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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): MARCH 20, 2000
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.)
98-746 Kuahao Place
Pearl City, Hawaii 96814
(Address of principal executive offices)
(808) 483-0520
(Registrant's telephone number, including area code)
N/A
(Former name or address, if changed since last report)
INFORMATION TO BE INCLUDED IN THE REPORT
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On March 20, 2000, Hawaiian Natural Water Company, Inc. (the "Company")
completed the acquisition of Aloha Water Company, Inc. ("Aloha"), a major
distributor of purified water to the home and office and point of use market
in the greater Honolulu area. Aloha's products are sold under the
"Aloha"-Registered Trademark- name.
The acquisition was effected by means of a merger (the "Merger") of Aloha with
and into a wholly owned subsidiary of the Company (the "Subsidiary") formed for
the purpose. The Subsidiary was the surviving corporation in the Merger, with
its name changed to "Aloha Water Company, Inc." Daniel Gabriel, a founder and
principal stockholder of Aloha, will be employed as the president of the
Subsidiary.
The consideration for Aloha consisted of an aggregate of (i) 750,000 shares of
Common Stock of the Company and a promissory note of the Company (the "Note") in
the original principal amount of $500,000. Interest on the Note is payable
monthly, commencing May 1, 2000, at the annual rate of 10%. The entire principal
amount of the Note is due on April 1, 2001. The Note is secured by a first
priority security interest in all of the capital stock of the Subsidiary.
As soon as practicable following the Merger, the Company expects to relocate
Aloha's plant and equipment to the Company's headquarters facility in Pearl
City. Such plant and equipment consists primarily of water filtering (reverse
osmosis) and bottling equipment and delivery vehicles. The Company intends to
continue the current use of these assets following their relocation.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED. The following
financial statements of Aloha Water Company, Inc. ("Aloha")
will be filed by amendment within 60 days:
(i) Audited Balance Sheet as of December 31, 1998
(ii) Audited Statements of Operations for the years ended
December 31, 1998 and 1997
(iii) Audited Statements of Changes in Stockholders Equity
for the years ended December 31, 1998 and 1997
(iv) Audited Statements of Cash Flows for the years ended
December 31, 1998 and 1997
(v) Unaudited Balance Sheet as of September 30, 1999
(vi) Unaudited Statements of Operations for the nine
months ended September 30, 1999 and 1998
(vii) Unaudited Statement of Changes in Stockholders
Equity for the nine months ended September 30, 1999
(viii) Unaudited Statements of Cash Flows for the nine
months ended September 30, 1999 and 1998
(b) PRO FORMA FINANCIAL INFORMATION. The following unaudited pro
forma financial statements of the Company, giving effect to
the acquisition of Aloha, will be filed by amendment within
60 days:
(i) Balance Sheet as of September 30, 1999
(ii) Statement of Operations for the year ended December
31, 1998
(iii) Statement of Operations for the nine months ended
September 30, 1999
(c) Exhibits.
2.1 Merger Agreement and Plan of Reorganization
4.1 Secured Exchangeable Promissory Note ($500,000)
4.2 Pledge and Security Agreement
10.1 Employment Agreement (Daniel Gabriel)
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
HAWAIIAN NATURAL WATER COMPANY, INC.
(Registrant)
March 27, 2000 By: /s/ MARCUS BENDER
-----------------------------------
Marcus Bender
President & Chief Executive Officer
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Exhibit 2.1
MERGER AGREEMENT AND PLAN OF REORGANIZATION
THIS MERGER AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is
made and entered into as of this 17th day of March 2000 by and among Hawaiian
Natural Water Company, Inc., a Hawaii corporation ("HNWC"), AWC Acquisition
Corp., a Hawaii corporation and a wholly owned subsidiary of HNWC
("Subsidiary"), Aloha Water Company, Inc., a Hawaii corporation ("Aloha"), and
Daniel Gabriel, Patricia Gabriel and David Smith, the stockholders of Aloha
(each, a "Stockholder" and, collectively, the "Stockholders"), with respect to
the following:
WHEREAS, the respective Boards of Directors of HNWC and Aloha believe
it is in the best interests of each company and their respective shareholders
that Aloha be acquired by HNWC; and
WHEREAS, in order to complete such acquisition, the respective Boards
of Directors of HNWC, Subsidiary and Aloha have approved the merger of Aloha
with and into Subsidiary (the "Merger") pursuant to and subject to the terms and
conditions of this Agreement; and
WHEREAS, the parties desire to effect the transactions in such a manner
that the Merger will constitute a tax-free reorganization within the meaning of
Sections 368(a)(1)(A) and 368(a)(2)(D) of the Internal Revenue Code of 1986, as
amended (the "Code"); and
WHEREAS, the parties desire to enter into this Agreement for the
purpose of setting forth certain representations, warranties and agreements in
connection with the Merger, and to prescribe various conditions precedent to the
Merger.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereby agree as follows:
ARTICLE I
THE MERGER AND REORGANIZATION
1.1 EFFECTIVE TIME OF THE MERGER. Subject to the terms and conditions
hereof, HNWC, Subsidiary and Aloha shall effect the Merger provided by this
Agreement as soon as practicable on or after the Closing Date (as defined in
Section 1.2 hereof), by filing an executed copy of the Articles of Merger and a
Plan of Merger with the Hawaii Department of Commerce and Consumer Affairs in
accordance with the Hawaii Business Corporation Act. The Merger shall become
effective upon such filing (the "Effective Time").
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1.2 CLOSING. The closing of the Merger (the "Closing") will take place
on March 17, 2000 or as soon as practicable thereafter following satisfaction or
waiver of all conditions to the Closing set forth in this Agreement (the
"Closing Date"). The Closing shall occur at the offices of HNWC, 98-746 Kuahao
Place, Pearl City, Hawaii or at such other place as the parties may agree upon.
At the Closing (i) HNWC shall deliver the aggregate Merger consideration
provided for in Section 2.1 hereof, including the promissory note constituting a
portion thereof, and (ii) the Stockholders shall surrender to HNWC the stock
certificates currently representing all outstanding shares of Aloha Common
Stock.
1.3 EFFECTS OF THE MERGER. At the Effective Time:
(a) Aloha shall be merged with and into the Subsidiary, and the
separate corporate existence of Aloha shall cease. The Subsidiary shall be the
surviving corporation in the merger, and the separate corporate existence of the
Subsidiary, with all its purposes, objects, rights, privileges, powers,
immunities and franchises, shall continue unaffected and unimpaired by the
merger. (Aloha and the Subsidiary are sometimes referred to herein as the
"Constituent Corporations," and the Subsidiary after the Merger is sometimes
referred to herein as the "Surviving Corporation").
(b) The Articles of Incorporation of the Subsidiary shall be the
Articles of Incorporation of the Surviving Corporation, except that the name of
the Surviving Corporation shall be changed to "Aloha Water Company, Inc."
(c) The Bylaws of the Subsidiary shall be the Bylaws of the Surviving
Corporation.
(d) The directors of the Subsidiary immediately prior to the Effective
Time shall be the directors of the Surviving Corporation, and the officers of
the Subsidiary immediately prior to the Effective Time shall be the officers of
the Surviving Corporation, in each case until their successors shall have been
elected and qualified or until otherwise provided by law; and
(e) The Merger shall, from and after the Effective Time, have
all the effects provided by applicable law.
1.4 FEDERAL INCOME TAX CONSEQUENCES. The parties intend that,
for federal income tax purposes, the Merger shall constitute a tax-free
reorganization within the meaning of Sections 368(a)(1)(A) and 368(a)(2)(D) of
the Code.
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ARTICLE II
MANNER AND BASIS OF CONVERTING SHARES OF CAPITAL STOCK
2.1 EFFECT ON CAPITAL STOCK. At the Effective Time, by virtue of the
Merger and without any action on the part of the holders of any shares of Aloha
Common Stock:
(a) Each share of Aloha Common Stock (except for shares, if any, which
shall then or thereafter constitute "dissenting shares" within the meaning of
Sections 415-80 and 415-81 of the Hawaii Revised Statutes (herein referred to as
"Dissenting Shares")) which is outstanding immediately prior to the Effective
Time shall be converted at the Effective Time into (i) 750 shares of HNWC Common
Stock; and (ii) a .1% (1/1000) fractional interest in a certain Secured
Exchangeable Promissory Note of HNWC (the "Note"), in the form attached hereto
as Exhibit A, with an aggregate original principal amount of $500,000. The
foregoing Merger consideration shall be subject to adjustment as provided in
Sections 2.2 and 2.3 hereof.
(b) Each issued and outstanding share of Common Stock of the Subsidiary
shall continue to be issued and shall be converted into one share of Common
Stock of the Surviving Corporation. Each stock certificate of the Subsidiary
evidencing ownership of such shares shall continue to evidence ownership of such
shares of Common Stock of the Surviving Corporation.
(c) If holders of the shares of Aloha Common Stock are entitled to
dissenters' rights in connection with the Merger under Sections 415-80 and
415-81 of the Hawaii Revised Statutes, any Dissenting Shares shall not be
converted as provided in Section 2.1(a) hereof, but shall be converted into the
right to receive such consideration as may be determined to be due with respect
to such Dissenting Shares pursuant to the law of the State of Hawaii.
(d) HNWC shall not be required to issue or deliver any
fractional shares of stock or any certificates representing fractional shares of
stock, in connection with any conversion of Aloha Common Stock as provided in
Section 2.1(a) hereof; however, HNWC shall pay to each person who would
otherwise be entitled to receive a fractional share of HNWC Common Stock an
amount in cash (rounded to the nearest whole cent) equal to the market value of
the HNWC Common Stock at the close of business on the date of the Effective
Time) multiplied by the fraction of a share of HNWC Common Stock to which such
holder would otherwise be entitled.
2.2 NET WORKING CAPITAL ADJUSTMENT. It is understood and agreed that
Aloha will have no indebtedness as of the Effective Time other than trade
payables and other short term obligations incurred in the ordinary course of
business. It is further understood and agreed that Aloha's Net Working Capital
(as hereinafter defined) will not be less than zero as of the Effective Time.
For purposes hereof, Net Working Capital means the net book value, as of the
Effective Time, of all (i) cash and cash equivalents, (ii) prepaid expenses,
(iii) finished goods inventory, and (iv) accounts receivable (net of allowance
for doubtful accounts), MINUS the sum of all (i) trade payables; (ii) accrued
payroll expenses, and (iii) other short term liabilities incurred in the
ordinary course of business, but not including bottle and cooler deposits and
capital lease obligations. As soon as practicable, and in any event within 30
days, following the Effective Time, HNWC and Aloha shall jointly prepare (and in
the absence of agreement, Arthur Andersen LLP shall prepare) a statement (the
"Closing Statement") setting forth Aloha's indebtedness and Net Working Capital
as of the Effective Time. In the event that Aloha has any indebtedness as of the
Effective Time (other than permitted indebtedness described above), the
aggregate principal amount of the Note shall be reduced dollar-for-dollar by the
amount of such indebtedness; in the event that the Net Working Capital shown on
the Closing Statement is less than zero, the aggregate principal amount of the
Note shall be further reduced dollar-for-dollar by the amount of any such
deficit.
