby elects to purchase ________ shares of
Common Stock, no par value per share (the "Common Stock"), of HAWAIIAN NATURAL
WATER COMPANY, INC. pursuant to the terms of the attached Warrant, and tenders
herewith payment of the exercise price in full, together with all applicable
transfer taxes, if any.
(2) Please issue a certificate or certificates representing said
shares of Common Stock in the name of the undersigned or in such other name as
is specified below:
-------------------------------
(Name)
-------------------------------
(Address)
-------------------------------
Dated:
------------------------------
Signature
<PAGE>
ASSIGNMENT FORM
(To assign the foregoing Warrant, execute
this form and supply required information.
Do not use this form to exercise the Warrant.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to
whose address is
- -----------------------------------------------
- ---------------------------------------------------------------.
- ---------------------------------------------------------------
Dated:
--------- -------------
Holder's Signature:
------------------------------------
Holder's Address:
------------------------------------
------------------------------------
Signature Guaranteed:
------------------------------------------------
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in an fiduciary or other representative
capacity should file proper evidence of authority to assign the foregoing
Warrant.
<PAGE>
EXHIBIT 10-1
CONVERTIBLE PREFERRED SHARES AND WARRANT PURCHASE AGREEMENT
BETWEEN
HAWAIIAN NATURAL WATER COMPANY, INC.
AND
AMRO INTERNATIONAL, S.A.
CONVERTIBLE PREFERRED SHARES AND WARRANT PURCHASE AGREEMENT dated as of
March 1, 1999 (the "Agreement") between, AMRO International, S.A., a Panama
corporation (the "Investor") and Hawaiian Natural Water Company, Inc., a
corporation organized and existing under the laws of the State of Hawaii (the
"Company").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Investor,
and the Investor shall purchase, (i) $1,250,000 liquidation preference of
Convertible Preferred Shares (as defined below) and (ii) a Warrant (as defined
below) to purchase up to 100,000 shares of the Common Stock (as defined below).
WHEREAS, such investments will be made in reliance upon the provisions of
Section 4(2) ("Section 4(2)") of the United States Securities Act and Regulation
D ("Regulation D") and the other rules and regulations promulgated thereunder
(the "Securities Act"), and/or upon such other exemption from the registration
requirements of the Securities Act as may be available with respect to any or
all of the investments in securities to be made hereunder.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1. "CAPITAL SHARES" shall mean the Common Stock and any shares of any
other class of common stock whether now or hereafter authorized, having the
right to participate in the distribution of earnings and assets of the Company.
Section 1.2. "CAPITAL SHARES EQUIVALENTS" shall mean any securities, rights, or
obligations that are convertible into or exchangeable for or give any right to
subscribe for any Capital Shares of the Company or any warrants, options or
other rights to subscribe for or purchase Capital Shares or any such convertible
or exchangeable securities.
Section 1.3. "CLOSING" shall mean the closing of the purchase and sale of the
Convertible Preferred Shares and Warrant pursuant to Section 2.1.
Section 1.4. "CLOSING DATE" shall mean the date on which all conditions to the
Closing have been satisfied (as defined in Section 2.1 (b) hereto) and the
Closing shall have occurred.
Section 1.5. "COMMON STOCK" shall mean the Company's common stock, no par value
per share.
<PAGE>
Section 1.6. "CONVERSION SHARES" shall mean the shares of Common
Stock issuable upon conversion of the Convertible Preferred Shares and any
shares of Common Stock issued as dividends upon the Convertible Preferred
Shares.
Section 1.7. "CONVERTIBLE PREFERRED SHARES" shall mean the $1,250,000
liquidation preference amount of Series A Convertible Preferred Stock, as
described in the Certificate of Designations in the form of Exhibit A hereto, to
be issued to the Investor pursuant to this Agreement.
Section 1.8. "DAMAGES" shall mean any loss, claim, damage, judgment, penalty,
deficiency, liability, costs and expenses (including, without limitation,
reasonable attorney's fees and disbursements and reasonable costs and expenses
of expert witnesses and investigation).
Section 1.9. "EFFECTIVE DATE" shall mean the date on which the SEC first
declares effective a Registration Statement registering the resale of the
Registrable Securities as set forth in the Registration Rights Agreement.
Section 1.10. "ESCROW AGENT" shall have the meaning set forth in the Escrow
Agreement.
Section 1.11. "ESCROW AGREEMENT" shall mean the Escrow Agreement in
substantially the form of Exhibit D hereto executed and delivered
contemporaneously with this Agreement.
Section 1.12. "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
Section 1.13. "LEGEND" shall mean the legend set forth in Section 9.1.
Section 1.14. "MARKET PRICE" on any given date shall mean the average of the
three lowest closing bid prices of the Common Stock on the Principal Market (as
reported by Bloomberg L.P.) during a period of 22 Trading Days ending on the
Trading Day immediately prior to the date for which the Market Price is to be
determined.
Section 1.15. "MATERIAL ADVERSE EFFECT" shall mean any effect on the business,
operations, properties, prospects, or financial condition of the Company that is
material and adverse to the Company and its subsidiaries and affiliates, taken
as a whole, and/or any condition, circumstance, or situation that would prohibit
or otherwise interfere with the ability of the Company to enter into and perform
any of its obligations under this Agreement, the Registration Rights Agreement,
the Escrow Agreement, the Convertible Preferred Shares or the Warrant in any
material respect.
Section 1.16. "OUTSTANDING" when used with reference to shares of Common Stock
or Capital Shares (collectively the "Shares"), shall mean, at any date as of
which the number of such Shares is to be determined, all issued and outstanding
Shares, and shall include all such Shares issuable in respect of outstanding
scrip or any certificates representing fractional interests in such Shares;
provided, however, that "Outstanding" shall not mean any such Shares then
directly or indirectly owned or held by or for the account of the Company.
Section 1.17. "PERSON" shall mean an individual, a corporation, a partnership,
an association, a trust or other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
<PAGE>
Section 1.18. "PRINCIPAL MARKET" shall mean the American Stock Exchange, the New
York Stock Exchange, the NASDAQ National Market, or the NASDAQ Small-Cap Market,
whichever is at the time the principal trading exchange or market for the Common
Stock, based upon share volume.
Section 1.19. "PURCHASE PRICE" shall mean one million two hundred fifty thousand
dollars ($1,250,000).
Section 1.20. "REGISTRABLE SECURITIES" shall mean the Conversion Shares and the
Warrant Shares until (i) the Registration Statement has been declared effective
by the SEC, and all Conversion Shares and Warrant Shares have been disposed of
pursuant to the Registration Statement, (ii) all Conversion Shares and Warrant
Shares have been sold under circumstances under which all of the applicable
conditions of Rule 144 (or any similar provision then in force) under the
Securities Act ("Rule 144") are met, (iii) all Conversion Shares and Warrant
Shares have been otherwise transferred to holders who may trade such shares
without restriction under the Securities Act, and the Company has delivered a
new certificate or other evidence of ownership for such securities not bearing a
restrictive legend or (iv) such time as, in the opinion of counsel to the
Company, all Conversion Shares and Warrant Shares may be sold without any time,
volume or manner limitations pursuant to Rule 144(k) (or any similar provision
then in effect) under the Securities Act.
Section 1.21. "REGISTRATION RIGHTS AGREEMENT" shall mean the agreement regarding
the filing of the Registration Statement for the resale of the Registrable
Securities, entered into between the Company and the Investor as of the Closing
Date in the form annexed hereto as Exhibit C.
Section 1.22. "REGISTRATION STATEMENT" shall mean a registration statement on
Form S-3 (if use of such form is then available to the Company pursuant to the
rules of the SEC and, if not, on such other form promulgated by the SEC for
which the Company then qualifies and which counsel for the Company shall deem
appropriate, and which form shall be available for the resale of the Registrable
Securities to be registered thereunder in accordance with the provisions of this
Agreement, the Registration Rights Agreement and in accordance with the intended
method of distribution of such securities), for the registration of the resale
by the Investor of the Registrable Securities under the Securities Act.
Section 1.23. "REGULATION D" shall have the meaning set forth in the recitals of
this Agreement.
Section 1.24. "SEC" shall mean the Securities and Exchange Commission.
Section 1.25. "SECTION 4(2)" shall have the meaning set forth in the recitals of
this Agreement.
Section 1.26. "SECURITIES ACT" shall have the meaning set forth in the recitals
of this Agreement.
Section 1.27. "SEC DOCUMENTS" shall mean the Company's Annual Report on Form
10-KSB for the fiscal year ended December 31, 1997 and each report, proxy
statement or registration statement filed by the Company with the SEC pursuant
to the Exchange Act or the Securities Act since the filing of such Annual Report
through the date hereof.
Section 1.28. "SHARES" shall have the meaning set forth in Section 1.16.
Section 1.29. "TRADING DAY" shall mean any day during which the Principal Market
at such day shall be open for business.
Section 1.30. "WARRANT" shall mean the warrant substantially in the form of
Exhibit B to be issued to the Investor hereunder.
<PAGE>
Section 1.31. "WARRANT SHARES" shall mean all shares of Common Stock or other
securities issued or issuable pursuant to exercise of the Warrant.
ARTICLE II
PURCHASE AND SALE OF CONVERTIBLE PREFERRED SHARES AND WARRANT
Section 2.1. INVESTMENT.
(a) Upon the terms and subject to the conditions set forth herein, the
Company agrees to sell, and the Investor agrees to purchase the Convertible
Preferred Shares and the Warrant at the Purchase Price on the Closing Date as
follows:
(i) Within ten Trading Days of execution and delivery of this
Agreement, the Investor shall deliver to the Escrow Agent
immediately available funds in the amount of $750,000,
representing the Purchase Price for 750 Convertible Preferred
Shares and the Warrant, and the Company shall deliver a
certificate representing such Convertible Preferred Shares and
the Warrant to the Escrow Agent, in each case to be held by the
Escrow Agent pursuant to the Escrow Agreement.
(ii) Upon satisfaction of the conditions set forth in Section 2.1(b),
the Closing ("Closing") shall occur at the offices of the Escrow
Agent at which the Escrow Agent (x) shall release the
Convertible Preferred Shares and the Warrant to the Investor and
(y) shall release the Purchase Price (after all fees have been
paid as set forth in the Escrow Agreement) to the Company,
pursuant to the terms of the Escrow Agreement.
