HAWAIIAN NATURAL WATER COMPANY, INC.
STOCK OPTION AGREEMENT
This Stock Option Agreement (this "Agreement") is made and entered into as
of October ___, 1996 by and between Hawaiian Natural Water Company, Inc., a
Hawaii corporation (the "Company"), and Xxxxxx Xxxxxx, an individual resident of
the State of Hawaii ("Optionee"), with respect to the following:
WHEREAS, concurrently herewith the Company and Optionee are entering into
an employment agreement (the "Employment Agreement") pursuant to which Optionee
will be employed as the President and Chief Executive Officer of the Company for
a period of five years; and
WHEREAS, in connection with the Employment Agreement, 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
One Hundred Fifty Thousand (150,000) 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 Fifty Thousand (50,000) Shares on the first
anniversary of the date hereof and as to an additional Fifty Thousand
(50,000) Shares on each of the second and third anniversaries of the date
hereof, provided in each case that the Employment Agreement has not been
terminated for any reason prior to such anniversary date; provided,
however, that if the Employment Agreement is terminated by the Company for
any reason other than For Cause (as defined in the Employment Agreement) or
because of Optionee's death or permanent disability (as defined in the
Employment Agreement), then any portion of the Option which is then
unvested shall thereupon automatically become vested in full. Except as
aforesaid, any portion of the Option which is unvested as of the date of
any termination of the
Employment Agreement shall thereupon become null and void and of no further
force or effect.
3. Exercise Price. The exercise price of the Option (the "Exercise
Price") shall be $4.00 per Share, subject to adjustment as provided herein;
provided, however, that if the Company effects an initial public offering
of its Common Stock (an "IPO") prior to the first anniversary of the date
hereof at a Price to Public (as hereinafter defined) different from the
Exercise Price then in effect, then upon consummation of such IPO, the
Exercise Price shall automatically be adjusted to equal the Price to Public
in such IPO, subject to further adjustment as provided herein. As used
herein, the term "Price to Public" means the price to the public per share
of Common Stock in the IPO; provided, however, that if the IPO involves an
offering of units (the "Units") consisting of one or more shares of Common
Stock and warrants or other rights to purchase additional shares of Common
Stock, then for purposes hereof, Price to Public shall mean the price to
the public per Unit in the IPO divided by the number of shares of Common
Stock included in each such Unit.
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 of Directors of
the Company. 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 held by Optionee, which shall be valued at the fair
market value thereof as determined by the Company's Board of Directors, or
(iii), in the discretion of the Company's Board of Directors, 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:
2.
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 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
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.
3.
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 "Act").
Optionee acknowledges that he has been informed that the Company is
granting the Option in reliance upon exemptions contained in the Act and
the General Rules and Regulations under the 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 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, subject to Section 10
hereof, any Shares acquired by him upon exercise of the Option will be
acquired for investment only. In addition, Employee specifically authorizes
the Company to place an appropriate legend on the Shares in the form set
forth in Section 11 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. Piggyback Registration. In the event that the Company elects to
register its existing stock option plan or any other employee stock option
plan adopted by the Company subsequent to the date hereof on Form S-8 (or
any successor form, if applicable) under the Act, the Company hereby
covenants and agrees to include the Option and the Shares subject to the
Option in such registration, subject to any limitations or restrictions
imposed by Form S-8 (or any successor form, if applicable).
4.
11. 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 "ACT"), AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER THE 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 ACT AND SUCH LAWS.
12. 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 the Employment Agreement and applicable
law. This Agreement is not an employment contract.
13. 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.
5.
14. 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: /s/ Xxxx Xxxxxxxx
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Xxxx Xxxxxxxx, Vice President
/s/ Xxxxxx Xxxxxx
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Xxxxxx Xxxxxx ("Optionee")
6.