2.3 ADJUSTMENT FOR STOCK SPLITS, ETC. If, between the date of this
Agreement and the Effective Time, the outstanding shares of HNWC Common Stock or
Aloha Common Stock shall have been changed into a different number of shares or
a different class by reason of any reclassification, recapitalization, split-up,
combination, exchange of shares or readjustment, or a stock dividend thereon
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shall be declared with a record date within such period (an "Adjustment Event")
the shares of HNWC Common Stock to be issued and delivered in the Merger in
exchange for each outstanding share of Aloha Common Stock, as provided above,
shall be appropriately adjusted to reflect such Adjustment Event.
2.4 EXCHANGE OF CERTIFICATES. As soon as practicable after the
Effective Time, and after surrender to HNWC of any certificate(s) which prior to
the Effective Time represented shares of Aloha Common Stock, HNWC shall cause to
be distributed to the person(s) in whose name(s) such certificate(s) have been
issued a certificate or certificates, registered in the name(s) of such
person(s), representing the shares of HNWC Common Stock into which the shares
previously represented by the surrendered certificate(s) shall have been
converted at the Effective Time, along with a corresponding fractional interest
in the Note in accordance with Section 2.1(a) hereof, and a check representing
the value of any fractional shares in accordance with Section 2.1(d) hereof.
Until surrendered as contemplated by the preceding sentence, each certificate
which immediately prior to the Effective Time represented any shares of Aloha
Common Stock shall be deemed at and after the Effective Time to represent only
the shares of HNWC Common Stock and the fractional interest in the Note into
which they have been converted hereunder.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ALOHA AND THE STOCKHOLDERS
Aloha and the Stockholders, jointly and severally, hereby represent and
warrant to HNWC, and its successors and assigns, as of the date hereof and as of
the Closing, as follows:
3.1 AUTHORITY. Aloha 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 Aloha to authorize the execution, delivery and
performance of this Agreement and all transactions contemplated hereby have been
duly and validly taken.
3.2 VALIDITY. The execution, delivery and performance of this Agreement
have been duly authorized by all requisite action on the part of Aloha, and this
Agreement and any related agreements (collectively, "Related Agreements") to
which Aloha or any of the Stockholders is a party have been, or as of the
Closing will be, duly executed and delivered by Aloha and/or such Stockholders
and constitute the valid and legally binding obligation of Aloha and/or such
Stockholders, enforceable against them in accordance with their 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.
3.3 NON-CONTRAVENTION. Neither the execution and delivery of this
Agreement or any Related Agreement by Aloha or any Stockholder, nor the
consummation of the transactions contemplated hereby or thereby, will or would
after the giving of notice or the lapse of time or both, (i) violate any
federal, state or local law, statute, rule or regulation to which Aloha or the
Stockholders are subject; (ii) conflict with Aloha's Articles of Incorporation
or Bylaws, or (iii) constitute a breach of or default under or result in the
imposition of any lien on any properties of Aloha or an acceleration of any
indebtedness of Aloha pursuant to, any material agreement, note or other
evidence of indebtedness, to which Aloha is a party or by which it is bound or
to which any material portion of its assets is subject.
3.4 CONSENTS. . Except for a filing of an executed copy of the Articles
of Merger and a Plan of Merger with the Hawaii Department of Commerce and
Consumer Affairs in connection with the Merger, 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 Aloha or the Stockholders in connection with
the execution, delivery and performance by them of this Agreement or any Related
Agreement, and consummation by them of the transactions contemplated hereby and
thereby, except for consents, approvals or filings which have been or as of the
Closing will have been obtained or made or waived by HNWC.
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3.5 CAPITALIZATION OF ALOHA. The authorized capital stock of Aloha
consists of 1,000 shares of Common Stock, of which 1,000 shares are, and as of
the Effective Time will be, issued and outstanding, and held of record as set
forth on the Schedule of Stockholders attached hereto as Schedule 1. There are
no other shares of capital stock of Aloha issued and outstanding. All
outstanding shares of Common Stock are validly issued, fully paid and
nonassessable and were issued in accordance with all applicable securities laws.
As of the Closing, there will be no outstanding (i) securities convertible into
or exchangeable for any capital stock of Aloha; (ii) options, warrants, calls or
other rights to purchase or subscribe for capital stock of Aloha or securities
convertible into or exchangeable for capital stock of Aloha; or (iii) contracts,
commitments, agreements, understandings or arrangements of any kind relating to
the issuance, sale, transfer (including rights to demand registration or to sell
in connection with any registration under the Securities Act of 1933, as
amended), and/or assignment of any capital stock of Aloha, any such convertible
or exchangeable securities or any such options, warrants or rights. None of the
Stockholders is a party to any voting trust agreement or other contract,
agreement, arrangement, commitment, plan, or understanding restricting or
otherwise relating to voting or dividend rights with respect to the capital
stock of Aloha.
3.6 FINANCIAL STATEMENTS. Aloha has previously delivered to HNWC a true
and correct copy of it balance sheet as of September 30, 1999 (the "Latest
Balance Sheet") and a statement of operations for the 9-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 Aloha as
of the date thereof and the results of operations for the period then ended.
3.7 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. Except as
set forth on Schedule 3.7 hereto or on the applicable invoice as disclosed to
HNWC, none of such accounts receivable is or will be subject to any discount,
rebate, refund, or similar cost adjustment.
3.8 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.
3.9 NO UNDISCLOSED LIABILITIES; ETC. Aloha has no material liabilities
or obligations of any nature (absolute, accrued, contingent or otherwise) which
were not fully reflected on or reserved against in the Latest Balance Sheet,
except as set forth on Schedule 3.9 and except for liabilities and obligations
incurred in the ordinary course of business and consistent with past practice
since the date of the Latest Balance Sheet, none of which individually exceeds
$5,000; and the reserves reflected on the Latest Balance Sheet are appropriate
and reasonable.
310 ABSENCE OF CERTAIN CHANGES. Except as and to the extent set forth
on Schedule 3.10 or as specifically contemplated by this Agreement, since the
date of the Latest Balance Sheet, Aloha has not:
(a) Suffered any material adverse change in its working capital,
financial condition, assets, liabilities (absolute, accrued,
contingent or otherwise), or reserves;
(b) Suffered any material adverse change in its business,
operations or financial condition;
(c) Incurred any liabilities or obligations for borrowed money or
increased, or experienced any change in any assumptions
underlying or methods of calculating, any bad debt,
contingency or other reserves;
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(d) Paid, discharged or satisfied any claim, liabilities or
obligations (absolute, accrued, contingent or otherwise),
other than in the ordinary course of business and consistent
with past practice;
(e) Permitted or allowed any of its properties or assets (real,
personal or mixed, tangible or intangible) to be subject to
any mortgage, pledge, lien, security interest, encumbrance,
restriction or charge of any kind, except for liens for
current taxes not yet due;
(f) Written down the value of any inventory or written off as
uncollectible any notes or accounts receivable, except for
write-downs and write-offs in the ordinary course of business
and consistent with past practice aggregating not more than
$5,000;
(g) Cancelled any debts or expressly waived any claims or rights
of substantial value, including without limitation, altering
the payment terms or discounts offered by Aloha to its trade
debtors;
(h) Sold, transferred or otherwise disposed of any of its
properties or assets (real, personal or mixed, tangible or
intangible), except in the ordinary course of business and
consistent with past practice, and except that prior to or
concurrent with the Closing Aloha shall have transferred to
Daniel and/or Patricia Gabriel the vehicles described in
Section 6.8 hereof, who shall have personally assumed and
agreed to discharge all remaining indebtedness encumbering
same;
(i) Disposed of or permitted to lapse any rights to the use of any
patent, trademark, trade name or copyright, or disposed of or
disclosed (except as necessary in the conduct of its business)
to any person, other than representatives of the Buyer, any
trade secret, formula, process or know-how not theretofore a
matter of public knowledge;
(j) Engaged any new officer or employee at an annual rate of
compensation in excess of $30,000 or made or granted any
increase in the compensation of officers or employees
(including any such increase pursuant to any bonus, pension,
profit sharing or other plan or commitment), and no such
increase is customary on a periodic basis or required by any
agreement or understanding;
(k) Made any capital expenditure or commitment for additions to
property, plant, equipment or intangible capital assets in
excess of $10,000 in the aggregate;
(l) (i)Offered, issued or sold any shares of the capital stock or
other securities (for purposes of this paragraph, such term to
include, without limitation, debt securities) of Aloha; (ii)
acquired directly or indirectly, by redemption or otherwise,
any such capital stock; (iii) reclassified or split-up any
such capital stock; (iv) declared or paid any dividends
thereon in cash, securities or other property, or made any
other distribution with respect thereto, except for a cash
distribution to Daniel Gabriel in an aggregate amount not
greater than $5,000, or (v) granted or issued any stock
options, warrants, or other rights to acquire securities of
Aloha or entered into any other contracts or commitments of
any kind with respect to the issuance of additional shares of
capital stock or other securities of the Aloha;
(m) Except as provided in paragraphs (h) and (l) above, paid,
loaned or advanced any amount to, or sold, transferred or
leased any properties or assets (real, personal or mixed,
tangible or intangible) to, or entered into any agreement or
arrangement with, any of the officers, directors or
stockholders of Aloha or any affiliate or associate thereof,
except for compensation to officers at rates not exceeding the
rates of compensation paid during Aloha's latest fiscal year;
or
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(n) Instituted any new method of purchase (or of the timing of
payment for purchases), sale, lease, management, accounting or
operation or engaged in any transaction or activity, entered
into any agreement or made any commitment or amended any
existing material agreement, except in the ordinary course of
business and consistent with past practice or except as
contemplated by this Agreement and the Related Agreements;
(o) Terminated any employee benefit plan or taken any action with
respect to the terms of any such plan which would adversely
affect the accrued benefits of employees participating
thereunder;
(p) Changed any of the banking, safe deposit or power of attorney
arrangements or initiated any such additional arrangement;
(q) Agreed, whether in writing or otherwise, to take any action
described in this Section 3.10 other than in connection with
the transactions contemplated hereby.
3.11 TITLE TO PROPERTIES; ENCUMBRANCES. Aloha has and as of the Closing
will have good, valid and marketable title to all the properties and assets
which are reflected in its books and records as being owned, including, without
limitation, all the properties and assets reflected in the Latest Balance Sheet,
and all the properties and assets purchased by Aloha since the date of the
Latest Balance Sheet including, without limitation, all the properties and
assets which will be reflected in the Closing Statement (except for properties
and assets sold in the ordinary course of business consistent with past practice
since the date of the Latest Balance Sheet or as specifically contemplated by
this Agreement). All such properties and assets are, or as of the Closing will
be, free and clear of all title defects or objections, liens, claims, charges,
security interests or other encumbrances of any nature whatsoever, including,
without limitation, leases, chattel mortgages, conditional sales contracts,
collateral security arrangements and other title or interest retention
arrangements, except, (i) liens shown on the Latest Balance Sheet as securing
specified liabilities or obligations, with respect to which no default exists,
(ii) minor imperfections of title, if any, none of which are substantial in
amount, or impair the use of the property subject thereto or impair the
operations of Aloha and which have arisen only in the ordinary course of
business consistent with past practice, and (iii) liens for taxes not yet due.
The rights, properties and other assets presently owned, leased or licensed by
Aloha and reflected in its books and records as being owned, leased or licensed
include all rights, properties and assets necessary to permit Aloha to conduct
its business in all material respects in the manner conducted prior to the date
hereof.