(b) The Closing is subject to the satisfaction of the following conditions:
(i) acceptance and execution by the Company and by the Investor, of
this Agreement and all Exhibits hereto;
(ii) delivery into escrow by Investor of immediately available funds
in the amount of the Purchase Price of the Convertible Preferred
Shares and the Warrant, as more fully set forth in the Escrow
Agreement;
(iii) all representations and warranties of the Investor contained
herein shall remain true and correct as of the Closing Date (as
a condition to the Company's obligations);
(iv) all representations and warranties of the Company contained
herein shall remain true and correct as of the Closing Date (as
a condition to the Investor's obligations);
(v) the Company shall have obtained all permits and qualifications
required by any state for the offer and sale of the Convertible
Preferred Shares and Warrant, or shall have the availability of
exemptions therefrom;
(vi) the sale and issuance of the Convertible Preferred Shares and
the Warrant hereunder, and the proposed issuance by the Company
to the Investor of the Common Stock underlying the Convertible
Preferred Shares and the Warrant upon the conversion or exercise
thereof shall be legally permitted by all laws and regulations
to which the
<PAGE>
Investor and the Company are subject and there shall be no
ruling, judgment or writ of any court prohibiting the
transactions contemplated by this Agreement;
(vii) delivery of the original fully executed Convertible Preferred
Shares and Warrant certificates to the Escrow Agent;
(viii) delivery to the Escrow Agent of an opinion of Graham & James,
LLP, counsel to the Company, in the form of Exhibit E hereto;
(ix) delivery to the Escrow Agent of the Irrevocable Instructions to
Transfer Agent in the form attached hereto as Exhibit F;
(x) delivery to the Escrow Agent of the Registration Rights
Agreement; and
(xi) delivery to the Escrow Agent of written agreements from each
current director and Named Executive Officer of the Company to
vote their shares in favor of a Company proposal to permit the
Company to issue more than 20% of its outstanding shares of
Common Stock on the Closing Date of this Agreement, upon
conversion of the Convertible Preferred Shares or exercise of
the Warrant upon any Partial Redemption, which shall be included
at the Company's next Annual Meeting of Shareholders.
(c) The Company further agrees to sell, and the Investor further agrees to
purchase an additional 500 Convertible Preferred Shares at the Purchase Price of
$500,000 on the date specified by the Company which is no earlier than ten (10)
Trading Days following the Effective Date as follows:
(i) Within three Trading Days of receipt of notice from the Company
that the Registration Statement has been declared effective by
the SEC, the Investor shall deliver to the Escrow Agent
immediately available funds in the amount of $500,000,
representing the Purchase Price for 500 Convertible Preferred
Shares, and the Company shall deliver a further certificate
representing such Convertible Preferred Shares to the Escrow
Agent, to be held by the Escrow Agent pursuant to the Escrow
Agreement.
(ii) Upon satisfaction of the conditions set forth in Section 2.1(b)
(ii) through (vii), other than with respect to the Warrant, an
additional Closing shall occur at the offices of the Escrow
Agent at which the Escrow Agent (x) shall release the
Convertible Preferred Shares to the Investor and (y) shall
release the Purchase Price (after all fees have been paid as set
forth in the Escrow Agreement) to the Company, pursuant to the
terms of the Escrow Agreement.
Section 2.2. THIS SECTION INTENTIONALLY OMITTED
Section 2.3. LIQUIDATED DAMAGES. The parties hereto acknowledge and agree that
the sum payable pursuant to the Registration Rights Agreement shall constitute
liquidated damages and not penalties. The parties further acknowledge that (a)
the amount of loss or damages likely to be incurred is incapable or is difficult
to precisely estimate, (b) the amounts specified in such Sections bear a
reasonable proportion and are not plainly or grossly disproportionate to the
probable loss likely to be incurred by the Investor in connection with the
failure by the Company to timely cause the registration of the Registrable
Securities and (c) the parties are sophisticated business parties and have been
represented by sophisticated and able legal and financial counsel and negotiated
this Agreement at arm's length.
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INVESTOR
The Investor represents and warrants to the Company that:
Section 3.1. INTENT. The Investor is entering into this Agreement for its own
account and the Investor has no present arrangement (whether or not legally
binding) at any time to sell the Convertible Preferred Shares, the Warrant, any
Conversion Shares or Warrant Shares to or through any person or entity;
provided, however, that by making the representations herein, the Investor does
not agree to hold such securities for any minimum or other specific term and
reserves the right to dispose of the Conversion Shares and Warrant Shares at any
time in accordance with federal and state securities laws applicable to such
disposition.
Section 3.2. SOPHISTICATED INVESTOR. The Investor is a sophisticated investor
(as described in Rule 506(b)(2)(ii) of Regulation D) and an accredited investor
(as defined in Rule 501 of Regulation D), and Investor has such experience in
business and financial matters that it is capable of evaluating the merits and
risks of an investment in the Convertible Preferred Shares, the Warrant and the
underlying Common Stock. The Investor acknowledges that an investment in the
Convertible Preferred Shares, the Warrant and the underlying Common Stock is
speculative and involves a high degree of risk.
Section 3.3. AUTHORITY. This Agreement and each agreement attached as an Exhibit
hereto which is required to be executed by Investor has been duly authorized and
validly executed and delivered by the Investor and is a valid and binding
agreement of the Investor enforceable against it in accordance with its terms,
subject to applicable bankruptcy, insolvency, or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.
Section 3.4. NOT AN AFFILIATE. The Investor is not an officer, director or
"affiliate" (as that term is defined in Rule 405 of the Securities Act) of the
Company.
Section 3.5. ABSENCE OF CONFLICTS. The execution and delivery of this Agreement
and the agreements the forms of which are attached as Exhibits hereto and
executed in connection herewith, and the consummation of the transactions
contemplated hereby and thereby, and compliance with the requirements hereof and
thereof, will not violate any law, rule, regulation, order, writ, judgment,
injunction, decree or award binding on Investor or (a) violate any provision of
any indenture, instrument or agreement to which Investor is a party or is
subject, or by which Investor or any of its assets is bound; (b) conflict with
or constitute a material default thereunder; (c) result in the creation or
imposition of any lien pursuant to the terms of any such indenture, instrument
or agreement, or constitute a breach of any fiduciary duty owed by Investor to
any third party; or (d) require the approval of any third-party (which has not
been obtained) pursuant to any material contract, agreement, instrument,
relationship or legal obligation to which Investor is subject or to which any of
its assets, operations or management may be subject.
<PAGE>
Section 3.6. DISCLOSURE; ACCESS TO INFORMATION. The Investor has received all
documents, records, books and other publicly available information pertaining to
Investor's investment in the Company that have been requested by the Investor.
The Company is subject to the periodic reporting requirements of the Exchange
Act, and the Investor has reviewed or received copies of all SEC Documents that
have been requested by it.
Section 3.7. MANNER OF SALE. At no time was Investor presented with or
solicited by or through any leaflet, public promotional meeting, television
advertisement or any other form of general solicitation or advertising.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Investor that:
Section 4.1. ORGANIZATION OF THE COMPANY. The Company is a corporation duly
incorporated and existing in good standing under the laws of the State of Hawaii
and has all requisite corporate authority to own its properties and to carry on
its business as now being conducted. The Company does not have any subsidiaries
and does not own more that fifty percent (50%) of or control any other business
entity except as set forth in the SEC Documents. The Company is duly qualified
and is in good standing as a foreign corporation to do business in every
jurisdiction in which the nature of the business conducted or property owned by
it makes such qualification necessary, other than those in which the failure so
to qualify would not have a Material Adverse Effect.
Section 4.2. AUTHORITY. (i) The Company has the requisite corporate power and
corporate authority to enter into and perform its obligations under this
Agreement, the Registration Rights Agreement, the Escrow Agreement, and the
Warrant and to issue the Convertible Preferred Shares, the Conversion Shares,
the Warrant and the Warrant Shares pursuant to their respective terms, (ii) the
execution, issuance and delivery of this Agreement, the Registration Rights
Agreement, the Escrow Agreement, the Convertible Preferred Shares and the
Warrant by the Company and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
and no further consent or authorization of the Company or its Board of Directors
or stockholders is required, and (iii) this Agreement, the Registration Rights
Agreement, the Escrow Agreement, the Convertible Preferred Shares and the
Warrant have been duly executed and delivered by the Company and at the Closing
shall constitute valid and binding obligations of the Company enforceable
against the Company in accordance with their terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, or similar
laws relating to, or affecting generally the enforcement of, creditors' rights
and remedies or by other equitable principles of general application. The
Company has duly and validly authorized and reserved for issuance shares of
Common Stock sufficient in number for the conversion of the Convertible
Preferred Shares and for the exercise of the Warrant. The Company understands
and acknowledges the potentially dilutive effect to the Common Stock of the
issuance of the Conversion Shares and, upon any redemption of the Warrant, the
Warrant Shares. The Company further acknowledges that its obligation to issue
Conversion Shares upon conversion of the Convertible Preferred Shares and
Warrant Shares upon exercise of the Warrant in accordance with this Agreement
and the Convertible Preferred Shares is absolute and unconditional regardless of
the dilutive effect that such issuance may have on the ownership interests of
other stockholders of the Company and notwithstanding the commencement of any
case under 11 U.S.C. Section 101 ET SEQ. (the "Bankruptcy Code"). The Company
shall not seek judicial relief from its obligations hereunder except pursuant to
the Bankruptcy Code. In the event the Company is a debtor under the Bankruptcy
Code, the Company hereby waives to the fullest extent permitted
<PAGE>
any rights to relief it may have under 11 U.S.C. Section 362 in respect of
the conversion of the Convertible Preferred Shares and the exercise of the
Warrant. The Company agrees, without cost or expense to the Investor, to take
or consent to any and all action necessary to effectuate relief under 11
U.S.C. Section 362.
Section 4.3. CAPITALIZATION. The authorized capital stock of the Company
consists of 20,000,000 shares of Common Stock, no par value per share, of which
4,023,563 shares are issued and outstanding as of December 15, 1998 and
5,000,000 shares of preferred stock, par value $1.00 per share, of which no
shares are issued and outstanding. Except for outstanding options and warrants
to acquire a total of 4,176,934 shares of Common Stock, there are no outstanding
Capital Shares Equivalents. All of the outstanding shares of Common Stock of the
Company have been duly and validly authorized and issued and are fully paid and
non-assessable.
