Exhibit 10.19
HAWAIIAN NATURAL WATER COMPANY, INC.
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF
SERIES C CONVERTIBLE PREFERRED STOCK
---------------------------------
PURSUANT TO SECTION 415-16 OF THE
HAWAII BUSINESS CORPORATION ACT
---------------------------------
Hawaiian Natural Water Company, Inc., a Hawaii corporation (the
"Corporation"), certifies that pursuant to the authority contained in Article
IV, Section 1 of its Articles of Incorporation, and in accordance with the
provisions of Section 415-16 of the Hawaii Business Corporation Act, its
Board of Directors has adopted the following resolution creating a series of
the Preferred Stock, par value $1.00 per share, designated as Series C
Convertible Preferred Stock:
RESOLVED, that a series of the class of Preferred Stock, par value
$1.00 per share, of the Corporation be hereby created, and that the
designation and amount thereof and the voting powers, preferences, and
relative, participating, optional and other special rights of the shares of
such series, and the qualifications, limitations or restrictions thereof are
set forth in this Certificate of Designation, Preferences and Rights of
Series C Convertible Preferred Stock (the "Certificate of Designation") as
follows:
1. Designation and Amount. Preferred Stock of the Corporation
----------------------
created and authorized for issuance hereby shall be designated as "Series C
Convertible Preferred Stock" (herein referred to as "Series C Preferred
Stock"), having a par value per share equal to $1.00, and the number of
shares constituting such series shall be 750,000. The Corporation shall only
originally issue shares of Series C Preferred Stock to the holder of a
Convertible Note (as defined in Section 11 hereof).
2. Rank. The Series C Preferred Stock shall, with respect to
----
dividend rights and rights upon liquidation, winding up or dissolution,
whether voluntary or involuntary, rank prior to the Common Stock (as defined
in Section 11 hereof) and all classes or series of preferred stock,
preference stock or any other capital stock or equity securities of the
Corporation, whether now issued or hereafter created, except that the Series
C Preferred Stock shall rank junior to the Series A Convertible Preferred
Stock of the Corporation ("Series A Preferred Stock") issued prior to the
date hereof and the Series B Convertible Preferred Stock of the Corporation
("Series B Preferred Stock") issued prior to the date hereof with respect to
dividend rights and rights upon liquidation, winding up or dissolution,
whether voluntary or involuntary. All equity securities of the Corporation to
which the Series C Preferred Stock ranks prior, including the Common Stock,
are collectively referred to herein as the "Junior Securities."
3. Dividend Provisions.
-------------------
(a) Dividends.
---------
(i) Cash Dividends. The Corporation shall pay,
and the Holders of outstanding shares of Series C Preferred
Stock shall be entitled to receive, when, as and if declared
by the Board of Directors, out of funds legally available
therefor, cumulative dividends on each share of Series C
Preferred Stock at a rate per annum equal to ten percent
(10%) of the Liquidation Value per share of Series C
Preferred Stock, accruable quarterly on each of the Dividend
Accrual Dates, payable only in cash. All cash dividends shall
be cumulative, whether or not declared, on a daily basis from
the date of issuance and shall accrue quarterly in arrears on
each Dividend Accrual Date, commencing on the date of
issuance. The Board of Directors shall declare and pay such
accrued dividends at such time and to the extent permitted by
law, subject to the dividend preference of the Series A
Preferred Stock and the Series B Preferred Stock.
(ii) General Provisions. Each distribution in the
form of a cash dividend shall be payable to Holders of record
as they appear on the stock books of the Corporation on such
record date, not less than 10 nor more than 60 days preceding
the relevant Dividend Payment Date, as shall be fixed by the
Board of Directors of the Corporation. For any period during
which any share of Series C Preferred Stock is outstanding
less than a full quarterly dividend period ending on a
Dividend Accrual Date, the dividends payable shall be
computed on the basis of a 360 day year consisting of twelve
30-day months and the actual number of days elapsed in the
period for which the dividends are payable. If any Dividend
Payment Date for a dividend payable in cash occurs on a day
that is not a Business Day, any accrued dividends otherwise
payable on such Dividend Payment Date shall be paid on the
next succeeding Business Day.
