UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
 
                                   Form 10-K
                                   (Mark One)
     [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                  For the fiscal year ended December 31, 2005

                                       OR

[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                                  ACT OF 1934

                 For the transition period from _____ to _____

                         Commission File Number 0-18761

                           HANSEN NATURAL CORPORATION
             (Exact name of registrant as specified in its charter)

             Delaware                               39-1679918
             (State or other jurisdiction of        (I.R.S. Employer
             incorporation or organization)         Identification No.)

                 1010 Railroad Street, Corona, California 92882
              (Address of principal executive offices) (Zip Code)

      Registrants telephone number, including area code: (951) 739 - 6200

          Securities registered pursuant to Section 12(b) of the Act:

                                                    Name of each exchange
                 Title of each class                on which registered
                ---------------------               ---------------------
                    Not Applicable                  Not Applicable

          Securities registered pursuant to Section 12(g) of the Act:

                                 Title of class
                                ----------------
                    Common Stock, $0.005 par value per share

     Indicate by check mark if the registrant is a well-known  seasoned  issuer,
as defined in Rule 405 of the Securities Act. Yes[X] No[ ].

     Indicate by check mark if the  registrant  is not  required to file reports
pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes[ ] No[X ].

     Indicate by check mark  whether the  registrant:  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best  of  the  registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. [ ]

     Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer or a  non-accelerated  filer. See definition of accelerated
filer and large  accelerated  filer in Rule  12b-2 of the  Exchange  Act.  Large
accelerated filer [ X ] Accelerated filer [ ] Non-accelerated filer [ ]
        

<PAGE>

     Indicate  by check mark  whether  the  registrant  is a shell  company  (as
defined by Rule 12b-2 of the Exchange Act.) Yes [ ] No [X]

     The aggregate  market value of the common equity held by  nonaffiliates  of
the registrant was $717,931,877  computed by reference to the closing sale price
for such stock on the NASDAQ  Capital Market on June 30, 2005, the last business
day of the registrant's most recently completed second fiscal quarter.
        
     The number of shares of the registrant's common stock, $0.005 par value per
share (being the only class of common stock of the  registrant),  outstanding on
February 10, 2006 was 22,307,006 shares.

                                       2

<PAGE>

                           HANSEN NATURAL CORPORATION

                                   FORM 10-K

                               TABLE OF CONTENTS



Item Number                                                     Page Number
------------                                                    -----------

                                     PART I
                                     ------


1.  Business                                                              4
1A. Risk Factors                                                         18
1B. Unresolved Staff Comments                                            23
2.  Properties                                                           23
3.  Legal Proceedings                                                    23
4.  Submission of Matters to a Vote of Security Holders                  24

                                    PART II
                                    -------

5.  Market for the Registrant's Common Equity,  Related
     Stockholder Matters and Issuer Purchases of Equity Securities       25
6.  Selected  Financial Data                                             26
7.  Management's Discussion and Analysis of Financial
     Condition and Results of Operations                                 27
7A. Qualitative and Quantitative Disclosures about Market Risks          45
8.  Financial Statements and Supplementary Data                          45
9.  Changes in and Disagreements with Accountants on
     Accounting and Financial Disclosure                                 45
9A. Controls and Procedures                                              46
9B. Other Information                                                    48

                                    PART III

10. Directors and Executive Officers of the Registrant                   49
11. Executive Compensation                                               52
12. Security Ownership of Certain Beneficial Owners and Management 
      and Related Stockholder Matters                                    58
13. Certain Relationships and Related Transactions                       61
14. Principal Accountant Fees and Services                               62

                                    PART IV

15. Exhibits, Financial Statement Schedules                              63

    Signatures                                                           64

                                       3

<PAGE>


                                     PART I


ITEM 1. BUSINESS

Overview

     Hansen Natural  Corporation was incorporated in Delaware on April 25, 1990.
Its principal place of business is at 1010 Railroad Street,  Corona,  California
92882 and its  telephone  number is (951)  739-6200.  When this  report uses the
words "Hansen",  "HBC", "the Company",  "we", "us", and "our", these words refer
to Hansen  Natural  Corporation  and our  subsidiaries  other than  Monster  LDA
Company ("MLDA"), unless the context otherwise requires.

     We are a holding company and carry on no operating  business except through
our direct wholly owned subsidiaries,  Hansen Beverage Company ("HBC") which was
incorporated  in Delaware on June 8, 1992,  and MLDA,  formerly  known as Hard e
Beverage  Company,  and  previously  known  as Hard  Energy  Company  and as CVI
Ventures,  Inc.,  which was  incorporated  in  Delaware on April 30,  1990.  HBC
generates substantially all of our operating revenues.

     We develop,  market,  sell and distribute  "alternative"  beverage category
natural sodas, fruit juices, energy drinks and energy sports drinks, fruit juice
smoothies  and,  "functional   drinks",   sparkling  lemonades  and  orangeades,
non-carbonated ready-to-drink iced teas, lemonades, juice cocktails,  children's
multi-vitamin  juice drinks and  non-carbonated  lightly  flavored energy waters
under the Hansen's(R) brand name. We also develop,  market,  sell and distribute
energy drinks under the Monster Energy(R),  Lost(R) Energy,  Rumba(TM) and Joker
Mad Energy(TM) brand names. We also market, sell and distribute,  natural sodas,
premium natural sodas with  supplements,  organic natural sodas,  seltzer waters
and  energy  drinks  under the Blue  Sky(R)  brand  name.  Our fruit  juices for
toddlers are marketed under the Junior Juice(R) brand name. We also market, sell
and  distribute  vitamin  and mineral  drink  mixes in  powdered  form under the
Fizzit(TM) brand name.

     The Company has two  reportable  segments,  namely  Direct  Store  Delivery
("DSD"),  whose principal products comprise energy drinks, and Warehouse,  whose
principal  products  comprise  juice based and soda  beverages.  The DSD segment
develops,  markets and sells products primarily through an exclusive distributor
network  whereas the  Warehouse  segment  develops,  markets and sells  products
primarily direct to retailers.

Corporate History

     In the 1930s,  Hubert  Hansen and his three sons started a business to sell
fresh  non-pasteurized  juices  in  Los  Angeles,   California.   This  business
eventually became Hansen's Juices,  Inc., which subsequently became known as The
Fresh Juice  Company of  California,  Inc.  ("FJC").  FJC  retained the right to
market and sell fresh  non-pasteurized  juices  under the Hansen  trademark.  In
1977, Tim Hansen, one of the grandsons of Hubert Hansen,  perceived a demand for
pasteurized  natural  juices and juice  blends that are shelf  stable and formed
Hansen Foods, Inc. ("HFI"). HFI expanded its product line from juices to include
Hansen's(R)  natural sodas.  California  Co-Packers  Corporation  (d/b/a/ Hansen
Beverage Company) ("CCC") acquired certain assets of HFI, including the right to
market the  Hansen's(R)  brand name,  in January  1990.  On July 27,  1992,  HBC
acquired the  Hansen's(R)  brand natural soda and apple juice business from CCC.
Under our ownership, the Hansen beverage business has significantly expanded and
includes a wide range of  beverages  within the growing  "alternative"  beverage
category including in particular,  energy drinks. In September 1999, we acquired
all of FJC's rights to manufacture,  sell and distribute  fresh  non-pasteurized
juice products under the Hansen's(R)  trademark together with certain additional
rights.  In 2000, HBC,  through its  wholly-owned  subsidiary,  Blue Sky Natural
Beverage Co. ("Blue Sky"),  which was  incorporated  in Delaware on September 8,
2000,  acquired  the natural  soda  business  previously  conducted  by Blue Sky
Natural Beverage Co., a New Mexico corporation ("BSNBC"),  under the Blue Sky(R)
trademark. In 2001, HBC, through its wholly-owned subsidiary Hansen Junior Juice
Company,  ("Junior  Juice"),  which was incorporated in Delaware on May 7, 2001,
acquired the Junior Juice business  previously  conducted by Pasco Juices,  Inc.
("Pasco") under the Junior Juice(R) trademark.
       
                                       4

<PAGE>

Industry Overview

     The alternative  beverage category combines  non-carbonated  ready-to-drink
iced teas, lemonades, juice cocktails,  single serve juices and fruit beverages,
ready-to-drink  dairy and coffee  drinks,  energy  drinks,  sports  drinks,  and
single-serve  still water  (flavored,  unflavored  and enhanced)  with "new age"
beverages,  including sodas that are considered  natural,  sparkling  juices and
flavored  sparkling  waters.  The alternative  beverage  category is the fastest
growing  segment of the beverage  marketplace  according  to Beverage  Marketing
Corporation.  According to Beverage  Marketing  Corporation,  wholesale sales in
2005 for the  alternative  beverage  category  of the market  are  provisionally
estimated at $18.7 billion  representing  a growth rate of  approximately  13.7%
over  the  revised  estimated  wholesale  sales in 2004 of  approximately  $16.4
billion.

Products

     Natural Sodas.  Hansen's(R)  natural sodas have been a leading natural soda
brand in  Southern  California  for the past 25  years.  In 2005,  according  to
Information Resources, Inc.'s Analyzer Reports for California, our natural sodas
recorded  the  highest  sales  among  comparable  carbonated  new  age  category
beverages  measured by unit volume in the California  market.  Our natural sodas
are available in fifteen regular flavors  consisting of mandarin lime, key lime,
grapefruit,  raspberry, ginger ale, creamy root beer, grapefruit,  vanilla cola,
cherry vanilla creme,  orange mango, kiwi strawberry,  tropical  passion,  black
cherry,  ginger ale and  tangerine.  In early 2001,  we introduced a new line of
diet sodas using  Splenda(R)  sweetener as the primary  sweetener.  We initially
introduced this line in four flavors:  peach, black cherry,  tangerine lime, and
kiwi  strawberry  and have since added two  additional  flavors,  ginger ale and
creamy root beer. Our natural sodas contain no preservatives,  sodium,  caffeine
or artificial  coloring and are made with high quality natural  flavors,  citric
acid and high fructose corn syrup or, in the case of diet sodas, with Splenda(R)
and Acesulfame-K. We package our natural sodas in 12-ounce and 16-ounce aluminum
cans. In 2002, we introduced a line of natural  mixers in 8-ounce  aluminum cans
comprising club soda, tonic water and ginger ale.

     In January 1999, we introduced a premium line of Signature  Sodas in unique
proprietary 14-ounce glass bottles. This line was marketed under the Hansen's(R)
brand name,  primarily through our distributor network, in six flavors. In early
2003,  we  repositioned  this line into lower cost 12-ounce  glass  packaging to
market our  repositioned  Signature Soda line at lower price points  directly to
our retail  customers  such as grocery  chains,  club stores,  specialty  retail
chains and mass  merchandisers  and to the health food sector through  specialty
and health food  distributors  (collectively  referred to as our "direct  retail
customers").  Signature  Soda is  available  in 12-ounce  glass  bottles in five
flavors:  orange  creme,  vanilla  creme,  ginger beer,  sarsaparilla  and black
cherry.

     In September  2000, we acquired the Blue Sky(R)  natural soda business from
BSNBC. Our Blue Sky product line comprises natural sodas, premium sodas, organic
natural sodas,  seltzer water,  energy drinks and tea sodas. Blue Sky(R) natural
sodas  are  available  in  twelve  regular  flavors  consisting  of lemon  lime,
grapefruit,  cola, root beer,  raspberry,  cherry vanilla creme, Jamaican ginger
ale, black cherry, orange creme, Dr. Becker, grape and cream soda. We also offer
a Blue Sky(R)  product  line,  a premium  line of natural  sodas  which  contain
supplements such as ginseng. This line is available in six flavors consisting of
ginseng  creme,  ginseng  cola,  ginseng  root beer,  ginseng  very berry creme,
ginseng ginger ale, and ginseng  cranberry-raspberry.  During 1999,  Blue Sky(R)
introduced a line of organic  natural sodas,  which are available in six flavors
consisting of prime lime cream,  new century cola,  orange divine,  ginger gale,
black cherry  cherish,  and root beer.  We also market a seltzer water under the
Blue  Sky(R)  label in three  flavors:  natural,  lime and  lemon.  In 2002,  we
introduced a lightly  carbonated  Blue Sky(R) energy drink in an 8.3-ounce  slim
can. In 2004, we introduced a new line of Blue Sky(R)  natural tea sodas in four
flavors consisting of Imperial Lime Green Tea, Peach Mist Green Tea, Pomegranate
White  Tea  and  Raspberry  Red  Tea.  The  Blue  Sky(R)  products   contain  no
preservatives,  sodium or caffeine  (other than the energy  drink) or artificial
coloring and are made with high quality  natural  flavors.  Blue Sky(R)  natural
sodas,  seltzer waters and tea sodas are all packaged in 12-ounce  aluminum cans
and are marketed  primarily to our direct  retail  customers.  In March 2005, we
introduced a new light line of Blue Sky sodas using  natural  sweeteners in four
flavors,  cherry  vanilla  creme,  creamy  root,  Jamaican  ginger  ale and wild
raspberry in 12-ounce  cans.  In the third  quarter of 2005, we introduced a new
line of Blue  Sky(R)  Natural  Sodas  with real sugar in  12-ounce  cans in four
flavors, cherry vanilla creme, cola, ginger ale and root beer. In December 2005,
we  introduced  a new  line of Blue  Sky  Isotonic  Sports  Drinks  in  16-ounce
polyethylene  terephthalate  ("PET") plastic  bottles in three flavors,  orange,
lemon lime and fruit punch.

                                       5

<PAGE>

     In 2001, we introduced a new line of sparkling lemonades (regular and pink)
and orangeades in unique  proprietary  1-liter glass bottles and towards the end
of 2002, we  introduced  diet  versions of our regular  sparkling  lemonades and
orangeades,   also  in  1-liter  glass  bottles.  The  sparkling  lemonades  and
orangeades  contain  real juice and pulp.  In 2003,  we extended  this line into
unique  proprietary  12-ounce  glass bottles in both regular and diet  versions.
This  product  line is marketed to our direct  retail  customers.  The  contract
packer who produced these products on our behalf underwent a change of ownership
and experienced  production  difficulties  which adversely affected this product
line. We are currently evaluating alternative packages for this line.

     Hansen's Energy Drinks. In 1997, we introduced a lightly  carbonated citrus
flavored  Hansen's(R)  energy drink in 8.3-ounce cans. Our energy drink competes
in the "functional" beverage category,  namely, beverages that provide a real or
perceived benefit in addition to simply delivering refreshment.  We also offered
additional  flavors of energy  drinks as well as functional  drinks  including a
ginger  flavored  d-stress(R)  drink,  an orange  flavored  b-well(TM)  drink, a
guarana berry flavored  stamina(R)  drink,  a grape flavored power drink,  and a
berry flavored  "slim-down"  drink that contained no calories,  in the same size
cans.  We have since  discontinued  sales of such  products.  Our energy  drinks
contain  vitamins,  minerals,  nutrients,  herbs and  supplements  (collectively
"supplements").  In 2004,  we commenced  to offer our  Hansen's  energy drink in
16-ounce  cans as well. In 2001, we  introduced  Energade(R),  a  non-carbonated
energy sports drink in 23.5-ounce  cans in two flavors,  citrus and orange,  and
subsequently  introduced  a third  flavor,  red  rocker,  which  we  have  since
discontinued.  We also introduced E2O Energy Water(R), a non-carbonated  lightly
flavored  water,  in  24-ounce  blue  PET  plastic  bottles,  in  four  flavors,
tangerine,  apple,  berry and lemon. We have since discontinued the apple flavor
and  introduced  a green tea flavor in its place.  In 2002,  we expanded our E2O
Energy Water(R) line with four additional  flavors in clear PET plastic bottles,
mango  melon,  kiwi  strawberry,   grapefruit  and  green  tea.  We  have  since
discontinued  the E2O Energy  Water(R)  line in clear PET plastic  bottles.  Our
Energade(R) and E2O Energy Water(R) drinks also contain  different  combinations
and  levels  of  supplements.  We are  currently  repositioning  our E2O  Energy
Water(R)  line.  At the end of 2002,  we  introduced a lightly  carbonated  diet
energy drink in 8.3-ounce  cans under the  Hansen's(R)  Diet Red brand name. Our
Diet Red energy drink is sweetened with Splenda(R) and  Acesulfame-K.  We market
our  energy,   and  Energade(R)   drinks  primarily  through  our  full  service
distributor network. We market our E2O Energy Water(R) drinks in blue bottles to
our direct retail  customers.  In 2003, we  introduced a new  carbonated  energy
drink  under the  Hansen's(R)  Deuce brand name,  in 16-ounce  cans,  but with a
different flavor from our existing  Hansen's(R) Energy drinks in 8.3-ounce cans.
We have since discontinued this product.
 
     Monster  Energy(R)  Drinks.  In 2002, we launched a new  carbonated  energy
drink under the Monster Energy(R) brand name, in 16-ounce cans, which was almost
double the size of our  regular  energy  drinks in  8.3-ounce  cans and the vast
majority of  competitive  energy drinks on the market at that time.  Our Monster
Energy(R)  drink contains  different  types and levels of  supplements  than our
Hansen's(R)  energy drinks and is marketed through our full service  distributor
network.  In 2003, we introduced a low carbohydrate  ("Lo-Carb")  version of our
Monster  Energy(R)  energy drink. In 2004, we introduced  4-packs of our Monster
Energy(R)  drinks  including our Lo-Carb version thereof and, towards the end of
2004, we launched a new Monster Energy(R)  Assault(TM)  energy drink in 16-ounce
cans.  During the first half of 2005, we introduced our Monster Energy(R) drinks
and  Lo-Carb  Monster  Energy(R)  in  24-ounce  size  cans as  well  as  Monster
Energy(R),  Lo-Carb  Monster  Energy(R)  and Monster  Energy(R)  Assault(TM)  in
8.3-ounce  size cans. In September  2005, we introduced a new Monster  Energy(R)
Khaos(TM)  energy drink in 16-ounce  cans.  Khaos(TM) is lightly  carbonated and
contains 70% juice.

                                      6

<PAGE>

     Lost(R) Energy Drinks.  In 2004, we launched a new carbonated  energy drink
under the Lost(R)  brand name,  in 16-ounce  cans.  Towards the end of 2005,  we
introduced a lo-carb  version of Lost(R) under the Perfect 10 brand name as well
as a new Lost(R)  Five-O  energy drink,  all in 16-ounce  cans.  Lost(R)  Five-O
contains 50% juice and is lightly  carbonated.  In December  2005, we introduced
Lost(R) and  Lost(R)  Five-O in 24-ounce  size cans.  The Lost(R)  brand name is
owned  by  Lost  International  LLC  and  the  drinks  are  produced,  sold  and
distributed by us under exclusive license from Lost International LLC.

     Rumba(TM) Energy Juice. In December 2004, we launched a new  non-carbonated
energy juice under the Rumba(TM) brand name in 15.5-ounce  cans.  Rumba(TM) is a
100% juice product that targets male and female morning  beverage  consumers and
is positioned as a substitute for coffee,  caffeinated  sodas and 100% orange or
other juices.

     Joker Mad  Energy(TM)  Drink.  In the first  quarter of 2005, we introduced
Joker Mad Energy(TM)  drinks in 16-ounce cans. Joker Mad Energy(TM)  drinks come
in both regular and lo-carb versions in 16-ounce cans.

     Juice  Products  and  Smoothies.  Our fruit  juice  product  line  includes
Hansen's(R)  Natural Old Fashioned Apple Juice which is packaged in 64-ounce PET
plastic  bottles and 128-ounce  polypropylene  bottles and White Grape,  Concord
Grape,  Orange, and Pomegranate,  Apple Strawberry and Apple Grape juice blends,
in 64-ounce PET plastic bottles.  These  Hansen's(R) juice products contain 100%
juice  (except  Pomegranate  which  contains  27%  juice) as well as  Vitamin C.
Certain of these products also contain added calcium. Hansen's(R) juice products
compete in the shelf-stable juice category. In 2002, we extended our fruit juice
and juice  blend  product  line by  introducing  certain  of these  products  in
10-ounce  PET  plastic  bottles  and in 2003  further  extended  our fruit juice
product  line  by  introducing  a 100%  Apple  Juice  in  aseptic  pouches  in a
6.75-ounce  size. We also offer light juices and juice cocktails in 64-ounce PET
plastic bottles.

     In March  1995,  we  introduced  a line of fruit juice  smoothie  drinks in
11.5-ounce aluminum cans. Certain flavors were subsequently offered in glass and
PET plastic  bottles.  We have since  discontinued  offering  smoothies in those
packages. Hansen's fruit juice smoothies have a smooth texture that is thick but
lighter than a nectar.  Hansen's  smoothies in 11.5-ounce  aluminum cans contain
approximately  35%  juice.  Our  fruit  juice  smoothies  provide  100%  of  the
recommended  daily  intake  for  adults  of  Vitamins  A, C & E and  represented
Hansen's entry into what is commonly  referred to as the  "functional"  beverage
category.  Hansen's(R)  fruit juice smoothies are available in thirteen flavors:
strawberry  banana,  peach berry, mango pineapple,  guava strawberry,  pineapple
coconut,  apricot nectar, tropical passion,  whipped orange, cranberry twist, as
well as the blast line  comprising  Island  Blast,  Colada Blast and Power Berry
Blast. In 2004, we repositioned our cranberry raspberry lite smoothie as part of
our new lo-carb line of smoothies.  Our lo-carb smoothie line currently consists
of peach, mango and cran-raspberry flavors in 12-ounce cans.
   
     In 2001,  we  introduced  a new line of soy  smoothies  in 32- and 11-ounce
aseptic packaging in five flavors: berry splash,  tropical breeze, orange dream,
lemon chiffon and peach  passion.  During 2004, we  discontinued  all of our soy
smoothies in 32-ounce aseptic packaging and four of the five flavors in 11-ounce
aseptic packaging, leaving Berry Splash, which was discontinued in 2005.
       
     Sparkling  Apple Cider. In 2002, we introduced a Sparkling Cider 100% juice
drink in a  1.5-liter  Magnum  glass  bottle.  However,  due to  reports of some
bottles  breaking we  promptly  voluntarily  recalled  the product in the fourth
quarter of 2003. We are pursuing a claim against the third-party bottler for the
costs and losses  incurred by us. We will  reevaluate  relaunching  this product
once certain  production  issues are resolved and a suitable  co-packer has been
identified.
    
                                       7

<PAGE>

     We market  the above  juice and  smoothie  products  to our  direct  retail
customers.

     Iced  Teas,  Lemonades  and  Juice  Cocktails.  We  introduced  Hansen's(R)
ready-to-drink iced teas and lemonades in 1993. Hansen's(R)  ready-to-drink iced
teas are available in three  flavors:  Original with Lemon,  Tropical  Peach and
Wildberry.  Lemonades  are  available  in one  flavor:  Original  Old  Fashioned
Lemonade.  Hansen's(R) juice cocktails were introduced in 1994 and are available
in three flavors: kiwi strawberry melon, tangerine pineapple with passion fruit,
and  California  paradise  punch.  We  introduced a variety 12 pack of iced teas
during  the  first  half of 2001,  which  experienced  limited  success.  We are
continuing  to  market  this  package.  Hansen's(R)  ready-to-drink  iced  teas,
lemonades  and juice  cocktails  were  packaged  in  16-ounce  wide-mouth  glass
bottles.  At the end of 2002, we converted this line from 16-ounce glass bottles
to 16-ounce polypropylene bottles and are currently reevaluating this line.

     Hansen's(R)  ready-to-drink  iced  teas are made  with  decaffeinated  tea.
Hansen's(R)  juice  products and smoothies are made with high quality juices and
products  that  contain  less than 100% fruit  juice are also made with  natural
flavors, high fructose corn syrup, citric acid and other ingredients.

     In 1999, we introduced a line of specialty  teas in 20-ounce glass bottles,
which  we named  our  "Gold  Standard"  line.  We  subsequently  introduced  two
additional green tea flavors as well as two diet green tea flavors and six juice
cocktails.  We have  discontinued  certain of the specialty  teas and all of the
juice cocktails but continue to market four products, green tea, lemon green tea
and  peach  green  tea as well as the diet  peach  green  tea  flavor.  Our Gold
Standard  line also  contains  supplements.  We  continue  to  package  our Gold
Standard Line in unique 20-ounce glass bottles.

     Juices for Children.  In 1999,  we  introduced  two new lines of children's
multi-vitamin  juice drinks in 8.45-ounce aseptic packages.  Each drink contains
eleven essential vitamins and six essential  minerals.  We introduce new flavors
in place of  existing  flavors  from  time to time.  One of these two lines is a
dual-branded  100%  juice  line  named  Juice  Blast(R)  that  was  launched  in
conjunction  with Costco  Wholesale  Corporation  ("Costco") and is sold through
Costco  stores.  The other  line was a 10% juice  line  named  "Hansens  Natural
Multi-Vitamin  Juice Slam(R) that was available to all of our customers.  During
2000,  we  repositioned  that line as a 100% juice line under the Juice  Slam(R)
name and market  that line to grocery  store  chain  customers,  the health food
trade, and other customers.  Both the Juice Blast(R) and Juice Slam(R) lines are
marketed in 6.75-ounce aseptic packages. The Juice Slam(R) line has four flavors
and the Juice Blast(R) line has three flavors.

     In May 2001, we acquired the Junior Juice(R) beverage business.  The Junior
Juice(R)  product line is comprised of seven flavors of 100% juice in 4.23-ounce
aseptic packages and is targeted at toddlers. Six flavors of the Junior Juice(R)
line have  calcium  added and all  flavors  have  vitamin C added.  The  current
flavors in the Junior Juice(R) line are apple, apple berry,  orange twist, apple
grape, mixed fruit, fruit punch and white grape.

     Bottled  Water.  Our still water  products were  introduced in 1993 and are
primarily sold in 0.5-liter plastic bottles to the food service trade.  Sales of
this product line are very limited.

     Fizzit(TM) Powdered Drink Mixes. In December 2005, we introduced a new line
of vitamin and mineral drink mixes in powdered form under the  Fizzit(TM)  brand
name.  This line  includes  vitamin and mineral  formulas as well as  functional
formulas.

                                       8

<PAGE>

 Other Products
       
     We  continue to  evaluate  and,  where  considered  appropriate,  introduce
additional  flavors and other types of  beverages  to  complement  our  existing
product lines.  We will also evaluate,  and may, where  considered  appropriate,
introduce  functional   foods/snack  foods  that  utilize  similar  channels  of
distribution  and/or are  complementary to our existing products and/or to which
our brand names are able to add value.

     We also  develop and supply,  on a limited  basis,  selected  beverages  in
different  formats  to a  limited  number of  customers  with the  objective  of
solidifying our relationship with those customers.

Manufacture and Distribution

     We do not  directly  manufacture  our products  but instead  outsource  the
manufacture to third party bottlers and contract packers.

     We purchase  concentrates,  juices,  flavors,  supplements,  caps,  labels,
trays, boxes and other ingredients for our beverage products which are delivered
to our various third party  bottlers and  co-packers.  Depending on the product,
the third party bottlers or packers add filtered water and/or high fructose corn
syrup, or sucrose,  or cane sugar or Splenda(R)  brand  sweetener,  Acesulfame-K
and/or citric acid or other  ingredients and supplements for the manufacture and
packaging of the finished  products into approved  containers in accordance with
our  formulas.  In the  case  of  sodas  and  other  carbonated  beverages,  the
bottler/packer  adds  carbonation  to the  products  as part  of the  production
process.

     We are generally responsible for arranging for the purchase of and delivery
to our third  party  bottlers  and  co-packers  of the  containers  in which our
beverage products are packaged.

     All of our  beverage  products  are  manufactured  by various  third  party
bottlers and co-packers  situated  throughout the United States and Canada under
separate   arrangements  with  each  of  such  parties.   The  majority  of  our
co-packaging arrangements are on a month-to-month basis. However, certain of our
material co-packing arrangements are described below:

     (a) Our agreement with Southwest Canning and Packaging,  Inc. ("Southwest")
pursuant to which Southwest packages a portion of our Hansen's(R) natural sodas.
This contract continues  indefinitely and is subject to termination upon 60 days
written notice from either party.

     (b) Our agreement with Nor-Cal Beverage Co., Inc.  ("Nor-Cal")  pursuant to
which  Nor-Cal  packages  a portion  of our  Hansen's(R)  juices in PET  plastic
bottles.  This contract  continues  until August 2007 and is renewable  annually
thereafter from year-to-year unless terminated by Hansen's not less than 60 days
before the end of the then current term.

     (c) Our agreement with Seven-Up/RC Bottling Company of Southern California,
Inc.  ("Seven-Up")  pursuant  to  which  Seven-Up  packages  a  portion  of  our
Monster(TM)  and Lost(R)  brand energy  drinks and a portion of our  Hansen's(R)
natural sodas. This contract  continues until March 2009. Upon termination prior
to such time we are entitled to recover certain  equipment we have purchased and
installed at Seven-Up's facility.

     (d)  Our   agreement   with   Southeast   Atlantic   Beverage   Corporation
("Southeast")  pursuant  to which  Southeast  packages a portion of our  Monster
Energy(R) and Lost(R) brand energy drinks.  This contract  continues  until July
2007 and is renewable annually thereafter, unless terminated by either party not
less than 180 days prior to the end of the then current term.

     (e) Our agreement with City Brewing  Company LLC ("City Brew")  pursuant to
which City Brew packages a portion of our  Energade(R)  energy sports drinks and
energy drinks in 16 and 24-ounce cans.  This contract  continues  until December
2006.  Either party is entitled,  at any time, to terminate  the agreement  upon
ninety (90) days prior written notice to the other party.

                                       9

<PAGE>

     (f) Our agreement with Pri-Pak,  Inc. ("Pri-Pak") pursuant to which Pri-Pak
packages  a portion  of our  energy  drinks in  8.3-ounce  cans.  This  contract
continues  indefinitely  but may be  terminated at any time by either party upon
ninety (90) days prior written notice to the other.

     (g) Our agreement with Gluek Brewing  Company  ("Gluek")  pursuant to which
Gluek  packages a portion of our energy drinks in 8.3,  15.5 and 16-ounce  cans.
This contract  continues until August 2008 and is automatically  renewed for one
year periods  thereafter.  Either party is entitled at any time to terminate the
agreement upon 180 days prior written notice to the other party.

     In certain  instances,  equipment is  purchased by us and  installed at the
facilities of our co-packers to enable them to produce  certain of our products.
In general, such equipment remains our property and is to be returned to us upon
termination  of the packing  arrangements  with such  co-packers or is amortized
over a pre-determined  number of cases that are to be produced at the facilities
concerned.

     We pack certain  products  outside of the West Coast region to enable us to
produce  products  closer to the markets where they are sold and thereby  reduce
freight costs. As volumes in markets outside of California  grow, we continue to
secure additional packing  arrangements closer to such markets to further reduce
freight costs.

     Our ability to estimate demand for our products is imprecise,  particularly
with new  products,  and may be less  precise  during  periods of rapid  growth,
particularly  in new  markets.  If we  materially  underestimate  demand for our
products  or are  unable  to  secure  sufficient  ingredients  or raw  materials
including, but not limited to, glass, PET/plastic bottles, cans, labels, flavors
or supplement  ingredients or certain sweeteners,  or packing  arrangements,  we
might not be able to satisfy  demand on a  short-term  basis.  The  supplier  of
sucralose has notified the Company that our  purchases of sucralose  during 2006
will be subject to volume limitations due to the demand for sucralose  exceeding
their  production  capacity.  While we  believe  that we will be able to  secure
sufficient  quantities  of  sucralose  during  2006 to meet the  demand  for our
products that contain sucralose,  we will reformulate  certain of those products
that  contain   sucralose  with  alternative   sweetener  systems  to  avoid  an
interruption in supply of those products, should the need arise.

     Although our production arrangements are generally of short duration or are
terminable  upon  request,  we  believe a short  disruption  or delay  would not
significantly  affect our revenues since alternative  packing  facilities in the
United  States with  adequate  capacity  can usually be obtained for many of our
products at commercially  reasonable rates and/or within a reasonably short time
period.  However, there are limited packing facilities in the United States with
adequate  capacity  and/or  suitable  equipment for many of our newer  products,
including  Hansen's(R)  brand energy drinks in 8.3-ounce and 16-ounce cans, Gold
Standard line,  aseptic juice  products,  Energade(R),  sparkling apple cider in
1.5-liter magnum glass bottles, Monster Energy(R),  Lost(R), Rumba(TM) and Joker
Mad  Energy(TM)  energy drinks in 8.3, 15.5, 16, and 24-ounce cans and sparkling
lemonades and orangeade  lines.  There are also limited  shrink sleeve  labeling
facilities  available to us in the United States with adequate  capacity for our
E2O Energy Water(R). A disruption or delay in production of any of such products
could  significantly  affect our  revenues  from such  products  as  alternative
co-packing  facilities in the United  States with  adequate  capacity may not be
available  for such  products  either at  commercially  reasonable  rates and/or
within a reasonably short time period, if at all. Consequently,  a disruption in
production  of such  products  could  affect our  revenues.  We continue to seek
alternative  and/or  additional  co-packing  facilities  in the United States or
Canada with  adequate  capacity for the  production  of our various  products to
minimize the risk of any disruption in production.

     We have entered into  distribution  agreements for the distribution in most
states of Hansen's(R) brand energy drinks,  Monster  Energy(R)  drinks,  Lost(R)
energy drinks,  and Energade(R) energy sports drinks.  Distribution  levels vary
from state to state and from  product to product.  Certain of our  products  are
sold in Canada.  We also sell a limited  range of our  products to  distributors
outside of the United States,  including in Mexico,  the Caribbean , Central and
South America, Japan, Korea, and Saudi Arabia.

                                       10

<PAGE>

     We continually seek to expand distribution of our products by entering into
agreements  with regional  bottlers or other direct store delivery  distributors
having established sales, marketing and distribution organizations.  Many of our
bottlers and distributors are affiliated with and manufacture  and/or distribute
other soda and non-carbonated brands and other beverage products. In many cases,
such products compete directly with our products.

     We continue to take steps to reduce our inventory  levels in an endeavor to
lower our warehouse and distribution costs.

     During 2005, we continued to expand  distribution  of our natural sodas and
smoothies outside of California. We expanded our national sales force to support
and grow sales,  primarily of Monster Energy(R)  drinks,  Lost(R) energy drinks,
and  Energade(R)  energy  sports  drinks and we intend to continue to build such
sales force in 2006.

     Our Blue  Sky(R)  products  are sold  primarily  to the health  food trade,
natural food chains and  mainstream  grocery  store  chains,  through  specialty
health food distributors.

     We concluded  exclusive  contracts  with the State of California  ("State")
Department of Health Services,  Women, Infant and Children ("WIC")  Supplemental
Nutrition  Branch ("DHS") to supply 100% apple juice and 100% blended juice,  in
64-ounce PET plastic bottles. The contracts are each for a period of three years
with a further  one-year  extension option to be mutually agreed between Hansens
and the State of California. We bid the lowest net cost per unit in terms of the
wholesale  price,  less a rebate to the State.  Formal written  agreements  were
signed  with  the  State  in  accordance  with the bid  process.  The  contracts
commenced on July 12, 2004.

     Under the contracts Hansen's is the exclusive supplier for both Apple Juice
and the blended  juice  category,  a new WIC category,  initially  with our 100%
Apple Grape Juice.  During 2005, our Apple  Strawberry Juice was approved within
the blended  juice  category and became  eligible for  redemption  under the WIC
contract  in  addition to our 100% Apple Grape  Juice.  The WIC  contracts  have
expanded the distribution of Hansens juices, resulting in increased exposure for
the Hansens  brand.  WIC-approved  items are stocked by the grocery trade and by
WIC-only stores.  Products are purchased by WIC consumers with vouchers given by
the DHS to qualified  participants.  

     Our principal  warehouse  and  distribution  center and  corporate  offices
relocated to our current facility in October 2000. In January 2004, we leased an
additional warehouse facility in Corona to consolidate additional space that had
been leased by us on short term  leases from time to time to meet our  increased
warehousing  needs due to  increases  in both sales  volumes  and  products  and
terminated  the two short term  leases  concerned.  We continue to take steps to
reduce our  inventory  levels  wherever  possible,  in an  endeavor to lower our
warehouse and distribution costs. (See also "PART I ITEM 2 PROPERTIES").

Raw Materials and Suppliers

     The  principal  raw  materials  used by us comprise  aluminum  cans,  glass
bottles and PET plastic  bottles as well as juices,  high  fructose  corn syrup,
sucrose and sucralose,  the costs of which are subject to  fluctuations.  Due to
the consolidations that have taken place in the glass industry over the past few
years,  the prices of glass  bottles  continue  to  increase.  The prices of PET
plastic  bottles and aluminum  cans have  increased in 2005.  The prices of high
fructose corn syrup,  sucrose and certain juice concentrates have also increased
in 2005. These increased costs together with increased costs primarily of energy
and gas and freight  resulted in  increases in certain  product  costs which are
ongoing and are expected to continue to exert  pressure on our gross  margins in
2006. We are uncertain whether the prices of these or any other raw materials or
ingredients will continue to rise in the future.

                                       11

<PAGE>

     Generally,  raw  materials  utilized  by us in  our  business  are  readily
available from numerous sources. However, certain raw materials are manufactured
by only one  company.  Sucralose,  which is used  alone or in  combination  with
Acesulfame-K in the Company's  low-calorie  products,  is purchased by us from a
single  manufacturer.  Certain  of our cans are  only  manufactured  by a single
company in the United States.

     With  regard to fruit  juice and  juice-drink  products,  the  industry  is
subject to variability of weather conditions,  which may result in higher prices
and/or lower consumer demand for juices.

     We  purchase   beverage   flavors,   concentrates,   juices,   supplements,
high-fructose corn syrup, cane sugar, sucrose, sucralose and other sweeteners as
well as other  ingredients  from  independent  suppliers  located  in the United
States and abroad.

     Generally,  flavor suppliers hold the proprietary  rights to their flavors.
Consequently, we do not have the list of ingredients or formulae for our flavors
and certain of our concentrates  readily available to us and we may be unable to
obtain these flavors or concentrates from alternative suppliers on short notice.
We have identified alternative suppliers of many of the supplements contained in
many of our beverages.  However,  industry-wide  shortages of certain fruits and
fruit juices,  and supplements and sweeteners have been and could,  from time to
time in the future,  be  experienced,  which could  interfere  with and/or delay
production of certain of our products.

     We continually endeavor to develop back-up sources of supply for certain of
our  flavors  and  concentrates  from  other  suppliers  as well as to  conclude
arrangements  with  suppliers  which would enable us to obtain access to certain
concentrates or flavor formulas in certain circumstances. We have been partially
successful  in these  endeavors.  Additionally,  in a  limited  number of cases,
contractual restrictions and/or the necessity to obtain regulatory approvals and
licenses  may  limit our  ability  to enter  into  agreements  with  alternative
suppliers and manufacturers and/or distributors.

     In connection with the development of new products and flavors, independent
suppliers  bear a large portion of the expense of product  development,  thereby
enabling us to develop new products and flavors at relatively  low cost. We have
historically developed and successfully  introduced new products and flavors and
packaging  for our products and intend to continue  developing  and  introducing
additional new beverages and flavors.

Competition

     The  beverage  industry  is  highly  competitive.  The  principal  areas of
competition are pricing, packaging,  development of new products and flavors and
marketing  campaigns.  Our products compete with a wide range of drinks produced
by a relatively large number of manufacturers,  most of which have substantially
greater financial, marketing and distribution resources than we do.

     Important  factors  affecting our ability to compete  successfully  include
taste and flavor of products, trade and consumer promotions, rapid and effective
development  of new,  unique  cutting edge  products,  attractive  and different
packaging,  branded  product  advertising  and  pricing.  We  also  compete  for
distributors  who will  concentrate  on marketing our products over those of our
competitors,  provide stable and reliable distribution and secure adequate shelf
space in retail outlets.  Competitive  pressures in the alternative,  energy and
functional  beverage categories could cause our products to be unable to gain or
to lose market share or we could  experience  price erosion,  which could have a
material adverse affect on our business and results.

                                       12

<PAGE>

     Over the past five years we have experienced  substantial  competition from
new entrants in the energy drink category.  A number of companies who market and
distribute iced teas and juice cocktails in larger volume  packages,  such as 16
and 20-ounce glass bottles,  including Sobe, Snapple Elements, Arizona and Fuse,
have added supplements to their products with a view to marketing their products
as  "functional"  or "energy"  beverages or as having  functional  benefits.  We
believe that many of those  products  contain  lower levels of  supplements  and
principally  deliver  refreshment.  In addition,  many competitive  products are
positioned  differently than our energy or functional  drinks. Our smoothies and
Gold Standard lines are positioned more closely against those products.

     We compete not only for consumer acceptance, but also for maximum marketing
efforts by multi-brand  licensed  bottlers,  brokers and  distributors,  many of
which have a principal  affiliation  with  competing  companies and brands.  Our
products  compete with all liquid  refreshments and with products of much larger
and  substantially  better  financed  competitors,  including  the  products  of
numerous  nationally and  internationally  known producers such as The Coca Cola
Company,  PepsiCo, Inc., Cadbury Schweppes plc, Red Bull Gmbh, Kraft Foods, Inc.
Nestle  Beverage  Company,  Tree  Top and  Ocean  Spray.  We also  compete  with
companies  that are smaller or primarily  local in operation.  Our products also
compete with private label brands such as those carried by grocery store chains,
convenience store chains, and club stores.

     Our natural sodas compete directly with traditional soda products including
those  marketed by The Coca-Cola Company,  PepsiCo,  Inc. and Cadbury  Schweppes
plc, as well as with carbonated beverages marketed by smaller or primarily local
companies such as Jones Soda Co., Clearly  Canadian  Beverage  Company,  Crystal
Geyser,  J.M.  Smucker  Company,  and with  private  label  brands such as those
carried by grocery store chains, convenience store chains and club stores.

     Our fruit juice smoothies  compete directly with Kern's,  Jumex,  Jugos del
Valle and Libby's  nectars,  V8  Smoothies,  as well as with single  serve juice
products produced by many competitors. Such competitive products are packaged in
glass and PET bottles  ranging from 8- to  48-ounces  in size and in  11.5-ounce
aluminum cans. The juice content of such competitive  products ranges from 1% to
100%.

     Our apple and other juice products  compete directly with Tree Top, Mott's,
Martinelli's,  Welch's, Ocean Spray, Tropicana,  Minute Maid, Langers, Apple and
Eve,  Seneca,  Northland  and also with  other  brands of apple  juice and juice
blends, especially store brands.

     Our  energy  drinks,   including  Hansen's(R)  energy,  Diet  Red,  Monster
Energy(R),  Lost(R) Energy,  Joker Mad Energy(TM) and Rumba(TM)  Energy Juice in
8.3,  15.5, 16 and 24-ounce  cans,  compete  directly with Red Bull,  Adrenaline
Rush, Amp,  Rockstar,  No Fear, Full Throttle,  180, KMX, Venom,  Extreme Energy
Shot, US energy, Red Devil, Rip It, Nos, Boo Koo, Lipovitan,  MET-Rx, Hype, XTC,
and  many  other  brands.  In  addition,  certain  large  companies  such as The
Coca-Cola  Company and Pepsico Inc.  market and/or  distribute  products in that
market segment such as Mountain Dew,  Mountain Dew MDX, Vault,  Adrenaline Rush,
Amp, No Fear, Full Throttle and Rockstar.

     Our E2O Energy  Water(R) and still water  products  compete  directly  with
Vitamin Water, Reebok, Propel, Dasani, Aquafina, Fruit2O, Evian, Crystal Geyser,
Naya, Palomar Mountain, Sahara, Arrowhead,  Dannon, and other brands of flavored
water and still water especially store brands.

Sales and Marketing

     We focus on consumers  who seek  products  that are perceived to be natural
and  healthy  and  emphasize  the  natural   ingredients   and  the  absence  of
preservatives,  sodium, artificial coloring and caffeine in our beverages (other
than our energy drinks) and the addition to most of our products, of one or more
supplements. We reinforce this message in our product packaging.
       
                                       13

<PAGE>

     Our sales and  marketing  strategy  is to focus our  efforts on  developing
brand  awareness  and trial  through  sampling  both in stores  and at events in
respect of all our  beverages and drink mixes.  We use our branded  vehicles and
other  promotional  vehicles at events at which we  distribute  our  products to
consumers for sampling.  We utilize "push-pull" methods to achieve maximum shelf
and display space  exposure in sales outlets and maximum  demand from  consumers
for our  products  including  advertising,  in  store  promotions  and in  store
placement  of  point  of sale  materials  and  racks,  prize  promotions,  price
promotions,  competitions,  endorsements from selected public and extreme sports
figures,  coupons,  sampling and  sponsorship of selected  causes such as breast
cancer  research  and  SPCA's as well as  extreme  sports  teams such as the Pro
Circuit - Kawasaki Motocross team, extreme sports figures and athletes, sporting
events such as the Energy Pro Pipeline Surfing competition, marathons, 10k runs,
bicycle  races,  volleyball  tournaments  and other  health and  sports  related
activities,  including extreme sports, particularly supercross,  freestyle motor
cross, surfing, skateboarding, wakeboarding, skiing, snowboarding, BMX, mountain
biking,  snowmobile racing, etc. and also participate in product demonstrations,
food tasting and other related  events.  Posters,  print,  radio and  television
advertising  together with price promotions and coupons are also used to promote
our brands.

     Additionally, in 2003 we entered into a multi-year sponsorship agreement to
advertise  on the new Las Vegas  Monorail  ("Monorail  Agreement")  with the Las
Vegas  Monorail  Company  ("LVMC")  which includes the right to vend our Monster
Energy(R)  drinks and natural  sodas on all  stations.  The initial  term of the
Monorail  Agreement  commenced in July 2004. For technical  reasons the Monorail
did not operate for some months in 2004 but recommenced  carrying  passengers at
the end of December 2004. The initial term of the Monorail Agreement ends on the
first  anniversary of its  commencement  date. Not less than 120 days before the
expiration  of the initial  term and each renewal  term,  as the case may be, we
have the right to renew the Monorail Agreement for a further one year term up to
a maximum of nine  additional  one year  terms and the LVMC has the  right,  not
withstanding  such  election by us, to terminate  the Monorail  Agreement at the
expiration of the then current term.  Due to the  interruption  in operations of
the  Monorail,  the  commencement  date of the initial term was extended and the
agreement commenced on January 1, 2005. We have renewed our agreement for 2006.

     We  believe  that one of the keys to success in the  beverage  industry  is
differentiation  such as making Hansen's(R)  products visually  distinctive from
other  beverages  on the  shelves  of  retailers.  We review  our  products  and
packaging  on an  ongoing  basis and,  where  practical,  endeavor  to make them
different,  better and unique.  The labels and graphics for many of our products
are   redesigned   from  time  to  time  to  maximize   their   visibility   and
identification,  wherever  they may be placed in stores and we will  continue to
reevaluate the same from time to time.

     Where  appropriate  we  partner  with  retailers  to assist  our  marketing
efforts.  For example,  while we retain  responsibility for the marketing of the
Juice  Slam(R)  line  of  children's  multi-vitamin  juice  drinks,  Costco  has
undertaken partial responsibility for the marketing of the Juice Blast(R) line.

     We  increased   expenditures  for  our  sales  and  marketing  programs  by
approximately 55% in 2005 compared to 2004. As of December 31, 2005, we employed
363 employees in sales and marketing activities, of which 183 were employed on a
full-time basis.

                                       14

<PAGE>

Customers

     Our  customers  are  typically   retail   grocery  and  specialty   chains,
wholesalers,  club stores,  drug, mass  merchandisers,  convenience chains, full
service  beverage  distributors,  health  food  distributors  and  food  service
customers. Sales to our various customer types for 2005 are reflected below. The
allocations  below  reflect  changes  made  by the  Company  to  the  categories
historically reported.
       
  Retail Grocery, specialty chains and wholesalers                           19%
  Club stores, drug & mass merchandisers                                     11%
  Full service distributors                                                  65%
  Health food distributors                                                    3%
  Other                                                                       2%

     Our customers  include Dr. Pepper  Bottling/7UP  Bottling  Group,  Wal-Mart
(including Sams Club),  Kalil Bottling Group,  Trader Joe's,  Seven-Up Companies
Northern California, Costco, Albertson's,  Kroger and Safeway. A decision by any
large  customer  to  decrease  amounts  purchased  from the  Company or to cease
carrying our products  could have a material  negative  effect on our  financial
condition and  consolidated  results of operations.  One customer  accounted for
approximately  18% and 13% of the Company's  sales for the years ended  December
31, 2005 and 2004, respectively.

Seasonality

     Sales of ready-to-drink  beverages are somewhat  seasonal,  with the second
and third calendar quarters accounting for the highest sales volumes. The volume
of sales in the beverage business may be affected by weather  conditions.  Sales
of  our  beverage   products  may  become   increasingly   subject  to  seasonal
fluctuations  as more sales  occur  outside of  California  with  respect to the
Hansen's  products.  However,  the  energy  drink  category  appears  to be less
seasonal than traditional beverages.

Intellectual Property

     We own  numerous  trademarks  that  are  very  important  to our  business.
Depending upon the jurisdiction, trademarks are valid as long as they are in use
and/or their  registrations are properly maintained and they have not been found
to have become generic.  Registrations of trademarks can generally be renewed as
long as the  trademarks are in use. We also own the copyright in and to numerous
statements made and content appearing on the packaging of our products.

     We own the Hansen's(R) trademark. This trademark is crucial to our business
and is  registered  in the U.S.  Patent  and  Trademark  Office  and in  various
countries  throughout the world. We own a number of other trademarks  including,
but not  limited  to, A New  Kind a  Buzz(TM)  ,Unleash  the  Beast(R),  Hansens
Energy(R),  Blue  Energy(R),  Energade(R),  Hansen's E2O Energy  Water(R),  Slim
Down(R),  Power  Formula(R),  THE  REAL  DEAL(R),  LIQUIDFRUIT(R),  California's
Natural Choice(R),  Medicine Man(R), Hansen's power(R),  b-well(R),  anti-ox(R),
d-stress(R),     stamina(R),     Antioxjuice    Intellijuice(R),     Defense(R),
Immunejuice(R),  Hansen's Natural Multi-Vitamin Juice Slam(R),  Juice Blast(R) ,
Red Rocker(R),  Monster  Energy(R),  M  (stylized)(R),  M Monster  Energy(R) and
Hansen's  Natural  Soda(R)  in  the  United  States  and,  the  Hansen's(R)  and
Smoothie(R) trademarks in a number of countries around the world.

     We have applied to register a number of trademarks in the United States and
elsewhere  including,  but not  limited  to,  Monster(TM),  Assault(TM),  Energy
Pro(TM),  Khaos(TM),  M  Monster  Mutant(TM),   Monster  Mutant(TM),  Joker  Mad
Energy(TM), Rumba(TM), Fizzit(TM) and Fizz Bomb(TM).

                                       15

<PAGE>

     In September  2000,  in  connection  with the  acquisition  of the Blue Sky
Natural  Beverage  business,  we, through our wholly owned  subsidiary Blue Sky,
acquired the Blue Sky(R) trademark, which is registered in the United States and
Canada.

     In May  2001,  in  connection  with the  acquisition  of the  Junior  Juice
beverage  business,  we,  through  our wholly  owned  subsidiary  Junior  Juice,
acquired  the  Junior  Juice(R)  trademark,  which is  registered  in the United
States.

     On April 4, 2000,  the United States  Patent and Trademark  Office issued a
patent to us for an invention  related to a shelf structure  (rolling rack) and,
more particularly,  a shelf structure for a walk-in cooler. Such shelf structure
is utilized by us to secure  shelf space for and to  merchandise  our energy and
functional  drinks in cans in  refrigerated  Visi coolers and walk-in coolers in
retail stores.

Government Regulation

     The production,  distribution  and sale in the United States of many of our
products is subject to the Federal  Food,  Drug and  Cosmetic  Act;  the Dietary
Supplement Health and Education Act of 1994; the Occupational  Safety and Health
Act; various environmental  statutes; and various other federal, state and local
statutes and  regulations  applicable to the production,  transportation,  sale,
safety, advertising,  labeling and ingredients of such products.  California law
requires that a specific warning appear on any product that contains a component
listed by the State as having been found to cause cancer or birth  defects.  The
law exposes all food and  beverage  producers  to the  possibility  of having to
provide  warnings on their  products  because the law  recognizes  no  generally
applicable  quantitative  thresholds  below  which a  warning  is not  required.
Consequently,  even trace  amounts  of listed  components  can  expose  affected
products  to  the  prospect  of  warning  labels.   Products  containing  listed
substances  that occur  naturally in the product or that are  contributed to the
product solely by a municipal water supply are generally exempt from the warning
requirement.  While  none of our  beverage  products  are  required  to  display
warnings under this law, we cannot predict whether an important component of any
of our products might be added to the California list in the future. We also are
unable to predict  whether or to what extent a warning under this law would have
an impact on costs or sales of our products.

     Measures  have been enacted in various  localities  and states that require
that a deposit be charged for certain  non-refillable  beverage containers.  The
precise requirements imposed by these measures vary. Other deposit, recycling or
product  stewardship  proposals  have been  introduced  in  certain  states  and
localities  and in  Congress,  and we  anticipate  that similar  legislation  or
regulations  may be  proposed  in the  future at the  local,  state and  federal
levels, both in the United States and elsewhere.

     Our facilities in the United States are subject to federal, state and local
environmental  laws and  regulations.  Compliance with these  provisions has not
had, and we do not expect such  compliance to have, any material  adverse effect
upon our capital expenditures, net income or competitive position.

Employees

     As of December 31, 2005,  we employed a total of 476 employees of which 290
were  employed  on a full-time  basis.  Of our 476  employees,  we employ 113 in
administrative and operational capacities and 363 persons in sales and marketing
capacities.  We  have  not  experienced  any  work  stoppages,  and we  consider
relations with our employees to be good.

  Compliance with Environmental Laws

     In  California,  we are  required  to collect  redemption  values  from our
customers  and to remit  such  redemption  values  to the  State  of  California
Department of Conservation  based upon the number of cans and bottles of certain
carbonated and non-carbonated  products sold. In certain other states and Canada
where  Hansen's(R)  products are sold, we are also required to collect  deposits
from our customers and to remit such deposits to the  respective  state agencies
based  upon  the  number  of  cans  and  bottles  of  certain   carbonated   and
non-carbonated products sold in such states.

                                     16

<PAGE>

Available Information

     Our  Internet  address is  www.hansens.com.  Information  contained  on our
website is not part of this  annual  report on Form 10-K.  Our annual  report on
Form 10-K and  quarterly  reports  on Form 10-Q will be made  available  free of
charge  on  www.hansens.com,   as  soon  as  reasonably   practicable  after  we
electronically  file such material with, or furnish it to, the SEC. In addition,
you may  request  a copy of these  filings  (excluding  exhibits)  at no cost by
writing or telephoning us at the following address or telephone number:

                            Hansen Beverage Company
                              1010 Railroad Street
                                Corona, CA 92882
                                 (951) 739-6200
                                 (800) HANSENS
                                 (800) 426-7367

                                       17

<PAGE>


I
TEM 1A.        RISK FACTORS

     In addition to the other  information in this report,  you should carefully
consider the following  risks. If any of the following risks actually occur, our
business,  financial  condition  and/or  operating  results  could be materially
adversely affected.  The risk factors summarized below are not the only risks we
face.  Additional risks and  uncertainties  not currently known to us or that we
currently  deem to be  immaterial  also  may  materially  adversely  affect  our
business, financial condition and/or operating results.

Increased competition could hurt our business.

     The  beverage  industry  is  highly  competitive.  The  principal  areas of
competition are pricing, packaging,  development of new products and flavors and
marketing  campaigns.  Our products compete with a wide range of drinks produced
by a relatively large number of manufacturers,  most of which have substantially
greater financial, marketing and distribution resources than we do.