Section 4.4. COMMON STOCK. The Company has registered its Common Stock pursuant
to Section 12(b) or (g) of the Exchange Act and is in full compliance with all
reporting requirements of the Exchange Act, and the Company is in compliance
with all requirements for the continued listing or quotation of its Common
Stock, and such Common Stock is currently listed or quoted on the Principal
Market. As of the date hereof, the Principal Market is the Nasdaq SmallCap
Market and the Company has not received any notice regarding, and to its
knowledge there is no threat, of the termination or discontinuance of the
eligibility of the Common Stock for such listing.
Section 4.5. SEC DOCUMENTS. The Company has delivered or made available to the
Investor true and complete copies of the SEC Documents. The Company has not
provided to the Investor any information that, according to applicable law, rule
or regulation, should have been disclosed publicly prior to the date hereof by
the Company, but which has not been so disclosed. As of their respective dates,
the SEC Documents complied in all material respects with the requirements of the
Exchange Act, and rules and regulations of the SEC promulgated thereunder and
the SEC Documents did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company included
in the SEC Documents complied in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC or
other applicable rules and regulations with respect thereto at the time of such
inclusion. Such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto or (ii) in the case of unaudited interim
statements, to the extent they exclude footnotes or may be condensed or summary
statements) and fairly present in all material respects the financial position
of the Company as of the dates thereof and the results of operations and cash
flows for the periods then ended (subject, in the case of unaudited interim
statements, to normal year-end audit adjustments). Neither the Company nor any
of its subsidiaries has any material indebtedness, obligations or liabilities of
any kind (whether accrued, absolute, contingent or otherwise, and whether due or
to become due) that would have been required to be reflected in, reserved
against or otherwise described in the financial statements or in the notes
thereto in accordance with GAAP, which was not fully reflected in, reserved
against or otherwise described in the financial statements or the notes thereto
included in the SEC Documents or was not incurred in the ordinary course of
business consistent with the Company's past practices since the last date of
such financial statements.
Section 4.6. EXEMPTION FROM REGISTRATION; VALID ISSUANCES. Subject to the
accuracy of the Investor's representations in Article III, the sale of the
Convertible Preferred Shares, the Conversion Shares, the Warrant and the Warrant
Shares will not require registration under the Securities Act and/or any
applicable state securities law. When issued and paid for in accordance with the
Warrant and validly converted in
<PAGE>
accordance with the terms of the Convertible Preferred Shares, the Conversion
Shares and the Warrant Shares will be duly and validly issued, fully paid,
and non-assessable. Neither the sales of the Convertible Preferred Shares,
the Conversion Shares, the Warrant or the Warrant Shares pursuant to, nor the
Company's performance of its obligations under, this Agreement, the
Registration Rights Agreement, the Escrow Agreement, the Convertible
Preferred Shares, or the Warrant will (i) result in the creation or
imposition by the Company of any liens, charges, claims or other encumbrances
upon the Convertible Preferred Shares, the Conversion Shares, the Warrant or
the Warrant Shares or, except as contemplated herein, any of the assets of
the Company, or (ii) entitle the holders of Outstanding Capital Shares to
preemptive or other rights to subscribe to or acquire the Capital Shares or
other securities of the Company. The Convertible Preferred Shares, the
Conversion Shares, the Warrant and the Warrant Shares shall not subject the
Investor to personal liability to the Company or its creditors by reason of
the possession thereof.
Section 4.7. NO GENERAL SOLICITATION OR ADVERTISING IN REGARD TO THIS
TRANSACTION. Neither the Company nor any of its affiliates nor any person acting
on its or their behalf (i) has conducted or will conduct any general
solicitation (as that term is used in Rule 502(c) of Regulation D) or general
advertising with respect to any of the Convertible Preferred Shares, the
Conversion Shares, the Warrant or the Warrant Shares, or (ii) made any offers or
sales of any security or solicited any offers to buy any security under any
circumstances that would require registration of the Convertible Preferred
Shares, the Conversion Shares, the Warrant or the Warrant Shares under the
Securities Act; provided, that the Company makes no representation or warranty
with respect to the Investor or Trinity Capital Advisors, Inc.
Section 4.8. CORPORATE DOCUMENTS. The Company has furnished or made available to
the Investor true and correct copies of the Company's Certificate of
Incorporation, as amended and in effect on the date hereof (the "Certificate"),
and the Company's By-Laws, as amended and in effect on the date hereof (the
"By-Laws").
Section 4.9. NO CONFLICTS. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby, including without limitation the issuance of the
Convertible Preferred Shares, the Conversion Shares, the Warrant and the Warrant
Shares, do not and will not (i) result in a violation of the Company's
Certificate of Incorporation or By-Laws or (ii) conflict with, or constitute a
material default (or an event that with notice or lapse of time or both would
become a default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any material agreement, indenture or
instrument, or any "lock-up" or similar provision of any underwriting or similar
agreement to which the Company is a party, or (iii) result in a violation of any
federal, state or local law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations) applicable to the
Company or by which any material property or asset of the Company is bound or
affected, nor is the Company otherwise in violation of, conflict with or default
under any of the foregoing (except in each case for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as would
not have, individually or in the aggregate, a Material Adverse Effect). The
business of the Company is not being conducted in violation of any law,
ordinance or regulation of any governmental entity, except for possible
violations that either singly or in the aggregate would not have a Material
Adverse Effect. The Company is not required under federal, state or local law,
rule or regulation to obtain any consent, authorization or order of, or make any
filing or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under this Agreement or issue
and sell the Convertible Preferred Shares or the Warrant in accordance with the
terms hereof (other than any SEC, Nasdaq or state securities filings that may be
required to be made by the Company subsequent to Closing, any registration
statement that may be filed pursuant hereto, and any shareholder approval
required by the rules applicable to companies whose common stock trades on the
Nasdaq Stock Market); provided that, for purposes of the representation made in
this sentence, the Company
<PAGE>
is assuming and relying upon the accuracy of the relevant representations and
agreements of the Investor herein.
Section 4.10. NO MATERIAL ADVERSE CHANGE. Since September 30, 1998, no
Material Adverse Effect has occurred or exists with respect to the Company,
except as disclosed in the SEC Documents.
Section 4.11. NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. Since September 30, 1998,
no event or circumstance has occurred or exists with respect to the Company or
its businesses, properties, prospects, operations or financial condition, that,
under applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by the Company but which has not been so
publicly announced or disclosed in the SEC Documents.
Section 4.12. NO INTEGRATED OFFERING. Other than as set forth in the SEC
Documents, or pursuant to an effective registration statement under the
Securities Act, or pursuant to the issuance or exercise of employee stock
options, or pursuant to its discussion with the Investor and Trinity Capital
Advisors, Inc. in connection with the transactions contemplated hereby, the
Company has not issued, offered or sold the Convertible Preferred Shares, the
Warrant or any shares of Common Stock (including for this purpose any securities
of the same or a similar class as the Convertible Preferred Shares, the Warrant
or Common Stock, or any securities convertible into a exchangeable or
exercisable for the Convertible Preferred Shares or Common Stock or any such
other securities) within the six-month period next preceding the date hereof,
and the Company shall not permit any of its directors, officers or Affiliates
directly or indirectly to take, any action (including, without limitation, any
offering or sale to any person or entity of the Convertible Preferred, Warrants
or shares of Common Stock), so as to make unavailable the exemption from
Securities Act registration being relied upon by the Company for the offer and
sale to Investor of the Convertible Preferred Shares (and the Conversion Shares)
or the Warrant (and the Warrant Shares) as contemplated by this Agreement.
Section 4.13. LITIGATION AND OTHER PROCEEDINGS. Except as disclosed in the SEC
Documents, there are no lawsuits or proceedings pending or, to the knowledge of
the Company, threatened, against the Company, nor has the Company received any
written or oral notice of any such action, suit, proceeding or investigation,
which could reasonably be expected to have a Material Adverse Effect. Except as
set forth in the SEC Documents, no judgment, order, writ, injunction or decree
or award has been issued by or, to the knowledge of the Company, requested of
any court, arbitrator or governmental agency which could result in a Material
Adverse Effect.
Section 4.14. MATERIAL NON-PUBLIC INFORMATION. Except as agreed to in writing by
Investor, the Company has not disclosed to the Investor any material non-public
information that (i) if disclosed, would, or could reasonably be expected to
have, a material effect on the price of the Common Stock or (ii) according to
applicable law, rule or regulation, should have been disclosed publicly by the
Company prior to the date hereof but which has not been so disclosed.
Section 4.15. PAYMENTS AND CONTRIBUTIONS. Neither the Company nor any of its
directors, officers or, to its knowledge, other employees has (i) used any
Company funds for any unlawful contribution, endorsement, gift, entertainment or
other unlawful expense relating to political activity; (ii) made any direct or
indirect unlawful payment of Company funds to any foreign or domestic government
official or employee; (iii) violated or is in violation of any provision of the
Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any bribe,
rebate, payoff, influence payment, kickback or other similar payment to any
person with respect to Company matters.
<PAGE>
Section 4.16. NO MISREPRESENTATION. No representation or warranty of the Company
contained in this Agreement, any schedule, annex or exhibit hereto or any
agreement, instrument or certificate furnished by the Company to the Investor
pursuant to this Agreement, contains any untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein, not misleading.
ARTICLE V
COVENANTS OF THE INVESTOR
Section 5.1. COMPLIANCE WITH LAW. The Investor's trading activities with respect
to shares of the Company's Common Stock will be in compliance with all
applicable state and federal securities laws, rules and regulations and rules
and regulations of the Principal Market on which the Company's Common Stock is
listed.
Section 5.2. SHORT SALES. The Investor and its affiliates shall not directly or
indirectly place any order to sell any shares of Common Stock unless at the time
of placing such sell order, the Investor (or its affiliates) owns the shares to
be sold or has previously delivered a Conversion Notice to the Company with
respect to Convertible Preferred Shares which would convert into such number of
Conversion Shares.
ARTICLE VI
COVENANTS OF THE COMPANY
Section 6.1. REGISTRATION RIGHTS. The Company shall cause the Registration
Rights Agreement to remain in full force and effect and the Company shall comply
in all material respects with the terms thereof.