(b) Certain Other Non-Cash Distributions. If the
------------------------------------
Corporation shall at any time, or from time to time, after the
Purchase Date, declare, order, pay or make a dividend or other
distribution (including, without limitation, any distribution or
issuance of stock or other securities or property or rights or
warrants to subscribe for securities of the Corporation or any of
its Subsidiaries by way of dividend or spin-off or rights to
purchase Common Stock or other Junior Securities) on its Common
Stock, other than (i) dividends payable in cash in an aggregate
amount in any fiscal year which, when declared, are not expected to
exceed the net income of the Corporation during such year from
continuing operations before extraordinary items, as determined in
accordance with generally accepted accounting principles
consistently applied in accordance with past practice, or (ii) any
dividend or distribution described in Section 5(c)(i), Section
5(c)(ii) or Section 5(c)(iii), then, and in each such case (a
"Triggering Distribution"), each Holder of shares of Series C
Preferred Stock shall be entitled to receive from the Corporation,
with respect to the shares of Series C Preferred Stock held by such
Holder, the same dividend or distribution that such Holder would
have received if immediately prior to the earlier of such Triggering
Distribution or any record date therefor such Holder converted all
of such
2
Holder's shares of Series C Preferred Stock into shares of Common
Stock. Any such dividend, distribution or issuance shall be
declared, ordered, paid or made on the Series C Preferred Stock at
the later of (i) same time such dividend, distribution or issuance
is declared, ordered, paid or made on the Common Stock, or (ii) the
date of issuance of the shares of the applicable Series C Preferred
Stock.
(c) Limitation on Dividends and Other Distributions.
-----------------------------------------------
Unless full cumulative dividends, if any, accrued on all outstanding
shares of the Series C Preferred Stock have been or contemporaneously
are declared and paid for all periods prior to and ending on the most
recent Dividend Accrual Date, no dividend shall be declared or paid
or set aside for payment or other distribution declared or made upon
the Junior Securities (other than a dividend or distribution paid
solely in shares of, or warrants, rights or options solely exercisable
for or convertible into, Junior Securities), nor shall any Junior
Securities be redeemed, purchased or otherwise acquired for any
consideration, nor may any moneys be paid to or made available for a
sinking fund for the redemption of any shares of any such securities,
by the Corporation, except by conversion into or exchange for Junior
Securities.
4. Liquidation Preference.
----------------------
(a) In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation
("Liquidation Event"), the Holders of Series C Preferred Stock then
outstanding shall be entitled to receive, prior and in preference to
any distribution of any of the assets of the Corporation to the
holders of Common Stock and other Junior Securities by reason of
their ownership thereof, an amount per share equal to the sum of (i)
$1.00, and (ii) all accumulations of accrued but unpaid dividends
payable in cash pursuant to Section 3(a)(i) on each share of Series
C Preferred Stock (including an amount equal to a prorated dividend
pursuant to Section 3(a)(i) for the period from the Dividend Accrual
Date immediately prior to the receipt of such sum to the date of
receipt of such sum), with the sum of the amounts referred to in
clauses (i) and (ii) referred to herein as the "Liquidation Value."
If upon the occurrence of such Liquidation Event and after
satisfying the liquidation preference of the Series A Preferred
Stock and the Series B Preferred Stock, the assets and funds are not
sufficient to pay in full the liquidation payments payable to the
Holders of the Series C Preferred Stock, then the Holders of
outstanding shares of Series C Preferred Stock shall share ratably
in such distribution of assets. Except as provided in this Section
4(a), Holders of Series C Preferred Stock shall not be entitled to
any additional distribution upon the occurrence of a Liquidation
Event.
(b) After the distribution described in Section 4(a) has
been paid, the remaining assets of the Corporation available for
distribution to shareholders shall be distributed among the holders
of Junior Securities in accordance with their respective rights
thereto.
(c) Neither the consolidation, merger or any other form
of business combination of the Corporation with or into any other
person or entity, nor the sale, lease, exchange, conveyance or
disposition of all or substantially all of the assets of the
3
Corporation to persons or entities other than the holders of Junior
Securities shall be deemed to be a Liquidation Event for purposes of
this Section 4.