     Important  factors  affecting our ability to compete  successfully  include
taste and flavor of products, trade and consumer promotions, rapid and effective
development  of new,  unique  cutting edge  products,  attractive  and different
packaging,  branded product  advertising and pricing.  Our products compete with
all liquid  refreshments  and with  products  of much  larger and  substantially
better financed  competitors,  including the products of numerous nationally and
internationally  known  producers such as The Coca-Cola  Company,  Pepsico Inc.,
Cadbury Schweppes plc, Red Bull Gmbh, Kraft Foods Inc., Nestle Beverage Company,
Tree Top and Ocean Spray.  We also compete  with  companies  that are smaller or
primarily  local in  operation.  Our products  also  compete with private  label
brands such as those carried by grocery store chains,  convenience store chains,
and  club  stores.  There  can  be no  assurance  that  we  will  not  encounter
difficulties in maintaining our current revenues or market share or position due
to competition in the beverage industry.  If our revenues decline, our business,
financial condition and results of operations could be adversely affected.

We  derive a  substantial  portion  of  revenues  from  our  energy  drinks  and
competitive  pressure in the "energy drink" category could adversely  affect our
operating results.

     A  substantial  portion of our sales are  derived  from our energy  drinks,
including in  particular  our Monster  Energy(R)  brand energy  drinks.  Our DSD
segment which comprises primarily energy drinks,  represented 77.4% of net sales
for the year ended  December 31, 2005.  Any decrease in the sales of our Monster
Energy(R) brand energy drinks could  significantly  adversely  affect our future
revenues  and  net  income.   Historically,   we  have  experienced  substantial
competition  from new entrants in the energy drink  category.  Our energy drinks
compete directly with Red Bull,  Adrenaline Rush, Amp,  Rockstar,  No Fear, Full
Throttle,  180, KMX, Venom,  Extreme Energy Shot, US energy,  Red Devil, Rip It,
Nos, Boo Koo, Lipovitan,  MET-Rx,  Hype, XTC, and many other brands. A number of
companies who market and distribute  iced teas and juice  cocktails in different
packages,  such  as 16 and  20-ounce  glass  bottles,  including  Sobe,  Snapple
Elements,  Arizona,  Fuse,  and Vitamin Water,  have added  supplements to their
products with a view to marketing  their  products as  "functional"  or "energy"
beverages or as having functional benefits. In addition, certain large companies
such as The Coca-Cola Company and Pepsico Inc. market and/or distribute products
in that market segment such as Mountain Dew, Mountain Dew MDX, Vault, Adrenaline
Rush, Amp, No Fear, Full Throttle,  and Rockstar.  Competitive  pressures in the
energy drink  category  could impact our revenues or we could  experience  price
erosion or lower market share, any of which could have a material adverse affect
on our business and results.

Change in consumer preferences may reduce demand for some of our products.

     There is increasing  awareness and concern for the health  consequences  of
obesity.  This may reduce demand for our non-diet beverages,  which could affect
our profitability.

                                       18

<PAGE>

     Consumers  are  seeking  greater  variety  in their  beverages.  Our future
success  will  depend,  in part,  upon our  continued  ability  to  develop  and
introduce different and innovative beverages.  In order to retain and expand our
market share, we must continue to develop and introduce different and innovative
beverages and be competitive in the areas of quality and health,  although there
can be no  assurance  of  our  ability  to do so.  There  is no  assurance  that
consumers  will  continue to purchase our products in the future.  Additionally,
many of our  products are  considered  premium  products and to maintain  market
share during  recessionary  periods we may have to reduce  profit  margins which
would adversely  affect our results of operations.  Product  lifecycles for some
beverage  brands and/or  products  and/or packages may be limited to a few years
before consumers'  preferences  change. The beverages we currently market are in
varying  stages of their  lifecycles  and there  can be no  assurance  that such
beverages  will become or remain  profitable  for us. The  beverage  industry is
subject to changing consumer  preferences and shifts in consumer preferences may
adversely affect us if we misjudge such preferences. We may be unable to achieve
volume growth through product and packaging  initiatives.  We also may be unable
to penetrate  new markets.  If our revenues  decline,  our  business,  financial
condition and results of operations will be adversely affected.

We rely on bottlers and other contract  packers to manufacture our products.  If
we are unable to maintain  good  relationships  with our  bottlers  and contract
packers and/or their ability to manufacture our products becomes  constrained or
unavailable to us, our business could suffer.

     We do not directly  manufacture  our products,  but instead  outsource such
manufacturing  to bottlers and other contract  packers.  Although our production
arrangements are generally of short duration or are terminable upon request,  in
the event of a  disruption  or delay,  we may be unable to  procure  alternative
packing  facilities at commercially  reasonable rates and/or within a reasonably
short time period.  In addition,  there are limited  packing  facilities  in the
United States with adequate  capacity and/or suitable  equipment for many of our
products,  including  Hansen's(R)  brand energy drinks in 8.3-ounce and 16-ounce
cans, Gold Standard line, aseptic juice products, juices in 64-ounce PET plastic
bottles,  Energade(R),  Monster  Energy(R),  Lost(R),  Rumba(TM)  and  Joker Mad
Energy(TM)  energy  drinks  in 8.3,  15.5,  16,  and  24-ounce  cans,  sparkling
lemonades  and  orangeades  and other  products.  There are also limited  shrink
sleeve  labeling  facilities  available to us in the United States with adequate
capacity for our E2O Energy Water(R). A disruption or delay in production of any
of such products could  significantly  affect our revenues from such products as
alternative  co-packing  facilities in the United States with adequate  capacity
may not be available for such products either at commercially  reasonable rates,
and/or  within a  reasonably  short  time  period,  if at all.  Consequently,  a
disruption in production of such products could adversely affect our revenues.

We rely on bottlers and  distributors to distribute our DSD products.  If we are
unable to secure such bottlers and distributors and/or we are unable to maintain
good  relationships  with our existing bottlers and  distributors,  our business
could suffer.

     We continually seek to expand distribution of our products by entering into
agreements  with regional  bottlers or other direct store delivery  distributors
having established sales, marketing and distribution organizations.  Many of our
bottlers and distributors are affiliated with and manufacture  and/or distribute
other soda and  non-carbonated  brands  and other  beverage  products  including
energy drinks. In many cases, such products compete directly with our products.

     The marketing efforts of our distributors are important for our success. If
our DSD  brands  prove  to be  less  attractive  to our  existing  bottlers  and
distributors  and/or if we fail to attract additional bottlers and distributors,
and/or our bottlers  and/or  distributors do not market and promote our products
above the products of our  competitors,  our business,  financial  condition and
results of operations could be adversely affected.

                                       19

<PAGE>

Our  customers  are material to our success.  If we are unable to maintain  good
relationships with our existing customers, our business could suffer.
       
     Unilateral decisions could be taken by our distributors, and/or convenience
chains, grocery chains,  specialty chain stores, club stores and other customers
to discontinue carrying all or any of the our products that they are carrying at
any time, which could cause our business to suffer.

     One customer  accounted for approximately 18% and 13% of the Companys sales
for the years  ended  December  31, 2005 and 2004,  respectively.  A decision by
that, or any other large  customer,  to decrease the amount  purchased  from the
Company or to cease carrying the Companys products could have a material adverse
effect  on  the  Companys  financial  condition  and  consolidated   results  of
operations.

     We  have  exclusive  contracts  with  the  State  of  California  ("State")
Department of Health Services,  Women, Infant and Children ("WIC")  Supplemental
Nutrition  Branch ("DHS") to supply 100% apple juice and 100% blended juice,  in
64-ounce PET plastic bottles. The contracts are each for a period of three years
with a further  one-year  extension option to be mutually agreed between Hansens
and the State of California.  The current contracts expire on July 11, 2007, and
we have no knowledge of whether the contracts will be extended for a further one
year,  or whether we will be successful in securing any new future WIC contracts
with the State. If we are unsuccessful in securing new future WIC contracts with
the State,  our  revenues  from those  products  could be  materially  adversely
affected.

Increases  in cost or  shortages  of raw  materials  or  increases  in  costs of
co-packing could harm our business.

     The  principal  raw  materials  used by us comprise  aluminum  cans,  glass
bottles and PET plastic  bottles as well as juices,  high  fructose  corn syrup,
sucrose and sucralose,  the costs of which are subject to  fluctuations.  Due to
the consolidations that have taken place in the glass industry over the past few
years,  the prices of glass  bottles  continue  to  increase.  The prices of PET
plastic  bottles and aluminum  cans  increased in 2005 and may increase in 2006.
The prices of high fructose corn syrup,  sucrose and certain juice  concentrates
have also  increased  during the year,  particularly  apple  concentrate.  These
increased  costs,  together with increased costs primarily of energy and gas and
freight resulted in increases in certain product costs which are ongoing and are
expected  to  continue  to exert  pressure  on our  gross  margins  in 2006.  In
addition,  certain of our co-pack arrangements allow such co-packers to increase
their  charges  based on certain of their own cost  increases.  We are uncertain
whether the prices of any of the above or any other raw materials or ingredients
will  continue  to rise in the future and whether we will be able to pass any of
such increases on to our customers.

     In addition,  some of these raw materials,  such as a sucralose and certain
sizes of cans,  are available  from a limited  number of  suppliers.  Sucralose,
which is used in the Company's  low-calorie  products, is purchased by us from a
single  manufacturer.  The  supplier  of  sucralose  has  notified  us that  our
purchases of sucralose during 2006 will be subject to volume  limitations due to
demand for sucralose exceeding  production  capacity.  While we believe that our
2006 sucralose  volume  allocation will be sufficient to meet the demand for our
products that contain  sucralose,  we may need to  reformulate  certain of those
products that contain  sucralose with alternative  sweetener systems to avoid an
interruption in supply of those products, should the need arise.

     We may not  correctly  estimate  demand for our  products.  Our  ability to
estimate demand for our products is imprecise,  particularly  with new products,
and may be less precise  during  periods of rapid  growth,  particularly  in new
markets. If we materially underestimate demand for our products or are unable to
secure sufficient  ingredients or raw materials  including,  but not limited to,
glass, PET plastic  bottles,  cans,  labels,  sucralose,  flavors,  supplements,
certain  sweeteners,  or packing  arrangements,  we might not be able to satisfy
demand on a short-term basis. Moreover, industry-wide shortages of certain juice
concentrates,  supplements and sweeteners have been and could, from time to time
in  the  future,  be  experienced,  which  could  interfere  with  and/or  delay
production of certain of our products and could have a material  adverse  effect
on our business  and  financial  results.  We do not use hedging  agreements  or
alternative instruments to manage this risk.

                                       20

<PAGE>

The costs of packaging supplies are subject to price increases from time to time
and we may be  unable  to pass  all or some of such  increased  costs  on to our
customers.

     The majority of our  packaging  supplies  contracts  allow our suppliers to
alter the costs they charge us for  packaging  supplies  based on changes in the
costs of the  underlying  commodities  that are used to produce those  packaging
supplies,  such as resin for PET bottles and aluminum for cans. These changes in
the prices we pay for our  packaging  supplies  occur at  certain  predetermined
times  that  vary by  product  and  supplier.  Accordingly,  we bear the risk of
increases in the costs of these  packaging  supplies,  including the  underlying
costs of the commodities that comprise these packaging  supplies.  We do not use
derivative  instruments  to manage  this  risk.  If the cost of these  packaging
supplies  increase,  we may be unable to pass these costs along to our customers
through  corresponding  adjustments to the prices we charge,  which could have a
material adverse effect on our results of operations.

We rely upon our ongoing relationships with our key flavor suppliers.  If we are
unable to source our  flavors on  acceptable  terms from our key  suppliers,  we
could suffer disruptions in our business.

     Generally,  flavor suppliers hold the proprietary  rights to their flavors.
Consequently, we do not have the list of ingredients or formulae for our flavors
and certain of our concentrates  readily available to us and we may be unable to
obtain these flavors or concentrates from alternative suppliers on short notice.
Industry-wide   shortages  of  certain  juice   concentrates,   supplements  and
sweeteners have been and could, from time to time in the future, be experienced,
which could  interfere with and/or delay  production of certain of our products.
If we  have  to  replace  a  flavor  supplier,  we  could  experience  temporary
disruptions in our ability to deliver products to our customers which could have
a material adverse effect on our results of operations.

Our intellectual  property rights are critical to our success,  the loss of such
rights could materially adversely affect our business.

     We own numerous trademarks that are very important to our business. We also
own the  copyright  in and to portion of the  content  on the  packaging  of our
products.  We  regard  our  trademarks,  copyrights,  and  similar  intellectual
property as critical to our success and attempt to protect  such  property  with
registered and common law trademarks and copyrights,  restrictions on disclosure
and other actions to prevent infringement.  Product packages, mechanical designs
and artwork are  important to our success and we take action to protect  against
imitation of our  packaging  and trade dress and to protect our  trademarks  and
copyrights as  necessary.  However,  there can be no assurance  that other third
parties  will  not  infringe  or  misappropriate   our  trademarks  and  similar
proprietary rights. If we lose some or all of our intellectual  property rights,
our business may be materially adversely affected.

Significant changes in government regulation may hinder sales.

     The production,  distribution  and sale in the United States of many of our
products is subject to the Federal  Food,  Drug and  Cosmetic  Act;  the Dietary
Supplement Health and Education Act of 1994; the Occupational  Safety and Health
Act; various environmental  statutes; and various other federal, state and local
statutes and  regulations  applicable to the production,  transportation,  sale,
safety, advertising, labeling and ingredients of such products. New statutes and
regulations  may also be  instituted  in the future.  If a regulatory  authority
finds that a current or future  product or  production  run is not in compliance
with any of these regulations,  we may be fined, or such products may have to be
recalled and/or reformulated and/or packaging changed,  thus adversely affecting
our financial condition and operations.  California law requires that a specific
warning  appear on any product that contains a component  listed by the State as
having been found to cause cancer or birth  defects.  While none of our beverage
products  are  required to display  warnings  under this law, we cannot  predict
whether an  important  component  of any of our  products  might be added to the
California list in the future.  We also are unable to predict whether or to what
extent a warning  under  this law would  have an impact on costs or sales of our
products.

                                      21

<PAGE>

If we are unable to maintain brand image or product quality,  or if we encounter
product recalls, our business may suffer.

     Our success  depends on our  ability to maintain  and build brand image for
our existing products,  new products and brand extensions.  We have no assurance
that our advertising,  marketing and promotional  programs will have the desired
impact on our products' brand image and on consumer preferences. Product quality
issues, real or imagined, or allegations of product contamination,  even if fake
or  unfounded,  could  tarnish  the image of the  affected  brands and may cause
consumers  to choose  other  products.  We may be required  from time to time to
recall  products  entirely  or from  specific  co-packers,  markets or  batches.
Product recalls could adversely affect our profitability and our brand image. We
do not maintain recall insurance.

     While  we have to date  not  experienced  any  credible  product  liability
litigation, there is no assurance that we will not experience such litigation in
the future.  In the event we were to experience  product  liability  claims or a
product  recall,  our  financial  condition  and  business  operations  could be
materially adversely effected.

If we are not able to retain the full-time  services of senior management it may
have an adverse effect on our operations and/or our operating  performance until
we find suitable replacements.

     Our  business is  dependent,  to a large  extent,  upon the services of our
senior management.  We do not maintain key person life insurance for any members
of our senior management. We currently have employment agreements with Mr. Sacks
and Mr.  Schlosberg  which end on  December  31,  2008.  The loss of services of
either of these persons or any other key members of our senior  management could
adversely affect our business until a suitable  replacements can be found. There
may be a limited number of personnel with the requisite skills to serve in these
positions and we may be unable to locate or employ such  qualified  personnel on
acceptable terms.

Weather could adversely affect our supply chain and demand for our products.

     With regard to fruit juice,  fruit juice  concentrates and natural flavors,
the beverage industry is subject to variability of weather conditions, which may
result in higher prices and/or the  nonavailability  of any of such items. Sales
of our products may also be influenced  to some extent by weather  conditions in
the markets in which we operate,  particularly  in areas outside of  California.
Weather  conditions may influence  consumer demand for certain of our beverages,
which could have an adverse effect on our results of operations.

Potential  changes in accounting  practices and/or taxation may adversely affect
our financial results.

     We cannot predict the impact that future changes in accounting standards or
practices may have on our financial results.  New accounting  standards could be
issued  that  could  change  the way we record  revenues,  expenses,  assets and
liabilities.  These changes in accounting  standards could adversely  affect our
reported  earnings.  Increases  in direct and  indirect  income tax rates  could
affect  after tax  income.  Equally,  increases  in  indirect  taxes  (including
environmental  taxes  pertaining to the disposal of beverage  containers)  could
affect our products' affordability and reduce our sales.

Volatility of Stock Price may restrict sale opportunities.
                                     
                                       22

<PAGE>

     Our stock price is affected by a number of factors,  including  stockholder
expectations,  financial results, the introduction of new products by us and our
competitors,  general economic and market conditions,  estimates and projections
by the investment  community and public comments by other persons and many other
factors,  many of which are  beyond  our  control.  We may be unable to  achieve
analysts earnings  forecasts,  which may be based on projected volumes and sales
of many product types and/or new products,  certain of which are more profitable
than others.  There can be no assurance that the Company will achieve  projected
levels or mixes of product  sales.  As a result,  our stock  price is subject to
significant  volatility  and  stockholders  may not be able to sell our stock at
attractive prices.

Provisions in our  organizational  documents and control by insiders may prevent
changes  in  control  even  if  such  changes   would  be  beneficial  to  other
stockholders.

     Our organizational documents may limit changes in control.  Furthermore, at
February  10,  2006,  Mr.  Sacks and Mr.  Schlosberg  together  may be deemed to
control a maximum of 21.2% of our outstanding  common stock.  Consequently,  Mr.
Sacks and Mr. Schlosberg could exercise significant control on matters submitted
to  a  vote  of  our  stockholders,   including  electing  directors,   amending
organizational  documents and  approving  extraordinary  transactions  such as a
takeover attempt,  even though such actions may be favorable to the other common
stockholders.

Our cash flow may not be sufficient to fund our long term goals.

     We may be unable to  generate  sufficient  cash flow to support our capital
expenditure  plans and general  operating  activities.  In  addition,  the terms
and/or  availability  of  our  credit  facility  and/or  the  activities  of our
creditors could affect the financing of our future growth.

Litigation or legal proceedings  could expose us to significant  liabilities and
thus negatively affect our financial results.

     We are a party,  from time to time, to various  litigation claims and legal
proceedings, which could adversely affect our financial results.


ITEM 1B.        UNRESOLVED STAFF COMMENTS

None


ITEM 2. PROPERTIES

     Our  corporate  offices and main  warehouse  are  located at 1010  Railroad
Street, Corona, California 92882. Our lease for this facility expires in October
2010.  The  area  of  the  facility  is   approximately   141,000  square  feet.
Additionally,  in January 2004 we entered into a lease for additional  warehouse
space in Corona,  California.  The area of this facility is approximately 80,000
square  feet.  This lease will expire at the end of March 2008 with an option to
extend the lease until October 2010. We also rent additional  warehouse space on
a short-term basis from time to time in public  warehouses  situated  throughout
the United States and Canada.


ITEM 3. LEGAL PROCEEDINGS

     In  September  2004,  Barrington  Capital  Corporation  through  an alleged
successor in interest,  Sandburg Financial  Corporation (both entities with whom
the Company has never had any dealings) served a Notice of Motion  ("Motion") on
the  Company  and  each of its  subsidiaries  as well as on a  number  of  other
unrelated entities and individuals. The Motion seeks to amend a default judgment
granted against a completely unconnected company, Hansen Foods, Inc., to add the
Company  and  its  subsidiary  companies,  as  well as the  other  entities  and
individuals  cited,  as judgment  debtors.  The default  judgment was entered on
February 15, 1996, for $7,626,000 plus legal interest and attorneys' fees in the
sum of  $211,000  arising  out of a breach  of  contract  claim  that  allegedly
occurred  in the  1980s.  Barrington  Capital  Corporation's/Sandburg  Financial
Corporations claim is based on the misconceived and unsubstantiated  theory that
the Company and its  subsidiaries  are alter egos  and/or  successors  of Hansen
Foods,  Inc. The Motion is based on demonstrably  false  allegations,  misstated
legal propositions and lacks any substantial  supporting  evidence.  The Company
and its  subsidiaries  are  vigorously  opposing the Motion and believe that the
Motion is without any merit.

                                       23

<PAGE>

     In June 2005,  the Company  filed a complaint in  California  federal court
against North American  Beverage Company ("NAB") seeking an injunction,  damages
and other relief  arising out of NAB's  infringement  of the  Company's  Monster
Energy(R)  marks through the promotion and  advertising of carbonated  beverages
under the mark  "Flathead  Lake Monster" with the word  "Monster"  predominantly
displayed.  In response, in July 2005, Flathead Lake Monster, Inc. ("Flathead"),
a Montana  corporation which allegedly licensed the mark "Flathead Lake Monster"
to NAB,  filed a complaint  against  the Company in federal  court in Montana in
which it alleged that it is the licensor of the mark "Flathead Lake Monster" and
sought a  declaration  that its use of that mark for soda does not  infringe the
Company's rights in its "Monster Energy" marks. Flathead's complaint also in the
alternative claimed trademark infringement by the Company "to the extent a court
finds a  likelihood  of  confusion"  between  the  parties  marks and  sought an
injunction against the Company from using the term "Monster Energy",  as well as
damages and other relief.  In December 2005,  all of the aforesaid  proceedings,
including the complaint  filed by the Company as well as the complaint  filed by
Flathead Lake, were settled on terms deemed to be favorable to the Company.
       
     Furthermore,  we are subject to litigation  from time to time in the normal
course of  business.  Although it is not possible to predict the outcome of such
litigation,  based on the facts known to us and after consultation with counsel,
we believe that such litigation  will not have a material  adverse effect on our
financial position or results of operations.

     Except as described above,  there are no material pending legal proceedings
to  which  we or any of our  subsidiaries  is a  party  or to  which  any of our
properties is subject,  other than ordinary and routine litigation incidental to
our business.


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     The annual meeting of  stockholders of the Company was held on November 11,
2005. At the meeting, the following individuals were elected as directors of the
Company and received the number of votes set opposite their respective names:

Director                                  Votes For      Votes Withheld
-------------------                     -------------   --------------
Rodney C. Sacks                           19,369,084           413,395
Hilton H. Schlosberg                      19,301,847           480,632
Benjamin M. Polk                          18,426,784         1,355,695
Norman C. Epstein                         18,382,312         1,400,167
Harold C. Taber, Jr.                      18,310,041         1,472,438
Mark S. Vidergauz                         19,455,910           326,569
Sydney Selati                             18,730,515         1,051,964


     The stockholders  approved the 2005 Hansen Natural Corporation Stock Option
Plan for  Non-Employee  Directors by a vote of 11,038,166 for,  735,864 against,
27,899 abstaining and 7,980,550 broker non-votes.

     In addition,  at the meeting our  stockholders  ratified the appointment of
Deloitte & Touche LLP as the independent  registered  public  accounting firm of
the Company for the year ended  December 31, 2005, by a vote of 19,627,174  for,
144,498 against, 10,807 abstaining and zero broker non-votes.

                                       24

<PAGE>


PART II


ITEM 5. MARKET FOR THE REGISTRANT'S  COMMON EQUITY,  RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES

Principal Market

     The Company's common stock began trading in the over-the-counter  market on
November  8, 1990 and is quoted on the NASDAQ  Capital  Market  under the symbol
"HANS".  As of February 10, 2006, there were 22,307,006  shares of the Company's
common stock outstanding held by approximately 514 holders of record.

Stock Price and Dividend Information
       
     The following  table sets forth high and low bid closing  quotations of our
common  stock for the periods  indicated  (as  adjusted for the stock split that
occurred on August 8, 2005 (Note 1)):


                                     High              Low
                               ---------------  ---------------
Year Ended December 31, 2004
----------------------------
First Quarter                  $       7.22     $         3.96
Second Quarter                 $      13.63     $         6.76
Third Quarter                  $      14.24     $         9.07
Fourth Quarter                 $      18.21     $        11.55

Year Ended December 31, 2005
----------------------------
First Quarter                  $      29.98     $        16.76
Second Quarter                 $      43.07     $        26.63
Third Quarter                  $      53.70     $        40.49
Fourth Quarter                 $      86.71     $        41.98

     The  quotations  for  the  common  stock  set  forth  above  represent  bid
quotations  between  dealers,  do not  include  retail  markups,  mark-downs  or
commissions and bid quotations may not necessarily represent actual transactions
and "real time" sale  prices.  The source of the bid  information  is the NASDAQ
Stock Market, Inc.

     We have not paid cash dividends to our stockholders since our inception and
do not anticipate paying cash dividends in the foreseeable future.

                                       25

<PAGE>

Equity Compensation Plan Information

     The  following  table sets forth  information  as of December 31, 2005 with
respect  to shares of our  common  stock  that may be  issued  under our  equity
compensation plans.

<TABLE>

       
                                  Number of securities                           Number of securities       
                                   to be issued upon     Weighted-average     remaining available for      
                                      exercise of        exercise price of     future issuance under       
                                 Nutstanding options,       outstanding       quity compensation plans     
                                  warrants and rights    options, warrants     (excluding securities       
                                          (a)               and rights        reflected in column (a))     
         Plan category                                         (b)                    (c)                
                                 ---------------------- -------------------- ---------------------------
<S>                              <C>                    <C>                  <C>   
Equity compensation plans                                                                                  
approved by stockholders                     3,712,600                 $8.38                     262,600    
                                                                                                           
Equity compensation plans not                                                                              
approved by stockholders                             -                    -                           -    
                                 ---------------------- -------------------- ---------------------------
                                                                                                           
Total                                        3,712,600                 $8.38                     262,600    
                                 ====================== ==================== ===========================

</TABLE>



ITEM 6. SELECTED FINANCIAL DATA
       
     The consolidated statements of operations data set forth below with respect
to each of the years ended  December 31, 2001 through 2005 and the balance sheet
data as of December  31, for the years  indicated,  are derived from our audited
consolidated  financial  statements and should be read in conjunction with those
financial statements and notes thereto, and with the Management's Discussion and
Analysis of Financial  Condition and Results of Operations included as ITEM 7 of
this Annual Report on Form 10-K.

                                       26

<PAGE>


<TABLE>

                                                                                                               
(in thousands, except                                                                                          
per share information)      2005             2004             2003             2002              2001          
---------------------------------------------------------------------------------------------------------------
<S>                    <C>              <C>              <C>               <C>              <C>    

Gross Sales*            $    415,417     $     224,098    $    135,655      $    112,885     $     97,609
Net sales               $    348,886     $     180,341    $    110,352      $     92,046     $     80,658
Gross Profit            $    182,543     $      83,466    $     43,775      $     32,032     $     27,232
Gross Profit as a                                                                                              
Percentage to Net                                                                                              
Sales                           52.3%             46.3%           39.7%             35.3%            34.6%
Operating Income        $    103,443     $      33,886    $      9,826      $      5,293     $      5,551
                                                                                                               
Net income              $     62,776     $      20,387    $      5,930      $      3,029     $      3,019      
                                                                                                               
Net income per                                                                                                 
common share                                                                                                   
  Basic                 $       2.85     $        0.96    $       0.29      $       0.15     $       0.15      
  Diluted               $       2.59     $        0.86    $       0.28      $       0.14     $       0.14
Total assets            $    163,890     $      82,022    $     47,997      $     40,464     $     38,561
Long-term debt          $         10     $         146    $        358      $      3,606     $      5,851
                                                                                                               
Stockholders' Equity    $   $125,509     $    $ 58,571    $     35,050      $   $ 28,371     $     25,334      
</TABLE>



* Gross  sales,  although  used  internally  by  management  as an  indicator of
operating performance,  should not be considered as an alternative to net sales,
which is determined in accordance  with GAAP, and should not be used alone as an
indicator of operating  performance in place of net sales.  Additionally,  gross
sales may not be comparable to similarly titled measures used by other companies
as  gross  sales  has  been  defined  by  the   Company's   internal   reporting
requirements.  However,  gross sales is used by management to monitor  operating
performance  including  sales  performance of particular  products,  salesperson
performance, product growth or declines and overall Company performance. The use
of gross sales allows evaluation of sales  performance  before the effect of any
promotional  items,  which  can  mask  certain  performance  issues.  Management
believes  the   presentation   of  gross  sales  allows  a  more   comprehensive
presentation  of the  Companys  operating  performance.  Gross  sales may not be
realized in the form of cash receipts as promotional  payment and allowances may
be  deducted  from  payments  received  from  customers.(  See "PART II ITEM 7 -
RESULTS OF OPERATIONS").



ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL 
CONDITION AND RESULTS OF OPERATIONS
 
     The following discussion ("MD&A") is provided as a supplement to and should
be read in conjunction  with-our financial statements and the accompanying notes
("Notes")  included  elsewhere  in this  Form  10-K.  This  discussion  contains
forward-looking  statements that are based on management's current expectations,
estimates and projections about our business and operations.  Our actual results
may differ  materially  from those  currently  anticipated and expressed in such
forwardlooking statements.

     This overview provides our perspective on the individual  sections of MD&A.
MD&A includes the following sections:

*    Our Business - a general description of our business;  the value drivers of
     our business; and opportunities and risks;

*    Results  of  Operations  - an  analysis  of  our  consolidated  results  of
     operations for the three years presented in our financial statements;

                                       27

<PAGE>

*    Liquidity  and Capital  Resources - an analysis of our cash flows,  sources
     and uses of cash and contractual obligations;

*    Accounting  Policies  and  Pronouncements  -  a  discussion  of  accounting
     policies that require  critical  judgments and  estimates  including  newly
     issued accounting pronouncements;

*    Sales - details of our sales measured on a quarterly basis in both dollars
     and cases;

*    Inflation - information about the impact that inflation may or may not have
     on our results;

*    Forward Looking  Statements - cautionary  information about forward looking
     statements and a description of certain risks and uncertainties  that could
     cause our actual results to differ materially from the companys  historical
     results or our current expectations or projections; and

*    Market Risks -  Information  about market  risks and risk  management.  See
     ("Forward  Looking  Statements"  and  "PART II ITEM 7A. -  QUALITATIVE  AND
     QUANTITATIVE DISCLOSURES ABOUT MARKET RISKS").

Our Business

Overview

     We  develop,  market,  sell and  distribute,  in the main,  a wide range of
branded  beverages.  The  majority  of our  beverages  fall  within the  growing
"alternative"  beverage  category.  The  principal  brand  names under which our
beverages are marketed are Hansen's(R),  Monster Energy(R),  Blue Sky(R), Junior
Juice(R),  Lost(R),  Rumba(TM)  and  Joker  Mad  Energy(TM).  We own  all of our
above-listed brand names other than Lost(R) which we produce,  market,  sell and
distribute under an exclusive licensing arrangement with Lost International LLC.

     Our  company  principally  generates  revenues,  income  and cash  flows by
developing,  producing,  marketing,  selling and distributing  finished beverage
products. We generally sell these products to retailers as well as distributors.

     We incur significant marketing expenditures to support our brands including
advertising  costs,  athlete and event sponsorship fees and special  promotional
events.  We focus on developing  brand awareness and trial through sampling both
in stores and at events. Retailers and distributors receive rebates, promotions,
point of sale materials,  merchandise displays and coolers. We also use in-store
promotions and in-store  placement of point-of-sale  materials and racks,  prize
promotions, price promotions, competitions, and sponsorship of, and endorsements
from selected  public and extreme sports figures,  events and causes.  Consumers
receive  coupons,   discounts  and  promotional   incentives.   These  marketing
expenditures  help to enhance  distribution  and availability of our products as
well as  awareness  and increase  consumer  preference  for our brands.  Greater
distribution  and  availability,  awareness  and  preference  promotes long term
growth.

     During 2005, we continued to expand our existing  product lines and further
develop our  markets.  In  particular,  we continue to focus on  developing  and
marketing  beverages  that fall within the category  generally  described as the
"alternative" beverage category, with particular emphasis on energy type drinks.

     We  believe  that one of the keys to success in the  beverage  industry  is
differentiation  such as making Hansen's(R)  products visually  distinctive from
other  beverages  on the  shelves  of  retailers.  We review  our  products  and
packaging  on an  ongoing  basis and,  where  practical,  endeavor  to make them
different,  better and unique.  The labels and graphics for many of our products
are   redesigned   from  time  to  time  to  maximize   their   visibility   and
identification,  wherever  they may be placed in stores and we will  continue to
reevaluate the same from time to time.

     A  substantial  portion  of our sales are  derived  from  "energy  drinks",
particularly our Monster Energy(R) brand energy drinks. Any decrease in sales of
our energy drinks,  particularly our Monster Energy(R) brand energy drinks could
significantly  adversely affect our future revenues and net income.  Competitive
pressure in the "energy  drink"  category could  adversely  affect our operating
results. (See "PART I ITEM 1A. - RISK FACTORS")

                                       28

<PAGE>

     We again achieved record sales in 2005. The increase in gross and net sales
in 2005 was primarily  attributable  to increased sales by volume of our Monster
Energy(R)  drinks,  which  were  introduced  in April  2002,  including  our low
carbohydrate  ("lo-carb")  Monster  Energy(R)  drinks,  which were introduced in
2003, our Monster Energy(R)  Assault(TM)  energy drinks which were introduced in
September 2004, sales of Monster Energy(R)  Khaos(TM) energy drinks,  which were
introduced in August 2005,  increased  sales by volume of Lost(R)  energy drinks
which were introduced in January 2004, and to a lesser extent, to sales of Joker
Mad  Energy(TM)  drinks  which  were  introduced  in  January  2005,  as well as
increased  sales  by  volume  of  apple  juice  and  juice  blends,   children's
multi-vitamin  juice drinks and Rumba(TM) energy juice,  which was introduced in
December  2004.  The  increase  in gross and net sales was  partially  offset by
decreased sales by volume  primarily of Hansen's(R)  natural sodas,  Hansen's(R)
energy drinks, Energade(R), and Smoothies in cans.

     During  the  year  ended  December  31,  2005,  sales  shipped  outside  of
California  represented  62% of our aggregate gross sales, as compared to 56% of
our aggregate  gross sales for the  comparable  period in 2004.  During the year
ended  December  31,  2005,  sales to  distributors  outside  the United  States
amounted  to $5.6  million,  as  compared  to $2.3  million  for the year  ended
December  31,  2004,  which  was less  than 2% of gross  sales  for each  period
respectively.

     Our  customers  are  typically   retail   grocery  and  specialty   chains,
wholesalers,  club stores,  drug, mass  merchandisers,  convenience chains, full
service  beverage  distributors,  health  food  distributors  and  food  service
customers. Sales to our various customer types for 2005 are reflected below. The
allocations  below  reflect  changes  made  by the  Company  to  the  categories
historically reported.

  Retail Grocery, specialty chains and wholesalers                           19%
  Club stores, drug & mass merchandisers                                     11%
  Full service distributors                                                  65%
  Health food distributors                                                    3%
  Other                                                                       2%

     In 2004, we introduced a carbonated  Lost(R) Energy drink in 16-ounce cans,
a carbonated Monster Energy(R) Assault(TM) drink in 16-ounce cans, a new line of
Blue Sky(R)  natural tea sodas in 12-ounce  cans,  Hansen's(R)  energy drinks in
16-ounce cans,  Rumba(TM)  Energy Juice in 15.5-once cans and also  introduced a
new line of lo-carb smoothies in 11.5-ounce cans.

     In 2005, we introduced a carbonated  Joker Mad Energy(TM) drink in 16-ounce
cans (regular and lo-carb) a carbonated Monster Energy(R) Khaos(TM) energy drink
in 16-ounce cans,  Monster  Energy(R) and Lo-Carb Monster Energy(R) in 24-ounce
cans,  Monster  Energy(R),  Lo-Carb  Monster  Energy(R)  and  Monster  Energy(R)
Assault(TM)  drinks in 8.3-ounce  cans, a new line of Blue Sky(R) natural sodas
with real sugar,  a new line of lite Blue Sky(R) natural sodas in 12-ounce cans,
a new line of non-carbonated  Blue Sky(R) isotonic sports drinks in 16-ounce PET
plastic bottles, as well as new juice products and Fizzit(TM) which is a line of
vitamin and mineral drink mixes in powdered form.

     Sales of our dual-branded  100% juice line named Juice Blast(R),  which was
launched in conjunction with Costco and is sold through Costco stores, were $4.0
million in 2005 as compared to $2.0 million in 2004.  We have and will  continue
to  introduce  new  flavors  from time to time in an  effort to ensure  that the
variety  pack  remains  fresh and  different  for  consumers  and  retain and if
possible increase current distribution levels.

                                       29

<PAGE>

     In  September  2000,  HBC,  through its wholly owned  subsidiary  Blue Sky,
acquired the Blue Sky(R)  natural soda  business.  The Blue Sky(R)  natural soda
brand is the leading  natural  soda in the health  food  trade.  Blue Sky offers
natural sodas,  premium natural sodas with added ingredients such as Ginseng and
anti-oxidant  vitamins,  organic sodas and seltzer waters in 12-ounce cans and a
Blue Energy(R) drink in 8.3-ounce cans and in 2004 introduced a new line of Blue
Sky(R)  natural tea sodas in 12-ounce cans. In 2005, we introduced a new line of
Blue Sky Lite natural  sodas,  a new line of Blue Sky(R) natural sodas made with
real sugar and a new line of non-carbonated Blue Sky(R) isotonic sports drinks.

     In May 2001,  HBC,  through  its  wholly  owned  subsidiary  Junior  Juice,
acquired the Junior Juice(R) beverage business. The Junior Juice(R) product line
is comprised of a line of 100% juices packed in 4.23-ounce  aseptic packages and
is targeted at toddlers.

     During 2005, we entered into several new  distribution  agreements  for the
sale of our products both within and outside the United States and substantially
expanded our national sales force and marketing and support staff.  As discussed
under "PART I ITEM 1. - BUSINESS  MANUFACTURE AND  DISTRIBUTION",  we anticipate
that we will continue  building our national  sales force in 2006 as well as our
marketing and support staff to support and grow the sales of our products.

     In 2002,  we  introduced a Sparkling  Cider 100% juice drink in a 1.5-liter
Magnum glass bottle. However, due to limited reports of some bottles breaking in
2003,  we promptly  recalled the product.  We are pursuing a claim for the costs
and losses  incurred by us. We will  reevaluate  relaunching  this  product once
certain  production  issues  are  resolved  to our  satisfaction  and a suitable
co-packer has been identified.

     During 2004, we concluded exclusive contracts with the State of California,
Department of Health Services Women, Infant and Children Supplemental  Nutrition
Branch,  to supply  100% Apple  juice and 100%  blended  juice in  64-ounce  PET
plastic bottles.  The contracts commenced on July 12, 2004. (See "PART I ITEM 1.
BUSINESS MANUFACTURE AND DISTRIBUTION").

     We continue to incur  expenditures  in connection  with the development and
introduction of new products and flavors.

      Value Drivers of our Business

          We believe  that the key value  drivers of our  business  include  the
     following:

     *    Profitable Growth - We believe natural, better for you brands properly
          supported by marketing and  innovation,  targeted to a broad  consumer
          base-drive  profitable  growth.  We  continue to broaden our family of
          brands.  In  particular,  we are  expanding  and growing our specialty
          beverages and energy drinks to provide more alternatives to consumers.
          We are focused on maintaining or increasing profit margins. We believe
          that  tailored  brand,  package,  price and  channel  strategies  help
          achieve profitable growth. We are implementing these strategies with a
          view to accelerating profitable growth.

     *    Cost Management - The principal focus of cost management will continue
          to be on  supplies  and cost  reduction.  One key area of  focus,  for
          example,  is to  decrease  raw  material  costs,  co-packing  fees and
          general and  administrative  costs as a  percentage  of net  operating
          revenues.  Another  key area of focus is the  reduction  in  inventory
          levels. However, due to the expansion in the number of our products as
          well as  increased  sales  levels in 2005,  overall  inventory  levels
          increased. During 2005, the costs primarily of PET plastic bottles and
          aluminum  cans,  as well as the costs of high  fructose corn syrup and
          sucrose and certain packaging and freight costs also increased.

                                       30

<PAGE>

     *    Efficient  Capital  Structure - Our capital  structure  is intended to
          optimize our costs of capital. We believe our strong capital position,
          our ability to raise funds at low effective cost and overall low costs
          of borrowing provide a competitive advantage.

     We believe that, subject to increases in the costs of certain raw materials
being contained, these value drivers, when properly implemented,  will result in
(1)  maintaining  and/or  improving  our  gross  profit  margin;  (2)  providing
additional  leverage over time through  reduced  expenses as a percentage of net
operating revenues; and (3) optimizing our cost of capital. The ultimate measure
of  success  is and will be  reflected  in our  current  and  future  results of
operations.

     Gross and net operating revenues, gross profits,  operating income, and net
income and net income per share  represent key  measurements  of the above value
drivers.  In 2005,  gross operating  revenues  totaled $415.4 million,  an 85.4%
increase over 2004. Net operating  revenues totaled $348.9 million,  an increase
of 93.5%  over 2004.  Gross  profit  totaled  $182.5  million in 2005,  a 118.7%
increase  from  2004.  Operating  income was $103.4  million  compared  to $33.9
million for 2004.  Net income was $62.8 million as compared to $20.4 million for
2004.  Net  income per  diluted  share was $2.59 as  compared  to net income per
diluted  share of $.86 in 2004.  These  measurements  will  continue to be a key
management  focus in 2006 and beyond.  See also "Results of  Operations  for the
Year Ended December 31, 2005 Compared to the Year Ended December 31, 2004."

     In 2005,  the  Company had working  capital of $107.1  million  compared to
$41.6  million as of  December  31,  2004.  In 2005,  our net cash  provided  by
operating  activities  was  approximately  $54.6  million as  compared  to $20.1
million  in 2004.  Principal  uses of cash  flows are  purchases  of  inventory,
increases in accounts  receivable and other assets,  acquisition of property and
equipment and  trademarks.  Payment of our debt and accounts  payable and income
taxes payable are expected to be and remain our principal  recurring use of cash
and working  capital  funds.  (See also "PART II ITEM 7. - LIQUIDITY AND CAPITAL
RESOURCES").

      Opportunities, Challenges and Risks  

     Looking forward, our management has identified certain challenges and risks
that demand the attention of the beverage industry and our company.  Increase in
consumer and regulatory  awareness of the health  problems  arising from obesity
and inactive lifestyles  represents a challenge.  We recognize that obesity is a
complex and serious public health  problem.  Our commitment to consumers  begins
with our broad  product  line and a wide  selection  of diet,  light and lo-carb
beverages,  juices and juice drinks, sports drinks and waters and energy drinks.
We  continuously  strive  to  meet  changing  consumer  needs  through  beverage
innovation, choice and variety.

     Our historical  success is  attributable,  in part, to our  introduction of
different and innovative  beverages.  Our future  success will depend,  in part,
upon our  continued  ability to develop and introduce  different and  innovative
beverages,  although there can be no assurance of our ability to do so. In order
to retain and expand our market share, we must continue to develop and introduce
different and  innovative  beverages and be competitive in the areas of quality,
health,   method  of  distribution,   brand  image  and  intellectual   property
protection.  The beverage industry is subject to changing  consumer  preferences
and shifts in consumer  preferences may adversely affect companies that misjudge
such preferences.
       
                                       31

<PAGE>

     In addition,  other key challenges and risks that could impact our companys
future financial results include, but are not limited to:

*    maintenance of our brand images and product quality;

*    profitable  expansion and growth of our family of brands in the competitive
     market place (See also "PART I ITEM 1. - BUSINESS -  COMPETITION  and SALES
     AND MARKETING");

*    restrictions on imports and sources of supply;  duties or tariffs;  changes
     in government regulations;

*    protection of our existing  intellectual  property  portfolio of trademarks
     and  the  continuous  pursuit  of new  and  innovative  trademarks  for our
     expanding product lines;

*    limitations on available quantities of sucralose,  a non-caloric  sweetener
     that is used in many of our beverage  products,  during 2006, due to demand
     for such sweetener exceeding the supplier's production capacity, as well as
     limitations on available  quantities of certain package  containers such as
     the 24-ounce cap can and copacking availability; and

*    the imposition of additional restrictions.

*    (See also  "PART I ITEM 1A. - RISK  FACTORS")  for  additional  information
     about risks and uncertainties facing our Company.

We believe that the following opportunities exist for us:

*    growth potential for  non-alcoholic  beverage  categories  including energy
     drinks,  carbonated soft drinks, juices and juice drinks, sports drinks and
     water;

*    new product introductions intended to contribute to higher gross profits;

*    premium packages intended to generate strong revenue growth;

*    significant  package,   pricing  and  channel   opportunities  to  maximize
     profitable growth; and

*    proper positioning to capture industry growth.

                                       32

<PAGE>

Results of Operations

<TABLE>

                                                                                                         Percentage Change
                                                                                                     ---------------------------
                                                2005                2004                2003          05 vs. 04     04 vs. 03
                                        -------------------- ------------------- ------------------- ------------- -------------
<S>                                     <C>                  <C>                 <C>                 <C>           <C>   

Gross sales, net of                           
  discounts & returns *                       $ 415,417,282       $ 224,097,875       $ 135,655,087         85.4%         65.2%
Less:  Promotional and                           
  other allowances**                             66,530,916          43,756,740          25,302,891         52.0%         72.9%
                                        -------------------- ------------------- ------------------- ------------- -------------
Net sales                                       348,886,366         180,341,135         110,352,196         93.5%         63.4%
Cost of sales                                   166,343,118          96,874,750          66,577,168         71.7%         45.5%
                                        -------------------- ------------------- ------------------- ------------- -------------
Gross profit                                    182,543,248          83,466,385          43,775,028        118.7%         90.7%
Gross profit margin                                   52.3%               46.3%               39.7%

Operating Expenses:
Selling, general and                             
   administrative expenses                       79,029,837          49,507,137          33,887,045         59.6%         46.1%
Amortization of trademarks                           70,102              73,046              61,888         (4.0%)        18.0%
                                        -------------------- ------------------- ------------------- ------------- -------------
Operating income                                103,443,309          33,886,202           9,826,095        205.3%        244.9%
Operating income as a percent                         
   of net sales                                       29.6%               18.8%                8.9%

Net nonoperating income                           
     (expense)                                    1,351,272              51,995             (67,013)     2,498.8%       (177.6%)
                                        -------------------- ------------------- ------------------- ------------- -------------
Income before provision for                     
   income taxes                                 104,794,581          33,938,197           9,759,082        208.8%        247.8%

Provision for income taxes                       42,018,605          13,551,393           3,828,678        210.1%        253.9%
                                        -------------------- ------------------- ------------------- ------------- -------------
Effective tax rate                                    40.1%                39.9%               39.2%

Net income                                     $ 62,775,976        $ 20,386,804         $ 5,930,404        207.9%        243.8%
                                        ==================== =================== =================== ============= =============
Net income as a percent of net                         
   sales                                               18.0%               11.3%                5.4%

Net income per common share:
   Basic (See Note 7 to the 
   consolidated financial statements)          $      2.85         $       0.96         $      0.29        196.9%        231.0%
  Diluted (See Note 7 to the 
   consolidated financial statements)          $      2.59         $       0.86         $      0.28        201.2%        207.1%

Case sales (in thousands) (in 192-ounce case equivalents)
                                                    48,214               29,760              20,421         62.0%         45.7%
</TABLE>


* Gross  sales,  although  used  internally  by  management  as an  indicator of
operating performance,  should not be considered as an alternative to net sales,
which is determined in accordance  with GAAP, and should not be used alone as an
indicator of operating  performance in place of net sales.  Additionally,  gross
sales may not be comparable to similarly titled measures used by other companies
as  gross  sales  has  been  defined  by  the   Company's   internal   reporting
requirements.  However,  gross sales is used by management to monitor  operating
performance  including  sales  performance of particular  products,  salesperson
performance, product growth or declines and overall Company performance. The use
of gross sales allows evaluation of sales  performance  before the effect of any
promotional  items,  which  can  mask  certain  performance  issues.  Management
believes  the   presentation   of  gross  sales  allows  a  more   comprehensive
presentation  of the  Companys  operating  performance.  Gross  sales may not be
realized in the form of cash receipts as promotional  payment and allowances may
be deducted from payments received from customers.

                                       33

<PAGE>

** Although  the  expenditures  described  in this line item are  determined  in
accordance with GAAP and meet GAAP requirements, the disclosure thereof does not
conform with GAAP presentation requirements.  Additionally,  the presentation of
promotional  and  other  allowances  may  not be  comparable  to  similar  items
presented  by  other  companies.  The  presentation  of  promotional  and  other
allowances  facilitates an evaluation of the impact thereof on the determination
of net sales and  illustrates the spending levels incurred to secure such sales.
Promotional and other allowances  constitute a material portion of the marketing
activities of the Company.

Results of Operations  for the Year Ended December 31, 2005 Compared to the Year
Ended December 31, 2004

     Gross Sales.  For the year ended December 31, 2005, gross sales were $415.4
million,  an  increase  of $191.3  million or 85.4%  higher  than gross sales of
$224.1 million for the year ended December 31, 2004. The increase in gross sales
is primarily attributable to increased sales of certain of our existing products
and the  introduction  of new  products as discussed  below in "Net Sales".  The
percentage increase in gross sales was lower than the percentage increase in net
sales due to a decrease in the promotional and other  allowances as a percentage
of gross sales,  which decreased from 19.5% for the year ended December 31, 2004
to 16.0% for the year ended  December  31, 2005,  although the actual  amount of
promotional and other  allowances  increased from $43.8 million to $66.5 million
for the respective periods.

     Net Sales.  For the year ended  December 31,  2005,  net sales were $ 348.9
million,  an increase of $168.5 million or 93.5% higher than net sales of $180.3
million for the year ended December 31, 2004. We again achieved  record sales in
2005. The increase in gross and net sales in 2005 was primarily  attributable to
increased sales by volume of our Monster Energy(R) drinks, which were introduced
in April 2002,  including our low  carbohydrate  ("lo-carb")  Monster  Energy(R)
drinks, which were introduced in 2003, our Monster Energy(R)  Assault(TM) energy
drinks which were  introduced  in  September  2004,  sales of Monster  Energy(R)
Khaos(TM) energy drinks,  which were introduced in August 2005,  increased sales
by volume of Lost(R) energy drinks which were introduced in January 2004, and to
a lesser extent,  to sales of Joker Mad Energy(TM)  drinks which were introduced
in January 2005,  as well as increased  sales by volume of apple juice and juice
blends,  and  children's  multi-vitamin  juice  drinks and  Rumba(TM)  which was
introduced in December  2004.  The increase in gross and net sales was partially
offset by  decreased  sales by volume  primarily of Hansen's  Natural  Sodas(R),
Hansen's(R)  energy  drinks,  Energade(R)  and Smoothies in cans. Net sales case
volumes  (calculated  on 192 U.S. fluid ounces of finished  beverage  equivalent
basis) increased from 29.8 million cases for the year ended December 31, 2004 to
48.2 million  cases for the year ended  December  31, 2005,  an increase of 18.4
million  cases or 62.0%.  The  overall  average  net  sales  price per case also
increased to $7.24 per case for the year ended  December 31, 2005 from $6.06 for
the year ended  December  31,  2004,  an increase of 19.5%.  The increase in the
average net sales  prices per case was due to an increase in the  proportion  of
case sales derived from higher priced products as described below.

     Net  sales for the DSD  segment  were  $270.0  million  for the year  ended
December 31, 2005, an increase of approximately  $157.0 million or 138.8% higher
than net sales of $113.1  million  for the year ended  December  31,  2004.  The
increase  in net  sales  for the  DSD  segment  was  primarily  attributable  to
increased sales by volume of our Monster Energy(R) drinks, which were introduced
in April 2002,  including our low  carbohydrate  ("lo-carb")  Monster  Energy(R)
drinks, which were introduced in 2003, our Monster Energy(R)  Assault(TM) energy
drinks which were  introduced  in  September  2004,  sales of Monster  Energy(R)
Khaos(TM) energy drinks,  which were introduced in August 2005,  increased sales
by volume of Lost energy  drinks  which were  introduced  in January  2004.  The
increase in net sales was also  attributable,  to a lesser  extent,  to sales of
Joker Mad Energy(TM)  drinks which were introduced in January 2005. The increase
in net sales was partially offset by lower sales by volume of Hansen's(R) energy
drinks and Energade(R).

     Net sales for the  Warehouse  segment were $78.9 million for the year ended
December 31, 2005,  an increase of  approximately  $11.3 million or 16.7% higher
than net sales of $67.6  million  for the year  ended  December  31,  2004.  The
increase in net sales for the Warehouse  segment was primarily  attributable  to
increased  sales  by  volume  of  Hansen's(R)  apple  juice  and  juice  blends,
children's  multi-vitamin  juice  drinks and  RumbaTM  energy  juice,  which was
introduced in December 2004.  The increase in net sales was partially  offset by
lower sales by volume of smoothies in cans and Hansen's(R) natural sodas.

                                       34

<PAGE>

     Gross Profit.  Gross profit was $182.5  million for the year ended December
31, 2005,  an increase of $99.1  million or 118.7% over the $83.5  million gross
profit for the year ended December 31, 2004. Gross profit as a percentage of net
sales was 52.3% for the year ended December 31, 2005 which was higher than gross
profit as a  percentage  of net sales of 46.3% for the year ended  December  31,
2004,  due  primarily to higher gross profit  margins  achieved on the increased
sales of  Monster  Energy(R)  and  Lost(R)  energy  drinks.  Although  a greater
percentage of our sales comprised  products having higher gross margins than the
prior year,  the  increase in profit  margins  was  partially  reduced by higher
promotional payments and allowances to promote our products.

     Gross profit may not be  comparable to those of other  entities  since some
entities include all costs associated with their distribution process in cost of
sales whereas  others like Hansen's  exclude  certain costs and instead  include
such costs within another line item such as selling,  general and administrative
expenses.
 
     Distribution  expenses,  which include  out-bound  freight and  warehousing
expenses after  manufacture,  were $22.1 million for the year ended December 31,
2005 and  $12.4  million  for the year  ended  December  31,  2004 and have been
included in operating expenses.

     Total Operating  Expenses.  Total operating expenses were $79.1 million for
the year ended  December  31, 2005,  an increase of $29.5  million or 59.6% over
total operating  expenses of $49.6 million for the year ended December 31, 2004.
Total operating expenses as a percentage of net sales decreased to 22.6% for the
year ended December 31, 2005, from 27.4% for the year ended December31,2004. The
increase in total  operating  expenses was primarily  attributable  to increased
selling,  general and administrative  expenses.  The decrease in total operating
expenses  as a  percentage  of  net  sales  was  primarily  attributable  to the
comparatively  lower increase in selling,  general and  administrative  expenses
than the increase in net sales.

     Selling.  Selling  expenses were $50.8 million for the year ended  December
31, 2005, an increase of $21.5  million or 73.7% over selling  expenses of $29.2
million for the year ended December 31, 2004.  Selling  expenses as a percentage
of net sales  decreased to 14.6% for the year ended December 31, 2005 from 16.2%
for the year ended  December  31,  2004.  The  increase in selling  expenses was
primarily  attributable to increased distribution (freight) and storage expenses
which increased by $9.7 million,  increased  expenditures for trade  development
activities and  cooperative  arrangements  with our customers and  distributors,
which  increased  by  $4.2  million,   increased  expenditures  for  merchandise
displays,  point-of-sale  materials,  and  premiums,  which  increased  by  $3.0
million,   increased   expenditures  for  sponsorships  and  endorsements  which
increased $1.7 million,  increased  expenditures for advertising which increased
by $1.3 million, and increased expenditures for samples, which increased by $1.2
million.

     General and Administrative.  General and administrative expenses were $28.3
million for the year ended  December  31,  2005,  an increase of $8.0 million or
39.4% over  general and  administrative  expenses of $20.3  million for the year
ended December 31, 2004. General and administrative  expenses as a percentage of
net sales  decreased to 8.1% for the year ended December 31, 2005 from 11.3% for
the year ended  December  31, 2004.  The increase in general and  administrative
expenses was primarily  attributable to payroll expenses which increased by $3.6
million,  distributor  termination  payments which increased by $1.2 million and
travel and entertainment expenses which increased by $682,000.

