<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): JUNE 30, 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 2. ACQUISITION OR DISPOSITION OF ASSETS.
(a) On June 30, 1999, Hawaiian Natural Water Company, Inc., a Hawaii
corporation (the "Company"), completed the acquisition of the business and
assets, subject to certain liabilities, of Ali'i Water Bottling, Inc., a
Hawaii corporation ("Ali'i). Ali'i bottles and distributes purified water to
the home and office market on the Big Island of Hawaii and also sells
purified water in PET plastic bottles through retail channels throughout the
Hawaiian Islands. All of these products are marketed under the name "Ali'i."
The acquisition was structured as a purchase of substantially all of
the operating assets of Ali'i, including plant and equipment, inventory,
receivables and intangibles (including the name "Ali'i" and related trademarks
and servicemarks). The liabilities assumed included trade payables, equipment
leases and other contractual obligations relating to the ongoing operations
of the business. The Company did not assume any bank debt, notes payable, tax
liabilities or other accrued liabilities of Ali'i outstanding at March 31,
1999, substantially all of which were paid prior to the closing.
The sole consideration for the net assets purchased was 300,000 shares
of common stock of HNWC. This consideration was determined through arms'
length negotiation between the Company and Dennis Harris, the sole
stockholder of Ali'i. The Company has valued the net assets acquired at
$356,250, based upon the closing sales price of the Company's common stock
($1-3/16) on the closing date of the transaction.
Pursuant to an agreement entered into in connection with the
acquisition, Mr. Harris has been elected as a director of the
Company by Board action. Mr. Harris has agreed not to compete with the
Company in the sale of bottled water in Hawaii for a period of three years
following the closing.
(b) The plant and equipment acquired consist primarily of two separate
bottling lines, one for the home and office (three and five gallon)
operation, and one for the retail PET business. Both bottling lines are
currently located at Ali'i's leased facility in Kailua-Kona on the Big Island
of Hawaii. The Company intends to continue utilizing this equipment for its
existing purpose but is contemplating relocating the PET bottling line to the
Company's own bottling facility on the Big Island or to an alternative
location. The Company did not assume the lease of Ali'i's facility, but has
entered into a new lease for a portion of the same space on a month-to-month
basis. The Company currently intends to maintain Ali'i's home and office
bottling line at this location.
1
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Ali'i Water Bottling, Inc. ("Ali'i")
Report of Independent Public Accountants F-1
Ali'i Water Bottling, Inc. Balance Sheet - March 31, 1999 F-2
Ali'i Water Bottling Inc. Statement of Operations For the Year
Ended March 31, 1999 F-4
Ali'i Water Bottling, Inc. Statement of Stockholder's Deficit
For the Year Ended March 31, 1999 F-5
Ali'i Water Bottling, Inc. Statement of Cash Flows For the Year
Ended March 31, 1999 F-6
Ali'i Water Bottling, Inc. Notes to Financial Statements -
March 31, 1999 F-7
(b) Pro Forma Financial Statements Giving Effect to
the Acquisition of Ali'i by the Registrant
Hawaiian Natural Water Company and Ali'i Water Bottling, Inc.
Unaudited Pro Forma Financial Statements F-13
Hawaiian Natural Water Company and Ali'i Water Bottling, Inc.
Unaudited Pro Forma Balance Sheet - March 31, 1999 F-14
Hawaiian Natural Water Company and Ali'i Water Bottling, Inc.
Unaudited Pro Forma Statement of Operations For
the Year Ended December 31, 1998 F-15
Hawaiian Natural Water Company and Ali'i Water Bottling, Inc.
Unaudited Pro Forma Statement of Operations For the
Three Months Ended March 31, 1999 F-16
Hawaiian Natural Water Company and Ali'i Water Bottling, Inc.
Notes to Unaudited Pro Forma Financial Statements F-17
(c) Exhibits
Exhibit
Number Description
------- -----------
10.1 Asset Purchase Agreement by and among the Registrant,
Ali'i and Dennis Harris
10.2 Bill of Sale
23.1 Consent of Arthur Andersen LLP
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Ali'i Water Bottling, Inc.:
We have audited the accompanying balance sheet of ALI'I WATER BOTTLING, INC. (a
Hawaii corporation) as of March 31, 1999, and the related statement of
operations, stockholder's deficit and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Ali'i Water Bottling, Inc. as
of March 31, 1999, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that Ali'i
Water Bottling, Inc. will continue as a going concern. As discussed in Note
9, since inception the Company has incurred losses from operations and
requires continued financial support from its owner. These factors raise
substantial doubt as to the Company's ability to continue as a going concern.
Management's plans with respect to the future operations of the Company are
also discussed in Note 10. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Honolulu, Hawaii
June 30, 1999
F-1
<PAGE>
ALI'I WATER BOTTLING, INC.
BALANCE SHEET AS OF MARCH 31, 1999
ASSETS
<TABLE>
<CAPTION>
1999
-----------
<S> <C>
CURRENT ASSETS:
Cash $ 17,865
Trade receivables, net of allowance
for doubtful accounts of $14,000 121,853
Inventories 46,612
Other current assets 17,819
-----------
Total current assets 204,149
PROPERTY HELD FOR SALE (Note 3) 375,758
-----------
$ 579,907
===========
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-2
<PAGE>
ALI'I WATER BOTTLING, INC.
BALANCE SHEET AS OF MARCH 31, 1999
LIABILITIES AND STOCKHOLDER'S DEFICIT
<TABLE>
<CAPTION>
1999
------------
<S> <C>
CURRENT LIABILITIES:
Accounts payable $ 163,432
Short-term borrowings (Note 4) 77,220
Capital lease obligations (Note 7) 15,302
Federal and state withholding taxes 55,897
Other accrued liabilities 87,284
-----------
Total current liabilities 399,135
NON-CURRENT LIABILITIES:
Note payable, net of current portion (Note 4) 296,787
Capital lease obligations, net of current portion (Note 7) 27,058
Advances from stockholder (Note 5) 45,682
-----------
369,527
-----------
Total liabilities 768,662
-----------
COMMITMENTS AND CONTINGENCIES (Note 7)
STOCKHOLDER'S DEFICIT:
Common stock, $10 par value--100 shares
authorized, issued and outstanding 1,000
Additional paid-in capital 935,094
Accumulated deficit (1,124,849)
-----------
Total stockholder's deficit (188,755)
-----------
$ 579,907
===========
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-3
<PAGE>
ALI'I WATER BOTTLING, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
1999
-----------
<S> <C>
NET SALES $ 883,139
COST OF SALES 637,087
-----------
Gross margin 246,052
EXPENSES:
General and administrative 712,982
Selling and marketing 5,035
Provision for impairment loss
on property held for sale 195,713
-----------
913,730
-----------
Operating loss (667,678)
OTHER EXPENSES:
Interest (49,838)
Other (939)
-----------
(50,777)
-----------
Net loss $ (718,455)
===========
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-4
<PAGE>
ALI'I WATER BOTTLING, INC.
STATEMENT OF STOCKHOLDER'S DEFICIT
FOR THE YEAR ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
Additional
Common Stock Paid-In Accumulated
Shares Amount Capital Deficit Total
------ ------ ---------- ----------- -----
<S> <C> <C> <C> <C> <C>
BALANCE, March 31, 1998 100 $ 1,000 $ 935,094 $ (406,394) $ 529,700
Net loss - - - (718,455) (718,455)
---- ------- --------- ----------- ----------
BALANCE, March 31, 1999 100 $ 1,000 $ 935,094 $(1,124,849) $ (188,755)
---- ------- --------- ----------- ----------
---- ------- --------- ----------- ----------
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-5
<PAGE>
ALI'I WATER BOTTLING, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
1999
-----------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (718,455)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 91,143
Provision for bad debts 14,000
Provision for impairment loss on property held for sale 195,713
Changes in assets and liabilities:
Increase in trade receivables (42,286)
Decrease in inventories 71,495
Decrease in other current assets 70,393
Increase in accounts payable 91,578
Decrease in bank overdraft (12,539)
Increase in federal and state withholding taxes 11,944
Increase in other accrued liabilities 50,343
-----------
Net cash used in operating activities (176,671)
-----------
CASH FLOWS FROM INVESTING ACTIVITIES--
Capital expenditures on property and equipment
(114,664)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments under capital lease obligations (14,050)
Net proceeds from line of credit 45,030
Proceeds from note payable 350,000
Repayments of note payable (117,462)
Advances from stockholder 45,682
-----------
Net cash provided by financing activities 309,200
-----------
Net increase in cash 17,865
-----------
CASH, beginning of year -
-----------
CASH, end of year $ 17,865
-----------
-----------
NON-CASH TRANSACTIONS--
Equipment acquired under capital lease $ 50,580
-----------
-----------
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-6
<PAGE>
ALI'I WATER BOTTLING, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
1. BACKGROUND
Ali'i Water Bottling, Inc. (the Company) was founded and incorporated in
1996 in the State of Hawaii. The Company was formed to provide purified
bottled water to the residents of Hawaii.
The Company's bottling plant and corporate office are located in
Kailua-Kona, Hawaii. The Company specializes in purifying water from the
municipal water supply at its bottling plant and distributing the premium
bottled water through the following channels: home and office delivery,
statewide delivery, and vending machines. The Company also engages in
selling water-conditioning systems for home and commercial use.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out method. Inventories consist of packaging and
shipping materials for water products and finished goods. Inventories at
March 31, 1999 consisted of the following:
Supplies $36,551
Finished goods $10,061
-------
$46,612
-------
-------
b. PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Costs of normal repairs and
maintenance are charged to expense as incurred. Depreciation is calculated
using the straight-line method over the following useful lives:
Leasehold improvements shorter of 5 years or
lease term
Automobiles and equipment 5 to 7 years
c. PROPERTY HELD FOR SALE
Property held for sale is stated at the lower of cost or fair value, less
estimated cost to sell.