5. Conversion. The Holders of the Series C Preferred Stock shall
----------
have conversion rights as follows (the "Conversion Rights"):
(a) Optional Conversion Rights and Automatic Conversion.
---------------------------------------------------
(i) Each share of Series C Preferred Stock shall
be convertible, at any time and at the option of the Holder
thereof, at the office of the Corporation or any transfer
agent for the Series C Preferred Stock, into such number of
validly issued, fully paid and nonassessable shares of Common
Stock, free and clear of all pledges, claims, liens, charges,
encumbrances and security interests of any kind or nature
whatsoever, as is determined by dividing $1.00 by the
Conversion Price at the time in effect for such share. The
"Conversion Price" per share for shares of Series C Preferred
Stock shall initially be $0.20 and shall be subject to
adjustment, from time to time after the Purchase Date as set
forth in Section 5(c).
(ii) Upon conversion of any Series C Preferred
Stock, payment shall be made for all accrued and unpaid
dividends under Section 3(a)(i) calculated in accordance with
Section 3(a)(ii).
(b) Mechanics of Conversion. If the Holder of shares of
-----------------------
Series C Preferred Stock desires to exercise such right of
conversion, such Holder shall give written notice to the Corporation
(the "Conversion Notice") of that Holder's election to convert a
stated whole number of shares of Series C Preferred Stock (the
"Conversion Shares") into shares of Common Stock, and surrender to
the Corporation, at its principal office or at such other office or
agency maintained by the Corporation for such purpose, such Holder's
certificate or certificates evidencing such Conversion Shares. The
Conversion Notice shall also contain a statement of the name or
names (with addresses) in which the certificate or certificates for
Common Stock shall be issued. Notwithstanding the foregoing, the
Corporation shall not be required to issue any certificates to any
person other than the Holder thereof unless the Corporation has
obtained reasonable assurance that such transaction is exempt from
the registration requirements of, or is covered by an effective
registration statement under, the Securities Act of 1933, as amended
(the "Act"), and all applicable state securities laws, including, if
necessary in the reasonable judgment of the Corporation or its legal
counsel, receipt of an opinion to such effect from counsel
reasonably satisfactory to the Corporation. In no event would such
opinion be required if the shares of Common Stock could, upon
conversion, be resold pursuant to Rule 144 or Rule 144A under the
Act. As promptly as practicable, and in any event within five
business days, after the receipt of the Conversion Notice (the "Date
of Conversion") and the surrender of the certificate or certificates
representing the Conversion Shares, the Corporation shall issue and
deliver, or cause to be delivered, to the Holder of the Conversion
Shares or his nominee or nominees, (i) a certificate or certificates
for the number of shares of Common Stock issuable upon the
conversion of such Conversion Shares and (ii) if less than the full
number of shares of Series C Preferred Stock
4
evidenced by the surrendered certificate or certificates are being
converted, a new certificate or certificates, of like tenor,
evidencing the number of shares evidenced by such surrendered
certificate or certificates less the number of Conversion Shares.
Such conversion shall be deemed to have been effected as of the
close of business on the Date of Conversion and the certificate or
certificates representing the Conversion Shares, and the person or
persons entitled to receive the shares of Common Stock issuable upon
conversion shall be treated for all purposes as the holder or
holders of record of such shares of Common Stock as of the close of
business on such date.
(c) Conversion Price Adjustments of Preferred Stock.
-----------------------------------------------
(i) If the Corporation should at any time or from
time to time after the Purchase Date (whether or not any or
all of the shares of Series C Preferred Stock have been
issued by the Corporation and are outstanding) fix a record
date for the effectuation of a split or subdivision of the
outstanding shares of Common Stock or the determination of
holders of Common Stock entitled to receive a dividend or
other distribution payable in additional shares of Common
Stock, then, as of such record date (or, if no record date is
fixed, as of the close of business on the date on which the
Board of Directors adopts the resolution relating to such
dividend, distribution, split or subdivision), the Conversion
Price shall be decreased to equal the product of the
Conversion Price in effect immediately prior to such date
multiplied by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding immediately
prior thereto and the denominator of which shall be the
number of shares of Common Stock outstanding immediately
thereafter.
