EXHIBIT 4.2
HAWAIIAN NATURAL WATER COMPANY, INC.
STOCK OPTION AGREEMENT
This Stock Option Agreement (this "Agreement") is made and entered into
as of July 31, 1998 by and between Hawaiian Natural Water Company, Inc., a
Hawaii corporation (the "Company"), and 8607 Colonial Group, Inc., a New York
corporation ("Colonial"), with respect to the following:
WHEREAS, Colonial and the Company have entered into a letter agreement,
dated as of the date hereof (the "Engagement Agreement"), pursuant to which the
Company has agreed to engage Colonial as the Company's financial public
relations advisor for a two year term; and
WHEREAS, as its sole compensation for services to be provided pursuant
to the Engagement Agreement, the Company has agreed to issue to Colonial
100,000 shares (the "Initial Shares") of common stock, no par value (the
"Common Stock"), of the Company and to grant to Colonial certain options to
purchase additional shares of Common Stock, as more fully described herein;
NOW, THEREFORE, in consideration of the premises and the covenants and
conditions contained herein, the parties hereto agree as follows:
1. GRANT OF OPTIONS. The Company hereby grants to Colonial the right
and option, but not the obligation, to purchase an aggregate of Five Hundred
Sixty-Five Thousand (565,000) shares of Common Stock (the "Option Shares"),
subject to adjustment as provided herein, on the terms and conditions set
forth herein (the "Options"). The Options are intended to be non-statutory
options and NOT incentive stock options within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended.
2. VESTING. The Options shall be fully vested on the date hereof.
3. EXERCISE PERIOD; EXERCISE PRICE. The Options may be exercised during
the periods (in each case, the "Exercise Period") and at the exercise prices per
Share (in each case, the "Exercise Price") set forth below. The Exercise Price
shall be subject to adjustment as provided herein.
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INITIAL
SHARES EXERCISE PRICE/ EXERCISE EXPIRATION
PURCHASABLE SHARE DATE DATE
100,000 $2.50 9/1/98 8/31/99
100,000 $3.00 10/1/98 8/31/99
100,000 $3.50 11/15/98 8/31/99
100,000 $4.00 1/15/99 7/15/00
100,000 $5.00 3/15/99 7/15/00
65,000 $6.00 5/15/99 7/15/00
The foregoing notwithstanding, in the event that the Registration
Statement (as defined in Section 11 below) has not been declared and remained
continuously effective for a period of at least thirty (30) days prior to
July 15, 1999, the Expiration Date of the Options as shown above shall be
extended until the date which is thirty (30) days following the earlier of
(i) the effective date of the Registration Statement, or (ii) receipt by
Colonial of an opinion of counsel to the Company to the effect that the
Initial Shares may be sold pursuant to Rule 144 under the Securities Act of
1933, as amended (the "Securities Act"), subject to the volume limitations,
manner of sale and Form 144 filing requirements set forth therein.
4. OPTIONAL REDEMPTION. Notwithstanding the Exercise Period provided
in Section 3 above, the Company shall have the right, but not the obligation,
to redeem any part or all of the Options at a redemption price of $.05 per
Option if and to the extent that the Trading Price thereof (as hereinafter
defined) is at least 150% of the Exercise Price thereof for a period of ten
(10) consecutive trading days within a period of fifteen (15) trading days
prior to delivery by the Company to Colonial of a written notice of
redemption (the "Redemption Notice") with respect thereto; provided, however,
that the Company shall not be entitled to redeem any Options unless all of
the following conditions are satisfied with respect thereto: (i) the Initial
Exercise Date thereof as provided in Section 3 above has occurred on or prior
to the delivery date of the Redemption Notice therefor; (ii) the
Registration Statement is effective as of the delivery date of such
Redemption Notice and remains continuously effective through the date set for
redemption (the "Redemption Date"); and (iii) the Common Stock is quoted on
the Nasdaq National Market System or SmallCap Market or is listed on the New
York Stock Exchange or other national or regional stock exchange
(collectively, "Listed") on
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the delivery date of the Redemption Notice and remains Listed continuously
through the Redemption Date . The Redemption Notice shall state (i) the
number of Options to be redeemed, (ii) the Exercise Price(s) thereof, (iii)
the Trading Price of the Common Stock during the applicable ten (10) day
trading period, and (iv) the applicable Redemption Date therefor, which shall
be not less than ten (10) nor more than twenty (20) days following the
delivery date of the Redemption Notice. Colonial shall be entitled to
exercise any or all of the Options called for redemption at any time through
the Redemption Date therefor. Thereafter, Colonial's right to exercise such
Options shall cease and its sole right with respect thereto shall be to
receive payment of the Redemption Price therefor.
As used herein, the term Trading Price with respect to any given trading
day means the greater of (i) the closing sales price, or (ii) the average of
the closing bid and asked prices for the Common Stock on such trading day as
reported on by Nasdaq, or the stock exchange on which the Common Stock is
then Listed.