F-7
<PAGE>
d. LONG-LIVED ASSETS
Whenever there are recognized events or changes in circumstances that could
affect the carrying amount of long-lived assets, management reviews these
assets for possible impairment. In accordance with Statements of Financial
Accounting Standards (SFAS) No. 121 "Accounting for Long-Lived Assets and
for Long-Lived Assets to be Disposed of," management uses estimated
expected future net cash flows (undiscounted and excluding interest costs)
from the use and eventual disposition of the assets, to measure the
recoverability of these assets. If it is determined that an impairment loss
has occurred, then a loss is recognized in the income statement using a
fair value based model in the year in which such a determination is made.
e. INCOME TAXES
The Company accounts for income taxes in accordance with the requirements
of SFAS No. 109, "Accounting for Income Taxes." Under this standard,
deferred income tax assets and liabilities are computed at current tax
rates for temporary differences between the financial statement and income
tax bases of assets and liabilities and are adjusted for enacted changes in
tax rates.
f. USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
those estimates.
g. REVENUE RECOGNITION
The Company recognizes revenue on the accrual basis of accounting when
title transfers upon receipt of goods by the customer. The Company also
grants customers the right to return goods which are defective or otherwise
unsuitable for sale and issues refunds to customers or replaces goods which
are rejected. The Company also provides a reserve for estimated sales
returns and related disposal costs.
3. PROPERTY HELD FOR SALE
As discussed in Note 10, the Company elected to sell substantially all of
its operating assets, net of certain operating liabilities for 300,000
shares of authorized but unissued common stock of Hawaiian Natural Water
Company, Inc. (the Buyer). In connection with this proposed sale, the
Company classified all of its bottling equipment, computer equipment,
vehicles, vending machines, and leasehold improvements as property held for
sale at March 31, 1999. It was determined that the Company does not
generate adequate cash flow such that the carrying value of the assets
would not be realizable. In accordance with SFAS 121, management revalued
the operating assets at fair value which was determined to be the fair
value of the 300,000 shares of stock of the Buyer at the date of exchange
as discussed above. As a result of this revaluation, an impairment loss of
approximately $196,000 was recognized in fiscal 1999.
F-8
<PAGE>
4. BORROWINGS
Bank borrowings at March 31, 1999 consist of the following:
<TABLE>
<S> <C>
Unsecured line of credit of $50,000, accrues interest at base (as
defined) plus 2.75 percent (10.5% at March 31, 1999), requires interest
only payments through April 1999 after which time the remaining balance
is due in full. This line of credit has not been
repaid as of the date of these financial statements. $ 45,030
Note payable to a bank, bearing interest at a rate of base (as defined)
plus 3 percent (10.75% at March 31, 1999), payable in monthly
installments of principal and interest totalling $5,500 through June
2003 after which the remaining balance is due in full. Secured by the
operating assets of the Company and a
personal guarantee from its president. 328,977
---------
374,007
Less--portion due within one year 77,220
---------
$ 296,787
---------
---------
</TABLE>
The approximate annual maturities on the borrowings at March 31, 1999 is as
follows:
<TABLE>
<CAPTION> Year ending March 31,
<S> <C>
2000 $ 77,220
2001 35,040
2002 39,095
2003 43,619
2004 179,033
---------
$ 374,007
---------
---------
</TABLE>
Interest paid on these loans approximated $33,000 in fiscal 1999.
5. ADVANCES FROM STOCKHOLDER
As discussed in Note 9, the Company's stockholder was required to
provide cash advances in order for the company to meet its obligations
as they became due. These advances are non-interest bearing and have no
stated repayment terms.
F-9
<PAGE>
6. INCOME TAXES
At March 31, 1999, the Company had approximately $1.1 million of net
operating loss (NOL) carryforwards available to offset future taxable
income. These NOL carryforwards expire on various dates through 2018.
Temporary differences as of March 31, 1999 consisted primarily of these net
operating loss carryforwards offset by certain accrued liabilities which
are not currently deductible. A valuation allowance has been established
against the entire amount of the net deferred tax asset generated by these
NOL carryforwards due to the uncertainty of their future realization.
No income taxes were paid by the Company during the year ended March 31,
1999.
7. COMMITMENTS AND CONTINGENCIES
a. PLANT LEASE
The Company leases its facility under an operating lease expiring in March
2002. Rent expense approximated $29,000 in fiscal 1999.
At March 31, 1999, the future rental payments under this lease are as
follows:
<TABLE>
<CAPTION>
Year ending March 31,
<S> <C>
2000 $ 26,418
2001 27,846
2002 29,274
----------
$ 83,538
==========
</TABLE>
As discussed in Note 9, this lease was terminated effective June 30,1999.
In accordance with the termination agreement, the Company is required to
pay approximately $18,000 related to the balance of rent due under the
lease and a termination fee. This entire amount has been accrued at March
31, 1999.
b. CAPITAL LEASE
The Company leases water coolers under capital leases that expire on
various dates through October 2001.
F-10
<PAGE>
At March 31, 1999, the future minimum lease payments, together with the
present value of the net minimum lease payments, are as follows:
<TABLE>
<CAPTION>
Year ending March 31,
<S> <C>
2000 $ 23,075
2001 23,075
2002 9,026
--------
Total future minimum lease payments 55,176
Less--amount representing interest
at approximately 13 percent
and 31 percent (12,816)
--------
Present value of minimum lease payments 42,360
Less--current portion (15,302)
--------
Non-current portion $ 27,058
--------
--------
</TABLE>
c. LITIGATION
A legal claim was filed against the Company alleging below cost pricing,
attempted monopolization, interference with prospective business advantage
and intentional interference with contractual relationships. In the opinion
of management, any loss incurred related to these proceedings would not
have a material adverse impact on the Company.
8. SIGNIFICANT CUSTOMERS AND SUPPLIERS
During fiscal year 1999, sales to two major customers approximated 36% of
revenues in the aggregate. No other single customer accounted for greater
than 10% of sales.
During fiscal year 1999, purchases from five major suppliers approximated
between 11% and 32% of the Company's purchases individually and totaled
approximately 75% of purchases in the aggregate. No other single supplier
accounted for greater than 10% of purchases.
9. GOING CONCERN
Since inception, the Company has suffered recurring losses from operations
and has relied on advances from its stockholder to meet its cash flow
requirements. These factors raise significant doubt as to the Company's
ability to continue as a going concern.
F-11
<PAGE>
10. SUBSEQUENT EVENTS
On June 30, 1999, the Company entered into an agreement to exchange all of
its operating assets, net of certain liabilities, for 300,000 shares of
authorized but unissued common stock of Hawaiian Natural Water Co. The
common stock issued to the Company will be "restricted securities" as
defined in Rule 144 under the Securities Act of 1933, and may not be sold
except in compliance with such Rule or other exemption from registration
under the Securities Act. The Buyer will have no obligation to register any
such shares under the Securities Act. The Buyer will assume the Company's
trade payables and contractual obligations related to continuing operations
but will not assume the note payable, line of credit or liabilities for
federal, state, or local taxes incurred by the Company. The carrying value
of the property held for sale at March 31, 1999 represents the fair value
of the 300,000 shares of Hawaiian Natural Water Co.'s common stock as of
the effective sales date. An impairment loss of approximately $196,000 was
recognized during the year ended March 31, 1999 in anticipation of this
sale.
The Company has insurance policies expiring on various dates through June
1999. The Company does not plan to renew these policies.
The Company repaid the note payable and line of credit prior to the date of
exchange and obtained a release of security interest in the Company's
operating assets from the lender.
As discussed in Note 6, the Company terminated its plant lease effective
June 30, 1999. The termination agreement requires the Company to pay
approximately $18,000 relating to the balance of rent due and a termination
fee.
Effective April 1999, the Company entered into an agreement to lease
certain water coolers. The lease is for a period of 36 months and calls for
monthly lease payments of $464 per month.
The Company paid approximately $46,000 of federal and state withholding
taxes outstanding at March 31, 1999.
F-12
<PAGE>
HAWAIIAN NATURAL WATER COMPANY, INC. AND ALI'I WATER BOTTLING, INC.
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The accompanying pro forma financial statements have been prepared to show the
effects of the June 30, 1999 acquisition of certain assets and liabilities of
Ali'i Water Bottling, Inc. ("Ali'i") by Hawaiian Natural Water Company, Inc.
(the "Company"). This acquisition is accounted for as a purchase business
combination.
The following unaudited pro forma balance sheet presents the pro forma financial
position of the Company at March 31, 1999 as if the acquisition of Ali'i had
occurred on such date. Included are adjustments to record the value of the
consideration paid by the Company and the assets and liabilities acquired by the
Company. Since Ali'i had previously written-down its long-lived assets in its
March 31, 1999 audited financial statements, no significant goodwill resulted
from this acquisition.
The unaudited pro forma statements of operations for the year ended December 31,
1998 and the three months ended March 31, 1999 reflect the combined results of
the Company and Ali'i as if the acquisition had occurred on January 1, 1998,
adjusted to reflect reduced interest expense due to the fact that the Company is
not assuming the long-term and short-term debt of Ali'i.
The unaudited pro forma consolidated statements of operations do not
necessarily represent actual results that would have been achieved had the
companies been together as of January 1, 1998, nor may they be indicative of
future operations. These unaudited pro forma consolidated financial
statements should be read in conjunction with the historical financial
statements and notes thereto of the Company and Ali'i.
F-13
<PAGE>
HAWAIIAN NATURAL WATER COMPANY, INC. AND ALII WATER BOTTLING, INC.