(ii) If the number of shares of Common Stock
outstanding at any time or from time to time after the
Purchase Date (whether or not any or all of the shares of
Series C Preferred Stock have been issued by the Corporation
and are outstanding) is decreased by a combination of the
outstanding shares of Common Stock, then following such
combination, the Conversion Price shall be increased to equal
the product of the Conversion Price in effect immediately
prior thereto multiplied by a fraction, the numerator of
which shall be the number of shares of Common Stock
outstanding immediately prior thereto and the denominator of
which shall be the number of shares of Common Stock
outstanding immediately thereafter. So long as any shares of
Series C Preferred Stock are outstanding, the Corporation
shall not combine any shares of Common Stock unless it
likewise combines all shares of Common Stock.
(iii) If the Corporation shall at any time and
from time to time after the Purchase Date (whether or not any
or all of the shares of Series C Preferred Stock have been
issued by the Corporation and are outstanding) issue rights
or warrants to all holders of the Common Stock entitling such
holders to subscribe for or purchase Common Stock at a price
per share less than the Current Market Price per share of the
Common Stock on the record date for the determination of
stockholders entitled to receive such rights or warrants,
then, and in each such
5
case, the number of shares of Common Stock into which each
share of Series C Preferred Stock is convertible shall be
adjusted so that the holder of each share thereof shall be
entitled to receive, upon the conversion thereof, the number
of shares of Common Stock determined by multiplying the
number of shares of Common Stock into which such share was
convertible on the day immediately prior to such record date
by a fraction, (A) the numerator of which is the sum of (1)
the number of shares of Common Stock outstanding on such
record date and (2) the number of additional shares of Common
Stock which such rights or warrants entitle holders of Common
Stock to subscribe for or purchase ("Offered Shares"), and
(B) the denominator of which is the sum of (1) the number of
shares of Common Stock outstanding on the record date and (2)
a fraction, (x) the numerator of which is the product of the
number of Offered Shares multiplied by the subscription or
purchase price of the Offered Shares and (y) the denominator
of which is the Current Market Price per share of Common
Stock on such record date. Such adjustment shall become
effective immediately after such record date.
(iv) If after the Purchase Date (whether or not
any or all of the shares of Series C Preferred Stock have
been issued by the Corporation and are outstanding) the
Corporation shall be a party to any transaction, including
any capital reorganization, reclassification or
recapitalization involving the Common Stock of the
Corporation (other than a transaction described in clauses
(i) and (ii) of this Section 5(c) or in Section 3(b)), or
some other form of transaction in which the previously
outstanding shares of Common Stock shall be changed into or,
pursuant to the operation of law or the terms of the
transaction to which the Corporation is a party, exchanged,
or would have been changed or exchanged as required by the
Articles of Incorporation if such Common Stock were
outstanding, for different securities of the Corporation or
common stock or other securities of another corporation or
interests in a non-corporate entity (such other corporation
or non-corporate entity is referred to herein as the
"Surviving Entity") or other property (including cash) or any
combination of the foregoing, then, as a condition to the
consummation of such transaction, lawful and adequate
provision shall be made whereby the Holders of the Series C
Preferred Stock shall thereafter have the right to receive,
in lieu of the shares of Common Stock of the Corporation
immediately theretofore receivable with respect to the
conversion of such shares of Series C Preferred Stock, such
shares of stock or securities (such stock and securities are
referred to herein as the "Surviving Entity Securities") or
assets as would have been issued or payable with respect to
or in exchange for the shares of Common Stock which such
holders would have held had the shares of Series C Preferred
Stock been converted immediately prior to such transaction.
In any such case, appropriate provisions shall be made with
respect to the rights and interests of the Holders of the
Series C Preferred Stock to the end that such conversion
rights (including, without limitation, provisions for
adjustment of the Conversion Price) shall thereafter be
applicable, as nearly as may be practicable in relation to
any shares of Surviving Entity Securities or assets
thereafter deliverable upon the exercise thereof.
6
(d) Stock Transfer Taxes. The issuance of stock
--------------------
certificates upon the conversion of the Series C Preferred Stock
shall be made without charge to the converting Holder for any tax in
respect of such issuance. The Corporation shall not, however, be
required to pay any tax which may be payable in respect of any
transfer involved in the issuance and delivery of shares in any name
other than that of the Holder of such shares of Series C Preferred
Stock converted, and the Corporation shall not be required to issue
or deliver any such stock certificate unless and until the person or
persons requesting the issuance thereof shall have paid to the
Corporation the amount of such tax, if any.