Section 6.2. RESERVATION OF COMMON STOCK. As of the date hereof, the Company has
reserved and the Company shall continue to reserve and keep available at all
times, free of preemptive rights, shares of Common Stock for the purpose of
enabling the Company to issue the Conversion Shares and the Warrant Shares
pursuant to any conversion of the Convertible Preferred Shares or exercise of
the Warrant; such amount of shares of Common Stock to be reserved shall be
calculated based upon a Market Price for the Common Stock under the terms of the
Convertible Preferred Shares of $1.00. The number of shares so reserved from
time to time, as theretofore increased or reduced as hereinafter provided, may
be reduced by the number of shares actually delivered pursuant to any conversion
of the Convertible Preferred Shares or exercise of the Warrant and the number of
shares so reserved shall be increased or decreased to reflect potential
increases or decreases in the Common Stock that the Company may thereafter be
obligated to issue by reason of adjustments to the Warrant.
Section 6.3. LISTING OF COMMON STOCK. The Company hereby agrees to maintain the
listing of the Common Stock on a Principal Market, and as soon as reasonably
practicable following the Closing or, to the extent that stockholder approval is
required, promptly following receipt thereof (but in any event prior to the
effective date of the Registration Statement as to that number of shares which
may be listed without such stockholder approval) to list the Conversion Shares
and the Warrant Shares on the Principal Market. The Company further agrees, if
the Company applies to have the Common Stock traded on any other Principal
Market, it will include in such application the Conversion Shares and the
Warrant Shares, and will take such
<PAGE>
other action as is necessary or desirable in the opinion of the Investor to
cause the Common Stock to be listed on such other Principal Market as
promptly as possible. The Company will take all action to continue the
listing and trading of its Common Stock on a Principal Market (including,
without limitation, maintaining sufficient net tangible assets) and will
comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the Principal Market and shall
provide Investor with copies of any correspondence to or from such Principal
Market which questions or threatens delisting of the Common Stock, within
three (3) Business Days of the Company's receipt thereof, until the Investor
has disposed of all of its Registrable Securities.
Section 6.4. EXCHANGE ACT REGISTRATION. The Company will cause its Common Stock
to continue to be registered under Section 12(b) or (g) of the Exchange Act,
will use its best efforts to comply in all respects with its reporting and
filing obligations under the Exchange Act, and will not take any action or file
any document (whether or not permitted by the Exchange Act or the rules
thereunder) to terminate or suspend such registration or to terminate or suspend
its reporting and filing obligations under said Act until the Investor has
disposed of all of its Registrable Securities.
Section 6.5. LEGENDS. The certificates evidencing the Registrable Securities
shall be free of legends, except as set forth in Article IX.
Section 6.6. CORPORATE EXISTENCE. The Company will take all steps necessary to
preserve and continue the corporate existence of the Company.
Section 6.7. CONSOLIDATION; MERGER. The Company shall not, at any time after the
date hereof, effect any merger or consolidation of the Company with or into, or
a transfer of all or substantially all of the assets of the Company to, another
entity (a "Consolidation Event") unless the resulting successor or acquiring
entity (if not the Company) assumes by written instrument or by operation of law
the obligation to deliver to the Investor such shares of stock and/or securities
as the Investor is entitled to receive pursuant to this Agreement.
Section 6.8. ISSUANCE OF CONVERTIBLE PREFERRED SHARES AND WARRANT SHARES. The
sale of the Convertible Preferred Shares and the issuance of the Warrant Shares
pursuant to exercise of the Warrant and the Conversion Shares upon conversion of
the Convertible Preferred Shares shall be made in accordance with the provisions
and requirements of Section 4(2) of Regulation D and any applicable state
securities law. The Company shall make all necessary SEC and "blue sky" filings
required to be made by the Company in connection with the sale of the Securities
to the Investor as required by all applicable Laws, and shall provide a copy
thereof to the Investor promptly after such filing.
Section 6.9. LIMITATION ON FUTURE FINANCING. The Company agrees that, so long as
any Convertible Preferred Shares are outstanding, it will not enter into any
sale of its securities for cash at a discount to Market Price without providing
the Investor with ten (10) Trading Days written notice of the terms of such
proposed financing, and the Investor does not agree in writing to provide
financing to the Company on such terms (which shall have been offered by a bona
fide third party) within such ten (10) Trading Day period. The foregoing
limitation shall not apply to any issuance of securities (x) pursuant to any (i)
presently existing employee benefit plan which plan has been approved by the
Company's stockholders, (ii) compensatory plan for a full time employee or key
consultant, or (iii) pursuant to any strategic partnership or other business
transaction, the principal purpose of which is not simply to raise money,
including, without limitation, options previously issued to 8607 Colonial Group,
Inc. pursuant to the Advisory Agreement between that entity and the Company; or
(y) if the Market Price of the Common Stock is less than $1.00 for 30 out of 45
consecutive Trading Days.
<PAGE>
ARTICLE VII
SURVIVAL; INDEMNIFICATION
Section 7.1. SURVIVAL. The representations, warranties and covenants made by
each of the Company and the Investor in this Agreement, the annexes, schedules
and exhibits hereto and in each instrument, agreement and certificate entered
into and delivered by them pursuant to this Agreement, shall survive the Closing
and the consummation of the transactions contemplated hereby. In the event of a
breach or violation of any of such representations, warranties or covenants, the
party to whom such representations, warranties or covenants have been made shall
have all rights and remedies for such breach or violation available to it under
the provisions of this Agreement or otherwise, whether at law or in equity,
irrespective of any investigation made by or on behalf of such party on or prior
to the Closing Date.
Section 7.2. INDEMNITY. (a) The Company hereby agrees to indemnify and hold
harmless the Investor, its Affiliates and their respective officers, directors,
partners and members (collectively, the "Investor Indemnitees"), from and
against any and all Damages, and agrees to reimburse the Investor Indemnitees
for all reasonable out-of-pocket expenses (including the reasonable fees and
expenses of legal counsel), in each case promptly as incurred by the Investor
Indemnitees and to the extent arising out of or in connection with:
(i) any misrepresentation, omission of fact or breach of any of
the Company's representations or warranties contained in this Agreement,
the annexes, schedules or exhibits hereto or any instrument, agreement or
certificate entered into or delivered by the Company pursuant to this
Agreement; or
(ii) any failure by the Company to perform in any material respect
any of its covenants, agreements, undertakings or obligations set forth
in this Agreement, the annexes, schedules or exhibits hereto or any
instrument, agreement or certificate entered into or delivered by the
Company pursuant to this Agreement.
(b) The Investor hereby agrees to indemnify and hold harmless the
Company, its Affiliates and their respective officers, directors, partners and
members (collectively, the "Company Indemnitees"), from and against any and all
Damages, and agrees to reimburse the Company Indemnitees for reasonable all
out-of-pocket expenses (including the reasonable fees and expenses of legal
counsel), in each case promptly as incurred by the Company Indemnitees and to
the extent arising out of or in connection with:
(i) any misrepresentation, omission of fact, or breach of any of
the Investor's representations or warranties contained in this Agreement,
the annexes, schedules or exhibits hereto or any instrument, agreement
or certificate entered into or delivered by the Investor pursuant to
this Agreement; or
(ii) any failure by the Investor to perform in any material
respect any of its covenants, agreements, undertakings or obligations set
forth in this Agreement or any instrument, certificate or agreement
entered into or delivered by the Investor pursuant to this Agreement.
Section 7.3. NOTICE. Promptly after receipt by either party hereto seeking
indemnification pursuant to Section 7.2 (an "Indemnified Party") of written
notice of any investigation, claim, proceeding or other action in respect of
which indemnification is being sought (each, a "Claim"), the Indemnified Party
promptly shall notify the party against whom indemnification pursuant to Section
7.2 is being sought (the "Indemnifying Party") of the commencement thereof; but
the omission to so notify the Indemnifying Party shall not relieve
<PAGE>
it from any liability that it otherwise may have to the Indemnified Party,
except to the extent that the Indemnifying Party is materially prejudiced and
forfeits substantive rights and defenses by reason of such failure. In
connection with any Claim as to which both the Indemnifying Party and the
Indemnified Party are parties, the Indemnifying Party shall be entitled to
assume the defense thereof. Notwithstanding the assumption of the defense of
any Claim by the Indemnifying Party, the Indemnified Party shall have the
right to employ separate legal counsel and to participate in the defense of
such Claim, and the Indemnifying Party shall bear the reasonable fees,
out-of-pocket costs and expenses of such separate legal counsel to the
Indemnified Party if (and only if): (x) the Indemnifying Party shall have
agreed to pay such fees, out-of-pocket costs and expenses, (y) the
Indemnified Party and the Indemnifying Party reasonably shall have concluded
that representation of the Indemnified Party and the Indemnifying Party by
the same legal counsel would not be appropriate due to actual or, as
reasonably determined by legal counsel to the Indemnified Party, potentially
differing interests between such parties in the conduct of the defense of
such Claim, or if there may be legal defenses available to the Indemnified
Party that are in addition to or disparate from those available to the
Indemnifying Party, or (z) the Indemnifying Party shall have failed to employ
legal counsel reasonably satisfactory to the Indemnified Party within a
reasonable period of time after notice of the commencement of such Claim. If
the Indemnified Party employs separate legal counsel in circumstances other
than as described in clauses (x), (y) or (z) above, the fees, costs and
expenses of such legal counsel shall be borne exclusively by the Indemnified
Party. Except as provided above, the Indemnifying Party shall not, in
connection with any Claim in the same jurisdiction, be liable for the fees
and expenses of more than one firm of legal counsel for the Indemnified Party
(together with appropriate local counsel). The Indemnifying Party shall not,
without the prior written consent of the Indemnified Party (which consent
shall not unreasonably be withheld), settle or compromise any Claim or
consent to the entry of any judgment that does not include an unconditional
release of the Indemnified Party from all liabilities with respect to such
Claim or judgment.
Section 7.4. DIRECT CLAIMS. In the event one party hereunder should have a claim
for indemnification that does not involve a claim or demand being asserted by a
third party, the Indemnified Party promptly shall deliver notice of such claim
to the Indemnifying Party. If the Indemnified Party disputes the claim, such
dispute shall be resolved by mutual agreement of the Indemnified Party and the
Indemnifying Party or by binding arbitration conducted in accordance with the
procedures and rules of the American Arbitration Association as set forth in
Article X. Judgment upon any award rendered by any arbitrators may be entered in
any court having competent jurisdiction thereof.