UNAUDITED PRO FORMA BALANCE SHEET
MARCH 31, 1999
<TABLE>
<CAPTION>
ASSETS
HAWAIIAN ALII
NATURAL WATER WATER PRO FORMA ADJUSTMENTS
COMPANY, INC. BOTTLING, INC. DEBIT CREDIT PRO FORMA
------------- -------------- ----- ------ ---------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 437,203 $ 17,865 $ 455,068
Inventories 351,413 46,612 398,025
Trade accounts receivable, net 293,735 121,853 415,588
Other current assets 45,147 17,819 62,966
----------- ----------- ----------- ---------- -------------
Total current assets 1,127,498 204,149 -- -- 1,331,647
PROPERTY AND EQUIPMENT - Net 2,076,501 375,758 (1) 17,865 2,434,394
----------- ----------- ----------- ---------- -------------
Total Assets $ 3,203,999 $ 579,907 $ -- $ 17,865 $ 3,766,041
----------- ----------- ----------- ---------- -------------
----------- ----------- ----------- ---------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 341,354 $ 163,432 $ 504,786
Line of credit -- 45,030 (1) 45,030 --
Accrued professional fees 34,538 -- 34,538
Accrued vacation 41,243 -- 41,243
Accrued payroll and related taxes 47,183 -- 47,183
Accrued commissions and billbacks 90,560 -- 90,560
Accrued other 92,850 143,181 (1) 143,181 92,850
Note payable - Current portion 25,322 32,190 (1) 32,190 25,322
Capital lease obligation - Current portion 43,783 15,302 59,085
----------- ----------- ----------- ---------- -------------
Total current liabilities 716,833 399,135 220,401 -- 895,567
NON-CURRENT LIABILITIES
Capital lease obligation - net of
current portion 17,925 27,058 44,983
Note payable - net of current portion 469,257 296,787 (1) 296,787 469,257
Advances from stockholder -- 45,682 (1) 45,682 -- --
----------- ----------- ----------- ---------- -------------
Total Non-Current Liabilities 487,182 369,527 342,469 -- 514,240
Total liabilities 1,204,015 768,662 562,870 -- 1,409,807
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred Stock, $1.00 par value;
5,000,000 shares authorized; 750 shares
issued and outstanding; aggregate
liquidation preference of $750,000 488,397 -- 488,397
Common Stock, no par value; 20,000,000
shares authorized; 4,079,563 shares
issued and outstanding actual and
4,379,563 proforma 6,836,812 936,094 (1) 936,094 (1) 356,250 7,193,062
Common stock warrants and options;
3,825,959 issued and outstanding 2,987,060 -- 2,987,060
Accumulated Deficit (8,312,285) (1,124,849) (1) 1,124,849 (8,312,285)
----------- ----------- ----------- ---------- -------------
Total Stockholders' Equity (Deficit) 1,999,984 (188,755) 936,094 1,481,099 2,356,234
Total Liabilities and
Stockholders' Equity (Deficit) $ 3,203,999 $ 579,907 $ 1,498,964 $1,481,099 $ 3,766,041
----------- ----------- ----------- ---------- -------------
----------- ----------- ----------- ---------- -------------
</TABLE>
F-14
<PAGE>
HAWAIIAN NATURAL WATER COMPANY, INC. AND ALII WATER BOTTLING, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
HAWAIIAN ALII
NATURAL WATER WATER PRO FORMA ADJUSTMENTS
COMPANY, INC. BOTTLING, INC.* DEBIT CREDIT PRO FORMA
----------------- -------------- ----- ------ ---------
<S> <C> <C> <C> <C> <C>
NET SALES $ 1,809,730 $ 883,139 $ 2,692,869
COST OF SALES 1,680,381 637,087 2,317,468
----------- ---------- ------ ------- -----------
GROSS MARGIN 129,349 246,052 -- -- 375,401
EXPENSES
Selling and Marketing 982,118 5,035 987,153
General and Administrative 1,266,158 712,982 1,979,140
----------- ---------- ------ ------- -----------
2,248,276 718,017 -- -- 2,966,293
OPERATING LOSS (2,118,927) (471,965) -- - (2,590,892)
OTHER INCOME (EXPENSE)
Investor relations expense (1,122,913) -- (1,122,913)
Impairment loss -- (195,713) (195,713)
Interest and other income 71,829 (939) 70,890
Interest expense (96,441) (49,838) (1) 44,738 (101,541)
----------- ---------- ------ ------- -----------
(1,147,525) (246,490) -- 44,738 (1,349,277)
Net Loss $(3,266,452) $ (718,455) $ -- $44,738 $(3,940,169)
----------- ---------- ------ ------- -----------
----------- ---------- ------ ------- -----------
Basic and Diluted Net Loss
Per Share $ (0.83) $ (0.93)
----------- -----------
----------- -----------
Weighted Average Common
Shares Outstanding 3,949,454 300,000 4,249,454
--------- ------- ---------
--------- ------- ---------
</TABLE>
* FOR PURPOSES OF THIS PROFORMA PRESENTATION, INFORMATION FOR THE FISCAL YEAR
ENDED MARCH 31, 1999 HAS BEEN INCLUDED.
F-15
<PAGE>
HAWAIIAN NATURAL WATER COMPANY, INC. AND ALII WATER BOTTLING, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
HAWAIIAN ALII
NATURAL WATER WATER PRO FORMA ADJUSTMENTS
COMPANY, INC. BOTTLING, INC. DEBIT CREDIT PRO FORMA
----------------- --------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
NET SALES $ 485,805 $ 253,601 $ 739,406
COST OF SALES 448,645 184,630 633,275
--------- --------- ------------ ------- ----------
GROSS MARGIN 37,160 68,971 106,131
EXPENSES
Selling and Marketing 149,055 - 149,055
General and Administrative 284,911 184,253 469,164
--------- --------- ------------ ------- ----------
433,966 184,253 618,219
OPERATING LOSS (396,806) (115,282) (512,088)
OTHER INCOME (EXPENSE)
Impairment loss -- (195,713) (195,713)
Interest and other income 3,391 (939) 2,452
Interest expense (23,133) (19,511) (1) 11,185 (31,459)
--------- --------- ------------ ------- ----------
(19,742) (216,163) 11,185 (224,720)
Net Loss $(416,548) $(331,445) $ -- $11,185 $(736,808)
--------- --------- ------------ ------- ----------
--------- --------- ------------ ------- ----------
Basic and Diluted Net Loss Per Share $ (0.10) $ (0.17)
--------- ---------
--------- ---------
Weighted Average Common
Shares Outstanding 4,070,619 300,000 4,370,619
--------- ------- ----------
--------- ------- ----------
</TABLE>
F-16
<PAGE>
HAWAIIAN NATURAL WATER COMPANY, INC. AND ALII WATER BOTTLING, INC.
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
A. The following unaudited pro-forma adjustments are included in the
accompanying unaudited pro forma balance sheet at March 31, 1999:
(1) To record the acquisition of certain assets and liabilities (as
defined) of Ali'i Water Company, Inc.
Ali'i agreed to exchange all of its operating assets, and
certain liabilities, for 300,000 shares of authorized but
unissued common stock of the Company. The common stock
issued to the Company will be "restricted securities" as
defined in Rule 144 under the Securities Act of 1933, and
may not be sold except in compliance with such Rule or other
exemption from registration under the Securities Act. The
Company will have no obligation to register any such shares
under the Securities Act. The Company will assume the trade
payables and contractual obligations of Ali'i related to
continuing operations but will not assume the note payable,
line of credit, or liabilities for federal, state, or local
income taxes incurred by Ali'i. The Purchase price totaled
$356,250, which represents the fair value of the 300,000
shares of the Company's common stock as of June 30, 1999
(the effective date of the sale). In anticipation of this
sale, Ali'i recognized an impairment loss of approximately
$196,000 in the fourth quarter of the fiscal year ended
March 31, 1999 and presented the property held for sale at
approximate fair value in the March 31, 1999 audited
financial statements. No significant goodwill resulted from
this acquisition. Acquisition costs were not material.
B. The following pro-forma adjustments are included in the accompanying
unaudited pro forma statement of operations for the three months ended
March 31, 1999 and the year ended December 31, 1998 which have been
prepared to reflect the June 30, 1999 acquisition as if it had occurred on
January 1, 1998:
(1) Interest expense has been reduced by $44,738 for the year ended
December 31, 1998 and $9,067 for the quarter ended March 31, 1999
due to the fact that the notes payable of Ali'i are not included
in the acquisition.
F-17
<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)
JULY 13, 1999 By: /s/ MARCUS BENDER
-----------------------------------
Marcus Bender
President & Chief Executive Officer
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
------ -----------
10.1 Asset Purchase Agreement between the Registrant and
Ali'i and Dennis Harris
10.2 Bill of Sale
23.1 Consent of Arthur Andersen LLP
<PAGE>
EXHIBIT 10.1
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement") is made and
entered into as of June 30, 1999 by and among HAWAIIAN NATURAL WATER COMPANY,
INC., a Hawaii Corporation ("Buyer"), ALI'I WATER BOTTLING, INC., a Hawaii
corporation ("Seller"), and Dennis Harris, the sole stockholder of Seller
("Harris"), with respect to the following:
WHEREAS, Seller is a manufacturer and marketer of purified bottled
water, with operations in both the three- and five-gallon home and office
delivery market (the "Delivery Business") and the PET retail market (the "PET
Business); and
WHEREAS, Buyer wishes to enter the Delivery Business and otherwise to
expand its operations in Hawaii; and
WHEREAS, Buyer wishes to purchase, and Seller wishes to sell, the
assets, subject to certain liabilities, and goodwill of Seller's operations, on
the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and conditions contained herein, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
1.1 PURCHASED AND EXCLUDED ASSETS.
1.1.1 PURCHASED ASSETS. On the basis of the
representations and warranties herein, and subject to the terms, conditions and
other provisions contained herein, Seller hereby agrees to sell, transfer,
assign and deliver to Buyer, and Buyer hereby agrees to purchase and accept from
Seller, all of Seller's right, title and interest in and to, all of the assets
of Seller used in the operation of Seller's business (including the Delivery
Business and the PET Business), wherever situated, and all the goodwill related
thereto (collectively the "Purchased Assets"); PROVIDED, HOWEVER, that the
Purchased Assets shall not include any items defined as Excluded Assets in
Section 1.1.2 hereof. For purposes hereof, the Purchased Assets shall include,
without limitation, all (i) plant and equipment; (ii) bottles and coolers, (iii)
delivery trucks
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and other rolling stock; (iv) raw and finished goods inventory; (v) accounts
receivable; (vi) contract rights; (vii) customer deposits; (viii) office
equipment and furniture; (ix) bank accounts; and (x) intangible assets,
including the name "Ali'i" and any other trademarks, servicemarks, trade
secrets or knowhow related to the business, except to the extent that any of
the foregoing are Excluded Assets.
