HAWAIIAN NATURAL WATER COMPANY, INC.
STOCK OPTION AGREEMENT
This Stock Option Agreement (this "Agreement") is made and entered into as
of September 17, 1997 by and between Hawaiian Natural Water Company, Inc., a
Hawaii corporation (the "Company"), and Xxxxx X. Xxxxx, an individual resident
of the State of Hawaii ("Optionee"), with respect to the following:
WHEREAS, Optionee is concurrently employed as the Chief Financial Officer
of the Company; and
WHEREAS, in connection with such employment, the Company has agreed to
grant to Optionee the option provided for herein, and the Company and Optionee
have agreed to enter into this Agreement with respect thereto;
NOW, THEREFORE, in consideration of the premises and the covenants and
conditions contained herein, the parties hereto agree as follows:
1. GRANT OF OPTION. The Company hereby grants to Optionee the right
and option (the "Option"), but not the obligation, to purchase a total of
Seventy-Five Thousand (75,000) shares of Common Stock, no par value, of the
Company, subject to adjustment as provided herein (the "Shares"), on the terms
and conditions set forth herein. The Option is intended to be a nonstatutory
option and not an incentive stock option within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended.
2. VESTING. The Option shall vest over a three year period as
follows: the Option shall vest as to Twenty-Five Thousand (25,000) Shares on the
first anniversary of the date hereof and as to an additional Twenty-Five
Thousand (25,000) Shares on each of the second and third anniversaries of the
date hereof, provided in each case that Optionee's employment with the Company
has not been terminated for any reason prior to such anniversary date; provided,
however, that the Option shall vest as to all then unvested Shares immediately
upon any Termination (as hereinafter defined) by the Company or any successor of
Optionee's employment, other than "For Cause" (as hereinafter defined),
following a Change in Control of the Company (as hereinafter defined). Subject
to the foregoing, any portion of the Option which is then unvested as of the
date of any termination of Optionee's employment shall thereupon become null and
void and of no further force or effect.
As used herein:
(i) "Termination" means (A) any termination of Optionee's employment with
the Company or any successor, or (B) any substantial diminution in Optionee's
duties and responsibilities or compensation, unless such diminution is consented
to in writing by Optionee;
(ii) "For Cause" means (A) the conviction of Optionee of (or plea of nolo
contendere to) a felony or any crime involving moral turpitude, (B) any
embezzlement or intentional misappropriation by Optionee of any assets of the
Company (which for this purpose shall not include the incurrence of any business
expense by Optionee in good faith in the performance of his duties hereunder),
or (C) gross negligence by Optionee in the performance of his duties hereunder,
but does not mean the Company's disagreement with any lawful action undertaken
by Optionee in the good faith exercise of his business judgment, subject to the
reasonable directives of the Board of Directors (the "Board"); and
(iii) "Change in Control" means (A) any merger or consolidation of the
Company with or into, or the sale, lease or exchange of all or substantially all
of the assets of the Company to, any other person if, (x) as a result of any
such merger or consolidation, the holders of the outstanding stock of the
Company generally entitled to vote in the election of directors ("Voting Power)
immediately prior thereto own less than a majority of the Voting Power of the
survivor thereof or its parent, or (y) as a result of any such sale, lease or
exchange of assets, the Company owns less than a majority of the Voting Power of
such other person; OR (B) any election of new directors as a result of which a
majority of the Board consists of members who were not nominated as candidates
by a majority of the directors in office immediately prior to such election.
3. EXERCISE PRICE. The exercise price of the Option (the "Exercise
Price") shall be $4.00 per Share, subject to adjustment as provided herein.
4. EXERCISE PERIOD. The Option granted hereby shall be exercisable
to the extent vested for a period of five years, commencing on the date hereof
and continuing until the fifth anniversary of the date hereof (the "Exercise
Period").
5. MANNER OF EXERCISE. The option granted hereby may be exercised in
lots of 100 Shares or multiples thereof during the Exercise Period as provided
above, by written notice delivered to the board. Such notice shall state the
number of Shares with respect to which the Option is being exercised and shall
be accompanied by payment of the purchase price in full (i) in cash, (ii) by the
surrender of other shares of Common Stock
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held by Optionee, which shall be valued at the fair market value thereof as
determined by the Board, or (iii) in the discretion of the Board, with full
recourse notes payable to the Company. As soon as practicable after any such
exercise of the Option, the Company shall issue and register in the name of and
deliver to Optionee a certificate or certificates for the Shares issuable upon
such exercise.
6. ADJUSTMENT PROVISIONS. If, at any time or from time to time
during the Exercise Period, any of the following events shall occur, the
Exercise Price and the number of and kind of Shares then subject to the Option
shall in each instance be adjusted as follows:
a. STOCK DIVIDENDS, SPLIT-UPS
AND COMBINATIONS
If a change is effected in the number of outstanding shares of Common
Stock by a stock dividend in Common Stock or by a subdivision or combination of
such shares, the Exercise Price shall be proportionately reduced or increased,
as the case may be, so that it will bear the same ratio to the Exercise Price in
effect immediately before such change as the number of shares outstanding
immediately before such change bears to the number outstanding immediately
thereafter.