ARTICLE VIII
DUE DILIGENCE REVIEW; NON-DISCLOSURE OF NON-PUBLIC INFORMATION.
Section 8.1. DUE DILIGENCE REVIEW. Subject to Section 8.2, the Company shall
make available for inspection and review by the Investor, advisors to and
representatives of the Investor (who may or may not be affiliated with the
Investor and who are reasonably acceptable to the Company), any underwriter
participating in any disposition of the Registrable Securities on behalf of the
Investor pursuant to the Registration Statement, any such registration statement
or amendment or supplement thereto or any blue sky, Nasdaq or other filing, all
SEC Documents and other filings with the SEC, and all other publicly available
corporate documents and properties of the Company as may be reasonably necessary
for the purpose of such review, and cause the Company's officers, directors and
employees to supply all such publicly available information reasonably requested
by the Investor or any such representative, advisor or underwriter in connection
with such Registration Statement (including, without limitation, in response to
all questions and other inquiries reasonably made or submitted by any of them),
prior to and from time to time after the filing
<PAGE>
and effectiveness of the Registration Statement for the sole purpose of
enabling the Investor and such representatives, advisors and underwriters
and their respective accountants and attorneys to conduct initial and ongoing
due diligence with respect to the Company and the accuracy of the
Registration Statement.
Section 8.2. NON-DISCLOSURE OF NON-PUBLIC INFORMATION.
(a) The Company shall not disclose material non-public information to
the Investor, advisors to or representatives of the Investor unless prior to
disclosure of such information the Company identifies such information as being
non-public information and provides the Investor, such advisors and
representatives with the opportunity to accept or refuse to accept such
non-public information for review. Other than disclosure of any comment letters
received from the SEC staff with respect to the Registration Statement, the
Company may, as a condition to disclosing any non-public information hereunder,
require the Investor's advisors and representatives to enter into a
confidentiality agreement in form reasonably satisfactory to the Company and the
Investor.
(b) Nothing herein shall require the Company to disclose material
non-public information to the Investor or its advisors or representatives, and
the Company represents that it does not disseminate material non-public
information to any investors who purchase stock in the Company in a public
offering, to money managers or to securities analysts, provided, however, that
notwithstanding anything herein to the contrary, the Company will, as
hereinabove provided, promptly notify the advisors and representatives of the
Investor and, if any, underwriters, of any event or the existence of any
circumstance (without any obligation to disclose the specific event or
circumstance) of which it becomes aware, constituting material non-public
information (whether or not requested of the Company specifically or generally
during the course of due diligence by such persons or entities), which, if not
disclosed in the prospectus included in the Registration Statement would cause
such prospectus to include a material misstatement or to omit a material fact
required to be stated therein in order to make the statements, therein in light
of the circumstances in which they were made, not misleading. Nothing contained
in this Section 8.2 shall be construed to mean that such persons or entities
other than the Investor (without the written consent of the Investor prior to
disclosure of such information) may not obtain non-public information in the
course of conducting due diligence in accordance with the terms of this
Agreement and nothing herein shall prevent any such persons or entities from
notifying the Company of their opinion that based on such due diligence by such
persons or entities, that the Registration Statement contains an untrue
statement of a material fact or omits a material fact required to be stated in
the Registration Statement or necessary to make the statements contained
therein, in light of the circumstances in which they were made, not misleading.
ARTICLE IX
LEGENDS; TRANSFER AGENT INSTRUCTIONS
Section 9.1. LEGENDS. Unless otherwise provided below, each certificate
representing Registrable Securities will bear the following legend or equivalent
(the "Legend"):
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY OTHER
APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
<PAGE>
ENCUMBERED, HYPOTHECATED OR OTHERWISE DISPOSED OF, EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO A
TRANSACTION THAT IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
Section 9.2. TRANSFER AGENT INSTRUCTIONS. Upon the execution and delivery
hereof, the Company is issuing to the transfer agent for its Common Stock (and
to any substitute or replacement transfer agent for its Common Stock upon the
Company's appointment of any such substitute or replacement transfer agent)
instructions in substantially the form of Exhibit F hereto. Such instructions
shall be irrevocable by the Company from and after the date hereof or from and
after the issuance thereof to any such substitute or replacement transfer agent,
as the case may be, except as otherwise expressly provided in the Registration
Rights Agreement.
Any of the notices referred to above in this Section 9.2 may be
sent by facsimile to the Company's transfer agent.
Section 9.3. NO OTHER LEGEND OR STOCK TRANSFER RESTRICTIONS. No legend other
than the one specified in Section 9.1 has been or shall be placed on the share
certificates representing the Registrable Securities and no instructions or
"stop transfer orders," so called, "stock transfer restrictions," or other
restrictions have been or shall be given to the Company's transfer agent with
respect thereto other than as expressly set forth in this Article IX.
Section 9.4. INVESTOR'S COMPLIANCE. Nothing in this Article shall affect in any
way the Investor's obligations under any agreement to comply with all applicable
securities laws upon resale of the Common Stock.
ARTICLE X
CHOICE OF LAW
Section 10.1. GOVERNING LAW/ARBITRATION. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made in New York by persons domiciled in New York City and without
regard to its principles of conflicts of laws. Any dispute under this Agreement
or any Exhibit attached hereto shall be submitted to arbitration under the
American Arbitration Association (the "AAA") in New York City, New York, and
shall be finally and conclusively determined by the decision of a board of
arbitration consisting of three (3) members (hereinafter referred to as the
"Board of Arbitration") selected as according to the rules governing the AAA.
The Board of Arbitration shall meet on consecutive business days in New York
City, New York, and shall reach and render a decision in writing (concurred in
by a majority of the members of the Board of Arbitration) with respect to the
amount, if any, which the losing party is required to pay to the other party in
respect of a claim filed. In connection with rendering its decisions, the Board
of Arbitration shall adopt and follow the laws of the State of New York. To the
extent practical, decisions of the Board of Arbitration shall be rendered no
more than thirty (30) calendar days following commencement of proceedings with
respect thereto. The Board of Arbitration shall cause its written decision to be
delivered to all parties involved in the dispute. Any decision made by the Board
of Arbitration (either prior to or after the expiration of such thirty (30)
calendar day period) shall be final, binding and conclusive on the parties to
the dispute, and entitled to be enforced to the fullest extent permitted by law
and entered in any court of competent jurisdiction. The non-prevailing party to
any arbitration (as determined by the
<PAGE>
Board of Arbitration) shall pay the expenses of the prevailing party
including reasonable attorney's fees, in connection with such arbitration.
ARTICLE XI
ASSIGNMENT; ENTIRE AGREEMENT
Section 11.1. ASSIGNMENT. Neither this Agreement nor any rights of the Investor
or the Company hereunder may be assigned by either party to any other person.
Notwithstanding the foregoing, (a) the provisions of this Agreement shall inure
to the benefit of, and be enforceable by, any permitted transferee of any of the
Convertible Preferred Shares or Warrant purchased or acquired by the Investor
hereunder with respect to the Convertible Preferred Shares or Warrant held by
such person, and (b) upon the prior written consent of the Company, which
consent shall not unreasonably be withheld or delayed, the Investor's interest
in this Agreement may be assigned at any time, in whole or in part, to any other
person or entity (including any affiliate of the Investor) who agrees to make
the representations and warranties contained in Article III and who agrees to be
bound by the covenants of Article V.
ARTICLE XII
NOTICES
Section 12.1. 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 reputable courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:
If to the Company: Hawaiian Natural Water Company, Inc.
248 Mokauea Street
Honolulu, HI 96819
Attention: Marcus Bender, Chief Executive Officer
Telephone: (808) 832-4550
Facsimile: (808) 832-4559
<PAGE>
with a copy to: Graham & James, LLP
(shall not constitute notice) 801 S. Figueroa Street
14th Floor
Los Angeles, CA 90017
Attention: Richard Manson, Esq.
Telephone: (213) 689-5112
Facsimile: (213) 623-4581
if to the Investor: AMRO International, S.A.
c/o Ultra Finanz
26 Grossmunster Platz
Zurich CH8022, Switzerland
Telephone:
Facsimile: 011-411-262-5515
with a copy to: Joseph A. Smith, Esq.
(shall not constitute notice) Epstein Becker & Green, P.C.
250 Park Avenue
New York, New York
Telephone: (212) 351-4500
Facsimile: (212) 661-0989
Either party hereto may from time to time change its address or facsimile number
for notices under this Section 12.1 by giving written notice of such changed
address or facsimile number to the other party hereto as provided in this
Section 12.1.
ARTICLE XIII
MISCELLANEOUS
Section 13.1. COUNTERPARTS/ FACSIMILE/ AMENDMENTS. This Agreement may be
executed in multiple counterparts, each of which may be executed by less than
all of the parties and shall be deemed to be an original instrument which shall
be enforceable against the parties actually executing such counterparts and all
of which together shall constitute one and the same instrument. Except as
otherwise stated herein, in lieu of the original documents, a facsimile
transmission or copy of the original documents shall be as effective and
enforceable as the original. This Agreement may be amended only by a writing
executed by all parties.
Section 13.2. ENTIRE AGREEMENT. This Agreement, the agreements attached as
Exhibits hereto, which include, but are not limited to the Convertible Preferred
Shares, the Warrant, the Escrow Agreement, and the Registration Rights
Agreement, set forth the entire agreement and understanding of the parties
relating to the subject matter hereof and supersedes all prior and
contemporaneous agreements, negotiations and understandings between the parties,
both oral and written relating to the subject matter hereof. The terms and
conditions of all Exhibits to this Agreement are incorporated herein by this
reference and shall constitute part of this Agreement as is fully set forth
herein.
<PAGE>
Section 13.3. SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that such severability shall be ineffective if
it materially changes the economic benefit of this Agreement to any party.
Section 13.4. HEADINGS. The headings used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
Section 13.5. REPORTING ENTITY FOR THE COMMON STOCK. The reporting entity relied
upon for the determination of the trading price or trading volume of the Common
Stock on any given Trading Day for the purposes of this Agreement shall be
Bloomberg, L.P. or any successor thereto. The written mutual consent of the
Investor and the Company shall be required to employ any other reporting entity.