1.1.2 EXCLUDED ASSETS. Notwithstanding the foregoing,
Seller will not transfer or assign to Buyer, and Buyer will not purchase or
assume, any of the assets described on Schedule 1.1.2 hereto (collectively, the
"Excluded Assets"). The Excluded Assets shall include, without limitation, the
lease of Seller's principal operating facility located at 73-5574 Olawalu
Street, Kailua-Kona, Hawaii, which Seller is expected to terminate prior to the
closing of the purchase and sale hereunder (the "Closing"); provided, however,
that Seller will cooperate with Buyer in negotiating a continuation of such
lease in the event that Buyer elects to utilize a portion or all of such space
after the Closing.
1.2 ASSUMED AND EXCLUDED LIABILITIES.
1.2.1 ASSUMED LIABILITIES. Buyer hereby assumes and
agrees to pay or otherwise discharge the following liabilities (collectively,
the "Assumed Liabilities") of Seller: (i) all of Seller's trade payables
outstanding as of the Closing; (ii) all of Seller's obligations for refunds of
customer deposits; and (iii) all of Seller's obligations, to the extent arising
after the Closing, pursuant to any assumed leases and other contracts included
within the Purchased Assets (collectively, the "Assumed Contracts"); provided,
however, that for purposes of the purchase price adjustment described in Section
2.2 hereof, any accrued liabilities under Assumed Contracts will be pro-rated as
of the Closing.
1.2.2 EXCLUDED LIABILITIES. Except as otherwise
specifically provided in Section 1.2.1 hereof, Buyer shall not assume or be
liable for, and is not agreeing to pay or discharge, any debts, claims, damages,
obligations, liabilities or responsibilities of any kind or nature whatsoever of
Seller, or any affiliated or related person or entity, including, without
limitation, (i) any outstanding indebtedness of Seller to the Bank of Hawaii, or
any refinancing of same, all of which will be repaid prior to the Closing; (ii)
any income taxes, payroll taxes, sales taxes or other federal, state or local
taxes arising out of or relating to transactions occurring prior to the Closing;
(iii) any accrued liabilities for employee compensation or benefits or any
contract or commitment relating to the employment of any employee or independent
contractor of Sellor; or (iv) any obligation for litigation matters arising out
of transactions occurring prior to
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<PAGE>
the Closing. All of the Purchased Assets shall be transferred to Buyer free
and clear of all liens, claims and encumbrances of any kind, except for the
Assumed Liabilities described in Section 1.2.1 hereof.
1.3 PAYMENT OF SALES TAXES. Any sales tax arising from or
relating to the Purchased Assets to be transferred hereunder shall be paid by
Seller.
1.4 COMPLIANCE WITH BULK SALES LAW. Seller agrees, and Harris
will cause Seller, to make any such governmental filing as may be required by
the provisions of Article 6 of the Uniform Commercial Code as in effect in the
State of Hawaii (the "UCC") within the time periods specified by such
provisions. The parties agree to waive any notice to creditors and waiting
period specified by the UCC.
ARTICLE II
PURCHASE PRICE; METHOD OF PAYMENT; ESCROW
2.1 AGGREGATE PURCHASE PRICE. The aggregate purchase price for
all of the Purchased Assets (the "Purchase Price") shall be $ , payable at the
Closing by means of the issuance to Seller of 300,000 authorized but unissued
shares of Common Stock of Buyer (the "Seller's Shares"). The Purchase Price
shall be subject to adjustment as provided in Section 2.2 hereof.
2.2 PURCHASE PRICE ADJUSTMENT. It is understood and agreed
that Seller's Net Current Assets (as hereinafter defined) will be not less than
zero as of the Closing. For purposes hereof, Net Current Assets means the net
book value, as of the Closing, of all Current Assets (as hereinafter defined)
included in the Purchased Assets, less all Current Liabilities (as hereinafter
defined) included in the Assumed Liabilities. For purposes of the foregoing,
Current Assets means all (i) inventory; (ii) accounts receivable (net of
allowance for doubtful accounts); and (iii) cash or cash equivalents. Current
Liabilities means all (i) trade payables; (ii) liabilities under Assumed
Contracts accrued as of the Closing; and (iii) refund obligations. As soon as
practicable, and in any event within 30 days, following the Closing, Buyer and
Seller shall jointly prepare (and in the absence of agreement, Arthur Andersen
LLP shall prepare) a statement (the "Closing Statement") setting forth Seller's
Current Assets and Current Liabilities and showing the computation of Net
Current Assets as of the Closing. In the event that the Net Current Assets shown
on such Closing Statement are less than zero, the Purchase Price shall be
reduced dollar-for-
3
<PAGE>
dollar by the amount of any such deficit. Any such reduction will be effected
solely by means of a cancellation of Escrow Shares (as hereinafter defined)
having a market value equal to the dollar amount of the applicable reduction.
For purposes of the foregoing, the market value of such Escrow Shares shall
be an amount per share equal to the closing sale price of the Common Stock on
the date of the Closing on the principal market on which the Common Stock is
then traded (currently the Nasdaq SmallCap Market).
2.3 ESCROW OF SELLER'S SHARES. Concurrently, with the Closing,
Buyer shall deposit 50,000 of the Seller's Shares (the "Escrow Shares") into an
escrow account (the "Escrow") to cover potential liabilities of Seller pursuant
to Section 2.2 (Purchase Price Adjustment) and 10.2 (Indemnification) hereof.
The Escrow Shares may be released to Buyer from time to time in the event of an
adjustment in accordance with such Sections. All of the Escrow Shares then held
in Escrow shall be released to Seller one year from the date of the Closing,
except to the extent that claims therefor from Buyer are then outstanding.
Escrow Shares sufficient to cover all such claims shall be held in Escrow,
pending the resolution thereof.
2.4 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be
allocated to the Purchased Assets as set forth on Schedule 2.4 hereto, which
shall be prepared by the parties and attached to this Agreement as soon as
practicable, and in any event within 30 days, following the Closing. The parties
hereby agree that each shall be bound by the allocation set forth above and
shall reflect such allocation in any filing pursuant to Section 1060 of the
Internal Revenue Code and the regulations thereunder.
ARTICLE III
THE CLOSING; TRANSFER OF PURCHASED ASSETS
3.1 CLOSING. The Closing of the transactions contemplated by
this Agreement shall take place as soon as practicable after all of the
conditions to the Closing set forth in Articles VII and VIII hereof shall have
been satisfied or waived, but in no event later than July 31, 1999. The Closing
shall take place at the offices of Buyer, 248 Mokauea Street, Honolulu, Hawaii
96819, or at such other place as the parties may agree upon.
3.2 MANNER OF CONVEYANCE; TITLE. The sale and purchase of the
Purchased Assets shall be consummated at the Closing by good and sufficient
bills of sale and by individual assignments, as necessary, in form and
4
<PAGE>
substance satisfactory to Buyer, in each case, with such other appropriate
instruments of title, consents of third parties, estoppel certificates and
other instruments and documents as Buyer shall reasonably request. At the
Closing, Seller shall transfer to Buyer good and marketable title to each of
the Purchased Assets, free and clear of all liens, claims, mortgages,
charges, commission arrangements, title retention agreements, covenants,
restrictions, options, purchase agreements, security agreements, security
interests, encumbrances and adverse interests of any kind or nature
whatsoever, except as otherwise provided in Section 1.2.1 hereof. At any time
and from time to time after the Closing, the parties shall duly execute,
acknowledge and deliver all such further assignments, conveyances,
instruments and documents, and will take such other action consistent with
the terms of this Agreement, in each case, as may be reasonably necessary to
assign, transfer and convey to Buyer good and marketable title to any and all
of the Purchased Assets, and to consummate the transactions contemplated by
this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER AND HARRIS
Seller and Harris, jointly and severally, hereby represents
and warrants to Buyer, its successors and assigns, as of the date hereof and as
of the Closing, as follows:
4.1 AUTHORITY. Seller has full corporate right, power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder and to consummate the transactions contemplated hereby. All corporate
and other actions required to be taken by Seller to authorize the execution,
delivery and performance of this Agreement and all transactions contemplated
hereby have been duly and validly taken.
4.2 VALIDITY. The execution, delivery and performance of this
Agreement have been, and each of the documents to be delivered at the Closing
will be, duly authorized by all requisite action on the part of Seller, and this
Agreement has been duly executed and delivered by Seller and Harris and
constitutes the valid and legally binding obligation of Seller and Harris,
enforceable against them in accordance with its terms, except to the extent
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally or by general
equitable principles.
5
<PAGE>
4.3 NON-CONTRAVENTION. Neither the execution and delivery of
this Agreement by Seller, nor the consummation of the transactions contemplated
hereby, do or would after the giving of notice or the lapse of time or both, (i)
conflict with, result in a breach of, or constitute a default under, any
federal, state or local law, statute, rule or regulation to which Seller or the
Purchased Assets are subject; (ii) result in the creation of, or give any party
the right to create, any lien, charge, encumbrance, security agreement or other
rights or adverse interests upon any of the Purchased Assets; (iii) terminate or
give any party the right to terminate, amend, abandon or refuse to perform any
Assumed Contract; or (iv) accelerate or modify, or give any party thereto the
right to accelerate or modify, the time within which, or the terms under which
any third party is to perform any duties or obligations or receive any rights or
benefits under any Assumed Contract.