(e) No Fractional Shares: Certificate as to Adjustments.
---------------------------------------------------
(i) No fractional shares shall be issued upon
conversion of the Series C Preferred Stock, and the number of
shares of Common Stock to be issued shall be rounded to the
nearest whole share.
(ii) Upon the occurrence of each adjustment or
readjustment of the Conversion Price of Series C Preferred
Stock pursuant to this Section 5, the Corporation, at its
expense, shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare
and furnish to each Holder of Series C Preferred Stock and
each holder of a Convertible Note a certificate setting forth
such adjustment or readjustment and showing in detail the
facts upon which such adjustment or readjustment is based.
The Corporation shall, upon the written request at any time
of any Holder of Series C Preferred Stock or any holder of a
Convertible Note, furnish or cause to be furnished to such
Holder a like certificate setting forth (A) such adjustment
and readjustment, (B) the Conversion Price at the time in
effect, and (C) the number of shares of Common Stock and the
amount, if any, of other property which at the time would be
received upon the conversion of a share of Series C Preferred
Stock.
(f) Notices of Record Date. In the event of any taking by
----------------------
the Corporation of a record of the Holders of any class of
securities for the purpose of determining the Holders thereof who
are entitled to receive any dividend (other than a cash dividend) or
other distribution, any right or warrant to subscribe for, purchase
or otherwise acquire any shares of stock or any class of any other
securities or property, or to receive any other right (including,
without limitation, making a dividend or other distribution of any
rights under a stockholder rights plan (sometimes known as a "poison
pill" plan), whether now existing or hereafter created), the
Corporation shall mail to each Holder of Series C Preferred Stock
and each holder of a Convertible Note, at least 20 days prior to the
date specified therein, a notice specifying the date on which any
such record is to be taken for the purpose of such dividend,
distribution, right or warrant, and the amount and character of such
dividend, distribution, right or warrant. The Corporation shall not
issue such dividend, distribution, right or warrant described herein
or in Section 5(c)(iii), or consummate any Business Combination, or
any reorganization, reclassification or recapitalization described
in Section 5(c)(iv), unless it provides the Holders of the Series C
Preferred Stock and each holder of a Convertible Note at least 20
days advance written notice thereof.
7
(g) Reservation of Securities Issuable upon Conversion.
--------------------------------------------------
The Corporation shall at all times reserve and keep available out of
its authorized but unissued shares of Common Stock, solely for the
purpose of effecting the conversion of the shares of the Series C
Preferred Stock, free from any preemptive right or other obligation,
such number of its shares of Common Stock as shall from time to time
be sufficient to effect the conversion of all authorized shares of
the Series C Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all authorized shares of the
Series C Preferred Stock, in addition to such other remedies as
shall be available to the Holder of such Series C Preferred Stock,
the Corporation will take such corporate action as may be necessary
to increase its authorized but unissued shares of Common Stock to
such number of shares as shall be sufficient for such purposes. The
Corporation shall prepare and shall use commercially reasonable
efforts to obtain and keep in force such governmental or regulatory
permits or other authorizations as may be required by law, and shall
comply with all requirements as to registration, qualification or
listing of the Common Stock in order to enable the Corporation to
lawfully issue and deliver to each Holder of record of Series C
Preferred Stock such number of shares of its Common Stock as shall
from time to time be sufficient to effect the conversion of all
Series C Preferred Stock then outstanding and convertible into
shares of Common Stock.
(h) Notices. Any notice required by the provisions of
-------
this Section 5 to be given to the Holders of shares of Series C
Preferred Stock shall only be effective upon receipt and may be
given by personal delivery, U.S. certified mail, return receipt
requested, or by a nationally recognized overnight delivery service
(e.g., United Parcel Service or Federal Express), delivery or
postage prepaid and addressed to each Holder of record at his
address appearing on the books of this Corporation (and, in the case
of any Holder that is a corporation or other entity, to the
attention of the President).