Upon any adjustment of the Exercise Price as provided above, the
number of Shares subject to the Option shall be increased or decreased, as
appropriate, so that it will bear the same ratio to the number of shares subject
to the Option immediately before such change as the number of shares outstanding
immediately after such change bears to the number of outstanding immediately
prior thereto.
b. OTHER CHANGES IN CAPITAL STRUCTURE
In the case of any reclassification or other change in the outstanding
Common Stock not covered by the foregoing provisions, other than a change in par
value, or from par value to no par value, or from no par value to par value, or
in the case of any consolidation or merger of the Company with or into another
corporation (other than a merger in which the Company is the continuing
corporation and which does not result in any reclassification or change of
outstanding shares of the Company), or in the case of any sale or conveyance to
another corporation of the property of the Company as an entirety, or
substantially as an entirety, the Optionee shall have the right, upon exercise
of Option, to receive solely a like amount and kind of shares of stock and other
securities and property receivable upon such reclassification, change,
consolidation, merger, sale or conveyance as Optionee would have been entitled
to receive if the option, to the extent not previously exercised, had been
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exercised in full (without regard to the vesting provisions set forth in Section
2 hereof) immediately prior to such reclassification, change, consolidation,
merger, sale or conveyance.
c. NOTICE OF ADJUSTMENT
Upon any adjustment of the Exercise Price and change in the number of
Shares or other securities purchasable hereunder, the Company shall give written
notice thereof to Optionee, stating the new price and the increased or decreased
number of Shares or other securities purchasable upon exercise of the Option and
setting forth in reasonable detail the method of calculation and the pertinent
facts upon which such calculation is based.
7. NON-TRANSFERABILITY OF OPTION. The Option may be exercised during
the lifetime of Optionee only by Optionee and may not be transferred in any
manner other than by will or by the laws of descent and distribution. In the
event of death of Optionee, the person or persons entitled to exercise the
Option under Optionee's will or under the laws of descent and distribution shall
have the same right that Optionee would have had to exercise any previously
unexercised vested portion of the Option as of the date of Optionee's death,
provided that the Company has been supplied with documentation satisfactory to
it with respect to the appointment of such person or persons as such. The terms
of this Option shall be binding upon the executors, administrators, heirs and
successors of Optionee.
8. REPRESENTATIONS OF OPTIONEE. Optionee acknowledges that he has
been informed that the shares subject to the Option, if and when issued, will
not be registered under the Securities Act of 1933, as amended (the "Securities
Act"). Optionee acknowledges that he has been informed that the Company is
granting the Option in reliance upon exemptions contained in the Securities Act
and the General Rules and Regulations under the Securities Act as promulgated
and from time to time amended by the Securities and Exchange Commission on the
grounds that, subject to Section 10 hereof, the grant of the Option and the
issuance and sale of the Shares subject to the Option when exercised are
transactions not involving any public offering and that, consequently, such
transactions are exempt from registration under the Securities Act by virtue of
the provisions of section 4(2) thereof. Optionee acknowledges that reliance upon
this exemption is predicated in part upon his representation that he has no
intention of dividing his participation for any interest in the Option and the
Shares subject to the Option with others or otherwise distributing all or any
part thereof but that any Shares acquired by him upon exercise of the option
will be acquired for investment only. In addition, Employee specifically
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authorizes the Company to place an appropriate legend an the Shares in the form
set forth in Section 10 hereof.
9. REPRESENTATION OF THE COMPANY. The Company represents and
warrants that the Shares issuable upon any exercise of the Option, when
purchased and paid for as herein provided, will be validly issued, fully paid
and non-assessable.
10. LEGEND. The certificates representing the Shares issued upon any
exercise of the Option granted hereby shall bear the following legend:
THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR UNLESS, IN THE
OPINION OF COUNSEL SATISFACTORY TO THE ISSUER, IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER, SUCH OFFER, SALE, TRANSFER, PLEDGE OR
HYPOTHECATION IS EXEMPT FROM REGISTRATION OR IS OTHERWISE IN COMPLIANCE
WITH THE SECURITIES ACT AND SUCH LAWS.
11. NO EMPLOYMENT CONTRACT. Nothing in this Agreement shall confer
upon the Optionee any right to continue to be an employee of the Company or
shall interfere with or restrict in any way the rights of the Company, which are
hereby expressly reserved, to discharge the Optionee, at any time, subject to
the provisions of applicable law. This Agreement is not an employment contract.
12. INCOME TAX WITHHOLDING. Optionee authorizes the Company to
withhold in accordance with applicable law from any compensation payable to him
or her any taxes required to be withheld by Federal, state or local laws as a
result of the exercise of the Option. Furthermore, in the event of any
determination that the Company has failed to withhold a sum sufficient to pay
all withholding taxes due in connection with the exercise of the Option,
Optionee agrees to pay the Company the amount of any such deficiency in cash
within five (5) days after receiving a written demand from the Company to do so,
whether or not Optionee is an employee of the Company at that time.
13. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Hawaii.
5.
IN WITNESS WHEREOF, the parties have executed this Stock Option Agreement
as OF THE DATE FIRST above written.
HAWAIIAN NATURAL WATER COMPANY, INC.
(the "Company")
By:
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Xxxxxx Xxxxxx, President
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Xxxxx X. Xxxxx ("Optionee")
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