4.4 CONSENTS. Except for compliance with Article 6 of the UCC
and any required consents to the assignment of the Assumed Contracts, no action,
consent, or approval by or filing with any person or entity, including, without
limitation, any federal, state, municipal, foreign or other court or
governmental or administrative body or agency or any securities or commodities
exchange is required to be obtained or made by Seller in connection with the
execution, delivery and performance by Seller of this Agreement, and
consummation by Seller of the transactions contemplated hereby, except for
consents, approvals or filings which have been or as of the Closing will have
been obtained or made.
4.5 TITLE TO ASSETS. At the Closing, Seller will convey to
Buyer, and Buyer will acquire, good and marketable title to all of the Purchased
Assets, free and clear of any and all mortgages, liens, claims, charges,
options, purchase agreements, security agreements and interests, commission
arrangements, title retention agreements, encumbrances, covenants, restrictions
and adverse interests of any kind or nature whatsoever, including tax liens,
except as otherwise provided in Section 1.2.1 hereof.
4.6 FINANCIAL STATEMENTS. Seller has previously delivered to
Buyer a true and correct copy of it balance sheet as of March 31, 1999 (the
"Latest Balance Sheet") and a statement of operations for the 12-month period
then ended. The Latest Balance Sheet was prepared in accordance with generally
accepted accounting principles and presents fairly the assets and liabilities of
Seller as of the date thereof. The Purchased Assets include all of the assets
shown on the Latest Balance Sheet, except for Excluded Assets and assets sold or
otherwise disposed of in the ordinary course of business since the date of the
Latest Balance Sheet.
6
<PAGE>
4.7 ACCOUNTS RECEIVABLE. All accounts receivable reflected on
the Latest Balance Sheet and all accounts receivable to be reflected on the
Closing Statement are or will represent bona fide claims against debtors for
sales or services previously performed or other charges previously incurred and
all such accounts receivable are or will be collectible in the ordinary course
of business, and in any event within 60 days of the Closing Statement date,
subject to the allowance for doubtful accounts set forth thereon. Except as set
forth on Schedule 4.7 hereto or on the applicable invoice as disclosed to Buyer,
none of such accounts receivable is or will be subject to any discount, rebate,
refund, or similar cost adjustment.
4.8 INVENTORY. All of the inventory reflected on the Latest
Balance Sheet or to be reflected on the Closing Statement is or will be usable
or salable in the ordinary course of business and is or will be reflected
thereon at the lower of cost or market.
4.09 ASSUMED CONTRACTS. Seller has previously deliver to Buyer
a true and complete copy of each of the Assumed Contracts as currently in
effect. Each of the Assumed Contracts is currently in effect and is valid,
binding and enforceable against each of the parties thereto in accordance with
its terms. Seller has not agreed to amend or modify any of the Assumed Contracts
and has not waived or agreed to waive any rights of substantial value
thereunder. All consents of third parties required for the assignment of the
Assumed Contracts to Buyer have been, or as of the Closing will be, obtained,
except as otherwise provided in Section 7.2 hereof.
4.10 ABSENCE OF CERTAIN CHANGES. Since the date of the Latest
Balance Sheet, there has not been any change or any development involving a
prospective change, which has materially and adversely affected or may
materially and adversely affect the business, condition, financial or otherwise,
prospects, assets, properties, or results of operations of Seller's business or
the Purchased Assets.
4.11 LITIGATION. Except for the action filed by Water
Unlimited, Inc., dba The Waterman, there is no suit, action, claim or
litigation, or legal, administrative, arbitration or other proceeding or
governmental investigation or inquiry pending or, to the best knowledge of
Seller and Harris after due inquiry, threatened against or affecting Seller or
any of the Purchased Assets, and/or one or more of the Shareholders, and, to the
best knowledge of Seller and Harris, there is no basis for any such action, nor
is there any judgment, decree, injunction, ruling, award, order or writ of any
court, governmental department, commission, agency, instrumentality, arbitration
or other person outstanding against, binding upon or involving Seller or any of
the Purchased Assets.
7
<PAGE>
4.12 COMPLIANCE WITH LAW. No notice has been issued and no
investigation or review is pending or, to the best knowledge of Seller and
Harris, threatened by any governmental entity with respect to (i) any alleged
violation by Seller of any law, ordinance, rule, regulation, order, policy or
guideline of any governmental entity, or (ii) any alleged failure to have all
permits, certificates, licenses, approvals and other authorizations required in
connection with the operation of Seller's business or the Purchased Assets.
4.13 ENVIRONMENTAL COMPLIANCE.
(a) The operations, practices, policies and procedures of
Seller and its employees have been conducted in compliance with, and
have not and will not give rise to any loss, liability, damage, costs
or expenses under, all applicable federal, state and local laws,
orders, regulations, directives and restrictions concerning protection
of the environment, the disposal of hazardous, toxic or industrial
chemicals, substances or wastes and health and safety.
(b) There are no claims or correspondence with respect to,
investigations, litigation, administrative proceedings, judgments or
orders, whether pending or, to the best knowledge of Seller and Harris,
threatened relating to any hazardous substances, hazardous wastes,
discharges, emissions or other forms of pollution (collectively "EPA
Matters") relating in any way to Seller's operations. To the best
knowledge of Seller and Harris, Seller has no liability for clean-up,
compliance or required capital expenditures in connection with any EPA
Matter which affect or may have a material adverse effect on Seller's
business or the Purchased Assets.
(c) No hazardous or toxic substances, within the meaning of
any applicable statute or regulation, are presently stored or otherwise
located at any facility operated by Seller which may, in the aggregate,
materially or adversely affect Seller's business or the Purchased
Assets, and, to the best knowledge of Seller and Harris, none of the
adjacent parcels of real estate, including the groundwater located
thereon or thereunder, is presently contaminated by any such substance
which affects or may affect, materially or adversely Seller's business
or the Purchased Assets.
8
<PAGE>
4.14 TAXES. All federal, state, county, local, foreign and other tax
returns, reports and declarations (including income, excise, property,
franchise, sales and use taxes) required to be filed with respect to Seller or
by or on behalf of Seller's business have been duly filed (or extensions for
filing have been filed) and such returns are complete and accurate and disclose
all taxes required to be paid for the periods covered thereby. All taxes shown
on such returns and any deficiency assessments, penalties and interest have been
paid. There are no tax liens on any of the Purchased Assets and no basis exists
for the imposition of any such liens. All federal, state, local and foreign
taxes, assessments, fees and charges (including interest and penalties, if any)
required to be paid or claimed to be due from or with respect to Seller for any
period prior to the Closing have been fully paid, as of the date hereof or will
be paid by Seller as of the Closing, together with any interest and penalties
thereon. All returns required to be filed for any period prior to the Closing
which are not filed as of the Closing will be duly filed. Notwithstanding any
other provision of this Agreement, each of Seller and Harris is satisfied as to,
and has relied solely upon its and his tax advisors with respect to, the
incidents of taxation which will or may result from the transactions
contemplated by this Agreement.
.
4.15 LEASES. Set forth on Schedule 4.15 hereto is a complete list of
all leases pursuant to which Seller leases real or personal property. A true and
complete copy of each such lease has been delivered to Buyer, and no changes
have been made therein since the date of such delivery. Each such lease is
valid, binding and enforceable in accordance with its terms, there are no
existing material defaults by Seller thereunder and no event has occurred which
(with or without notice, lapse of time or both) would constitute a material
default thereunder by any party.
4.16 PLANT AND EQUIPMENT. The plant, structure and equipment used by
Seller in the operation of its business are structurally sound and in good
operating condition and repair and are adequate for the purposes to which they
are being put; and none of such plant, structure or equipment are in need of
maintenance or repair, except for ordinary, routine maintenance and repairs
which are not material in nature or cost.
4.17 LABOR MATTERS. There are no controversies pending, nor, to the
best knowledge of Seller and Harris, is there any basis for any such
controversies, between Seller and any of its employees, which controversies have
affected or may affect materially and adversely the operation of Seller's
business or the Purchased Assets.
9
<PAGE>
4.18 SECURITIES MATTERS.
(a) Seller is acquiring the Seller's Shares solely for its own
beneficial account, for investment purposes, and not with a view to, or
for resale in connection with, any distribution thereof. Seller and
Harris understand that the issuance of the Seller's Shares hereunder
has not been registered under the Securities Act of 1933, as amended
(the "Securities Act"), or the securities laws of any State
(collectively, "State Securities Laws") by reason of specific
exemptions under the provision thereof which depend in part upon
Seller's investment intent.
.
(b) Seller and Harris understand that the Seller's Shares are
"restricted securities" under the Securities Act and that the
Securities Act and the rules of the Securities and Exchange Commission
thereunder provide in substance that such securities may be disposed of
only pursuant to an effective registration statement under the
Securities Act, or an exemption from such registration if available, or
in certain transactions not subject to the registration requirements of
the Securities Act and further understands that Buyer has no obligation
or intention to register any of the Seller's Shares.
(c) Seller agrees that it will not, and Harris agrees to cause
Seller not to: (i) sell, assign, pledge, give, transfer, or otherwise
dispose of the Seller's Shares or any interest therein, or make any
offer or attempt to do any of the foregoing, except pursuant to a
registration thereof under the Securities Act and all applicable State
Securities Laws or in a transaction which, in the written opinion of
Sellers' counsel, reasonably satisfactory to Buyer, is exempt from or
not subject to the registration provisions of the Securities Act and
all applicable State Securities Laws; (ii) that the certificate(s)
representing the Seller's Shares may bear an appropriate legend making
reference to the foregoing restrictions; and (iii) that the transfer
agent for the Seller's Shares will not be required to give effect to
any purported transfer thereof, except upon compliance with the
foregoing restrictions.