     Amortization of Trademarks.  Amortization of trademarks was $70,000 for the
year  ended  December  31,  2005,  a decrease  of $3,000  from  amortization  of
trademarks  of $73,000 for the year ended  December  31,  2004.  The decrease in
amortization  of  trademarks  was due to a reduction  in the balance of definite
life trademarks.

                                       35

<PAGE>

     Contribution  Margin.  Contribution  margin represents net sales by segment
less the cost of sales and operating  expenses which can be directly  attributed
to segment net sales. Contribution margin for the DSD segment was $112.9 million
for the year ended December 31, 2005, an increase of approximately $71.8 million
or 174.4%  higher than  contribution  margin of $41.2 million for the year ended
December 31, 2004. The increase in  contribution  margin for the DSD segment was
primarily  attributable to the increase in net sales of Monster  Energy(R) brand
energy drinks and Lost(R) energy drinks.  Contribution  margin for the Warehouse
segment was $6.4 million for the year ended  December  31, 2005,  an increase of
approximately  $2.4  million or 58.5%  higher than  contribution  margin of $4.0
million for year ended  December  31,  2004.  The  increase in the  contribution
margin for the Warehouse  segment was primarily  attributable to increased sales
of apple juice and juice blends.

     Operating  Income.  Operating  income was $103.4 million for the year ended
December 31,  2005,  compared to $33.9  million for the year ended  December 31,
2004. The $69.6 million increase in operating income was primarily  attributable
to increased gross profits,  which was partially  offset by increased  operating
expenses.

     Net Nonoperating  Income/(Expense).  Net nonoperating  income/(expense) was
$1.4  million  for  the  year  ended  December  31,  2005,  as  compared  to net
nonoperating  income/(expense)  of $52,000 for the year ended December 31, 2004.
Net nonoperating  income/(expense)  consists of interest income and interest and
financing expense. The increase in interest income was primarily attributable to
an increase in the cash balances in interest  bearing  accounts  during the year
ended  December 31, 2005.  Interest  income for the year ended December 31, 2005
was $1.4  million  compared  to  interest  income of $94,000  for the year ended
December 31, 2004.  Interest and financing  expense for the year ended  December
31, 2005 was $77,000  compared to $42,000 for the year ended  December 31, 2004.
The increase in interest and financing expense was primarily  attributable to an
increase in capital leases entered into during 2005.

     Provision for Income  Taxes.  Provision for income taxes for the year ended
December 31, 2005 was $42.0  million  which was an increase of $28.4  million as
compared to the  provision  for income taxes of $13.6 million for the year ended
December 31, 2004.  The  increase in  provision  for income taxes was  primarily
attributable to the increase in operating income. The effective combined federal
and state tax rate for 2005 was 40.1%,  as compared to an effective  tax rate of
39.9% for 2004.

     Net Income.  Net income was $62.8  million for the year ended  December 31,
2005,  which was an increase of $42.4 million as compared to net income of $20.4
million for the year ended  December  31,  2004.  The increase in net income was
primarily  attributable  to the $99.1  million  increase in gross  profit and an
increase of net nonoperating income/(expense) of $1.3 million for the year ended
December 31, 2005 which was partially offset by increased  operating expenses of
$29.5  million  and an  increase  in the  provision  for  income  taxes of $28.4
million.

     Results of Operations  for the Year Ended December 31, 2004 Compared to the
Year Ended December 31, 2003

     Gross Sales.  For the year ended December 31, 2004, gross sales were $224.1
million,  an increase of approximately  $88.4 million or 65.2% higher than gross
sales of $135.7  million for the year ended  December 31, 2003.  The increase in
gross sales for the year ended December 31, 2004 was primarily  attributable  to
increased  sales by volume of certain of our  existing  products  as well as the
introduction of new products as discussed  below in "Net Sales".  The percentage
increase in gross sales was comparable to the percentage  increase in net sales.
The  promotional  and other  allowances as a percentage of gross sales increased
slightly  from 18.7% for the year ended  December 31, 2003 to 19.5% for the year
ended  December 31, 2004 as well as the actual amount of  promotional  and other
allowances,  which  increased  from  $25.3  million  to  $43.8  million  for the
respective periods.

                                       36

<PAGE>

     Net Sales.  For the year ended  December  31,  2004,  net sales were $180.3
million,  an increase of  approximately  $70.0  million or 63.4% higher than net
sales of $110.4  million for the year ended  December 31, 2003.  The increase in
gross and net sales in 2004 was  primarily  attributable  to increased  sales by
volume of Monster Energy(R) drink, which was introduced in April 2002, including
our low carbohydrate ("lo-carb") Monster Energy(R) drink which was introduced in
2003 and sales by volume of Lost  energy  drinks  which were  introduced  at the
beginning of 2004,  as well as increased  sales by volume of apple juice,  juice
blends,  and  Energade(R)  energy sports drinks.  Additionally,  the increase in
gross  and net sales  was  attributable  to the  increased  sales  prices of and
reduced  allowances  for  smoothies in cans and natural  sodas.  The increase in
gross and net sales was partially  offset by decreased sales by volume primarily
of Hansen's(R) energy drinks in 8.3-ounce cans,  childrens  multi-vitamin  juice
drinks, and teas, lemonades and cocktails. Net sales case volumes increased from
20.4 million  cases for the year ended  December 31, 2003 to 29.8 million  cases
for the year ended December 31, 2004, an increase of 9.3 million cases or 45.7%.
The overall  average net sales price per case also  increased  to $6.06 per case
for the year  ended  December  31,  2004 from  $5.40 per case for the year ended
December 31, 2003,  an increase of 12.2%.  The increase in the average net sales
prices per case was due to an increase in the  proportion  of case sales derived
from higher priced products.

     Net  sales for the DSD  segment  were  $113.1  million  for the year  ended
December 31, 2004, an increase of  approximately  $63.6 million or 128.5% higher
than net sales of $49.5  million  for the year  ended  December  31,  2003.  The
increase  in net  sales  for the  DSD  segment  was  primarily  attributable  to
increased sales by volume of Monster  Energy(R)  drink,  which was introduced in
April 2002,  including our low carbohydrate  ("lo-carb") Monster Energy(R) drink
which was  introduced in 2003 and sales by volume of Lost(R) energy drinks which
were  introduced at the beginning of 2004, as well as increased  sales by volume
of  Energade(R)  energy  sports  drinks.  The  increase in net sales for the DSD
segment  was  partially  offset  by  decreased  sales  by  volume  primarily  of
Hansen's(R) energy drinks.

     Net sales for the  Warehouse  segment were $67.6 million for the year ended
December 31,  2004,  an increase of  approximately  $6.7 million or 11.0% higher
than net sales of $60.9  million  for the year  ended  December  31,  2003.  The
increase in net sales of the  Warehouse  segment was primarily  attributable  to
increased  sales  by  volume  of  Hansen's(R)  apple  juice  and  juice  blends.
Additionally,   the  increase  in  net  sales  for  the  Warehouse  segment  was
attributable  to the  increased  sales  prices  of and  reduced  allowances  for
smoothies in cans and natural  sodas.  The  increase in net sales was  partially
offset by decreased  sales by volume  primarily of our  childrens  multi-vitamin
juice drinks, and teas, lemonades and cocktails.

     Gross Profit.  Gross profit was $83.5  million for the year ended  December
31, 2004,  an increase of $39.7  million or 90.7% over the $43.8  million  gross
profit for the year ended December 31, 2003. Gross profit as a percentage of net
sales was 46.3% for the year ended December 31, 2004 which was higher than gross
profit as a  percentage  of net sales of 39.7% for the year ended  December  31,
2003. Increases in gross sales volume contributed to an increase in gross profit
while a change in the Companys product and customer mix and the related increase
in the percentage of sales of higher margin products increased both gross profit
and gross profit as a percentage of net sales.  This increase in profit  margins
was partially reduced by higher  promotional  payments and allowances to promote
our products.

     Gross profit may not be  comparable to those of other  entities  since some
entities include all costs associated with their distribution process in cost of
sales whereas others exclude certain costs and instead include such costs within
another line item such as selling, general and administrative expenses.

     Distribution  expenses,  which include  out-bound  freight and  warehousing
expenses  after  manufacture,  were $12.4 million and $8.3 million for the years
ended  December  31,  2004 and  2003,  respectively  and have been  included  in
operating expenses.

                                       37

<PAGE>

     Total Operating  Expenses.  Total operating expenses were $49.6 million for
the year ended  December  31, 2004,  an increase of $15.6  million or 46.0% over
total operating  expenses of $33.9 million for the year ended December 31, 2003.
Total  operating  expenses as a percentage  of net sales  decreased  slightly to
27.5% for the year  ended  December  31,  2004,  from  30.8% for the year  ended
December  31,  2003.  The increase in total  operating  expenses  was  primarily
attributable to increased  selling,  general and  administrative  expenses.  The
decrease in total operating  expenses as a percentage of net sales was primarily
attributable  to the  comparatively  lower  increase  in  selling,  general  and
administrative expenses than the increase in net sales.

     Selling.  Selling  expenses were $29.2 million for the year ended  December
31, 2004,  an increase of $9.1  million or 45.5% over selling  expenses of $20.1
million for the year ended December 31, 2003.  Selling  expenses as a percentage
of net sales  decreased to 16.2% for the year ended December 31, 2004 from 18.2%
for the year ended  December  31,  2003.  The  increase in selling  expenses was
primarily  attributable to increased distribution (freight) and storage expenses
after manufacture,  which increased by $4.1 million,  increased expenditures for
trade development activities and cooperative arrangements with our customers and
distributors,  which increased by $2.1 million,  and increased  expenditures for
merchandise displays,  point-of-sale materials, and premiums, which increased by
$2.0 million

     General and Administrative.  General and administrative expenses were $20.3
million for the year ended  December  31,  2004,  an increase of $6.5 million or
47.0% over  general and  administrative  expenses of $13.8  million for the year
ended December 31, 2003. General and administrative  expenses as a percentage of
net sales decreased to 11.2% for the year ended December 31, 2004 from 12.5% for
the year ended  December  31, 2003.  The increase in general and  administrative
expenses was primarily  attributable to payroll expenses which increased by $3.3
million,  professional services,  consisting of legal, consulting and accounting
services  primarily  related to the  implementation  and testing required by the
Sarbanes-Oxley Act of 2002, and legal services related to protecting  trademarks
which  increased by $1.5 million,  and travel and  entertainment  expenses which
increased by $622,000.

     Contribution  Margin.  Contribution  margin for the DSD  segment  was $41.2
million for the year ended December 31, 2004, an increase of approximately $26.3
million or 176.6% higher than contribution  margin of $14.9 million for the year
ended  December  31,  2003.  The  increase  in  contribution  margin for the DSD
division  was  primarily  attributable  to the  increase in net sales of Monster
Energy(R) brand energy drinks and Lost(R) energy drinks. Contribution margin for
the Warehouse  segment was $4.0 million for the year ended December 31, 2004, an
increase of approximately $1.6 million or 66.7% higher than contribution  margin
of  $2.4  million  for  year  ended  December  31,  2003.  The  increase  in the
contribution  margin for the  Warehouse  segment was primarily  attributable  to
increased sales of Hansen's(R) apple juice and juice blends.

     Amortization of Trademark License and Trademarks. Amortization of trademark
license and  trademarks  was $73,000 for the year ended  December 31,  2004,  an
increase of $11,000 over  amortization  of trademark  license and  trademarks of
$62,000 for the year ended  December 31, 2003. The increase in  amortization  of
trademark license and trademarks was due to the acquisition of trademarks during
the year ended December 31, 2004.

     Operating  Income.  Operating  income was $33.9  million for the year ended
December  31,  2004,  compared to $9.8  million for the year ended  December 31,
2003,  an increase  of $24.1  million.  The  increase  in  operating  income and
operating  income as a percentage of net sales was  attributable to higher gross
profit as well as gross profit  increasing at a higher rate than the increase in
operating  expenses for the year ended December 31, 2004 as compared to the year
ended December 31, 2003.

     Net Nonoperating Income/(Expense).  Net nonoperating income was $52,000 for
the year ended  December 31, 2004,  as compared to net  nonoperating  expense of
$67,000 for the year ended December 31, 2003. Net nonoperating  income/(expense)
consists of interest income and interest and financing expense.  The increase in
interest  income was primarily  attributable to an increase in the cash invested
in interest bearing  accounts during the year ended December 31, 2004.  Interest
and financing  expense for the year ended December 31, 2004 was $42,000 compared
to $73,000 for the year ended  December 31,  2003.  The decrease in interest and
financing expense was primarily attributable to the decrease in outstanding loan
balances and lower interest  rates.  Interest income for the year ended December
31, 2004 was $94,000,  compared to interest  income of $6,000 for the year ended
December 31, 2003.

                                       38

<PAGE>

     Provision for Income  Taxes.  Provision for income taxes for the year ended
December  31, 2004 was $13.6  million  which was an increase of $9.7  million as
compared to the  provision  for income  taxes of $3.8 million for the year ended
December 31, 2003.  The  increase in  provision  for income taxes was  primarily
attributable to the increase in operating income. The effective combined federal
and state tax rate for 2004 was 39.9%,  which was higher than the  effective tax
rate of 39.2% for 2003 due to the increase in the statutory  federal  income tax
rate applicable to the Company's pre-tax income.

     Net Income.  Net income was $20.4  million for the year ended  December 31,
2004,  which was an increase of $14.5  million as compared to net income of $5.9
million for the year ended  December  31,  2003.  The increase in net income was
primarily  attributable  to the  $39.7  million  increase  in gross  profit  and
decrease in nonoperating expense and increase in nonoperating income of $119,000
for the year ended  December  31, 2004 which was  partially  offset by increased
operating  expenses of $15.6 million and an increase in the provision for income
taxes of $9.7 million.

Liquidity and Capital Resources 

     Cash flows from  operating  activities  - Net cash  provided  by  operating
activities was $54.6 million for the year ended December 31, 2005 as compared to
$20.1 million in the comparable  period in 2004. For the year ended December 31,
2005,  cash provided by operating  activities was primarily  attributable to net
income earned including adjustments for certain non-cash expenses. In 2005, cash
provided  by  operating  activities  was reduced  due to  increases  in accounts
receivable  which  was  attributable  to  increased  sales  volumes  as  well as
increased  sales to certain  classes of  customers  who have  different  payment
terms,  increases in inventories required to meet increased sales levels and the
increases in prepaid income taxes.  Increases in inventory levels are the direct
result of increases in purchasing,  which contributed to the increased  balances
of accounts payable and accrued liabilities.

     Purchases  of  inventories,  increases  in  accounts  receivable  and other
assets,  acquisition  of property  and  equipment,  acquisition  of  trademarks,
payments of accounts payable and income taxes payable are expected to remain our
principal recurring use of cash.

     Cash flows from  investing  activities  - Net cash  provided  by  investing
activities  was $3.2 million for the year ended December 31, 2005 as compared to
net cash used in investing  activities of $18.8 million in the comparable period
in 2004.  For the year ended  December  31,  2005,  cash  provided by  investing
activities  was primarily  attributable  to purchases,  maturities  and sales of
short-term  investments,  and to a minor extent,  the  sale-leaseback of certain
vans and  promotional  vehicles and the sale of certain  property and  equipment
that  was no  longer  operational.  For both  periods,  cash  used in  investing
activities  included the acquisitions of fixed assets consisting of computer and
office  equipment  used  for  sales  and  administrative  activities,  vans  and
promotional   vehicles  and  other   equipment  to  support  the  marketing  and
promotional  activities  of the Company  and also for  additions  to  trademark.
Management expects that it will continue to use portion of its cash in excess of
its  requirements  for operations,  to purchase  short-term  investments and for
other  corporate  purposes.   Management,  from  time  to  time,  considers  the
acquisition  of capital  equipment,  particularly,  specific items of production
equipment   required  to  produce  certain  of  our  products,   storage  racks,
merchandise  display racks,  vans and  promotional  vehicles,  coolers and other
promotional  equipment and businesses  compatible with the image of the Companys
brands, as well as the introduction of new product lines.

     Cash  flows  from  financing  activities  -  Net  cash  used  in  financing
activities  was $113,000 for the year ended December 31, 2005 as compared to net
cash provided by financing  activities of $1.3 million in the comparable  period
in 2004.  For the year ended  December  31,  2005,  cash  provided by  financing
activities was primarily  attributable to proceeds received from the issuance of
common  stock  pursuant to the  exercise of stock  options  which was  partially
offset by  principal  payments of  long-term  debt.  The increase in payments on
long-term  debt as compared to the  comparable  period in 2004  related to lease
payments made on vehicle leases entered into over the past year.

                                       39

<PAGE>

     Debt and other  obligations - HBC has a credit  facility from Comerica Bank
("Comerica"),  consisting of a revolving line of credit.  Such revolving line of
credit is  secured  by  substantially  all of HBCs  assets,  including  accounts
receivable,  inventory, trademarks and certain equipment. In accordance with the
provisions of the credit  facility,  HBC can borrow up to $7.8 million under its
revolving line of credit. The revolving line of credit remains in full force and
effect through June 1, 2007.  Interest on borrowings under the line of credit is
based on Comericas  base (prime) rate minus up to 1.5% or varying LIBOR rates up
to 180 days plus an additional  percentage of up to 1.5%, depending upon certain
financial ratios maintained by HBC. The Company had no outstanding borrowings on
the line of credit at December 31, 2005.

     The  terms  of the  Companys  line  of  credit  contain  certain  financial
covenants including certain financial ratios. The Company was in compliance with
its covenants at December 31, 2005.

     If any event of default  shall occur for any reason,  whether  voluntary or
involuntary,  Comerica may declare all or any portion outstanding on the line of
credit  immediately due and payable,  exercise rights and remedies  available to
secured parties under the Uniform  Commercial Code,  institute legal proceedings
to foreclose upon the lien and security  interest granted or for the sale of any
or all collateral.

     Noncancelable  contractual  obligations  include our obligations  under our
agreement with the Las Vegas Monorail Company and other  commitments.  (See also
P
ART II ITEM 8 - NOTE 8, COMMITMENTS & CONTINGENCIES).

     Purchase  commitments  include  obligations  made  by the  Company  and its
subsidiaries  to various  suppliers for raw materials used in the  manufacturing
and packaging of our products. These obligations vary in terms.

     The following represents a summary of the Company's contractual obligations
and related scheduled maturities as of December 31, 2005:

<TABLE>


                                         Payments due by period
----------------------------------------------------------------------------------------------------------
       Obligations               Total      Less than          1-3              3-5          More than 5
                                             1 year           years            years            years
----------------------------------------------------------------------------------------------------------
<S>                       <C>            <C>            <C>              <C>              <C>   

Noncancelable contracts   $   3,265,595   $  2,870,595   $     395,000    $           -    $            -
Long-Term Debt                  109,864        109,864
Capital Lease                   415,480        405,357          10,123
Operating Lease               5,110,157      1,289,343       3,154,166          666,648
Purchase Commitments         11,699,072      7,437,967       4,261,105
                          --------------  -------------  --------------   --------------   ---------------
                          $  20,600,168   $ 12,113,126   $   7,820,394    $     666,648    $            -
                          ==============  =============  ==============   ==============   ===============
</TABLE>


     In addition to the above  obligations,  pursuant to a can supply  agreement
between the Company and Rexam Beverage Can Company ("Rexam") dated as of January
1, 2006,  the Company has  undertaken  to purchase a minimum  volume of 24-ounce
resealable  aluminum  beverage  cans over the four year period  commencing  from
January 1, 2006 through  December 31, 2009.  Should the Company fail to purchase
the minimum volume, the Company will be obligated to reimburse Rexam for certain
capital  reimbursements  on a pro rated basis. The Company's  maximum  liability
under this  agreement  is $4.3  million  subject to  compliance  by Rexam with a
number of conditions under this agreement.

                                       40

<PAGE>

     Management  believes that cash  available from  operations,  including cash
resources and the revolving  line of credit,  will be sufficient for our working
capital needs,  including purchase  commitments for raw materials and inventory,
increases in accounts receivable,  payments of tax liabilities,  debt servicing,
expansion and  development  needs,  purchases of shares of our common stock,  as
well as any  purchases  of  capital  assets or  equipment  for at least the next
twelve months.  Based on the Company's  current plans,  at this time the Company
estimates  that  capital  expenditures  are  likely to be less  than $5  million
through December 2006. However, future business opportunities may cause a change
in this estimate.

Accounting Policies and Pronouncements

      Critical Accounting Policies

     The Company's  consolidated financial statements are prepared in accordance
with GAAP.  GAAP  requires the Company to make  estimates and  assumptions  that
affect the reported amounts in our consolidated  financial  statements including
various  allowances and reserves for accounts  receivable and  inventories,  the
estimated  lives of  long-lived  assets  and  trademarks  as well as claims  and
contingencies  arising out of litigation or other transactions that occur in the
normal  course  of  business.  The  following  summarize  the  most  significant
accounting and reporting policies and practices of the Company:

     Trademarks  -  Trademarks   primarily   represent  the  Companys  exclusive
     ownership of the Hansen's(R)  trademark in connection with the manufacture,
     sale and distribution of beverages and water and non-beverage  products and
     the Monster  Energy(R)  trademark in connection with the manufacture,  sale
     and distribution of supplements and beverages. The Company also owns in its
     own right, a number of other  trademarks in the United States as well as in
     a number of  countries  around the world.  The  Company  also owns the Blue
     Sky(R)  trademark,  which was  acquired in September  2000,  and the Junior
     Juice(R)  trademark,  which was  acquired  in May 2001.  During  2002,  the
     Company adopted SFAS No. 142, Goodwill and Other Intangible  Assets.  Under
     the provisions on SFAS No. 142, the Company  discontinued  amortization  on
     indefinite-lived   trademarks  while   continuing  to  amortize   remaining
     trademarks over one to 20 years.

     In accordance  with SFAS No. 142, we evaluate our  trademarks  annually for
     impairment or earlier if there is an indication of impairment.  If there is
     an indication of impairment of identified  intangible assets not subject to
     amortization,  management  compares  the  estimated  fair  value  with  the
     carrying  amount of the asset.  An  impairment  loss is recognized to write
     down the intangible asset to its fair value if it is less than the carrying
     amount.  The fair value is calculated using the income  approach.  However,
     preparation  of  estimated   expected   future  cash  flows  is  inherently
     subjective  and is based  on  management's  best  estimate  of  assumptions
     concerning  expected  future  conditions.  Based on  managements  quarterly
     impairment  analysis  performed,  the  estimated  fair values of trademarks
     exceeded the carrying value.

     Long-Lived Assets - Management regularly reviews property and equipment and
     other long-lived assets,  including certain identifiable  intangibles,  for
     possible  impairment.  This review occurs  annually,  or more frequently if
     events or changes in  circumstances  indicate  the  carrying  amount of the
     asset may not be  recoverable.  If there is  indication  of  impairment  of
     property and equipment or amortizable  intangible  assets,  then management
     prepares  an  estimate  of future  cash  flows  (undiscounted  and  without
     interest  charges)  expected  to  result  from the use of the asset and its
     eventual disposition. If these cash flows are less than the carrying amount
     of the asset,  an impairment  loss is recognized to write down the asset to
     its estimated fair value.  The fair value is estimated at the present value
     of  the  future  cash  flows  discounted  at  a  rate   commensurate   with
     management's   estimates  of  the  business  risks.  No  impairments   were
     identified  during 2005,  however,  during 2004,  management  recognized an
     impairment to property and equipment as discussed in Note 1 of the attached
     financial statements.

                                       41

<PAGE>

     Management  believes that the accounting  estimate related to impairment of
     its long lived assets, including its trademarks,  is a "critical accounting
     estimate"  because:  (1) it is highly  susceptible to change from period to
     period because it requires  company  management to make  assumptions  about
     cash flows and  discount  rates;  and (2) the impact  that  recognizing  an
     impairment  would have on the assets reported on our  consolidated  balance
     sheet, as well as net income,  could be material.  Managements  assumptions
     about cash flows and discount rates require  significant  judgment  because
     actual  revenues and expenses have  fluctuated in the past and are expected
     to continue to do so.

     In estimating future revenues,  we use internal  budgets.  Internal budgets
     are developed  based on recent revenue data and future  marketing plans for
     existing  product lines and planned timing of future  introductions  of new
     products and their impact on our future cash flows.

     Revenue  Recognition  - The  Company  recognizes  revenue  when  persuasive
     evidence of an arrangement exists,  delivery has occurred,  the sales price
     is  fixed or  reasonably  determinable  and  collectibility  is  reasonably
     assured.  Management  believes an adequate  provision against net sales has
     been made for estimated returns, allowances and cash discounts based on the
     Company's historical experience.

     Net Sales - Net sales  consist of sales  recorded  at the time the  related
     products are shipped and the risk of ownership and title have passed,  less
     allowances  for returns,  spoilage,  discounts and  promotional  allowances
     recorded in accordance  with Emerging  Issues Task Force ("EITF") Issue No.
     01-9.

     Cost of  Sales - Cost of  sales  consists  of the  costs  of raw  materials
     utilized in the  manufacture  of our products,  co-packing  fees,  in-bound
     freight  charges  as well as certain  internal  transfer  costs,  warehouse
     expenses  incurred  prior  to the  manufacture  of the  Company's  finished
     products and certain quality control costs.  Raw materials  account for the
     largest portion of the cost of sales. Raw materials include cans,  bottles,
     other containers, ingredients and packaging materials.

     Operating  Expenses - Operating  expenses  include selling expenses such as
     distribution  expenses  to  transport  our  products to our  customers  and
     warehousing  expenses after manufacture,  expenses  including  advertising,
     sampling and in-store  demonstration costs,  material costs for merchandise
     displays,  point-of-sale materials and premium items, sponsorship expenses,
     other  marketing  expenses and design  expenses.  Operating  expenses  also
     include  general and  administrative  costs such as payroll  costs,  travel
     costs,  professional  service  fees,  depreciation  and other  general  and
     administrative costs.

     Distribution  expenses,  which include  out-bound  freight and  warehousing
     expenses  after  manufacture,  were $22.1  million,  $12.4 million and $8.3
     million for the years ended December 31, 2005, 2004, and 2003 respectively.

     Advertising  and  Promotional   Allowances  -  The  Company   accounts  for
     advertising  production  costs by expensing such production costs the first
     time the related advertising takes place. In addition, the Company supports
     its customers with promotional  allowances,  a portion of which is utilized
     for marketing and indirect  advertising  by them. In certain  instances,  a
     portion of the  promotional  allowances  payable to customers  based on the
     levels of sales to such customers,  promotion  requirements or expected use
     of the  allowances,  are  estimated by the Company.  If the level of sales,
     promotion  requirements  or use of the  allowances  are different from such
     estimates,  the  promotional  allowances  could,  to the  extent  based  on
     estimates,  require  adjustments.  The  Company  presents  advertising  and
     promotional allowances in accordance with the provisions of EITF No. 01-9.

                                       42

<PAGE>

     Accounts Receivable - The Company evaluates the collectibility of its trade
     accounts  receivable based on a number of factors.  In circumstances  where
     the Company  becomes  aware of a specific  customers  inability to meet its
     financial  obligations to the Company,  a specific reserve for bad debts is
     estimated  and recorded  which  reduces the  recognized  receivable  to the
     estimated  amount the Company  believes will  ultimately  be collected.  In
     addition to specific  customer  identification  of potential bad debts, bad
     debt  charges are recorded  based on the Companys  recent past loss history
     and  an  overall   assessment  of  past  due  trade   accounts   receivable
     outstanding.

     Inventories  -  Inventories  are  stated at the  lower of cost to  purchase
     and/or  manufacture the inventory or the current  estimated market value of
     the inventory.  The Company regularly  reviews its inventory  quantities on
     hand and  records a  provision  for excess  and  obsolete  inventory  based
     primarily on the Company's  estimated forecast of product demand and/or its
     ability  to sell the  product(s)  concerned  and  production  requirements.
     Demand for the  Company's  products can  fluctuate  significantly.  Factors
     which could affect demand for the Company's products include  unanticipated
     changes  in  consumer  preferences,  general  market  conditions  or  other
     factors, which may result in cancellations of advance orders or a reduction
     in the rate of reorders placed by customers and/or  continued  weakening of
     economic conditions. Additionally, management's estimates of future product
     demand  may  be  inaccurate,  which  could  result  in  an  understated  or
     overstated provision required for excess and obsolete inventory.

     Income  Taxes - Current  income tax  expense is the amount of income  taxes
     expected to be payable for the current year. A deferred income tax asset or
     liability is established for the expected future  consequences of temporary
     differences  in the  financial  reporting  and  tax  bases  of  assets  and
     liabilities.  The Company  considers  future  taxable  income and  ongoing,
     prudent and feasible tax planning  strategies in assessing the value of its
     deferred tax assets. If the Company  determines that it is more likely than
     not that these  assets will not be  realized,  the Company  will reduce the
     value  of  these  assets  to  their  expected  realizable  value,   thereby
     decreasing net income.  Evaluating the value of these assets is necessarily
     based on the Company's  judgment.  If the Company  subsequently  determined
     that the  deferred  tax  assets,  which  had been  written  down,  would be
     realized  in the  future,  the value of the  deferred  tax assets  would be
     increased,   thereby   increasing  net  income  in  the  period  when  that
     determination  was  made.  See Note 9 in Notes  to  Consolidated  Financial
     Statements.

      Newly Issued Accounting Pronouncements

     Information  regarding newly issued accounting  pronouncements is contained
in Note 1 to the Consolidated  Financial  Statements for the year ended December
31, 2005, which note is incorporated herein by this reference.

Sales

The table set forth below discloses  selected quarterly data regarding sales for
the past five  years.  Data  from any one or more  quarters  is not  necessarily
indicative of annual results or continuing trends.

*      Sales of beverages are expressed in unit case volume. A "unit case" means
a unit of measurement  equal to 192 U.S.  fluid ounces of finished  beverage (24
eight-ounce  servings) or concentrate sold that will yield 192 U.S. fluid ounces
of finished beverage. Unit case volume of the Company means number of unit cases
(or unit case  equivalents)  of  beverages  directly or  indirectly  sold by the
Company.  Sales of food bars and cereals,  which have been  discontinued and are
not material, are expressed in actual cases.

     The Company's  quarterly results of operations reflect seasonal trends that
are primarily  the result of increased  demand in the warmer months of the year.
It has been our experience that beverage sales tend to be lower during the first
and fourth quarters of each fiscal year.  Because the primary  historical market
for Hansens products is California, which has a year-long temperate climate, the
effect of seasonal  fluctuations  on quarterly  results may have been mitigated;
however,  such  fluctuations  may be  more  pronounced  as the  distribution  of
Hansen's  products expands outside of California.  The Companys  experience with
its energy drink products, suggests that they are less seasonal than traditional
beverages.  As the percentage of the Companys sales that are represented by such
products continues to increase, seasonal fluctuations will be further mitigated.
Quarterly  fluctuations  may also be affected  by other  factors  including  the
introduction  of new  products,  the  opening of new markets  where  temperature
fluctuations are more pronounced, the addition of new bottlers and distributors,
changes in the mix of the sales of its  finished  products and changes in and/or
increased  advertising  and  promotional  expenses.  (See also "PART I ITEM 1. -
BUSINESS SEASONALITY").

                                       43

<PAGE>


<TABLE>

                      2005               2004               2003              2002              2001
                -----------------  ----------------    ---------------    --------------    -------------
<S>              <C>               <C>                 <C>                <C>               <C>    
 
    Unit Case Volume / Case Sales (in Thousands)
     Quarter 1             9,295             5,368              4,219             3,597            3,091
     Quarter 2            12,368             7,605              5,356             4,977            4,171
     Quarter 3            13,983             8,916              6,221             5,146            4,271
     Quarter 4            12,568             7,871              4,625             3,885            3,583
                -----------------    --------------    ---------------    --------------    -------------
         Total            48,214            29,760             20,421            17,605           15,116
                =================    ==============    ===============    ==============    =============

    Net Revenues (in Thousands)
     Quarter 1  $         60,014     $      31,299     $       22,086     $      18,592     $     16,908
     Quarter 2            85,441            46,064             28,409            26,265           22,337
     Quarter 3           105,421            52,641             33,291            26,985           23,011
     Quarter 4            98,010            50,337             26,566            20,204           18,402
                -----------------    --------------    ---------------    --------------    -------------
         Total  $        348,886     $     180,341     $      110,352     $      92,046     $     80,658
                =================    ==============    ===============    ==============    =============

    Average Price per Case
     Quarter 1  $           6.46     $        5.83     $         5.23     $        5.17     $       5.47
     Quarter 2  $           6.91     $        6.06     $         5.30     $        5.28     $       5.36
     Quarter 3  $           7.54     $        5.90     $         5.35     $        5.24     $       5.39
     Quarter 4  $           7.80     $        6.40     $         5.74     $        5.20     $       5.14
                -----------------    --------------    ---------------    --------------    -------------
         Total  $           7.24     $        6.06     $         5.40     $        5.23     $       5.34
                =================    ==============    ===============    ==============    =============

</TABLE>


Inflation

     The Company does not believe that inflation had a significant impact on the
Company's results of operations for the periods presented.

Forward Looking Statements

     The Private Security  Litigation  Reform Act of 1995 (the "Act") provides a
safe harbor for forward looking  statements made by or on behalf of the Company.
Certain statements made in this report may constitute forward looking statements
(within the meaning of Section 27.A of the Securities Act 1933, as amended,  and
Section 21.E of the Securities  Exchange Act of 1934, as amended)  regarding the
expectations of management with respect to revenues, profitability,  adequacy of
funds from operations and our existing credit facility,  among other things. All
statements  which address  operating  performance,  events or developments  that
management  expects or  anticipates  will or may occur in the  future  including
statements  related to new products,  volume  growth,  revenues,  profitability,
adequacy  of  funds  from  operations,  and/or  the  Company's  existing  credit
facility,  earnings per share growth,  statements  expressing  general  optimism
about  future  operating  results and non  historical  information,  are forward
looking  statements  within  the  meaning  of  the  Act.  Without  limiting  the
foregoing, the words "believes",  "thinks",  "anticipates",  "plans", "expects",
and similar expressions are intended to identify forward-looking statements.

                                       44

<PAGE>

     Management  cautions  that these  statements  are  qualified by their terms
and/or  important  factors,  many of which are  outside our  control,  involve a
number of risks,  uncertainties  and other  factors,  that  could  cause  actual
results and events to differ materially from the statements made including,  but
not limited to, those  described  in "PART I ITEM 1A. - RISK  FACTORS" and other
risks  detailed  from  time to time in the  Company's  reports  filed  with  the
Securities and Exchange Commission. Such factors are not exhaustive.

     Our actual results could be materially different from the results described
or anticipated by our forward-looking statements due to the inherent uncertainty
of  estimates,  forecasts  and  projections  and may be  better  or  worse  than
anticipated.  Given these uncertainties,  you should not rely on forward-looking
statements.  Forward-looking  statements represent our estimates and assumptions
only as of the date that they  were  made.  We  expressly  disclaim  any duty to
provide updates to forward-looking statements, and the estimates and assumptions
associated with them, after the date of this report, in order to reflect changes
in  circumstances  or  expectations  or the occurrence of  unanticipated  events
except to the extent required by applicable securities laws.


ITEM 7A.        QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISKS

     In the normal  course of  business,  our  financial  position is  routinely
subject to a variety of risks.  The  principal  market risks (i.e.,  the risk of
loss arising from adverse  changes in market rates and prices) which the Company
is exposed to are  fluctuations  in commodity  prices  affecting the cost of raw
materials and changes in interest  rates of the Company's long term debt and the
limited  availability  of certain raw materials  such as sucralose.  We are also
subject to market  risks with  respect to the cost of  commodities  because  our
ability to recover  increased  costs  through  higher  pricing is limited by the
competitive  environment in which we operate. We are also subject to other risks
associated  with the business  environment  in which we operate,  including  the
collectibility of accounts receivable.

     At December 31, 2005, the majority of the Company's debt consisted of fixed
rather than  variable  rate debt.  The amount of variable  rate debt  fluctuates
during the year based on the Company's cash  requirements.  If average  interest
rates were to increase one percent for the year ended December 31, 2005, the net
impact on the Company's  pre-tax earnings would have been  insignificant.  There
have been no significant changes to the Company's exposure to market risks.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The information required to be furnished in response to this ITEM 8 follows
the signature page hereto at pages 67 through 90.


ITEM  9.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
FINANCIAL DISCLOSURE

       None.

                                       45

<PAGE>


ITEM 9A.        CONTROLS AND PROCEDURES

     Evaluation of Disclosure  Controls and  Procedures - Under the  supervision
and with the  participation  of the  Company's  management,  including our Chief
Executive   Officer  and  Chief  Financial   Officer,   we  have  evaluated  the
effectiveness  of the  design  and  operation  of our  disclosure  controls  and
procedures as of the end of the period  covered by this report.  Based upon this
evaluation,  the Chief  Executive  Officer  and  Chief  Financial  Officer  have
concluded that the Company's disclosure controls and procedures are adequate and
effective to ensure that information we are required to disclose in reports that
we file or submit under the  Securities  Exchange  Act of 1934 is (1)  recorded,
processed,  summarized  and reported  within the time  periods  specified in SEC
rules  and  forms  and (2) is  accumulated  and  communicated  to the  Company's
management,  including its principal  executive and principal financial officers
as appropriate to allow timely decisions regarding required disclosures.

     There have been no changes in internal  control  over  financial  reporting
that  occurred  during  the  fiscal  period  covered  by this  report  that have
materially  affected,  or  are  reasonably  likely  to  materially  affect,  the
registrant's internal control over financial reporting.

     Management's  Report on Internal Control Over Financial Reporting - Company
management is responsible for  establishing  and maintaining  adequate  internal
control over  financial  reporting,  as defined in Exchange Act Rule  13a-15(f).
Under  the  supervision  and  with  the  participation  of  company  management,
including the principal executive officer and principal  financial officer,  the
company  conducted an evaluation of the  effectiveness  of its internal  control
over financial  reporting based on the framework in Internal Control  Integrated
Framework  issued by the Committee of Sponsoring  Organizations  of the Treadway
Commission as of December 31, 2005. Based on the company's  evaluation under the
framework in Internal Control - Integrated Framework,  management concluded that
the  company's  internal  control over  financial  reporting was effective as of
December 31, 2005.

     Management's  assessment  of the  effectiveness  of internal  control  over
financial  reporting  as of  December  31,  2005 has been  audited by Deloitte &
Touche LLP, an independent  registered  public accounting firm, as stated in its
report, which is included herein.

                                       46

<PAGE>


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders
Hansen Natural Corporation
Corona, California

We have audited management's assessment, included in the accompanying Management
Report on  Internal  Control  Over  Financial  Reporting,  that  Hansen  Natural
Corporation and  subsidiaries  (the  "Company")  maintained  effective  internal
control over  financial  reporting  as of December  31, 2005,  based on criteria
established in Internal Control-Integrated  Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission. The Company's management is
responsible for maintaining  effective internal control over financial reporting
and for its assessment of the  effectiveness  of internal control over financial
reporting.   Our  responsibility  is  to  express  an  opinion  on  management's
assessment and an opinion on the effectiveness of the Company's internal control
over financial reporting based on our audit.

We conducted  our audit in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain  reasonable  assurance  about whether  effective
internal  control  over  financial  reporting  was  maintained  in all  material
respects. Our audit included obtaining an understanding of internal control over
financial reporting,  evaluating management's assessment, testing and evaluating
the design and operating  effectiveness of internal control, and performing such
other  procedures as we considered  necessary in the  circumstances.  We believe
that our audit provides a reasonable basis for our opinions.

A company's internal control over financial  reporting is a process designed by,
or under the  supervision  of, the company's  principal  executive and principal
financial officers, or persons performing similar functions, and effected by the
company's  board of  directors,  management,  and  other  personnel  to  provide
reasonable  assurance  regarding the reliability of financial  reporting and the
preparation  of financial  statements for external  purposes in accordance  with
accounting  principles  generally  accepted  in the  United  States  of  America
("generally accepted accounting principles").  A company's internal control over
financial  reporting  includes those policies and procedures that (1) pertain to
the  maintenance  of records that, in reasonable  detail,  accurately and fairly
reflect the  transactions  and  dispositions  of the assets of the company;  (2)
provide  reasonable  assurance  that  transactions  are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting  principles,  and that receipts and  expenditures  of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of  unauthorized  acquisition,  use, or  disposition  of the company's
assets that could have a material effect on the financial statements.

Because  of  the  inherent   limitations  of  internal  control  over  financial
reporting,  including  the  possibility  of  collusion  or  improper  management
override of controls,  material  misstatements  due to error or fraud may not be
prevented or detected on a timely basis. Also,  projections of any evaluation of
the  effectiveness  of the internal  control over financial  reporting to future
periods are subject to the risk that the controls may become inadequate  because
of changes in conditions,  or that the degree of compliance with the policies or
procedures may deteriorate.

     In  our  opinion,   managements  assessment  that  the  Company  maintained
effective internal control over financial  reporting as of December 31, 2005, is
fairly stated, in all material  respects,  based on the criteria  established in
Internal  Control-Integrated  Framework  issued by the  Committee of  Sponsoring
Organizations  of the  Treadway  Commission.  Also in our  opinion,  the Company
maintained, in all material respects,  effective internal control over financial
reporting as of December 31, 2005, based on the criteria established in Internal
Control-Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission.

                                       47

<PAGE>

We have also  audited,  in accordance  with the standards of the Public  Company
Accounting   Oversight  Board  (United  States),   the  consolidated   financial
statements and financial  statement  schedule listed in Item 15(b) as of and for
the year ended  December 31, 2005,  of the Company and our report dated March 9,
2006  expressed  an  unqualified  opinion  on  those  financial  statements  and
financial statement schedule.



DELOITTE & TOUCHE LLP
Costa Mesa, California
March 9, 2006

                                   

ITEM 9B.        OTHER INFORMATION

None

    48

<PAGE>


PART III


ITEM 10.        DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     Directors of the Company are elected  annually by the holders of the common
stock and executive officers are elected annually by the Board of Directors,  to
serve until the next annual meeting of  stockholders  or the Board of Directors,
as the case may be, or until their  successors are elected and qualified.  It is
anticipated that the next annual meeting of stockholders will be held in October
or November 2006.

     The members of our Board of  Directors  and our  executive  officers are as
follows:

<TABLE>

           Name                       Age                           Position
 ------------------------------     ------------    -------------------------------------
<S>                                 <C>             <C> 

Rodney C. Sacks(1)                     56          Chairman of the Board of Directors and
                                                    Chief Executive Officer
Hilton H. Schlosberg(1)                53          Vice Chairman of the Board of
                                                    Directors, Chief Financial Officer,
                                                    Chief Operating Officer and
                                                    Secretary
Benjamin M. Polk                       55          Director
Norman C. Epstein (2,3,4)              65          Director
Sydney Selati(2)                       67          Director
Harold C. Taber, Jr. (2,4)             66          Director
Mark S. Vidergauz (3)                  52          Director
Mark Hall                              50          President,
                                                    Monster Beverage Division
Michael B. Schott                      57          Senior Vice President, National Sales,
                                                    Monster Beverage Division
Kirk Blower                            55          Senior Vice President, Non-Carbonated
                                                    Products, HBC
Thomas J. Kelly                        51          Vice President - Finance and
                                                    Secretary, HBC

</TABLE>


(1)  Member of the Executive Committee of the  Board of Directors
(2)  Member of the Audit Committee of the Board of Directors
(3)  Member of the Compensation Committee of the Board of Directors
(4)  Member of the Nominating Committee of the Board of Directors

     Rodney C. Sacks - Chairman of the Board of Directors of the Company,  Chief
Executive Officer and director of the Company from November 1990 to the present.
Member of the Executive Committee of the Board of Directors of the Company since
October 1992. Chairman and a director of HBC from June 1992 to the present.

     Hilton H.  Schlosberg  - Vice  Chairman  of the Board of  Directors  of the
Company,  President,  Chief Operating Officer,  Secretary, and a director of the
Company from  November  1990 to the present and Chief  Financial  Officer of the
Company  since  July 1996.  Member of the  Executive  Committee  of the Board of
Directors of the Company  since  October 1992.  Vice  Chairman,  Secretary and a
director of HBC from July 1992 to the present.

     Benjamin  M. Polk -  Director  of the  Company  from  November  1990 to the
present.  Assistant  Secretary  of HBC since  October 1992 and a director of HBC
since July 1992.  Partner  with  Schulte  Roth & Zabel LLP(1) since May 2004 and
previously a partner with Winston & Strawn LLP where Mr. Polk practiced law with
that firm and its predecessors, from August 1976 to May 2004.

                                       49

<PAGE>

     Norman C. Epstein - Director of the Company and member of the  Compensation
Committee of the Board of Directors of the Company since June 1992 and member of
the  Nominating  Committee  of the  Board  of  Directors  of the  Company  since
September  2004.  Member and  Chairman  of the Audit  Committee  of the Board of
Directors of the Company since September 1997.  Director of HBC since July 1992.
Director of Integrated Asset Management  Limited, a company listed on the London
Stock Exchange since June 1998.  Managing  Director of Cheval  Property  Finance
PLC, a mortgage  finance  company based in London,  England.  Partner with Moore
Stephens,  an international  accounting firm, from 1974 to December 1996 (senior
partner beginning 1989 and the managing partner of Moore Stephens, New York from
1993 until 1995).

     Sydney  Selati - Director of the Company and member of the Audit  Committee
of the Board of Directors  since  September  2004.  Mr. Selati was a director of
Barbeques  Galore  Ltd.  from  1997 to 2005  and was  Chairman  of the  Board of
Directors  of Galore USA since from 1988 to 2005.  Mr.  Selati was  president of
Sussex Group Limited from 1984 to 1988.

     Harold C. Taber,  Jr. - Director of the Company since July 1992.  Member of
the Audit Committee of the Board of Directors since April 2000 and member of the
Nominating  Committee of the Board of Directors of the Company  since  September
2004.  President and Chief Executive Officer of HBC from July 1992 to June 1997.
Consultant  for The Joseph Company from October 1997 to March 1999 and for Costa
Macaroni  Manufacturing  Company  from July 2000 to January  2002.  Director  of
Mentoring at Biola University from July 2002 to present.

     Mark S. Vidergauz - Director of the Company and member of the  Compensation
Committee of the Board of Directors  of the Company  since June 1998.  Member of
the Audit  Committee of the Board of Directors from April 2000 through May 2004.
Managing  Director and Chief Executive Officer of Sage Group LLC from April 2000
to present.  Managing  director at the Los Angeles  office of ING Barings LLC, a
diversified financial service institution  headquartered in the Netherlands from
April 1995 to April 2000.

     Mark Hall - President, Monster Beverage Division, joined HBC in 1997. Prior
to joining  HBC,  Mr.  Hall spent  three years with  Arizona  Beverages  as Vice
President  of Sales  where he was  responsible  for  sales and  distribution  of
Arizona products through a national network of beer  distributors and soft drink
bottlers.

     Michael  B.  Schott - Vice  President,  National  Sales,  Monster  Beverage
Division,  joined HBC in 2002. Prior to joining HBC, Mr. Schott held a number of
management  positions in the beverage  industry  including  president of Snapple
Beverage  Co.,  SOBE Beverage Co. and  Everfresh  Beverages,  respectively.  Mr.
Schott has over 30 years of experience in sales and  marketing,  primarily  with
beverage companies in key executive and operational roles.

     Kirk Blower - Senior Vice President,  Juice and Non-Carbonated Products, of
HBC  since  1992.  Mr.  Blower  has  over 30 years of  experience  in sales  and
marketing, primarily with the Coca-Cola organization.

     Thomas J. Kelly - Vice  President  Finance and Secretary of HBC since 1992.
Prior to joining HBC, Mr. Kelly served as controller  for  California  Copackers
Corporation.  Mr. Kelly is a Certified  Public  Accountant and has worked in the
beverage business for over 20 years.

(1)Mr. Polk and his law firm,  Schulte Roth & Zabel LLP, serve as counsel to the
Company.

                                       50

<PAGE>

Audit Committee and Audit Committee Financial Expert 

     The  Company  has  a  separately   designated   standing  Audit   Committee
established in accordance  with Section  3(a)(58)(A) of the Securities  Exchange
Act of 1934, as amended (the "Exchange Act"). The members of the Audit Committee
are Messrs.  Epstein  (Chairman),  Taber and Selati.  The Board of Directors has
determined  that Mr. Epstein is (1) an "audit  committee  financial  expert," as
that term is defined in Item 401(h) of  Regulation  S-K of the Exchange Act, and
(2)  independent  as  defined by the  listing  standards  of NASDAQ and  Section
10A(m)(3) of the Exchange Act.

Nominating Committee

     The Board of Directors of the Company established a Nominating Committee in
September  2004  consisting  of Norman C.  Epstein  and  Harold C. Taber Jr. and
adopted a  Nominating  Committee  Charter  which is  available on our website at
www.hansens.com.

Code of Ethics

     We have  adopted  a Code  of  Ethics  that  applies  to all our  directors,
officers (including its principal executive officer, principal financial officer
and controller) and employees.  The Code of Ethics and any amendment to the Code
of Ethics, as well as any waivers that are required to be disclosed by the rules
of the SEC or NASDAQ may be obtained at no cost to you by writing or telephoning
us at the following address or telephone number:

                            Hansen Beverage Company
                              1010 Railroad Street
                                Corona, CA 92882
                                 (951) 739-6200
                                 (800) HANSENS
                                 (800) 426-7367


Section 16(a) Beneficial Ownership Reporting Compliance

     Section  16(a) of the Exchange Act requires  the  Company's  directors  and
executive  officers,  and persons who own more than ten percent of a  registered
class of the Company's equity securities, to file by specific dates with the SEC
initial  reports of  ownership  and  reports of changes in  ownership  of equity
securities of the Company.  Executive  officers,  directors and greater than ten
percent  stockholders are required by SEC regulation to furnish the Company with
copies of all  Section  16(a)  forms that they file.  The Company is required to
report in this  annual  report on Form 10-K any  failure  of its  directors  and
executive  officers  and greater  than ten percent  stockholders  to file by the
relevant  due date any of these  reports  during the most recent  fiscal year or
prior fiscal years.

     To the  Company's  knowledge,  based  solely  on  review  of copies of such
reports  furnished to the Company  during the year ended  December 31, 2005, all
Section  16(a)  filing  requirements   applicable  to  the  Company's  executive
officers,  directors  and greater than ten percent  stockholders  were  complied
with,  except that Form 4's in respect of the grant of options to  purchase  the
Company's stock required to be filed by each of Mark Hall,  Kirk Blower,  Norman
Epstein,  Mark Vidergauz,  and Benjamin Polk, an option exercise to purchase the
Company's  stock  required to be filed by Mark Hall,  Tom Kelly and Kirk Blower,
the distribution of shares held by a limited partnership required to be filed by
Rodney Sacks,  Hilton  Schlosberg and Brandon  Limited  Partnership No. 2, and a
sale of shares of the Company's  common stock  required to be filed by Mark Hall
and Mike Schott were inadvertently filed late. The respective  transactions were
subsequently filed on Form 4's.

                                       51

<PAGE>


ITEM 11.        EXECUTIVE COMPENSATION 

     The  following  tables set forth  certain  information  regarding the total
remuneration  earned and grants of options/ made to the chief executive  officer
and each of the four most highly  compensated  executive officers of the Company
and its  subsidiaries  who earned total cash  compensation in excess of $100,000
during the year ended  December  31,  2005.  These  amounts  reflect  total cash
compensation  paid by the  Company  and its  subsidiaries  to these  individuals
during the years December 31, 2003 through 2005.

                           SUMMARY COMPENSATION TABLE
   

<TABLE>

====================================================================================================================
                                                                                            Long Term 
                                                    ANNUAL COMPENSATION                    Compensation
--------------------------------------------------------------------------------------------------------------------
<S>                      <C>        <C>             <C>                <C>                      <C>     

                                                                         Other                   Securities
 Name and Principal                                 Bonus(2)            Annual                  underlying
      Positions           Year       Salary(1)($)      ($)         Compensation ($)             Options (#)
--------------------------------------------------------------------------------------------------------------------
   Rodney C. Sacks        2005       257,250        125,000            24,542(3)                    450,000
    Chairman, CEO         2004       245,000        100,000            27,948(3)                                   
    and Director          2003       225,833         35,000            19,333(3)                    300,000         
--------------------------------------------------------------------------------------------------------------------
Hilton H. Schlosberg                                                                                         
 Vice-Chairman, CFO,                                                                                         
   COO, President,        2005       257,250        125,000            10,114(3)                    450,000         
    Secretary and         2004       245,000        100,000             9,671(3)                                   
      Director            2003       225,833         35,000             7,753(3)                    300,000         
--------------------------------------------------------------------------------------------------------------------
    Mark J. Hall                                                                                            
      President           2005       225,000        175,000             7,806(3)                    250,000         
  Monster Beverage        2004       200,000        150,000             8,356(3)                    120,000         
      Division            2003       175,000         70,000             9,554(3)                                   
--------------------------------------------------------------------------------------------------------------------
   Michael Schott                                                                                                   
     Senior Vice                                                                                                    
 President National                                                                                               
        Sales             2005       180,000         50,000             28,448(6)                    62,000         
  Monster Beverage        2004       160,000         20,000             29,027(5)                    64,000         
      Division            2003       140,000         50,000             24,572(4)                                  
--------------------------------------------------------------------------------------------------------------------
   Thomas J. Kelly        2005       150,000         40,000             8,668(3)                      2,000
   Vice President         2004       125,000         40,000             9,319(3)                     50,000         
       Finance            2003       115,000         15,000             6,937(3)                                   
====================================================================================================================

</TABLE>


(1) SALARY - Pursuant to employment  agreements,  Messrs.  Sacks and  Schlosberg
were entitled to an annual base salary of $257,250,  $245,000,  and $225,833 for
2005, 2004 and 2003, respectively.

(2) BONUS -  Payments  made in 2006,  2005 and 2004 are for  bonuses  accrued in
2005, 2004 and 2003, respectively.

(3) OTHER  ANNUAL  COMPENSATION  - The cash  value of  perquisites  of the named
persons  did not total  $50,000 or 10% of  payments  of salary and bonus for the
years shown.

(4)  Includes  $7,200  for  auto  reimbursement  expense,  $10,000  for  housing
expenses,  $1,200  for  travel  expenses,  and  $6,172  for other  miscellaneous
perquisites.

(5)  Includes  $7,200  for  auto  reimbursement  expense,  $10,000  for  housing
expenses,  $4,800  for  travel  expenses,  and  $7,027  for other  miscellaneous
perquisites.

(6) Includes $7,015 for auto reimbursement expenses, $9,732 for housing expenses
and $11,701 for other miscellaneous perquisites.

                                       52

<PAGE>

               OPTION GRANTS FOR THE YEAR ENDED DECEMBER 31, 2005


<TABLE>
====================================================================================================================================
                                                                                                                                
                                                                                                                                
                                                                                                Potential realizable value at     
                                                                                             assumed annual rates of stock price  
                                                 Individual Grants                             appreciation for option term(4)    
------------------------------------------------------------------------------------------   ---------------------------------------

                              Number of      Percent of total
                              Securities     Options granted to    Exercise or                                                     
                              underlying       employees in         base price  Expiration             5%                10%       
           Name          Options granted (#)       2005              ($/Share)      Date              ($)                ($)       
------------------------------------------------------------------------------------------  ----------------------------------------
<S>                        <C>               <C>                   <C>          <C>            <C>                    <C>
Rodney C. Sacks                  300,000 (1)         19.4%             26.25     3/23/2015         4,952,548         12,550,718
                                 150,000 (3)          9.7%             67.48    11/11/2015         6,365,675         16,131,857
------------------------------------------------------------------------------------------  ----------------------------------------
Hilton H. Schlosberg             300,000 (1)         19.4%             26.25     3/23/2015         4,952,548         12,550,718
                                 150,000 (3)          9.7%             67.48    11/11/2015         6,365,675         16,131,857
------------------------------------------------------------------------------------------  ----------------------------------------
Mark J. Hall                     200,000 (1)         12.9%             26.25     3/23/2015         3,301,699          8,367,146 
                                  25,000 (2)          1.6%             43.79     9/28/2015           688,483          1,744,749 
                                  25,000 (3)          1.6%             67.48    11/11/2015         1,060,946          2,688,643 
------------------------------------------------------------------------------------------  ----------------------------------------
Michael Schott                    50,000 (1)          3.2%             26.25     3/23/2015           825,425          2,091,786 
                                  12,000 (3)          0.8%             67.48    11/11/2015           509,254          1,290,549 
------------------------------------------------------------------------------------------  ----------------------------------------
Thomas J. Kelly                    2,000 (3)          0.1%             67.48    11/11/2015            84,876            215,091
==========================================================================================  ========================================
</TABLE>



(1) Options to purchase the Company's  common stock become  exercisable in equal
annual increments over 5 years beginning March 23, 2006.