6. Redemption. The Series C Preferred Stock may be redeemed, in
----------
whole or in part and at any time, by the Corporation for the product of the
number of shares to be redeemed times the Liquidation Value per share.
7. Voting Rights.
-------------
(a) Election of Directors.
---------------------
(i) Except as otherwise provided herein, the
Holders of shares of Series C Preferred Stock shall have the
right to elect a number of directors that constitute at any
given time a majority of the directors of the Corporation
(the "Investor Directors"). The Holders of Series C Preferred
Stock shall receive copies of all information and materials
provided to the directors of the Corporation and any
Subsidiary of the Corporation or to committee members.
Notwithstanding the foregoing, nothing set forth herein shall
entitle any Investor Director to participate on any committee
of the Board of Directors of the Corporation or any
Subsidiary of the Corporation created for the purpose of
considering a transaction or contract with a Holder or
Holders of Series C
8
Preferred Stock, or to participate in the Board's
deliberations with respect to the foregoing.
(ii) The Holders of Series C Preferred Stock shall
have the right to elect any replacement for an Investor
Director designated for nomination or nominated in accordance
with this Section 7(a) upon the death, resignation,
retirement, disqualification or removal from office for other
cause of such Director.
(b) Other Matters. On all other matters that come to a
-------------
vote of the shareholders of the Corporation, the Holder of each
share of Series C Preferred Stock shall have the right to one vote
for each share of Common Stock into which such Series C Preferred
Stock could then be converted, and with respect to such vote, such
Holder shall have full voting rights and powers equal to the voting
rights and powers of holders of Common Stock, and shall be entitled,
notwithstanding any provision hereof, to notice of any shareholder's
meeting in accordance with the Bylaws of the Corporation, and shall
be entitled to vote, together with the holders of Common Stock, with
respect to any question upon which holders of Common stock have the
right to vote.
8. Protective Provisions.
---------------------
(a) Class Voting. So long as shares of Series C Preferred
------------
Stock are outstanding, this Corporation shall not, without first
obtaining the approval (by vote or written consent) of the Holders
of sixty-six and two-thirds percent (66 2/3%) of the then
outstanding shares of Series C Preferred Stock (voting as a class):
(i) alter or change the rights, preferences or
privileges of the shares of Series C Preferred Stock so as to
affect adversely the shares;
(ii) increase the number of authorized shares of
Series C Preferred Stock, or create any new series of stock
or any other securities convertible into equity securities of
the Corporation having a preference over, or being on a
parity with, the Series C Preferred Stock with respect to
voting, dividends, distribution of assets upon liquidation,
dissolution, winding up or otherwise or conversion rights;
(iii) amend the Articles of Incorporation, Bylaws
or other organizational documents of the Corporation or take
any action or enter into any other agreements which, prohibit
or materially conflict with the Corporation's obligations
hereunder with respect to the Holders of Series C Preferred
Stock; or
(iv) engage in a Liquidation Event.
(b) No Impairment. The Corporation will not, by amendment
-------------
of its Articles of Incorporation, Bylaws or other organizational
documents or through any reorganization, reclassification,
recapitalization, Liquidation Event, issue or sale of securities or
any other voluntary action by the Corporation, avoid or seek to
avoid the
9
observance or performance of any of the terms to be observed or
performed hereunder by the Corporation but will at all times in good
faith assist in the carrying out of all the provisions of this
Certificate of Designation, and in the taking of all such action as
may be necessary or appropriate in order to protect the conversion
and other rights of the Holders of the Series C Preferred Stock
against impairment. Without limiting the foregoing, the Corporation
will not effect any transaction described in this Section 8(b), the
result of which is to adversely affect any of the rights of holders
of Common Stock relative to the rights of holders of any other
securities other than the Series C Preferred Stock.