(d) Seller and Harris acknowledges that they and their
representatives have been given full access to such of the business,
personnel and financial information of Buyer and its properties, books,
contracts, commitments and records, together with projected and pro
forma financial information concerning Buyer giving effect to the
transactions contemplated by this Agreement as the undersigned has
requested in order to make an independent investigation of the
transactions contemplated by this Agreement and evaluate the condition
10
<PAGE>
(financial and other), properties, assets, liabilities, business
operations and prospects of Buyer. Seller and Harris and their advisors
(if any) have had an opportunity to ask questions of, and to receive
information from, Buyer and to obtain any additional information
necessary to verify the accuracy of the information and data received
by them. Seller and Harris and their advisors (if any) have received
all information and data which they believe to be necessary in order to
reach an informed decision as to the advisability of acquiring the
Seller's Shares hereunder. Seller and Harris understand that the
acquisition of the Seller's Shares is subject to a number of risks and
uncertainties, including without limitation, the risk that Buyer's
Common Stock may be delisted from the Nasdaq SmallCap Market, pending
the outcome of a hearing scheduled for July 8, 1999.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller and Harris, as of the
date hereof and as of the Closing, as follows:
5.1 DUE ORGANIZATION. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Hawaii,
with full corporate power and authority to acquire and operate the Purchased
Assets.
5.2 AUTHORITY. Buyer has full corporate right, power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. All corporate actions required to be taken by
Buyer to authorize the execution, delivery and performance of this Agreement and
all transactions contemplated hereby, including the issuance of the Seller's
Shares have been, or as of the Closing will have been, duly and properly taken.
5.3 VALIDITY. This Agreement constitutes the valid and legally
binding obligation of Buyer, enforceable against it in accordance with its
terms, except to the extent enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium, or similar laws affecting creditors'
rights generally or by general equitable principles.
5.4 CAPITALIZATION. The authorized capital stock of Buyer
consists of 20,000,000 shares of Common Stock, of which approximately 4,079,563
shares are issued and outstanding, and 5,000,000 shares of Preferred Stock, of
which 750 shares are currently outstanding, convertible into Common Stock as set
forth in the Certificate of Amendment relating thereto, a copy of which has
previously been furnished to Seller. There are no other shares of capital stock
of Buyer issued and outstanding. All outstanding shares
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of Common Stock are, and the Seller's Shares, when issued at the Closing in
accordance with the provisions of this Agreement will be, validly issued,
fully paid and nonassessable.
5.5 NON-CONTRAVENTION. Neither the execution and delivery of
this Agreement by Buyer nor the consummation of the transactions contemplated
hereby, do, or would after the giving of notice or the lapse of time or both,
(i) conflict with, result in a breach of, or constitute a default under, the
Articles of Incorporation or the Bylaws of Buyer; (ii) conflict with, result in
a breach of, or constitute a default under, any federal, state, or local law,
statute, rule or regulation to which Buyer is subject, or (iii) violate or
conflict with any other material restriction applicable to Buyer.
5.6 CONSENTS. Except for a filing with the Nasdaq Stock Market
in connection with the issuance of the Seller's Shares, no action, consent, or
approval by or filing with any person or entity, including, without limitation,
any federal, state, municipal, foreign or other court or governmental or
administrative body or agency or any securities or commodities exchange is
required to be obtained or made by Buyer in connection with the execution,
delivery and performance by Buyer of this Agreement and the consummation by
Buyer of the transactions contemplated hereby, except for consents, approvals or
filings which have been or as of the Closing will have been obtained or made.
.
ARTICLE VI
ADDITIONAL COVENANTS AND AGREEMENTS
6.1 INTERIM CONDUCT OF THE BUSINESS. At all times during the
period from the date of this Agreement through the Closing:
6.1.1 OPERATIONS IN THE ORDINARY COURSE OF BUSINESS. Except
for actions required by this Agreement, Seller covenants and agrees
that it will, and Harris covenants and agrees to cause Seller to, cause
its business and the Purchased Assets to be operated only in the
lawful, ordinary and usual course of business and that it will not take
any action inconsistent therewith or engage in any transaction other
than in the ordinary and usual course of business as heretofore
conducted.
6.1.2 FORBEARANCES BY SELLER. Without limiting the generality
of Section 6.1.1 hereof, Seller covenants and agrees that it will not,
and Harris covenants and agrees to cause Seller not to, without the
prior written consent of Buyer:
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(a) sell, lease, transfer or dispose of or
enter into any agreement to dispose of any of the Purchased Assets,
except in the ordinary course of business;
(b) waive or release any rights of
material value, or cancel, compromise, release or assign any claims
held by Seller;
(c) permit Seller to enter into, amend,
modify, terminate or cancel any Assumed Contract, other than in the
ordinary course of business;
(d) (i) increase the salary and bonus
compensation or fringe benefits payable to any of its directors,
officers or employees; or (ii) pay or agree to pay any pension or
retirement allowance not required by any existing employment agreement
or employment plan to any such directors or officers; or (iii) commit
itself to any employment agreement or employment plan with or for the
benefit of any officer or director; or (iv) alter, amend or terminate
in whole or in part, any employee pension or other benefit plan;
(e) agree or commit to do any of the things
described above in this Section 6.1.2.
6.2 REGULATORY CONSENTS, AUTHORIZATIONS, ETC. Each of the
parties hereto will use its best efforts to obtain all consents, authorizations,
orders and approvals of, and make or give all filings and notices with or to,
any person or entity required in connection with the consummation by it of the
transactions contemplated on its part hereby and will cooperate fully with the
other party in assisting it to obtain such consents, authorizations, orders and
approvals and to make or give such filings and notices. No party hereto will
take or omit to take any action for the purpose of delaying, impairing or
impeding the receipt of any required consent, authorization, order or approval
or the making or giving of any required filing or notice.
6.3 ACCESS. Prior to the Closing, Buyer may make or cause to
be made such reasonable investigation of the business, properties and assets of
Seller and its financial and legal condition as Buyer deems necessary or
advisable in order to familiarize itself therewith. From the date hereof through
the Closing, Seller shall give or cause Buyer and its authorized representatives
to be given permission, during Seller's normal business hours and upon
reasonable notice, full access to all properties, books, contracts, leases,
commitments and records of Seller, and during this period Seller shall furnish
Buyer or cause Buyer to be furnished with all financial and operating data and
other information as to the business, properties and assets of Seller as Buyer
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may from time to time reasonably request; PROVIDED, HOWEVER, that such
investigation shall not interfere with the conduct of Seller's business.
6.4 NO SOLICITATION. Seller and Harris hereby covenants and
agrees that, prior to July 31, 1999, without the prior written consent of Buyer,
neither Seller nor any of its affiliates, representatives or agents will,
directly or indirectly, take any action to initiate, assist, solicit, negotiate,
encourage, accept or otherwise pursue any offer of inquiry from any person or
entity to engage in, attempt to consummate or reach any agreement or
understanding (whether absolute, revocable, contingent or conditional) with
respect to any Business Combination (as hereinafter defined). For purposes
hereof, "Business Combination" means (i) any merger, consolidation, business
combination, sale, lease, or similar transaction relating to Seller, (ii) any
sale or other disposition of capital stock of, or other equity interest in,
Seller, (iii) any sale, dividend or other disposition of all or any material
portion of the assets of Seller, or (iv) any other transaction involving Seller
which is inconsistent with the transactions contemplated by this Agreement.
6.5 COVENANT NOT TO COMPETE OR SOLICIT.
(a) Partially in consideration of the purchase of the
Purchased Assets contemplated hereby (which is intended to transfer to
Buyer the goodwill of Seller's business), Harris agrees that, for a
period of three years following the Closing, he will not, directly or
indirectly, either as employee, employer, consultant, agent, principal,
partner, stockholder, officer, director or in any other individual or
representative capacity, engage or participate in any activity in the
bottled water business or which otherwise competes with Buyer in the
State of Hawaii, without the express written consent of Buyer;
provided, however, that the foregoing will not be deemed to restrict
Harris from selling or installing point of use systems or equipment or
otherwise engaging in any business which does not involve the
production, sale or distribution of packaged water products.
(b) The parties intend that the covenant contained in
the preceding paragraph will be construed as a series of separate,
identical covenants, one for each portion of the geographical territory
described above. In the event that any court or administrative body
shall refuse to enforce any of the separate covenants deemed included
in the preceding paragraph, each such unenforceable covenant shall be
eliminated from the these provisions to the extent necessary to permit
the remaining separate covenants to be enforced against Harris to the
fullest extent.
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(c) Harris further agrees that, for a period of three
years following the Closing, he will not, on his own behalf or in the
service of others, except with Buyer's prior written consent, disrupt,
damage, impair or interfere with the business of Buyer or its
affiliates by raiding or in any manner encouraging, inducing and/or
persuading any of Buyer's or such affiliates' officers, directors,
employees, agents and/or independent contractors to terminate,
discontinue or otherwise change any of their employment, contractual or
other relationships with Buyer.
6.6 NO INCONSISTENT ACTION. Each of the parties hereto will
use its best efforts to consummate the transactions contemplated by this
Agreement and shall not take any action inconsistent with its obligations
hereunder or which could hinder or delay the consummation of the transactions
contemplated hereby.
6.7 PUBLICITY. Except to the extent otherwise required by law,
each party hereto agrees not to issue any press release or otherwise make any
public statement in any general circulation medium with respect to the existence
or terms of this Agreement or the transactions contemplated hereby, without the
prior written consent of the other party hereto.