(2) Options to purchase the Company's  common stock become  exercisable in equal
annual increments over 5 years beginning September 28, 2006.

(3) Options to purchase the Company's  common stock become  exercisable in equal
annual increments over 5 years beginning November 11, 2006.

(4)  The 5% and 10%  assumed  annual  rates  of  appreciation  are  provided  in
accordance  with the rules and  regulations  of the SEC and do not represent our
estimates or projections of our future common stock price growth.

                                       53

<PAGE>

               AGGREGATED OPTION EXERCISES DURING THE YEAR ENDED
            DECEMBER 31, 2005 AND OPTION VALUES AT DECEMBER 31, 2005

<TABLE>

====================================================================================================================
                                                                                                                    
                                                                                                                    
                                                       Number of underlying                                         
                                                            unexercised                                             
                                                            Options at        Value of unexercised in-the-money     
                                                       December 31, 2005 (#)  options at December 31, 2005 ($)      
                                                      --------------------------------------------------------------
<S>                    <C>              <C>           <C>                     <C>    
                       Shares acquired      Value          Exercisable/                     Exercisable/
         Name          on exercise (#)  Realized ($)       Unexercisable                   Unexercisable
--------------------- ----------------- -------------- ---------------------- --------------------------------------
Rodney C. Sacks                       -              -    400,000/710,000 (1)              30,704,200/37,437,300
--------------------- ----------------- -------------- ---------------------- --------------------------------------
Hilton H. Schlosberg                  -              -    400,000/710,000 (1)              30,704,200/37,437,300
--------------------- ----------------- -------------- ---------------------- --------------------------------------
Mark J. Hall                     32,000        939,360          0/362,000 (2)                       0/20,077,710
--------------------- ----------------- -------------- ---------------------- --------------------------------------
Michael Schott                   40,000      1,366,040          0/182,000 (3)                       0/11,886,960
--------------------- ----------------- -------------- ---------------------- --------------------------------------
Thomas J. Kelly                  14,000        533,710          0/ 50,000 (4)                       0/ 3,628,260
====================================================================================================================
</TABLE>


(1) Includes  options to purchase  200,000  shares of common stock at $2.125 per
share which are  exercisable  at December  31, 2005,  granted  pursuant to Stock
Option  Agreements dated February 2, 1999 between the Company and Messrs.  Sacks
and Schlosberg, respectively; options to purchase 160,000 shares of common stock
at $1.785 per share of which  80,000  are  exercisable  at  December  31,  2005,
granted  pursuant to Stock  Option  Agreements  dated July 12, 2002  between the
Company  and Messrs.  Sacks and  Schlosberg,  respectively;  options to purchase
300,000  shares  of  common  stock at $2.10  per  share  of  which  120,000  are
exercisable  at December  31, 2005 granted  pursuant to Stock Option  Agreements
dated May 28,  2003  between  the  Company  and  Messrs.  Sacks and  Schlosberg,
respectively;  options to purchase  300,000 shares of common stock at $26.25 per
share of which none are  exercisable  at December 31, 2005  granted  pursuant to
Stock  Option  Agreements  dated March 23, 2005  between the Company and Messrs.
Sacks and  Schlosberg  respectively;  and options to purchase  150,000 shares of
common stock at $67.48 per share of which none are  exercisable  at December 31,
2005 granted pursuant to Stock Option Agreements dated November 11, 2005 between
the Company and Messrs. Sacks and Schlosberg respectively.

(2)  Includes  options to purchase  16,000  shares of common stock at $1.785 per
share of which none are exercisable at December 31, 2005,  granted pursuant to a
Stock  Option  Agreement  dated July 12, 2002  between the Company and Mr. Hall;
options to purchase  96,000  shares of common stock at $4.075 per share of which
none are  exercisable at December 31, 2005,  granted  pursuant to a Stock Option
Agreement  dated  January 15, 2004 between the Company ant Mr. Hall;  options to
purchase  200,000  shares of common  stock at $26.25 per share of which none are
exercisable  at December 31, 2005 granted  pursuant to a Stock Option  Agreement
dated March 23, 2005  between  the  Company  and Mr.  Hall;  options to purchase
25,000 shares of common stock at $43.79 per share of which none are  exercisable
at  December  31,  2005  granted  pursuant  to a Stock  Option  Agreement  dated
September  28, 2005  between the Company and Mr.  Hall;  and options to purchase
25,000 shares of common stock at $67.48 per share of which none are  exercisable
at December 31, 2005 granted pursuant to a Stock Option Agreement dated November
11, 2005 between the Company and Mr. Hall.

(3)Includes  options to  purchase  72,000  shares of common  stock at $1.925 per
share of which none are exercisable at December 31, 2005,  granted pursuant to a
Stock Option  Agreement dated August 9, 2002 between the Company and Mr. Schott;
options to purchase  48,000  shares of common stock at $4.075 per share of which
none are  exercisable at December 31, 2005,  granted  pursuant to a Stock Option
Agreement dated January 15, 2004 between the Company and Mr. Schott;  options to
purchase  50,000  shares of common  stock at $26.25  per share of which none are
exercisable  at December 31, 2005 granted  pursuant to a Stock Option  Agreement
dated March 23, 2005 between the Company and Mr. Schott; and options to purchase
12,000 shares of common stock at $67.48 per share of which none are  exercisable
at December 31, 2005 granted pursuant to a Stock Option Agreement dated November
11, 2005 between the Company and Mr. Schott.

(4)  Includes  options to purchase  8,000  shares of common  stock at $1.785 per
share of which none are exercisable at December 31, 2005,  granted pursuant to a
stock Option  Agreement  dated July 12, 2002 between the Company and Mr.  Kelly;
options to purchase  40,000  shares of common stock at $4.075 per share of which
none are  exercisable at December 31, 2005,  granted  pursuant to a Stock Option
Agreement dated January 15, 2004 between the Company and Mr. Kelly;  and options
to purchase  2,000  shares of common stock at $67.48 per share of which none are
exercisable  at December 31, 2005 granted  pursuant to a Stock Option  Agreement
dated November 11, 2005 between the Company and Mr. Kelly.

                                       54

<PAGE>

Employment Agreements 

     The Company  entered into an employment  agreement dated as of June 1, 2003
with Rodney C. Sacks pursuant to which Mr. Sacks renders services to the Company
as its  Chairman  and  Chief  Executive  Officer  for an annual  base  salary of
$230,000 for the 7-months  ended  December  31,  2003,  $245,000 for 2004,  with
subsequent increases of a minimum of 5% for each subsequent year, plus an annual
bonus in an amount  determined  at the  discretion of the Board of Directors and
certain fringe  benefits.  The employment  period  commenced on June 1, 2003 and
ends on December 31, 2008.

     The Company also entered into an employment  agreement  dated as of June 1,
2003 with Hilton H. Schlosberg pursuant to which Mr. Schlosberg renders services
to the Company as its Vice Chairman,  President,  Chief Operating Officer, Chief
Financial  Officer and  Secretary  for an annual base salary of $230,000 for the
7-months ended December 31, 2003,  $245,000 for 2004, with subsequent  increases
of a minimum of 5% for each  subsequent  year, plus an annual bonus in an amount
determined  at the  discretion  of the Board of  Directors  and  certain  fringe
benefits.  The employment  period commenced on June 1, 2003 and ends on December
31, 2008.

     The employment  agreements for Messrs. Sacks and Schlosberg,  and the terms
and  conditions  thereof,  were  discussed  and  approved  by  the  Compensation
Committee of the Board of Directors.

     The preceding  descriptions of the employment  agreements for Messrs. Sacks
and Schlosberg are qualified in their entirety by reference to such  agreements,
which have been filed or incorporated by reference as exhibits to this report.

Directors' Compensation

     In 2005,  outside  directors were entitled to an annual fee of $15,000 plus
$1,500 for each meeting of the Board of Directors  attended.  Outside  directors
were also  entitled  to $500 for each Board of  Directors  meeting  attended  by
telephone.  Outside  directors were entitled to $1,000 for each Audit  committee
meeting attended in person and $500 for each Audit committee meeting attended by
telephone.  The audit  committee  chairman  earns an  additional  annual  fee of
$5,000.  Outside directors were entitled to $500 for each Compensation Committee
meeting  attended  in person and $250 for each  Compensation  Committee  meeting
attended by telephone.

Compensation  Committee  Interlocks and Insider  Participation  in  Compensation
Decisions

     The  Company's  Compensation  Committee is composed of Mr.  Epstein and Mr.
Vidergauz.  No  interlocking  relationships  exist  between  any  member  of the
Company's  Board of Directors or  Compensation  Committee  and any member of the
board of directors or compensation  committee of any other company,  nor has any
such  interlocking   relationship   existed  in  the  past.  No  member  of  the
Compensation  Committee  is or was  formerly  an officer or an  employee  of the
Company.

Employee Stock Option Plans

     The Company has a stock option plan (the Plan) that  provided for the grant
of options to purchase up to 6,000,000 shares of the common stock of the Company
to certain key employees of the Company and its  subsidiaries.  Options  granted
under the Plan may either be incentive stock options qualified under Section 422
of the Internal Revenue Code of 1986, as amended, or non-qualified options. Such
options are  exercisable  at fair market value on the date of grant for a period
of up to ten years.  Under the Plan,  shares subject to options may be purchased
for cash,  or for shares of common stock valued at fair market value on the date
of purchase.  Under the Plan, no additional options may be granted after July 1,
2001.

                                       55

<PAGE>

     During 2001, the Company adopted the Hansen Natural  Corporation 2001 Stock
Option Plan ("2001 Option Plan"). The 2001 Option Plan provides for the grant of
options to purchase up to 4,000,000 shares of the common stock of the Company to
certain key employees of the Company and its subsidiaries. Options granted under
the 2001 Stock Option Plan may be incentive  stock  options under Section 422 of
the Internal Revenue Code, as amended (the "Code"),  nonqualified stock options,
or stock appreciation rights.

     The Plan and the 2001  Option  Plan are  administered  by the  Compensation
Committee of the Board of Directors of the Company,  comprised of directors  who
satisfy  the  "non-employee"  director  requirements  of Rule  16b-3  under  the
Securities  Exchange Act of 1934 and the outside  director  provision of Section
162(m) of the Code.  Grants  under  the Plan and the 2001  Option  Plan are made
pursuant to  individual  agreements  between the Company and each  grantee  that
specifies the terms of the grant, including the exercise price, exercise period,
vesting and other terms thereof.

Outside Directors Stock Option Plans

     The Company had an option plan for its outside  directors  ("the  Directors
Plan") that  provided for the grant of options to purchase up to an aggregate of
200,000  shares of common  stock of the Company to  directors of the Company who
are not and have not been employed by or acted as consultants to the Company and
its  subsidiaries  or affiliates  and who are not and have not been nominated to
the Board of Directors  of the Company  pursuant to a  contractual  arrangement.
Under the Directors  Plan, no additional  options could be granted after July 1,
2004.

     During 2005, the Company adopted the 2005 Hansen Natural  Corporation Stock
Option Plan for Non-Employee Directors ("2005 Directors Plan") that provides for
the grant of options to purchase up to an aggregate of 200,000  shares of common
stock of the Company to  non-employee  directors of the Company.  On the date of
the annual meeting of  stockholders  at which an eligible  director is initially
elected,  each eligible  director is entitled to receive a one-time  grant of an
option to purchase 6,000 shares of the Companys common stock  exercisable at the
closing price for a share of common stock on the date of grant. Additionally, on
the fifth anniversary of the election of eligible directors elected or appointed
to the Board,  and each fifth  anniversary  thereafter,  each eligible  director
shall receive an additional  grant of an option to purchase  4,800 shares of the
Companys common stock.  Options become  exercisable in four equal  installments,
with the  grant  immediately  vested  with  respect  to 25% of the grant and the
remaining installments vesting on the three successive anniversaries of the date
of grant;  provided that all options held by an eligible  director  become fully
and  immediately  exercisable  upon a change in control of the Company.  Options
granted under the 2005  Directors Plan that are not exercised  generally  expire
ten years  after the date of grant.  Option  grants  may be made  under the 2005
Directors Plan for ten years from the effective date of the Directors  Plan. The
Directors  Plan  is  a  "formula   plan"  so  that  a   non-employee   directors
participation   in  the  Directors   Plan  does  not  affect  his  status  as  a
"disinterested  person" (as defined in Rule 16b-3 under the Securities  Exchange
Act of 1934). Four eligible directors were initially granted options to purchase
4,800 shares of the Companys  common stock pursuant to the 2005 Directors  Plan,
(see  "PART III ITEM 12  SECURITY  OWNERSHIP  OF CERTAIN  BENEFICIAL  OWNERS AND
RELATED STOCKHOLDER MATTERS").

                                       56

<PAGE>

Performance Graph       

The following graph shows a five-year comparison of cumulative total returns:(1)

                          Total Return To Shareholders
                      (Includes reinvestment of dividends)


<TABLE>
                                                        ANNUAL RETURN PERCENTAGE

For the year ended December 31,
<S>                                              <C>           <C>          <C>         <C>         <C>           <C>

Company Name / Index                                            Dec01        Dec02       Dec03       Dec04        Dec05
------------------------------------------------------------------------------------------------------------------------
HANSEN NATURAL CORP                                              8.39         0.50       99.48      332.42       332.90
S&P SMALLCAP 600 INDEX                                           6.54       (14.63)      38.79       22.65         7.68
PEER GROUP                                                      82.83        17.06       41.59       (1.94)      (16.23)


                                                                              INDEXED RETURNS
For the year ended December 31,
                                                 Base                             
                                                Period
Company Name / Index                             Dec00          Dec01        Dec02       Dec03       Dec04        Dec05
------------------------------------------------------------------------------------------------------------------------
HANSEN NATURAL CORP                               100          108.39       108.93      217.29      939.61      4067.61
S&P SMALLCAP 600 INDEX                            100          106.54        90.95      126.23      154.82       166.71
PEER GROUP                                        100          182.83       214.02      303.02      297.13       248.91

</TABLE>



(1) Annual return assumes  reinvestment  of dividends.  Cumulative  total return
assumes an initial  investment  of $100 on  December  31,  2000.  The  Company's
self-selected peer group is comprised of National Beverage Corporation,  Clearly
Canadian Beverage Company,  Triarc Companies,  Inc., Leading Brands,  Inc., Cott
Corporation,  Northland  Cranberries  and Jones Soda Co. All of the companies in
the peer group traded during the entire  five-year  period with the exception of
Triarc  Companies,  Inc.,  which sold their  beverage  business in October 2000,
Jones Soda Co., which started trading in August 2000, and Northland Cranberries,
which began trading November 2001.

                                       57

<PAGE>


ITEM 12.        SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND 
MANAGEMENT AND RELATED STOCKHOLDER MATTERS

     The disclosure set forth in ITEM 5 of this report is incorporated herein.

(a) The  following  table sets forth  information,  as of February 10, 2006,  in
respect of the only persons known to the Company who  beneficially own more than
5% of the outstanding common stock of the Company:

<TABLE>

                                                                Amount and Nature of          Percent
 Title Of Class     Name and Address of Beneficial Owner        Beneficial Ownership          of Class
--------------------------------------------------------------------------------------------------------
<S>                <C>                                          <C>                          <C>    

Common Stock       Brandon Limited Partnership No. 1(1)                  326,730                1.4%
                   Brandon Limited Partnership No. 2 (2)               2,383,334               10.2%
                   HRS Holdings, L.P. (3)                                250,000                1.1%
                   Hilrod Holdings L.P. (4)                            1,420,000                6.0%
                   Rodney C. Sacks (5)                                 4,980,064(6)            21.2%
                   Hilton H. Schlosberg (7)                            4,902,258(8)            20.9%
                   Kevin Douglas, Douglas Family Trust and                                              
                    James Douglas and Jean Douglas                                         
                    Irrevocable Descendants' Trust(9)                  1,207,122(10)            5.1%
                   Fidelity Low Priced Stock Fund(11)                  3,096,143               13.2%

</TABLE>


(1) The mailing  address of Brandon  No. 1 is 21  Dartmouth  Street,  4th Floor,
London SW1 H9BP,  United  Kingdom.  The  general  partners  of Brandon No. 1 are
Rodney C. Sacks and Hilton H. Schlosberg.

(2) The mailing  address of Brandon  No. 2 is 21  Dartmouth  Street,  4th Floor,
London SW1 H9BP,  United  Kingdom.  The  general  partners  of Brandon No. 2 are
Rodney C. Sacks and Hilton H. Schlosberg.

(3) The mailing address of HRS Holdings,  L.P.  ("HRS") is 1010 Railroad Street,
Corona,  California  92882.  The general partners of HRS are Rodney C. Sacks and
Hilton H. Schlosberg.

(4) The mailing  address of Hilrod  Holdings  L.P.  ("Hilrod")  is 1010 Railroad
Street,  Corona,  California 92882. The general partners of Hilrod are Rodney C.
Sacks and Hilton H. Schlosberg.

(5) The mailing address of Mr. Sacks is 1010 Railroad Street, Corona, California
92882.

(6) Includes  80,000 shares of common stock owned by Mr. Sacks;  326,730  shares
beneficially  held by Brandon No. 1 because  Mr.  Sacks is one of Brandon No. 1s
general  partners;  2,383,334 shares  beneficially held by Brandon No. 2 because
Mr. Sacks is one of Brandon No. 2s general partners; 250,000 shares beneficially
held by HRS because Mr. Sacks is one of HRSs  general  partners;  and  1,420,000
shares  beneficially  held by Hilrod because Mr. Sacks is one of Hilrods general
partners.  Also  includes  options to purchase  200,000  shares of common  stock
exercisable at $2.125 per share,  granted  pursuant to a Stock Option  Agreement
dated  February 2, 1999  between the Company and Mr.  Sacks;  options  presently
exercisable  to  purchase  180,000  shares of common  stock,  out of  options to
purchase  a total of 300,000  shares,  exercisable  at $2.10 per share,  granted
pursuant to a Stock Option  Agreement dated May 28, 2003 between the Company and
Mr. Sacks;  options  presently  exercisable to purchase  80,000 shares of common
stock,  out of options to  purchase a total of 300,000  shares,  exercisable  at
$1.785 per share,  granted  pursuant to a Stock Option  Agreement dated July 12,
2002  between the Company and Mr.  Sacks and options  presently  exercisable  to
purchase  60,000 shares of common  stock,  out of options to purchase a total of
300,000  shares,  exercisable at $26.25 per share,  granted  pursuant to a Stock
Option  Agreement  dated March 23, 2005 between the Company and Mr.  Sacks. 

Mr. Sacks disclaims beneficial ownership of all shares deemed beneficially owned
by him hereunder except:  (i) 80,000 shares of common stock; (ii) 125,000 shares
of common stock held by HRS allocable to Mr. Sacks and grantor  retained annuity
trusts for the benefit of Mr. Sacks and his children;  (iii)  710,000  shares of
common stock held by Hilrod  allocable to Mr. Sacks and grantor retained annuity
trusts  for the  benefit of Mr.  Sacks and his  children;  and (iv) the  520,000
shares of common stock presently exercisable under Stock Option Agreements.

(7) The mailing  address of Mr.  Schlosberg  is 1010  Railroad  Street,  Corona,
California 92882.

                                       58

<PAGE>

(8)  Includes  2,194  shares of common  stock  which  are  jointly  owned by Mr.
Schlosberg  and his wife,  326,730  shares  beneficially  held by Brandon  No. 1
because  Mr.  Schlosberg  is one of Brandon No. 1s general  partners;  2,383,334
shares  beneficially  held by Brandon  No. 2 because  Mr.  Schlosberg  is one of
Brandon No. 2s general partners; 250,000 shares beneficially held by HRS because
Mr.  Schlosberg  is  one  of  HRSs  general   partners;   and  1,420,000  shares
beneficially  held by Hilrod  because Mr.  Schlosberg is one of Hilrods  general
partners.  Also  includes  options to purchase  200,000  shares of common  stock
exercisable at $2.125 per share,  granted  pursuant to a Stock Option  Agreement
dated  February 2, 1999  between the  Company  and Mr.  Schlosberg;  and options
presently exercisable to purchase 180,000 shares of common stock, out of options
to purchase a total of 300,000 shares,  exercisable at $2.10 per share,  granted
pursuant to a Stock Option  Agreement dated May 28, 2003 between the Company and
Mr.  Schlosberg;  options  presently  exercisable  to purchase  80,000 shares of
common stock, out of options to purchase a total of 300,000 shares,  exercisable
at $1.785 per share, granted pursuant to a Stock Option Agreement dated July 12,
2002 between the Company and Mr. Schlosberg and options presently exercisable to
purchase  60,000 shares of common  stock,  out of options to purchase a total of
300,000  shares,  exercisable at $26.25 per share,  granted  pursuant to a Stock
Option  Agreement  dated March 23, 2005 between the Company and Mr.  Schlosberg.

Mr. Schlosberg  disclaims beneficial ownership of all shares deemed beneficially
owned by him hereunder  except:  (i) 2,194 shares of common stock,  (ii) 125,000
shares of common  stock held by HRS  allocable  to Mr.  Schlosberg  and  grantor
retained  annuity  trusts for the benefit of Mr.  Schlosberg  and his  children;
(iii) 710,000 shares of common stock held by Hilrod allocable to Mr.  Schlosberg
and grantor  retained  annuity trusts for the benefit of Mr.  Schlosberg and his
children;  and (iv) the 520,000  shares of common  stock  presently  exercisable
under Stock Option Agreements.

(9) The mailing  address of this  reporting  person is 1101 Fifth Avenue,  Suite
360, San Rafael, California 94901.

(10)  Includes  450,078  shares of  common  stock  owned by Kevin  and  Michelle
Douglas;  354,033 shares of common stock owned by James Douglas and Jean Douglas
Irrevocable  Descendants Trust;  400,705 shares of common stock owned by Douglas
Family  Trust;  and 2,306  shares of common stock owned by James E. Douglas III.
Kevin Douglas, James E. Douglas, Douglas Family Trust and James Douglas and Jean
Douglas Irrevocable  Descendants Trust are deemed members of a group that shares
voting and dispositive power over the shares.

(11) The  mailing  address of this  reporting  person is 82  Devonshire  Street,
Boston, Massachusetts, 02109.


(b) The following table sets forth information as to the beneficial ownership of
shares of common  stock,  as of  February  10,  2006,  held by  persons  who are
directors of the Company and certain executive officers,  naming them, and as to
directors and all executive  officers of the Company as a group,  without naming
them:

Title of Class           Name                Amount Owned    Percent of Class
--------------------------------------------------------------------------------
Common Stock       Rodney C. Sacks            4,980,064(1)            21.2%
                   Hilton H. Schlosberg       4,902,258(2)            20.9%
                   Mark J. Hall                 102,000(3)               *%
                   Michael Schott                40,500(4)               *%
                   Kirk Blower                   25,000(5)               *%
                   Thomas J. Kelly               12,500(6)               *%
                   Sydney Selati                  8,000(7)               *%
                   Norman Epstein                 3,200(8)               *%
                   Harold Taber                   2,201(9)               *%
                   Benjamin M. Polk               1,200(10)              *%
                   Mark Vidergauz                 1,200(10)              *%


Executive  Officers and Directors as a group:  11 members;  7,368,059  shares or
31.4% in aggregate(11).

*Less than 1%

                                       59

<PAGE>

(1) Includes  80,000 shares of common stock owned by Mr. Sacks;  326,730  shares
beneficially  held by Brandon No. 1 because  Mr.  Sacks is one of Brandon No. 1s
general  partners;  2,383,334 shares  beneficially held by Brandon No. 2 because
Mr. Sacks is one of Brandon No. 2s general partners; 250,000 shares beneficially
held by HRS because Mr. Sacks is one of HRSs  general  partners;  and  1,420,000
shares  beneficially  held by Hilrod because Mr. Sacks is one of Hilrods general
partners.  Also  includes  options to purchase  200,000  shares of common  stock
exercisable at $2.125 per share,  granted  pursuant to a Stock Option  Agreement
dated  February 2, 1999  between the Company and Mr.  Sacks;  options  presently
exercisable  to  purchase  180,000  shares of common  stock,  out of  options to
purchase  a total of 300,000  shares,  exercisable  at $2.10 per share,  granted
pursuant to a Stock Option  Agreement dated May 28, 2003 between the Company and
Mr. Sacks;  options  presently  exercisable to purchase  80,000 shares of common
stock,  out of options to  purchase a total of 300,000  shares,  exercisable  at
$1.785 per share,  granted  pursuant to a Stock Option  Agreement dated July 12,
2002  between the Company and Mr.  Sacks and options  presently  exercisable  to
purchase  60,000 shares of common  stock,  out of options to purchase a total of
300,000  shares,  exercisable at $26.25 per share,  granted  pursuant to a Stock
Option  Agreement  dated March 23, 2005 between the Company and Mr.  Sacks.  

Mr. Sacks disclaims beneficial ownership of all shares deemed beneficially owned
by him hereunder except:  (i) 80,000 shares of common stock; (ii) 125,000 shares
of common stock held by HRS allocable to Mr. Sacks and grantor  retained annuity
trusts for the benefit of Mr. Sacks and his children;  (iii)  710,000  shares of
common stock held by Hilrod  allocable to Mr. Sacks and grantor retained annuity
trusts  for the  benefit of Mr.  Sacks and his  children:  and (iv) the  520,000
shares of common stock presently exercisable under Stock Option Agreements.

(2)  Includes  2,194  shares of common  stock  which  are  jointly  owned by Mr.
Schlosberg  and his wife,  326,730  shares  beneficially  held by Brandon  No. 1
because  Mr.  Schlosberg  is one of Brandon No. 1s general  partners;  2,383,334
shares  beneficially  held by Brandon  No. 2 because  Mr.  Schlosberg  is one of
Brandon No. 2s general partners; 250,000 shares beneficially held by HRS because
Mr.  Schlosberg  is  one  of  HRSs  general   partners;   and  1,420,000  shares
beneficially  held by Hilrod  because Mr.  Schlosberg is one of Hilrods  general
partners.  Also  includes  options to purchase  200,000  shares of common  stock
exercisable at $2.125 per share,  granted  pursuant to a Stock Option  Agreement
dated  February 2, 1999  between the  Company  and Mr.  Schlosberg;  and options
presently exercisable to purchase 180,000 shares of common stock, out of options
to purchase a total of 300,000 shares,  exercisable at $2.10 per share,  granted
pursuant to a Stock Option  Agreement dated May 28, 2003 between the Company and
Mr.  Schlosberg;  options  presently  exercisable  to purchase  80,000 shares of
common stock, out of options to purchase a total of 300,000 shares,  exercisable
at $1.785 per share, granted pursuant to a Stock Option Agreement dated July 12,
2002 between the Company and Mr. Schlosberg and options presently exercisable to
purchase  60,000 shares of common  stock,  out of options to purchase a total of
300,000  shares,  exercisable at $26.25 per share,  granted  pursuant to a Stock
Option  Agreement  dated March 23, 2005 between the Company and Mr.  Schlosberg.

Mr. Schlosberg  disclaims beneficial ownership of all shares deemed beneficially
owned by him hereunder  except:  (i) 2,194 shares of common stock,  (ii) 125,000
shares of common  stock held by HRS  allocable  to Mr.  Schlosberg  and  grantor
retained  annuity  trusts for the benefit of Mr.  Schlosberg  and his  children;
(iii) 710,000 shares of common stock held by Hilrod allocable to Mr.  Schlosberg
and grantor  retained  annuity trusts for the benefit of Mr.  Schlosberg and his
children;  and (iv) the 520,000  shares of common  stock  presently  exercisable
under Stock Option Agreements.

(3)  Includes  62,000  shares  of common  stock  owned by Mr.  Hall and  options
presently  exercisable to purchase 40,000 shares of common stock, out of options
to purchase a total of 200,000 shares,  exercisable at $26.25 per share, granted
pursuant to a Stock  Option  Agreement  dated March 23, 2005 between the Company
and Mr. Hall.

(4)  Includes  28,000  shares of common  stock  owned by Mr.  Schott and options
presently  exercisable to purchase 12,500 shares of common stock, out of options
to purchase a total of 50,000 shares,  exercisable at $26.25 per share,  granted
pursuant to a Stock  Option  Agreement  dated March 23, 2005 between the Company
and Mr. Schott.

(5) Includes 25,000 shares of common stock owned by Mr. Blower.

(6) Includes 12,500 shares of common stock owned by Mr. Kelly.

(7) Includes 8,000 shares of common stock owned by Mr. Selati.

(8) Includes 2,000 shares beneficially held by Shoreland  Investment because Mr.
Epstein is one of the general  partners  and options  presently  exercisable  to
purchase  1,200  shares of common  stock,  out of options to purchase a total of
4,800 shares of common stock,  exercisable at $67.48 per share, granted pursuant
to a Stock Option  Agreement dated November 11, 2005 between the Company and Mr.
Epstein.

                                       60

<PAGE>

(9)  Includes  1,001  shares  of common  stock  owned by Mr.  Taber and  options
presently  exercisable to purchase 1,200 shares of common stock,  out of options
to purchase a total of 4,800 shares of common stock,  exercisable  at $67.48 per
share,  granted  pursuant to a Stock Option  Agreement  dated  November 11, 2005
between the Company and Mr. Taber.

(10) Includes options  presently  exercisable to purchase 1,200 shares of common
stock,  out of options  to  purchase  a total of 4,800  shares of common  stock,
exercisable at $67.48 per share,  granted  pursuant to a Stock Option  Agreement
dated  November  11, 2005  between the  Company and Messrs.  Polk and  Vidergauz
respectively.

(11)  Includes  securities  beneficially  owned by all  directors  and executive
officers of the Company including those listed above.

     There are no arrangements known to the Company,  the operation of which may
at a subsequent date result in a change of control of the Company.


ITEM 13.        CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Benjamin M. Polk is a partner in Schulte  Roth & Zabel LLP, a law firm that
has been  retained by the Company since May 2004,  and was  previously a partner
with Winston & Strawn LLP, a law firm (together with its predecessors)  that had
been retained by the company since 1992.

     Mark Vidergauz is the Managing  Director and Chief Executive Officer of the
Sage Group LLC, a  professional  services  firm that is  utilized by the Company
during 2005.

     Rodney C. Sacks is  currently  acting as the sole Trustee of a trust formed
pursuant to an Agreement of Trust dated July 27, 1992 for the purpose of holding
the  Hansen's(R)  trademark.  The Company and HBC have agreed to  indemnify  Mr.
Sacks and hold him harmless  from any claims,  loss or liability  arising out of
his acting as Trustee.

     During 2005, the Company  purchased  promotional items from IFM Group, Inc.
("IFM"). Rodney C. Sacks, together with members of his family, own approximately
27% of the issued shares in IFM. Hilton H. Schlosberg,  together with members of
his family,  own approximately  43% of the issued shares in IFM.  Purchases from
IFM of  promotional  items in 2005,  2004 and 2003 were  $748,725,  $638,590 and
$331,478, respectively. The Company continues to purchase promotional items from
IFM Group, Inc. in 2006.

     The preceding descriptions of agreements are qualified in their entirety by
reference to such agreements,  which have been filed as exhibits to the Companys
reports, as applicable.

                                       61

<PAGE>


ITEM 14.         PRINCIPAL ACCOUNTANT FEES AND SERVICES

Accounting Fees

     Aggregate fees billed and unbilled to the company for service  provided for
the years ended December 31, 2005, and 2004 by the Companys principal accounting
firm,  Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu,  and
their respective affiliates (collectively "Deloitte & Touche"):


                                                 Year ended December 31,
                                               2005                  2004
                                      --------------------  --------------------
     Audit Fees                       $           559,572   $           464,575
     Audit Related Fees(1)                         93,830                     
     Tax Fees(2)                                   10,383                 8,360
                                      --------------------  --------------------
              Total Fees(3)           $           663,785   $           472,935
                                      ====================  ====================


(1) Audit related fees consisted of fees for consultations  regarding  reporting
matters under regulations of the Securities and Exchange Commission.

(2) Tax fees consisted of fees for tax consultation  services including advisory
services for state tax analysis and tax audit assistance.

(3) For years ended December 31, 2005 and 2004, all of the services performed by
Deloitte & Touche have been pre-approved by the Audit Committee.

     The Audit Committee has considered  whether Deloitte & Touches provision of
the non-audit  services covered above is compatible with maintaining  Deloitte &
Touche's independence and has determined that it is.

Audit  Committee  Pre-Approval of Audit and  Permissible  Non-Audit  Services of

Independent Auditors

     The Audit  Committee's  policy is to  pre-approve  all audit and  non-audit
services  provided by the Company's  independent  auditors.  These  services may
include audit services, audit-related services, tax services and other services.
Pre-approval is generally  provided for up to one year, and any  pre-approval is
detailed as to the  particular  service or category of services and is generally
subject to a specific  budget.  The Audit  Committee has delegated  pre-approval
authority to its  Chairman  when  necessary  due to timing  considerations.  Any
services  approved by the Chairman must be reported to the full Audit  Committee
at its next  scheduled  meeting.  The  independent  auditors and  management are
required to periodically report to the full Audit Committee regarding the extent
of  services  provided  by the  independent  auditors  in  accordance  with  the
pre-approval policies, and the fees for the services performed to date.
       
                                       62

<PAGE>


PART IV


ITEM 15.        EXHIBITS, FINANCIAL STATEMENT SCHEDULES 

(a)  The following documents are filed as a part of this Form 10-K


1. Index to Financial Statements filed as part of this Report
   Report of Independent Registered Public Accounting Firm                    67
   Consolidated Balance Sheets as of December 31, 2005 and 2004               68
   Consolidated Statements of Income for the years ended December 31, 2005,
   2004 and 2003                                                              69
   Consolidated Statements of Stockholders' Equity for the years ended 
   December 31, 2005, 2004 and 2003                                           70
   Consolidated Statements of Cash Flows for the years ended December 31,
   2005, 2004 and 2003                                                        71
   Notes to Consolidated Financial Statements for the years ended December 31,
   2005, 2004 and 2003                                                        73

2. Financial Statement Schedule

   Valuation and Qualifying Accounts for the years ended December 31, 2005, 
   2004 and 2003                                                              90

3.Exhibits

   The Exhibits  listed in the Index of Exhibits,  which  appears  immediately
   following the signature page and is  incorporated  herein by reference,  as
   filed as part of this Form 10-K

                                       63

<PAGE>


SIGNATURES

     Pursuant to the  requirements  of  Sections  13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

HANSEN NATURAL CORPORATION
       
/s/ RODNEY C. SACKS        Rodney C. Sacks                  Date: March 14, 2006

-------------------        Chairman of the Board

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant in the capacities and on the dates indicated.

Signature                  Title                                Date
---------                  ------                               ----
/s/ RODNEY C. SACKS
------------------------
Rodney C. Sacks            Chairman of the Board of             March 15, 2006
                           Directors and Chief Executive 
                           Officer (principal executive
                           officer)

/s/ HILTON H. SCHLOSBERG
------------------------
Hilton H. Schlosberg       Vice Chairman of the Board of        March 15, 2006
                           Directors, President, Chief 
                           Operating Officer, Chief
                           Financial Officer and Secretary
                           (principal financial officer,
                           controller and principal
                           accounting officer)

/s/ NORMAN C. EPSTEIN
------------------------
Norman C. Epstein          Director                             March 15, 2006

/s/ BENJAMIN M. POLK
------------------------
Benjamin M. Polk           Director                             March 15, 2006

/s/ SYDNEY SELATI
------------------------
Sydney Selati              Director                             March 15, 2006

/s/ HAROLD C. TABER, JR.
------------------------
Harold C. Taber, Jr.       Director                             March 15, 2006

/s/ MARK S. VIDERGAUZ
------------------------
Mark S. Vidergauz          Director                             March 15, 2006

                                       64

<PAGE>


INDEX TO EXHIBITS    

     The following designated exhibits,  as indicated below, are either filed or
furnished,  as applicable  herewith or have  heretofore  been filed or furnished
with the Securities and Exchange  Commission under the Securities Act of 1933 or
the Securities Exchange Act of 1934 as indicated by footnote.

10.34 Amended and Restated Loan and Security  Agreement by and between  Comerica
     Bank California and Hansen Beverage Company dated July 15, 2005.

10.35 Stock option  Agreement dated as of November 5, 2004 by and between Hansen
     Natural Corporation and Sydney Selati.

10.36 Stock option  Agreement  dated as of March 23, 2005 by and between  Hansen
     Natural Corporation and Rodney Sacks.

10.37 Stock option  Agreement  dated as of March 23, 2005 by and between  Hansen
     Natural Corporation and Hilton H. Schlosberg.

10.38 Stock option  Agreement  dated as of March 23, 2005 by and between  Hansen
     Natural Corporation and Mark Hall.

10.39 Stock option  Agreement  dated as of March 23, 2005 by and between  Hansen
     Natural Corporation and Michael Schott.

10.40 Stock  option  Agreement  dated as of  September  28,  2005 by and between
     Hansen Natural Corporation and Mark Hall.

10.41 Stock option  Agreement dated as of November 1, 2005 by and between Hansen
     Natural Corporation and Kirk Blower.

10.42 Stock option Agreement dated as of November 11, 2005 by and between Hansen
     Natural Corporation and Harold C. Taber.

10.43 Stock option Agreement dated as of November 11, 2005 by and between Hansen
     Natural Corporation and Norman Epstein.

10.44 Stock option Agreement dated as of November 11, 2005 by and between Hansen
     Natural Corporation and Mark Vidergauz.

10.45 Stock option Agreement dated as of November 11, 2005 by and between Hansen
     Natural Corporation and Benjamin Polk.

10.46 Stock option Agreement dated as of November 11, 2005 by and between Hansen
     Natural Corporation and Hilton H. Schlosberg.

10.47 Stock option Agreement dated as of November 11, 2005 by and between Hansen
     Natural Corporation and Rodney Sacks.

10.48 Stock option Agreement dated as of November 11, 2005 by and between Hansen
     Natural Corporation and Mark Hall.

10.49 Stock option Agreement dated as of November 11, 2005 by and between Hansen
     Natural Corporation and Mike Schott.

10.50 Stock option Agreement dated as of November 11, 2005 by and between Hansen
     Natural Corporation and Thomas Kelly.

21   Subsidiaries(1)

23   Independent Auditors' Consent

31.1 Certification  by CEO  pursuant  to  Rule  13A-14(a)  or  15D-14(a)  of the
     Securities  Exchange Act of 1934, as adopted pursuant to Section 302 of the
     Sarbanes-Oxley Act of 2002

31.2 Certification  by CFO  pursuant  to  Rule  13A-14(a)  or  15D-14(a)  of the
     Securities  Exchange Act of 1934, as adopted pursuant to Section 302 of the
     Sarbanes-Oxley Act of 2002

32.1 Certification  by CEO  pursuant  to 18  U.S.C.  Section  1350,  as  adopted
     pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2 Certification  by CFO  pursuant  to 18  U.S.C.  Section  1350,  as  adopted
     pursuant  to  Section  906  of the  Sarbanes-Oxley  Act  of  2002  

(1) Filed  previously  as an exhibit to Form 10-Q for the quarter ended June 30,
2005.

                                       65

<PAGE>

INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES


                                                                            Page
                                                                   -------------
HANSEN NATURAL CORPORATION AND SUBSIDIARIES


Report of Independent Registered Public Accounting Firm                       67

Consolidated Balance Sheets as of December 31, 2005 and 2004                  68

Consolidated Statements of Income for the years ended December 31, 2005, 
2004 and 2003                                                                 69

Consolidated Statements of Stockholders' Equity for the years ended
December 31, 2005, 2004 and 2003                                              70

Consolidated Statements of Cash Flows for the years ended December 31, 2005, 
2004 and 2003                                                                 71

Notes to Consolidated Financial Statements for the years ended December 31, 

2005, 2004 and 2003                                                           73

Financial  Statement  Schedule - Valuation and Qualifying  Accounts for
the years ended December 31, 2005, 2004 and 2003                              90

                                       66

<PAGE>


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



The Board of Directors and Stockholders 
Hansen Natural Corporation
Corona, California



We have audited the accompanying  consolidated  balance sheets of Hansen Natural
Corporation and  subsidiaries  ("the Company") as of December 31, 2005 and 2004,
and the related consolidated statements of income, stockholders equity, and cash
flows for each of the three years in the period ended  December  31,  2005.  Our
audits also  included the  financial  statement  schedule  listed in Item 15(b).
These   financial   statements   and  financial   statement   schedule  are  the
responsibility of the Companys  management.  Our responsibility is to express an
opinion on the financial  statements and financial  statement  schedule based on
our audits.

We conducted our audits in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion,  such consolidated  financial  statements present fairly, in all
material respects, the financial position of the Company as of December 31, 2005
and 2004,  and the results of their  operations and their cash flows for each of
the three years in the period  ended  December  31,  2005,  in  conformity  with
accounting principles generally accepted in the United States of America.  Also,
in our opinion,  such financial statement schedule,  when considered in relation
to the  basic  consolidated  financial  statements  taken as a  whole,  presents
fairly, in all material respects, the information set forth therein.

We have also  audited,  in accordance  with the standards of the Public  Company
Accounting  Oversight Board (United States),  the  effectiveness of the Companys
internal control over financial  reporting as of December 31, 2005, based on the
criteria  established  in Internal  Control-Integrated  Framework  issued by the
Committee of Sponsoring  Organizations of the Treadway Commission and our report
dated March 9, 2006 expressed an unqualified opinion on management's  assessment
of the effectiveness of the Company's internal control over financial  reporting
and an  unqualified  opinion  on the  effectiveness  of the  Company's  internal
control over financial reporting.


DELOITTE & TOUCHE LLP
Costa Mesa, California
March 9, 2006


                                       67

<PAGE>

HANSEN NATURAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2005 AND 2004

<TABLE>

                                                                                  2005                  2004
                                                                           -------------------   --------------------
                                ASSETS
                                ------
<S>                                                                        <C>                   <C>    
CURRENT ASSETS:
Cash and cash equivalents                                                       $  61,654,284           $  3,676,119
Short-term investments (Note 2)                                                    11,860,665             17,300,000
Accounts receivable, net                                                           28,751,588             12,650,055
Inventories (Note 3)                                                               31,399,628             22,406,054
Prepaid expenses and other current assets                                             477,237                638,967
Prepaid income taxes                                                                  637,794
Deferred income tax asset (Note 9)                                                  5,505,264              3,708,942
                                                                           -------------------   --------------------
     Total current assets                                                         140,286,460             60,380,137

PROPERTY AND EQUIPMENT, net (Note 4)                                                3,742,958              2,964,064

INTANGIBLE AND OTHER ASSETS:
Trademarks, net (Note 5)                                                           19,103,049             18,351,804
Deposits and other assets                                                             757,215                326,312
                                                                           -------------------   --------------------
     Total intangible and other assets                                             19,860,264             18,678,116
                                                                           -------------------   --------------------
                                                                                $ 163,889,682           $ 82,022,317
                                                                           ===================   ====================

                 LIABILITIES AND STOCKHOLDERS' EQUITY
                -------------------------------------
CURRENT LIABILITIES:
Accounts payable                                                                $  26,613,663           $ 14,542,753
Accrued liabilities                                                                 2,481,703              1,582,968
Accrued compensation                                                                3,346,243              1,831,627
Current portion of long-term debt (Note 6)                                            515,221                437,366
Income taxes payable                                                                        -                346,449
                                                                           -------------------   --------------------
     Total current liabilities                                                     32,956,830             18,741,163

LONG-TERM DEBT, less current portion (Note 6)                                          10,123                146,486

DEFERRED INCOME TAX LIABILITY (Note 9)                                              5,413,880              4,563,439

COMMITMENTS AND CONTINGENCIES (Note 8)                                                      -                      -

STOCKHOLDERS' EQUITY (Note 10):
Common stock - $0.005 par value; 30,000,000 shares                                    
     authorized; 22,607,128 shares issued, 22,193,606
     outstanding in 2005; 22,239,728 shares issued, 21,826,206
     outstanding in 2004 (Notes 1 and 7)                                              113,036                111,198
Additional paid-in capital                                                         19,917,748             15,757,942
Retained earnings                                                                 106,292,610             43,516,634
Common stock in treasury, at cost; 413,522 shares in 2005 and 2004                   (814,545)              (814,545)
                                                                           -------------------   --------------------
     Total stockholders' equity                                                   125,508,849             58,571,229
                                                                           -------------------   --------------------
                                                                                $ 163,889,682           $ 82,022,317
                                                                           ===================   ====================
</TABLE>


          See accompanying notes to consolidated financial statements.

                                       68

<PAGE>

HANSEN NATURAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME 
FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

<TABLE>

                                                                 2005                    2004                     2003
                                                         ---------------------   ---------------------    ---------------------
<S>                                                      <C>                     <C>                      <C>    

NET SALES                                                       $ 348,886,366           $ 180,341,135            $ 110,352,196

COST OF SALES                                                     166,343,118              96,874,750               66,577,168
                                                         ---------------------   ---------------------    ---------------------

GROSS PROFIT                                                      182,543,248              83,466,385               43,775,028

OPERATING EXPENSES:
Selling, general and administrative                                79,029,837              49,507,137               33,887,045
Amortization of trademarks                                             70,102                  73,046                   61,888
                                                         ---------------------   ---------------------    ---------------------

     Total operating expenses                                      79,099,939              49,580,183               33,948,933
                                                         ---------------------   ---------------------    ---------------------

OPERATING INCOME                                                  103,443,309              33,886,202                9,826,095

NONOPERATING INCOME (EXPENSE):
Interest and financing expense                                        (76,531)                (41,988)                 (72,592)
Interest income                                                     1,427,803                  93,983                    5,579
                                                         ---------------------   ---------------------    ---------------------

     Net nonoperating income (expense)                              1,351,272                  51,995                  (67,013)
                                                         ---------------------   ---------------------    ---------------------

INCOME BEFORE PROVISION FOR                                       
     INCOME TAXES                                                 104,794,581              33,938,197                9,759,082

PROVISION FOR                                                      
     INCOME TAXES (Note 9)                                         42,018,605              13,551,393                3,828,678
                                                         ---------------------   ---------------------    ---------------------

NET INCOME                                                      $  62,775,976           $  20,386,804            $   5,930,404
                                                         =====================   =====================    =====================

NET INCOME PER COMMON SHARE:
     Basic (Note 7)                                             $        2.85           $        0.96            $        0.29
                                                         =====================   =====================    =====================
     Diluted (Note 7)                                           $        2.59           $        0.86            $        0.28
                                                         =====================   =====================    =====================

NUMBER OF COMMON SHARES USED IN PER SHARE COMPUTATIONS:
     Basic (Note 7)                                                22,055,983              21,333,784               20,557,420
                                                         =====================   =====================    =====================
     Diluted (Note 7)                                              24,272,235              23,619,880               21,524,314
                                                         =====================   =====================    =====================

</TABLE>


          See accompanying notes to consolidated financial statements.

                                       69

<PAGE>

HANSEN NATURAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY 
FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

<TABLE>


                                                                                                             
                                Common stock           Additional                          Treasury stock              Total
                         ---------------------------     paid-in        Retained      -------------------------    stockholders'
                             Shares        Amount        capital         earnings       Shares        Amount          equity
                         --------------- ----------- --------------- ---------------- -----------  ------------   ------------------
<S>                      <C>             <C>         <C>             <C>              <C>         <C>           <C>

 Balance,
      January 1, 2003        20,519,528   $ 102,598    $ 11,883,265    $  17,199,426    (413,522)   $ (814,545)      $ 28,370,744

 Exercise of stock              
     options                    730,200       3,650         744,780                                                       748,430

 Net income                                                                5,930,404                                    5,930,404
                         --------------- ----------- --------------- ---------------- -----------  ------------   ------------------

 Balance,
      December 31, 2003      21,249,728     106,248      12,628,045       23,129,830    (413,522)     (814,545)        35,049,578

 Exercise of stock              
     options                    990,000       4,950       1,714,978                                                     1,719,928

 Reduction of tax liability
   in connection with the
   exercise of certain
   stock options                                          1,414,919                                                     1,414,919

 Net income                                                               20,386,804                                   20,386,804
                         --------------- ----------- --------------- ---------------- ----------- ------------- --------------------

 Balance,
      December 31, 2004      22,239,728     111,198      15,757,942       43,516,634    (413,522)     (814,545)        58,571,229

 Exercise of stock                                                                   
     options                    367,400       1,838       1,165,922                                                     1,167,760

 Reduction of tax liability
   in connection with the
   exercise of certain
   stock options                                          2,993,884                                                     2,993,884

 Net income                                                               62,775,976                                   62,775,976
                         --------------- ----------- --------------- ---------------- ----------- ------------- --------------------

 Balance,
      December 31, 2005      22,607,128   $ 113,036    $ 19,917,748    $ 106,292,610    (413,522)   $ (814,545)      $125,508,849
                         =============== =========== =============== ================ =========== ============= ====================
</TABLE>


          See accompanying notes to consolidated financial statements.

                                       70

<PAGE>

HANSEN NATURAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003



<TABLE>

                                                                           2005                 2004                 2003
                                                                     ------------------   ------------------   ------------------
<S>                                                                  <C>                  <C>                  <C>   

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                                $ 62,775,976         $ 20,386,804         $  5,930,404
Adjustments to reconcile net income to
     net cash provided by operating activities:
     Amortization of trademark                                                  70,102               73,046               61,888
     Depreciation and other amortization                                     1,008,629              770,413              584,197
     Impairment of operating equipment                                                              587,877                    
     Loss on disposal of property and equipment                                180,085              120,200               31,992
     Deferred income taxes                                                    (945,881)            (172,543)            (360,524)
     Provision for doubtful accounts                                            86,783             (116,311)              16,996
     Effect on cash of changes in operating assets and liabilities
         Accounts receivable                                               (16,188,316)          (7,160,761)             559,423
         Inventories                                                        (8,993,574)          (4,762,268)          (6,000,052)
         Prepaid expenses and other current assets                             161,730             (157,190)             500,713
         Prepaid income taxes                                                 (637,794)
         Accounts payable                                                   12,070,910            8,021,351            1,789,141
         Accrued liabilities                                                   898,735              397,626              504,383
         Accrued compensation                                                1,514,616              948,168              573,395
         Income taxes payable/receivable                                     2,647,435            1,114,105            1,292,458
                                                                     ------------------   ------------------   ------------------
            Net cash provided by operating activities                       54,649,436           20,050,517            5,484,414

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of held-to-maturity investments                                   (9,642,565)
Sales and maturities of held-to-maturity investments                         4,481,900
Purchases of available for sale investments                                (13,000,000)         (23,600,000)
Sales of available for sale investments                                     23,600,000            6,300,000
Purchases of property and equipment                                         (1,519,760)          (1,260,068)          (1,627,490)
Proceeds from sale of property and equipment                                   178,571               24,698               70,826
Additions to trademarks                                                       (821,347)            (131,146)            (995,137)
(Increase) decrease in deposits and other assets                               (60,869)            (104,210)             114,267
                                                                     ------------------   ------------------   ------------------
            Net cash provided by (used in) investing activities              3,215,930          (18,770,726)          (2,437,534)

CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt                                        (1,054,961)            (422,385)          (3,234,445)
Proceeds from issuance of common stock                                       1,167,760            1,719,928              748,430
                                                                     ------------------   ------------------   ------------------
            Net cash provided by (used in) financing activities                112,799            1,297,543           (2,486,015)
                                                                     ------------------   ------------------   ------------------

NET INCREASE IN CASH AND
     CASH EQUIVALENTS                                                       57,978,165            2,577,334              560,865
CASH AND CASH EQUIVALENTS, beginning of year                                 3,676,119            1,098,785              537,920
                                                                     ------------------   ------------------   ------------------
CASH AND CASH EQUIVALENTS, end of year                                    $ 61,654,284         $  3,676,119         $  1,098,785
                                                                     ==================   ==================   ==================

SUPPLEMENTAL INFORMATION:
  Cash paid during the year for:
     Interest                                                             $     65,119         $     35,510         $     76,306
                                                                     ==================   ==================   ==================
     Income taxes                                                         $ 40,954,842         $ 12,538,355         $  2,896,743
                                                                     ==================   ==================   ==================
</TABLE>


          See accompanying notes to consolidated financial statements.

                                       71

<PAGE>

HANSEN NATURAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

NONCASH TRANSACTIONS:

     During 2005 and 2004,  the Company  entered into capital leases of $996,454
and $403,902, respectively, for the acquisition of promotional vehicles.

     During 2005 and 2004, the Company  reduced current income taxes payable and
increased additional paid-in capital in the amount of $2,993,884 and $1,414,919,
respectively, in connection with the exercise of certain stock options.


See accompanying notes to consolidated financial statements.

                                       72

<PAGE>

HANSEN NATURAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Organization  Hansen  Natural  Corporation  (the "Company" or "Hansen") was
incorporated in Delaware on April 25, 1990. The Company is a holding company and
has no operating business except through its direct  wholly-owned  subsidiaries,
Hansen Beverage  Company  ("HBC") which was  incorporated in Delaware on June 8,
1992 and Monster LDA Company ("MLDA") formally known as Hard e Beverage Company,
and previously  known as Hard Energy Company and CVI Ventures,  Inc.,  which was
incorporated  in Delaware on April 30, 1990.  HBC conducts the vast  majority of
the Companys operating business and generates  substantially all of the Companys
operating revenues.  References herein to "Hansen" or the "Company" when used to
describe the operating business of the Company are references to the business of
HBC  unless  otherwise  indicated,  and  references  herein to MLDA when used to
describe  the  operating  business of MLDA,  are to the  business of MLDA unless
otherwise indicated.

     In addition, HBC, through its wholly-owned  subsidiaries,  Blue Sky Natural
Beverage Co. ("Blue Sky") and Hansen Junior Juice Company  ("Junior Juice") owns
and operates the natural soda business  under the Blue Sky(R)  trademark and the
Junior   Juice(R)   beverage   business  under  the  Junior  Juice   trademarks,
respectively.

     Nature of Operations - Hansen markets and distributes  Hansen's(R)  Natural
Sodas, Signature Sodas, fruit juice Smoothies, energy drinks, Energade(R) energy
sports  drinks,  E20  Energy  Water(R),   Sparkling  Lemonades  and  Orangeades,
multi-vitamin juice drinks in aseptic packaging,  Junior Juice juice, iced teas,
lemonades and juice cocktails,  apple juice, cider and juice blends, Blue Sky(R)
brand  carbonated  beverages,  Monster  Energy(R)  brand energy drinks,  Lost(R)
Energy brand energy drinks, Rumba(TM) brand Energy Juice and Fizzit(TM) powdered
drink mixes.

     Basis of Presentation - The accompanying  consolidated financial statements
have been prepared in accordance with accounting  principles  generally accepted
in the United States of America ("generally accepted accounting principles").

     Principles  of  Consolidation  - The  accompanying  consolidated  financial
statements  include the  accounts of Hansen and its wholly  owned  subsidiaries,
HBC,  MLDA,  Blue  Sky  and  Junior  Juice  since  their   respective  dates  of
incorporation.  All intercompany  balances and transactions have been eliminated
in consolidation.

     Stock Split - On August 8, 2005,  the common stock of the Company was split
on a  two-for-one  basis  through  a 100%  stock  dividend.  All  per-share  and
outstanding share information has been presented to reflect the stock split.