3.12 PLANT AND EQUIPMENT. The plant, fixtures, structures and equipment
owned, leased or used by Aloha are in good operating condition and repair,
normal wear and tear excepted, and are reasonably adequate for the uses to which
they are being put. None of such fixtures and equipment are in need of
maintenance or repairs, except for ordinary, routine maintenance and repairs
which are not material in cost. The occupancy or operation by Aloha of any of
its facilities, whether owned or leased, does not constitutes a nuisance or
material violation of any law or of any building, zoning or other ordinance,
code or regulation or any private or public covenant or restriction, and no
notice from any governmental body or other person has been served on Aloha
claiming any violation of any such law, ordinance, code, regulation, covenant or
restriction with respect to any such facility, or requiring material work,
repairs, construction, alterations or installations on or in connection
therewith.
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3.13 LEASES. Schedule 3.13 sets forth a complete and accurate list of
all leases pursuant to which Aloha leases real or personal property. A true and
correct copy of each such lease has been delivered to HNWC, and no material
changes have been made thereto since the date of such delivery. Except as set
forth on Schedule 3.13, each such lease is valid, binding and enforceable in
accordance with its terms, there are no existing material defaults by Aloha, and
no event has occurred which (with or without notice, lapse of time or both)
would constitute a material default thereunder by any party.
3.14 INTELLECTUAL PROPERTY. Schedule 3.14 sets forth: (i) all
registered trademarks and service marks of Aloha and any pending applications by
Aloha to register trademarks, including, for each such trademark, the
registration or application number, country, filing and expiration date, mark
and class and all unregistered trademarks and service marks; and (ii) all
registered copyrights of Aloha and applications by Aloha for registration of
copyrights, including the registration number, country and filing and expiration
date of each such copyright. Except as set forth on Schedule 3.14, Aloha is not
a party to any licenses or other contracts or commitments (either as licensor or
licensee) relating to any trademarks, service marks, trade names or copyrights
(or applications or registrations as applicable for any thereof), trade secrets
or other proprietary know-how or technical assistance, and, to the best
knowledge of the Stockholders, no claims have been asserted by any person to the
use of any such trademarks, trade names, copyrights, technology, know-how or
processes or challenging or questioning the validity or effectiveness of any
such license or agreement. Each item identified on Schedule 3.14 is a valid,
legally binding obligation of all parties thereto, enforceable in accordance
with its terms. Each such item is in full force and effect, and there is no
default (or an event which with the giving of notice, passage of time, or both,
would constitute a default) by any party thereto. Except as set forth on
Schedule 3.14, Aloha has not nor, to the best knowledge of the Stockholders, has
Aloha been alleged to have, infringed upon any patent, trademark, trade name or
copyright or misappropriated or misused any invention, trade secret or other
proprietary information entitled to legal protection.
3.15 TAX MATTERS.
(a) Except as set forth on Schedule 3.15, Aloha has (i) filed or caused
to be filed all federal, foreign, state and local franchise, income or other tax
returns and statements which are required to be filed and which were due prior
to the date of this Agreement (the "Tax Returns and Statements"), (ii) paid
within the time and in the manner prescribed by law all Taxes (as defined below)
reported on such returns as due for all periods ending on or prior to the date
of this Agreement, except where the payment thereof is being contested in good
faith by appropriate proceedings, and (iii) established reasonable reserves
(determined in accordance with generally accepted accounting principles) for the
payment of all unpaid but accrued or payable Taxes for all periods prior to the
date of this Agreement. The Tax Returns and Statements are complete and accurate
in all material respects. No tax assessment or deficiency has been made or
proposed against Aloha, nor has any notice been given of any actual or proposed
assessment or deficiency which has not been paid or for which a reasonable
reserve has not been set aside. The Tax Returns and Statements are not currently
the subject of any audit or other administrative or court proceeding by any
federal, state, local or foreign governmental agency. Neither Aloha nor any
Stockholder has received any notice that any of the Tax Returns and Statements
is now being or will be examined or audited, and no consents extending any
applicable statute of limitations have been filed.
For purposes of this Agreement, "Taxes" shall mean any and all taxes,
levies, assessments, charges or other fees (whether relating to income, sales,
payroll or other matters), together with any interest, penalties or other
additions, imposed by any governmental authority.
(b) Aloha is a validly constituted Subchapter S corporation under
Section 1361(a) of the Internal Revenue Code (the "Code"). Aloha has not
revoked, nor has Aloha or any of the Stockholders taken any action which would
cause the revocation of, Aloha's election under Subchapter S of the Code.
3.16 TRANSACTIONS WITH AFFILIATES. Except as set forth on Schedule
3.16, none of the Stockholders nor any of their associates or affiliates, has
any interest, directly or indirectly, in any lease, lien, contract, license,
encumbrance, loan or other agreement to which Aloha is a party, or any interest
in any competitor, supplier or customer of Aloha. Except as set forth on
Schedule 3.16, Aloha is not indebted, directly or indirectly, to any of the
Stockholders or to any of their associates or affiliates for any
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liability or obligation, whether arising by reason of stock ownership, contract,
oral or written agreement or otherwise. Schedule 3.16 sets forth a complete and
accurate list of any loans made by Aloha to any Stockholder, and except as set
forth thereon, neither the Stockholders nor any of their associates or
affiliates is indebted, directly or indirectly, to Aloha.
3.17 CONTRACTS AND COMMITMENTS. Except as set forth on Schedule 3.17:
(a) Aloha has not entered into any agreements, contracts,
commitments or restrictions which are material to its
business, operations or prospects or which require the making
of any charitable contribution;
(b) No purchase contracts or commitments of Aloha continue for a
period of more than 12 months;
(c) There are no outstanding sales contracts, commitments or
proposals which continue for a period of more than 12 months
or are currently expected to result in losses;
(d) Aloha has not entered into any consulting, sales agency,
licensing or distributorship agreements which are currently
outstanding;
(e) There are no outstanding employment agreements, or any other
agreements of Aloha that contain any severance or termination
pay liabilities or obligations;
(f) Aloha is not restricted by agreement from carrying on its
business anywhere in the world;
(g) Aloha is not under any liability or obligation with respect to
the return of inventory or merchandise in the possession of
wholesalers, distributors, retailers or customers;
(h) There are no currently outstanding debt obligations of Aloha
for borrowed money, including guarantees of or agreements to
acquire any such debt obligation of others except as shown on
or reflected in the Latest Balance Sheet;
(i) Aloha has not extended any loan to any person which is
currently outstanding; and
(j) Aloha has not executed any power of attorney which is
currently outstanding, or incurred any currently outstanding
obligations or liabilities (whether absolute, accrued,
contingent or otherwise), as guarantor, surety, co-signor,
endorser, co-maker, indemnitor or otherwise in respect of the
obligation of any person, corporation, partnership, joint
venture, association, organization or other entity.
3.18 COMPLIANCE WITH CONTRACTS. Aloha is not in default under any
contract or agreement listed on Schedule 3.17 hereto, and no act or omission has
occurred which, with notice or lapse of time or both, would constitute a default
under any material term or provision of any such contract or agreement. Each of
the agreements referred to in Schedule 3.17 hereto is in full force and effect
and is the valid and binding obligation of the parties thereto, enforceable
against the parties thereto in accordance with its terms, subject to judicial
discretion regarding specific performance or other equitable remedies, and
except as such enforcement may be limited by bankruptcy, reorganization,
insolvency, moratorium or other laws relating to or affecting the enforcement of
creditors' rights and remedies generally.
3.19 CUSTOMERS. Aloha currently has not less than 4,000 active home and
office delivery and point of use customers. Agreements with all such customers
are in full force and effect, and Aloha has not received any notices of
termination which would reduce the total number of such active customers below
4,000.
3.20 INSURANCE. Schedule 3.20 sets forth a complete and accurate
description of all material policies of fire, liability, worker's compensation
and other forms of insurance owned or held by Aloha. All
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such policies are in full force and effect, all premiums with respect thereto
covering all periods up to and including the date hereof have been paid, and no
notice of cancellation or termination has been received with respect to any such
policy. Such policies are sufficient for compliance with all requirements of law
and of all agreements to which Aloha is a party; are valid, outstanding and
enforceable policies; and will remain in full force and effect through the
respective dates set forth on Schedule 3.20 without the payment of additional
premiums. No such policy will be adversely affected by, or terminate or lapse by
reason of, the transactions contemplated by this Agreement. Schedule 3.20 also
identifies all risks which Aloha has designated as being self insured. Except as
set forth on Schedule 3.20, Aloha has not been refused any insurance with
respect to its assets or operations, nor has its coverage been limited or
terminated, by any insurance carrier to which it has applied for any such
insurance or with which it has carried insurance during the last five years.
3.21 LABOR MATTERS. Except to the extent set forth on Schedule 3.21:
(a) Aloha is in substantial compliance with all applicable laws
respecting employment and employment practices, terms and conditions of
employment and wages and hours, including without limitation Title VIII
of the Civil Rights Act of 1964, as amended, the Equal Pay Act, the Age
Discrimination Act, and the Americans With Disabilities Act, and Aloha
is not engaged in any unfair labor practice;
(b) There is no unfair labor practice charge or complaint against
Aloha pending before the National Labor Relations Board;
(c) There is no labor strike, dispute, slowdown or stoppage
actually pending or threatened against or affecting Aloha;
(d) No representation question exists respecting the employees of
Aloha;
(e) No grievance which might have a material adverse effect on
Aloha or the conduct of its business is pending and no claim
therefor exists; and
(f) Aloha has not experienced any work stoppage or other labor
difficulty during the past five years.
(g) Schedule 3.21 sets forth a complete list of all full-time
employees of Aloha, including their compensation, benefits,
length of service and summary description of their duties.
3.22 EMPLOYEE BENEFIT PLANS.
(a) Schedule 3.22 sets forth a complete and accurate description of
each "employee benefit plan", as such term is defined in section 3(3) of the
Employee Retirement Income Security Act of 1974 ("ERISA"), and each bonus,
incentive or deferred compensation, severance, termination, retention, change of
control, stock option, stock appreciation, stock purchase, phantom stock or
other equity-based, performance or other employee or retiree benefit or
compensation plan, program arrangement, agreement, policy or understanding,
whether written or unwritten, that provides or may provide benefits or
compensation in respect of any employee or former employee of Aloha or the
beneficiaries or dependents of any such employee or former employee
(collectively, "Employees") or under which any Employee is or may become
eligible to participate or derive a benefit. Aloha has not communicated to any
Employee any intention or commitment to modify any Employee Benefit Plan or to
establish or implement any other employee or retiree benefit or compensation
arrangement. The Latest Balance Sheet reflects in the aggregate an accrual of
all amounts accrued but unpaid under the aforesaid Employee Benefit Plans as of
the date thereof.
(b) Each Employee Benefit Plan currently complies, and has complied at
all times in the past, in all material respects with all applicable laws
(including to the extent applicable, without limitation, the Consolidated
Omnibus Budget Reconciliation Act of 1985 ("COBRA") and ERISA).
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(c) Neither Aloha nor, to the best knowledge of the Stockholders, any
plan fiduciary of any Employee Benefit Plan, has engaged in any transaction or
acted or, where action was required, failed to act in a manner which could
subject Aloha (either directly or indirectly, including as a result of an
indemnification agreement) to material liability for breach of fiduciary duty
under ERISA or any other applicable law. Neither Aloha nor, to the best
knowledge of the Stockholders, any trustee, plan fiduciary or administrator of
any Employee Benefit Plan has engaged in any prohibited transaction, within the
meaning of Section 406 of ERISA and Section 4975 of the Code, which has not been
exempted or corrected, and which could subject Aloha (either directly or
indirectly, including as a result of an indemnification provision) to any
material liability or material civil penalty assessed pursuant to Section 502(i)
of ERISA or a tax imposed by Section 4975 of the Code.
