THIS 10% SECURED CONVERTIBLE NOTE, AND THE SECURITIES INTO WHICH IT IS
CONVERTIBLE (COLLECTIVELY, THE "SECURITIES"), HAS NOT BEEN REGISTERED WITH THE
UNITED STATES SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR THE SECURITIES COMMISSION OF ANY STATE UNDER APPLICABLE
STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE
SECURITIES ARE "RESTRICTED" AND MAY NOT BE OFFERED OR SOLD UNLESS THE
SECURITIES ARE REGISTERED UNDER THE ACT, OR PURSUANT TO AVAILABLE EXEMPTIONS
FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND THE ISSUER WILL BE PROVIDED
WITH OPINION OF COUNSEL OR OTHER SUCH INFORMATION AS IT MAY REASONABLY REQUIRE
TO CONFIRM THAT SUCH EXEMPTIONS ARE AVAILABLE.
HAWAIIAN NATURAL WATER COMPANY, INC.
10% Secured Convertible Note
Due September 30, 2001
$500,000.00 June 18, 2001
FOR VALUE RECEIVED, Hawaiian Natural Water Company, Inc., a Hawaiian
corporation (the "Corporation"), promises to pay to the order of AMCON
Distributing Company, a Delaware corporation (the "Holder"), the principal sum
of Five Hundred Thousand and NO/100 Dollars ($500,000.00), on September 30,
2001 (the "Maturity Date"), together with interest in the amount and manner
hereafter provided.
IT IS FURTHER AGREED THAT:
1. Interest. The Corporation promises to pay interest on the principal
amount of this 10% Secured Convertible Note (the "Note") at the rate per annum
of ten percent (10%), compounded quarterly. Interest will be computed on the
basis of a three hundred sixty (360) day year of twelve (12), thirty (30) day
months. Interest will be paid quarterly on January 1, April 1, July 1, and
October 1 of each year and at maturity, with the first such interest payment
to be made on July 1, 2001.
2. Method of Payment. Except with respect to the rights of conversion
provided herein, and subject to Section 3 hereof, the Corporation will pay
principal and interest by wire transfer of immediately-available money of the
United States, or other form of payment of immediately available money of the
United States as the Holder may direct the Corporation, that at the time of
payment is legal tender for payment of public and private debts. Information
for making the wire transfers will be provided in writing by the Holder to the
Corporation. If any payment hereunder becomes due and payable on a day other
than a business day, the due date thereof shall be extended to the next
business day and, with respect to payments of principal, interest thereon
shall be payable at the applicable rate during such extension.
3. Right to Prepay. The Corporation shall have the right to prepay all
or any part of the Note; provided, however, that (i) the Corporation must give
written notice to the Holder of its intention to make any such prepayment not
less than five (5) and not more than ten (10) business days in advance of such
prepayment, which notice must include a representation that the funds to
effect the prepayment are legally available for that purpose and that
representation must be supported by evidence reasonably satisfactory to the
Holder that such funds will be provided to the Corporation at the time
specified in the notice for prepayment, and (ii) during the period following
that notice and prior to the actual prepayment, the Holder shall be entitled
to exercise the conversion privilege set forth in Section 4(a) hereof, if the
right to convert specified therein is available by its terms, or Section 4(b)
hereof.
4. Right to Convert.
(a) At any time before the close of business on the Maturity Date but
after the earlier of (A) termination of the Fourth Amended and
Restated Agreement and Plan of Merger (the "Merger Agreement"), dated as
of June 18, 2001, among the Corporation, the Holder and AMCON Merger Sub,
Inc.("Merger Sub") or (B) the occurrence of an Event of Default, the
Holder may convert the outstanding principal balance and unpaid accrued
interest of this Note into fully paid and non-assessable shares of Series
C Convertible Preferred Stock, par value $1.00 per share, of the
Corporation (the "Preferred Stock"). The price at which shares of
Preferred Stock shall be delivered upon conversion (herein called the
"Preferred Conversion Price") shall be $1.00 per share of Preferred
Stock.
(b) At any time before the close of business on the Maturity Date,
the Holder may convert the outstanding principal balance and unpaid
accrued interest of this Note into fully paid and non-assessable shares
of common stock of the Corporation (the "Common Stock"). The price at
which shares of Common Stock shall be delivered upon conversion shall be
$0.40 per share; provided, however, that if the Corporation shall at any
time increase or decrease the number of its outstanding shares of Common
Stock or change in any way the rights and privileges of such shares by
means of the payment of a stock dividend or any other distribution upon
such shares payable in Common Stock, or through a stock split,
subdivision, consolidation, combination, reclassification or
recapitalization involving the Common Stock, then the price at which
shares shall be delivered upon conversion shall be proportionately
increased or decreased, as the case may be, to avoid dilution of the
number and kind of shares to which the Noteholder is fairly entitled upon
conversion of the Note.
(c) This Note may be converted in whole, but not in part, into
Preferred Stock or Common Stock or a combination thereof (referred to
collectively as the "Conversion Shares") based on the terms set forth in
subsections (a) and (b) of this Section 4, as the case may be.