          Cash and Cash  Equivalents  - The Company  invests  cash  available in
     various  investments  from  time to time  including,  but not  limited  to,
     investments of the following  nature:  auction rate  securities,  corporate
     bank debt, commercial paper,  certificates of deposit, U.S. treasury bills,
     notes and bonds,  money  market funds and tax exempt  securities  including
     municipal notes.  Those investments that have maturity dates of ninety days
     or less are included in Cash and cash equivalents whereas those investments
     that  have  maturity  dates  in  excess  of  ninety  days are  included  in
     "Short-term  investments".  The  Company  did not have any  investments  in
     auction rate securities at December 31, 2005 but did hold such  investments
     at December 31, 2004. As a result, we reclassified $17.3 million from "Cash
     and  cash  equivalents"  to  "Short-term   investments"  in  our  Condensed
     Consolidated  Balance Sheet as of December 31, 2004. This  reclassification
     has no impact on previously  reported total current  assets,  total assets,
     working  capital,  or results of operations and does not affect  previously
     reported cash flows from operating or financing activities.  Throughout the
     year,  the Company had amounts on deposit at a financial  institution  that
     exceed the depository insurance limits. The Company has not experienced any
     loss as a result of these  deposits and does not expect to incur any losses
     in the future.

                                       73

<PAGE>

     Inventories  - Inventories  are valued at the lower of first-in,  first-out
(FIFO) cost or market value (net realizable value).

     Property  and  Equipment  -  Property  and  equipment  are  stated at cost.
Depreciation of furniture, office equipment,  equipment and vehicles is based on
their  estimated  useful lives (three to ten years) and is calculated  using the
straight-line  method.  Amortization  of leasehold  improvements is based on the
lesser of their estimated useful lives or the terms of the related leases and is
calculated using the straight-line method.

     Trademarks - Trademarks  represents the Companys exclusive ownership of the
Hansens  trademark in connection with the manufacture,  sale and distribution of
beverages  and  water  and  non-beverage  products  and  the  Monster  Energy(R)
trademark  in  connection  with  the  manufacture,   sale  and  distribution  of
supplements and beverages. The Company also owns a number of other trademarks in
the United  States as well as in a number of  countries  around  the world.  The
Company  also owns the Blue Sky(R)  trademark,  which was  acquired in September
2000,  and the Junior  Juice(R)  trademark,  which was acquired in May 2001. The
Company amortizes its trademarks over their useful lives of 1 to 20 years.

     Long-Lived Assets - Management regularly reviews property and equipment and
other  long-lived  assets,  including  certain  identifiable  intangibles,   for
possible impairment.  This review occurs annually,  or more frequently if events
or changes in circumstances indicate the carrying amount of the asset may not be
recoverable.  If there is  indication of impairment of property and equipment or
amortizable  intangible assets,  then management  prepares an estimate of future
cash flows  (undiscounted  and without interest charges) expected to result from
the use of the asset and its eventual disposition.  If these cash flows are less
than the carrying amount of the asset, an impairment loss is recognized to write
down the asset to its estimated  fair value.  The fair value is estimated at the
present value of the future cash flows  discounted at a rate  commensurate  with
management's  estimates of the business risks. Annually, or earlier, if there is
indication  of  impairment  of  identified  intangible  assets  not  subject  to
amortization,  management  compares the  estimated  fair value with the carrying
amount  of the  asset.  An  impairment  loss is  recognized  to  write  down the
intangible  asset to its  fair  value if it is less  than the  carrying  amount.
Preparation of estimated expected future cash flows is inherently subjective and
is based on management's best estimate of assumptions concerning expected future
conditions.  For the year  ended  December  31,  2004,  the  Company  recognized
impairment on operating equipment in cost of sales of $587,877.  For 2005, there
was no impairment losses recorded.

     Revenue  Recognition  - The  Company  recognizes  revenue  when  persuasive
evidence of an  arrangement  exists,  delivery has occurred,  the sales price is
fixed or  determinable  and  collectibility  is reasonably  assured.  Management
believes an adequate provision has been made for estimated  returns,  allowances
and cash  discounts  based on the  Company's  historical  experience,  which are
accounted for as a reduction of gross sales.

     Freight Costs and  Reimbursement of Freight Costs - In accordance with EITF
No. 00-10,  Accounting for Shipping and Handling Fees and Costs,  reimbursements
of freight  charges are recorded in net sales in the  accompanying  consolidated
statements  of income.  For the years ended  December 31,  2005,  2004 and 2003,
freight-out  costs  amounted to $19.1  million,  $10.7 million and $7.0 million,
respectively,  and have been  recorded  in selling,  general and  administrative
expenses in the accompanying consolidated statements of income.

                                       74

<PAGE>

     Advertising  and  Promotional   Allowances  -  The  Company   accounts  for
advertising  production  costs by expensing such production costs the first time
the related  advertising takes place.  Advertising  expenses,  including but not
limited to production costs,  amounted to $18.0 million,  $10.8 million and $7.9
million for the years ended  December  31,  2005,  2004 and 2003,  respectively.
Advertising  expenses  are  included  in  selling,  general  and  administrative
expenses.

     Income Taxes - The Company  accounts for income taxes under the  provisions
of SFAS No. 109,  Accounting  for Income  Taxes.  This  statement  requires  the
recognition of deferred tax assets and liabilities  for the future  consequences
of events that have been recognized in the Companys financial  statements or tax
returns.  Measurement of the deferred items is based on enacted tax laws. In the
event the future  consequences of differences  between financial reporting bases
and tax bases of the Companys  assets and  liabilities  result in a deferred tax
asset,  SFAS No. 109 requires an evaluation of the  probability of being able to
realize  the future  benefits  indicated  by such asset.  A valuation  allowance
related to a deferred tax asset is recorded when it is more likely than not that
some portion or all of the deferred tax asset will not be realized.

     Stock-Based  Compensation - The Company accounts for its stock option plans
in accordance with Accounting  Principles Board (APB) Opinion No.25,  Accounting
for Stock Issued to Employees,  and related  Interpretations.  Under APB Opinion
No.25, no compensation  expense is recognized  because the exercise price of the
Companys  employee stock options equals the market price of the underlying stock
at the date of the grant. In December 2002, the Financial  Accounting  Standards
Board    ("FASB")    issued   SFAS   No.148,    Accounting    for    Stock-Based
Compensation-Transition  and  Disclosure.   Statement  of  Financial  Accounting
Standards  ("SFAS")  No.148  amends  SFAS  No.123,  Accounting  for  Stock-based
Compensation,  and was effective immediately upon issuance.  The Company follows
the requirements of APB Opinion No.25 and the disclosure-only  provision of SFAS
No.123, as amended by SFAS No.148. Had compensation cost for the Companys option
plans  been  determined  based on the fair  value at the grant  date for  awards
consistent  with the provisions of SFAS No. 123, the Companys net income and net
income per common share for the years ended  December  31,  2005,  2004 and 2003
would have been reduced to the pro forma amounts indicated below.  Additionally,
the effect of the stock  split,  which was  effective  August 8, 2005,  has been
given effect to all years presented (Note 1).


<TABLE>

                                                   2005                 2004                 2003
                                               --------------       --------------       --------------
<S>                                            <C>                  <C>                  <C>    

Net income, as reported                        $  62,775,976        $  20,386,804        $   5,930,404
Less: total stock-based employee compensation                                                              
    expense determined under fair value                                                                    
    based method for all awards, net of related                                                                  
    tax effects                                    2,682,562              356,156              216,250     
                                               --------------       --------------       -------------- 
Net income, pro forma                          $  60,093,414        $  20,030,648        $   5,714,154
                                               ==============       ==============       ==============
                                               
Net income per common share, as reported:
    Basic                                      $        2.85        $        0.96        $        0.29
    Diluted                                    $        2.59        $        0.86        $        0.28

Net income per common share, pro forma:
    Basic                                      $        2.72        $        0.94        $        0.28
    Diluted                                    $        2.48        $        0.85        $        0.27

</TABLE>


                                       75

<PAGE>

The fair value of each option  grant is estimated on the date of grant using the
Black-Scholes   option-pricing   model  with  the   following   weighted-average
assumptions used:



<TABLE>

                                                                  Risk-Free                                
           Dividend Yield        Expected Volatility            Interest Rate            Expected Lives
          -----------------   ---------------------------   -----------------------   ---------------------
<S>       <C>                 <C>                           <C>                       <C>    
2005             0%                       62%                      4.4%                       7 years
2004             0%                       46%                      4.0%                       8 years
2003             0%                       12%                      3.5%                       8 years

</TABLE>


     Net Income Per Common Share - In accordance with SFAS No. 128, Earnings per
Share,  net income per common share,  on a basic and diluted basis, is presented
for all  periods.  Basic net income per share is computed by dividing net income
by the weighted average number of common shares outstanding . Diluted net income
per share is computed by dividing net income by the weighted  average  number of
common and dilutive common equivalent shares outstanding.

     Concentration  Risk - Certain of the Companys  products utilize  components
(raw materials and/or co-packing  services) from a limited number of sources.  A
disruption  in the  supply of such  components  could  significantly  affect the
Companys revenues from those products, as alternative sources of such components
may not be available  at  commercially  reasonable  rates or within a reasonably
short time period.  The Company  continues to take steps on an ongoing  basis to
secure the availability of alternative  sources for such components and minimize
the risk of any disruption in production.

     One customer accounted for approximately 18% and 13% of the Company's sales
for the years  ended  December  31, 2005 and 2004,  respectively.  A decision by
that, or any other large  customer,  to decrease the amount  purchased  from the
Company or to cease carrying the Companys products could have a material adverse
effect  on  the  Companys  financial  condition  and  consolidated   results  of
operations.

     During 2005, 2004 and 2003,  sales outside of California  represented  62%,
56% and 47% of the aggregate sales of the Company, respectively.

     Credit Risk - The  Company  sells its  products  nationally,  primarily  to
retailers  and  beverage  distributors.  The  Company  performs  ongoing  credit
evaluations  of its  customers and generally  does not require  collateral.  The
Company maintains reserves for estimated credit losses,  and historically,  such
losses have been within managements expectations.

     Fair Value of Financial  Instruments  - At December 31, 2005 and 2004,  the
carrying values of cash,  accounts  receivable and accounts payable  approximate
fair  value  because  of the  short  maturity  of these  financial  instruments.
Long-term debt bears interest at a rate comparable to the prime rate; therefore,
management  believes  the  carrying  amount for the  outstanding  borrowings  at
December 31, 2005 approximates fair value.

     Use of Estimates - The preparation of the consolidated financial statements
in conformity with generally accepted accounting  principles requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities  and disclosure of contingent  assets and liabilities at the date of
the  financial  statements  and the  reported  amounts of revenues  and expenses
during the reporting period. Actual results could differ from those estimates.

     Segment  Information  - The Company  has two  reportable  segments,  namely
Direct Store Delivery ("DSD"),  whose principal products comprise energy drinks,
and Warehouse, whose principal products comprise juice based and soda beverages.

                                       76

<PAGE>

     Newly Issued  Accounting  Pronouncements  - In November  2004,  FASB issued
statement of Financial  Accounting  Standard No. 151, "Inventory Costs". The new
Statement  amends  Accounting  Research  Bulletin No. 43, Chapter 4,  "Inventory
Pricing",  to clarify  the  accounting  for  abnormal  amounts of idle  facility
expense,  freight,  handling costs, and wasted material. This Statement requires
that those items be  recognized  as  current-period  charges and  requires  that
allocation of fixed  production  overheads to the cost of conversion be based on
the normal  capacity of the production  facilities.  This statement is effective
for fiscal years  beginning  after June 15, 2005. The adoption of this statement
will have an  immaterial  impact  on the  financial  condition  and  results  of
operations of the Company.

     In December  2004,  the FASB issued SFAS No. 153,  Exchanges of Nonmonetary
Assets  An  Amendment  of  APB  Opinion  No.  29,   Accounting  for  Nonmonetary
Transactions.  This  statement  amends  APB  Opinion  No.  29 to  eliminate  the
exception for nonmonetary exchanges of similar productive assets and replaces it
with a general  exception for exchanges of  nonmonetary  assets that do not have
commercial  substance.  A nonmonetary  exchange has commercial  substance if the
future cash flows of the entity are expected to change significantly as a result
of the  exchange.  The  provision in SFAS No. 153 is effective  for  nonmonetary
asset exchanges  incurred during fiscal years beginning after June 15, 2005. The
adoption  of this  statement  will have an  immaterial  impact on the  financial
condition and results of operations of the Company.

     In December 2004, the FASB issued SFAS No. 123 (revised 2004),  Share-Based
Payment.  This  Statement  replaces FASB  Statement No. 123 and  supersedes  APB
Opinion No. 25. SFAS No.  123(R) will require the fair value of all stock option
awards issued to employees to be recorded as an expense over the related vesting
period. The Statement also requires the recognition of compensation  expense for
the fair value of any unvested  stock option awards  outstanding  at the date of
adoption.  This  standard  is  effective  for the Company as of January 1, 2006.
Management  has  concluded  it will adopt the modified  prospective  application
method. Management has not completed their evaluation of the effect of these new
rules  on the  Companys  financial  statements  but  expects  the  effect  to be
material.

     In May  2005,  FASB  issued  SFAS No.  154,  Accounting  Changes  and Error
Corrections, which establishes, unless impracticable,  retrospective application
as the required  method for  reporting a change in  accounting  principle in the
absence  of  explicit  transition  requirements  specific  to the newly  adopted
accounting  principle.  The statement provides guidance for determining  whether
retrospective  application of a change in accounting principle is impracticable.
The statement also addresses the reporting of a correction of error by restating
previously issued financial statements. SFAS No. 154 is effective for accounting
changes and  corrections of errors made in fiscal years beginning after December
15,  2005.  The Company  does not expect  adoption of this  statement  to have a
material impact on its financial condition or results of operations.

2.      SHORT-TERM INVESTMENTS

     We consider all  short-term,  highly  liquid  investments  having  original
maturities of three months or less to be cash equivalents.  All investments with
original  maturities  greater than three months but less than twelve  months are
considered to be short-term investments.

     We classify our debt securities in one of two categories:  held-to-maturity
or available-for-sale. Held-to-maturity securities are those securities in which
we have the  positive  intent  and  ability to hold  until  maturity.  All other
securities    not   included   in    held-to-maturity    are    classified    as
available-for-sale. No securities are held for speculative or trading purposes.

     Held-to-maturity  securities are recorded at amortized  cost,  adjusted for
the amortization of accretion of premiums or discounts.  A decline in the market
value of any  held-to-maturity  security  below  cost that is deemed  other than
temporary  results  in a  reduction  in  carrying  amount  to  fair  value.  The
impairment  is charged to  earnings  and a new cost  basis for the  security  is
established.  Premiums and  discounts are amortized or accreted over the life of
the  related  held-to-maturity  security  as an  adjustment  to yield  using the
effective-interest  method.  The Company  evaluates  whether the decline in fair
value of its  investments  is  other-than  temporary at each  quarter-end.  This
evaluation  consists of a review by  management,  and  includes  market  pricing
information  and maturity  dates for the  securities  held,  market and economic
trends in the  industry  and  information  on the  investee  companys  financial
condition.

                                       77

<PAGE>

     The carrying  amount,  gross  unrealized  holding gains,  gross  unrealized
holding  losses  and fair  value  for  available-for-sale  and  held-to-maturity
short-term investments at December 31, 2005 and 2004 are as follows:


<TABLE>

                                                                                              Continuous    
                                                                                Continuous    Unrealized    
                                                                                Unrealized        Loss       
                                       Gross         Gross                         Loss        Position     
                                     Unrealized     Unrealized                   Position       greater      
                        Carrying      Holding       Holding           Fair       less than      than 12      
                         Amount        Gains        Losses           Value       12 Months       Months      
                     -------------- -------------  ------------  ------------- ------------- -------------
<S>                  <C>            <C>            <C>           <C>           <C>           <C>
December 31, 2005
-------------------- 
Held-to-maturity
  Debt securities of                                                                                      
   government                                                                                            
   sponsored                                                                                             
   entities           $  2,951,409  $        284   $       152   $  2,951,541  $        152  $             
  Corporate bonds        2,209,256                       1,055      2,208,201         1,055              
                      ------------- -------------  ------------  ------------- ------------- -------------
                         5,160,665           284         1,207      5,159,742         1,207             
Available-for-sale
  Municipal bonds        6,700,000                                  6,700,000
                      ------------- -------------  ------------  ------------- ------------- -------------
                         6,700,000                                  6,700,000                           
                      ------------- -------------  ------------  ------------- ------------- -------------
                      $ 11,860,665  $        284   $     1,207   $ 11,859,742  $      1,207  $          
                      ============= =============  ============  ============= ============= =============
                     
December 31, 2004
--------------------
Available-for-sale
  Debt securities of                                                                                      
   government                                                                                            
   sponsored                                                                                             
   entities           $ 10,300,000  $              $             $ 10,300,000  $             $             
  Municipal bonds        7,000,000                                  7,000,000                          
                      ------------- -------------  ------------  ------------- ------------- -------------
                      $ 17,300,000  $              $             $ 17,300,000  $             $          
                      ============= =============  ============  ============= ============= =============
</TABLE>



3.      INVENTORIES

Inventories consist of the following at December 31:

                                      2005                          2004
                               ----------------------       --------------------
         Raw materials          $          10,227,362        $         6,449,520
         Finished goods                    21,172,266                 15,956,534
                               ----------------------       --------------------
                                $          31,399,628        $        22,406,054
                               ======================       ====================

                                       78

<PAGE>

4.      PROPERTY AND EQUIPMENT

Property and equipment consist of the following at December 31:


<TABLE>

                                                               2005                        2004
                                                       ---------------------        --------------------
<S>                                                    <C>                          <C>

Leasehold improvements                                 $            579,240         $           268,068
Furniture and office equipment                                    1,700,131                   1,193,741
Equipment                                                         1,162,944                   1,488,571
Vehicles                                                          2,402,399                   2,359,264
                                                       ---------------------        --------------------
                                                                  5,844,714                   5,309,644
Less accumulated depreciation and amortization                   (2,101,756)                 (2,345,580)
                                                       ---------------------        --------------------
                                                       $          3,742,958         $         2,964,064
                                                       =====================        ====================
    
</TABLE>


5.      TRADEMARK AND TRADEMARK AMORTIZATIONS

     As of December 31, 2004 and 2005, the trademarks were tested for impairment
in accordance  with the  provisions of SFAS No. 142. Fair values were  estimated
based on the  Company's  best  estimate of the expected  present value of future
cash flows.  No amounts were  impaired at those dates.  The  following  provides
additional information concerning the Company's trademarks as of December 31:


                                       2005                        2004
                                 --------------------       --------------------
Amortizing trademarks            $         1,169,248        $         1,169,248
Accumulated amortization                   (289,366)                  (219,264)
                                 --------------------       --------------------
                                             879,882                    949,984
Nonamortizing trademarks                  18,223,167                 17,401,820
                                 --------------------       --------------------
                                 $        19,103,049        $        18,351,804
                                 ====================       ====================


     All  amortizing  trademarks  have been assigned an estimated  finite useful
life, and are amortized on a  straight-line  basis over the number of years that
approximate   their  respective   useful  lives  ranging  from  1  to  20  years
(weighted-average  life of 19 years).  The straight-line  method of amortization
allocates  the cost of the  trademarks  to earnings  over the period of expected
benefit.  Total amortization expense during the year ended December 31, 2005 was
$70,102. As of December 31, 2005, future estimated  amortization expense related
to amortizing trademarks through the year ended December 31, 2010 is:


                       2006             $55,739
                       2007              55,739
                       2008              55,590
                       2009              55,590
                       2010              55,590



6.      DEBT

     HBC has a credit facility from Comerica Bank ("Comerica"),  consisting of a
revolving  line  of  credit.  Such  revolving  line  of  credit  is  secured  by
substantially all of HBC's assets,  including  accounts  receivable,  inventory,
trademarks  and certain  equipment.  In  accordance  with the  provisions of the
credit  facility,  HBC can borrow up to $7.8 million under its revolving line of
credit.  The  revolving  line of credit  remains  effect  through  June 1, 2007.
Interest  on  borrowings  under the line of credit  is based on  Comericas  base
(prime)  rate  minus up to 1.5% or  varying  LIBOR  rates up to 180 days plus an
additional  percentage of up to 1.5%,  depending upon certain  financial  ratios
maintained  by HBC.  The Company had no  outstanding  borrowings  on the line of
credit at December 31, 2005.
       
                                       79

<PAGE>

     The  terms  of the  Companys  line  of  credit  contain  certain  financial
     covenants based on certain financial ratios.  The Company was in compliance
     with its  covenants at December 31, 2005.  Long-term  debt  consists of the
     following at December 31:


<TABLE>

                                                                        2005             2004
                                                                 ---------------  ---------------
<S>                                                             <C>               <C>    
Note payable to Pasco Juices,  Inc.,  collateralized by the                              
Junior Juice trademark,  payable in quarterly  installments                                                         
of varying  amounts  through May 2006,  net of  unamortized                                                         
discount  (based  on  imputed  interest  rate of  4.5%)  of                                                         
$2,636  and  $13,329  at   December   31,  2005  and  2004,                                                         
respectively                                                     $      109,864   $      267,390       
                                                                                                                    
Capital  leases,  collateralized  by vehicles and warehouse                                                         
equipment  acquired,  payable  over  26  to  60  months  in                                                         
monthly  installments at various  effective  interest rates                                                         
ranging  from  4.3% to 9.9%,  with  final  payments  ending                                                         
from  2006 to 2008.                                                     415,480          316,462       
                                                                 ---------------  ---------------
                                                                        525,344          583,852
Less: current portion of long-term debt                                (515,221)        (437,366)
                                                                 ---------------  ---------------
                                                                 $       10,123   $      146,486
                                                                 ===============  ===============

</TABLE>


       Long-term debt is payable as follows:

                  Years ending December 31:
                  2006                     $         515,221
                  2007                                 6,201
                  2008                                 3,922
                                           -----------------
                                           $         525,344
                                           =================


     At December 31, 2005 and 2004, the assets acquired under capital leases had
a net book value of $1,035,046 and $402,245, net of accumulated  depreciation of
$338,901 and $518,988, respectively.

     Interest expense recorded,  including those for capital lease  obligations,
amounted to $55,576,  $35,988 and $66,592 for the years ended December 31, 2005,
2004 and 2003, respectively.

7.      EARNINGS PER SHARE

     A  reconciliation  of the  weighted  average  shares  used in the basic and
diluted  earnings  per common share  computations  for the three and years ended
December 31, 2005 and 2004 is presented below:

<TABLE>

                                                 2005                2004                2003
                                            ---------------     ---------------     ---------------
<S>                                         <C>                 <C>                 <C>    

Weighted-average shares outstanding:
            Basic                               22,055,983          21,333,784          20,557,420
            Dilutive securities                  2,216,252           2,286,096             966,894
                                            ---------------     ---------------     ---------------
            Diluted                             24,272,235          23,619,880          21,524,314
                                            ===============     ===============     ===============
        
</TABLE>


     For the years ended December 31, 2005, 2004 and 2003,  options  outstanding
totaling 507,200, 34,500 and 20,000 shares respectively,  were excluded from the
calculations, as their effect would have been antidilutive.

                                       80

<PAGE>

8.      COMMITMENTS AND CONTINGENCIES

     Operating Leases - The Company leases its warehouse  facility and corporate
offices under a 10 year lease  expiring in 2010.  The facility lease and certain
equipment and other  noncancelable  operating  leases which expire through 2010.
The facility  lease has scheduled  rent  increases  which are accounted for on a
straight-line  basis.  Rent expense  under such leases  amounted to  $1,080,107,
$965,730,  and  $660,616 for the years ended  December 31, 2005,  2004 and 2003,
respectively.  In January 2004, the Company  entered into a lease for additional
warehouse  space.  This  lease  expires  in March  2008  with an option to renew
through 2010.

     Future  minimum  rental  payments at December 31, 2005 under the  operating
leases referred to above are as follows: Year ending December 31:

        Year ending December 31:

        2006                      $   1,289,343
        2007                          1,279,292
        2008                            986,010
        2009                            888,864
        2010 and thereafter             666,648
                                 --------------
                                  $   5,110,157
                                 ==============

     Purchase  Commitments  - The Company has purchase  commitments  aggregating
approximately $11.7 million, which represent commitments made by the Company and
its subsidiaries to various suppliers of raw materials for the manufacturing and
packaging of its products. These obligations vary in terms.

     In addition to the above  obligations,  pursuant to a can supply  agreement
between the Company and Rexam Beverage Can Company ("Rexam") dated as of January
1, 2006,  the Company has  undertaken  to purchase a minimum  volume of 24-ounce
resealable  aluminum  beverage  cans over the four year period  commencing  from
January 1, 2006 through  December 31, 2009.  Should the Company fail to purchase
the minimum volume, the Company will be obligated to reimburse Rexam for certain
capital  reimbursements  on a pro rated basis.  The Companys  maximum  liability
under this  agreement  is $4.3  million  subject to  compliance  by Rexam with a
number of conditions under this agreement.

     The  Company  purchases  various raw  material  items,  including,  but not
limited  to,  flavors,  ingredients  and  containers,  from a limited  number of
resources.  An interruption in supply from any of such resources could result in
the  Companys  inability  to produce  certain  products  for limited or possibly
extended  periods of time.  The aggregate  value of purchases  from suppliers of
such limited resources  described above for the year ended December 31, 2005 was
$46.4 million.

     Advertising  Commitment - In March 2003,  HBC entered  into an  advertising
display  agreement  ("Monorail  Agreement")  with the Las Vegas Monorail Company
("LVMC") in terms of which HBC was granted the right,  in  consideration  of the
payment by HBC to LVMC of the sum of $1,000,000 per year, payable quarterly,  to
advertise and promote its products on a designated four car monorail  vehicle as
well as the right to sell certain of its  products on all monorail  stations for
payment of additional consideration.

     The initial term of the  Monorail  Agreement  commenced  in July 2004.  The
initial  term of the Monorail  Agreement  ends on the first  anniversary  of its
commencement  date.  However  due  to  interruptions  in the  operations  of the
Monorail,  the commencement  date of the initial term was extended to January 1,
2005.  Not less than 120 days before the expiration of the initial term and each
renewal  term,  as the case may be,  HBC has the  right  to renew  the  Monorail
Agreement  for a further  one year term up to a maximum of nine  additional  one
year terms and the LVMC has the right,  notwithstanding such election by HBC, to
terminate the Monorail Agreement at the expiration of the then current term. The
Company renewed the Monorail Agreement for an additional one-year term.

                                       81

<PAGE>

     Licensing Agreements - The Company produces,  sells and distributes Lost(R)
Energy  drinks  under an  exclusive  license  with Lost  International  LLC. The
license  agreement  requires  certain royalty payments to be made related to the
sale of Lost(R) brand  products.  Royalty  expense under this  agreement for the
years 2005, 2004 and 2003 was $594,803, $351,773, and $0, respectively.

     Employment and Consulting Agreements - On June 1, 2003, the Company entered
into an  employment  agreement  with  Rodney C. Sacks and  Hilton H.  Schlosberg
pursuant to which Mr. Sacks and Mr. Schlosberg render services to the Company as
its Chairman and Chief Executive Officer,  and its Vice Chairman,  President and
Chief Financial Officer, respectively. The agreements provide for an annual base
salary of $230,000 each for the 7 months ended December 31, 2003,  increasing to
$245,000 for the year ending December 31, 2004 and increasing by a minimum of 5%
for each  subsequent  twelve-month  period  during  the  employment  period.  In
addition,  the agreement provides for an annual bonus in an amount determined at
the  discretion  of the Board of  Directors  of the  Company  as well as certain
fringe benefits for the period  commencing  June1,  2003 and ending December 31,
2008.  Compensation expense related to these agreements for the years 2005, 2004
and 2003 was $ 799,156, $ 727,619 and $ 548,752, respectively.

     Litigation  - The  Company  is  subject  to, and  involved  in,  claims and
contingencies  related to lawsuits,  and other matters arising out of the normal
course of business.  In management's  opinion, the ultimate liability associated
with such  claims and  contingencies,  if any,  is not likely to have a material
adverse effect on the financial condition of the Company.

     In  September  2004,  Barrington  Capital  Corporation  through  an alleged
successor in interest,  Sandburg Financial  Corporation (both entities with whom
the Company has never had any dealings) served a Notice of Motion  ("Motion") on
the  Company  and  each of its  subsidiaries  as well as on a  number  of  other
unrelated entities and individuals. The Motion seeks to amend a default judgment
granted against a completely unconnected company, Hansen Foods, Inc., to add the
Company  and  its  subsidiary  companies,  as  well as the  other  entities  and
individuals  cited,  as judgment  debtors.  The default  judgment was entered on
February 15, 1996, for $7,626,000  plus legal interest and attorneys fees in the
sum of  $211,000  arising  out of a breach  of  contract  claim  that  allegedly
occurred  in  the  1980s.  Barrington  Capital  Corporations/Sandburg  Financial
Corporations claim is based on the misconceived and unsubstantiated  theory that
the Company and its  subsidiaries  are alter egos  and/or  successors  of Hansen
Foods, Inc. In managements  opinion,  the Motion is based on demonstrably  false
allegations,  misstated legal propositions and lacks any substantial  supporting
evidence.  The Company and its subsidiaries  are vigorously  opposing the Motion
and believe  that the Motion is without any merit.  The Company does not believe
the Motion will have a material adverse effect on the financial condition of the
Company.

     In June 2005,  the Company  filed a complaint in  California  federal court
against North American  Beverage Company ("NAB") seeking an injunction,  damages
and other  relief  arising out of NAB's  infringement  of the  Companys  Monster
Energy(TM)  marks through the promotion and advertising of carbonated  beverages
under the mark  "Flathead  Lake Monster" with the word  "Monster"  predominantly
displayed.   In  response,   in  July  2005,   "Flathead  Lake  Monster",   Inc.
("Flathead"),  a Montana corporation which allegedly licensed the mark "Flathead
Lake Monster" to NAB, filed a complaint  against the Company in federal court in
Montana in which it alleges that it is the licensor of the mark  "Flathead  Lake
Monster"  and sought a  declaration  that its use of that mark for soda does not
infringe the Companys rights in its "Monster Energy" marks.  Flatheads complaint
also in the  alternative  claimed  trademark  infringement by the Company to the
extent a court finds a  likelihood  of confusion  between the parties  marks and
sought an injunction  against the Company from using the term "Monster  Energy",
as well as damages and other  relief.  In December  2005,  all of the  aforesaid
proceedings  including  the  complaint  filed  by the  Company  as  well  as the
complaint filed by Flathead Lake were settled on terms deemed to be favorable to
the Company.

                                       82

<PAGE>

     Guarantees  - The Company  from time to time enters into  certain  types of
contracts that  contingently  require the Company to indemnify  parties  against
third party claims.  These contracts primarily relate to: (i) certain agreements
with the Company's officers, directors and employees under which the Company may
be required to  indemnify  such  persons  for  liabilities  arising out of their
employment relationship,  (ii) certain distribution or purchase agreements under
which the Company may have to indemnify the Company's  customers from any claim,
liability  or loss  arising  out of any  actual or  alleged  injury  or  damages
suffered  in  connection  with the  consumption  or  purchase  of the  Company's
products,  and (iii) certain real estate leases,  under which the Company may be
required to indemnify  property  owners for liabilities and other claims arising
from the Company's use of the applicable premises.

     The terms of such obligations vary. Generally,  a maximum obligation is not
explicitly  stated.  Because the obligated  amounts of these types of agreements
often are not explicitly  stated,  the overall maximum amount of the obligations
cannot be reasonably estimated. Further, the Company believes that its insurance
coverage  is  adequate to cover any  liabilities  or claims  arising out of such
instances referred to above. Historically, the Company has not been obligated to
make significant payments for these obligations and accordingly, the Company has
not valued these  obligations on its consolidated  balance sheets as of December
31, 2005 and 2004.

9.      INCOME TAXES

       Components of the income tax provision are as follows:


<TABLE>

                                                           Year Ended December 31,
                                              2005              2004            2003
                                        ----------------  ----------------  ---------------
<S>                                     <C>               <C>               <C>  
Current income taxes:                                                                     
   Federal                             $     35,273,920   $    11,305,019   $     3,386,946
   State                                      7,690,566         2,418,917           802,256
                                       -----------------  ----------------  ---------------
                                             42,964,486        13,723,936         4,189,202
Deferred income taxes:
   Federal                                   (1,080,085)         (218,967)         (290,357)
   State                                        134,204            46,424           (70,167)
                                       -----------------  ----------------  ---------------
                                               (945,881)         (172,543)         (360,524)
                                       -----------------  ----------------  ---------------
                                       $     42,018,605   $    13,551,393   $     3,828,678
                                       =================  ================  ===============
</TABLE>



     The  differences  between the income tax  provision  that would result from
applying the 35% federal  statutory  rate to income before  provision for income
taxes and the reported provision for income taxes are as follows:

<TABLE>

                                                        Year Ended December 31,
                                             2005                2004             2003
                                        ----------------  ----------------  ---------------
<S>                                     <C>                    <C>                      <C>    
Income tax provision using the                               
  statutory rate                       $     36,678,103   $    11,878,369   $     3,318,088
State taxes, net of federal tax                                                                      
benefit                                       5,086,100         1,602,471           521,475     
Permanent differences                           147,986            74,374           39,895
Rate change                                                        23,735                 
Other                                           106,416           (27,556)         (50,780)
                                       -----------------  ----------------  ---------------
                                       $     42,018,605   $    13,551,393   $    3,828,678
                                       =================  ================  ===============

</TABLE>


                                       83

<PAGE>

     Major  components of the  Company's  deferred tax assets  (liabilities)  at
December 31 are as follows:


<TABLE>

                                                       2005                       2004
                                                 -------------------       -------------------
<S>                                              <C>                       <C>   

Reserve for sales returns                        $          266,233         $          385,371
Reserve for doubtful accounts                                82,381                     45,838
Reserve for obsolescence                                    358,196                    410,945
Reserves for marketing development fund                   1,726,762                  1,542,576
Capitalization of inventory costs                           183,832                    199,462
State franchise tax                                       2,733,997                  1,014,799
Accrued compensation                                        153,863                    109,951
                                                 -------------------        -------------------
   Total deferred tax asset                               5,505,264                  3,708,942

Amortization of trademarks                               (4,430,284)                (3,857,784)
Depreciation                                              ( 890,746)                  (583,708)
Amortization of graphic design                             ( 92,850)                  (121,947)
                                                 -------------------        -------------------
   Total deferred tax liability                          (5,413,880)                (4,563,439)
                                                 -------------------        -------------------
     Net deferred tax asset (liability)          $           91,384         $         (854,497)
                                                 ===================        ===================
</TABLE>



10.     STOCK OPTIONS 

     The Company has four stock option  plans,  the  Employee  Stock Option Plan
(the "Plan"),  the Outside Directors Stock Option Plan ("Directors  Plan"),  the
Hansen Natural  Corporation 2001 Stock Option Plan ("2001 Option Plan"), and the
2005 Stock Option Plan for Non-Employee Directors ("2005 Directors Plan").

     The Plan, as amended,  provided for the granting of options to purchase not
more than  6,000,000  shares  of Hansen  common  stock to key  employees  of the
Company and its subsidiaries through July 1, 2001. Stock options are exercisable
at such time and in such amounts as determined by the Compensation  Committee of
the Board of Directors  of the Company up to a ten-year  period after their date
of grant,  and no options may be granted  after July 1, 2001.  The option  price
will not be less  than the fair  market  value at the date of  grant.  As of the
expiration  date, July 1, 2001,  options to purchase  4,191,400 shares of Hansen
common stock had been granted under the Plan, net of options that had expired.

     The  Directors  Plan  provides  for the grant of options to  purchase up to
200,000  shares of common  stock of the Company to  directors of the Company who
are not and have not been employed by or acted as consultants to the Company and
its  subsidiaries  or affiliates  and who are not and have not been nominated to
the Board of Directors of the Company (the  "Board")  pursuant to a  contractual
arrangement.  On the date of the  annual  meeting of  stockholders,  at which an
eligible  director is initially  elected,  each eligible director is entitled to
receive a one-time  grant of an option to purchase  12,000 shares (24,000 shares
if the director is serving on a committee  of the Board) of the Companys  common
stock,  exercisable one-third each on the first, second and third anniversary of
the date of grant;  provided,  however,  that options granted as of February 14,
1995,  are  exercisable  66 2/3% on the date of grant and 100% on July 8,  1995;
provided,  further,  that all options held by an eligible  director become fully
and  immediately  exercisable  upon a change in control of the Company.  Options
granted under the Directors  Plan that are not  exercised  generally  expire ten
years  after the date of grant.  Option  grants may be made under the  Directors
Plan for ten years from the effective date of the Directors  Plan. The Directors
Plan is a "formula plan" so that a nonemployee  directors  participation  in the
Directors  Plan does not  affect  his  status as a  "disinterested  person"  (as
defined in Rule 16b-3 under the Securities Exchange Act of 1934). As of December
31,  2005,  options to purchase  96,000  shares of Hansen  common stock had been
granted  under the  Directors  Plan and  options to purchase  104,000  shares of
Hansen common stock remained available for grant.

                                       84

<PAGE>

     During 2001,  the Company  adopted the 2001 Option Plan which  provides for
the grant of options to purchase up to  4,000,000  shares of the common stock of
the  Company to certain  key  employees  of the  Company  and its  subsidiaries.
Options  granted under the 2001 Option Plan may be incentive stock options under
Section 422 of the Internal Revenue Code, as amended (the "Code"),  nonqualified
stock options,  or stock appreciation  rights.  Stock options are exercisable at
such time and in such amounts as determined by the Compensation Committee of the
Board of  Directors  of the Company up to a ten-year  period after their date of
grant. As of December 31, 2005,  options to purchase  3,918,200 shares of Hansen
common stock had been granted under the 2001 Option Plan and options to purchase
81,800 shares of Hansen  common stock remain  available for grant under the 2001
Option Plan.

     During 2005, the Company adopted the 2005 Hansen Natural  Corporation Stock
Option Plan for Non-Employee Directors ("2005 Directors Plan") that provides for
the grant of options to purchase up to an aggregate of 200,000  shares of common
stock of the Company to  non-employee  directors of the Company.  On the date of
the annual meeting of  stockholders  at which an eligible  director is initially
elected,  each eligible  director is entitled to receive a one-time  grant of an
option to purchase 6,000 shares of the Company's common stock exercisable at the
closing price for a share of common stock on the date of grant. Additionally, on
the fifth anniversary of the election of eligible directors elected or appointed
to the Board,  and each fifth  anniversary  thereafter,  each eligible  director
shall receive an additional  grant of an option to purchase  4,800 shares of the
Companys common stock.  Options become  exercisable in four equal  installments,
with the  grant  immediately  vested  with  respect  to 25% of the grant and the
remaining installments vesting on the three successive anniversaries of the date
of grant;  provided that all options held by an eligible  director  become fully
and  immediately  exercisable  upon a change in control of the Company.  Options
granted under the 2005  Directors Plan that are not exercised  generally  expire
ten years  after the date of grant.  Option  grants  may be made  under the 2005
Directors Plan for ten years from the effective date of the Directors  Plan. The
Directors  Plan  is  a  "formula   plan"  so  that  a   non-employee   directors
participation   in  the  Directors   Plan  does  not  affect  his  status  as  a
"disinterested  person" (as defined in Rule 16b-3 under the Securities  Exchange
Act of 1934).  As of December 31,  2005,  options to purchase  19,200  shares of
Hansen  common stock had been granted  under the  Directors  Plan and options to
purchase 180,800 shares of Hansen common stock remained available for grant.

                                       85

<PAGE>

     During the years  ended  December  31,  2005,  2004 and 2003,  the  Company
granted 1,546,200, 742,000 and 710,000 options to purchase shares under the 2001
Option Plan and the 2005  Directors Plan at a  weighted-average  grant date fair
value of $21.97, $3.34 and $0.64.  Additional information regarding the plans is
as follows:

<TABLE>

                     --------------------------------------------------------------------------------------------
                                       2005                           2004                           2003
                     ----------------------------  -----------------------------  -------------------------------
                                      Weighted                       Weighted                        Weighted
                                      -average                       -average                        -average
                                      exercise                       exercise                        exercise
                        Shares          price         Shares           price         Shares            price
                     ----------------------------  -----------------------------  -------------------------------
<S>                 <C>               <C>          <C>               <C>          <C>             <C>

Options               
 outstanding,                                                                                                    
 beginning of year    2,596,800        $    3.05     2,939,600        $    1.94     3,003,800      $      1.65   
Options granted       1,546,200        $   38.21       742,000        $    5.70       710,000      $      2.22
Options exercised      (367,400)       $    3.18      (990,000)       $    1.74      (730,200)     $      1.03
Options canceled                                                                                                   
 or expired             (63,000)       $    9.09       (94,800)       $    3.02       (44,000)     $      1.77     
                     -----------                    -----------                    -----------
Options               
 outstanding,                                                                                                    
 end of year          3,712,600        $    8.38     2,596,800        $    3.05     2,939,600      $      1.94   
                     ===========                    ===========                    ===========
Option price range                    
 end of year                           $ 1.51 to                      $ 1.51 to                    $   0.57 to        
                                          $80.10                         $16.25                          $4.12     

</TABLE>


     The following table summarizes  information about fixed-price stock options
outstanding at December 31, 2005:


<TABLE>

                             ------------------------------------------------------------------------------
                                          Options Outstanding                   Options Exercisable
                             ------------------------------------------------------------------------------
                                                Weighted-                         
                                Number           average      Weighted-                        Weighted-
                              outstanding       remaining      average          Number         average
     Range of exercise        at December      contractual     exercise     exercisable at     exercise
           prices              31, 2005      life (in years)    price     December 31, 2005     price
                             ------------------------------------------------------------------------------
<S>                          <C>              <C>             <C>         <C>                  <C>     
$1.51 to $ 2.46                  1,592,400          6          $   2.00              827,600   $   2.04
$4.06 to $ 9.09                    527,000          8          $   4.89               12,000   $   4.09
$12.51 to $20.45                   146,000          8          $  15.96               10,000   $  13.57
$26.25 to $29.59                   895,000          9          $  26.30                    
$42.44 to $49.71                   184,000         10          $  46.99                    
$67.48 to $80.10                   368,200         10          $  67.82                4,800   $  67.48
                             --------------                               -------------------
                                 3,712,600                                           854,400
                             ==============                               ===================

</TABLE>



11.     EMPLOYEE BENEFIT PLAN

     Employees  of Hansen  Natural  Corporation  may  participate  in the Hansen
Natural  Corporation  401(k) Plan, a defined  contribution plan, which qualifies
under Section 401(k) of the Internal Revenue Code.  Participating  employees may
contribute up to 15% of their pretax salary up to statutory limits.  The Company
contributes  25%  of  the  employee  contribution,  up to 8% of  each  employees
earnings,  which vest 20% each year for five years  after the first  anniversary
date.  Matching  contributions were $162,659,  $98,494 and $70,518 for the years
ended December 31, 2005, 2004 and 2003, respectively.

                                       86

<PAGE>

12.     RELATED-PARTY TRANSACTIONS

     A director of the Company is a partner in a law firm that serves as counsel
to the Company and was a partner in another law firm that  previously  served as
counsel to the Company.  Expenses  incurred in connection with services rendered
by such firms to the Company during the years ended December 31, 2005,  2004 and
2003 were $331,880, $173,878 and $59,146, respectively.

     A  director  of the  Company  is a managing  director  and Chief  Executive
Officer of a company that provided  investment  banking services to the Company.
Expenses incurred in connection with services rendered by the Sage Group, LLC to
the Company during the year ended December 31, 2005 were $16,293.

     Two directors and officers of the Company are principal owners of a company
that provides promotional materials to the Company.  Expenses incurred with such
company in connection  with  promotional  materials  purchased  during the years
ended  December 31, 2005,  2004 and 2003 were  $748,725,  $638,590 and $331,478,
respectively.

13.     OPERATING SEGMENTS

     The Company has two  reportable  segments,  namely  Direct  Store  Delivery
("DSD"),  whose principal products comprise energy drinks, and Warehouse,  whose
principal  products  comprise  juice based and soda  beverages.  The DSD segment
develops,  markets and sells products primarily through an exclusive distributor
network  whereas the  Warehouse  segment  develops,  markets and sells  products
primarily  direct to retailers.  Corporate and  unallocated  amounts that do not
relate  to DSD or  Warehouse  segments  have  been  allocated  to  "Corporate  &
Unallocated".

     The  net  revenues  derived  from  DSD and  Warehouse  segments  and  other
financial  information  related  thereto for the years ended  December 31, 2005,
2004 and 2003 are as follows:

                                       87

<PAGE>


<TABLE>
------------------------------------------------------------------------------------------------------------------
                                                                                   Corporate &                       
       Year Ended December 31, 2005                DSD             Warehouse       Unallocated          Total        
-------------------------------------         ----------------  --------------  --------------  ------------------
<S>                                               <C>             <C>           <C>                   <C>  

Net sales                                     $   270,011,144   $  78,875,222   $               $    348,886,366
Contribution margin                               112,943,469       6,373,787                        119,317,256
Corporate & unallocated expenses                                                  (15,873,947)       (15,873,947)
Operating income                                                                                     103,443,309
Net nonoperating income (expense)                     (34,041)        (10,693)      1,396,006          1,351,272
Income before provision for                                                                                         
    income taxes                                                                                     104,794,581
Depreciation & amortization                           403,226          30,403         575,000          1,008,629
Trademark amortization                                                 44,060          26,042             70,102


                                                                                   Corporate &                      
       Year Ended December 31, 2004                 DSD            Warehouse       Unallocated          Total       
-------------------------------------         ----------------  --------------  --------------  ------------------

Net sales                                     $    113,050,278  $  67,573,480   $    (282,623)  $    180,341,135
Contribution margin                                 41,151,012      4,020,973                         45,171,985
Corporate & unallocated expenses                                                  (11,285,783)       (11,285,783)
Operating income                                                                                      33,886,202
Net nonoperating income (expense)                      (22,703)       (16,218)         90,916             51,995
Income before provision for                                                                                         
    income taxes                                                                                      33,938,197  
Depreciation & amortization                            345,096         48,798         376,519            770,413
Trademark amortization                                                 44,060          28,986             73,046

                                                                                    Corporate &                      
       Year Ended December 31, 2003                 DSD            Warehouse       Unallocated          Total       
-------------------------------------         ----------------  --------------  --------------  ------------------
Net sales                                     $     49,468,755  $  60,884,383   $        (942)  $    110,352,196
Contribution margin                                 14,872,174      2,411,996                         17,284,170
Corporate & unallocated expenses                                                   (7,458,075)        (7,458,075)
Operating income                                                                                       9,826,095
Net nonoperating income (expense)                      (22,545)       (44,048)           (420)           (67,013)
Income before provision for                                                                                         
    income taxes                                                                                       9,759,082
Depreciation & amortization                            271,848         56,075         256,274            584,197
Trademark amortization                                                 29,596          32,292             61,888
------------------------------------------------------------------------------------------------------------------
</TABLE>


     The  accounting  policy for segment  information  is  described  in Note 1,
"Organization and Summary of Significant  Accounting  Policies".  All revenue is
derived from sales to external  customers.  Operating  expenses  that pertain to
each segment are allocated to the segment concerned.

     Corporate  and  unallocated  expenses were $15.9 million for the year ended
December 31, 2005 and included $8.3 million of payroll costs and $2.5 million of
professional  service expenses including  accounting and legal costs.  Corporate
and unallocated expenses were $11.3 million for the year ended December 31, 2004
and  included  $5.6 million of payroll  costs and $2.3  million of  professional
service expenses including accounting and legal costs. Corporate and unallocated
expenses  were $7.5  million for the year ended  December  31, 2003 and included
$4.1 million of payroll costs and $1.0 million of professional  service expenses
including accounting and legal costs. Certain items,  including operating assets
and income taxes, are not allocated to individual segments and therefore are not
presented above.

                                       88

<PAGE>

     One customer of the DSD segment made up  approximately  18%, 13%, and 8% of
the Company's net revenues for the years ended December 31, 2005, 2004, and 2003
respectively.

     The  Company's  net sales by product line for the years ended  December 31,
2005, 2004 and 2003 were as follows:

<TABLE>

Product Line                                2005                     2004                    2003
--------------------------------   ----------------------    --------------------    -------------------
<S>                                <C>                       <C>                     <C>    

DSD (primarily energy drinks)      $         270,011,144     $       113,050,278     $       49,468,755
Non-Carbonated (primarily                                                                                  
juice based beverages)                        51,522,955              38,871,923             31,415,692   
Carbonated (primarily soda                                                                                 
beverages)                                    27,352,267              28,418,934             29,467,749   
                                    ---------------------    --------------------    -------------------
                                   $         348,886,366     $       180,341,135     $      110,352,196
                                   ======================    ====================    ===================
</TABLE>

                           
14.     QUARTERLY FINANCIAL DATA (Unaudited)


<TABLE>

                                                                                     Net Income per Common     
                                                                                       Share (post-split)     
                            Net Sales        Gross Profit       Net Income           Basic            Diluted
                        -----------------  ---------------   ---------------   ---------------   ---------------
<S>                     <C>                <C>               <C>               <C>               <C>   

 Quarter ended:
  March 31, 2005        $     60,014,272   $   30,329,318    $    8,844,713     $        0.40    $         0.37
  June 30, 2005               85,440,555       44,927,078        15,245,698              0.69              0.63
  September 30, 2005         105,421,454       55,343,669        20,245,368              0.92              0.83
  December 31, 2005           98,010,085       51,943,183        18,440,197              0.84              0.76
                        -----------------  ---------------   ---------------    --------------   ---------------
                        $    348,886,366   $  182,543,248    $   62,775,976     $        2.85    $         2.59
                        =================  ===============   ===============    ==============   ===============
             
 Quarter ended:
  March 31, 2004        $     31,298,783   $   13,907,821    $    2,183,281     $        0.10    $         0.09
  June 30, 2004               46,063,543       20,758,929         5,078,149              0.24              0.22
  September 30, 2004          52,641,477       23,809,208         5,798,648              0.27              0.24
  December 31, 2004           50,337,332       24,990,427         7,326,726              0.35              0.31
                        -----------------  ---------------   ---------------    --------------   ---------------
                        $    180,341,135   $   83,466,385    $   20,386,804     $        0.96    $         0.86
                        =================  ===============   ===============    ==============   ===============
</TABLE>


     Certain of the figures  reported above may differ from previously  reported
figures for individual quarters due to rounding.

     On  August  8,  2005,  the  common  stock  of the  Company  was  split on a
two-for-one  basis  through a 100% stock  dividend.  Net Income per Common Share
information has been presented to reflect the stock split (Note 1).

                                       89

<PAGE>

HANSEN NATURAL CORPORATION AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

<TABLE>

                            Balance at              Charged to                                   Balance at         
                            beginning                cost and                                      end of           
  Description               of period                expenses            Deductions                period           
----------------       ---------------------       -------------       ---------------      ----------------------
<S>                    <C>                         <C>                 <C>                  <C>    
Allowance for doubtful accounts, sales returns and cash discounts:

2005                   $          1,252,101           2,416,828            (2,700,569)      $             968,360
2004                   $            875,351           3,585,153            (3,208,403)      $           1,252,101
2003                   $          1,098,645           2,936,429            (3,159,723)      $             875,351

Inventory reserves:                                                                 

2005                   $            955,687              74,169              (189,021)      $             840,835
2004                   $          1,236,219             184,472              (465,004)      $             955,687
2003                   $            646,439             589,780                             $           1,236,219


</TABLE>


                                       90

<PAGE>

E
XHIBIT 23



CONSENT OF INDEPENDENT PUBLIC ACCOUNTING FIRM


We consent to the  incorporation  by reference in  Registration  Statements  No.
33-92526,  No.  333-41333,  No.  333-89123,  No. 333-112482 and No.333-131467 of
Hansen  Natural  Corporation  on Form S-8 of our  reports  dated  March 9, 2006,
relating  to the  consolidated  financial  statements  and  financial  statement
schedule of Hansen Natural  Corporation and subsidiaries and management's report
on internal control over financial  reporting  appearing in the Annual Report on
Form 10-K of Hansen Natural Corporation for the year ended December 31, 2005.



/s/ DELOITTE & TOUCHE LLP

Costa Mesa, California
March 9, 2006


                                       91



 

STOCK OPTION AGREEMENT

 

 

This Stock Option Agreement ("Agreement") is made as of March 23, 2005, by and between Hansen Natural Corporation, a Delaware corporation (the "Company"), and Michael B. Schott ("Holder").

 

Preliminary Recitals

 

A.

Holder is an employee of the Company or one of its subsidiaries or affiliates.

B.        Pursuant to the Hansen Natural Corporation 2001 Stock Option Plan (the "Plan"), the Company desires to grant Holder an incentive stock option to purchase shares of the Company's common stock, par value $.005 per share (the "Common Stock").

 

NOW, THEREFORE, the Company and Holder agree as follows:

1.         Grant of Incentive Stock Option.        The Company hereby grants to Holder, subject to the terms and conditions set forth herein, the incentive stock option ("ISO") to purchase up to 25,000 shares of Common Stock, at the purchase price of $52.50 per share, such ISO to be exercisable and exercised as hereinafter provided.

2.         Exercise Period.           The ISO shall expire three months after the termination of the Holder's employment with the Company and its subsidiaries and affiliates (the "Hansen Natural Group") unless the employment is terminated by a member of the Hansen Natural Group for Cause (as defined below) or unless the employment is terminated by reason of the death or Total Disability (as defined below) of Holder. If the Holder's employment is terminated by a member of the Hansen Natural Group for Cause, the ISO shall expire as of the date employment terminates. If the Holder's employment terminates due to his death or Total Disability, then the ISO may be exercised by Holder or the person or persons to which Holder's rights under this Agreement pass by will, or if no such person has such right, by his executors or administrators, within six months after the date of death or Total Disability, but no later than the expiration date specified in Section 3(c) below. "Cause" means the Holder's act of fraud or dishonesty, knowing and material failure to comply with applicable laws or regulations or satisfactorily perform his duties of employment, insubordination or drug or alcohol abuse, as determined by the Committee of the Hansen Natural Corporation Stock Option Plan (the "Committee"). "Total Disability" means the complete and permanent inability of Holder to perform all of his duties of employment with the Company, as determined by the Committee upon the basis of such evidence, including independent medical reports and data, as the Committee deems appropriate or necessary.

3.

Exercise of Option

(a)       Subject to the other terms of this Agreement regarding the exercisability of the ISO, and provided that Holder is employed by a member of the Hansen Natural Group on the relevant date, the ISO may only be exercised in respect of the number of shares listed in column A from and after the exercise dates listed in column B,

 

Column "A"

Column "B"

 

Number of Shares

Exercise Date

 

5,000

March 23, 2006

5,000

March 23, 2007

5,000

March 23, 2008

5,000

March 23, 2009

5,000

March 23, 2010

(b)       This ISO may be exercised, to the extent exercisable by its terms, from time to time in whole or in part at any time prior to the expiration thereof. Any exercise shall be accompanied by a written notice to the Company specifying the number of shares as to which this ISO is being exercised (the "Option Shares"). Notations of any partial exercise or installment exercise, shall be made by the Company on Schedule A hereto.

(c)       Notwithstanding anything else herein to the contrary, this ISO shall expire ten years from the date of this agreement.

(d)       The Holder hereby agrees to notify the Company in writing in the event shares acquired pursuant to the exercise of this ISO are transferred, other than by will or by the laws of descent and distribution, within two years after the date of this agreement or within one year after the issuance of such shares pursuant to such exercise.

4.         Payment of Purchase Price Upon Exercise.    At the time of any exercise of the ISO the purchase price of the ISO shall be paid in full to the Company in either of the following ways or in any combination of the following ways:

(a)

By check or other immediately available funds.

(b)       With property consisting of shares of Common Stock. (The shares of Common Stock to be used as payment shall be valued as of the date of exercise of the ISO at the Closing Price as defined below. For example, if Holder exercises the option for 4,000 shares at a total Exercise Price of $8,000, assuming exercise price of $2.00 per share, and the Closing Price is $5.00, he may pay for the 4,000 Option Shares by transferring 1,600 shares of Common Stock to the Company.)