(d) Except as set forth on Schedule 3.22, neither Aloha nor any
Employee Benefit Plan is obligated to make payment of post-retirement life,
accidental death, medical or disability insurance benefits of any type,
excluding for this purpose, the provision of any such benefits as a result of an
individual's exercise of his or her COBRA and/or state law conversion rights, to
or with respect to any former employee of Aloha under any Employee Benefit Plan
or individual arrangement.
(e) Except as set forth on Schedule 3.22, other than claims for
benefits submitted or to be submitted by participants or beneficiaries in the
ordinary course of business, there is no litigation, legal action, suit,
investigation, claim, counterclaim, or proceeding pending or threatened against
or affecting any Employee Benefit Plan or any fiduciary thereof.
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3.23 LITIGATION.
(a) Except for a certain claim filed by AAA Customized Services, Inc.
against Aloha et. al. (the "AAA Litigation"), there is no claim, action, suit or
proceeding, before any federal, state, municipal, foreign or other court or
governmental or administrative body or agency, or any private arbitration
tribunal or, to the best knowledge of the Stockholders, any investigation or
inquiry before any federal, state, municipal, foreign or other court or
governmental or administrative body now pending or, to the best knowledge of the
Stockholders, threatened against or involving Aloha or any director, officer,
agent or employee thereof in his capacity as such, or the assets, properties or
business of Aloha or challenging the transactions contemplated by this
Agreement.
(b) There is not in effect any order, judgment or decree of any court
or governmental or administrative body enjoining, barring, suspending,
prohibiting or otherwise limiting Aloha or any of its officers, directors,
employees or agents from conducting or engaging in any aspect of its business,
or requiring Aloha or any such officer, director, employee or agent to take any
action with respect to any aspect of the business or operations of Aloha, which
could reasonably be anticipated to have a material adverse effect on the
business or operations of Aloha.
(c) Aloha is not in violation of or default under any order, judgment,
writ, injunction or decree of any court or regulatory authority.
3.24 COMPLIANCE WITH LAW.
(a) Schedule 3.24 sets forth a complete and accurate list of all
permits or licenses material to the operation of Aloha's business as currently
conducted. All such permits and licenses have been duly obtained, and are in
full force and effect. Aloha has timely made all filings or reports required to
be delivered to any federal, state, local or foreign regulatory agency or
authority in connection with its operations, except where the failure to make
any such filing or report would not have a materially adverse effect on its
business taken as a whole.
(b) The operations of Aloha have been conducted in accordance with all
applicable laws, regulations and other requirements of all national governmental
authorities, and of all states, municipalities and other political subdivisions
and agencies thereof, having jurisdiction over the Company, including, without
limitation, all such laws, regulations and requirements relating to antitrust,
consumer protection, equal opportunity, immigration, health, occupational
safety, pension, and environmental matters, except for violations that
individually, or in the aggregate, will have no material adverse effect on
Aloha's business, operations or financial condition. Aloha has not received any
notification of any asserted failure to comply with such laws, rules or
regulations.
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3.25 ENVIRONMENTAL COMPLIANCE.
(a) The operations, practices, policies and procedures of Aloha 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 the Stockholders, threatened
relating to any hazardous substances, hazardous wastes, discharges, emissions or
other forms of pollution (collectively "EPA Matters") relating in any way to
Aloha's operations. To the best knowledge of the Stockholders, Aloha 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 Aloha's business.
(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 Aloha which may, in the aggregate, materially or
adversely affect Aloha's business, and, to the best knowledge of the
Stockholders, 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 and adversely Aloha's
business.
3.26 BANK ACCOUNTS. Schedule 3.26 sets forth the names and locations of
all banks, trust companies, savings and loan associations and other financial
institutions at which Aloha maintains safe deposit boxes or accounts of any
nature, including 401(k) Plan accounts, and the names of all persons authorized
to draw thereon, make withdrawals therefrom or have access thereto.
3.27 BROKERS AND FINDERS. Neither Aloha nor any of the Stockholders has
employed any broker or finder or incurred any liability for any brokerage fees,
commissions or finders' fees in connection with the transactions contemplated by
this Agreement.
ARTICLE 4
SECURITIES LAWS MATTERS
4.1 SECURITIES MATTERS. Each of the Stockholders severally represents
and warrants to HNWC as follows with respect to the shares of HNWC Common Stock
(the "Merger Shares") to be issued to the Stockholders in the Merger:
(a) Such Stockholder is acquiring the Merger Shares solely for
his or her own beneficial account, for investment purposes, and not with a view
to, or for resale in connection with, any distribution thereof. Such Stockholder
understands that the issuance of the Merger Shares 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 such
Stockholder's investment intent.
(b) Such Stockholder understand that the Merger Shares will be
"restricted securities" under the Securities Act and that the Securities Act and
the rules of the Securities and Exchange Commission (the "SEC") 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
HNWC has no obligation or intention to register any of the Merger Shares.
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(c) Such Stockholder agrees that he or she will not: (i) sell,
assign, pledge, give, transfer, or otherwise dispose of the Merger 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 counsel, reasonably satisfactory to HNWC, 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 Merger
Shares may bear an appropriate legend making reference to the foregoing
restrictions; and (iii) that the transfer agent for the Shares will not be
required to give effect to any purported transfer thereof, except upon
compliance with the foregoing restrictions.
(d) Such Stockholder acknowledges that he or she and his/her
representatives have been given full access to such of the business, personnel
and financial information of HNWC and its properties, books, contracts,
commitments and records, together with projected and pro forma financial
information concerning HNWC giving effect to the transactions contemplated by
this Agreement as such Stockholder has requested in order to make an independent
investigation of the transactions contemplated by this Agreement and evaluate
the condition (financial and other), properties, assets, liabilities, business
operations and prospects of HNWC. Such Stockholder and his/her advisors (if any)
have had an opportunity to ask questions of, and to receive information from,
HNWC and to obtain any additional information necessary to verify the accuracy
of the information and data received by them. Such Stockholder and his/her
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
the Merger and the issuance of the Merger Shares. Such Stockholder understands
that ownership of the Merger Shares is subject to a number of risks and
uncertainties, including those described in HNWC's public filings. Such
Stockholder acknowledges receipt of the SEC Documents (as defined in Section 5.7
hereof) and such other filings as he or she may have requested.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF HNWC AND THE SUBSIDIARY
HNWC and the Subsidiary hereby represent and warrant to each of the
Stockholders, as of the date hereof and as of the Effective Time, as follows:
5.1 DUE ORGANIZATION. Each of HNWC and the Subsidiary 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 own and operate its
business as currently constituted. Except for the Subsidiary, HNWC has no
subsidiaries or equity interest in any other entity and has no joint venture,
partnership or other investment arrangement with any other entity. The
Subsidiary is a newly formed Hawaii corporation, with no operations and no
material assets or liabilities. The Subsidiary has no subsidiaries or equity
interest in any other entity and has no joint venture, partnership or other
investment arrangement with any other entity.
5.2 AUTHORITY. Each of HNWC and the Subsidiary has full corporate
right, power and authority to execute and deliver this Agreement, to consummate
the transactions contemplated hereby and to own and operate Aloha following the
Closing. All corporate actions required to be taken by HNWC and the Subsidiary
to authorize the execution, delivery and performance of this Agreement and all
transactions contemplated hereby, including the issuance of the Merger Shares
and the Note have been, or as of the Closing will have been, duly and properly
taken.
5.3 VALIDITY. This Agreement and the Related Agreements (including the
Note and the Pledge and Security Agreement) constitute valid and legally binding
obligations of HNWC and or the Subsidiary, enforceable against them in
accordance with their respective 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.
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5.4 CAPITALIZATION. The authorized capital stock of HNWC consists of
20,000,000 shares of Common Stock, of which approximately 5,700,000 shares are
issued and outstanding, and 5,000,000 shares of Preferred Stock, of which 219
shares of Series A Convertible Preferred Stock and 100 shares of Series B
Convertible Preferred Stock are currently outstanding, convertible into Common
Stock as set forth in the Certificate of Designations relating thereto, a copy
of which has previously been furnished to the Stockholders. The authorized
capital stock of the Subsidiary consists of 1,000,000 shares of Common Stock, no
par value, of which 1,000 shares are issued and outstanding and held
beneficially and of record by HNWC. There are no other shares of capital stock
of HNWC or the Subsidiary issued and outstanding. All outstanding shares of
Common Stock of HNWC and the Subsidiary are, and the Merger Shares, when issued
at the Effective Time 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 or any Related Agreement by HNWC or the Subsidiary, nor the
consummation of the transactions contemplated hereby or thereby, will or would
after the giving of notice or the lapse of time or both, (i) violate any
federal, state or local law, statute, rule or regulation to HNWC or the
Subsidiary is subject; (ii) conflict with HNWC's or the Subsidiary's Articles of
Incorporation or Bylaws, or (iii) constitute a breach of or default under or
result in the imposition of any lien on any properties of HNWC or the Subsidiary
or an acceleration of any indebtedness of HNWC or the Subsidiary pursuant to,
any material agreement, note or other evidence of indebtedness, to which HNWC or
the Subsidiary is a party or by which it is bound or to which any material
portion of its assets is subject.
5.6 CONSENTS. Except for a filing of an executed copy of the Articles
of Merger and a Plan of Merger with the Hawaii Department of Commerce and
Consumer Affairs in connection with the Merger, 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 HNWC or the Subsidiary in connection with the
execution, delivery and performance by them of this Agreement and the
consummation by them 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. .
5.7 SEC DOCUMENTS. HNWC has previously furnished to Aloha and the
Stockholders true and complete copies of all documents (other than preliminary
material) that HNWC has filed with the SEC since January 1, 1999 (the "SEC
Documents"). As of their respective filing dates (except as thereafter amended)
the SEC Documents complied in all material respects with the applicable
requirements of the Securities Act or the Securities Exchange Act of 1934 (the
"Exchange Act"), and none of the SEC Documents contained any untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements made therein, in light of
the circumstances under which they were made, not misleading except to the
extent corrected by a subsequently filed SEC Document. The financial statements
of HNWC included in the SEC Documents comply as to form in all material respects
with applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto or,
in the case of unaudited statements, as permitted by the rules and regulations
of the SEC) and fairly present the consolidated financial position of HNWC as at
the dates thereof and the consolidated results of their operations and changes
in financial position for the periods then ended (subject in the case of
unaudited statements, to normal recurring audit adjustments). Except as
disclosed in the SEC Documents filed prior to the execution of this Agreement,
or except as contemplated by this Agreement or on account of the transactions
contemplated hereby, since the date of the most recent SEC Document, there has
not been any material adverse change in the results of operations, financial
condition, assets or business of HNWC (other than on account of matters which
affect generally the economy or the industries in which HNWC is engaged).