Section 13.6. REPLACEMENT OF CERTIFICATES. Upon (i) receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of a certificate representing the Convertible Preferred Shares or any
Conversion Shares or Warrant or any Warrant Shares and (ii) in the case of any
such loss, theft or destruction of such certificate, upon delivery of an
indemnity agreement or security reasonably satisfactory in form and amount to
the Company (which shall not exceed that required by the Company's transfer
agent in the ordinary course) or (iii) in the case of any such mutilation, on
surrender and cancellation of such certificate, the Company at its expense will
execute and deliver, in lieu thereof, a new certificate of like tenor.
Section 13.7. FEES AND EXPENSES. Each of the Company and the Investor agrees to
pay its own expenses incident to the performance of its obligations hereunder,
except that the Company shall pay the fees, expenses and disbursements of
Investor's counsel in an amount not to exceed $5,000 plus $1,000 for its
services as Escrow Agent at the first Closing, and $500 for its services as
Escrow Agent for the second Closing, all as set forth in the Escrow Agreement.
Section 13.8. BROKERAGE. Each of the parties hereto represents that it has had
no dealings in connection with this transaction with any finder or broker who
will demand payment of any fee or commission from the other [continued] party
except for Trinity Capital Advisors, Inc., and any other finder or broker
specifically identified in the Company's engagement letter with Trinity, whose
fees shall be paid by the Company. The Company on the one hand, and the
Investor, on the other hand, agree to indemnify the other against and hold the
other harmless from any and all liabilities to any person claiming brokerage
commissions or finder's fees on account of services purported to have been
rendered on behalf of the indemnifying party in connection with this Agreement
or the transactions contemplated hereby.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by the undersigned, thereunto duly authorized, as of the date first set
forth above.
HAWAIIAN NATURAL WATER COMPANY, INC.
By: /s/ MARCUS BENDER
-------------------------------------
Marcus Bender
Chief Executive Officer
AMRO International, S.A.
By: /s/ H. U. BACHOFEN
-------------------------------------
Name: H. U. Bachofen, Director
<PAGE>
EXHIBIT 10.2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of March 1, 1999, between AMRO
International, S.A., a Panama corporation ("Holder"), and HAWAIIAN NATURAL
WATER COMPANY, INC., a corporation incorporated under the laws of the State
of Hawaii (the "Company").
WHEREAS, simultaneously with the execution and delivery of this
Agreement, the Holder is purchasing or agreeing to purchase from the Company,
pursuant to a Convertible Preferred Shares and Warrant Purchase Agreement
dated the date hereof (the "Purchase Agreement"), $1,250,000 liquidation
preference amount of Convertible Preferred Shares and a Warrant to purchase
up to 100,000 shares of the Company's Common Stock (terms not defined herein
shall have the meanings ascribed to them in the Purchase Agreement); and
WHEREAS, the Company desires to grant to the Holder the registration
rights set forth herein with respect to the shares of Common Stock issuable
upon conversion of the Preferred Shares and shares of Common Stock issuable
upon exercise of the Warrant (hereinafter referred to as the "Stock" or
"Securities" of the Company).
NOW, THEREFORE, the parties hereto mutually agree as follows:
Section 1. REGISTRABLE SECURITIES. As used herein the term
"Registrable Security" means the Securities until (i) the Registration
Statement has been declared effective by the Commission, and all Securities
have been disposed of pursuant to the Registration Statement, (ii) all
Securities have been sold under circumstances under which all of the
applicable conditions of Rule 144 (or any similar provision then in force)
under the Securities Act ("Rule 144") are met, (iii) all Securities have been
otherwise transferred to holders who may trade such Securities without
restriction under the Securities Act, and the Company has delivered a new
certificate or other evidence of ownership for such Securities not bearing a
restrictive legend or (iv) such time as, in the opinion of counsel to the
Company, all Securities may be sold without any time, volume or manner
limitations pursuant to Rule 144(k) (or any similar provision then in effect)
under the Securities Act. The term "Registrable Securities" means any and/or
all of the securities falling within the foregoing definition of a
"Registrable Security." In the event of any merger, reorganization,
consolidation, recapitalization or other change in corporate structure
affecting the Common Stock, such adjustment shall be deemed to be made in the
definition of "Registrable Security" as is appropriate in order to prevent
any dilution or enlargement of the rights granted pursuant to this Agreement.
Section 2. RESTRICTIONS ON TRANSFER. The Holder acknowledges and
understands that prior to the registration of the Securities as provided
herein, the Securities are "restricted securities" as defined in Rule 144
promulgated under the Act. The Holder understands that no disposition or
transfer of the Securities may be made by Holder in the absence of (i) an
opinion of counsel to the Holder that such transfer may be made without
registration under the Securities Act or (ii) such registration.
With a view to making available to the Holder the benefits of
Rule 144 under the Securities Act or any other similar rule or regulation of
the Commission that may at any time permit the Holder to sell securities of
the Company to the public without registration ("Rule 144"), the Company
agrees to:
<PAGE>
(a) comply with the provisions of paragraph (c)(1) of Rule 144;
and
(b) file with the Commission in a timely manner all reports and
other documents required to be filed by the Company pursuant to Section 13 or
15(d) under the Exchange Act; and, if at any time it is not required to file
such reports but in the past had been required to or did file such reports,
it will, upon the request of any Holder, make available other information as
required by, and so long as necessary to permit sales of, its Registrable
Securities pursuant to Rule 144.
Section 3. REGISTRATION RIGHTS WITH RESPECT TO THE SECURITIES.
(a) The Company agrees that it will prepare and file with the
Securities and Exchange Commission (the "Commission"), on or before April 15,
1999, a registration statement (on Form S-3, or other appropriate
registration statement) under the Securities Act (the "Registration
Statement"), at the sole expense of the Company (except as provided in
Section 3(c) hereof), in respect of all holders of Securities, so as to
permit a public offering and resale of the Securities under the Act.
The Company shall use its best efforts to cause the
Registration Statement to become effective within ninety (90) days from the
Closing Date (or within 120 days, if the staff of the Commission advises the
Company in writing that it is not eligible to register the Registrable
Securities on Form S-3), or, if earlier, within five (5) days of SEC
clearance to request acceleration of effectiveness. The number of shares
designated in the Registration Statement to be registered shall include all
the Warrant Shares and the number of shares of Common Stock which would be
issued upon conversion of the Preferred Shares assuming a Market Price of
$1.00 per share of Common Stock, and shall include appropriate language
regarding reliance upon Rule 416 to the extent permitted by the Commission.
The Company will notify Holder of the effectiveness of the Registration
Statement within one Business Day of such event.
(b) The Company will maintain the Registration Statement or
post-effective amendment filed under this Section 3 hereof effective under
the Securities Act until the earlier of (i) the date that none of the
Preferred Shares, the Warrant or the Securities are or may become issued and
outstanding, (ii) the date that all of the Securities have been sold pursuant
to the Registration Statement, (iii) the date the holders thereof receive an
opinion of counsel to the Company, which counsel shall be reasonably
acceptable to the Holder, that the Securities may be sold under the
provisions of Rule 144 without limitation as to volume, (iv) all Securities
have been otherwise transferred to Holders who may trade such shares without
restriction under the Securities Act, and the Company has delivered a new
certificate or other evidence of ownership for such securities not bearing a
restrictive legend, or (v) all Securities may be sold without any time,
volume or manner limitations pursuant to Rule 144(k) or any similar provision
then in effect under the Securities Act in the opinion of counsel to the
Company, which counsel shall be reasonably acceptable to the Holder (the
"Effectiveness Period").
(c) All fees, disbursements and out-of-pocket expenses and
costs incurred by the Company in connection with the preparation and filing
of the Registration Statement under subparagraph 3(a) and in complying with
applicable securities and Blue Sky laws (including, without limitation, all
attorneys' fees of the Company) shall be borne by the Company. The Holder
shall bear the cost of underwriting and/or brokerage discounts, fees and
commissions, if any, applicable to the Securities being registered and the
fees and expenses of its counsel. The Holder and its counsel shall have a
reasonable period, not to exceed three (3) Business Days, to review the
proposed Registration Statement or any amendment thereto, prior to filing
with the Commission, and the Company shall provide each Holder with
<PAGE>
copies of any comment letters received from the Commission with respect
thereto within two (2) Business Days of receipt thereof. The Company shall
make reasonably available for inspection by Holder, any underwriter
participating in any disposition pursuant to the Registration Statement, and
any attorney, accountant or other agent retained by such Holder or any such
underwriter all relevant financial and other records, pertinent corporate
documents and properties of the Company and its subsidiaries, and cause the
Company's officers, directors and employees to supply all information
reasonably requested by such Holder or any such underwriter, attorney,
accountant or agent in connection with the Registration Statement, in each
case, as is customary for similar due diligence examinations; PROVIDED,
HOWEVER, that all records, information and documents that are designated in
writing by the Company, in good faith, as confidential, proprietary or
containing any material non-public information shall be kept confidential by
such Holder and any such underwriter, attorney, accountant or agent (pursuant
to an appropriate confidentiality agreement in the case of any such Holder or
agent), unless such disclosure is made pursuant to judicial process in a
court proceeding (after first giving the Company an opportunity promptly to
seek a protective order or otherwise limit the scope of the information
sought to be disclosed) or is required by law, or such records, information
or documents become available to the public generally or through a third
party not in violation of an accompanying obligation of confidentiality; and
PROVIDED FURTHER that, if the foregoing inspection and information gathering
would otherwise disrupt the Company's conduct of its business, such
inspection and information gathering shall, to the maximum extent possible,
be coordinated on behalf of the Holder and the other parties entitled thereto
by one firm of counsel designed by and on behalf of the majority in interest
of Holder and other parties. The Company shall qualify any of the securities
for sale in such states as such Holder reasonably designates and shall
furnish indemnification in the manner provided in Section 6 hereof. However,
the Company shall not be required to qualify in any state which will require
an escrow or other restriction relating to the Company and/or the sellers, or
which will require the Company to qualify to do business in such state or
require the Company to file therein any general consent to service of
process. The Company at its expense will supply the Holder with copies of the
Registration Statement and the prospectus included therein and other related
documents in such quantities as may be reasonably requested by the Holder.