9. Stockholder Rights Plan. Notwithstanding any other provision
-----------------------
of this Certificate of Designation to the contrary, if the Corporation shall
adopt a stockholders rights plan (sometimes known as a "poison pill" plan),
and shall declare, order, pay or make a dividend or other distribution of
rights thereunder with respect to the Common Stock (whether or not separate
from the Common Stock), each Holder of shares of Series C Preferred Stock
shall be entitled to receive from the Corporation, upon conversion of such
shares of Series C Preferred Stock into Common Stock pursuant to Section 5,
all of the rights distributed under such plan (but without any limitation or
restriction or the exercise of such rights that are not also applicable to
holders of Common Stock) fully and to the same extent as if immediately prior
to the earlier of such distribution or any record date therefor such Holder
had then converted all of such Holder's shares of Series C Preferred Stock
into shares of Common Stock. The preceding sentence shall provide the
exclusive protection under this Certificate of Designation to the Holders of
the Series C Preferred Stock (including any adjustments that would otherwise
be required by Section 5(c)) with respect to the subject matter of the
immediately preceding sentence.
10. Status of Converted Stock. In the event any shares of Series C
-------------------------
Preferred Stock shall be converted pursuant to Section 5 hereof, the shares
so converted shall be canceled and thereupon restored to the status of
authorized but unissued Preferred Stock undesignated as to class or series.
Upon payment of all principal and accrued interest of a Convertible Note in
accordance with its terms, the Corporation and its officers may cancel and
retire the number of shares of authorized but unissued shares of Series C
Preferred Stock into which such Convertible Note was convertible and restore
the status of such shares to authorized but unissued Preferred Stock
undesignated as to class or series.
11. Certain Definitions. For purposes of this Certificate of
-------------------
Designation, Preferences and Rights of Series C Preferred Stock, unless the
context otherwise requires:
(i) "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2
under the Exchange Act as such Rule is in effect on the
Purchase Date.
(ii) "AMCON" shall mean AMCON Distributing
Company, a Delaware corporation.
(iii) A Person shall be deemed to "beneficially
own," any securities:
10
(A) which such Person or any of such
Person's Affiliates or Associates, directly or
indirectly, has the right to acquire (whether such
right is exercisable immediately or only after the
passage of time) pursuant to any agreement,
arrangement or understanding (whether or not in
writing) or upon the exercise of conversion rights,
exchange rights, rights, warrants or options, or
otherwise;
(B) which such Person or any of such
Person's Affiliates or Associates, directly or
indirectly, has the right to vote or dispose of or
has "beneficial ownership" of (as determined
pursuant to Rule 13d-3 under the Exchange Act as
such Rule is in effect on the date of this
Agreement), including pursuant to any agreement,
arrangement or understanding, whether or not in
writing; provided, however, that a Person shall not
-------- -------
be deemed the "Beneficial Owner" of, or to
"beneficially own," any security under this
subparagraph (B) as a result of an agreement,
arrangement or understanding to vote such security
if such agreement, arrangement or understanding
arises solely from a revocable proxy given in
response to a public proxy or consent solicitation
made by the Corporation pursuant to, and in
accordance with, the applicable provisions of the
General Rules and Regulations under the Exchange
Act; or
(C) which are beneficially owned, directly
or indirectly, by any other Person (or any Affiliate
or Associate thereof) with which such Person (or any
of such Person's Affiliates or Associates) has any
agreement, arrangement or understanding (whether or
not in writing), for the purpose of acquiring,
holding, voting (except pursuant to a revocable
proxy as described in the proviso to subparagraph
(B)) or disposing of any voting securities of the
Corporation; provided, however, that nothing in this
-------- -------
subparagraph (C) shall cause a person engaged in
business as an underwriter of securities to be the
"Beneficial Owner" of, or to "beneficially own," any
securities acquired through such person's
participation in good faith in a firm commitment
underwriting under the Act until the expiration of
40 days after the date of such acquisition.
(iv) "Business Day" means any day other than a
Saturday, Sunday or a day on which banking institutions in
the State of Hawaii are authorized or obligated by law or
executive order to close.
(v) "Closing Price" per share of Common Stock on
any date shall be the last sale price, regular way, or, in
case no such sale takes place on such day, the average of the
closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Common
Stock is not listed or admitted to trading on the New York
Stock Exchange or, as reported in the principal consolidated
transaction reporting system with respect to securities
listed on the principal national securities
11
exchange on which the Common Stock is listed or admitted to
trading or, if the Common Stock is not listed or admitted to
trading on any national securities exchange, if such shares
of Common Stock are not listed or admitted to trading on such
exchange, as reported on the Nasdaq National Market, or if
not quoted on the Nasdaq National Market, the last quoted
sale price or, if not so quoted, the average of the high bid
and low asked prices in the over-the-counter market, as
reported by Nasdaq or such other system then in use, or, if
on any such date the Common Stock is not quoted by any such
organization, the average of the closing bid and asked prices
as furnished by a professional market maker making a market
in the Common Stock selected by the Board of Directors. If
the Common Stock is not publicly held or so listed or
publicly traded, "Closing Price" shall mean the Fair Market
Value per share as determined in good faith by the Board of
Directors of the Corporation.