ARTICLE VI
ADDITIONAL COVENANTS AND AGREEMENTS
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6.1 INTERIM CONDUCT OF THE BUSINESS. At all times during the period
from the date of this Agreement through the Closing, except for actions required
by this Agreement, Aloha covenants and agrees that it will, and the Stockholders
covenant and agree to cause Aloha to, operate its business 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. Without limiting the
generality of the foregoing, Aloha covenants and agrees that it will not, and
the Stockholders covenant and agree to cause Aloha not to, without the prior
written consent of HNWC:
(a) amend Aloha's Articles of Incorporation or Bylaws as currently
in effect;
(b) sell, lease, transfer or dispose of or enter into any
agreement to dispose of any of any assets of Aloha, except in
the ordinary course of business consistent with past practice,
and except that, prior to or concurrent with the Closing,
Aloha shall have transferred to Daniel and/or Patricia Gabriel
the vehicles described in Section 6.8 hereof, and they shall
have personally assumed and agreed to discharge all remaining
indebtedness encumbering same;
(c) waive or release any rights of material value, or cancel,
compromise, release or assign any claims held by Aloha;
(d) enter into, amend, modify, terminate or cancel any material
contract or lease, other than in the ordinary course of
business;
(e) (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;
(f) (i)Offer, issue or sell any shares of the capital stock or
other securities (for purposes of this paragraph, such term to
include, without limitation, debt securities) of Aloha; (ii)
acquire directly or indirectly, by redemption or otherwise,
any such capital stock; (iii) reclassify or split-up any such
capital stock; (iv) declared or pay any dividends thereon in
cash, securities or other property, or make any other
distribution with respect thereto, except that Aloha may make
a cash distribution to the Stockholders in an aggregate amount
equal to Aloha's taxable income for 1999 and may also
distribute an additional $5,000 to Daniel Gabriel, so long as
the Net Working Capital of Aloha is not reduced to an amount
less than zero as a result thereof, or (v) grant or issue any
stock options, warrants, or other rights to acquire securities
of Aloha or enter into any other contracts or commitments of
any kind with respect to the issuance of additional shares of
capital stock or other securities of the Aloha;
(g) agree or commit to do any of the things described above in
this Section 6.1.
6.2 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.
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6.3 ACCESS. Prior to the Closing, HNWC may make or cause to be made
such reasonable investigation of the business, properties and assets of Aloha
and its financial and legal condition as HNWC deems necessary or advisable in
order to familiarize itself therewith, and the Stockholders shall have the same
right of investigation with respect to HNWC. From the date hereof through the
Closing, Aloha shall give or cause HNWC and its authorized representatives to be
given permission, during Aloha's normal business hours and upon reasonable
notice, full access to all properties, books, contracts, leases, commitments and
records of Aloha, and during this period Aloha shall furnish HNWC or cause HNWC
to be furnished with all financial and operating data and other information as
to the business, properties and assets of Aloha as HNWC may from time to time
reasonably request; provided, however, that such investigation shall not
interfere with the conduct of Aloha's business. HNWC shall give or cause the
Stockholders or their authorized representatives to be given the same access to
the books and records of HNWC. Any such information so furnished shall be held
in strict confidence by the receiving party in accordance with the provisions of
the confidentiality agreements previously entered into by the parties, the terms
and conditions of which are hereby confirmed.
6.4 NO SOLICITATION. Aloha and the Stockholders hereby covenant and
agree that, prior to March 31, 2000, without the prior written consent of HNWC,
neither Aloha 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 or similar transaction relating to Aloha, (ii) any sale or other
disposition of capital stock of, or other equity interest in, Aloha, (iii) any
sale, dividend or other disposition of all or any material portion of the assets
of Aloha, or (iv) any other transaction involving Aloha which is inconsistent
with the transactions contemplated by this Agreement.
6.5 EMPLOYMENT AGREEMENT. Concurrently herewith, Aloha is entering into
a one year employment agreement (the "Employment Agreement") with Daniel Gabriel
in the form attached hereto as Exhibit C, pursuant to which Mr. Gabriel will be
employed as the president of Aloha on the terms and conditions set forth
therein. Upon the effectiveness of the Employment Agreement, any other
employment and/or severance arrangement between Aloha and Mr. Gabriel shall
terminate and become of no further force or effect.
6.6 COVENANT NOT TO COMPETE OR SOLICIT.
(a) Daniel Gabriel hereby covenants and agrees that he will not, for a
period of one year following any termination or expiration of the Employment
Agreement (including any extension thereof), directly or indirectly, whether for
his own account or as a stockholder, investor, director, officer, employee,
consultant or other agent of or to any other person or entity, except as an
employee of or consultant to HNWC or its affiliates, engage or participate in
any home and office or point of use water delivery business in the State of
Hawaii (the "Non-Competition Agreement"); provided, however, that the foregoing
shall not be deemed to prevent Mr. Gabriel from purchasing or owning stock in
any publicly traded company which competes in the foregoing business, so long as
the market value of his interest therein does not exceed 10% of his net worth at
the time of acquisition; and provided further, that the Non-Competition
Agreement shall terminate immediately upon the occurrence of the events
described in Section 6.6(c) hereof.
(b) Daniel Gabriel further agrees that, for so long as the
Non-Competition Agreement is in effect, he will not, on his own behalf or in the
service of others, except with HNWC's prior written consent, disrupt, damage,
impair or interfere with the business of HNWC or Aloha or their affiliates by
raiding or in any manner encouraging, inducing and/or persuading any of their 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 HNWC or Aloha (the
"Non-Solicitation Agreement").
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(c) The foregoing notwithstanding, both the Non-Competition Agreement
and the Non-Solicitation Agreement shall terminate immediately and in full upon
any election by the Stockholders to exercise their right of foreclosure on the
stock of Aloha as provided in Section 6 of the Pledge and Security Agreement.
(d) The parties intend that the covenants contained in the preceding
paragraphs 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 paragraphs, 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 Mr. Gabriel to the fullest extent.
(e) The necessity of protection against the competition by Mr. Gabriel
and the nature and scope of such protection has been carefully considered and
agreed upon by the parties hereto. Mr. Gabriel hereby agrees and acknowledges
that the duration, scope and geographic area applicable to the restrictions set
forth above are fair, reasonable and necessary and represent the area in which
the goodwill of Aloha has been developed and that the consideration provided for
herein is sufficient and adequate to compensate him for agreeing to the
restrictions contained above. Mr. Gabriel further agrees that a monetary remedy
for a breach of the Non-Competition Agreement or Non-Solicitation Agreement
would be inadequate, impracticable and extremely difficult to prove, that such a
breach would cause HNWC irreparable harm, and that HNWC shall be entitled to
temporary and permanent injunctive relief without the necessity of proving
actual damages or of posting bond or other undertaking in connection therewith,
all of which are hereby expressly waived by Mr. Gabriel.
6.7 LEASE ARRANGEMENTS. It is understood that Aloha's bottling
operations are currently conducted at a leased facility (the "Aloha Facility")
located at 94-538 Puahi Street, Unit A, Waipahu, Hawaii 96797. By its terms, the
lease of this facility (the "Aloha Lease") extends through March 31, 2003. It is
expected that, as soon as practicable after the Closing, Aloha's bottling
operations will be relocated to HNWC's facility on Oahu and that thereafter
Aloha will either sublet the Aloha Facility or terminate the Aloha Lease, as the
parties may mutually determine. In the event that (i) the parties elect to
sublet the Aloha Facility and the payments received from the sublessee are
insufficient to cover Aloha's total continuing rental obligations under the
Aloha Lease, or (ii) the parties elect to terminate the Aloha Lease upon payment
of a termination fee, the aggregate amount of any such deficit or termination
fee, as applicable, shall be borne 50% by HNWC and 50% by the Stockholders
personally. Any such payment obligation by the Stockholders (the "Lease
Obligation") shall be met by offsetting interest payments to the Stockholders
under the Note until the Lease Obligation is paid in full, or as the parties may
otherwise agree. The Stockholders shall have no liability with respect to the
Lease Obligation unless and until the termination date of the Aloha Lease or the
commencement of a sublease thereunder.
6.8 CERTAIN VEHICLES. It is understood and agreed that Aloha currently
owns, in addition to other vehicles, (i) a 1997 Dodge pickup truck, and (ii) a
1997 Chrysler van which are used by Daniel and Patricia Gabriel primarily as
their personal vehicles. It is hereby agreed that, prior to or concurrently with
the Closing, Aloha shall transfer ownership of such vehicles to Daniel and/or
Patricia Gabriel personally, who shall assume and agree to pay all outstanding
indebtedness and operating expenses with respect thereto. Aloha shall be
released from all such payment obligations following the Closing, and Daniel and
Patricia Gabriel hereby agree to indemnify Aloha for any payments they may be
required to make on account of such vehicles following the Closing (the "Vehicle
Obligation"), except as otherwise agreed in writing among the parties.
6.9 AAA LITIGATION. The Stockholders shall not be personally liable for
any monetary damages or award assessed against Aloha in connection with the AAA
Litigation described in Section 3.23 hereof; provided, however, that the
Stockholders hereby agree to be personally liable, and to pay or reimburse Aloha
(or HNWC), for any attorneys' fees and expenses, court costs and other related
expenses (collectively, "Defense Costs") in excess of $5,000 paid or incurred by
Aloha (or HNWC) in the defense of the AAA Litigation, to the extent such Defense
Costs are not otherwise covered by Aloha's insurance. Aloha (or HNWC) shall be
responsible for the first $5,000 of any such Defense Costs. In the
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event that Aloha receives any monetary award based upon any counterclaim in the
AAA Litigation, Aloha shall pay such award to the Stockholders, less the
aggregate amount of any Defense Costs borne by Aloha (or HNWC) in connection
with the AAA Litigation.
6.10 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.
6.11 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 parties hereto.
6.12 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 THE OBLIGATIONS OF HNWC AND THE SUBSIDIARY
The obligation of HNWC and Subsidiary to consummate the Merger in
accordance with this Agreement shall be subject to the satisfaction or waiver
(by HNWC 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 Aloha and the Stockholders contained in
Articles III and IV hereof shall be true and correct in all material respects on
the date hereof and shall also be true and correct in all material respects as
of the Closing with the same effect as if such representations and warranties
had been made on and as of the Closing, and Aloha and the Stockholders 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 them.
7.2 GOVERNMENTAL APPROVALS; CONSENTS OF THIRD PARTIES. Any governmental
notices or filings required to be made, and all consents or approvals from third
parties required to be obtained, in connection with the transactions
contemplated hereby shall have been made or obtained, unless waived by HNWC in
its sole discretion.
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 for the purpose of
challenging or restricting the consummation of this Agreement or the
transactions contemplated hereby this Agreement, (i) which claims damages
against HNWC 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 HNWC, could materially and
adversely affect the operations of Aloha after he Closing; and no injunction or
restraining order shall be in effect prohibiting the transactions contemplated
by this Agreement.
7.4 FORCE MAJEURE. No material part of the operating assets of Aloha
shall 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 NO DISSENTING SHARES. None of the Stockholders shall have exercised
dissenters' rights in connection with the Merger.
7.6 CERTIFICATES. HNWC shall have received from Aloha or the
Stockholders 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 THE OBLIGATIONS OF ALOHA AND THE STOCKHOLDERS
The obligation of Aloha and the Stockholders to consummate the Merger
in accordance with this Agreement shall be subject to the satisfaction or waiver
(by Aloha and the Stockholders in their 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 HNWC and Subsidiary contained in Article V
hereof shall be true and correct in all material respects on the date hereof and
shall also be true and correct in all material respects as of the Closing with
the same effect as if such representations and warranties had been made on and
as of the Closing, and HNWC and Subsidiary 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 them.