6.8 FURTHER ASSURANCES. Subject to the terms and conditions
herein provided, each of the parties hereto shall use its best efforts to bring
about the transactions contemplated by this Agreement, as soon as practicable,
including the execution and delivery of all instruments and other documents, and
shall take or cause to be taken all such further actions as may reasonably be
requested by the other party hereto in order to carry out the intent and purpose
of and to consummate the transactions contemplated by this Agreement.
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ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
The obligation of Buyer to purchase the Purchased Assets and
otherwise to consummate the transactions contemplated by this Agreement shall be
subject to the satisfaction or waiver (by Buyer in its sole and absolute
discretion) concurrently with or prior to the Closing of the following
conditions precedent:
7.1 ACCURACY OF WARRANTIES; PERFORMANCE OF COVENANTS. The
representations and warranties of Seller and Harris contained in Article IV
hereof shall be true, accurate and correct on the date hereof and shall also be
true, accurate and correct on and as of the Closing with the same effect as if
such representations and warranties had been made on and as of the Closing, and
Seller and Harris shall have performed each and every obligation and complied
with each and every agreement and covenant required by this Agreement to be
performed or complied with by it.
7.2 CONSENTS OF THIRD PARTIES. All consents from parties to
the Assumed Contracts required in connection with assignment to Buyer of the
Assumed Contracts shall have been obtained, on terms and conditions satisfactory
to Buyer in its sole discretion; provided, however, that if any such consent
cannot be obtained, the related Assumed Contract shall nevertheless be
transferred to Buyer and Buyer shall perform all of Seller's obligations
thereunder, whether or not Seller or Harris is released therefrom.
7.3 NO PENDING ACTION. No claim, investigation, action, suit,
proceeding or litigation, either administrative or judicial, at law or in
equity, by any governmental or regulatory commission, agency or other body or
authority or by any other person, firm, corporation or other entity shall have
been instituted, threatened or pending as of the Closing (i) for the purposes of
challenging, prohibiting, operating, enjoining, restricting or delaying the
consummation of this Agreement or any of the transactions contemplated by this
Agreement, or any of the conditions to the consummation of the transactions
contemplated by this Agreement (ii) which claims damages against Buyer as a
result of the consummation of the transactions contemplated hereby or otherwise
claims that this Agreement or the consummation thereof is improper, or (iii)
which in the reasonable opinion of Buyer, could materially or adversely affect
the right of Buyer to retain or operate the Purchased Assets after the Closing;
and no injunction or restraining order shall be in effect prohibiting the
transactions contemplated by this Agreement.
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7.4 FORCE MAJEURE. All or any material part of the Purchased
Assets shall not have been adversely affected in any way by any act of God,
fire, flood, war, legislation (proposed or enacted) or other event or
occurrence, whether or not covered by insurance.
7.5 ASSUMED CONTRACTS. All of the Assumed Contracts shall
remain in effect, without amendment or modification, except as otherwise
consented to by Buyer in its sole discretion.
7.6 CERTIFICATES. Buyer shall have received from Seller or
Harris a certificate or certificates dated as of the Closing and certifying that
the conditions set forth above in this Article VII have been satisfied.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
The obligation of Seller to sell the Purchased Assets and
otherwise to consummate the transactions contemplated by this Agreement shall be
subject to the satisfaction or waiver (by Seller in its sole and absolute
discretion) concurrently with or prior to the Closing of the following
conditions precedent:
8.1 ACCURACY OF WARRANTIES; PERFORMANCE OF COVENANTS. The
representations and warranties of Buyer contained in Article V hereof shall be
true, accurate and correct on the date hereof and shall also be true, accurate
and correct on and as of the Closing with the same effect as if such
representations and warranties had been made on and as of the Closing Date, and
Buyer shall have performed each and every obligation and complied with each and
every agreement and covenant required by this Agreement to be performed or
complied with by it.
8.2 NO PENDING ACTION. No claim, investigation, action, suit,
proceeding or litigation, either administrative or judicial, at law or in
equity, by any governmental or regulatory commission, agency or other body or
authority or by any other person, firm, corporation or other entity shall have
been instituted, threatened or pending as of the Closing (i) for the purposes of
challenging, prohibiting, operating, enjoining, restricting or delaying the
consummation of this Agreement or any of the transactions contemplated by this
Agreement, or any of the conditions to the consummation of the transactions
contemplated by this Agreement, or (ii) which claims damages against Seller as a
result of the consummation of the transactions contemplated hereby or otherwise
claims that this Agreement or the consummation thereof is improper.
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8.3 FORCE MAJEURE. All or any material part of the Purchased
Assets shall not have been adversely affected in any way by any act of God,
fire, flood, war, legislation (proposed or enacted) or other event or
occurrence, whether or not covered by insurance.
8.4 CERTIFICATES. Seller shall have received from Buyer a
certificate or certificates dated as of the Closing and certifying that the
conditions set forth above in this Article VIII have been satisfied.
ARTICLE IX
EMPLOYEES
Seller shall terminate all of its employees concurrently with
or prior to the Closing. Except pursuant to the Assumed Contracts, Buyer shall
not be obligated in any way to offer employment to any employee of Seller, and
Buyer will not be responsible or liable in connection with any employment
arrangements (whether written or oral) with employees of Seller, or for any
salaries, severance pay, vacation accruals or other benefits owed or payable to
any employees of Seller; PROVIDED, HOWEVER, that Buyer shall be responsible for
any salaries, severance pay, vacation accruals or other benefits owed or payable
to former employees of Seller employed by Buyer after the Closing, to the extent
such payments relate to periods as of and after the Closing.
ARTICLE X
SURVIVAL AND INDEMNIFICATION
10.1 SURVIVAL. The respective representations and warranties
of the parties contained herein shall not be deemed waived or otherwise affected
by any investigation made by either party hereto and shall survive the Closing
for a period of three years.
10.2 INDEMNIFICATION.
10.2.1(a) Seller hereby agrees to defend, indemnify and hold
the Buyer and its officers, directors agents and affiliates (collectively,
"Buyer's Representatives"), harmless from and against any and all claims,
demands, damages, liabilities, losses, costs and expenses (including reasonable
attorneys' fees) of any kind or nature whatsoever (collectively, "Losses"), that
may be suffered or paid by Buyer or Buyer's Representatives, directly or
indirectly, as a result of (i) any liability other than an Assumed Liability
relating to the Purchased Assets arising out of events occurring prior to the
Closing, including any liability other than an Assumed Liability arising out of
Sellers
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failure to notify its creditors pursuant to the Bulk Sale provisions of
the UCC; or (ii) the failure of any representation or warranty contained in
Article IV hereof to be true and correct in all respects as of the Closing.
(b) Buyer shall defend, indemnify and hold Seller and
its officers, directors, agents and affiliates, if any (collectively, "Seller's
Representatives") harmless from and against (i) any and all Losses of any kind
or nature whatsoever that may be suffered or paid by Seller or Seller's
Representatives, directly or indirectly, as a result of (i) any liability
relating to the Purchased Assets arising out of events occurring subsequent to
the Closing, including any liability relating to an Assumed Contract for which a
consent to assignment has not been obtained prior to the Closing; or (ii) the
failure of any representation or warranty contained in Article V hereof to be
true and correct in all respects as of the Closing.
10.3 PROCEDURE. In the event of any claim for indemnification
by Buyer or Buyer's Representatives, on the one hand, or Seller or Seller's
Representatives, on the other (the "Indemnified Party") under Section 10.2
hereof, the Indemnified Party shall notify the other party (the "Indemnitor") in
writing of said claim within 30 days of the first receipt of notice of such
claim, and in any event within such shorter period as may be necessary for the
Indemnitor to take appropriate action to resist such claim, which notice shall
set forth the basis of the claim (including, without limitation, reference to
the specific representation, warranty, covenant or obligation alleged to have
been breached) and, if then determinable by the Indemnified Party, a reasonable
estimate of the amount thereof (or, if in the Indemnified Party's good faith
opinion, no such reasonable estimate can then be made by it, the maximum
potential Losses that, in the Indemnified Party's good faith opinion, might be
sustained in connection with such claim). Any claim for indemnification pursuant
to Section 10.2 hereof arising out of a breach of any representation or warranty
must be delivered in writing to the party from whom indemnification is sought
prior to the expiration of the applicable survival period for such
representation or warranty as provided in Section 10.1 hereof.
10.4 CONDITIONS OF INDEMNIFICATION. The obligations and
liabilities of the parties pursuant to Section 10.2 hereof with respect to
claims for damages resulting from the assertion of liability by third parties,
including without limitation any notices of Internal Revenue Service or Hawaii
State taxing authorities ("Claims"), shall be subject to the following terms and
conditions:
10.4.1 The Indemnified Party shall give the Indemnitor prompt
notice of any Claim asserted against or imposed upon or incurred by the
Indemnified Party and shall then take no further action without the written
consent of the Indemnitor to settle or compromise such Claim, except as
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provided below. The Indemnitor will be entitled to undertake the defense of
such Claim by representatives of its own choosing and to control the
proceedings relating thereto. The Indemnified Party shall cooperate to the
extent reasonably requested by the Indemnitor in the defense or prosecution
thereof and shall furnish such records, information and testimony and attend
all such conferences, discovery proceedings, hearings, trials and appeals as
may be reasonably requested by the Indemnitor in connection therewith.
10.4.2 In the event that the Indemnitor, within a reasonable
time after notice of any such Claim, fails to defend, the Indemnified Party will
(upon further notice to the Indemnitor) be entitled to undertake the defense,
compromise or settlement of such Claim for the account of the Indemnitor,
subject to the right of the Indemnitor to assume the defense of such Claim at
any time prior to settlement, compromise or final determination thereof, and the
Indemnitor shall be liable for all fees and costs, including reasonable
attorneys' fees, incurred by the Indemnified Party in employing counsel of its
choice to defend any such actions or proceedings. The Indemnified Party shall
give written notice to the Indemnitor of any proposed settlement of any Claim,
which Indemnitor may reject in its reasonable judgment within ten (10) days of
receipt of such notice or such shorter period as may be necessary for the
Indemnified Party to take appropriate action to resist such Claim; provided that
Indemnitor shall then undertake the defense of such Claim.