(vi) "Common Stock" shall mean the Corporation's
authorized Common Stock, no par value, as constituted on the
Purchase Date, and any stock into which such Common Stock may
thereafter be changed or reclassified, including, without
limitation, any Surviving Entity Securities; provided,
however, that if Common Stock is changed or reclassified into
more than one class or series of equity securities, the term
"Common Stock" shall refer to the class or series of such
equity securities having the greatest general voting power in
the election of directors of the Corporation as compared to
the other classes or series of equity securities.
(vii) "Convertible Note" shall mean each Amended
and Restated 10% Secured Convertible Note originally issued
by the Corporation to AMCON Distributing Company.
(viii) "Corporation" means Hawaiian Natural Water
Company, Inc., a Hawaii corporation, together with any
successors of the Corporation, whether by merger,
consolidation or otherwise, including without limitation a
Surviving Entity.
(ix) "Current Market Price" per share of Common
Stock on any date shall be deemed to be the Closing Price
per share of Common Stock on the Trading Day immediately
prior to such date.
(x) "Dividend Accrual Date" shall mean each
January 1, April 1, July 1 and October 1 of each year,
beginning on the first such date after the date of issuance
of the applicable shares, or at such additional times and for
such interim periods, if any, as determined by the Board of
Directors.
(xi) "Dividend Payment Date" shall mean the date
established by the Board of Directors for the payment of all
or part of the accrued dividends on the Series C Preferred
Stock.
12
(xii) "Equity Security" means (i) any Common
Stock, (ii) any debt or equity securities of the Corporation
convertible into or exchangeable for Common Stock or other
Equity Securities of the Corporation that grant the right to
vote generally in the election of directors ("Voting Equity
Securities"), (iii) any options, rights or warrants (or any
other similar securities) issued by the Corporation to
acquire Common Stock or other Voting Equity Securities or
(iv) any security issuable in connection with any stock
split, stock dividend, recapitalization or other similar
transaction in which securities are issued on a proportionate
basis to all holders of a class of Equity Securities.
(xiii) "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended and in effect on the
Purchase Date.
(xiv) "Fair Market Value" means the amount which a
willing buyer would pay a willing seller in an arm's-length
transaction.
(xv) "Merger" shall mean the merger of the
Corporation into Merger Sub pursuant to the Merger Agreement.
(xvi) "Merger Agreement" shall mean the Amended
and Restated Agreement and Plan of Merger, by and among the
Corporation, AMCON and Merger Sub dated as of November 7,
2000.
(xvii) "Merger Sub" shall mean AMCON Merger Sub,
Inc., a Delaware corporation.
(xviii) "Person" means any individual, firm,
corporation, partnership, limited liability company or other
entity, and shall include any successor (by merger or
otherwise) of such entity.
(xix) "Purchase Date" means the date of the Merger
Agreement.
(xx) "Subsidiary" of any person means any
corporation or other entity of which a majority of the voting
power of the voting equity securities or equity interest is
owned, directly or indirectly, by such person.
(xxi) "Trading Day" means a day on which the
principal national securities exchange, Nasdaq or other
securities market on which the Common Stock is listed or
admitted to trading is open for the transaction of business
or, if the Common Stock is not listed or admitted to trading
on any national securities exchange, any day other than a
Saturday, Sunday, or a day on which banking institutions in
the State of New York are authorized or obligated by law or
executive order to close.
13
IN WITNESS WHEREOF, the Corporation has caused the foregoing
Certificate of Designations for Series C Convertible Preferred Stock to be
signed on November __, 2000.
HAWAIIAN NATURAL WATER COMPANY, INC.
By: /s/ Marcus Bender
-------------------------------------
Name: Marcus Bender
Title: President
14