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8.2 GOVERNMENTAL APPROVALS; CONSENTS OF THIRD PARTIES. Any governmental
notices or filings required to be made, and all consents or approvals from third
parties required to be obtained, in connection with the transactions
contemplated hereby shall have been made or obtained, unless waived by Aloha in
its sole discretion.
8.3 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 for the purpose of
challenging or restricting the consummation of this Agreement or the
transactions contemplated hereby this Agreement, (i) which claims damages
against Aloha 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 Aloha, could materially
and adversely affect the value of the Shares or the Note after he Closing; and
no injunction or restraining order shall be in effect prohibiting the
transactions contemplated by this Agreement.
8.4 FORCE MAJEURE. No material part of the operating assets of Aloha
shall 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.
8.5 CERTIFICATES. Aloha or the Stockholders shall have received from
HNWC and/or Subsidiary 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
SURVIVAL AND INDEMNIFICATION
9.1 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 two years, except for the representations and warranties by Aloha and
the Stockholders contained in Section 3.15 hereof (Tax Matters), which shall
survive until the expiration of the applicable statute of limitations and the
representations and warranties of the Stockholders contained in Article IV
hereof ( Securities Laws Matters), which shall survive indefinitely.
9.2 INDEMNIFICATION.
(a) The Stockholders, jointly and severally, agree to defend, indemnify
and hold HNWC and its officers, directors agents and affiliates (collectively,
"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 HNWC or its Representatives, directly or indirectly,
as a result of: (i) the failure of any representation or warranty contained in
Articles III and IV hereof to be true and correct in all respects as of the
Closing, but only to the extent such Losses exceed $20,000 in the aggregate and
do not exceed the aggregate value of the Merger consideration received by the
Stockholders; (ii) the Lease Obligation described in Section 6.7 hereof; (iii)
the Vehicle Obligation described in Section 6.8 hereof; and (iv) the Defense
Costs described in Section 6.9 hereof.
(b) HNWC shall defend, indemnify and hold the Stockholders and their
Representatives harmless from and against any and all Losses of any kind or
nature whatsoever that may be suffered or paid by them, directly or indirectly,
as a result of: (i) the failure of any representation or warranty contained in
Article V hereof to be true and correct in all respects as of the Closing, but
only to the extent such Losses exceed $20,000 in the aggregate; and (ii) the
termination or subletting of the Aloha Lease, other than the Lease Obligation
described in Section 6.7 hereof; and (iii) any Defense Costs in connection with
the AAA Litigation other than as described in Section 6.9 hereof.
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(c) In the event of any claim for indemnification under this Section
9.2 by HNWC or its Representatives, on the one hand, or by the Stockholders or
their Representatives, on the other (in each case, the claimant being
hereinafter referred to as the "Indemnified Party"), the Indemnified Party shall
notify the other party (the "Indemnitor") in writing of said claim within 30
days of first becoming aware 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 this Section 9.2
arising out of a breach of any representation or warranty must be delivered in
writing to the Indemnitor prior to the expiration of the applicable survival
period for such representation or warranty as provided in Section 9.1 hereof.
(d) The obligations and liabilities of the parties pursuant to Section
9.2 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:
(i) 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 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.
(ii) 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.
(iii) 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.
9.3 PAYMENT OF CLAIMS . All claims for indemnification hereunder by
HNWC shall be satisfied through a reduction the aggregate principal amount of
the Note, so long as the Note or any portion thereof remains outstanding. After
the Note is no longer outstanding (whether because of repayment or upon
foreclosure or exchange in the event of a default thereunder), all claims for
indemnification hereunder by HNWC shall be satisfied by surrender and
cancellation of Merger Shares having a market
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value equal to the dollar amount of the applicable claim. Any claim for
indemnification hereunder by the Stockholders shall be satisfied through the
issuance of additional shares of HNWC Common Stock having a market value equal
to the dollar amount of the applicable claim. For purposes of the foregoing, the
market value of the shares surrendered or issued shall be based upon the closing
sales price per share 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
OTC Bulletin Board).
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 BROKERS. HNWC and the Subsidiary, on the one hand, and Aloha dn
the Stockholders on the other, hereby 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. The parties 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.
10.2 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.
10.3 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.
10.4 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.
10.5 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.
10.6 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 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.
10.7 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
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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 Aloha, to: Aloha Water Company, Inc.
94-538 Puahi Street, Unit A
Waipahu, HI 96797
Telephone: (808) 677-1500
Facsimile: (808) 677-9444
Attn: Daniel Gabriel, President
If to any Stockholder, to the address and telephone number set
forth on the Schedule of Stockholders attached hereto.
If to HNWC
or Subsidiary, to: Hawaiian Natural Water Company, Inc.
98-746 Kuahao Place
Pearl City, HI 96782
Telephone: (808) 483-0527
Facsimile: (808) 483-0536
Attn: Marcus Bender, President
10.8 SUCCESSORS AND ASSIGNS. This Agreement shall not be assigned or
delegated by any party without the prior written consent of the other parties.
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 the parties. 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.
10.9 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.
10.10 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.
10.11 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.
10.12 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, except that HNWC shall pay
all of the joint attorneys' fees and expenses in excess of $5,000 in the
aggregate and HNWC shall pay up to $20,000 in accounting expenses for the audit
of Aloha's financial statements. The Stockholders shall be personally liable for
one half of the joint attorneys' expenses up to $2,500 in the aggregate, and
Aloha for any accounting expenses in excess of $20,000.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
HAWAIIAN NATURAL WATER COMPANY, INC.
By: /s/ MARCUS BENDER
------------
Marcus Bender, President
AWC ACQUISITION CORP.
By: /s/ MARCUS BENDER
------------
Marcus Bender, Chairman
ALOHA WATER COMPANY, INC.
By: /s/ DANIEL GABRIEL
--------------
Daniel Gabriel, President
THE STOCKHOLDERS:
/s/ DANIEL GABRIEL
--------------
Daniel Gabriel
/s/ PATRICIA GABRIEL
----------------
Patricia Gabriel
/s/ DAVID SMITH
-----------
David Smith
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Exhibit 4.1
March 17, 2000 $500,000
SECURED EXCHANGEABLE PROMISSORY NOTE
FOR GOOD AND VALUABLE CONSIDERATION, receipt of which is hereby
acknowledged, the undersigned, Hawaiian Natural Water Company, Inc., a Hawaii
corporation ("Maker"), hereby promises to pay to the persons listed on Schedule
I hereto (collectively, the "Holders"), in lawful money of the United States of
America, the aggregate principal amount of $500,000, plus interest thereon at
the rate set forth below, upon the terms and conditions set forth in this
Secured Exchangeable Promissory Note (this "Note"). This Note is being issued to
the Holders in partial payment of the merger consideration owing to them in
connection with the merger of Aloha Water Company, Inc., a Hawaii corporation
wholly owned by the Holders ("Aloha"), with and into AWC Acquisition Corp., a
Hawaii corporation and a wholly owned subsidiary of Maker ("Subsidiary"),
Subsidiary being the surviving corporation in such merger, as more fully set
forth in that certain Merger Agreement and Plan of Reorganization (the "Merger
Agreement") dated March 17, 2000 by and among Maker, Subsidiary, Aloha and the
Holders, which is incorporated herein by reference (capitalized terms appearing
herein without definition having the meanings assigned to them in the Merger
Agreement). In the event of any conflict between the provisions of the Merger
Agreement and this Note, the provisions of the Merger Agreement shall govern.
All rights of the Holders hereunder shall rank pari passu, and all payments of
principal and interest hereunder shall be made to the Holders pro rata in
accordance with their interests as set forth on Schedule I hereto.
1. PAYMENT OF INTEREST. Maker promises to pay interest on the
outstanding principal amount of this Note, from the date hereof or from the most
recent date as of which interest has been paid, until this Note has been paid in
full, at the annual rate of 10%, compounded annually. Interest for the period
from the date hereof through April 30, 2000 shall be payable on May 1, 2000;
interest for all periods thereafter shall be payable monthly in arrears on the
first day of each month, commencing June 1, 2000. Interest shall be computed on
the basis of a 360-day year, consisting of twelve 30-day months.
The foregoing notwithstanding, Maker shall offset against the interest
payments due hereunder, the amount of any Lease Obligation owing to Maker by the
Holders as provided in Section 6.7 of the Merger Agreement until such Lease
Obligation is paid in full.
2. PAYMENT OF PRINCIPAL. The entire principal amount of this Note, plus
all accrued and unpaid interest thereon, shall become due and payable on April
1, 2001.
3. PREPAYMENT. Maker may prepay this Note in whole or in part (in each
case, a "Prepayment") at any time without premium or penalty.
4. SECURITY. This Note is secured by a first priority security interest
in all of the capital stock of Subsidiary (the "Pledged Shares") as further
described in that certain Pledge and Security Agreement of even date herewith
(the "Security Agreement"), a copy of which is attached hereto and made a part
hereof.
5. EXCHANGE. Solely in the event of an Acceleration (as defined in
Section 6 hereof), the Holders may elect (an "Exchange Election") to exchange
this Note, in whole but not in part for convertible preferred stock of Maker
("Exchange Preferred") with an aggregate liquidation preference equal to the
then outstanding principal amount of this Note, plus all accrued but unpaid
interest thereon. The Exchange Preferred will have such rights, preferences,
privileges and restrictions as are set forth in its governing instrument,
including without limitation the following: the Exchange Preferred will be
convertible, at any time at the option of the holder thereof, into common stock
of Maker ("Common Stock")
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at a conversion price per share equal to the trading price of the Common Stock
on the date of the Acceleration on the principal market on which the Common
Stock is then traded (currently the OTC Bulletin Board) or, if the Common Stock
is not then publicly traded, at the fair market value thereof as determined in
good faith by the Board of Directors of Maker; provided, however, that the
Holders may rescind any Exchange Election within ten days following receipt of
written notice of any such determination by the Board of Directors. In the event
of a conversion of the Exchange Preferred into shares of Common Stock, at the
request of a majority in interest of the holders thereof, Maker shall be
obligated to register such conversion shares for resale under the Securities Act
of 1933, as amended, provided that Form S-3 or other similar short form
registration statement is then available to Maker.
6. DEFAULT. The occurrence of any of the following events shall
constitute a default hereunder (a "Default"): (i) the failure of Maker to pay
the principal of this Note when due; (ii) ) the failure of Maker to pay interest
on this Note when due which failure shall have continued for a period of 60 days
following the applicable due date; (iii) the breach of any covenant or
representation and warranty contained in this Note, which breach shall not have
been cured within 30 days following written notice thereof from the Holders;
(iv) the occurrence of any Event of Default (as defined in the Security
Agreement); and (v)(A) any assignment for the benefit of creditors of Maker, or
(B) the involuntary application (which application is not dismissed within 60
days) for, or appointment of, a receiver for Maker or any assets of Maker, or
(C) the commencement of any bankruptcy or insolvency proceedings against Maker
under any of the provisions of the Federal bankruptcy laws or of any comparable
rule of law of any other jurisdiction to which Maker is subject.
In case of a Default pursuant to any of clauses (i) through (iv) above, the
Holders shall be entitled to declare the entire outstanding principal amount of
this Note, together with any accrued but unpaid interest thereon at the rate
specified above, immediately due and payable (an "Acceleration"); in case of a
Default pursuant to clause (v) above, an Acceleration of this Note shall occur,
without notice to or action of any kind by the Holders.