10.4.3 If the Indemnitor has assumed the defense of any Claim
against the Indemnified Party, Indemnitor shall have the right to settle any
Claim for which indemnification has been sought and is available hereunder;
provided that, to the extent that such settlement refers to any alleged
liability or wrongdoing of the Indemnified Party, requires the Indemnified Party
to take, or prohibits the Indemnified Party from taking, any action or purports
to obligate the Indemnified Party other than for the payment of money, then the
Indemnitor shall not settle such claim without the prior consent of the
Indemnified Party, which consent shall not be unreasonably withheld.
10.5 PAYMENT OF CLAIMS IN COMMON STOCK OF BUYER. All Claims for
indemnification hereunder shall be paid in shares of Common Stock of Buyer. Any
Claim by Buyer shall be satisfied through the cancellation of Escrow Shares
having a market value equal to the dollar amount of such Claim; and any Claim by
Seller shall be satisfied through the issuance of additional Escrow Shares. In
either case, such shares shall have a market value equal to the dollar amount of
the applicable Claim. For purposes of the foregoing, the market value of the
such Escrow Shares shall be an amount per share equal to the closing sale price
of the Common Stock on the date of the Closing on the principal market on which
the Common Stock is then traded (currently the Nasdaq SmallCap Market).
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ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1 BROKERS., Buyer and Seller represent and warrant to each other
that no broker, investment banker or finder is entitled to any financial
advisory fee brokerage fee or finder's fee or other similar payment with respect
to this Agreement or the transactions contemplated hereby. Buyer and Seller
hereby agree to indemnify, defend and hold each other harmless against and in
respect of all claims, losses, liabilities and expenses which may be asserted
against the one by any broker or other person who claims to be entitled to a
broker's, finder's or similar fee or commission in respect of the execution of
this Agreement, or the consummation of the transactions contemplated hereby, by
reason of his acting at the request of the other.
11.2 ENTIRE UNDERSTANDING. This Agreement (including the Schedules and
Exhibits hereto, each of which is incorporated herein and made a part of this
Agreement) and the other agreements and instruments the execution and delivery
of which are provided for herein constitutes the entire agreement and
understanding of the parties hereto and terminate and supersede any and all
prior agreements, arrangements and understandings, both oral and written,
between the parties hereto concerning the subject matter of this Agreement.
11.3 WAIVER AND AMENDMENT. No waiver, amendment, modification or change
of any provision of this Agreement shall be effective unless and until made in
writing and signed by all of the parties hereto. No waiver, forbearance or
failure by any party of its right to enforce any provision of this Agreement
shall constitute a waiver or estoppel of such party's right to enforce any other
provision of this Agreement or a continuing waiver by such party of compliance
with any provision.
11.4 HEADINGS. The headings herein are for convenience only, do not
constitute a part of this Agreement, and shall not be deemed to limit or affect
any of the provisions hereof.
11.5 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be original, but all of which
together shall constitute one and the same instrument.
11.6 INTERPRETATION. The provisions of this Agreement are intended to
be interpreted and construed in a manner so as to make such provisions valid,
binding and enforceable. In the event that any provision of this Agreement is
determined to be partially or wholly invalid, illegal or unenforceable, then
such provision shall be deemed to be modified or restricted to the extent
necessary to
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make such provision valid, binding and enforceable, or, if such
provision cannot be modified or restricted in a manner so as to make such
provision valid, binding and enforceable, then such provision shall be deemed to
be excised from this Agreement and the validity, binding effect and
enforceability of the remaining provisions of this Agreement shall not be
affected or impaired in any manner. Nothing in this Agreement shall be
interpreted or construed as creating, expressly or by implication, a
partnership, joint venture or agency relationship between the parties hereto or
any of their respective officers, directors, agents, employees or
representatives.
11.7 NOTICES. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed to have been
delivered three business days after having been mailed in a general or branch
post office and enclosed in a registered or certified post-paid envelope; one
business day after having been sent by overnight courier; when delivered to a
telegraph company or when telecopied or scanned graphically or otherwise by
communications equipment of the sending party on a business day, or otherwise on
the next succeeding business day thereafter; and, in each case, addressed to the
respective parties at the addresses stated below or to such other changed
addresses the parties may have fixed by notice as provided herein:
IF TO SELLER, TO: Ali'i Water Bottling, Inc.
----------------
73-5574 Olawalu Street,
Kailua-Kona, HI 96740
Telephone: (808) 327-3399
Facsimile: (808) 327-3398
Attn: Dennis Harris, President
IF TO BUYER, TO: Hawaiian Natural Water Company, Inc.
---------------
248 Mokauea Street
Honolulu, HI 96819
Telephone: (808) 832-4555
Facsimile: (808) 832-4559
Attn: Marcus Bender, President
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11.8 SUCCESSORS AND ASSIGNS. This Agreement shall not be assigned or
delegated by either party without the prior written consent of the other party,
except that Buyer may assign this Agreement and the right to receive the
Purchased Assets to one or more subsidiaries or affiliates of Buyer. Subject to
the preceding sentence, each term and provision of this Agreement shall be
binding upon and enforceable against and inure to the benefit of any successors
or assigns of Buyer and Seller. Nothing in this Agreement, expressed or implied,
is intended to confer on any person other than the parties and their respective
successors and assigns any rights or remedies under or by reason of this
Agreement.
11.9 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of Hawaii, without regard to
the conflicts of laws principles thereof.
11.10 CONSTRUCTION. Whenever in this Agreement the context so requires,
references to the masculine shall be deemed to include feminine and the neuter,
reference to the neuter shall be deemed to include the masculine and feminine,
and references to the plural shall be deemed to include the singular and the
singular to include the plural.
11.11 COOPERATION. Each party hereto shall cooperate with the other
party and shall take such further action and shall execute and deliver such
further documents as may be necessary or desirable in order to carry out the
provisions and purposes of this Agreement.
11.12 EXPENSES. Whether or not the transactions contemplated by this
Agreement and the related agreements are consummated, each party to this
Agreement shall pay its own costs and expenses in connection with the
negotiation, preparation, execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, including but not limited
to, attorneys' fees, accountants' fees and other professional fees and expenses.
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IN WITNESS WHEREOF, Buyer, Seller and Harris have executed and
delivered this Agreement as of the day and year first above written.
HAWAIIAN NATURAL WATER COMPANY, INC.
By: /s/ MARCUS BENDER
-------------------------------
Marcus Bender, President
ALI'I WATER BOTTLING, INC.,
By: /s/ DENNIS HARRIS
-------------------------------
Dennis Harris, President
/s/ DENNIS HARRIS
-------------------------------
Dennis Harris, personally
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EXHIBIT 10.2
BILL OF SALE
KNOW ALL MEN BY THESE PRESENTS:
That ALI'I WATER BOTTLING, INC., a Hawaii corporation ("Seller"), for good
and valuable consideration received from HAWAIIAN NATURAL WATER COMPANY,
INC., a Hawaii Corporation ("Buyer"), pursuant to that certain ASSET PURCHASE
AGREEMENT ("Agreement") dated as of June 30, 1999, by and among Buyer, Seller
and Dennis Harris ("Harris"), the sole stockholder of Seller, does hereby
sell to and assign, transfer, convey and deliver to Buyer all of the assets
set forth in Section 1.1.1 of the Agreement (the "Assets") and attached
hereto as Annex A.
TO HAVE AND TO HOLD, UNTO Buyer, its successors and assigns, FOREVER.
Seller hereby authorizes Buyer to take any and all appropriate action, in the
name of Seller or Harris, to protect the right, title and interest hereby
conveyed in connection with the Assets hereby assigned, transferred, conveyed
and delivered to Buyer.
Seller hereby covenants that, from time to time at the request of Buyer,
Seller will execute and deliver all such further instruments of conveyance
and transfer, and will take such other actions consistent with the terms of
the Agreement, as Buyer may reasonably request, in order to vest in Buyer
good and marketable title to any and all of the Assets.
Notwithstanding anything to the contrary contained herein, any inconsistency
or ambiguity between this Bill of Sale (including Annex A hereto) and the
Agreement shall be governed by the Agreement.
IN WITNESS WHEREOF, Seller has executed and delivered this Bill of
Sale as of the day and year first above written.
ALI'I WATER BOTTLING, INC.,
By:
----------------------------
Dennis Harris, President
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ANNEX A
PURCHASED ASSETS: Seller hereby sells, transfers, assigns and
delivers to Buyer all of Seller's right, title and interest in and to all of
the assets of Seller used in the operation of Seller's business (including
the Delivery Business and the PET Business (each as defined in the
Agreement)), wherever situated, and all the goodwill related thereto,
including, without limitation, all (i) plant and equipment; (ii) bottles and
coolers, (iii) delivery trucks and other rolling stock; (iv) raw and finished
goods inventory; (v) accounts receivable; (vi) contract rights; (vii)
customer deposits; (viii) office equipment and furniture; (ix) bank accounts;
and (x) intangible assets, including the name "Ali'i" and any other
trademarks, servicemarks, trade secrets or knowhow related to the business,
except to the extent that any of the foregoing are Excluded Assets (as
defined in the Agreement).
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EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
included in this Form 8K (and to all references to our Firm), incorporated by
reference into the Company's previously filed Registration Statements on Form
S-8 (File No. 333-65253), Form S-3 (File No. 333-63827) and Form S-3 (File
No. 333-76513).
/s/ ARTHUR ANDERSEN LLP
Honolulu, Hawaii
July 15, 1999