(c)       For purposes of this Agreement, the term "Closing Price" means, with respect to the Company's Common Stock, the last sale price regular-way or, in case no such sale takes place on such date, the average of the closing bid and asked prices regular-way on the principal national securities exchange on which the securities are listed or admitted to trading; or, if they are not listed or admitted to trading on any national securities exchange, the last sale price of the securities on the consolidated transaction reporting system of the National Association of Securities Dealers ("NASD"), if such last sale information is reported on such system or, if not so reported, the average of the closing bid and asked prices of the securities on the National Association of Securities Dealers Automatic Quotation System ("NASDAQ") or any comparable system or, if the securities are not listed on NASDAQ or a comparable system, the average of the closing bid and asked prices as furnished by two members of the NASD selected from time to time by the Company for that purpose.

5.         Purchase for Investment; Resale Restrictions.  Unless at the time of exercise of the ISO there shall be a valid and effective registration statement under the Securities Act of 1933 ("'33 Act") and appropriate qualification and registration under applicable state securities laws relating to the Option Shares being acquired, Holder shall upon exercise of the ISO give a representation that he is acquiring such shares for his own account for investment and not with a view to, or for sale in connection with, the resale or distribution of any such shares. In the absence of such registration statement, Holder shall execute a written affirmation, in a form reasonably satisfactory to the Company, of such investment intent. Holder further agrees that he will not sell or transfer any Option Shares until he requests and receives an opinion of the Company's counsel or other counsel reasonably satisfactory to the Company to the effect that such proposed sale or transfer will not result in a violation of the '33 Act, or a registration statement covering the sale or transfer of the shares has been declared effective by the Securities and Exchange Commission, or he obtains a no-action letter from the Securities and Exchange Commission with respect to the proposed transfer.

6.         Nontransferability. This ISO shall not be transferable other than by will or by the laws of descent and distribution. During the lifetime of Holder, this ISO shall be exercisable only by Holder.

7.         (a)       Adjustments. In the event of any change in the outstanding Common Stock of the Company by reason of any stock recapitalization, merger, consolidation, combination or exchange of shares, the kind of shares subject to the ISO and their purchase price per share (but not the number of shares) shall be appropriately adjusted consistent with such change in such manner as the Board of Directors of the Company may deem equitable. In the event of a stock dividend or stock split the kind of shares, their purchase price per share and the number of shares shall be appropriately adjusted, consistent with such change in such manner as the Board of Directors may deem equitable. Any adjustment so made shall be final and binding on Holder. No adjustments shall be made that would have the effect of modifying an ISO under Internal Revenue Code §§ 422 and 424.

(b)       Notwithstanding anything else herein to the contrary, upon the occurrence of a change in control (as defined in 7(c) below), 50% of any portion of the option not theretofore exercisable, shall immediately become exercisable and such portion of the option (being the Option to purchase shares of Common Stock subject to the applicable provisions of the Plan and awarded in accordance with the Plan in terms of section 1 above) may, with the consent of the Holder, be purchased by the Company at a fair value (as defined in 7(c) below) less the purchase price payable by Holder to exercise the option as set out in Article 1 above for one (1) share of Common Stock of the Company multiplied by the number of shares of Common Stock which Holder has the option to purchase in terms of Article 1 above.

Further, notwithstanding anything herein to the contrary if, after the occurrence of a change in control (as defined in 7(c) below) the Holder’s employment by the Hansen Natural group is terminated (unless his employment is terminated by the Hansen Natural group for cause as defined above) and on the date of termination any portion of the option has not theretofore become exercisable, then such remaining portion shall immediately become exercisable and that portion of the option (being the option to purchase shares of common stock subject to the applicable provisions of the plan and awarded in accordance with the plan in terms of section 1 above) may, with the consent of Holder, be purchased by the Company for cash at a price equal to the fair market value (defined in 7(c) below) less the purchase price payable by Holder to exercise the option as set out in Article 1 above for one (1) share of common stock of the Company multiplied by the number of shares of common stock which Holder has the option to purchase in terms of Article 1 above.

 

(c)

For the purposes of this Agreement

 

 

(i)

"Change in Control" means;

(A)              the acquisition of "Beneficial Ownership" by any person (as defined in rule 13(d) - 3 under the Securities Exchange Act 1934), corporation or other entity other than the Company or a wholly owned subsidiary of the Company of 50% or more of the outstanding Stock,

(B)  the sale or disposition of substantially all of the assets of the Company, or

(C)             the merger of the Company with another corporation in which the Common Stock of the Company is no longer outstanding after such merger.

(ii)        "Fair Market Value" means, as of any date, the Closing Price for one share of the common Stock of the company on such date.

8.         No Rights as Stockholder.       Holder shall have no rights as a stockholder with respect to any shares of Common Stock subject to this ISO prior to the date of issuance to him of a certificate or certificates for such shares.

9.         No Right to Continue Employment.      This Agreement shall not confer upon Holder any right with respect to continuance of employment with any member of the Hansen Natural Group nor shall it interfere in any way with the right of any such member to terminate his employment at any time.

10.       Compliance With Law and Regulation. This Agreement and the obligation of the Company to sell and deliver shares of Common Stock hereunder shall be subject to all applicable federal and state laws, rules and regulations and to such approvals by any government or regulatory agency as may be required. If at any time the Board of Directors of the Company shall determine that (i) the listing, registration or qualification of the shares of Common Stock subject or related thereto upon any securities exchange or under any state or federal law, or (ii) the consent or approval of any government regulatory body, is necessary or desirable as a condition of or in connection with the issue or purchase of shares of Common Stock hereunder, this ISO may not be exercised in whole or in part unless such listing, registration, qualification, consent, approval or agreement shall have been effected or obtained free of any conditions not acceptable to the Board of Directors.

11.

Tax Withholding Requirements. The Company shall have the right to require

Holder to remit to the Company an amount sufficient to satisfy any federal, state or local withholding tax requirements prior to the delivery of any certificate or certificates for Common Stock.

12.       Fractional Shares.                 Notwithstanding any other provision of this Agreement, no fractional shares of stock shall be issued upon the exercise of this ISO and the Company shall not be under any obligation to compensate Holder in any way for such fractional shares.

13.       Notices. Any notice hereunder to the Company shall be addressed to it at its office at 1010 Railroad Street, Corona, California 92882, Attention: Rodney C. Sacks with a copy to Benjamin Polk, Schulte Roth & Zabel LLP, 919 Third Avenue, New York, New York 10022, and any notice hereunder to Holder shall be addressed to him at 1372 Brys Drive, Grosse Point Woods, Michigan 48236, subject to the right of either party to designate at any time hereafter in writing some other address.

14.       Amendment.    No modification, amendment or waiver of any of the provisions of this Agreement shall be effective unless in writing specifically referring hereto, and signed by both parties.

15.       Governing Law.                  This Agreement shall be construed according to the laws of the State of Delaware and all provisions hereof shall be administered according to and its validity shall be determined under, the laws of such State, except where preempted by federal laws.

16.       Counterparts.   This Agreement may be executed in one or more counterparts, each of which shall constitute one and the same instrument.

IN WITNESS WHEREOF, Hansen Natural Corporation has caused this Agreement to be executed by a duly authorized officer and Holder has executed this Agreement both as of the day and year first above written.

 

HANSEN NATURAL CORPORATION

 

 

By: /s/ Rodney C. Sacks

 

Title: Chairman of the Board

 

 

/s/ Michael B. Schott

Michael B. Schott

 

 

 

EXHIBIT 31.1

 

CERTIFICATION PURSUANT TO RULE 13A-14(a) OR 15D-14(a) OF THE SECURITIES

EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

 

I, Rodney Sacks, certify that:

 

1.

I have reviewed this annual report on Form 10-K of Hansen Natural Corporation;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a.

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b.

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c.

evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d.

disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

 

5.

The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

 

a.

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

 

 

 

 

b.

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

Date:

March 15, 2006

/s/Rodney C. Sacks

 

 

Rodney C. Sacks

Chairman of the Board of Directors

and Chief Executive Officer

 

 

 

 

 

 

 

 

EXHIBIT 31.2

 

CERTIFICATION PURSUANT TO RULE 13A-14(a) OR 15D-14(a) OF THE SECURITIES

EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

 

I, Hilton Schlosberg, certify that:

 

1.

I have reviewed this annual report on Form 10-K of Hansen Natural Corporation;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a.

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b.

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c.

evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d.

disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

 

5.

The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

 

a.

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

 

b.

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

Date:

March 15, 2006

/s/ Hilton H. Schlosberg

 

 

Hilton H. Schlosberg

Vice Chairman of the Board of Directors, President, Chief Operating Officer, Chief Financial Officer and Secretary

 

 

 

 

 

EXHIBIT 32.1

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the annual report of Hansen Natural Corporation (the "Company") on Form 10-K for the year ended December 31, 2005 as filed with the Securities and Exchange Commission (the "Report"), the undersigned, Rodney C. Sacks, Chairman of the Board of Directors and Chief Executive Officer of the Company, certifies, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

1.

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

2.

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

 

Date:

March 15, 2006

/s/ Rodney C. Sacks

 

 

Rodney C. Sacks

Chairman of the Board of Directors

and Chief Executive Officer

 

 

 

 

 

EXHIBIT 32.2

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the annual report of Hansen Natural Corporation (the "Company") on Form 10-K for the year ended December 31, 2005 as filed with the Securities and Exchange Commission (the "Report"), the undersigned, Hilton H. Schlosberg, Vice Chairman of the Board of Directors, President, Chief Operating Officer, Chief Financial Officer and Secretary of the Company, certifies, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

1.

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

2.

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

 

Date:

March 15, 2006

/s/ Hilton H. Schlosberg

 

 

Hilton H. Schlosberg

Vice Chairman of the Board of Directors, President, Chief Operating Officer, Chief Financial Officer and Secretary

 

 

 

 

 

 

STOCK OPTION AGREEMENT

 

This Stock Option Agreement ("Agreement") is made as of November 5, 2004, by and between Hansen Natural Corporation, a Delaware corporation (the "Company"), and Sydney Selati ("Holder").

 

 

Preliminary Recitals

 

A.

Holder is an employee of the Company or one of its subsidiaries or affiliates.

B.        Pursuant to the Hansen Natural Corporation Stock Option Plan (the "Plan"), the Company desires to grant Holder an incentive stock option to purchase shares of the Company's common stock, par value $.005 per share (the "Common Stock").

 

NOW, THEREFORE, the Company and Holder agree as follows:

1.         Grant of Incentive Stock Option.        The Company hereby grants to Holder, subject to the terms and conditions set forth herein, the incentive stock option ("ISO") to purchase 12,000 shares of Common Stock, at the purchase price of $25.80 per share, such ISO to be exercisable and exercised as hereinafter provided.

2.         Exercise Period.           The ISO shall expire three months after the termination of the Holder's employment with the Company and its subsidiaries and affiliates (the "Hansen Natural Group") unless the employment is terminated by a member of the Hansen Natural Group for Cause (as defined below) or unless the employment is terminated by reason of the death or Total Disability (as defined below) of Holder. If the Holder's employment is terminated by a member of the Hansen Natural Group for Cause, the ISO shall expire as of the date employment terminates. If the Holder's employment terminates due to his death or Total Disability, then the ISO may be exercised by Holder or the person or persons to which Holder's rights under this Agreement pass by will, or if no such person has such right, by his executors or administrators, within six months after the date of death or Total Disability, but no later than the expiration date specified in Section 3(c) below. "Cause" means the Holder's act of fraud or dishonesty, knowing and material failure to comply with applicable laws or regulations or satisfactorily perform his duties of employment, insubordination or drug or alcohol abuse, as determined by the Committee of the Hansen Natural Corporation Stock Option Plan (the "Committee"). "Total Disability" means the complete and permanent inability of Holder to perform all of his duties of employment with the Company, as determined by the Committee upon the basis of such evidence, including independent medical reports and data, as the Committee deems appropriate or necessary.

3.

Exercise of Option

(a)       Subject to the other terms of this Agreement regarding the exercisability of the ISO, and provided that Holder is employed by a member of the Hansen Natural Group on the relevant date, the ISO may only be exercised in respect of the number of shares listed in column A from and after the exercise dates listed in column B,

 

 

Column "A"

Column "B"

 

Number of Shares

Exercise Date

 

4,000

November 5, 2006

4,000

November 5, 2007

4,000

November 5, 2008

 

(b)       This ISO may be exercised, to the extent exercisable by its terms, from time to time in whole or in part at any time prior to the expiration thereof. Any exercise shall be accompanied by a written notice to the Company specifying the number of shares as to which this ISO is being exercised (the "Option Shares"). Notations of any partial exercise or installment exercise, shall be made by the Company on Schedule A hereto.

(c)       Notwithstanding anything else herein to the contrary, this ISO shall expire ten years from the date of this agreement.

(d)       The Holder hereby agrees to notify the Company in writing in the event shares acquired pursuant to the exercise of this ISO are transferred, other than by will or by the laws of descent and distribution, within two years after the date of this agreement or within one year after the issuance of such shares pursuant to such exercise.

4.         Payment of Purchase Price Upon Exercise.    At the time of any exercise of the ISO the purchase price of the ISO shall be paid in full to the Company in any of the following ways or in any combination of the following ways:

(a)

By check or other immediately available funds.

(b)       With property consisting of shares of Common Stock. (The shares of Common Stock to be used as payment shall be valued as of the date of exercise of the ISO at the Closing Price as defined below. For example, if Holder exercises the option for 4,000 shares at a total Exercise Price of $8,000, assuming exercise price of $2.00 per share, and the Closing Price is $5.00, he may pay for the 4,000 Option Shares by transferring 1,600 shares of Common Stock to the Company.)

(c)       By delivering a properly executed exercise notice together with irrevocable instructions to a broker to deliver promptly to the company the amount of sale or loan proceeds necessary to pay the purchase price and applicable withholding taxes, and such other documents as the Committee may determine.

(d)       For purposes of this Agreement, the term "Closing Price" means, with respect to the Company's Common Stock, the last sale price regular-way or, in case no such sale takes place on such date, the average of the closing bid and asked prices regular-way on the principal national securities exchange on which the securities are listed or admitted to trading; or, if they are not listed or admitted to trading on any national securities exchange, the last sale price of the securities on the consolidated transaction reporting system of the National Association of Securities Dealers ("NASD"), if such last sale information is reported on such system or, if not so reported, the average of the closing bid and asked prices of the securities on the National Association of Securities Dealers Automatic Quotation System ("NASDAQ") or any comparable system or, if the securities are not listed on NASDAQ or a comparable system, the average of the closing bid and asked prices as furnished by two members of the NASD selected from time to time by the Company for that purpose.

5.         Purchase for Investment; Resale Restrictions.  Unless at the time of exercise of the ISO there shall be a valid and effective registration statement under the Securities Act of 1933 ("'33 Act") and appropriate qualification and registration under applicable state securities laws relating to the Option Shares being acquired, Holder shall upon exercise of the ISO give a representation that he is acquiring such shares for his own account for investment and not with a view to, or for sale in connection with, the resale or distribution of any such shares. In the absence of such registration statement, Holder shall execute a written affirmation, in a form reasonably satisfactory to the Company, of such investment intent. Holder further agrees that he will not sell or transfer any Option Shares until he requests and receives an opinion of the Company's counsel or other counsel reasonably satisfactory to the Company to the effect that such proposed sale or transfer will not result in a violation of the '33 Act, or a registration statement covering the sale or transfer of the shares has been declared effective by the Securities and Exchange Commission, or he obtains a no-action letter from the Securities and Exchange Commission with respect to the proposed transfer.

6.         Nontransferability. This ISO shall not be transferable other than by will or by the laws of descent and distribution. During the lifetime of Holder, this ISO shall be exercisable only by Holder.

7.

Adjustments.

(a)       Subject to clause 7(b) below, if the outstanding shares of stock of the Company are increased, decreased, or exchanged for a different number or kind of shares or other securities, or if additional shares or new or different shares or other securities are distributed with respect to such shares of stock or securities, through merger, consolidation, sale of all or substantially all of the property of the Company, reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other distribution with respect to such shares of stock or other securities, then, to the extent permitted by the Board of the Company, an appropriate and proportionate adjustment shall be made in (1) the maximum number and kind of shares provided in clause 1 above; (2) the number and kind of shares or other securities subject to the outstanding options and tandum SARs, if any; and (3) the price for each share or other unit of any other securities subject to outstanding options without change in the aggregate purchase price or value as to which the options remain exercisable or subject to restrictions. Any adjustment under this clause 7(a) shall be made by the Board of the Company, whose determination as to what adjustments shall be made, if any, and the extent thereof, will be final, binding and conclusive. No fractional interests will be issued under this agreement resulting from any such adjustment.

(b)       Notwithstanding anything else herein to the contrary, the Board of the Company may, at any time, in its sole discretion, provide that upon the occurrence of a change in control of the Company (as determined by the Board), all or a specified portion of any outstanding options not theretofore exercisable shall immediately become exercisable and that any option not exercised prior to such change in control shall be canceled.

8.         No Rights as Stockholder.       Holder shall have no rights as a stockholder with respect to any shares of Common Stock subject to this ISO prior to the date of issuance to her of a certificate or certificates for such shares.

9.         No Right to Continue Employment.      This Agreement shall not confer upon Holder any right with respect to continuance of employment with any member of the Hansen Natural Group nor shall it interfere in any way with the right of any such member to terminate her employment at any time.

10.       Compliance With Law and Regulation. This Agreement and the obligation of the Company to sell and deliver shares of Common Stock hereunder shall be subject to all applicable federal and state laws, rules and regulations and to such approvals by any government or regulatory agency as may be required. If at any time the Board of Directors of the Company shall determine that (i) the listing, registration or qualification of the shares of Common Stock subject or related thereto upon any securities exchange or under any state or federal law, or (ii) the consent or approval of any government regulatory body, is necessary or desirable as a condition of or in connection with the issue or purchase of shares of Common Stock hereunder, this ISO may not be exercised in whole or in part unless such listing, registration, qualification, consent, approval or agreement shall have been effected or obtained free of any conditions not acceptable to the Board of Directors.

11.       Tax Withholding Requirements.            The Company shall have the right to require Holder to remit to the Company an amount sufficient to satisfy any federal, state or local withholding tax requirements prior to the delivery of any certificate or certificates for Common Stock.

12.       Fractional Shares.                Notwithstanding any other provision of this Agreement, no fractional shares of stock shall be issued upon the exercise of this ISO and the Company shall not be under any obligation to compensate Holder in any way for such fractional shares.

13.       Notices.           Any notice hereunder to the Company shall be addressed to it at its office at 1010 Railroad Street, Corona, California 92882, Attention: Rodney C. Sacks with a copy to Benjamin Polk, Schulte Roth & Zabel, 919 Third Avenue, New York, New York 10022, and any notice hereunder to Holder shall be addressed to him at 10 Orchard Road, Suite 200, Lake Forest, California 92630, subject to the right of either party to designate at any time hereafter in writing some other address.

14.       Amendment.    No modification, amendment or waiver of any of the provisions of this Agreement shall be effective unless in writing specifically referring hereto, and signed by both parties.

15.       Governing Law.    This Agreement shall be construed according to the laws of the State of Delaware and all provisions hereof shall be administered according to and its validity shall be determined under, the laws of such State, except where preempted by federal laws.

16.       Counterparts.   This Agreement may be executed in one or more counterparts, each of which shall constitute one and the same instrument.

 

 

 

 

 

IN WITNESS WHEREOF, Hansen Natural Corporation has caused this Agreement to be executed by a duly authorized officer and Holder has executed this Agreement both as of the day and year first above written.

 

 

HANSEN NATURAL CORPORATION

 

 

By: /s/ Rodney C. Sacks

 

Title: Chairman of the Board

 

 

/s/ Sydney Selati

Sydney Selati

 

 

 

 

 

STOCK OPTION AGREEMENT

 

This Stock Option Agreement ("Agreement") is made as of March 23, 2005, by and between Hansen Natural Corporation, a Delaware corporation (the "Company"), and Rodney C. Sacks ("Holder").

 

Preliminary Recitals

 

A.

Holder is an employee of the Company or one of its subsidiaries or affiliates.

B.        Pursuant to the Hansen Natural Corporation 2001 Stock Option Plan (the "Plan"), the Company desires to grant Holder an incentive stock option to purchase shares of the Company's common stock, par value $.005 per share (the "Common Stock"), subject to the terms and conditions of the Plan and subject further to the terms and conditions set forth below.

NOW, THEREFORE, the Company and Holder agree as follows:

1.         Grant of Incentive Stock Option.        The Company hereby grants to Holder, subject to the terms and conditions set forth herein, the incentive stock option ("ISO") to purchase up to 150,000 shares of Common Stock, at the purchase price of $52.50 per share, such ISO to be exercisable and exercised as hereinafter provided.

2.         Exercise Period.           The ISO shall expire three months after the termination of the Holder's employment with the Company and its subsidiaries and affiliates (the "Hansen Group") unless the employment is terminated by a member of the Hansen Group for Cause (as defined below) or unless the employment is terminated by reason of the death or Total Disability (as defined below) of Holder. If the Holder's employment is terminated by a member of the Hansen Group for Cause, the ISO shall expire as of the date employment terminates. If the Holder's employment terminates due to his death or Total Disability, then the ISO may be exercised by Holder or the person or persons to which Holder's rights under this Agreement pass by will, or if no such person has such right, by his executors or administrators, within six months after the date of death or Total Disability, but no later than the expiration date specified in Section 3(d) below. "Cause" means the Holder's act of fraud or dishonesty, knowing and material failure to comply with applicable laws or regulations, drug or alcohol abuse, as determined by the Committee of the Hansen Natural Corporation Stock Option Plan (the "Committee"). "Total Disability" means the complete and permanent inability of Holder to perform all of his duties of employment with the Company, as determined by the Committee upon the basis of such evidence, including independent medical reports and data, as the Committee deems appropriate or necessary.

3.

Exercise of Option

(a)       Subject to the other terms of this Agreement regarding the exercisability of the ISO, the ISO may only be exercised in respect of the number of shares listed in column A from and after the exercise dates listed in column B,

 

Column "A"

Column "B"

 

Number of Shares

Exercise Date

 

30,000

March 23, 2006

30,000

March 23, 2007

30,000

March 23, 2008

30,000

March 23, 2009

30,000

March 23, 2010

 

(b)       This ISO may be exercised, to the extent exercisable by its terms, from time to time in whole or in part at any time prior to the expiration thereof. Any exercise shall be accompanied by a written notice to the Company specifying the number of shares as to which this ISO is being exercised (the "Option Shares"). Notations of any partial exercise or installment exercise, shall be made by the Company on Schedule A hereto.

(c)       Notwithstanding the above, this ISO shall be fully exercisable in the event Holder's employment with the Hansen Group is terminated by Holder for "Good Reason" (as defined below), or a member of the Hansen Group terminates his employment without "Cause" (as defined above). "Good Reason" means the Holder's termination of employment with the Hansen Group on or after a reduction in his compensation or benefits, his removal as the Company's Chairman of the Board or Chief Executive Officer, or his being assigned duties or responsibilities that are inconsistent with the dignity, importance or scope of his position with the Company.

(d)       Notwithstanding anything else herein to the contrary, this ISO shall expire ten years from the date of this agreement.

(e)       The Holder hereby agrees to notify the Company in writing in the event shares acquired pursuant to the exercise of this ISO are transferred, other than by will or by the laws of descent and distribution, within two years after the date indicated above or within one year after the issuance of such shares pursuant to such exercise.

 

 

 

4.         Payment of Purchase Price Upon Exercise.    At the time of any exercise of the ISO the purchase price of the ISO shall be paid in full to the Company in either of the following ways or in any combination of the following ways:

(a)

By check or other immediately available funds.

(b)       With property consisting of shares of Common Stock. (The shares of Common Stock to be used as payment shall be valued as of the date of exercise of the ISO at the Closing Price as defined below. For example, if Holder exercises the option for 4,000 shares at a total Exercise Price of $7,000, assuming exercise price of $1.75 per share, and the Closing Price is $5.00, he may pay for the 4,000 Option Shares by transferring 1,400 shares of Common Stock to the Company.)

(c)       For purposes of this Agreement, the term "Closing Price" means, with respect to the Company's Common Stock, the last sale price regular-way or, in case no such sale takes place on such date, the average of the closing bid and asked prices regular-way on the principal national securities exchange on which the securities are listed or admitted to trading; or, if they are not listed or admitted to trading on any national securities exchange, the last sale price of the securities on the consolidated transaction reporting system of the National Association of Securities Dealers (NASD"), if such last sale information is reported on such system or, if not so reported, the average of the closing bid and asked prices of the securities on the National Association of Securities Dealers Automatic Quotation System ("NASDAQ") or any comparable system or, if the securities are not listed on NASDAQ or a comparable system, the average of the closing bid and asked prices as furnished by two members of the NASD selected from time to time by the Company for that purpose.

5.         Purchase for Investment; Resale Restrictions.  Unless at the time of exercise of the ISO there shall be a valid and effective registration statement under the Securities Act of 1933 ("'33 Act") and appropriate qualification and registration under applicable state securities laws relating to the Option Shares being acquired, Holder shall upon exercise of the ISO give a representation that he is acquiring such shares for his own account for investment and not with a view to, or for sale in connection with, the resale or distribution of any such shares. In the absence of such registration statement, Holder shall execute a written affirmation, in a form reasonably satisfactory to the Company, of such investment intent. Holder further agrees that he will not sell or transfer any Option Shares until he requests and receives an opinion of the Company's counsel or other counsel reasonably satisfactory to the Company to the effect that such proposed sale or transfer will not result in a violation of the '33 Act, or a registration statement covering the sale or transfer of the shares has been declared effective by the Securities and Exchange Commission, or he obtains a no-action letter from the Securities and Exchange Commission with respect to the proposed transfer.

6.         Nontransferability. This ISO shall not be transferable other than by will or by the laws of descent and distribution. During the lifetime of Holder, this ISO shall be exercisable only by Holder.

7.

Adjustments.

(a)       If the Company hereafter (i) declares a distribution on its shares in shares, (ii) splits its outstanding shares, (iii) combines its outstanding shares into a smaller number of securities or (iv) issues any shares or other securities by reclassification of its shares (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing entity), the purchase price in effect at the time of the record date for such distribution or the effective date of such subdivision, combination or reclassification shall be adjusted so that it shall equal the price determined by multiplying the purchase price by a fraction, the denominator of which shall be the number of shares outstanding immediately after giving effect to such action, and the numerator of which shall be the number of shares outstanding immediately prior to such action. Whenever the purchase price payable upon exercise of the ISO is adjusted pursuant to the preceding sentence above, the number of shares purchasable upon exercise of the ISO shall simultaneously be adjusted by multiplying the number of shares issuable upon exercise of the ISO immediately prior to the event which causes the adjustment by the purchase price in effect immediately prior to the event which causes the adjustment and dividing the product so obtained by the purchase price, as adjusted. Such adjustments shall be made successively whenever any event listed above shall occur.

(b)       If, at any time, as a result of an adjustment made pursuant to paragraph 7(a) above, the Holder shall become entitled to receive any securities of the Company other than shares, the number of such other securities so receivable upon exercise of the ISO shall thereafter be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the shares contained in paragraph 7(a) above.

(c)       If any other event contemplated in Section 10(a) of the Plan occurs, adjustments to the number and kind of shares subject to this ISO and/or to the purchase price for each share subject to this ISO may be made in accordance with Section 10(a) of the Plan.

(d)       No adjustments shall be made under this Section 7 that would have the effect of modifying this ISO under Internal Revenue Code §§ 422 or 424.

(e)       Whenever the purchase price or the number of shares is adjusted, as herein provided, Hansen shall within 10 business days of the event causing such adjustment give a notice setting forth the adjusted purchase price and adjusted number of shares issuable upon exercise of the ISO to be mailed to the Holder.

(f)        Notwithstanding anything else herein to the contrary, upon the occurrence of a change in control (as defined in (g) below), the option or any portion thereof not theretofore exercisable, shall immediately become exercisable in its entirety and the option (being the option to purchase shares of Common Stock subject to the applicable provisions of the Plan and awarded in accordance with the Plan in terms of section 1 above) may, with the consent of Holder, be purchased by the Company for cash at a price equal to the fair market value (as defined in 7(g) below) less the purchase price payable by Holder to exercise the option as set out in Article 1 above for one (1) share of Common Stock of the Company multiplied by the number of shares of Common Stock which Holder has the option to purchase in terms of Article 1 above.

(g)

For the purposes of this agreement

 

 

(i)

"Change in Control" means;

(A)             the acquisition of "Beneficial Ownership" by any person (as defined in rule 13 (d) - 3 under the Securities Exchange Act 1934), corporation or other entity other than the Company or a wholly owned subsidiary of the Company of 20% or more of the outstanding Stock,

(B)  the sale or disposition of substantially all of the assets of the Company, or

(C)             the merger of the Company with another corporation in which the Common Stock of the Company is no longer outstanding after such merger.

(ii)        "Fair Market Value" means, as of any date, the Closing Price for one share of the Common Stock of the Company on such date.

8.         The provisions of Section 5(b) (iii) of the Plan, regarding the execution of a shareholder's agreement as a condition precedent to the Company's obligation to issue shares under the Plan, shall not apply to the ISO or any shares issued pursuant to the ISO.

 

 

9.         The Company represents and warrants to Holder that (a) there are no options to purchase the Company's Common Stock, containing the same or substantially the same terms as the ISO, which are actively traded on an established market within the meaning of Internal Revenue Code §83 and the regulations promulgated thereunder; and (b) the shares of the Company's Common Stock issued upon exercise of the ISO, when issued in accordance with the terms hereof, will be duly authorized, validly issued, fully paid and nonassessable. The Company shall reserve and keep reserved out of its authorized shares of Common Stock the number of shares of Common Stock that may be issuable from time to time upon exercise of the ISO.

10.       No Rights as Stockholder.       Holder shall have no rights as a stockholder with respect to any shares of Common Stock subject to this ISO prior to the date of issuance to him of a certificate or certificates for such shares.

11.       No Right to Continue Employment.      This Agreement shall not confer upon Holder any right with respect to continuance of employment with any member of the Hansen Group nor shall it interfere in any way with the right of any such member to terminate his employment at any time.

12.       Compliance With Law and Regulation. This Agreement and the obligation of the Company to sell and deliver shares of Common Stock hereunder shall be subject to all applicable federal and state laws, rules and regulations and to such approvals by any government or regulatory agency as may be required. If at any time the Board of Directors of the Company shall determine that (i) the listing, registration or qualification of the shares of Common Stock subject or related thereto upon any securities exchange or under any state or federal law, or (ii) the consent or approval of any government regulatory body, is necessary or desirable as a condition of or in connection with the issue or purchase of shares of Common Stock hereunder, this ISO may not be exercised in whole or in part unless such listing, registration, qualification, consent, approval or agreement shall have been effected or obtained free of any conditions not acceptable to the Board of Directors. The Company agrees to use its reasonable efforts to obtain any necessary listing, registration, qualification, consent, approval or agreement as expeditiously as possible, and the term of this ISO shall be extended until 30 days following the date such listing, registration, qualification, consent, approval or agreement is effected or obtained. Moreover, this ISO may not be exercised if its exercise or the receipt of shares of Common Stock pursuant thereto would be contrary to applicable law.

 

 

 

13.       Tax Withholding Requirements.            The Company shall have the right to require Holder to remit to the Company an amount sufficient to satisfy any federal, state or local withholding tax requirements prior to the delivery of any certificate or certificates for Common Stock.

14.       Fractional Shares.                Notwithstanding any other provision of this Agreement, no fractional shares of stock shall be issued upon the exercise of this ISO and the Company shall not be under any obligation to compensate Holder in any way for such fractional shares.

15.       Notices.           Any notice hereunder to the Company shall be addressed to it at its office at 1010 Railroad Street, Corona, California 92882, Attention: Hilton Schlosberg with a copy to Benjamin Polk, Schulte Roth & Zabel LLP, 919 Third Avenue, New York, New York 10022, and any notice hereunder to Holder shall be addressed to him at 14 Vienne, Irvine, California 92606, subject to the right of either party to designate at any time hereafter in writing some other address.

16.       Amendment.    No modification, amendment or waiver of any of the provisions of this Agreement shall be effective unless in writing specifically referring hereto, and signed by both parties.

17.       Governing Law.    This Agreement shall be construed according to the laws of the State of Delaware and all provisions hereof shall be administered according to and its validity shall be determined under, the laws of such State, except where preempted by federal laws.

18.       Counterparts.   This Agreement may be executed in one or more counterparts, each of which shall constitute one and the same instrument.

IN WITNESS WHEREOF, Hansen Natural Corporation has caused this Agreement to be executed by a duly authorized officer and Holder has executed this Agreement both as of the day and year first above written.

HANSEN NATURAL CORPORATION

 

 

By: /s/ Hilton H. Schlosberg       

Title: Vice Chairman

 

/s/ Rodney C. Sacks

Rodney C. Sacks

 

 

 

 

STOCK OPTION AGREEMENT

 

This Stock Option Agreement ("Agreement") is made as of March 23, 2005, by and between Hansen Natural Corporation, a Delaware corporation (the "Company"), and Hilton H. Schlosberg ("Holder").

 

Preliminary Recitals

 

A.

Holder is an employee of the Company or one of its subsidiaries or affiliates.

B.        Pursuant to the Hansen Natural Corporation 2001 Stock Option Plan (the "Plan"), the Company desires to grant Holder an incentive stock option to purchase shares of the Company's common stock, par value $.005 per share (the "Common Stock"), subject to the terms and conditions of the Plan and subject further to the terms and conditions set forth below.

 

NOW, THEREFORE, the Company and Holder agree as follows:

1.         Grant of Incentive Stock Option.        The Company hereby grants to Holder, subject to the terms and conditions set forth herein, the incentive stock option ("ISO") to purchase up to 150,000 shares of Common Stock, at the purchase price of $52.50 per share, such ISO to be exercisable and exercised as hereinafter provided.

2.         Exercise Period.           The ISO shall expire three months after the termination of the Holder's employment with the Company and its subsidiaries and affiliates (the "Hansen Group") unless the employment is terminated by a member of the Hansen Group for Cause (as defined below) or unless the employment is terminated by reason of the death or Total Disability (as defined below) of Holder. If the Holder's employment is terminated by a member of the Hansen Group for Cause, the ISO shall expire as of the date employment terminates. If the Holder's employment terminates due to his death or Total Disability, then the ISO may be exercised by Holder or the person or persons to which Holder's rights under this Agreement pass by will, or if no such person has such right, by his executors or administrators, within six months after the date of death or Total Disability, but no later than the expiration date specified in Section 3(d) below. "Cause" means the Holder's act of fraud or dishonesty, knowing and material failure to comply with applicable laws or regulations, drug or alcohol abuse, as determined by the Committee of the Hansen Natural Corporation Stock Option Plan (the "Committee"). "Total Disability" means the complete and permanent inability of Holder to perform all of his duties of employment with the Company, as determined by the Committee upon the basis of such evidence, including independent medical reports and data, as the Committee deems appropriate or necessary.

3.

Exercise of Option

(a)       Subject to the other terms of this Agreement regarding the exercisability of the ISO, the ISO may only be exercised in respect of the number of shares listed in column A from and after the exercise dates listed in column B,

 

Column "A"

Column "B"

 

Number of Shares

Exercise Date

 

30,000

March 23, 2006

30,000

March 23, 2007

30,000

March 23, 2008

30,000

March 23, 2009

30,000

March 23, 2010

 

(b)       This ISO may be exercised, to the extent exercisable by its terms, from time to time in whole or in part at any time prior to the expiration thereof. Any exercise shall be accompanied by a written notice to the Company specifying the number of shares as to which this ISO is being exercised (the "Option Shares"). Notations of any partial exercise or installment exercise, shall be made by the Company on Schedule A hereto.

(c)       Notwithstanding the above, this ISO shall be fully exercisable in the event Holder's employment with the Hansen Group is terminated by Holder for "Good Reason" (as defined below), or a member of the Hansen Group terminates his employment without "Cause" (as defined above). "Good Reason" means the Holder's termination of employment with the Hansen Group on or after a reduction in his compensation or benefits, his removal as the Company's Vice Chairman of the Board of Directors, President, Chief Operating Officer, Chief Financial Officer or Secretary, or his being assigned duties or responsibilities that are inconsistent with the dignity, importance or scope of his position with the Company.

(d)       Notwithstanding anything else herein to the contrary, this ISO shall expire ten years from the date of this agreement.

(e)       The Holder hereby agrees to notify the Company in writing in the event shares acquired pursuant to the exercise of this ISO are transferred, other than by will or by the laws of descent and distribution, within two years after the date indicated above or within one year after the issuance of such shares pursuant to such exercise.

4.         Payment of Purchase Price Upon Exercise.    At the time of any exercise of the ISO the purchase price of the ISO shall be paid in full to the Company in either of the following ways or in any combination of the following ways:

(a)

By check or other immediately available funds.

(b)       With property consisting of shares of Common Stock. (The shares of Common Stock to be used as payment shall be valued as of the date of exercise of the ISO at the Closing Price as defined below. For example, if Holder exercises the option for 4,000 shares at a total Exercise Price of $7,000, assuming exercise price of $1.75 per share, and the Closing Price is $5.00, he may pay for the 4,000 Option Shares by transferring 1,400 shares of Common Stock to the Company.)

(c)       For purposes of this Agreement, the term "Closing Price" means, with respect to the Company's Common Stock, the last sale price regular-way or, in case no such sale takes place on such date, the average of the closing bid and asked prices regular-way on the principal national securities exchange on which the securities are listed or admitted to trading; or, if they are not listed or admitted to trading on any national securities exchange, the last sale price of the securities on the consolidated transaction reporting system of the National Association of Securities Dealers (NASD"), if such last sale information is reported on such system or, if not so reported, the average of the closing bid and asked prices of the securities on the National Association of Securities Dealers Automatic Quotation System ("NASDAQ") or any comparable system or, if the securities are not listed on NASDAQ or a comparable system, the average of the closing bid and asked prices as furnished by two members of the NASD selected from time to time by the Company for that purpose.

5.         Purchase for Investment; Resale Restrictions.  Unless at the time of exercise of the ISO there shall be a valid and effective registration statement under the Securities Act of 1933 ("'33 Act") and appropriate qualification and registration under applicable state securities laws relating to the Option Shares being acquired, Holder shall upon exercise of the ISO give a representation that he is acquiring such shares for his own account for investment and not with a view to, or for sale in connection with, the resale or distribution of any such shares. In the absence of such registration statement, Holder shall execute a written affirmation, in a form reasonably satisfactory to the Company, of such investment intent. Holder further agrees that he will not sell or transfer any Option Shares until he requests and receives an opinion of the Company's counsel or other counsel reasonably satisfactory to the Company to the effect that such proposed sale or transfer will not result in a violation of the '33 Act, or a registration statement covering the sale or transfer of the shares has been declared effective by the Securities and Exchange Commission, or he obtains a no-action letter from the Securities and Exchange Commission with respect to the proposed transfer.

6.         Nontransferability. This ISO shall not be transferable other than by will or by the laws of descent and distribution. During the lifetime of Holder, this ISO shall be exercisable only by Holder.

7.

Adjustments.

(a)       If the Company hereafter (i) declares a distribution on its shares in shares, (ii) splits its outstanding shares, (iii) combines its outstanding shares into a smaller number of securities or (iv) issues any shares or other securities by reclassification of its shares (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing entity), the purchase price in effect at the time of the record date for such distribution or the effective date of such subdivision, combination or reclassification shall be adjusted so that it shall equal the price determined by multiplying the purchase price by a fraction, the denominator of which shall be the number of shares outstanding immediately after giving effect to such action, and the numerator of which shall be the number of shares outstanding immediately prior to such action. Whenever the purchase price payable upon exercise of the ISO is adjusted pursuant to the preceding sentence above, the number of shares purchasable upon exercise of the ISO shall simultaneously be adjusted by multiplying the number of shares issuable upon exercise of the ISO immediately prior to the event which causes the adjustment by the purchase price in effect immediately prior to the event which causes the adjustment and dividing the product so obtained by the purchase price, as adjusted. Such adjustments shall be made successively whenever any event listed above shall occur.

(b)       If, at any time, as a result of an adjustment made pursuant to paragraph 7(a) above, the Holder shall become entitled to receive any securities of the Company other than shares, the number of such other securities so receivable upon exercise of the ISO shall thereafter be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the shares contained in paragraph 7(a) above.

(c)       If any other event contemplated in Section 10(a) of the Plan occurs, adjustments to the number and kind of shares subject to this ISO and/or to the purchase price for each share subject to this ISO may be made in accordance with Section 10(a) of the Plan.

(d)       No adjustments shall be made under this Section 7 that would have the effect of modifying this ISO under Internal Revenue Code §§ 422 or 424.

(e)       Whenever the purchase price or the number of shares is adjusted, as herein provided, Hansen shall within 10 business days of the event causing such adjustment give a notice setting forth the adjusted purchase price and adjusted number of shares issuable upon exercise of the ISO to be mailed to the Holder.

(f)        Notwithstanding anything else herein to the contrary, upon the occurrence of a change in control (as defined in (g) below), the option or any portion thereof not theretofore exercisable, shall immediately become exercisable in its entirety and the option (being the option to purchase shares of Common Stock subject to the applicable provisions of the Plan and awarded in accordance with the Plan in terms of section 1 above) may, with the consent of Holder, be purchased by the Company for cash at a price equal to the fair market value (as defined in 7(g) below) less the purchase price payable by Holder to exercise the option as set out in Article 1 above for one (1) share of Common Stock of the Company multiplied by the number of shares of Common Stock which Holder has the option to purchase in terms of Article 1 above.

(g)

For the purposes of this agreement

 

 

(i)

"Change in Control" means;

(A)             the acquisition of "Beneficial Ownership" by any person (as defined in rule 13 (d) - 3 under the Securities Exchange Act 1934), corporation or other entity other than the Company or a wholly owned subsidiary of the Company of 20% or more of the outstanding Stock,

(B) the sale or disposition of substantially all of the assets of the Company, or

(C)            the merger of the Company with another corporation in which the Common Stock of the Company is no longer outstanding after such merger.

(ii)        "Fair Market Value" means, as of any date, the Closing Price for one share of the Common Stock of the Company on such date.

8.         The provisions of Section 5(b) (iii) of the Plan, regarding the execution of a shareholder's agreement as a condition precedent to the Company's obligation to issue shares under the Plan, shall not apply to the ISO or any shares issued pursuant to the ISO.

9.         The Company represents and warrants to Holder that (a) there are no options to purchase the Company's Common Stock, containing the same or substantially the same terms as the ISO, which are actively traded on an established market within the meaning of Internal Revenue Code §83 and the regulations promulgated thereunder; and (b) the shares of the Company's Common Stock issued upon exercise of the ISO, when issued in accordance with the terms hereof, will be duly authorized, validly issued, fully paid and nonassessable. The Company shall reserve and keep reserved out of its authorized shares of Common Stock the number of shares of Common Stock that may be issuable from time to time upon exercise of the ISO.

10.       No Rights as Stockholder.       Holder shall have no rights as a stockholder with respect to any shares of Common Stock subject to this ISO prior to the date of issuance to him of a certificate or certificates for such shares.

11.       No Right to Continue Employment.      This Agreement shall not confer upon Holder any right with respect to continuance of employment with any member of the Hansen Group nor shall it interfere in any way with the right of any such member to terminate his employment at any time.

12.       Compliance With Law and Regulation. This Agreement and the obligation of the Company to sell and deliver shares of Common Stock hereunder shall be subject to all applicable federal and state laws, rules and regulations and to such approvals by any government or regulatory agency as may be required. If at any time the Board of Directors of the Company shall determine that (i) the listing, registration or qualification of the shares of Common Stock subject or related thereto upon any securities exchange or under any state or federal law, or (ii) the consent or approval of any government regulatory body, is necessary or desirable as a condition of or in connection with the issue or purchase of shares of Common Stock hereunder, this ISO may not be exercised in whole or in part unless such listing, registration, qualification, consent, approval or agreement shall have been effected or obtained free of any conditions not acceptable to the Board of Directors. The Company agrees to use its reasonable efforts to obtain any necessary listing, registration, qualification, consent, approval or agreement as expeditiously as possible, and the term of this ISO shall be extended until 30 days following the date such listing, registration, qualification, consent, approval or agreement is effected or obtained. Moreover, this ISO may not be exercised if its exercise or the receipt of shares of Common Stock pursuant thereto would be contrary to applicable law.

13.       Tax Withholding Requirements.            The Company shall have the right to require Holder to remit to the Company an amount sufficient to satisfy any federal, state or local withholding tax requirements prior to the delivery of any certificate or certificates for Common Stock.

14.       Fractional Shares.                Notwithstanding any other provision of this Agreement, no fractional shares of stock shall be issued upon the exercise of this ISO and the Company shall not be under any obligation to compensate Holder in any way for such fractional shares.

15.       Notices.           Any notice hereunder to the Company shall be addressed to it at its office at 1010 Railroad Street, Corona, California 92882, Attention: Rodney Sacks with a copy to Benjamin Polk, Schulte Roth & Zabel LLP, 919 Third Avenue, New York, New York 10022, and any notice hereunder to Holder shall be addressed to him at 2 Nidden, Irvine, California 92715, subject to the right of either party to designate at any time hereafter in writing some other address.

16.       Amendment.    No modification, amendment or waiver of any of the provisions of this Agreement shall be effective unless in writing specifically referring hereto, and signed by both parties.

17.       Governing Law.    This Agreement shall be construed according to the laws of the State of Delaware and all provisions hereof shall be administered according to and its validity shall be determined under, the laws of such State, except where preempted by federal laws.

18.       Counterparts.   This Agreement may be executed in one or more counterparts, each of which shall constitute one and the same instrument.

IN WITNESS WHEREOF, Hansen Natural Corporation has caused this Agreement to be executed by a duly authorized officer and Holder has executed this Agreement both as of the day and year first above written.

HANSEN NATURAL CORPORATION

 

By: /s/ Rodney C. Sacks             

/s/ Hilton H. Schlosberg

Chairman/Chief Executive Officer

Hilton H. Schlosberg

 

 

 

STOCK OPTION AGREEMENT

 

 

This Stock Option Agreement ("Agreement") is made as of March 23, 2005, by and between Hansen Natural Corporation, a Delaware corporation (the "Company"), and Mark J. Hall ("Holder").

 

 

Preliminary Recitals

 

A.

Holder is an employee of the Company or one of its subsidiaries or affiliates.

B.        Pursuant to the Hansen Natural Corporation 2001 Stock Option Plan (the "Plan"), the Company desires to grant Holder an incentive stock option to purchase shares of the Company's common stock, par value $.005 per share (the "Common Stock").

 

NOW, THEREFORE, the Company and Holder agree as follows:

1.         Grant of Incentive Stock Option.        The Company hereby grants to Holder, subject to the terms and conditions set forth herein, the incentive stock option ("ISO") to purchase up to 100,000 shares of Common Stock, at the purchase price of $52.50 per share, such ISO to be exercisable and exercised as hereinafter provided.

2.         Exercise Period.           The ISO shall expire three months after the termination of the Holder's employment with the Company and its subsidiaries and affiliates (the "Hansen Natural Group") unless the employment is terminated by a member of the Hansen Natural Group for Cause (as defined below) or unless the employment is terminated by reason of the death or Total Disability (as defined below) of Holder. If the Holder's employment is terminated by a member of the Hansen Natural Group for Cause, the ISO shall expire as of the date employment terminates. If the Holder's employment terminates due to his death or Total Disability, then the ISO may be exercised by Holder or the person or persons to which Holder's rights under this Agreement pass by will, or if no such person has such right, by his executors or administrators, within six months after the date of death or Total Disability, but no later than the expiration date specified in Section 3(c) below. "Cause" means the Holder's act of fraud or dishonesty, knowing and material failure to comply with applicable laws or regulations or satisfactorily perform his duties of employment, insubordination or drug or alcohol abuse, as determined by the Committee of the Hansen Natural Corporation Stock Option Plan (the "Committee"). "Total Disability" means the complete and permanent inability of Holder to perform all of his duties of employment with the Company, as determined by the Committee upon the basis of such evidence, including independent medical reports and data, as the Committee deems appropriate or necessary.

3.

Exercise of Option

(a)       Subject to the other terms of this Agreement regarding the exercisability of the ISO, and provided that Holder is employed by a member of the Hansen Natural Group on the relevant date, the ISO may only be exercised in respect of the number of shares listed in column A from and after the exercise dates listed in column B,

 

 

Column "A"

Column "B"

 

Number of Shares

Exercise Date

 

20,000

March 23, 2006

20,000

March 23, 2007

20,000

March 23, 2008

20,000

March 23, 2009

20,000

March 23, 2010

 

(b)       This ISO may be exercised, to the extent exercisable by its terms, from time to time in whole or in part at any time prior to the expiration thereof. Any exercise shall be accompanied by a written notice to the Company specifying the number of shares as to which this ISO is being exercised (the "Option Shares"). Notations of any partial exercise or installment exercise, shall be made by the Company on Schedule A hereto.

(c)       Notwithstanding anything else herein to the contrary, this ISO shall expire ten years from the date of this agreement.

(d)       The Holder hereby agrees to notify the Company in writing in the event shares acquired pursuant to the exercise of this ISO are transferred, other than by will or by the laws of descent and distribution, within two years after the date of this agreement or within one year after the issuance of such shares pursuant to such exercise.

4.         Payment of Purchase Price Upon Exercise.    At the time of any exercise of the ISO the purchase price of the ISO shall be paid in full to the Company in any of the following ways or in any combination of the following ways:

(a)

By check or other immediately available funds.

(b)       With property consisting of shares of Common Stock. (The shares of Common Stock to be used as payment shall be valued as of the date of exercise of the ISO at the Closing Price as defined below. For example, if Holder exercises the option for 4,000 shares at a total Exercise Price of $8,000, assuming exercise price of $2.00 per share, and the Closing Price is $5.00, he may pay for the 4,000 Option Shares by transferring 1,600 shares of Common Stock to the Company.)

(c)       By delivering a properly executed exercise notice together with irrevocable instructions to a broker to deliver promptly to the company the amount of sale or loan proceeds necessary to pay the purchase price and applicable withholding taxes, and such other documents as the Committee may determine.

(d)       For purposes of this Agreement, the term "Closing Price" means, with respect to the Company's Common Stock, the last sale price regular-way or, in case no such sale takes place on such date, the average of the closing bid and asked prices regular-way on the principal national securities exchange on which the securities are listed or admitted to trading; or, if they are not listed or admitted to trading on any national securities exchange, the last sale price of the securities on the consolidated transaction reporting system of the National Association of Securities Dealers ("NASD"), if such last sale information is reported on such system or, if not so reported, the average of the closing bid and asked prices of the securities on the National Association of Securities Dealers Automatic Quotation System ("NASDAQ") or any comparable system or, if the securities are not listed on NASDAQ or a comparable system, the average of the closing bid and asked prices as furnished by two members of the NASD selected from time to time by the Company for that purpose.

5.         Purchase for Investment; Resale Restrictions.  Unless at the time of exercise of the ISO there shall be a valid and effective registration statement under the Securities Act of 1933 ("'33 Act") and appropriate qualification and registration under applicable state securities laws relating to the Option Shares being acquired, Holder shall upon exercise of the ISO give a representation that he is acquiring such shares for his own account for investment and not with a view to, or for sale in connection with, the resale or distribution of any such shares. In the absence of such registration statement, Holder shall execute a written affirmation, in a form reasonably satisfactory to the Company, of such investment intent. Holder further agrees that he will not sell or transfer any Option Shares until he requests and receives an opinion of the Company's counsel or other counsel reasonably satisfactory to the Company to the effect that such proposed sale or transfer will not result in a violation of the '33 Act, or a registration statement covering the sale or transfer of the shares has been declared effective by the Securities and Exchange Commission, or he obtains a no-action letter from the Securities and Exchange Commission with respect to the proposed transfer.

 

6.

Nontransferability.

This ISO shall not be transferable other than by will or by the

 

 

laws of descent and distribution. During the lifetime of Holder, this ISO shall be exercisable only by Holder.

7.

Adjustments.

(a)       In the event of any change in the outstanding Common Stock of the Company by reason of any stock recapitalization, merger, consolidation, combination or exchange of shares, the kind of shares subject to the ISO and their purchase price per share (but not the number of shares) shall be appropriately adjusted consistent with such change in such manner as the Board of Directors of the Company may deem equitable. In the event of a stock dividend or stock split the kind of shares, their purchase price per share and the number of shares shall be appropriately adjusted, consistent with such change in such manner as the Board of Directors may deem equitable. Any adjustment so made shall be final and binding on Holder. No adjustments shall be made that would have the effect of modifying an ISO under Internal Revenue Code §§ 422 and 424.

(b)       Notwithstanding anything else herein to the contrary, upon the occurrence of a change in control (as defined in 7(c) below), any portion of the option not theretofore excercisable, shall immediately become exercisable in its entirety and the option (being the Option to purchase shares of Common Stock subject to the applicable provisions of the Plan and awarded in accordance with the Plan in terms of section 1 above) may, with the consent of Holder, be purchased by the Company for cash at a price equal to the fair market value (as defined in 7(c) below) less the purchase price payable by Holder to exercise the option as set out in Article 1 above for one (1) share of Common Stock of the Company multiplied by the number of shares of Common Stock which Holder has the option to purchase in terms of Article 1 above.

(c)

       For the purposes of this Agreement

 

 

(i)

"Change in Control" means;

 

 

(A)

the acquisition of "Beneficial Ownership" by any person (as

 

 

defined in rule 13(d) - 3 under the Securities Exchange Act 1934), corporation or other entity other than the Company or a wholly owned subsidiary of the Company of 50% or more of the outstanding Stock,

(B)  the sale or disposition of substantially all of the assets of the Company, or

(C)             the merger of the Company with another corporation in which the Common Stock of the Company is no longer outstanding after such merger.

(ii)        "Fair Market Value" means, as of any date, the Closing Price for one share of the common Stock of the company on such date.

8.         No Rights as Stockholder.       Holder shall have no rights as a stockholder with respect to any shares of Common Stock subject to this ISO prior to the date of issuance to him of a certificate or certificates for such shares.

9.         No Right to Continue Employment.      This Agreement shall not confer upon Holder any right with respect to continuance of employment with any member of the Hansen Natural Group nor shall it interfere in any way with the right of any such member to terminate his employment at any time.

10.       Compliance With Law and Regulation. This Agreement and the obligation of the Company to sell and deliver shares of Common Stock hereunder shall be subject to all applicable federal and state laws, rules and regulations and to such approvals by any government or regulatory agency as may be required. If at any time the Board of Directors of the Company shall determine that (i) the listing, registration or qualification of the shares of Common Stock subject or related thereto upon any securities exchange or under any state or federal law, or (ii) the consent or approval of any government regulatory body, is necessary or desirable as a condition of or in connection with the issue or purchase of shares of Common Stock hereunder, this ISO may not be exercised in whole or in part unless such listing, registration, qualification, consent, approval or agreement shall have been effected or obtained free of any conditions not acceptable to the Board of Directors.

11.       Tax Withholding Requirements.            The Company shall have the right to require Holder to remit to the Company an amount sufficient to satisfy any federal, state or local withholding tax requirements prior to the delivery of any certificate or certificates for Common Stock.

12.       Fractional Shares.                Notwithstanding any other provision of this Agreement, no fractional shares of stock shall be issued upon the exercise of this ISO and the Company shall not be under any obligation to compensate Holder in any way for such fractional shares.

13.       Notices.           Any notice hereunder to the Company shall be addressed to it at its office at 1010 Railroad Street, Corona, California 92882, Attention: Rodney C. Sacks with a copy to Benjamin Polk, Schulte Roth & Zabel LLP, 919 Third Avenue, New York, New York 10022, and any notice hereunder to Holder shall be addressed to him at 22433 Stanley Lane, Wildomar, California 92595, subject to the right of either party to designate at any time hereafter in writing some other address.

14.       Amendment.    No modification, amendment or waiver of any of the provisions of this Agreement shall be effective unless in writing specifically referring hereto, and signed by both parties.