If any amount required to be paid pursuant to this Note is not paid in
full when due, Maker shall pay to the Holders all costs and expenses of
collection, including (without limitation) reasonable attorneys' fees,
arbitration fees and costs, and court fees and costs.
7. CERTAIN COVENANTS. Except with the written consent of the Holders,
Maker hereby covenants that it will not, and will not permit Subsidiary to:
(a) Declare or pay any dividend or make any distribution, loan or
management fee to Maker, unless at the time of any such action and after giving
effect thereto:
(i) no Default under this Note has occurred and is continuing;
and
(ii) the aggregate amount expended for all such purposes
subsequent to the date hereof does not exceed the aggregate
amount of the Subsidiary's net income for such period
(determined in accordance with generally accepted accounting
principles ("GAAP"), consistent with past practice); provided,
however, that Maker shall be obligated to repay to Subsidiary
all such amounts received in the event of a foreclosure on the
Pledged Shares as provided in Section 6 of the Security
Agreement; and, provided further, that for purposes of the
foregoing a management fee shall not include the Subsidiary's
allocable portion of Maker's corporate overhead expense
("Allocated Overhead"), determined in accordance with GAAP,
which Aloha shall be permitted to pay to Maker without regard
to the foregoing restrictions and conditions.
(b) Transfer or assign to Subsidiary, or cause Subsidiary to
assume or guarantee, any liability of Maker (other than
Allocated Overhead), or transfer or assign to Maker any asset
of Subsidiary, other than for fair equivalent value.
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(c) Adopt any plan of liquidation of Subsidiary or sell, lease
or otherwise convey or dispose of all or substantially all of
the assets of Subsidiary or merge Subsidiary with or into any
other person.
8. REPRESENTATIONS AND WARRANTIES OF MAKER. Maker represents and warrants
to the Holders as follows:
(a) The issuance of this Note, the Exchange Preferred and the
conversion shares underlying the Exchange Preferred have been
duly authorized by all necessary corporate action on the part
of Maker and do not and will not conflict with any provision
of Maker's charter documents or any material rule, law
regulation or agreement, or any order, judgment or decree, to
which Maker is subject or by which it is bound.
(b) The Exchange Preferred and the conversion shares
underlying the Exchange Preferred, if and when issued and paid
for in accordance with the provisions of this Note and the
governing instrument of the Exchange Preferred, will be duly
authorized, fully paid and non-assessable shares of capital
stock of Maker.
(c) Maker has reserved for issuance, and will continue to
reserve for issuance at all times while either this Note or
the Exchange Preferred are outstanding, such number of shares
of its Common Stock as is sufficient for the conversion in
full of the Exchange Preferred.
9. ACTION BY MAJORITY IN INTEREST. By acceptance of this Note, each of
the Holders agrees that wherever this Note permits or requires any action to be
taken (or foregone) at the election of the Holders, such action may be taken (or
foregone) at the election of a majority in interest of the Holders, and all of
the Holders agree to be bound by any such election.
10. NOTICES. In the event that any notice or other communication is to
be sent pursuant to this Note, such notice shall be in writing, sent by
facsimile or by certified mail, return receipt requested, or delivery in person
(including, without limitation, by Federal Express or similar service),
addressed as follows, or to such other address as a party may notify the others
in accordance with the provisions hereof:
If to Maker, to:
Hawaiian Natural Water Company, Inc.
98-746 Kuahao Place
Pearl City, Hawaii 96782
Facsimile: (808) 483-0536
Attn: Marcus Bender, President
If to the Holders, to them at their respective addresses or
facsimile numbers set forth on Schedule I hereto.
All notices, payments, and other communications hereunder shall be
deemed given when faxed or delivered, or three days following deposit in the
United States mails, if mailed, in accordance with this Section.
11. SEVERABILITY. In case any provision in this Note shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired
thereby.
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12. GOVERNING LAW. This Note shall be governed by and construed in
accordance with the laws of the State of Hawaii, without regard to the
conflicts of law principles thereof.
HAWAIIAN NATURAL WATER COMPANY, INC.
/s/ Marcus Bender
-----------------------------------
By: Marcus Bender, President
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SCHEDULE OF HOLDERS
NAME PERCENTAGE INTEREST
---- -------------------
Daniel Gabriel 51
94-112 Ahahui Way
Mililani, Hawaii 96789
Patricia Gabriel 20
94-112 Ahahui Way
Mililani, Hawaii 96789
David Smith 29
C/o White Tiger Development
16490 Vineyard Boulevard
Morgan Hill, California 95037
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<PAGE>
Exhibit 4.2
PLEDGE AND SECURITY AGREEMENT
This Pledge and Security Agreement (this "Agreement") is made
and entered into as of this 17th day of March 2000, by and between Hawaiian
Natural Water Company, Inc., a Hawaii corporation ("Grantor"), on the one hand,
and Daniel Gabriel, Patricia Gabriel and David Smith, individuals (collectively,
"Pledgees"), on the other hand. This Agreement shall become effective at the
effective time (the "Effective Time") of the Merger (as defined below).
WHEREAS, Pledgees are collectively the holders of the entire
equity interest in Aloha Water Company, Inc., a Hawaii corporation ("Aloha");
and
WHEREAS, at the Effective Time, Pledgees will transfer the
entire equity interest in Aloha to Grantor by means of a merger (the "Merger")
of Aloha with and into a wholly owned subsidiary of Grantor, which subsidiary
shall be the surviving corporation (the "Surviving Corporation") in the Merger
(with its name changed to "Aloha Water Company, Inc."); and
WHEREAS, as partial consideration in the Merger, Grantor will
issue to Pledgees collectively a certain promissory note of Grantor (the "Note")
in the original principal amount of $500,000, a copy of such Note being attached
hereto and made a part hereof; and
WHEREAS, in order to induce Pledgees to consummate the Merger
and to accept the Note, Grantor has agreed to grant Pledgees the security
interest provided for herein as security for Grantor's obligations under the
Note;
NOW, THEREFORE, in consideration of the premises and in order
to induce Pledgees to consummate the Merger and to accept the Note, Grantor
hereby agrees with Pledgees as follows:
1. GRANT OF SECURITY INTEREST. As of the Effective Time,
Grantor hereby assigns, pledges and grants to Pledgees collectively a continuing
first priority security interest in the following collateral (the "Collateral"):
(i) an aggregate of 1,000 shares (the "Pledged Shares") of Common Stock of the
Surviving Corporation, constituting all of the issued and outstanding shares of
capital stock of the Surviving Corporation, and (ii) all dividends or
distributions thereon or proceeds thereof.
2. DELIVERY OF CERTIFICATES AND INSTRUMENTS. At the Effective
Time, Grantor shall deliver to Daniel Gabriel, as Pledge and as agent on behalf
of all Pledgees, stock certificate(s) representing the Pledged Shares,
accompanied by duly executed instruments of transfer. Mr. Gabriel shall be
entitled to hold same, solely as agent on behalf of Pledgees, pending the
occurrence of an Event of Default (as defined below). Upon payment of the Note
in full, Mr. Gabriel, as agent on behalf of Pledgees, shall promptly redeliver
to Grantor all such certificate(s) and shall execute any such instruments of
transfer as may be reasonably requested by Grantor in order to reconvey to
Grantor and evidence Grantor's absolute ownership of all of the Collateral.
3. GRANTOR'S RIGHTS AS OWNER. Notwithstanding anything to the
contrary contained herein, prior to the occurrence of an Event of Default
hereunder, Grantor shall be, and shall be entitled to exercise all of the rights
of, the absolute owner of the Collateral, except as otherwise provided herein,
including the right to vote and to receive dividends on the Pledged Shares
(subject to the restrictions contained in the Note).
4. SECURITY FOR OBLIGATIONS. This Agreement secures the
payment obligations of Grantor to Pledgees under the Note. Pledgees rights
hereunder shall be secured equally and ratably, in accordance with their
interests in the Note. In the event of any foreclosure on the Note as provided
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<PAGE>
below, the Pledged Shares shall be distributed to Pledgees pro rata in
accordance with their then interests in the Note.
4. TRANSFERS AND OTHER LIENS. Grantor shall not, without the prior
written consent of Pledgees: (i) sell, assign or otherwise dispose of, or grant
any option with respect to, the Pledged Shares, or (ii) create or suffer to
exist any lien, security interest or other charge or encumbrance (collectively,
"Liens") upon or with respect to the Pledged Shares, except for the Lien created
by this Agreement and any Lien which may subsequently be granted by Grantor to a
lender on all of Grantor's assets, including the Pledged Shares, provided that
any such Lien shall be made expressly subordinate to the Lien created hereby and
any such lender shall expressly acknowledge Pledgees rights hereunder.
5. EVENTS OF DEFAULT. The occurrence of any of the following
events shall constitute an event of default hereunder (an "Event of Default"):
(i) any breach by Grantor of its obligations under Section 4 hereof, which
breach has not been cured within 10 business days following written notice
thereof from Pledgee; or (ii) any Acceleration under the Note (as defined in
Section 6 thereof).
6. REMEDY UPON DEFAULT.
(a) Upon the occurrence of an Event of Default
hereunder, Pledgees shall be entitled to foreclose on the Collateral (a
"Foreclosure") by transferring the Pledged Shares into the names of
Pledgees, and the Pledged Shares shall thereupon become the property of
Pledgees, free and clear of any rights of Grantor therein, whereupon
all obligations of Grantor to Pledgees under the Note shall be deemed
satisfied, except as provided in Section 6(c) hereof.
(b) The right of Foreclosure provided for in Section
6(a) hereof shall be Pledgees' sole remedy hereunder upon the
occurrence of an Event of Default; provided, however, that the
foregoing shall not affect any other rights or remedies Pledgees may
have as set forth in the Note.
(c) Upon any Foreclosure of the Pledged Shares as
provided in Section 6(a) hereof, Grantor shall be obligated to repay or
redeliver to the Surviving Corporation, within 30 days after the date
of any Foreclosure, all dividends or distributions received from the
Surviving Corporation while the Note was outstanding, irrespective of
whether or not any such dividend or distribution was made with, or
required, the consent of Pledgees. In the case of any distribution of
property, Grantor shall redeliver such property in kind, except as
otherwise agreed between the parties, but shall not be obligated to
compensate the Surviving Corporation for the use thereof or for any
change in the condition thereof due to normal wear and tear.
7. NOTICES. In the event that any notice or other
communication is to be sent pursuant to this Note, such notice shall be in
writing, sent by facsimile or by certified mail, return receipt requested, or
delivery in person (including, without limitation, by Federal Express or similar
service), addressed as follows, or to such other address as a party may notify
the others in accordance with the provisions hereof:
If to Grantor, to:
Hawaiian Natural Water Company, Inc.
98-746 Kuahao Place
Pearl City, Hawaii 96782
Facsimile: (808) 483-0536
Attn: Marcus Bender, President
If to Pledgees, to them at their respective addresses or
facsimile numbers set forth on Schedule I hereto.
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<PAGE>
All notices, payments, and other communications hereunder shall be
deemed given when faxed or delivered, or three days following deposit in the
United States mails, if mailed, in accordance with this Section.