(d) The Company shall not be required by this Section 3 to
include a Holder's Securities in any Registration Statement which is to be
filed if, in the opinion of counsel for both the Holder and the Company (or,
should they not agree, in the opinion of another counsel experienced in
securities law matters acceptable to counsel for the Holder and the Company)
the proposed offering or other transfer as to which such registration is
requested is exempt from applicable federal and state securities laws and
would result in all purchasers or transferees obtaining securities which are
not "restricted securities", as defined in Rule 144 under the Securities Act.
(e) In the event that the Registration Statement to be filed by
the Company pursuant to Section 3(a) above is not declared effective by the
Commission within ninety (90) days from the Closing Date (or within 120 days
as set forth a Section 3(a)), or the Registration Statement is not maintained
as effective by the Company for the period set forth in Section 3(b) above
(each a "Registration Default") then the Company will pay Holder (pro rated
on a daily basis), as liquidated damages for such failure and not as a
penalty, two percent (2%) of the aggregate market value of all Securities
purchased from the Company and then held by the Investor per month thereafter
until the Registration Statement has been declared effective; provided,
however, that the foregoing liquidated damages provision shall not apply if
the Company has filed the Registration as aforesaid on or before April15,
1999 and thereafter uses best efforts to cause it to become effective within
the time period set forth above, but the Registration Statement does not
become effective within such time period primarily because of issues or
concerns raised by the Commission concerning the structure of the transaction
contemplated by the Purchase Agreement. Only one liquidated
<PAGE>
damages amount shall be payable regardless of whether more than one such
Registration Default is then in existence. Such payment of the liquidated
damages shall be made to the Holder in cash, within five (5) calendar days of
demand, provided, however, that the payment of such liquidated damages shall
not relieve the Company from its obligations to register the Securities
pursuant to this Section. The market value of the Common Stock for this
purpose shall be the closing price (or last trade, if so reported) on the
Principal Market for each day during such Registration Default.
Notwithstanding anything to the contrary contained herein, a failure to
maintain the effectiveness of the Registration Statement or the ability of a
Holder to use the Registration Statement to effect resales of Securities
during the period after 45 days and within 90 days from the end of the
Company's fiscal year resulting solely from the need to update the Company's
financial statements contained or incorporated by reference in the
Registration Statement shall not constitute a Registration Default and shall
not trigger the accrual of liquidated damages hereunder.
If the Company does not remit the damages to the Holder as set
forth above, the Company will pay the Holder reasonable costs of collection,
including attorneys' fees, in addition to the liquidated damages. The
registration of the Securities pursuant to this provision shall not affect or
limit Holder's other rights or remedies as set forth in this Agreement.
(f) No provision contained herein shall preclude the Company
from selling securities pursuant to any Registration Statement in which it is
required to include Securities pursuant to this Section 3.
(g) If at any time or from time to time after the effective
date of the Registration Statement, the Company notifies the Holder in
writing of the existence of a Potential Material Event (as defined in Section
3(h) below), the Holder shall not offer or sell any Securities or engage in
any other transaction involving or relating to Securities, from the time of
the giving of notice with respect to a Potential Material Event until such
Holder receives written notice from the Company that such Potential Material
Event either has been disclosed to the public or no longer constitutes a
Potential Material Event; provided, however, that the Company may not so
suspend the right to such holders of Securities for more than twenty (20)
days in the aggregate during any twelve month period, during the periods the
Registration Statement is required to be in effect. If a Potential Material
Event shall occur prior to the date the Registration Statement is filed, then
the Company's obligation to file the Registration Statement shall be delayed
without penalty for not more than twenty (20) days, and such delay or delays
shall not constitute a Registration Default. The Company must give Holder
notice in writing at least two (2) business days prior to the first day of
the blackout period.
(h) "Potential Material Event" means any of the following: (a)
the possession by the Company of material information not ripe for disclosure
in a registration statement, as determined in good faith by the Chief
Executive Officer or the Board of Directors of the Company that disclosure of
such information in the Registration Statement would be detrimental to the
business and affairs of the Company; or (b) any material engagement or
activity by the Company which would, in the good faith determination of the
Chief Executive Officer or the Board of Directors of the Company, be
adversely affected by disclosure in a registration statement at such time,
which determination shall be accompanied by a good faith determination by the
Chief Executive Officer or the Board of Directors of the Company that the
Registration Statement would be materially misleading absent the inclusion of
such information.
<PAGE>
Section 4. COOPERATION WITH COMPANY. Holder will cooperate with the
Company in all respects in connection with this Agreement, including timely
supplying all information reasonably requested by the Company (which shall
include all information regarding the Holder and proposed manner of sale of
the Registrable Securities required to be disclosed in the Registration
Statement) and executing and returning all documents reasonably requested in
connection with the registration and sale of the Registrable Securities and
entering into and performing its obligations under any underwriting
agreement, if the offering is an underwritten offering, in usual and
customary form, with the managing underwriter or underwriters of such
underwritten offering. Nothing in this Agreement shall obligate the Holder to
consent to be named as an underwriter in the Registration Statement. The
obligation of the Company to register the Registrable Securities shall be
absolute and unconditional as to those Securities which the Commission will
permit to be registered without naming the Holder as an underwriter,
notwithstanding that such Registrable Securities may be limited to only those
Conversion Shares issuable upon conversion of the Preferred Shares.
Section 5. REGISTRATION PROCEDURES. If and whenever the Company is
required by any of the provisions of this Agreement to effect the
registration of any of the Registrable Securities under the Act, the Company
shall (except as otherwise provided in this Agreement), as expeditiously as
possible, subject to the Holder's assistance and cooperation as reasonably
required:
(a) (i) prepare and file with the Commission such amendments
and supplements to the Registration Statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective and to comply with the provisions of the Act with respect to the
sale or other disposition of all securities covered by such registration
statement whenever the Holder of such Registrable Securities shall desire to
sell or otherwise dispose of the same (including prospectus supplements with
respect to the sales of securities from time to time in connection with a
registration statement pursuant to Rule 415 promulgated under the Act) and
(ii) take all lawful action such that each of (A) the Registration Statement
and any amendment thereto does not, when it becomes effective, contain an
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, not
misleading and (B) the Prospectus forming part of the Registration Statement,
and any amendment or supplement thereto, does not at any time during the
Registration Period include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(b) (i) prior to the filing with the Commission of any
Registration Statement (including any amendments thereto) and the
distribution or delivery of any prospectus (including any supplements
thereto), provide draft copies thereof to the Holders and reflect in such
documents all such comments as the Holders (and their counsel) reasonably may
propose respecting the Selling Shareholders and Plan of Distribution sections
(or equivalents) and (ii) furnish to each Holder such numbers of copies of a
prospectus including a preliminary prospectus or any amendment or supplement
to any prospectus, as applicable, in conformity with the requirements of the
Act, and such other documents, as such Holder may reasonably request in order
to facilitate the public sale or other disposition of the securities owned by
such Holder;
(c) register and qualify the Registrable Securities covered by
the Registration Statement under such other securities or blue sky laws of
such jurisdictions as the Holder shall reasonably request (subject to the
limitations set forth in Section 3(d) above), and do any and all other acts
and things which may be necessary or advisable to enable each Holder to
consummate the public sale or other disposition in such jurisdiction of the
securities owned by such Holder, except that the Company shall not for
<PAGE>
any such purpose be required to qualify to do business as a foreign
corporation in any jurisdiction wherein it is not so qualified or to file
therein any general consent to service of process;
(d) list such Registrable Securities on the American Stock
Exchange, other national securities exchange, the NASDAQ National Market or
the NASDAQ Small-Cap Market, on which the Common Stock of the Company is then
listed, if the listing of such Registrable Securities is then permitted under
the rules of such exchange or Nasdaq;
(e) notify each Holder of Registrable Securities covered by the
Registration Statement, at any time when a prospectus relating thereto
covered by the Registration Statement is required to be delivered under the
Act, of the happening of any event of which it has knowledge as a result of
which the prospectus included in the Registration Statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing, and the Company shall prepare and file a curative amendment under
Section 5(a) as quickly as commercially possible;
(f) as promptly as practicable after becoming aware of such
event, notify each Holder who holds Registrable Securities being sold (or, in
the event of an underwritten offering, the managing underwriters) of the
issuance by the Commission of any stop order or other suspension of the
effectiveness of the Registration Statement at the earliest possible time and
take all lawful action to effect the withdrawal, recession or removal of such
stop order or other suspension;
(g) cooperate with the Holders who hold Registrable Securities
being offered to facilitate the timely preparation and delivery of
certificates for the Registrable Securities to be offered pursuant to the
Registration Statement and enable such certificates for the Registrable
Securities to be in such denominations or amounts, as the case may be, as the
Holders reasonably may request and registered in such names as the Holder may
request; and, within three business days after a Registration Statement which
includes Registrable Securities is declared effective by the Commission,
deliver and cause legal counsel selected by the Company to deliver to the
transfer agent for the Registrable Securities (with copies to the Holders
whose Registrable Securities are included in such Registration Statement) an
appropriate instruction and, to the extent necessary, an opinion of such
counsel;
(h) take all such other lawful actions reasonably necessary to
expedite and facilitate the disposition by the Holders of their Registrable
Securities in accordance with the intended methods therefor provided in the
prospectus which are customary for issuers to perform under the circumstances;
(i) in the event of an underwritten offering, promptly include
or incorporate in a Prospectus supplement or post-effective amendment to the
Registration Statement such information as the managers reasonably agree
should be included therein and to which the Company does not reasonably
object and make all required filings of such Prospectus supplement or
post-effective amendment as soon as practicable after it is notified of the
matters to be included or incorporated in such Prospectus supplement or
post-effective amendment; and
(j) maintain a transfer agent and registrar for its Common
Stock.
<PAGE>
Section 6. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless the
Holder and each person, if any, who controls the Holder within the meaning of
the Securities Act ("Distributing Holder") against any losses, claims,
damages or liabilities, joint or several (which shall, for all purposes of
this Agreement, include, but not be limited to, all reasonable costs of
defense and investigation and all reasonable attorneys' fees), to which the
Distributing Holder may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement, or any related preliminary prospectus, final prospectus or
amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading;
provided, however, that the Company will not be liable in any such case to
the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in the Registration Statement, preliminary prospectus,
final prospectus or amendment or supplement thereto in reliance upon, and in
conformity with, written information furnished to the Company by the
Distributing Holder, specifically for use in the preparation thereof. This
Section 6(a) shall not inure to the benefit of any Distributing Holder with
respect to any person asserting such loss, claim, damage or liability who
purchased the Registrable Securities which are the subject thereof if the
Distributing Holder failed to send or give (in violation of the Securities
Act or the rules and regulations promulgated thereunder) a copy of the
prospectus contained in such Registration Statement to such person at or
prior to the written confirmation to such person of the sale of such
Registrable Securities, where the Distributing Holder was obligated to do so
under the Securities Act or the rules and regulations promulgated thereunder.
