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 Xxxxxx Xxxxxxx, Xxxxxxxx Xxxxxxx and Xxxxx Xxxxx, 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 Xxxxxx Xxxxxxx, as Pledge and as agent on behalf
of all Pledgees, stock certificate(s) representing the Pledged Shares,
accompanied by duly executed instruments of transfer. Xx. Xxxxxxx 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, Xx. Xxxxxxx, 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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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.
00-000 Xxxxxx Xxxxx
Xxxxx Xxxx, Xxxxxx 00000
Facsimile: (000) 000-0000
Attn: Xxxxxx Xxxxxx, President
If to Pledgees, to them at their respective addresses or
facsimile numbers set forth on Schedule I hereto.
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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 Xxxxxx Xxxxxxx 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 Xx. Xxxxxxx
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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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/ XXXXXX XXXXXX
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Xxxxxx Xxxxxx, President
THE PLEDGEES:
/s/ XXXXXX XXXXXXX
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Xxxxxx Xxxxxxx
/s/ XXXXXXXX XXXXXXX
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Xxxxxxxx Xxxxxxx
/s/ XXXXX XXXXX
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Xxxxx Xxxxx
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