8. ACTION BY MAJORITY IN INTEREST; AGENT FOR PLEDGEES. By
acceptance of the security interest granted hereby, each of Pledgees grees that
wherever this Agreement permits or requires any action to be taken or foregone
at the election of Pledgees, such action may be taken (or foregone) at the
election of a majority in interest of Pledgees, and all Pledgees agree to be
bound by any such election. Pledgees further agree that Daniel Gabriel may act
as agent for all Pledgees hereunder, unless and until a different agent is named
with the consent of the majority in interest of Pledgees, and that Mr. Gabriel
shall not be liable to any other Pledgee for any acts or omissions taken or
omitted by him in the good faith exercise of his duties hereunder.
9. FURTHER ASSURANCES. Grantor hereby agrees to execute and
deliver promptly to or for the benefit of Pledgees any and all other instruments
and documents that Pledgees may reasonably request in order to perfect the
security interest granted hereby. Upon payment of the Note in full, Pledgees
hereby agree to execute and deliver promptly to or for the benefit of Grantor
any and all other instruments and documents that Grantor may reasonably request
in order to release the security interest granted hereby and to reconvey to
Grantor all right and title to the Collateral, free and clear of the security
interest granted hereby.
10. COUNTERPARTS. This Agreement, and any amendments, waivers,
consents or supplements hereto, may be executed in any number of counterparts,
each of which when so executed shall be deemed an original but all of which
together shall constitute one and the same instrument.
11. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Hawaii, without giving
effect to the conflicts of laws principles thereof.
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<PAGE>
IN WITNESS WHEREOF, the parties have cause this Agreement to
be executed and delivered as of the date first above written.
HAWAIIAN NATURAL WATER COMPANY, INC.
By: /s/ MARCUS BENDER
-------------
Marcus Bender, President
THE PLEDGEES:
/s/ DANIEL GABRIEL
--------------
Daniel Gabriel
/s/ PATRICIA GABRIEL
----------------
Patricia Gabriel
/s/ DAVID SMITH
-----------
David Smith
38
<PAGE>
Exhibit 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated as of March 17,
2000, is made and entered into by and between Aloha Water Company, Inc., a
Hawaii corporation (the "Company"), and Daniel Gabriel, an individual resident
of the State of Hawaii ("Employee").
WHEREAS, the Company desires to employ Employee as the Company's
President and Chief Operating Officer, and the Employee desires to be employed
by the Company in such capacity, all on the terms set forth herein; and
WHEREAS, Employee has the experience, knowledge and abilities necessary
to enable him to perform his obligations hereunder;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereby agree as follows:
1. DUTIES.
(a) Within the limitations established by the Company's Bylaws
and its Board of Directors ("the Board"), Employee shall have each and all of
the duties and responsibilities of the President and Chief Operating Officer of
the Company as those duties may from time to time be established by the Board.
It is also anticipated that Employee shall be nominated to serve as a director
of the Company throughout the term of this Agreement and will also be nominated
to serve as a director of the Company's parent corporation, Hawaiian Natural
Water Company, Inc. ("HNWC"). Employee shall not be entitled to receive any
additional compensation for such service as a director, except to the extent
otherwise determined by the Board or HNWC.
(b) Employee shall devote his full time and best efforts to
the performance of his duties hereunder and to the advancement of the interests
of the Company and shall not, without the express prior written consent of the
Board, render directly or indirectly to any other person, corporation,
partnership, firm, company, joint venture or other entity any services of any
kind for compensation, or engage in any other activity that would in any manner
whatsoever compete with the Company, be adverse to any interests of the Company,
and/or in any manner whatsoever interfere with the proper performance of
Employee's duties and responsibilities to the Company hereunder. The foregoing
shall not be deemed to preclude or prohibit Employee from performing services
within the civic community including, without limitation, serving on boards of
civic groups, so long as such services do not interfere with Employee's
performance of his duties hereunder.
2. TERM. Unless earlier terminated as provided in Section 7 hereof,
Employee's employment hereunder (the "Employment") shall extend for a term of
one year; provided, however, that the Employment shall automatically be extended
for an additional year (as so extended, the "Term"), and thereafter from year to
year, on the same terms and conditions as are then existing as of the extension
date, unless either party, in its sole and absolute discretion, shall have given
written notice of termination to the other party not less than 90 days prior to
the end of the then current Term.
3. SALARY. During the first year of the Term, Employee shall be
entitled to receive an annual salary of $125,000, payable in equal installments
on the Company's regular payroll dates. Employee's salary hereunder after the
first year of the Term shall be established by mutual agreement of the parties.
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4. BONUS. During each year of the Term, Employee shall be eligible to
receive a bonus in an amount to be determined by the Board based upon the
achievement by the Company of certain performance goals to be established by the
Board, in its discretion, during the first quarter of each year of the Term. Any
such bonus shall be payable by the Company in two equal installments not later
than 90 days and 150 days, respectively, following the end of the year in which
earned.
5. EXPENSES. The Company shall pay or reimburse Employee for all usual,
reasonable and necessary expenses paid or incurred by him in the performance of
his duties hereunder, subject to receipt by the Company of appropriate
documentary proof of such expenditures and to the right of the Company at any
time to place reasonable limitations on expenses thereafter to be incurred or
reimbursed; provided, however, that Employee may not incur any expense or
related group of expenses in excess of $1,000 per month in the aggregate without
the express prior written consent of the Board.
6. EMPLOYEE BENEFITS. Employee shall be entitled to an automobile
allowance of $300 per month. Employee shall also be entitled to participate in
and receive any and all benefits pursuant to any benefit programs maintained by
the Company during the Term that are generally available to other senior
executives of the Company including, without limitation, participation in any
life insurance, hospital, surgical, medical or other group health and accident
benefit plans. In addition, Employee shall be entitled to participate in all
profit sharing, pension, bonus or retirement plans of the Company as may be in
existence during the Term in accordance with their respective terms and
provisions, but, to the extent participation or the amount of participation is
in the discretion of the Board or any committee thereof, Employee's
participation shall likewise be solely in such discretion. Employee shall be
entitled to three weeks' paid vacation during each year of the Term.
7. TERMINATION.
(a) The Employment may be terminated by the Company prior to
the end of its then current Term upon notice to Employee at any time For Cause
(as hereinafter defined). The Employment shall also terminate automatically upon
Employee's death or permanent disability (as defined pursuant to the Company's
long-term disability insurance policy as then in effect). If the Company
terminates the Employment For Cause, or if the Employment terminates
automatically upon Employee's death or permanent disability, the Company shall
have no further obligation to Employee under this Agreement, except the
obligation to pay Employee all salary and benefits accrued through the effective
date of such termination including, in the case of death or permanent
disability, any benefits to which Employee may be entitled under long-term
disability or other insurance programs maintained by the Company (collectively,
"Termination Benefits").
(b) For purposes hereof, the term "For Cause" means (i) the
conviction of Employee of (or plea of nolo contendere to) a felony or any crime
involving moral turpitude, (ii) any embezzlement or intentional misappropriation
by Employee of any assets of the Company (which for this purpose shall not
include the incurrence of any business expense by Employee in good faith in the
performance of his duties hereunder), or (iii) gross negligence by Employee in
the performance of his duties hereunder, but does not mean the Company's
disagreement with any lawful action undertaken by Employee in the good faith
exercise of his business judgment, subject to the reasonable directives of the
Board.
(c) Subject to receipt of all Termination Benefits then due,
for a period of thirty (30) days following any termination of Employee's
employment hereunder, Employee shall fully cooperate with the Company in all
matters relating to the winding up of Employee's work on behalf of the Company
and the orderly transfer of all pending work and Employee's duties and
responsibilities to such other person or persons as may be designated by the
Company, in its sole discretion. Upon any termination of Employee's employment
hereunder, Employee shall immediately deliver to the Company any and all of the
Company's property of any kind or nature whatsoever in Employee's possession,
custody or control, including, without limitation, any and all Confidential
Information (as defined in Section 8 hereof).
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8. CONFIDENTIAL INFORMATION.
(a) Employee recognizes, acknowledges and agrees that as a
result of or in connection with the Employment, he will have access to and
obtain certain Confidential Information (as hereinafter defined), relating to
the Company's business and not generally known to the public or to the Company's
competitors. Employee recognizes, acknowledges and agrees that the Confidential
Information constitutes a valuable, special and unique asset of the Company,
access to and knowledge of which is essential to the performance of Employee's
duties. Employee specifically agrees that, except as directed by the Board,
Employee will not at any time during or for a period of five years after any
termination of the Employment, use or disclose any Confidential Information to
any person whomsoever for any purpose other than for the benefit of the Company.
(b) For purposes hereof, the term "Confidential Information"
means any and all marketing surveys; marketing programs; compensation
arrangements; customer lists; contact lists; agency lists; agency agreements;
pricing information; sources of customers' business plans, projections or
prospects; actual and/or projected expenses; actual and/or projected revenues;
actual and/or projected profits; research or experimental work; data; lists;
files; notes; books; records; drawings and any and all other documents, work
products and/or materials and other information of the Company or its clients or
customers of a confidential, proprietary or secret nature which is or may be
applicable to or related in any way to the business of the Company or its
clients or customers.
9. INJUNCTIVE RELIEF. The parties hereto agree that in the event of the
breach of Section 8 of this Agreement by Employee, monetary damages alone would
not be an adequate remedy to the Company for the injury that would result from
such breach, and that the Company shall be entitled, at any time after any such
breach, to immediately obtain injunctive relief prohibiting any further breach
of this Agreement. Employee further agrees that any such injunctive relief
obtained by the Company shall be in addition to monetary damages.
10. WAIVER OF MODIFICATION. Any waiver, alteration or modifications of
any of the provisions of this Agreement shall not be valid unless made in
writing and signed by the parties hereto. Waiver by either party of a breach of
any provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach.
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<PAGE>
11. SUCCESSORS AND ASSIGNS; ENTIRE AGREEMENT. This Agreement may not be
assigned by either party hereto without the prior written consent of the other
party hereto. This Agreement shall inure to the benefit of, and be binding upon
any successor or assign of the parties hereto. This Agreement constitutes the
entire agreement of the parties with respect to the subject matter hereof and
thereof and supersedes all prior agreements, amendments, memoranda
representations or understandings, whether written or oral, with respect to the
subject matter hereof between the Company and Employee.
12. APPLICABLE LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Hawaii, without regard to the
conflicts of law provisions thereof.
13. NOTICES. Any notice required or permitted to be given under this
Agreement shall be in writing and delivered in person or sent via facsimile,
with conformation of receipt, by registered, certified or express mail, postage
and fees prepaid, in the case of the Company, to the then-current address of its
then principal office and, in the case of Employee, to the then-current address
of his office of employment hereunder or such other address or to the attention
of such other person as the recipient party will have specified by prior written
notice to the sending party.
14. DESCRIPTIVE HEADINGS. The descriptive headings for the paragraphs
in this Agreement are inserted for convenience only and do not constitute a part
of this Agreement.
15. NEGOTIATED AGREEMENT. This Agreement reflects the negotiations of
both parties hereto. The language used herein shall be deemed to be the language
chosen by the parties hereto to express their mutual intent, and no rule of
strict construction shall be applied.
16. SEVERABILITY. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
this Agreement.
17. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be construed as an original for all purposes,
but all of which taken together shall constitute one and same Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement effective
the day and year first above written.
ALOHA WATER COMPANY, INC.
By: /s/ MARCUS BENDER
-------------
Marcus Bender, Chairman
/s/ DANIEL GABRIEL
--------------
DANIEL GABRIEL
42