This indemnity agreement will be in addition to any liability which the
Company may otherwise have.
(b) Each Distributing Holder agrees that it will indemnify and
hold harmless the Company, and each officer, director of the Company or
person, if any, who controls the Company within the meaning of the Securities
Act, against any losses, claims, damages or liabilities (which shall, for all
purposes of this Agreement, include, but not be limited to, all reasonable
costs of defense and investigation and all reasonable attorneys' fees) to
which the Company or any such officer, director or controlling person may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, or any related
preliminary prospectus, final prospectus or amendment or supplement thereto,
or arise out of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, but in each case only to the
extent that such untrue statement or alleged untrue statement or omission or
alleged omission was made in the Registration Statement, preliminary
prospectus, final prospectus or amendment or supplement thereto in reliance
upon, and in conformity with, written information furnished to the Company by
such Distributing Holder, specifically for use in the preparation thereof.
This indemnity agreement will be in addition to any liability which the
Distributing Holder may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 6 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying
party under this Section 6, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not
relieve the indemnifying party from any liability which it may have to any
indemnified party except to the extent of actual prejudice demonstrated by
the indemnifying party. In case any such action is brought against any
indemnified party, and it notifies the
<PAGE>
indemnifying party of the commencement thereof, the indemnifying party will
be entitled to participate in, and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, assume the defense
thereof, subject to the provisions herein stated and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such
indemnified party under this Section 6 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation, unless the
indemnifying party shall not pursue the action to its final conclusion. The
indemnified party shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the fees and expenses
of such counsel shall not be at the expense of the indemnifying party if the
indemnifying party has assumed the defense of the action with counsel
reasonably satisfactory to the indemnified party; provided that if the
indemnified party is the Distributing Holder, the fees and expenses of such
counsel shall be at the expense of the indemnifying party if (i) the
employment of such counsel has been specifically authorized in writing by the
indemnifying party, or (ii) the named parties to any such action (including
any impleaded parties) include both the Distributing Holder and the
indemnifying party and the Distributing Holder shall have been advised by
such counsel that there may be one or more legal defenses available to the
indemnifying party different from or in conflict with any legal defenses
which may be available to the Distributing Holder (in which case the
indemnifying party shall not have the right to assume the defense of such
action on behalf of the Distributing Holder, it being understood, however,
that the indemnifying party shall, in connection with any one such action or
separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable only for the reasonable fees and expenses of one separate firm of
attorneys for the Distributing Holder, which firm shall be designated in
writing by the Distributing Holder). No settlement of any action against an
indemnified party shall be made without the prior written consent of the
indemnified party, which consent shall not be unreasonably withheld.
Section 7. CONTRIBUTION. In order to provide for just and equitable
contribution under the Securities Act in any case in which (i) the
indemnified party makes a claim for indemnification pursuant to Section 6
hereof but is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to
appeal or the denial of the last right of appeal) that such indemnification
may not be enforced in such case notwithstanding the fact that the express
provisions of Section 6 hereof provide for indemnification in such case, or
(ii) contribution under the Securities Act may be required on the part of any
indemnified party, then the Company and the applicable Distributing Holder
shall contribute to the aggregate losses, claims, damages or liabilities to
which they may be subject (which shall, for all purposes of this Agreement,
include, but not be limited to, all reasonable costs of defense and
investigation and all reasonable attorneys' fees), in either such case (after
contribution from others) on the basis of relative fault as well as any other
relevant equitable considerations. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company on the one hand
or the applicable Distributing Holder on the other hand, and the parties'
relative intent, knowledge, access to information and opportunity to correct
or prevent such statement or omission. The Company and the Distributing
Holder agree that it would not be just and equitable if contribution pursuant
to this Section 7 were determined by pro rata allocation or by any other
method of allocation which does not take account of the equitable
considerations referred to in this Section 7. The amount paid or payable by
an indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above in this Section
7 shall be deemed to include any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any
such action or claim. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled
to contribution from any person who was not guilty of such fraudulent
misrepresentation.
<PAGE>
Notwithstanding any other provision of this Section 7, in no event shall any
(i) Holder be required to undertake liability to any person under this
Section 7 for any amounts in excess of the dollar amount of the proceeds to
be received by such Holder from the sale of such Holder's Registrable
Securities (after deducting any fees, discounts and commissions applicable
thereto) pursuant to any Registration Statement under which such Registrable
Securities are to be registered under the Securities Act and (ii) underwriter
be required to undertake liability to any person hereunder for any amounts in
excess of the aggregate discount, commission or other compensation payable to
such underwriter with respect to the Registrable Securities underwritten by
it and distributed pursuant to the Registration Statement.
Section 8. 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 reputable courier
service, fully prepaid, addressed to such address, or upon actual receipt of
such mailing, whichever shall first occur. The addresses for such
communications shall be:
If to the Company: HAWAIIAN NATURAL WATER COMPANY, INC.
248 Mokauea Street
Honolulu, HI 96819
Attention: Marcus Bender
Telephone: (818) 832-4550
Fax: (818) 832-4559
with a copy to: Richard Manson, Esq.
(shall not constitute notice) Graham & James, LLP
801 S. Figueroa Street
Los Angeles, CA 90017
Telephone: (213) 689-5112
Fax: (213) 623-4581
If to the Investor: AMRO International, S.A.
C/o Ultra Finanz
26 Grossmunsterplatz
Zurich CH8022, Switzerland
Telephone:
Fax: 011-411-262-5515
<PAGE>
Either party hereto may from time to time change its address or facsimile
number for notices under this Section 8 by giving at least ten (10) days'
prior written notice of such changed address or facsimile number to the other
party hereto.
Section 9. ASSIGNMENT. This Agreement is binding upon and inures to
the benefit of the parties hereto and their respective heirs, successors and
permitted assigns. The rights granted the Holder under this Agreement may be
assigned to any purchaser of substantially all of the Registrable Securities
(or the rights thereto) from Holder, as otherwise permitted by the Purchase
Agreement. In the event of a transfer of the rights granted under this
Agreement, the Holder agrees that the Company may require that the transferee
comply with reasonable conditions as determined in the discretion of the
Company.
Section 10. ADDITIONAL COVENANTS OF THE COMPANY. The Company agrees
that at such time as it meets all the requirements for the use of Securities
Act Registration Statement on Form S-3 it shall file all reports and
information required to be filed by it with the Commission in a timely manner
and take all such other action so as to maintain such eligibility for the use
of such form.
Section 11. COUNTERPARTS/FACSIMILE. This Agreement may be executed
in two or more counterparts, each of which shall constitute an original, but
all of which, when together shall constitute but one and the same instrument,
and shall become effective when one or more counterparts have been signed by
each party hereto and delivered to the other party. In lieu of the original,
a facsimile transmission or copy of the original shall be as effective and
enforceable as the original.
Section 12. REMEDIES. The remedies provided in this Agreement are
cumulative and not exclusive of any remedies provided by law. If any term,
provision, covenant or restriction of this Agreement is held by a court of
competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth
herein shall remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their best efforts
to find and employ an alternative means to achieve the same or substantially
the same result as that contemplated by such term, provision, covenant or
restriction. It is hereby stipulated and declared to be the intention of the
parties that they would have executed the remaining terms, provisions,
covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
Section 13. CONFLICTING AGREEMENTS. The Company shall not enter into
any agreement with respect to its securities that is inconsistent with the
rights granted to the holders of Registrable Securities in this Agreement or
otherwise prevents the Company from complying with all of its obligations
hereunder.
Section 14. HEADINGS. The headings in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 15. GOVERNING LAW, ARBITRATION. This Agreement shall be
governed by and construed in accordance with the laws of the State of New
York applicable to contracts made in New York by persons domiciled in New
York City and without regard to its principles of conflicts of laws. Any
dispute under this Agreement shall be submitted to arbitration under the
American Arbitration Association (the "AAA") in New York City, New York, and
shall be finally and conclusively determined by the decision of a board of
arbitration consisting of three (3) members (hereinafter referred to as the
"Board of Arbitration") selected as according to the rules governing the AAA.
The Board of Arbitration shall meet on consecutive business days in New York
City, New York, and shall reach and render a decision in writing (concurred
in by a majority of the members of the Board of Arbitration) with respect to
the amount, if any, which the losing party is required to
<PAGE>
pay to the other party in respect of a claim filed. In connection with
rendering its decisions, the Board of Arbitration shall adopt and follow the
laws of the State of New York. To the extent practical, decisions of the
Board of Arbitration shall be rendered no more than thirty (30) calendar days
following commencement of proceedings with respect thereto. The Board of
Arbitration shall cause its written decision to be delivered to all parties
involved in the dispute. Any decision made by the Board of Arbitration
(either prior to or after the expiration of such thirty (30) calendar day
period) shall be final, binding and conclusive on the parties to the dispute,
and entitled to be enforced to the fullest extent permitted by law and
entered in any court of competent jurisdiction. The non-prevailing party to
any arbitration (as determined by the Board of Arbitration) shall pay the
expenses of the prevailing party, including reasonable attorneys' fees, in
connection with such arbitration.
Section 16. SEVERABILITY. If any provision of this Agreement shall
for any reason be held invalid or unenforceable, such invalidity or
unenforceablity shall not affect any other provision hereof and this
Agreement shall be construed as if such invalid or unenforceable provision
had never been contained herein.
Section 17. CAPITALIZED TERMS. All capitalized terms not otherwise
defined herein shall have the meaning assigned to them in the Purchase
Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, on the day and year first above written.
HAWAIIAN NATURAL WATER CO., INC.
By: /s/ MARCUS BENDER
-------------------------------------------
Marcus Bender
Chief Executive Officer and President
AMRO International, S.A.
By: /s/ H. U. BACHOFEN
-------------------------------------------
H. U. Bachofen, Director