15.       Governing Law.    This Agreement shall be construed according to the laws of the State of Delaware and all provisions hereof shall be administered according to and its validity shall be determined under, the laws of such State, except where preempted by federal laws.

16.       Counterparts.   This Agreement may be executed in one or more counterparts, each of which shall constitute one and the same instrument.

IN WITNESS WHEREOF, Hansen Natural Corporation has caused this Agreement to be executed by a duly authorized officer and Holder has executed this Agreement both as of the day and year first above written.

HANSEN NATURAL CORPORATION

 

 

 

By: /s/ Rodney C. Sacks

 

 

Title: Chairman of the Board

/s/ Mark J. Hall

 

 

Mark J. Hall

 

 

 

 

 

STOCK OPTION AGREEMENT

 

 

This Stock Option Agreement ("Agreement") is made as of September 28, 2005, by and between Hansen Natural Corporation, a Delaware corporation (the "Company"), and Mark J. Hall ("Holder").

 

 

Preliminary Recitals

 

A.

Holder is an employee of the Company or one of its subsidiaries or affiliates.

B.        Pursuant to the Hansen Natural Corporation 2001 Stock Option Plan (the "Plan"), the Company desires to grant Holder an incentive stock option to purchase shares of the Company's common stock, par value $.005 per share (the "Common Stock").

 

NOW, THEREFORE, the Company and Holder agree as follows:

1.         Grant of Incentive Stock Option.        The Company hereby grants to Holder, subject to the terms and conditions set forth herein, the incentive stock option ("ISO") to purchase up to 25,000 shares of Common Stock, at the purchase price of $43.79 per share, such ISO to be exercisable and exercised as hereinafter provided.

2.         Exercise Period.           The ISO shall expire three months after the termination of the Holder's employment with the Company and its subsidiaries and affiliates (the "Hansen Natural Group") unless the employment is terminated by a member of the Hansen Natural Group for Cause (as defined below) or unless the employment is terminated by reason of the death or Total Disability (as defined below) of Holder. If the Holder's employment is terminated by a member of the Hansen Natural Group for Cause, the ISO shall expire as of the date employment terminates. If the Holder's employment terminates due to his death or Total Disability, then the ISO may be exercised by Holder or the person or persons to which Holder's rights under this Agreement pass by will, or if no such person has such right, by his executors or administrators, within six months after the date of death or Total Disability, but no later than the expiration date specified in Section 3(c) below. "Cause" means the Holder's act of fraud or dishonesty, knowing and material failure to comply with applicable laws or regulations or satisfactorily perform his duties of employment, insubordination or drug or alcohol abuse, as determined by the Committee of the Hansen Natural Corporation Stock Option Plan (the "Committee"). "Total Disability" means the complete and permanent inability of Holder to perform all of his duties of employment with the Company, as determined by the Committee upon the basis of such evidence, including independent medical reports and data, as the Committee deems appropriate or necessary.

3.

Exercise of Option

(a)       Subject to the other terms of this Agreement regarding the exercisability of the ISO, and provided that Holder is employed by a member of the Hansen Natural Group on the relevant date, the ISO may only be exercised in respect of the number of shares listed in column A from and after the exercise dates listed in column B,

 

 

Column "A"

Column "B"

 

Number of Shares

Exercise Date

 

5,000

September 28, 2006

5,000

September 28, 2007

5,000

September 28, 2008

5,000

September 28, 2009

5,000

September 28, 2010

 

(b)       This ISO may be exercised, to the extent exercisable by its terms, from time to time in whole or in part at any time prior to the expiration thereof. Any exercise shall be accompanied by a written notice to the Company specifying the number of shares as to which this ISO is being exercised (the "Option Shares"). Notations of any partial exercise or installment exercise, shall be made by the Company on Schedule A hereto.

(c)       Notwithstanding anything else herein to the contrary, this ISO shall expire ten years from the date of this agreement.

(d)       The Holder hereby agrees to notify the Company in writing in the event shares acquired pursuant to the exercise of this ISO are transferred, other than by will or by the laws of descent and distribution, within two years after the date of this agreement or within one year after the issuance of such shares pursuant to such exercise.

4.         Payment of Purchase Price Upon Exercise.    At the time of any exercise of the ISO the purchase price of the ISO shall be paid in full to the Company in any of the following ways or in any combination of the following ways:

(a)

By check or other immediately available funds.

(b)       With property consisting of shares of Common Stock. (The shares of Common Stock to be used as payment shall be valued as of the date of exercise of the ISO at the Closing Price as defined below. For example, if Holder exercises the option for 4,000 shares at a total Exercise Price of $8,000, assuming exercise price of $2.00 per share, and the Closing Price is $5.00, he may pay for the 4,000 Option Shares by transferring 1,600 shares of Common Stock to the Company.)

(c)       By delivering a properly executed exercise notice together with irrevocable instructions to a broker to deliver promptly to the company the amount of sale or loan proceeds necessary to pay the purchase price and applicable withholding taxes, and such other documents as the Committee may determine.

(d)       For purposes of this Agreement, the term "Closing Price" means, with respect to the Company's Common Stock, the last sale price regular-way or, in case no such sale takes place on such date, the average of the closing bid and asked prices regular-way on the principal national securities exchange on which the securities are listed or admitted to trading; or, if they are not listed or admitted to trading on any national securities exchange, the last sale price of the securities on the consolidated transaction reporting system of the National Association of Securities Dealers ("NASD"), if such last sale information is reported on such system or, if not so reported, the average of the closing bid and asked prices of the securities on the National Association of Securities Dealers Automatic Quotation System ("NASDAQ") or any comparable system or, if the securities are not listed on NASDAQ or a comparable system, the average of the closing bid and asked prices as furnished by two members of the NASD selected from time to time by the Company for that purpose.

5.         Purchase for Investment; Resale Restrictions.  Unless at the time of exercise of the ISO there shall be a valid and effective registration statement under the Securities Act of 1933 ("'33 Act") and appropriate qualification and registration under applicable state securities laws relating to the Option Shares being acquired, Holder shall upon exercise of the ISO give a representation that he is acquiring such shares for his own account for investment and not with a view to, or for sale in connection with, the resale or distribution of any such shares. In the absence of such registration statement, Holder shall execute a written affirmation, in a form reasonably satisfactory to the Company, of such investment intent. Holder further agrees that he will not sell or transfer any Option Shares until he requests and receives an opinion of the Company's counsel or other counsel reasonably satisfactory to the Company to the effect that such proposed sale or transfer will not result in a violation of the '33 Act, or a registration statement covering the sale or transfer of the shares has been declared effective by the Securities and Exchange Commission, or he obtains a no-action letter from the Securities and Exchange Commission with respect to the proposed transfer.

 

6.

Nontransferability.

This ISO shall not be transferable other than by will or by the laws

of descent and distribution. During the lifetime of Holder, this ISO shall be exercisable only by Holder.

7.

Adjustments.

(a)       In the event of any change in the outstanding Common Stock of the Company by reason of any stock recapitalization, merger, consolidation, combination or exchange of shares, the kind of shares subject to the ISO and their purchase price per share (but not the number of shares) shall be appropriately adjusted consistent with such change in such manner as the Board of Directors of the Company may deem equitable. In the event of a stock dividend or stock split the kind of shares, their purchase price per share and the number of shares shall be appropriately adjusted, consistent with such change in such manner as the Board of Directors may deem equitable. Any adjustment so made shall be final and binding on Holder. No adjustments shall be made that would have the effect of modifying an ISO under Internal Revenue Code §§ 422 and 424.

(b)       Notwithstanding anything else herein to the contrary, upon the occurrence of a change in control (as defined in 7(c) below), any portion of the option not theretofore excercisable, shall immediately become exercisable in its entirety and the option (being the Option to purchase shares of Common Stock subject to the applicable provisions of the Plan and awarded in accordance with the Plan in terms of section 1 above) may, with the consent of Holder, be purchased by the Company for cash at a price equal to the fair market value (as defined in 7(c) below) less the purchase price payable by Holder to exercise the option as set out in Article 1 above for one (1) share of Common Stock of the Company multiplied by the number of shares of Common Stock which Holder has the option to purchase in terms of Article 1 above.

(c)

       For the purposes of this Agreement

 

 

(i)

"Change in Control" means;

 

 

(A)

the acquisition of "Beneficial Ownership" by any person (as

defined in rule 13(d) - 3 under the Securities Exchange Act 1934), corporation or other entity other than the Company or a wholly owned subsidiary of the Company of 50% or more of the outstanding Stock,

(B)  the sale or disposition of substantially all of the assets of the Company, or

(C)             the merger of the Company with another corporation in which the Common Stock of the Company is no longer outstanding after such merger.

(ii)        "Fair Market Value" means, as of any date, the Closing Price for one share of the common Stock of the company on such date.

8.         No Rights as Stockholder.       Holder shall have no rights as a stockholder with respect to any shares of Common Stock subject to this ISO prior to the date of issuance to him of a certificate or certificates for such shares.

9.         No Right to Continue Employment.      This Agreement shall not confer upon Holder any right with respect to continuance of employment with any member of the Hansen Natural Group nor shall it interfere in any way with the right of any such member to terminate his employment at any time.

10.       Compliance With Law and Regulation. This Agreement and the obligation of the Company to sell and deliver shares of Common Stock hereunder shall be subject to all applicable federal and state laws, rules and regulations and to such approvals by any government or regulatory agency as may be required. If at any time the Board of Directors of the Company shall determine that (i) the listing, registration or qualification of the shares of Common Stock subject or related thereto upon any securities exchange or under any state or federal law, or (ii) the consent or approval of any government regulatory body, is necessary or desirable as a condition of or in connection with the issue or purchase of shares of Common Stock hereunder, this ISO may not be exercised in whole or in part unless such listing, registration, qualification, consent, approval or agreement shall have been effected or obtained free of any conditions not acceptable to the Board of Directors.

11.       Tax Withholding Requirements.            The Company shall have the right to require Holder to remit to the Company an amount sufficient to satisfy any federal, state or local withholding tax requirements prior to the delivery of any certificate or certificates for Common Stock.

12.       Fractional Shares.                Notwithstanding any other provision of this Agreement, no fractional shares of stock shall be issued upon the exercise of this ISO and the Company shall not be under any obligation to compensate Holder in any way for such fractional shares.

13.       Notices.           Any notice hereunder to the Company shall be addressed to it at its office at 1010 Railroad Street, Corona, California 92882, Attention: Rodney C. Sacks with a copy to Benjamin Polk, Schulte Roth & Zabel LLP, 919 Third Avenue, New York, New York 10022, and any notice hereunder to Holder shall be addressed to him at 22433 Stanley Lane, Wildomar, California 92595, subject to the right of either party to designate at any time hereafter in writing some other address.

14.       Amendment.    No modification, amendment or waiver of any of the provisions of this Agreement shall be effective unless in writing specifically referring hereto, and signed by both parties.

15.       Governing Law.    This Agreement shall be construed according to the laws of the State of Delaware and all provisions hereof shall be administered according to and its validity shall be determined under, the laws of such State, except where preempted by federal laws.

16.       Counterparts.   This Agreement may be executed in one or more counterparts, each of which shall constitute one and the same instrument.

IN WITNESS WHEREOF, Hansen Natural Corporation has caused this Agreement to be executed by a duly authorized officer and Holder has executed this Agreement both as of the day and year first above written.

HANSEN NATURAL CORPORATION

 

 

 

By: /s/ Rodney C. Sacks

 

 

Title: Chairman of the Board

/s/ Mark J. Hall

 

 

Mark J. Hall

 

 

 

 

STOCK OPTION AGREEMENT

 

This Stock Option Agreement ("Agreement") is made as of November 1, 2005, by and between Hansen Natural Corporation, a Delaware corporation (the "Company"), and Kirk Blower ("Holder").

 

 

Preliminary Recitals

 

A.

Holder is an employee of the Company or one of its subsidiaries or affiliates.

B.        Pursuant to the Hansen Natural Corporation Stock Option Plan (the "Plan"), the Company desires to grant Holder an incentive stock option to purchase shares of the Company's common stock, par value $.005 per share (the "Common Stock").

 

NOW, THEREFORE, the Company and Holder agree as follows:

1.         Grant of Incentive Stock Option.        The Company hereby grants to Holder, subject to the terms and conditions set forth herein, the incentive stock option ("ISO") to purchase 2,000 shares of Common Stock, at the purchase price of $49.71 per share, such ISO to be exercisable and exercised as hereinafter provided.

2.         Exercise Period.           The ISO shall expire three months after the termination of the Holder's employment with the Company and its subsidiaries and affiliates (the "Hansen Natural Group") unless the employment is terminated by a member of the Hansen Natural Group for Cause (as defined below) or unless the employment is terminated by reason of the death or Total Disability (as defined below) of Holder. If the Holder's employment is terminated by a member of the Hansen Natural Group for Cause, the ISO shall expire as of the date employment terminates. If the Holder's employment terminates due to his death or Total Disability, then the ISO may be exercised by Holder or the person or persons to which Holder's rights under this Agreement pass by will, or if no such person has such right, by his executors or administrators, within six months after the date of death or Total Disability, but no later than the expiration date specified in Section 3(c) below. "Cause" means the Holder's act of fraud or dishonesty, knowing and material failure to comply with applicable laws or regulations or satisfactorily perform his duties of employment, insubordination or drug or alcohol abuse, as determined by the Committee of the Hansen Natural Corporation Stock Option Plan (the "Committee"). "Total Disability" means the complete and permanent inability of Holder to perform all of his duties of employment with the Company, as determined by the Committee upon the basis of such evidence, including independent medical reports and data, as the Committee deems appropriate or necessary.

3.

Exercise of Option

(a)       Subject to the other terms of this Agreement regarding the exercisability of the ISO, and provided that Holder is employed by a member of the Hansen Natural Group on the relevant date, the ISO may only be exercised in respect of the number of shares listed in column A from and after the exercise dates listed in column B,

 

 

Column "A"

Column "B"

 

Number of Shares

Exercise Date

 

400

November 1, 2006

400

November 1, 2007

400

November 1, 2008

400

November 1, 2009

400

November 1, 2010

 

(b)       This ISO may be exercised, to the extent exercisable by its terms, from time to time in whole or in part at any time prior to the expiration thereof. Any exercise shall be accompanied by a written notice to the Company specifying the number of shares as to which this ISO is being exercised (the "Option Shares"). Notations of any partial exercise or installment exercise, shall be made by the Company on Schedule A hereto.

(c)       Notwithstanding anything else herein to the contrary, this ISO shall expire ten years from the date of this agreement.

(d)       The Holder hereby agrees to notify the Company in writing in the event shares acquired pursuant to the exercise of this ISO are transferred, other than by will or by the laws of descent and distribution, within two years after the date of this agreement or within one year after the issuance of such shares pursuant to such exercise.

4.         Payment of Purchase Price Upon Exercise.    At the time of any exercise of the ISO the purchase price of the ISO shall be paid in full to the Company in any of the following ways or in any combination of the following ways:

(a)

By check or other immediately available funds.

(b)       With property consisting of shares of Common Stock. (The shares of Common Stock to be used as payment shall be valued as of the date of exercise of the ISO at the Closing Price as defined below. For example, if Holder exercises the option for 4,000 shares at a total Exercise Price of $8,000, assuming exercise price of $2.00 per share, and the Closing Price is $5.00, he may pay for the 4,000 Option Shares by transferring 1,600 shares of Common Stock to the Company.)

(c)       By delivering a properly executed exercise notice together with irrevocable instructions to a broker to deliver promptly to the company the amount of sale or loan proceeds necessary to pay the purchase price and applicable withholding taxes, and such other documents as the Committee may determine.

(d)       For purposes of this Agreement, the term "Closing Price" means, with respect to the Company's Common Stock, the last sale price regular-way or, in case no such sale takes place on such date, the average of the closing bid and asked prices regular-way on the principal national securities exchange on which the securities are listed or admitted to trading; or, if they are not listed or admitted to trading on any national securities exchange, the last sale price of the securities on the consolidated transaction reporting system of the National Association of Securities Dealers ("NASD"), if such last sale information is reported on such system or, if not so reported, the average of the closing bid and asked prices of the securities on the National Association of Securities Dealers Automatic Quotation System ("NASDAQ") or any comparable system or, if the securities are not listed on NASDAQ or a comparable system, the average of the closing bid and asked prices as furnished by two members of the NASD selected from time to time by the Company for that purpose.

5.         Purchase for Investment; Resale Restrictions.  Unless at the time of exercise of the ISO there shall be a valid and effective registration statement under the Securities Act of 1933 ("'33 Act") and appropriate qualification and registration under applicable state securities laws relating to the Option Shares being acquired, Holder shall upon exercise of the ISO give a representation that he is acquiring such shares for his own account for investment and not with a view to, or for sale in connection with, the resale or distribution of any such shares. In the absence of such registration statement, Holder shall execute a written affirmation, in a form reasonably satisfactory to the Company, of such investment intent. Holder further agrees that he will not sell or transfer any Option Shares until he requests and receives an opinion of the Company's counsel or other counsel reasonably satisfactory to the Company to the effect that such proposed sale or transfer will not result in a violation of the '33 Act, or a registration statement covering the sale or transfer of the shares has been declared effective by the Securities and Exchange Commission, or he obtains a no-action letter from the Securities and Exchange Commission with respect to the proposed transfer.

6.         Nontransferability. This ISO shall not be transferable other than by will or by the laws of descent and distribution. During the lifetime of Holder, this ISO shall be exercisable only by Holder.

7.

Adjustments.

(a)       Subject to clause 7(b) below, if the outstanding shares of stock of the Company are increased, decreased, or exchanged for a different number or kind of shares or other securities, or if additional shares or new or different shares or other securities are distributed with respect to such shares of stock or securities, through merger, consolidation, sale of all or substantially all of the property of the Company, reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other distribution with respect to such shares of stock or other securities, then, to the extent permitted by the Board of the Company, an appropriate and proportionate adjustment shall be made in (1) the maximum number and kind of shares provided in clause 1 above; (2) the number and kind of shares or other securities subject to the outstanding options and tandum SARs, if any; and (3) the price for each share or other unit of any other securities subject to outstanding options without change in the aggregate purchase price or value as to which the options remain exercisable or subject to restrictions. Any adjustment under this clause 7(a) shall be made by the Board of the Company, whose determination as to what adjustments shall be made, if any, and the extent thereof, will be final, binding and conclusive. No fractional interests will be issued under this agreement resulting from any such adjustment.

(b)       Notwithstanding anything else herein to the contrary, the Board of the Company may, at any time, in its sole discretion, provide that upon the occurrence of a change in control of the Company (as determined by the Board), all or a specified portion of any outstanding options not theretofore exercisable shall immediately become exercisable and that any option not exercised prior to such change in control shall be canceled.

8.         No Rights as Stockholder.       Holder shall have no rights as a stockholder with respect to any shares of Common Stock subject to this ISO prior to the date of issuance to her of a certificate or certificates for such shares.

9.         No Right to Continue Employment.      This Agreement shall not confer upon Holder any right with respect to continuance of employment with any member of the Hansen Natural Group nor shall it interfere in any way with the right of any such member to terminate her employment at any time.

10.       Compliance With Law and Regulation. This Agreement and the obligation of the Company to sell and deliver shares of Common Stock hereunder shall be subject to all applicable federal and state laws, rules and regulations and to such approvals by any government or regulatory agency as may be required. If at any time the Board of Directors of the Company shall determine that (i) the listing, registration or qualification of the shares of Common Stock subject or related thereto upon any securities exchange or under any state or federal law, or (ii) the consent or approval of any government regulatory body, is necessary or desirable as a condition of or in connection with the issue or purchase of shares of Common Stock hereunder, this ISO may not be exercised in whole or in part unless such listing, registration, qualification, consent, approval or agreement shall have been effected or obtained free of any conditions not acceptable to the Board of Directors.

11.       Tax Withholding Requirements.            The Company shall have the right to require Holder to remit to the Company an amount sufficient to satisfy any federal, state or local withholding tax requirements prior to the delivery of any certificate or certificates for Common Stock.

12.       Fractional Shares.                Notwithstanding any other provision of this Agreement, no fractional shares of stock shall be issued upon the exercise of this ISO and the Company shall not be under any obligation to compensate Holder in any way for such fractional shares.

13.       Notices.           Any notice hereunder to the Company shall be addressed to it at its office at 1010 Railroad Street, Corona, California 92882, Attention: Rodney C. Sacks with a copy to Benjamin Polk, Schulte Roth & Zabel LLP, 919 Third Avenue, New York, New York 10022, and any notice hereunder to Holder shall be addressed to him at 3 Promontory, Dove Canyon, California 92679, subject to the right of either party to designate at any time hereafter in writing some other address.

14.       Amendment.    No modification, amendment or waiver of any of the provisions of this Agreement shall be effective unless in writing specifically referring hereto, and signed by both parties.

15.       Governing Law.    This Agreement shall be construed according to the laws of the State of Delaware and all provisions hereof shall be administered according to and its validity shall be determined under, the laws of such State, except where preempted by federal laws.

16.       Counterparts.   This Agreement may be executed in one or more counterparts, each of which shall constitute one and the same instrument.

 

 

 

 

 

 

IN WITNESS WHEREOF, Hansen Natural Corporation has caused this Agreement to be executed by a duly authorized officer and Holder has executed this Agreement both as of the day and year first above written.

 

 

HANSEN NATURAL CORPORATION

 

 

By: /s/ Rodney C. Sacks

 

Title: Chairman of the Board

 

 

/s/ Kirk Blower

 

 

Kirk Blower

 

 

 

STOCK OPTION AGREEMENT

 

 

This STOCK OPTION AGREEMENT (“Agreement”) is made as of November 11, 2005

by and between HANSEN NATURAL CORPORATION, a Delaware corporation (the “Company”), and Harold Taber (“Holder”).

 

Preliminary Recitals

 

A.        Holder is a member of the Board of Directors of the Company (the “Board”) who: (i) is not an employee of the Company or one of its subsidiaries or affiliates, (ii) does not serve as a consultant of the Company or its subsidiaries or affiliates and (iii) the Company is not contractually obligated to nominate as a member of the Board.

B.        Pursuant to the 2005 Hansen Natural Corporation Stock Option Plan For Non-Employee Directors, (the “Plan”), the Company desires to grant Holder a stock option to purchase shares of the Company’s common stock, par value $.005 per share (the “Common Stock”), subject to the terms and conditions of the Plan and subject further to the terms and conditions set forth below.

 

NOW, THEREFORE, the Company and Holder agree as follows:

1.        Grant of Stock Option. The Company hereby grants to Holder, subject to the terms and conditions set forth herein, the stock option (the “Option”) to purchase up to 4,800 shares of Common Stock, at the purchase price of $67.48 per share (the “Exercise Price”), such Option to be exercisable and exercised as hereinafter provided.

2.        Exercise Period. The Option shall expire on the date which is the earlier of (x) ten (10) years after the date of grant or (y) three (3) months after the termination of the Holder’s membership on the Board unless the Holder’s membership on the Board terminates by reason of the death or Total Disability (as defined below) of holder. If the Holder’s membership on the Board terminates due to his death or Total Disability, then the Option may be exercised to the extent vested at any time, or from time to time, within twelve (12) months after the date of termination, but not later than the expiration date specified in Section 3 (c) below, by Holder or the person or persons to which Holder’s rights under this Agreement pass by will, or if no such person has such right, by his executors or administrators. For purposes of this Agreement, “Total Disability” means the complete and permanent inability of Holder to perform all of his duties as a director, as determined by the Board upon the basis of such evidence, including independent medical reports and data, as the Board deems appropriate or necessary.

3.

Exercise of Option.

(a)       Subject to the other terms of this Agreement regarding the exercisability of the Option, the Option may only be exercised in respect of the number of shares listed in column A from and after the exercise dates listed in column B:

 

 

Column “A”

Column “B”

 

Number of Shares

Exercise Date

 

 

1,200

November 11, 2005

 

1,200

May 1, 2006

 

 

1,200

May 1, 2007

 

 

1,200

May 1, 2008

 

4,800

 

 

 

(b)       This Option may be exercised, to the extent exercisable by its terms, from time to time in whole or in part at any time prior to the expiration thereof. Any exercise shall be accompanied by a written notice to the Company specifying the number of shares as to which this Option is being exercised (the “Option Shares”). Notations of any partial exercise or installment exercise, shall be made by the Company on Schedule A hereto.

(c)       Notwithstanding anything else herein to the contrary, this Option shall expire on November 11, 2015.

4.        Payment of Exercise Price. At the time of any exercise of the Option the Exercise Price of the Option Shares shall be paid in full to the Company in either of the following ways or in any combination of the following ways:

(a)

By check or other immediately available funds.

(b)       With property consisting of shares of Common Stock. (the shares of Common Stock to be used as payment shall be valued as of the date of exercise of the Option at the Closing Price as defined below. For example, if Holder exercises the Option for 1,200 shares at a total Exercise Price of $60,000, assuming an Exercise Price of $50.00 per share, and the Closing Price is $70.00, he may pay for the 1,200 Option Shares by transferring 857 shares of Common Stock to the Company.)

(c)       By delivering a properly executed exercise notice together with irrevocable instructions to a broker to deliver promptly to the Company the amount of sale or loan proceeds necessary to pay the purchase price and applicable withholding taxes, and such other documents as the Committee may determine.

(d)       For purposes of this Agreement, the term “Closing Price” means, with respect to the Company’s Common Stock, the last sale price regular-way or, in case no such sale takes place on such date, the average of the closing bid and asked prices regular-way on the principal national securities exchange on which the securities are listed or admitted to trading; or, if they are not listed or admitted to trading on any national securities exchange, the last sale price of the securities on the consolidated transaction reporting system of the National Association of Securities Dealers (“NASD”), if such last sale information is reported on such system or, if not so reported, the average of the closing bid and asked prices of the securities on the National Association of Securities Dealers Automatic Quotation System (“NASDAQ”) or any comparable system or, if the securities are not listed on NASDAQ or a comparable system, the average of the closing bid and asked prices as furnished by two members of the NASD selected from time to time by the Company for that purpose.

5.        Purchase for Investment; Resale Restrictions. Unless at the time of exercise of the Option there shall be a valid and effective registration statement under the Securities Act of 1933 (“’33 Act”) and appropriate qualification and registration under applicable state securities laws relating to the Option Shares being acquired, Holder shall upon exercise of the Option give a representation that he is acquiring such shares for his own account for investment and not with a view to, or for sale in connection with, the resale or distribution of any such shares. In the absence of such registration statement, Holder shall execute a written affirmation, in a form reasonably satisfactory to the Company, of such investment intent. Holder further agrees that he will not sell or transfer any Option Shares until he requests and receives an opinion of the Company’s counsel or other counsel reasonably satisfactory to the Company to the effect that such proposed sale or transfer will not result in a violation of the ’33 Act, or a registration statement covering the sale or transfer of the shares has been declared effective by the Securities and Exchange Commission, or he obtains a no-action letter from the Securities and Exchange Commission with respect to the proposed transfer.

6.        Nontransferability. This Option shall not be transferable other than by will or by the laws of descent and distribution. During the lifetime of Holder, this Option shall be exercisable only by Holder.

7.

Adjustments.

(a)       Subject to Section 7(b) below, in the event of any change in the outstanding Common Stock by reason of any stock recapitalization, merger, consolidation, combination or exchange of shares, the kind of shares subject to the Option and their purchase price per share (but not the number of shares) shall be appropriately adjusted consistent with such change in such manner as the Board may deem equitable. In the event of a stock dividend or stock split the kind of shares, their purchase price per share and the number of shares shall be appropriately adjusted, consistent with such change in such manner as the Board may deem equitable. Any adjustment so made shall be final and binding.

(b)       Notwithstanding anything else herein to the contrary, upon the occurrence of a Change in Control (as defined in the Plan), the Option or any portion thereof not theretofore exercisable, shall immediately become exercisable in its entirety and the Option may be purchased by the Company for cash at a price equal to the Fair Market Value (as defined in the Plan) of the Option as determined in good faith by the Board.

8.        Reservation of Shares. The Company shall reserve and keep reserved out of its authorized shares of Common Stock the number of shares of Common Stock that may be issuable from time to time upon exercise of the Option.

9.        No Rights as Stockholder. Holder shall have no rights as a stockholder with respect to any shares of Common Stock subject to this Option prior to the date of issuance to him of a certificate or certificates for such shares.

10.      No Right to Continue Membership on Board. This Agreement shall not confer upon Holder any right with respect to continuance on the Board nor shall it interfere in any way with the rights of Holder to terminate his membership on the Board at any time.

11.      Compliance With Law and Regulation. This Agreement and the obligation of the Company to sell and deliver shares of Common Stock hereunder shall be subject to all applicable federal and state laws, rules and regulations and to such approvals by any government or regulatory agency as may be required. If at any time the Board shall determine that (I) the listing, registration or qualification of the shares of Common Stock subject or related thereto upon any securities exchange or under any state or federal law, or (ii) the consent or approval of any government regulatory body, is necessary or desirable as a condition of or in connection with the issue or purchase of shares of Common Stock hereunder, this Option may not be exercised in whole or in part unless such listing, registration, qualification, consent, approval or agreement shall have been effected or obtained free of any conditions not acceptable to the Board. Moreover, this Option may not be exercised if its exercise or the receipt of shares of Common Stock pursuant thereto would be contrary to applicable law.

12.      Tax Withholding Requirements. The Company shall have the right to require Holder to remit to the Company an amount sufficient to satisfy any federal, state or local withholding tax requirements prior to the delivery of any certificate or certificates for Common Stock.

13.      Fractional Shares. Notwithstanding any other provision of this Agreement, no fractional shares of stock shall be issued upon the exercise of this Option and the Company shall not be under any obligation to compensate Holder in any way for such fractional shares.

14.      Notices. Any notice hereunder to the Company shall be addressed to it at its offices at 1010 Railroad Street, Corona, California 92882, Attention: Rodney Sacks, and any notice to Holder shall be addressed to him at 1421 Brighton Street, La Habra, California 90631, subject to the right of either party to designate at any time hereafter in writing some other address.

15.      Amendment. No modification, amendment or waiver of any of the provisions of this Agreement shall e effective unless in writing specifically referring hereto, and signed by both parties.

16.      Governing Law. This Agreement shall be construed according to the laws of the State of Delaware and all provisions hereof shall be administered according to and its validity shall be determined under, the laws of such State, except where preempted by federal laws.

17.      Counterparts. This Agreement may be executed in one or more counterparts, each of which shall constitute one and the same instrument.

IN WITNESS WHEREOF, Hansen Natural Corporation has caused this Agreement to be executed by a duly authorized officer and Holder has executed this Agreement, both as of the day and year first above written.

 

HANSEN NATURAL CORPORATION

 

 

By: /s/ Rodney C. Sacks

 

Name: Rodney C. Sacks

 

Title: Chairman of the Board

 

HOLDER

 

 

/s/ Harold Taber

Harold Taber

 

 

STOCK OPTION AGREEMENT

 

 

This STOCK OPTION AGREEMENT (“Agreement”) is made as of November 11, 2005

by and between HANSEN NATURAL CORPORATION, a Delaware corporation (the “Company”), and Norman Epstein (“Holder”).

 

Preliminary Recitals

 

A.        Holder is a member of the Board of Directors of the Company (the “Board”) who: (i) is not an employee of the Company or one of its subsidiaries or affiliates, (ii) does not serve as a consultant of the Company or its subsidiaries or affiliates and (iii) the Company is not contractually obligated to nominate as a member of the Board.

B.        Pursuant to the 2005 Hansen Natural Corporation Stock Option Plan For Non-Employee Directors, (the “Plan”), the Company desires to grant Holder a stock option to purchase shares of the Company’s common stock, par value $.005 per share (the “Common Stock”), subject to the terms and conditions of the Plan and subject further to the terms and conditions set forth below.

 

NOW, THEREFORE, the Company and Holder agree as follows:

1.        Grant of Stock Option. The Company hereby grants to Holder, subject to the terms and conditions set forth herein, the stock option (the “Option”) to purchase up to 4,800 shares of Common Stock, at the purchase price of $67.48 per share (the “Exercise Price”), such Option to be exercisable and exercised as hereinafter provided.

2.        Exercise Period. The Option shall expire on the date which is the earlier of (x) ten (10) years after the date of grant or (y) three (3) months after the termination of the Holder’s membership on the Board unless the Holder’s membership on the Board terminates by reason of the death or Total Disability (as defined below) of holder. If the Holder’s membership on the Board terminates due to his death or Total Disability, then the Option may be exercised to the extent vested at any time, or from time to time, within twelve (12) months after the date of termination, but not later than the expiration date specified in Section 3 (c) below, by Holder or the person or persons to which Holder’s rights under this Agreement pass by will, or if no such person has such right, by his executors or administrators. For purposes of this Agreement, “Total Disability” means the complete and permanent inability of Holder to perform all of his duties as a director, as determined by the Board upon the basis of such evidence, including independent medical reports and data, as the Board deems appropriate or necessary.

3.

Exercise of Option.

(a)       Subject to the other terms of this Agreement regarding the exercisability of the Option, the Option may only be exercised in respect of the number of shares listed in column A from and after the exercise dates listed in column B:

 

 

Column “A”

Column “B”

 

Number of Shares

Exercise Date

 

 

1,200

November 11, 2005

 

1,200

May 1, 2006

 

 

1,200

May 1, 2007

 

 

1,200

May 1, 2008

 

4,800

 

 

(b)       This Option may be exercised, to the extent exercisable by its terms, from time to time in whole or in part at any time prior to the expiration thereof. Any exercise shall be accompanied by a written notice to the Company specifying the number of shares as to which this Option is being exercised (the “Option Shares”). Notations of any partial exercise or installment exercise, shall be made by the Company on Schedule A hereto.

(c)       Notwithstanding anything else herein to the contrary, this Option shall expire on November 11, 2015.

4.        Payment of Exercise Price. At the time of any exercise of the Option the Exercise Price of the Option Shares shall be paid in full to the Company in either of the following ways or in any combination of the following ways:

(a)

By check or other immediately available funds.

(b)       With property consisting of shares of Common Stock. (the shares of Common Stock to be used as payment shall be valued as of the date of exercise of the Option at the Closing Price as defined below. For example, if Holder exercises the Option for 1,200 shares at a total Exercise Price of $60,000, assuming an Exercise Price of $50.00 per share, and the Closing Price is $70.00, he may pay for the 1,200 Option Shares by transferring 857 shares of Common Stock to the Company.)

(c)       By delivering a properly executed exercise notice together with irrevocable instructions to a broker to deliver promptly to the Company the amount of sale or loan proceeds necessary to pay the purchase price and applicable withholding taxes, and such other documents as the Committee may determine.

(d)       For purposes of this Agreement, the term “Closing Price” means, with respect to the Company’s Common Stock, the last sale price regular-way or, in case no such sale takes place on such date, the average of the closing bid and asked prices regular-way on the principal national securities exchange on which the securities are listed or admitted to trading; or, if they are not listed or admitted to trading on any national securities exchange, the last sale price of the securities on the consolidated transaction reporting system of the National Association of Securities Dealers (“NASD”), if such last sale information is reported on such system or, if not so reported, the average of the closing bid and asked prices of the securities on the National Association of Securities Dealers Automatic Quotation System (“NASDAQ”) or any comparable system or, if the securities are not listed on NASDAQ or a comparable system, the average of the closing bid and asked prices as furnished by two members of the NASD selected from time to time by the Company for that purpose.

5.        Purchase for Investment; Resale Restrictions. Unless at the time of exercise of the Option there shall be a valid and effective registration statement under the Securities Act of 1933 (“’33 Act”) and appropriate qualification and registration under applicable state securities laws relating to the Option Shares being acquired, Holder shall upon exercise of the Option give a representation that he is acquiring such shares for his own account for investment and not with a view to, or for sale in connection with, the resale or distribution of any such shares. In the absence of such registration statement, Holder shall execute a written affirmation, in a form reasonably satisfactory to the Company, of such investment intent. Holder further agrees that he will not sell or transfer any Option Shares until he requests and receives an opinion of the Company’s counsel or other counsel reasonably satisfactory to the Company to the effect that such proposed sale or transfer will not result in a violation of the ’33 Act, or a registration statement covering the sale or transfer of the shares has been declared effective by the Securities and Exchange Commission, or he obtains a no-action letter from the Securities and Exchange Commission with respect to the proposed transfer.

6.        Nontransferability. This Option shall not be transferable other than by will or by the laws of descent and distribution. During the lifetime of Holder, this Option shall be exercisable only by Holder.

7.

Adjustments.

(a)       Subject to Section 7(b) below, in the event of any change in the outstanding Common Stock by reason of any stock recapitalization, merger, consolidation, combination or exchange of shares, the kind of shares subject to the Option and their purchase price per share (but not the number of shares) shall be appropriately adjusted consistent with such change in such manner as the Board may deem equitable. In the event of a stock dividend or stock split the kind of shares, their purchase price per share and the number of shares shall be appropriately adjusted, consistent with such change in such manner as the Board may deem equitable. Any adjustment so made shall be final and binding.

(b)       Notwithstanding anything else herein to the contrary, upon the occurrence of a Change in Control (as defined in the Plan), the Option or any portion thereof not theretofore exercisable, shall immediately become exercisable in its entirety and the Option may be purchased by the Company for cash at a price equal to the Fair Market Value (as defined in the Plan) of the Option as determined in good faith by the Board.

8.        Reservation of Shares. The Company shall reserve and keep reserved out of its authorized shares of Common Stock the number of shares of Common Stock that may be issuable from time to time upon exercise of the Option.

9.        No Rights as Stockholder. Holder shall have no rights as a stockholder with respect to any shares of Common Stock subject to this Option prior to the date of issuance to him of a certificate or certificates for such shares.

10.      No Right to Continue Membership on Board. This Agreement shall not confer upon Holder any right with respect to continuance on the Board nor shall it interfere in any way with the rights of Holder to terminate his membership on the Board at any time.

11.      Compliance With Law and Regulation. This Agreement and the obligation of the Company to sell and deliver shares of Common Stock hereunder shall be subject to all applicable federal and state laws, rules and regulations and to such approvals by any government or regulatory agency as may be required. If at any time the Board shall determine that (I) the listing, registration or qualification of the shares of Common Stock subject or related thereto upon any securities exchange or under any state or federal law, or (ii) the consent or approval of any government regulatory body, is necessary or desirable as a condition of or in connection with the issue or purchase of shares of Common Stock hereunder, this Option may not be exercised in whole or in part unless such listing, registration, qualification, consent, approval or agreement shall have been effected or obtained free of any conditions not acceptable to the Board. Moreover, this Option may not be exercised if its exercise or the receipt of shares of Common Stock pursuant thereto would be contrary to applicable law.

12.      Tax Withholding Requirements. The Company shall have the right to require Holder to remit to the Company an amount sufficient to satisfy any federal, state or local withholding tax requirements prior to the delivery of any certificate or certificates for Common Stock.

13.      Fractional Shares. Notwithstanding any other provision of this Agreement, no fractional shares of stock shall be issued upon the exercise of this Option and the Company shall not be under any obligation to compensate Holder in any way for such fractional shares.

14.      Notices. Any notice hereunder to the Company shall be addressed to it at its offices at 1010 Railroad Street, Corona, California 92882, Attention: Rodney Sacks, and any notice to Holder shall be addressed to him at Cheval Acceptances, Stanmore House, 2nd Floor, 15/19 Church Road, Stanmore, Middlesex HA7 4AR, subject to the right of either party to designate at any time hereafter in writing some other address.

15.      Amendment. No modification, amendment or waiver of any of the provisions of this Agreement shall e effective unless in writing specifically referring hereto, and signed by both parties.

16.      Governing Law. This Agreement shall be construed according to the laws of the State of Delaware and all provisions hereof shall be administered according to and its validity shall be determined under, the laws of such State, except where preempted by federal laws.

17.      Counterparts. This Agreement may be executed in one or more counterparts, each of which shall constitute one and the same instrument.

IN WITNESS WHEREOF, Hansen Natural Corporation has caused this Agreement to be executed by a duly authorized officer and Holder has executed this Agreement, both as of the day and year first above written.

 

HANSEN NATURAL CORPORATION

 

 

By: /s/ Rodney C. Sacks

 

Name: Rodney C. Sacks

 

Title: Chairman of the Board

 

HOLDER

 

 

/s/ Norman Epstein

Norman Epstein

 

 

STOCK OPTION AGREEMENT

 

 

This STOCK OPTION AGREEMENT (“Agreement”) is made as of November 11, 2005

by and between HANSEN NATURAL CORPORATION, a Delaware corporation (the “Company”), and Mark Vidergauz (“Holder”).

 

Preliminary Recitals

 

A.        Holder is a member of the Board of Directors of the Company (the “Board”) who: (i) is not an employee of the Company or one of its subsidiaries or affiliates, (ii) does not serve as a consultant of the Company or its subsidiaries or affiliates and (iii) the Company is not contractually obligated to nominate as a member of the Board.

B.        Pursuant to the 2005 Hansen Natural Corporation Stock Option Plan For Non-Employee Directors, (the “Plan”), the Company desires to grant Holder a stock option to purchase shares of the Company’s common stock, par value $.005 per share (the “Common Stock”), subject to the terms and conditions of the Plan and subject further to the terms and conditions set forth below.

 

NOW, THEREFORE, the Company and Holder agree as follows:

1.        Grant of Stock Option. The Company hereby grants to Holder, subject to the terms and conditions set forth herein, the stock option (the “Option”) to purchase up to 4,800 shares of Common Stock, at the purchase price of $67.48 per share (the “Exercise Price”), such Option to be exercisable and exercised as hereinafter provided.

2.        Exercise Period. The Option shall expire on the date which is the earlier of (x) ten (10) years after the date of grant or (y) three (3) months after the termination of the Holder’s membership on the Board unless the Holder’s membership on the Board terminates by reason of the death or Total Disability (as defined below) of holder. If the Holder’s membership on the Board terminates due to his death or Total Disability, then the Option may be exercised to the extent vested at any time, or from time to time, within twelve (12) months after the date of termination, but not later than the expiration date specified in Section 3 (c) below, by Holder or the person or persons to which Holder’s rights under this Agreement pass by will, or if no such person has such right, by his executors or administrators. For purposes of this Agreement, “Total Disability” means the complete and permanent inability of Holder to perform all of his duties as a director, as determined by the Board upon the basis of such evidence, including independent medical reports and data, as the Board deems appropriate or necessary.

3.

Exercise of Option.

(a)       Subject to the other terms of this Agreement regarding the exercisability of the Option, the Option may only be exercised in respect of the number of shares listed in column A from and after the exercise dates listed in column B:

 

 

Column “A”

Column “B”

 

Number of Shares

Exercise Date

 

 

1,200

November 11, 2005

 

1,200

May 1, 2006

 

 

1,200

May 1, 2007

 

 

1,200

May 1, 2008

 

4,800

 

 

 

(b)       This Option may be exercised, to the extent exercisable by its terms, from time to time in whole or in part at any time prior to the expiration thereof. Any exercise shall be accompanied by a written notice to the Company specifying the number of shares as to which this Option is being exercised (the “Option Shares”). Notations of any partial exercise or installment exercise, shall be made by the Company on Schedule A hereto.

(c)       Notwithstanding anything else herein to the contrary, this Option shall expire on November 11, 2015.

4.        Payment of Exercise Price. At the time of any exercise of the Option the Exercise Price of the Option Shares shall be paid in full to the Company in either of the following ways or in any combination of the following ways:

(a)

By check or other immediately available funds.

(b)       With property consisting of shares of Common Stock. (the shares of Common Stock to be used as payment shall be valued as of the date of exercise of the Option at the Closing Price as defined below. For example, if Holder exercises the Option for 1,200 shares at a total Exercise Price of $60,000, assuming an Exercise Price of $50.00 per share, and the Closing Price is $70.00, he may pay for the 1,200 Option Shares by transferring 857 shares of Common Stock to the Company.)

(c)       By delivering a properly executed exercise notice together with irrevocable instructions to a broker to deliver promptly to the Company the amount of sale or loan proceeds necessary to pay the purchase price and applicable withholding taxes, and such other documents as the Committee may determine.

(d)       For purposes of this Agreement, the term “Closing Price” means, with respect to the Company’s Common Stock, the last sale price regular-way or, in case no such sale takes place on such date, the average of the closing bid and asked prices regular-way on the principal national securities exchange on which the securities are listed or admitted to trading; or, if they are not listed or admitted to trading on any national securities exchange, the last sale price of the securities on the consolidated transaction reporting system of the National Association of Securities Dealers (“NASD”), if such last sale information is reported on such system or, if not so reported, the average of the closing bid and asked prices of the securities on the National Association of Securities Dealers Automatic Quotation System (“NASDAQ”) or any comparable system or, if the securities are not listed on NASDAQ or a comparable system, the average of the closing bid and asked prices as furnished by two members of the NASD selected from time to time by the Company for that purpose.

5.        Purchase for Investment; Resale Restrictions. Unless at the time of exercise of the Option there shall be a valid and effective registration statement under the Securities Act of 1933 (“’33 Act”) and appropriate qualification and registration under applicable state securities laws relating to the Option Shares being acquired, Holder shall upon exercise of the Option give a representation that he is acquiring such shares for his own account for investment and not with a view to, or for sale in connection with, the resale or distribution of any such shares. In the absence of such registration statement, Holder shall execute a written affirmation, in a form reasonably satisfactory to the Company, of such investment intent. Holder further agrees that he will not sell or transfer any Option Shares until he requests and receives an opinion of the Company’s counsel or other counsel reasonably satisfactory to the Company to the effect that such proposed sale or transfer will not result in a violation of the ’33 Act, or a registration statement covering the sale or transfer of the shares has been declared effective by the Securities and Exchange Commission, or he obtains a no-action letter from the Securities and Exchange Commission with respect to the proposed transfer.

6.        Nontransferability. This Option shall not be transferable other than by will or by the laws of descent and distribution. During the lifetime of Holder, this Option shall be exercisable only by Holder.

7.

Adjustments.

(a)       Subject to Section 7(b) below, in the event of any change in the outstanding Common Stock by reason of any stock recapitalization, merger, consolidation, combination or exchange of shares, the kind of shares subject to the Option and their purchase price per share (but not the number of shares) shall be appropriately adjusted consistent with such change in such manner as the Board may deem equitable. In the event of a stock dividend or stock split the kind of shares, their

 

 

purchase price per share and the number of shares shall be appropriately adjusted, consistent with such change in such manner as the Board may deem equitable. Any adjustment so made shall be final and binding.

(b)       Notwithstanding anything else herein to the contrary, upon the occurrence of a Change in Control (as defined in the Plan), the Option or any portion thereof not theretofore exercisable, shall immediately become exercisable in its entirety and the Option may be purchased by the Company for cash at a price equal to the Fair Market Value (as defined in the Plan) of the Option as determined in good faith by the Board.

8.        Reservation of Shares. The Company shall reserve and keep reserved out of its authorized shares of Common Stock the number of shares of Common Stock that may be issuable from time to time upon exercise of the Option.

9.        No Rights as Stockholder. Holder shall have no rights as a stockholder with respect to any shares of Common Stock subject to this Option prior to the date of issuance to him of a certificate or certificates for such shares.

10.      No Right to Continue Membership on Board. This Agreement shall not confer upon Holder any right with respect to continuance on the Board nor shall it interfere in any way with the rights of Holder to terminate his membership on the Board at any time.

11.      Compliance With Law and Regulation. This Agreement and the obligation of the Company to sell and deliver shares of Common Stock hereunder shall be subject to all applicable federal and state laws, rules and regulations and to such approvals by any government or regulatory agency as may be required. If at any time the Board shall determine that (I) the listing, registration or qualification of the shares of Common Stock subject or related thereto upon any securities exchange or under any state or federal law, or (ii) the consent or approval of any government regulatory body, is necessary or desirable as a condition of or in connection with the issue or purchase of shares of Common Stock hereunder, this Option may not be exercised in whole or in part unless such listing, registration, qualification, consent, approval or agreement shall have been effected or obtained free of any conditions not acceptable to the Board. Moreover, this Option may not be exercised if its exercise or the receipt of shares of Common Stock pursuant thereto would be contrary to applicable law.

12.      Tax Withholding Requirements. The Company shall have the right to require Holder to remit to the Company an amount sufficient to satisfy any federal, state or local withholding tax requirements prior to the delivery of any certificate or certificates for Common Stock.

13.      Fractional Shares. Notwithstanding any other provision of this Agreement, no fractional shares of stock shall be issued upon the exercise of this Option and the Company shall not be under any obligation to compensate Holder in any way for such fractional shares.

14.      Notices. Any notice hereunder to the Company shall be addressed to it at its offices at 1010 Railroad Street, Corona, California 92882, Attention: Rodney Sacks, and any notice to Holder shall be addressed to him at Sage Group LLC, 11111 Santa Monica Boulevard, Suite 2200, Los Angeles, California 90025, subject to the right of either party to designate at any time hereafter in writing some other address.

15.      Amendment. No modification, amendment or waiver of any of the provisions of this Agreement shall e effective unless in writing specifically referring hereto, and signed by both parties.

16.      Governing Law. This Agreement shall be construed according to the laws of the State of Delaware and all provisions hereof shall be administered according to and its validity shall be determined under, the laws of such State, except where preempted by federal laws.

17.      Counterparts. This Agreement may be executed in one or more counterparts, each of which shall constitute one and the same instrument.

IN WITNESS WHEREOF, Hansen Natural Corporation has caused this Agreement to be executed by a duly authorized officer and Holder has executed this Agreement, both as of the day and year first above written.

 

HANSEN NATURAL CORPORATION

 

 

By: /s/ Rodney C. Sacks

 

Name:Rodney C. Sacks

 

Title: Chairman of the Board

 

HOLDER

 

/s/ Mark Vidergauz

Mark Vidergauz

 

 

STOCK OPTION AGREEMENT

 

 

This STOCK OPTION AGREEMENT (“Agreement”) is made as of November 11, 2005

by and between HANSEN NATURAL CORPORATION, a Delaware corporation (the “Company”), and Benjamin Polk (“Holder”).

 

Preliminary Recitals

 

A.        Holder is a member of the Board of Directors of the Company (the “Board”) who: (i) is not an employee of the Company or one of its subsidiaries or affiliates, (ii) does not serve as a consultant of the Company or its subsidiaries or affiliates and (iii) the Company is not contractually obligated to nominate as a member of the Board.

B.        Pursuant to the 2005 Hansen Natural Corporation Stock Option Plan For Non-Employee Directors, (the “Plan”), the Company desires to grant Holder a stock option to purchase shares of the Company’s common stock, par value $.005 per share (the “Common Stock”), subject to the terms and conditions of the Plan and subject further to the terms and conditions set forth below.

 

NOW, THEREFORE, the Company and Holder agree as follows:

1.        Grant of Stock Option. The Company hereby grants to Holder, subject to the terms and conditions set forth herein, the stock option (the “Option”) to purchase up to 4,800 shares of Common Stock, at the purchase price of $67.48 per share (the “Exercise Price”), such Option to be exercisable and exercised as hereinafter provided.

2.        Exercise Period. The Option shall expire on the date which is the earlier of (x) ten (10) years after the date of grant or (y) three (3) months after the termination of the Holder’s membership on the Board unless the Holder’s membership on the Board terminates by reason of the death or Total Disability (as defined below) of holder. If the Holder’s membership on the Board terminates due to his death or Total Disability, then the Option may be exercised to the extent vested at any time, or from time to time, within twelve (12) months after the date of termination, but not later than the expiration date specified in Section 3 (c) below, by Holder or the person or persons to which Holder’s rights under this Agreement pass by will, or if no such person has such right, by his executors or administrators. For purposes of this Agreement, “Total Disability” means the complete and permanent inability of Holder to perform all of his duties as a director, as determined by the Board upon the basis of such evidence, including independent medical reports and data, as the Board deems appropriate or necessary.

3.

Exercise of Option.

(a)       Subject to the other terms of this Agreement regarding the exercisability of the Option, the Option may only be exercised in respect of the number of shares listed in column A from and after the exercise dates listed in column B:

 

 

Column “A”

Column “B”

 

Number of Shares

Exercise Date

 

 

1,200

November 11, 2005

 

1,200

May 1, 2006

 

 

1,200

May 1, 2007

 

 

1,200

May 1, 2008

 

4,800

 

 

 

(b)       This Option may be exercised, to the extent exercisable by its terms, from time to time in whole or in part at any time prior to the expiration thereof. Any exercise shall be accompanied by a written notice to the Company specifying the number of shares as to which this Option is being exercised (the “Option Shares”). Notations of any partial exercise or installment exercise, shall be made by the Company on Schedule A hereto.

(c)       Notwithstanding anything else herein to the contrary, this Option shall expire on November 11, 2015.

4.        Payment of Exercise Price. At the time of any exercise of the Option the Exercise Price of the Option Shares shall be paid in full to the Company in either of the following ways or in any combination of the following ways:

(a)

By check or other immediately available funds.

(b)       With property consisting of shares of Common Stock. (the shares of Common Stock to be used as payment shall be valued as of the date of exercise of the Option at the Closing Price as defined below. For example, if Holder exercises the Option for 1,200 shares at a total Exercise Price of $60,000, assuming an Exercise Price of $50.00 per share, and the Closing Price is $70.00, he may pay for the 1,200 Option Shares by transferring 857 shares of Common Stock to the Company.)

(c)       By delivering a properly executed exercise notice together with irrevocable instructions to a broker to deliver promptly to the Company the amount of sale or loan proceeds necessary to pay the purchase price and applicable withholding taxes, and such other documents as the Committee may determine.

(d)       For purposes of this Agreement, the term “Closing Price” means, with respect to the Company’s Common Stock, the last sale price regular-way or, in case no such sale takes place on such date, the average of the closing bid and asked prices regular-way on the principal national securities exchange on which the securities are listed or admitted to trading; or, if they are not listed or admitted to trading on any national securities exchange, the last sale price of the securities on the consolidated transaction reporting system of the National Association of Securities Dealers (“NASD”), if such last sale information is reported on such system or, if not so reported, the average of the closing bid and asked prices of the securities on the National Association of Securities Dealers Automatic Quotation System (“NASDAQ”) or any comparable system or, if the securities are not listed on NASDAQ or a comparable system, the average of the closing bid and asked prices as furnished by two members of the NASD selected from time to time by the Company for that purpose.

5.        Purchase for Investment; Resale Restrictions. Unless at the time of exercise of the Option there shall be a valid and effective registration statement under the Securities Act of 1933 (“’33 Act”) and appropriate qualification and registration under applicable state securities laws relating to the Option Shares being acquired, Holder shall upon exercise of the Option give a representation that he is acquiring such shares for his own account for investment and not with a view to, or for sale in connection with, the resale or distribution of any such shares. In the absence of such registration statement, Holder shall execute a written affirmation, in a form reasonably satisfactory to the Company, of such investment intent. Holder further agrees that he will not sell or transfer any Option Shares until he requests and receives an opinion of the Company’s counsel or other counsel reasonably satisfactory to the Company to the effect that such proposed sale or transfer will not result in a violation of the ’33 Act, or a registration statement covering the sale or transfer of the shares has been declared effective by the Securities and Exchange Commission, or he obtains a no-action letter from the Securities and Exchange Commission with respect to the proposed transfer.

6.        Nontransferability. This Option shall not be transferable other than by will or by the laws of descent and distribution. During the lifetime of Holder, this Option shall be exercisable only by Holder.

7.

Adjustments.

(a)       Subject to Section 7(b) below, in the event of any change in the outstanding Common Stock by reason of any stock recapitalization, merger, consolidation, combination or exchange of shares, the kind of shares subject to the Option and their purchase price per share (but not the number of shares) shall be appropriately adjusted consistent with such change in such manner as the Board may deem equitable. In the event of a stock dividend or stock split the kind of shares, their purchase price per share and the number of shares shall be appropriately adjusted, consistent with such change in such manner as the Board may deem equitable. Any adjustment so made shall be final and binding.

(b)       Notwithstanding anything else herein to the contrary, upon the occurrence of a Change in Control (as defined in the Plan), the Option or any portion thereof not theretofore exercisable, shall immediately become exercisable in its entirety and the Option may be purchased by the Company for cash at a price equal to the Fair Market Value (as defined in the Plan) of the Option as determined in good faith by the Board.