5. MANNER OF EXERCISE. The Options may be exercised in lots of 100
Option 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 Option Shares with respect to which Options are being exercised and
shall be accompanied by payment of the purchase price in full in cash. As
soon as practicable after any such exercise of Options, the Company shall
issue and register in the name of and deliver to Colonial a certificate or
certificates for the Option 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 Option Shares then subject to the Options
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 Option Shares subject to the Options shall be increased or decreased, as
appropriate, so that it will bear the same ratio to the number of Option
Shares subject to the Options immediately before such change as the number of
shares outstanding immediately after such change bears to the number of
outstanding immediately prior thereto.
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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, Colonial shall have the right,
upon exercise of the Options, 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
Colonial would have been entitled to receive if the Options, to the extent
not previously exercised, had been exercised in full 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
Option Shares or other securities purchasable hereunder, the Company shall
give written notice thereof to Colonial, stating the new price and the
increased or decreased number of Option Shares or other securities
purchasable upon exercise of the Options and setting forth in reasonable
detail the method of calculation and the pertinent facts upon which such
calculation is based.
7. NON-TRANSFERABILITY OF OPTIONS. The Options may be exercised only by
Colonial and may not be transferred in any manner, except with the prior written
consent of the Company.
8. REPRESENTATIONS OF COLONIAL. Colonial acknowledges that it has been
informed that the Option Shares subject to the Options, if and when issued, will
not be registered under the Securities Act. Colonial understands that the
Company is granting the Options 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 (the "SEC") on the grounds that, subject to Section 11 hereof, the
grant of the Options and the issuance and sale of the Option Shares subject
thereto 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. Colonial
acknowledges that reliance upon this exemption is predicated in part upon its
representation that it has no intention of dividing its participation or any
interest in the Options and the Option Shares with others or otherwise
distributing all or any part thereof but that any Option Shares acquired by it
upon exercise of the Options will be acquired for its own account and for
investment only, subject to Section 11 below. In
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addition, Colonial specifically authorizes the Company to place an
appropriate legend on the Option Shares in the form set forth in Section 10
below.
9. REPRESENTATION OF THE COMPANY. The Company represents and warrants
that the Option Shares issuable upon any exercise of the Options, when
purchased and paid for as herein provided, will be validly issued, fully paid
and non-assessable.
10. LEGEND. The certificates representing the Option Shares issued
upon any exercise of the Options 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. REGISTRATION RIGHTS. On or prior to August 31, 1998 (the "Filing
Date"), the Company shall prepare and file with the SEC a registration
statement (the "Registration Statement") on Form S-3 or such other applicable
form as the Company may determine covering the Initial Shares and the Option
Shares (collectively, the "Shares") and permitting the Shares to be offered
and resold on a continuous basis pursuant to Rule 415 (or any similar rule)
under the Securities Act. The Company shall use its reasonable best efforts
to cause the Registration Statement to become effective as soon as
practicable, and in any event not more than sixty (60) days, following the
Filing Date and to remain effective for a period of twelve (12) months or, if
earlier, until all the Shares have been sold. The foregoing notwithstanding,
the Company may, one time during such period for up to a maximum of ninety
(90) days, suspend the effectiveness of the Registration Statement, if the
Company shall determine, upon advice of counsel, that it would be required to
disclose any significant corporate development, which disclosure would have a
material adverse effect on the Company, by giving notice to Colonial in
accordance with Section 12 below; provided, however, that the period of time
that the Registration Statement is required to kept effective as provided
above shall be increased by the number of days in such suspension period.
The Company shall pay all expenses of registering the Shares pursuant to this
Section 11, except that Colonial shall pay any underwriting discounts or
commissions attributable to the sale of
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Shares and shall pay its own counsel's fees should it elect to use counsel
separate from the Company's.
12. Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be personally delivered, transmitted
by facsimile, telex or cable, or transmitted by postage prepaid, registered
or certified mail with return receipt requested, or by FedEx or other similar
overnight delivery service, addressed as follows:
If to Colonial, to it at:
000 Xxxxx Xxxx
Xxxxxx, Xxx Xxxx 00000
Attn: Xxxxxxx Xxxxx
Fax:
With a copy to:
Xxxxxxx XxXxxx, Esq.
Xxxxxxxx Xxxxx Xxxxxxxx Xxxx & Ballon LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Fax: (000) 000-0000
If to the Company, to it at:
000 Xxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxx 00000
Fax: (000) 000-0000
Attn: Xxxxxx Xxxxxx, President
With a copy to:
Xxxxxxx X. Xxxxxx, Esq.
Xxxxxx & Xxxxx LLP
000 X. Xxxxxxxx Xxxxxx, Xxx Xxxxxxx, XX 00000
Fax: (000) 000-0000
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Notices shall be deemed to have been given: (i) on the fifth business
day after posting, if mailed first class, (ii) on the date of receipt if
delivered personally, or (iii) on the next business day after transmission if
transmitted by facsimile, telex or cable (and appropriate answerbacks have
been received) or overnight delivery service. Either party hereto may change
its address for purposes hereof by notice to the other party in accordance
with this Section 12.
13. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Hawaii.
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: _______________________________
Xxxxxx Xxxxxx, President
8607 COLONIAL GROUP, INC.
___________________________________
By: Xxxxxxx Xxxxx, President
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