5. Mechanics of Conversion. If the Holder desires to exercise such right
of conversion, such Holder shall give written notice to the Corporation in the
form attached to this Note as Exhibit A (the "Conversion Notice") of that
Holder's election to convert a stated whole dollar amount of outstanding
principal balance and unpaid accrued interest of the Note into shares of
Preferred Stock, and/or Common Stock, as the case may be, and surrender to the
Corporation, at its principal office or at such other office or agency
maintained by the Corporation for such purpose, this Note. The Conversion
Notice shall also contain a statement of the name or names (with addresses) in
which the certificate or certificates for Preferred Stock and/or Common Stock,
as the case may be, 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 Preferred Stock and/or Common Stock, as the case may be,
could, upon conversion, be resold pursuant to Rule 144 or Rule 144A under the
Act. As promptly as practicable, and in any event within two 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 or his nominee or nominees, a certificate or certificates for the
number of shares of Preferred Stock and/or Common Stock, as the case may be,
issuable upon the conversion of this Note. Such conversion shall be deemed to
have been effected as of the close of business on the Date of Conversion and
the replacement Note, and the person or persons entitled to receive the shares
of Preferred Stock and/or Common Stock, as the case may be, issuable upon
conversion shall be treated for all purposes as the holder or holders of
record of such shares of Preferred Stock and/or Common Stock, as the case may
be, as of the close of business on such date.
6. Fractions of Share. The Corporation shall not be required to issue
fractions of a share or scrip representing fractional shares of Preferred
Stock and/or Common Stock, as the case may be, upon the exercise of any
conversion right hereunder. If any fraction of a share of Preferred Stock
and/or Common Stock, as the case may be, would, except for the provisions of
this Section 6, be issuable upon any conversion exercise, the Corporation
shall pay a cash adjustment in respect of such fraction, equal to the value of
such fraction based on the Conversion Price per share of Preferred Stock.
7. Security. The obligations herein are secured by the security
interest granted pursuant to that certain Second Amended and Restated 10%
Convertible Note in the principal sum of $350,000.00 payable by the
Corporation to Holder due on September 30, 2001 (and as such note may be
further amended and/or restated).
8. Corporation Covenants. The Corporation represents, warrants,
covenants and agrees that:
(a) Any shares of Preferred Stock and/or Common Stock, as the case
may be, delivered upon conversion of this Note shall, at the time of
delivery of the certificates for such shares of Preferred Stock or Common
Stock, be validly issued and outstanding and fully-paid and non-
assessable shares of Preferred Stock or Common Stock free from taxes,
liens and charges with respect to their purchase. Without limiting the
generality of the foregoing, the Corporation covenants and agrees to take
any necessary actions to assure that the par value per share of the
Preferred Stock is at all times equal to or less than the then current
Conversion Price per share for the Preferred Stock issuable pursuant to
this Note. The Corporation further covenants and agrees that it will pay
when due and payable any and all federal and state original issue stock
taxes, if any, which may be payable in respect of the issue of the shares
of Preferred Stock or Common Stock upon the conversion of this Note or a
part hereof. Except for an amendment required pursuant to the foregoing
sentence, the Certificate of Designation, Preferences and Rights of the
Preferred Stock shall not be amended without the prior written consent of
the Holder.
(b) The Corporation shall at all times reserve and keep available a
number of its authorized but unissued shares of Preferred Stock and
Common Stock which will be sufficient to permit the full exercise of this
Note. If at any time the number of authorized but unissued shares of
Preferred Stock or Common Stock is not sufficient for this purpose, the
Corporation shall take such corporate actions as may be necessary to
increase its authorized but unissued shares of Preferred Stock and/or
Common Stock, as the case may be, to a number of shares sufficient for
such purpose.
(c) (i) The Corporation is duly organized as a corporation under
the laws of the State of Hawaii, it is authorized to transact business in
all jurisdictions where the conduct of its business requires it to be
qualified, and it is duly authorized to execute, deliver and perform
under this Note without the necessity of obtaining any consents or
approvals of, or the taking of any other action with respect to, any
governmental agency or third party; and
(ii) The financial statements submitted to Holder fairly present
the financial condition of the Corporation as of the date of this Note
knowing that Holder has relied thereon in granting the Loan, there have
been no material adverse changes in the financial condition of the
Corporation since the date of said financial statements, the Corporation
has no material obligations, financial or otherwise, not disclosed to
Holder, and at the present time there are no material, unrealized or
anticipated losses from any present commitment of the Corporation.
(d) The Corporation shall give written notice to the Holder at least
10 days prior to establishing a record date to determine the stockholders
of record entitled to vote on the merger contemplated by the Merger
Agreement in order to permit the Holder to exercise the right to convert
this Note and vote upon such merger and to receive merger consideration
pursuant to such merger.
9. Rights of Holder. The Holder of this Note shall not be entitled to
vote or receive dividends or be deemed the Holder of Preferred Stock or Common
Stock of the Corporation for any purpose, nor shall anything contained in this
Note be construed to confer upon the Holder, as such, any of the rights of a
stockholder of the Corporation or any right to vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof,
or to give or withhold consent to any corporate action (whether upon a merger,
conveyance or otherwise) or to receive notice of meetings, or to receive
dividends or subscription rights or otherwise until the right to convert this
Note shall have been exercised and the Preferred Stock or Common Stock
purchasable upon the exercise hereof shall have become deliverable.
10. Rights Upon Exercise. Irrespective of the date Preferred Stock or
Common Stock is issued and of delivery of certificates for any shares issuable
upon the exercise of the conversion privilege under this Note, each person in
whose name any such certificate is issued shall for all purposes be deemed to
have become the holder of record of the shares represented thereby on the Date
of Conversion.
11. Investment Representation; Transfer. The Holder hereby represents
and warrants to the Corporation that it has purchased this Note and will
purchase shares of the Preferred Stock and/or Common Stock, as the case may
be, of the Corporation issuable upon conversion hereof for investment purposes
only and not with a view to the distribution thereof. The Holder acknowledges
that it has been advised by the Corporation that neither this Note nor the
Conversion Shares has been registered under the Securities Act of 1933 or any
state securities law for the reason that no distribution or public offering of
this Note or the Conversion Shares is to be effected.
12. Dissolution. In case any voluntary or involuntary dissolution,
liquidation or winding up of the Corporation shall at any time be proposed,
the Corporation shall give at least sixty-two (62) days' prior written notice
thereof to the Holder stating the date on which such event is to take place
and the date (which shall be at least sixty-two (62) days after the giving of
such notice) as of which the holders of Preferred Stock or Common Stock of
record shall be entitled to exchange their Preferred Stock or Common Stock for
securities or other property deliverable upon such dissolution, liquidation or
winding up.
13. Default. Any one or more of the following shall be events of default
under this Note ("Events of Default"):
(a) Default shall be made: (i) in the payment of the principal or
interest under this Note when due; or (ii) in due observance or
performance of any other agreement contained in this Note, which is not
remedied within fifteen (15) days after notice to the Corporation;
(b) Any warranty, representation or agreement made or furnished to
the Holder by or on behalf of the Corporation in the Merger Agreement
proves to have been false in any material respect when made or furnished;
or
(c) The insolvency of the Corporation, the making of a general
assignment for the benefit of creditors, or the filing of any voluntary
or involuntary petition or commencement of any proceeding by or against
the Corporation under any bankruptcy or insolvency laws.
Upon the occurrence of one or more Events of Default and at any time
thereafter, the Holder may, by notice in writing to the Corporation, declare
the entire outstanding principal amount of the Note to be, and such entire
principal amount of the Note shall thereupon become forthwith, due and payable
in full together with interest accrued thereon, anything in this Note to the
contrary notwithstanding. Upon the occurrence of one or more Events of
Default, the Corporation agrees to pay out-of-pocket expenses, including
reasonable attorneys' fees and legal expenses, whether or not suit is
commenced, incurred by the Holder. If an Event of Default shall have occurred
and has not been cured by the Corporation within 90 days after the occurrence
thereof, then thereafter this Note shall accrue interest at the rate per annum
of eighteen percent (18%), compounded quarterly and computed in accordance
with Section 1 of this Note.
14. Notice. All notices and other communications from the Corporation to
the Holder shall be mailed by first class registered mail, postage prepaid, to
the principal business address of the Holder or other address furnished to the
Corporation in writing by the Holder. All notices and other communications
from the Holder to the Corporation shall be mailed by first class registered
mail, postage prepaid, to the principal business address of the Corporation or
other address furnished to the Holder in writing by the Corporation. All
notices and other communications delivered in the manner set forth above shall
be deemed delivered two (2) days after the date mailed.
15. Governing Law; Certain Waivers. This Note, without regard to the
place of execution, delivery or payment, shall be construed and enforced
according to and governed by the laws of the State of Delaware. The
Corporation waives presentment and demand for payment, notice of dishonor,
protest and notice of protest.
16. Severability. Whenever possible, each provision of this Note shall
be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Note shall be prohibited by or invalid under
such law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Note.
HAWAIIAN NATURAL WATER COMPANY, INC.
By: Marcus Bender
---------------------------------
Name: Marcus Bender
Title: President
EXHIBIT A
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CONVERSION NOTICE
------------------
(To be executed by the Holder in order to Convert the Note)
TO: HAWAIIAN NATURAL WATER COMPANY, INC.
The undersigned hereby irrevocably elects to convert $------------ of the
principal amount of, and $---------- of any accrued but unpaid interest on,
the above Second Amended and Restated 10% Secured Convertible Note into (i)---
--------- shares of Series C Preferred Stock, par value $1.00 per share, of
Hawaiian Natural Water Company, Inc. (the "Company"), and (ii)----------
shares of Common Stock of the Company, in each case according to the
conditions stated in such Note, as of the Conversion Date written below.
Conversion Date:
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Applicable Conversion Price:
----------------------
Signature:
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Name:
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Address:
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