8.        Reservation of Shares. The Company shall reserve and keep reserved out of its authorized shares of Common Stock the number of shares of Common Stock that may be issuable from time to time upon exercise of the Option.

9.        No Rights as Stockholder. Holder shall have no rights as a stockholder with respect to any shares of Common Stock subject to this Option prior to the date of issuance to him of a certificate or certificates for such shares.

10.      No Right to Continue Membership on Board. This Agreement shall not confer upon Holder any right with respect to continuance on the Board nor shall it interfere in any way with the rights of Holder to terminate his membership on the Board at any time.

11.      Compliance With Law and Regulation. This Agreement and the obligation of the Company to sell and deliver shares of Common Stock hereunder shall be subject to all applicable federal and state laws, rules and regulations and to such approvals by any government or regulatory agency as may be required. If at any time the Board shall determine that (I) the listing, registration or qualification of the shares of Common Stock subject or related thereto upon any securities exchange or under any state or federal law, or (ii) the consent or approval of any government regulatory body, is necessary or desirable as a condition of or in connection with the issue or purchase of shares of Common Stock hereunder, this Option may not be exercised in whole or in part unless such listing, registration, qualification, consent, approval or agreement shall have been effected or obtained free of any conditions not acceptable to the Board. Moreover, this Option may not be exercised if its exercise or the receipt of shares of Common Stock pursuant thereto would be contrary to applicable law.

12.      Tax Withholding Requirements. The Company shall have the right to require Holder to remit to the Company an amount sufficient to satisfy any federal, state or local withholding tax requirements prior to the delivery of any certificate or certificates for Common Stock.

13.      Fractional Shares. Notwithstanding any other provision of this Agreement, no fractional shares of stock shall be issued upon the exercise of this Option and the Company shall not be under any obligation to compensate Holder in any way for such fractional shares.

14.      Notices. Any notice hereunder to the Company shall be addressed to it at its offices at 1010 Railroad Street, Corona, California 92882, Attention: Rodney Sacks, and any notice to Holder shall be addressed to him at Schulte Roth & Zabel LLP 919 Third Avenue, New York, NY 10022, subject to the right of either party to designate at any time hereafter in writing some other address.

15.      Amendment. No modification, amendment or waiver of any of the provisions of this Agreement shall e effective unless in writing specifically referring hereto, and signed by both parties.

16.      Governing Law. This Agreement shall be construed according to the laws of the State of Delaware and all provisions hereof shall be administered according to and its validity shall be determined under, the laws of such State, except where preempted by federal laws.

17.      Counterparts. This Agreement may be executed in one or more counterparts, each of which shall constitute one and the same instrument.

IN WITNESS WHEREOF, Hansen Natural Corporation has caused this Agreement to be executed by a duly authorized officer and Holder has executed this Agreement, both as of the day and year first above written.

 

HANSEN NATURAL CORPORATION

 

 

By: /s/ Rodney C. Sacks                                                                                                                  Name: Rodney C. Sacks

Title: Chairman of the Board

 

HOLDER

 

 

/s/Benjamin Polk

Benjamin Polk

 

 

 

SCHEDULE A

 

HANSEN NATURAL CORPORATION

 

NOTATIONS AS TO PARTIAL OR INSTALLMENT

EXERCISE OF STOCK OPTION

 

 

 

Number of

Balance of

 

Date of

Shares

Shares on

Authorized

 

Exercise

Purchased

Option

Signature

Notation Date

 

 

 

 

STOCK OPTION AGREEMENT

 

This Stock Option Agreement ("Agreement") is made as of November 11, 2005, by and between Hansen Natural Corporation, a Delaware corporation (the "Company"), and Hilton H. Schlosberg ("Holder").

 

 

Preliminary Recitals

 

A.

Holder is an employee of the Company or one of its subsidiaries or affiliates.

B.        Pursuant to the Hansen Natural Corporation 2001 Stock Option Plan (the "Plan"), the Company desires to grant Holder an incentive stock option to purchase shares of the Company's common stock, par value $.005 per share (the "Common Stock"), subject to the terms and conditions of the Plan and subject further to the terms and conditions set forth below.

 

NOW, THEREFORE, the Company and Holder agree as follows:

1.         Grant of Incentive Stock Option.        The Company hereby grants to Holder, subject to the terms and conditions set forth herein, the incentive stock option ("ISO") to purchase up to 150,000 shares of Common Stock, at the purchase price of $67.48 per share, such ISO to be exercisable and exercised as hereinafter provided.

2.         Exercise Period.           The ISO shall expire three months after the termination of the Holder's employment with the Company and its subsidiaries and affiliates (the "Hansen Group") unless the employment is terminated by a member of the Hansen Group for Cause (as defined below) or unless the employment is terminated by reason of the death or Total Disability (as defined below) of Holder. If the Holder's employment is terminated by a member of the Hansen Group for Cause, the ISO shall expire as of the date employment terminates. If the Holder's employment terminates due to his death or Total Disability, then the ISO may be exercised by Holder or the person or persons to which Holder's rights under this Agreement pass by will, or if no such person has such right, by his executors or administrators, within six months after the date of death or Total Disability, but no later than the expiration date specified in Section 3(d) below. "Cause" means the Holder's act of fraud or dishonesty, knowing and material failure to comply with applicable laws or regulations, drug or alcohol abuse, as determined by the Committee of the Hansen Natural Corporation Stock Option Plan (the "Committee"). "Total Disability" means the complete and permanent inability of Holder to perform all of his duties of employment with the Company, as determined by the Committee upon the basis of such evidence, including independent medical reports and data, as the Committee deems appropriate or necessary.

3.

Exercise of Option

(a)       Subject to the other terms of this Agreement regarding the exercisability of the ISO, the ISO may only be exercised in respect of the number of shares listed in column A from and after the exercise dates listed in column B,

 

Column "A"

Column "B"

 

Number of Shares

Exercise Date

 

30,000

November 11, 2006

30,000

November 11, 2007

30,000

November 11, 2008

30,000

November 11, 2009

30,000

November 11, 2010

 

(b)       This ISO may be exercised, to the extent exercisable by its terms, from time to time in whole or in part at any time prior to the expiration thereof. Any exercise shall be accompanied by a written notice to the Company specifying the number of shares as to which this ISO is being exercised (the "Option Shares"). Notations of any partial exercise or installment exercise, shall be made by the Company on Schedule A hereto.

(c)       Notwithstanding the above, this ISO shall be fully exercisable in the event Holder's employment with the Hansen Group is terminated by Holder for "Good Reason" (as defined below), or a member of the Hansen Group terminates his employment without "Cause" (as defined above). "Good Reason" means the Holder's termination of employment with the Hansen Group on or after a reduction in his compensation or benefits, his removal as the Company's Vice Chairman of the Board of Directors, President, Chief Operating Officer, Chief Financial Officer or Secretary, or his being assigned duties or responsibilities that are inconsistent with the dignity, importance or scope of his position with the Company.

(d)       Notwithstanding anything else herein to the contrary, this ISO shall expire ten years from the date of this agreement.

(e)       The Holder hereby agrees to notify the Company in writing in the event shares acquired pursuant to the exercise of this ISO are transferred, other than by will or by the laws of descent and distribution, within two years after the date indicated above or within one year after the issuance of such shares pursuant to such exercise.

4.         Payment of Purchase Price Upon Exercise.    At the time of any exercise of the ISO the purchase price of the ISO shall be paid in full to the Company in either of the following ways or in any combination of the following ways:

(a)

By check or other immediately available funds.

(b)       With property consisting of shares of Common Stock. (The shares of Common Stock to be used as payment shall be valued as of the date of exercise of the ISO at the Closing Price as defined below. For example, if Holder exercises the option for 4,000 shares at a total Exercise Price of $7,000, assuming exercise price of $1.75 per share, and the Closing Price is $5.00, he may pay for the 4,000 Option Shares by transferring 1,400 shares of Common Stock to the Company.)

(c)       For purposes of this Agreement, the term "Closing Price" means, with respect to the Company's Common Stock, the last sale price regular-way or, in case no such sale takes place on such date, the average of the closing bid and asked prices regular-way on the principal national securities exchange on which the securities are listed or admitted to trading; or, if they are not listed or admitted to trading on any national securities exchange, the last sale price of the securities on the consolidated transaction reporting system of the National Association of Securities Dealers (NASD"), if such last sale information is reported on such system or, if not so reported, the average of the closing bid and asked prices of the securities on the National Association of Securities Dealers Automatic Quotation System ("NASDAQ") or any comparable system or, if the securities are not listed on NASDAQ or a comparable system, the average of the closing bid and asked prices as furnished by two members of the NASD selected from time to time by the Company for that purpose.

5.         Purchase for Investment; Resale Restrictions.  Unless at the time of exercise of the ISO there shall be a valid and effective registration statement under the Securities Act of 1933 ("'33 Act") and appropriate qualification and registration under applicable state securities laws relating to the Option Shares being acquired, Holder shall upon exercise of the ISO give a representation that he is acquiring such shares for his own account for investment and not with a view to, or for sale in connection with, the resale or distribution of any such shares. In the absence of such registration statement, Holder shall execute a written affirmation, in a form reasonably satisfactory to the Company, of such investment intent. Holder further agrees that he will not sell or transfer any Option Shares until he requests and receives an opinion of the Company's counsel or other counsel reasonably satisfactory to the Company to the effect that such proposed sale or transfer will not result in a violation of the '33 Act, or a registration statement covering the sale or transfer of the shares has been declared effective by the Securities and Exchange Commission, or he obtains a no-action letter from the Securities and Exchange Commission with respect to the proposed transfer.

6.         Nontransferability. This ISO shall not be transferable other than by will or by the laws of descent and distribution. During the lifetime of Holder, this ISO shall be exercisable only by Holder.

7.

Adjustments.

(a)       If the Company hereafter (i) declares a distribution on its shares in shares, (ii) splits its outstanding shares, (iii) combines its outstanding shares into a smaller number of securities or (iv) issues any shares or other securities by reclassification of its shares (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing entity), the purchase price in effect at the time of the record date for such distribution or the effective date of such subdivision, combination or reclassification shall be adjusted so that it shall equal the price determined by multiplying the purchase price by a fraction, the denominator of which shall be the number of shares outstanding immediately after giving effect to such action, and the numerator of which shall be the number of shares outstanding immediately prior to such action. Whenever the purchase price payable upon exercise of the ISO is adjusted pursuant to the preceding sentence above, the number of shares purchasable upon exercise of the ISO shall simultaneously be adjusted by multiplying the number of shares issuable upon exercise of the ISO immediately prior to the event which causes the adjustment by the purchase price in effect immediately prior to the event which causes the adjustment and dividing the product so obtained by the purchase price, as adjusted. Such adjustments shall be made successively whenever any event listed above shall occur.

(b)       If, at any time, as a result of an adjustment made pursuant to paragraph 7(a) above, the Holder shall become entitled to receive any securities of the Company other than shares, the number of such other securities so receivable upon exercise of the ISO shall thereafter be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the shares contained in paragraph 7(a) above.

 

 

 

(c)       If any other event contemplated in Section 10(a) of the Plan occurs, adjustments to the number and kind of shares subject to this ISO and/or to the purchase price for each share subject to this ISO may be made in accordance with Section 10(a) of the Plan.

(d)       No adjustments shall be made under this Section 7 that would have the effect of modifying this ISO under Internal Revenue Code §§ 422 or 424.

(e)       Whenever the purchase price or the number of shares is adjusted, as herein provided, Hansen shall within 10 business days of the event causing such adjustment give a notice setting forth the adjusted purchase price and adjusted number of shares issuable upon exercise of the ISO to be mailed to the Holder.

(f)        Notwithstanding anything else herein to the contrary, upon the occurrence of a change in control (as defined in (g) below), the option or any portion thereof not theretofore exercisable, shall immediately become exercisable in its entirety and the option (being the option to purchase shares of Common Stock subject to the applicable provisions of the Plan and awarded in accordance with the Plan in terms of section 1 above) may, with the consent of Holder, be purchased by the Company for cash at a price equal to the fair market value (as defined in 7(g) below) less the purchase price payable by Holder to exercise the option as set out in Article 1 above for one (1) share of Common Stock of the Company multiplied by the number of shares of Common Stock which Holder has the option to purchase in terms of Article 1 above.

 

(g)

For the purposes of this agreement

 

 

(i)

"Change in Control" means;

(A)             the acquisition of "Beneficial Ownership" by any person (as defined in rule 13 (d) - 3 under the Securities Exchange Act 1934), corporation or other entity other than the Company or a wholly owned subsidiary of the Company of 20% or more of the outstanding Stock,

(B) the sale or disposition of substantially all of the assets of the Company, or

(C)            the merger of the Company with another corporation in which the Common Stock of the Company is no longer outstanding after such merger.

(ii)        "Fair Market Value" means, as of any date, the Closing Price for one share of the Common Stock of the Company on such date.

 

 

 

8.         The provisions of Section 5(b) (iii) of the Plan, regarding the execution of a shareholder's agreement as a condition precedent to the Company's obligation to issue shares under the Plan, shall not apply to the ISO or any shares issued pursuant to the ISO.

9.         The Company represents and warrants to Holder that (a) there are no options to purchase the Company's Common Stock, containing the same or substantially the same terms as the ISO, which are actively traded on an established market within the meaning of Internal Revenue Code §83 and the regulations promulgated thereunder; and (b) the shares of the Company's Common Stock issued upon exercise of the ISO, when issued in accordance with the terms hereof, will be duly authorized, validly issued, fully paid and nonassessable. The Company shall reserve and keep reserved out of its authorized shares of Common Stock the number of shares of Common Stock that may be issuable from time to time upon exercise of the ISO.

10.       No Rights as Stockholder.       Holder shall have no rights as a stockholder with respect to any shares of Common Stock subject to this ISO prior to the date of issuance to him of a certificate or certificates for such shares.

11.       No Right to Continue Employment.      This Agreement shall not confer upon Holder any right with respect to continuance of employment with any member of the Hansen Group nor shall it interfere in any way with the right of any such member to terminate his employment at any time.

12.       Compliance With Law and Regulation. This Agreement and the obligation of the Company to sell and deliver shares of Common Stock hereunder shall be subject to all applicable federal and state laws, rules and regulations and to such approvals by any government or regulatory agency as may be required. If at any time the Board of Directors of the Company shall determine that (i) the listing, registration or qualification of the shares of Common Stock subject or related thereto upon any securities exchange or under any state or federal law, or (ii) the consent or approval of any government regulatory body, is necessary or desirable as a condition of or in connection with the issue or purchase of shares of Common Stock hereunder, this ISO may not be exercised in whole or in part unless such listing, registration, qualification, consent, approval or agreement shall have been effected or obtained free of any conditions not acceptable to the Board of Directors. The Company agrees to use its reasonable efforts to obtain any necessary listing, registration, qualification, consent, approval or agreement as expeditiously as possible, and the term of this ISO shall be extended until 30 days following the date such listing, registration, qualification, consent, approval or agreement is effected or obtained. Moreover, this ISO may not be exercised if its exercise or the receipt of shares of Common Stock pursuant thereto would be contrary to applicable law.

13.       Tax Withholding Requirements.            The Company shall have the right to require Holder to remit to the Company an amount sufficient to satisfy any federal, state or local withholding tax requirements prior to the delivery of any certificate or certificates for Common Stock.

14.       Fractional Shares.                Notwithstanding any other provision of this Agreement, no fractional shares of stock shall be issued upon the exercise of this ISO and the Company shall not be under any obligation to compensate Holder in any way for such fractional shares.

15.       Notices.           Any notice hereunder to the Company shall be addressed to it at its office at 1010 Railroad Street, Corona, California 92882, Attention: Rodney Sacks with a copy to Benjamin Polk, Schulte Roth & Zabel LLP, 919 Third Avenue, New York, New York 10022, and any notice hereunder to Holder shall be addressed to him at 2 Nidden, Irvine, California 92603, subject to the right of either party to designate at any time hereafter in writing some other address.

16.       Amendment.    No modification, amendment or waiver of any of the provisions of this Agreement shall be effective unless in writing specifically referring hereto, and signed by both parties.

17.       Governing Law.    This Agreement shall be construed according to the laws of the State of Delaware and all provisions hereof shall be administered according to and its validity shall be determined under, the laws of such State, except where preempted by federal laws.

18.       Counterparts.   This Agreement may be executed in one or more counterparts, each of which shall constitute one and the same instrument.

IN WITNESS WHEREOF, Hansen Natural Corporation has caused this Agreement to be executed by a duly authorized officer and Holder has executed this Agreement both as of the day and year first above written.

HANSEN NATURAL CORPORATION

 

 

By: /s/ Rodney C. Sacks

 

/s/ Hilton H. Schlosberg

Chairman/Chief Executive Officer

Hilton H. Schlosberg

 

 

 

 

STOCK OPTION AGREEMENT

 

 

This Stock Option Agreement ("Agreement") is made as of November 11, 2005, by and between Hansen Natural Corporation, a Delaware corporation (the "Company"), and Mark J. Hall ("Holder").

 

 

Preliminary Recitals

 

A.

Holder is an employee of the Company or one of its subsidiaries or affiliates.

B.        Pursuant to the Hansen Natural Corporation 2001 Stock Option Plan (the "Plan"), the Company desires to grant Holder an incentive stock option to purchase shares of the Company's common stock, par value $.005 per share (the "Common Stock").

 

NOW, THEREFORE, the Company and Holder agree as follows:

1.         Grant of Incentive Stock Option.        The Company hereby grants to Holder, subject to the terms and conditions set forth herein, the incentive stock option ("ISO") to purchase up to 25,000 shares of Common Stock, at the purchase price of $67.48 per share, such ISO to be exercisable and exercised as hereinafter provided.

2.         Exercise Period.           The ISO shall expire three months after the termination of the Holder's employment with the Company and its subsidiaries and affiliates (the "Hansen Natural Group") unless the employment is terminated by a member of the Hansen Natural Group for Cause (as defined below) or unless the employment is terminated by reason of the death or Total Disability (as defined below) of Holder. If the Holder's employment is terminated by a member of the Hansen Natural Group for Cause, the ISO shall expire as of the date employment terminates. If the Holder's employment terminates due to his death or Total Disability, then the ISO may be exercised by Holder or the person or persons to which Holder's rights under this Agreement pass by will, or if no such person has such right, by his executors or administrators, within six months after the date of death or Total Disability, but no later than the expiration date specified in Section 3(c) below. "Cause" means the Holder's act of fraud or dishonesty, knowing and material failure to comply with applicable laws or regulations or satisfactorily perform his duties of employment, insubordination or drug or alcohol abuse, as determined by the Committee of the Hansen Natural Corporation Stock Option Plan (the "Committee"). "Total Disability" means the complete and permanent inability of Holder to perform all of his duties of employment with the Company, as determined by the Committee upon the basis of such evidence, including independent medical reports and data, as the Committee deems appropriate or necessary.

3.

Exercise of Option

(a)       Subject to the other terms of this Agreement regarding the exercisability of the ISO, and provided that Holder is employed by a member of the Hansen Natural Group on the relevant date, the ISO may only be exercised in respect of the number of shares listed in column A from and after the exercise dates listed in column B,

 

 

Column "A"

Column "B"

 

Number of Shares

Exercise Date

 

5,000

November 11, 2006

5,000

November 11, 2007

5,000

November 11, 2008

5,000

November 11, 2009

5,000

November 11, 2010

 

(b)       This ISO may be exercised, to the extent exercisable by its terms, from time to time in whole or in part at any time prior to the expiration thereof. Any exercise shall be accompanied by a written notice to the Company specifying the number of shares as to which this ISO is being exercised (the "Option Shares"). Notations of any partial exercise or installment exercise, shall be made by the Company on Schedule A hereto.

(c)       Notwithstanding anything else herein to the contrary, this ISO shall expire ten years from the date of this agreement.

(d)       The Holder hereby agrees to notify the Company in writing in the event shares acquired pursuant to the exercise of this ISO are transferred, other than by will or by the laws of descent and distribution, within two years after the date of this agreement or within one year after the issuance of such shares pursuant to such exercise.

4.         Payment of Purchase Price Upon Exercise.    At the time of any exercise of the ISO the purchase price of the ISO shall be paid in full to the Company in any of the following ways or in any combination of the following ways:

(a)

By check or other immediately available funds.

(b)       With property consisting of shares of Common Stock. (The shares of Common Stock to be used as payment shall be valued as of the date of exercise of the ISO at the Closing Price as defined below. For example, if Holder exercises the option for 4,000 shares at a total Exercise Price of $8,000, assuming exercise price of $2.00 per share, and the Closing Price is $5.00, he may pay for the 4,000 Option Shares by transferring 1,600 shares of Common Stock to the Company.)

(c)       By delivering a properly executed exercise notice together with irrevocable instructions to a broker to deliver promptly to the company the amount of sale or loan proceeds necessary to pay the purchase price and applicable withholding taxes, and such other documents as the Committee may determine.

(d)       For purposes of this Agreement, the term "Closing Price" means, with respect to the Company's Common Stock, the last sale price regular-way or, in case no such sale takes place on such date, the average of the closing bid and asked prices regular-way on the principal national securities exchange on which the securities are listed or admitted to trading; or, if they are not listed or admitted to trading on any national securities exchange, the last sale price of the securities on the consolidated transaction reporting system of the National Association of Securities Dealers ("NASD"), if such last sale information is reported on such system or, if not so reported, the average of the closing bid and asked prices of the securities on the National Association of Securities Dealers Automatic Quotation System ("NASDAQ") or any comparable system or, if the securities are not listed on NASDAQ or a comparable system, the average of the closing bid and asked prices as furnished by two members of the NASD selected from time to time by the Company for that purpose.

5.         Purchase for Investment; Resale Restrictions.  Unless at the time of exercise of the ISO there shall be a valid and effective registration statement under the Securities Act of 1933 ("'33 Act") and appropriate qualification and registration under applicable state securities laws relating to the Option Shares being acquired, Holder shall upon exercise of the ISO give a representation that he is acquiring such shares for his own account for investment and not with a view to, or for sale in connection with, the resale or distribution of any such shares. In the absence of such registration statement, Holder shall execute a written affirmation, in a form reasonably satisfactory to the Company, of such investment intent. Holder further agrees that he will not sell or transfer any Option Shares until he requests and receives an opinion of the Company's counsel or other counsel reasonably satisfactory to the Company to the effect that such proposed sale or transfer will not result in a violation of the '33 Act, or a registration statement covering the sale or transfer of the shares has been declared effective by the Securities and Exchange Commission, or he obtains a no-action letter from the Securities and Exchange Commission with respect to the proposed transfer.

6.

Nontransferability.

This ISO shall not be transferable other than by will or by the laws

of descent and distribution. During the lifetime of Holder, this ISO shall be exercisable only by Holder.

7.

Adjustments.

(a)       In the event of any change in the outstanding Common Stock of the Company by reason of any stock recapitalization, merger, consolidation, combination or exchange of shares, the kind of shares subject to the ISO and their purchase price per share (but not the number of shares) shall be appropriately adjusted consistent with such change in such manner as the Board of Directors of the Company may deem equitable. In the event of a stock dividend or stock split the kind of shares, their purchase price per share and the number of shares shall be appropriately adjusted, consistent with such change in such manner as the Board of Directors may deem equitable. Any adjustment so made shall be final and binding on Holder. No adjustments shall be made that would have the effect of modifying an ISO under Internal Revenue Code §§ 422 and 424.

(b)       Notwithstanding anything else herein to the contrary, upon the occurrence of a change in control (as defined in 7(c) below), any portion of the option not theretofore excercisable, shall immediately become exercisable in its entirety and the option (being the Option to purchase shares of Common Stock subject to the applicable provisions of the Plan and awarded in accordance with the Plan in terms of section 1 above) may, with the consent of Holder, be purchased by the Company for cash at a price equal to the fair market value (as defined in 7(c) below) less the purchase price payable by Holder to exercise the option as set out in Article 1 above for one (1) share of Common Stock of the Company multiplied by the number of shares of Common Stock which Holder has the option to purchase in terms of Article 1 above.

(c)       

For the purposes of this Agreement

 

 

(i)

"Change in Control" means;

 

 

(A)

the acquisition of "Beneficial Ownership" by any person (as

defined in rule 13(d) - 3 under the Securities Exchange Act 1934), corporation or other entity other than the Company or a wholly owned subsidiary of the Company of 50% or more of the outstanding Stock,

(B)  the sale or disposition of substantially all of the assets of the Company, or

(C)             the merger of the Company with another corporation in which the Common Stock of the Company is no longer outstanding after such merger.

(ii)        "Fair Market Value" means, as of any date, the Closing Price for one share of the common Stock of the company on such date.

8.         No Rights as Stockholder.       Holder shall have no rights as a stockholder with respect to any shares of Common Stock subject to this ISO prior to the date of issuance to him of a certificate or certificates for such shares.

9.         No Right to Continue Employment.      This Agreement shall not confer upon Holder any right with respect to continuance of employment with any member of the Hansen Natural Group nor shall it interfere in any way with the right of any such member to terminate his employment at any time.

10.       Compliance With Law and Regulation. This Agreement and the obligation of the Company to sell and deliver shares of Common Stock hereunder shall be subject to all applicable federal and state laws, rules and regulations and to such approvals by any government or regulatory agency as may be required. If at any time the Board of Directors of the Company shall determine that (i) the listing, registration or qualification of the shares of Common Stock subject or related thereto upon any securities exchange or under any state or federal law, or (ii) the consent or approval of any government regulatory body, is necessary or desirable as a condition of or in connection with the issue or purchase of shares of Common Stock hereunder, this ISO may not be exercised in whole or in part unless such listing, registration, qualification, consent, approval or agreement shall have been effected or obtained free of any conditions not acceptable to the Board of Directors.

11.       Tax Withholding Requirements.            The Company shall have the right to require Holder to remit to the Company an amount sufficient to satisfy any federal, state or local withholding tax requirements prior to the delivery of any certificate or certificates for Common Stock.

12.       Fractional Shares.                Notwithstanding any other provision of this Agreement, no fractional shares of stock shall be issued upon the exercise of this ISO and the Company shall not be under any obligation to compensate Holder in any way for such fractional shares.

13.       Notices.           Any notice hereunder to the Company shall be addressed to it at its office at 1010 Railroad Street, Corona, California 92882, Attention: Rodney C. Sacks with a copy to Benjamin Polk, Schulte Roth & Zabel LLP, 919 Third Avenue, New York, New York 10022, and any notice hereunder to Holder shall be addressed to him at 22433 Stanley Lane, Wildomar, California 92595, subject to the right of either party to designate at any time hereafter in writing some other address.

14.       Amendment.    No modification, amendment or waiver of any of the provisions of this Agreement shall be effective unless in writing specifically referring hereto, and signed by both parties.

15.       Governing Law.    This Agreement shall be construed according to the laws of the State of Delaware and all provisions hereof shall be administered according to and its validity shall be determined under, the laws of such State, except where preempted by federal laws.

16.       Counterparts.   This Agreement may be executed in one or more counterparts, each of which shall constitute one and the same instrument.

IN WITNESS WHEREOF, Hansen Natural Corporation has caused this Agreement to be executed by a duly authorized officer and Holder has executed this Agreement both as of the day and year first above written.

HANSEN NATURAL CORPORATION

 

 

 

By:/s/ Rodney C. Sacks

 

 

Title: Chairman of the Board

/s/Mark J. Hall

 

 

Mark J. Hall

 

 

 

 

 

STOCK OPTION AGREEMENT

 

This Stock Option Agreement ("Agreement") is made as of November 11, 2005, by and between Hansen Natural Corporation, a Delaware corporation (the "Company"), and Thomas J. Kelly ("Holder").

 

 

Preliminary Recitals

 

A.

Holder is an employee of the Company or one of its subsidiaries or affiliates.

B.        Pursuant to the Hansen Natural Corporation Stock Option Plan (the "Plan"), the Company desires to grant Holder an incentive stock option to purchase shares of the Company's common stock, par value $.005 per share (the "Common Stock").

 

NOW, THEREFORE, the Company and Holder agree as follows:

1.         Grant of Incentive Stock Option.        The Company hereby grants to Holder, subject to the terms and conditions set forth herein, the incentive stock option ("ISO") to purchase 2,000 shares of Common Stock, at the purchase price of $67.48 per share, such ISO to be exercisable and exercised as hereinafter provided.

2.         Exercise Period.           The ISO shall expire three months after the termination of the Holder's employment with the Company and its subsidiaries and affiliates (the "Hansen Natural Group") unless the employment is terminated by a member of the Hansen Natural Group for Cause (as defined below) or unless the employment is terminated by reason of the death or Total Disability (as defined below) of Holder. If the Holder's employment is terminated by a member of the Hansen Natural Group for Cause, the ISO shall expire as of the date employment terminates. If the Holder's employment terminates due to his death or Total Disability, then the ISO may be exercised by Holder or the person or persons to which Holder's rights under this Agreement pass by will, or if no such person has such right, by his executors or administrators, within six months after the date of death or Total Disability, but no later than the expiration date specified in Section 3(c) below. "Cause" means the Holder's act of fraud or dishonesty, knowing and material failure to comply with applicable laws or regulations or satisfactorily perform his duties of employment, insubordination or drug or alcohol abuse, as determined by the Committee of the Hansen Natural Corporation Stock Option Plan (the "Committee"). "Total Disability" means the complete and permanent inability of Holder to perform all of his duties of employment with the Company, as determined by the Committee upon the basis of such evidence, including independent medical reports and data, as the Committee deems appropriate or necessary.

3.

Exercise of Option

(a)       Subject to the other terms of this Agreement regarding the exercisability of the ISO, and provided that Holder is employed by a member of the Hansen Natural Group on the relevant date, the ISO may only be exercised in respect of the number of shares listed in column A from and after the exercise dates listed in column B,

 

 

Column "A"

Column "B"

 

Number of Shares

Exercise Date

 

400

November 11, 2006

400

November 11, 2007

400

November 11, 2008

400

November 11, 2009

400

November 11, 2010

 

(b)       This ISO may be exercised, to the extent exercisable by its terms, from time to time in whole or in part at any time prior to the expiration thereof. Any exercise shall be accompanied by a written notice to the Company specifying the number of shares as to which this ISO is being exercised (the "Option Shares"). Notations of any partial exercise or installment exercise, shall be made by the Company on Schedule A hereto.

(c)       Notwithstanding anything else herein to the contrary, this ISO shall expire ten years from the date of this agreement.

(d)       The Holder hereby agrees to notify the Company in writing in the event shares acquired pursuant to the exercise of this ISO are transferred, other than by will or by the laws of descent and distribution, within two years after the date of this agreement or within one year after the issuance of such shares pursuant to such exercise.

4.         Payment of Purchase Price Upon Exercise.    At the time of any exercise of the ISO the purchase price of the ISO shall be paid in full to the Company in any of the following ways or in any combination of the following ways:

(a)

By check or other immediately available funds.

(b)       With property consisting of shares of Common Stock. (The shares of Common Stock to be used as payment shall be valued as of the date of exercise of the ISO at the Closing Price as defined below. For example, if Holder exercises the option for 4,000 shares at a total Exercise Price of $8,000, assuming exercise price of $2.00 per share, and the Closing Price is $5.00, he may pay for the 4,000 Option Shares by transferring 1,600 shares of Common Stock to the Company.)

(c)       By delivering a properly executed exercise notice together with irrevocable instructions to a broker to deliver promptly to the company the amount of sale or loan proceeds necessary to pay the purchase price and applicable withholding taxes, and such other documents as the Committee may determine.

(d)       For purposes of this Agreement, the term "Closing Price" means, with respect to the Company's Common Stock, the last sale price regular-way or, in case no such sale takes place on such date, the average of the closing bid and asked prices regular-way on the principal national securities exchange on which the securities are listed or admitted to trading; or, if they are not listed or admitted to trading on any national securities exchange, the last sale price of the securities on the consolidated transaction reporting system of the National Association of Securities Dealers ("NASD"), if such last sale information is reported on such system or, if not so reported, the average of the closing bid and asked prices of the securities on the National Association of Securities Dealers Automatic Quotation System ("NASDAQ") or any comparable system or, if the securities are not listed on NASDAQ or a comparable system, the average of the closing bid and asked prices as furnished by two members of the NASD selected from time to time by the Company for that purpose.

5.         Purchase for Investment; Resale Restrictions.  Unless at the time of exercise of the ISO there shall be a valid and effective registration statement under the Securities Act of 1933 ("'33 Act") and appropriate qualification and registration under applicable state securities laws relating to the Option Shares being acquired, Holder shall upon exercise of the ISO give a representation that he is acquiring such shares for his own account for investment and not with a view to, or for sale in connection with, the resale or distribution of any such shares. In the absence of such registration statement, Holder shall execute a written affirmation, in a form reasonably satisfactory to the Company, of such investment intent. Holder further agrees that he will not sell or transfer any Option Shares until he requests and receives an opinion of the Company's counsel or other counsel reasonably satisfactory to the Company to the effect that such proposed sale or transfer will not result in a violation of the '33 Act, or a registration statement covering the sale or transfer of the shares has been declared effective by the Securities and Exchange Commission, or he obtains a no-action letter from the Securities and Exchange Commission with respect to the proposed transfer.

6.         Nontransferability. This ISO shall not be transferable other than by will or by the laws of descent and distribution. During the lifetime of Holder, this ISO shall be exercisable only by Holder.

7.

Adjustments.

(a)       Subject to clause 7(b) below, if the outstanding shares of stock of the Company are increased, decreased, or exchanged for a different number or kind of shares or other securities, or if additional shares or new or different shares or other securities are distributed with respect to such shares of stock or securities, through merger, consolidation, sale of all or substantially all of the property of the Company, reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other distribution with respect to such shares of stock or other securities, then, to the extent permitted by the Board of the Company, an appropriate and proportionate adjustment shall be made in (1) the maximum number and kind of shares provided in clause 1 above; (2) the number and kind of shares or other securities subject to the outstanding options and tandum SARs, if any; and (3) the price for each share or other unit of any other securities subject to outstanding options without change in the aggregate purchase price or value as to which the options remain exercisable or subject to restrictions. Any adjustment under this clause 7(a) shall be made by the Board of the Company, whose determination as to what adjustments shall be made, if any, and the extent thereof, will be final, binding and conclusive. No fractional interests will be issued under this agreement resulting from any such adjustment.

(b)       Notwithstanding anything else herein to the contrary, the Board of the Company may, at any time, in its sole discretion, provide that upon the occurrence of a change in control of the Company (as determined by the Board), all or a specified portion of any outstanding options not theretofore exercisable shall immediately become exercisable and that any option not exercised prior to such change in control shall be canceled.

8.         No Rights as Stockholder.       Holder shall have no rights as a stockholder with respect to any shares of Common Stock subject to this ISO prior to the date of issuance to her of a certificate or certificates for such shares.

9.         No Right to Continue Employment.      This Agreement shall not confer upon Holder any right with respect to continuance of employment with any member of the Hansen Natural Group nor shall it interfere in any way with the right of any such member to terminate her employment at any time.

10.       Compliance With Law and Regulation. This Agreement and the obligation of the Company to sell and deliver shares of Common Stock hereunder shall be subject to all applicable federal and state laws, rules and regulations and to such approvals by any government or regulatory agency as may be required. If at any time the Board of Directors of the Company shall determine that (i) the listing, registration or qualification of the shares of Common Stock subject or related thereto upon any securities exchange or under any state or federal law, or (ii) the consent or approval of any government regulatory body, is necessary or desirable as a condition of or in connection with the issue or purchase of shares of Common Stock hereunder, this ISO may not be exercised in whole or in part unless such listing, registration, qualification, consent, approval or agreement shall have been effected or obtained free of any conditions not acceptable to the Board of Directors.

11.       Tax Withholding Requirements.            The Company shall have the right to require Holder to remit to the Company an amount sufficient to satisfy any federal, state or local withholding tax requirements prior to the delivery of any certificate or certificates for Common Stock.

12.       Fractional Shares.                Notwithstanding any other provision of this Agreement, no fractional shares of stock shall be issued upon the exercise of this ISO and the Company shall not be under any obligation to compensate Holder in any way for such fractional shares.

13.       Notices.           Any notice hereunder to the Company shall be addressed to it at its office at 1010 Railroad Street, Corona, California 92882, Attention: Rodney C. Sacks with a copy to Benjamin Polk, Schulte Roth & Zabel LLP, 919 Third Avenue, New York, New York 10022, and any notice hereunder to Holder shall be addressed to him at 4472 Torrey Pines Drive, Chino Hills, CA 91709, subject to the right of either party to designate at any time hereafter in writing some other address.

14.       Amendment.    No modification, amendment or waiver of any of the provisions of this Agreement shall be effective unless in writing specifically referring hereto, and signed by both parties.

15.       Governing Law.    This Agreement shall be construed according to the laws of the State of Delaware and all provisions hereof shall be administered according to and its validity shall be determined under, the laws of such State, except where preempted by federal laws.

16.       Counterparts.   This Agreement may be executed in one or more counterparts, each of which shall constitute one and the same instrument.

 

 

 

 

 

 

IN WITNESS WHEREOF, Hansen Natural Corporation has caused this Agreement to be executed by a duly authorized officer and Holder has executed this Agreement both as of the day and year first above written.

 

 

HANSEN NATURAL CORPORATION

 

 

By: /s/Rodney C. Sacks

 

Title: Chairman of the Board

 

 

/s/Thomas Kelly

Thomas Kelly

 

 

 

 

 

STOCK OPTION AGREEMENT

 

This Stock Option Agreement ("Agreement") is made as of November 11, 2005, by and between Hansen Natural Corporation, a Delaware corporation (the "Company"), and Rodney C. Sacks ("Holder").

 

Preliminary Recitals

 

A.

Holder is an employee of the Company or one of its subsidiaries or affiliates.

B.        Pursuant to the Hansen Natural Corporation 2001 Stock Option Plan (the "Plan"), the Company desires to grant Holder an incentive stock option to purchase shares of the Company's common stock, par value $.005 per share (the "Common Stock"), subject to the terms and conditions of the Plan and subject further to the terms and conditions set forth below.

 

NOW, THEREFORE, the Company and Holder agree as follows:

1.         Grant of Incentive Stock Option.        The Company hereby grants to Holder, subject to the terms and conditions set forth herein, the incentive stock option ("ISO") to purchase up to 150,000 shares of Common Stock, at the purchase price of $67.48 per share, such ISO to be exercisable and exercised as hereinafter provided.

2.         Exercise Period.           The ISO shall expire three months after the termination of the Holder's employment with the Company and its subsidiaries and affiliates (the "Hansen Group") unless the employment is terminated by a member of the Hansen Group for Cause (as defined below) or unless the employment is terminated by reason of the death or Total Disability (as defined below) of Holder. If the Holder's employment is terminated by a member of the Hansen Group for Cause, the ISO shall expire as of the date employment terminates. If the Holder's employment terminates due to his death or Total Disability, then the ISO may be exercised by Holder or the person or persons to which Holder's rights under this Agreement pass by will, or if no such person has such right, by his executors or administrators, within six months after the date of death or Total Disability, but no later than the expiration date specified in Section 3(d) below. "Cause" means the Holder's act of fraud or dishonesty, knowing and material failure to comply with applicable laws or regulations, drug or alcohol abuse, as determined by the Committee of the Hansen Natural Corporation Stock Option Plan (the "Committee"). "Total Disability" means the complete and permanent inability of Holder to perform all of his duties of employment with the Company, as determined by the Committee upon the basis of such evidence, including independent medical reports and data, as the Committee deems appropriate or necessary.

3.

Exercise of Option

(a)       Subject to the other terms of this Agreement regarding the exercisability of the ISO, the ISO may only be exercised in respect of the number of shares listed in column A from and after the exercise dates listed in column B,

 

Column "A"

Column "B"

 

Number of Shares

Exercise Date

 

30,000

November 11, 2006

30,000

November 11, 2007

30,000

November 11, 2008

30,000

November 11, 2009

30,000

November 11, 2010

 

(b)       This ISO may be exercised, to the extent exercisable by its terms, from time to time in whole or in part at any time prior to the expiration thereof. Any exercise shall be accompanied by a written notice to the Company specifying the number of shares as to which this ISO is being exercised (the "Option Shares"). Notations of any partial exercise or installment exercise, shall be made by the Company on Schedule A hereto.

(c)       Notwithstanding the above, this ISO shall be fully exercisable in the event Holder's employment with the Hansen Group is terminated by Holder for "Good Reason" (as defined below), or a member of the Hansen Group terminates his employment without "Cause" (as defined above). "Good Reason" means the Holder's termination of employment with the Hansen Group on or after a reduction in his compensation or benefits, his removal as the Company's Chairman of the Board or Chief Executive Officer, or his being assigned duties or responsibilities that are inconsistent with the dignity, importance or scope of his position with the Company.

(d)       Notwithstanding anything else herein to the contrary, this ISO shall expire ten years from the date of this agreement.

(e)       The Holder hereby agrees to notify the Company in writing in the event shares acquired pursuant to the exercise of this ISO are transferred, other than by will or by the laws of descent and distribution, within two years after the date indicated above or within one year after the issuance of such shares pursuant to such exercise.

 

 

 

4.         Payment of Purchase Price Upon Exercise.    At the time of any exercise of the ISO the purchase price of the ISO shall be paid in full to the Company in either of the following ways or in any combination of the following ways:

(a)

By check or other immediately available funds.

(b)       With property consisting of shares of Common Stock. (The shares of Common Stock to be used as payment shall be valued as of the date of exercise of the ISO at the Closing Price as defined below. For example, if Holder exercises the option for 4,000 shares at a total Exercise Price of $7,000, assuming exercise price of $1.75 per share, and the Closing Price is $5.00, he may pay for the 4,000 Option Shares by transferring 1,400 shares of Common Stock to the Company.)

(c)       For purposes of this Agreement, the term "Closing Price" means, with respect to the Company's Common Stock, the last sale price regular-way or, in case no such sale takes place on such date, the average of the closing bid and asked prices regular-way on the principal national securities exchange on which the securities are listed or admitted to trading; or, if they are not listed or admitted to trading on any national securities exchange, the last sale price of the securities on the consolidated transaction reporting system of the National Association of Securities Dealers (NASD"), if such last sale information is reported on such system or, if not so reported, the average of the closing bid and asked prices of the securities on the National Association of Securities Dealers Automatic Quotation System ("NASDAQ") or any comparable system or, if the securities are not listed on NASDAQ or a comparable system, the average of the closing bid and asked prices as furnished by two members of the NASD selected from time to time by the Company for that purpose.

5.         Purchase for Investment; Resale Restrictions.  Unless at the time of exercise of the ISO there shall be a valid and effective registration statement under the Securities Act of 1933 ("'33 Act") and appropriate qualification and registration under applicable state securities laws relating to the Option Shares being acquired, Holder shall upon exercise of the ISO give a representation that he is acquiring such shares for his own account for investment and not with a view to, or for sale in connection with, the resale or distribution of any such shares. In the absence of such registration statement, Holder shall execute a written affirmation, in a form reasonably satisfactory to the Company, of such investment intent. Holder further agrees that he will not sell or transfer any Option Shares until he requests and receives an opinion of the Company's counsel or other counsel reasonably satisfactory to the Company to the effect that such proposed sale or transfer will not result in a violation of the '33 Act, or a registration statement covering the sale or transfer of the shares has been declared effective by the Securities and Exchange Commission, or he obtains a no-action letter from the Securities and Exchange Commission with respect to the proposed transfer.

6.         Nontransferability. This ISO shall not be transferable other than by will or by the laws of descent and distribution. During the lifetime of Holder, this ISO shall be exercisable only by Holder.

7.

Adjustments.

(a)       If the Company hereafter (i) declares a distribution on its shares in shares, (ii) splits its outstanding shares, (iii) combines its outstanding shares into a smaller number of securities or (iv) issues any shares or other securities by reclassification of its shares (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing entity), the purchase price in effect at the time of the record date for such distribution or the effective date of such subdivision, combination or reclassification shall be adjusted so that it shall equal the price determined by multiplying the purchase price by a fraction, the denominator of which shall be the number of shares outstanding immediately after giving effect to such action, and the numerator of which shall be the number of shares outstanding immediately prior to such action. Whenever the purchase price payable upon exercise of the ISO is adjusted pursuant to the preceding sentence above, the number of shares purchasable upon exercise of the ISO shall simultaneously be adjusted by multiplying the number of shares issuable upon exercise of the ISO immediately prior to the event which causes the adjustment by the purchase price in effect immediately prior to the event which causes the adjustment and dividing the product so obtained by the purchase price, as adjusted. Such adjustments shall be made successively whenever any event listed above shall occur.

(b)       If, at any time, as a result of an adjustment made pursuant to paragraph 7(a) above, the Holder shall become entitled to receive any securities of the Company other than shares, the number of such other securities so receivable upon exercise of the ISO shall thereafter be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the shares contained in paragraph 7(a) above.

(c)       If any other event contemplated in Section 10(a) of the Plan occurs, adjustments to the number and kind of shares subject to this ISO and/or to the purchase price for each share subject to this ISO may be made in accordance with Section 10(a) of the Plan.

(d)       No adjustments shall be made under this Section 7 that would have the effect of modifying this ISO under Internal Revenue Code §§ 422 or 424.

(e)       Whenever the purchase price or the number of shares is adjusted, as herein provided, Hansen shall within 10 business days of the event causing such adjustment give a notice setting forth the adjusted purchase price and adjusted number of shares issuable upon exercise of the ISO to be mailed to the Holder.

(f)        Notwithstanding anything else herein to the contrary, upon the occurrence of a change in control (as defined in (g) below), the option or any portion thereof not theretofore exercisable, shall immediately become exercisable in its entirety and the option (being the option to purchase shares of Common Stock subject to the applicable provisions of the Plan and awarded in accordance with the Plan in terms of section 1 above) may, with the consent of Holder, be purchased by the Company for cash at a price equal to the fair market value (as defined in 7(g) below) less the purchase price payable by Holder to exercise the option as set out in Article 1 above for one (1) share of Common Stock of the Company multiplied by the number of shares of Common Stock which Holder has the option to purchase in terms of Article 1 above.

 

(g)

For the purposes of this agreement

 

 

(i)

"Change in Control" means;

(A)             the acquisition of "Beneficial Ownership" by any person (as defined in rule 13 (d) - 3 under the Securities Exchange Act 1934), corporation or other entity other than the Company or a wholly owned subsidiary of the Company of 20% or more of the outstanding Stock,

(B)  the sale or disposition of substantially all of the assets of the Company, or

(C)             the merger of the Company with another corporation in which the Common Stock of the Company is no longer outstanding after such merger.

(ii)        "Fair Market Value" means, as of any date, the Closing Price for one share of the Common Stock of the Company on such date.

8.         The provisions of Section 5(b) (iii) of the Plan, regarding the execution of a shareholder's agreement as a condition precedent to the Company's obligation to issue shares under the Plan, shall not apply to the ISO or any shares issued pursuant to the ISO.

9.         The Company represents and warrants to Holder that (a) there are no options to purchase the Company's Common Stock, containing the same or substantially the same terms as the ISO, which are actively traded on an established market within the meaning of Internal Revenue Code §83 and the regulations promulgated thereunder; and (b) the shares of the Company's Common Stock issued upon exercise of the ISO, when issued in accordance with the terms hereof, will be duly authorized, validly issued, fully paid and nonassessable. The Company shall reserve and keep reserved out of its authorized shares of Common Stock the number of shares of Common Stock that may be issuable from time to time upon exercise of the ISO.

10.       No Rights as Stockholder.       Holder shall have no rights as a stockholder with respect to any shares of Common Stock subject to this ISO prior to the date of issuance to him of a certificate or certificates for such shares.

11.       No Right to Continue Employment.      This Agreement shall not confer upon Holder any right with respect to continuance of employment with any member of the Hansen Group nor shall it interfere in any way with the right of any such member to terminate his employment at any time.

12.       Compliance With Law and Regulation. This Agreement and the obligation of the Company to sell and deliver shares of Common Stock hereunder shall be subject to all applicable federal and state laws, rules and regulations and to such approvals by any government or regulatory agency as may be required. If at any time the Board of Directors of the Company shall determine that (i) the listing, registration or qualification of the shares of Common Stock subject or related thereto upon any securities exchange or under any state or federal law, or (ii) the consent or approval of any government regulatory body, is necessary or desirable as a condition of or in connection with the issue or purchase of shares of Common Stock hereunder, this ISO may not be exercised in whole or in part unless such listing, registration, qualification, consent, approval or agreement shall have been effected or obtained free of any conditions not acceptable to the Board of Directors. The Company agrees to use its reasonable efforts to obtain any necessary listing, registration, qualification, consent, approval or agreement as expeditiously as possible, and the term of this ISO shall be extended until 30 days following the date such listing, registration, qualification, consent, approval or agreement is effected or obtained. Moreover, this ISO may not be exercised if its exercise or the receipt of shares of Common Stock pursuant thereto would be contrary to applicable law.

 

13.       Tax Withholding Requirements.            The Company shall have the right to require Holder to remit to the Company an amount sufficient to satisfy any federal, state or local withholding tax requirements prior to the delivery of any certificate or certificates for Common Stock.

14.       Fractional Shares.                Notwithstanding any other provision of this Agreement, no fractional shares of stock shall be issued upon the exercise of this ISO and the Company shall not be under any obligation to compensate Holder in any way for such fractional shares.

15.       Notices.           Any notice hereunder to the Company shall be addressed to it at its office at 1010 Railroad Street, Corona, California 92882, Attention: Hilton Schlosberg with a copy to Benjamin Polk, Schulte Roth & Zabel LLP, 919 Third Avenue, New York, New York 10022, and any notice hereunder to Holder shall be addressed to him at 14 Vienne, Irvine, California 92606, subject to the right of either party to designate at any time hereafter in writing some other address.

16.       Amendment.    No modification, amendment or waiver of any of the provisions of this Agreement shall be effective unless in writing specifically referring hereto, and signed by both parties.

17.       Governing Law.    This Agreement shall be construed according to the laws of the State of Delaware and all provisions hereof shall be administered according to and its validity shall be determined under, the laws of such State, except where preempted by federal laws.

18.       Counterparts.   This Agreement may be executed in one or more counterparts, each of which shall constitute one and the same instrument.

IN WITNESS WHEREOF, Hansen Natural Corporation has caused this Agreement to be executed by a duly authorized officer and Holder has executed this Agreement both as of the day and year first above written.

HANSEN NATURAL CORPORATION

 

 

By: Hilton H. Schlosberg

 

Title: Vice Chairman

 

/s/ Rodney C. Sacks

 

Rodney C. Sacks

 

 

 

 

STOCK OPTION AGREEMENT

 

 

This Stock Option Agreement ("Agreement") is made as of November 11, 2005, by and between Hansen Natural Corporation, a Delaware corporation (the "Company"), and Michael B. Schott ("Holder").

 

 

Preliminary Recitals

 

A.

Holder is an employee of the Company or one of its subsidiaries or affiliates.

B.        Pursuant to the Hansen Natural Corporation 2001 Stock Option Plan (the "Plan"), the Company desires to grant Holder an incentive stock option to purchase shares of the Company's common stock, par value $.005 per share (the "Common Stock").

 

NOW, THEREFORE, the Company and Holder agree as follows:

1.         Grant of Incentive Stock Option.        The Company hereby grants to Holder, subject to the terms and conditions set forth herein, the incentive stock option ("ISO") to purchase up to 12,000 shares of Common Stock, at the purchase price of $67.48 per share, such ISO to be exercisable and exercised as hereinafter provided.

2.         Exercise Period.           The ISO shall expire three months after the termination of the Holder's employment with the Company and its subsidiaries and affiliates (the "Hansen Natural Group") unless the employment is terminated by a member of the Hansen Natural Group for Cause (as defined below) or unless the employment is terminated by reason of the death or Total Disability (as defined below) of Holder. If the Holder's employment is terminated by a member of the Hansen Natural Group for Cause, the ISO shall expire as of the date employment terminates. If the Holder's employment terminates due to his death or Total Disability, then the ISO may be exercised by Holder or the person or persons to which Holder's rights under this Agreement pass by will, or if no such person has such right, by his executors or administrators, within six months after the date of death or Total Disability, but no later than the expiration date specified in Section 3(c) below. "Cause" means the Holder's act of fraud or dishonesty, knowing and material failure to comply with applicable laws or regulations or satisfactorily perform his duties of employment, insubordination or drug or alcohol abuse, as determined by the Committee of the Hansen Natural Corporation Stock Option Plan (the "Committee"). "Total Disability" means the complete and permanent inability of Holder to perform all of his duties of employment with the Company, as determined by the Committee upon the basis of such evidence, including independent medical reports and data, as the Committee deems appropriate or necessary.

3.

Exercise of Option

(a)       Subject to the other terms of this Agreement regarding the exercisability of the ISO, and provided that Holder is employed by a member of the Hansen Natural Group on the relevant date, the ISO may only be exercised in respect of the number of shares listed in column A from and after the exercise dates listed in column B,

 

Column "A"

Column "B"

 

Number of Shares

Exercise Date

 

2,400

November 11, 2006

2,400

November 11, 2007

2,400

November 11, 2008

2,400

November 11, 2009

2,400

November 11, 2010

(b)       This ISO may be exercised, to the extent exercisable by its terms, from time to time in whole or in part at any time prior to the expiration thereof. Any exercise shall be accompanied by a written notice to the Company specifying the number of shares as to which this ISO is being exercised (the "Option Shares"). Notations of any partial exercise or installment exercise, shall be made by the Company on Schedule A hereto.

(c)

Notwithstanding anything else herein to the contrary, this ISO shall expire ten years

from the date of this agreement.

(d)       The Holder hereby agrees to notify the Company in writing in the event shares acquired pursuant to the exercise of this ISO are transferred, other than by will or by the laws of descent and distribution, within two years after the date of this agreement or within one year after the issuance of such shares pursuant to such exercise.

4.         Payment of Purchase Price Upon Exercise.    At the time of any exercise of the ISO the purchase price of the ISO shall be paid in full to the Company in either of the following ways or in any combination of the following ways:

(a)

By check or other immediately available funds.

(b)       With property consisting of shares of Common Stock. (The shares of Common Stock to be used as payment shall be valued as of the date of exercise of the ISO at the Closing Price as defined below. For example, if Holder exercises the option for 4,000 shares at a total Exercise Price of $8,000, assuming exercise price of $2.00 per share, and the Closing Price is $5.00, he may pay for the 4,000 Option Shares by transferring 1,600 shares of Common Stock to the Company.)

(c)       For purposes of this Agreement, the term "Closing Price" means, with respect to the Company's Common Stock, the last sale price regular-way or, in case no such sale takes place on such date, the average of the closing bid and asked prices regular-way on the principal national securities exchange on which the securities are listed or admitted to trading; or, if they are not listed or admitted to trading on any national securities exchange, the last sale price of the securities on the consolidated transaction reporting system of the National Association of Securities Dealers ("NASD"), if such last sale information is reported on such system or, if not so reported, the average of the closing bid and asked prices of the securities on the National Association of Securities Dealers Automatic Quotation System ("NASDAQ") or any comparable system or, if the securities are not listed on NASDAQ or a comparable system, the average of the closing bid and asked prices as furnished by two members of the NASD selected from time to time by the Company for that purpose.

5.         Purchase for Investment; Resale Restrictions.  Unless at the time of exercise of the ISO there shall be a valid and effective registration statement under the Securities Act of 1933 ("'33 Act") and appropriate qualification and registration under applicable state securities laws relating to the Option Shares being acquired, Holder shall upon exercise of the ISO give a representation that he is acquiring such shares for his own account for investment and not with a view to, or for sale in connection with, the resale or distribution of any such shares. In the absence of such registration statement, Holder shall execute a written affirmation, in a form reasonably satisfactory to the Company, of such investment intent. Holder further agrees that he will not sell or transfer any Option Shares until he requests and receives an opinion of the Company's counsel or other counsel reasonably satisfactory to the Company to the effect that such proposed sale or transfer will not result in a violation of the '33 Act, or a registration statement covering the sale or transfer of the shares has been declared effective by the Securities and Exchange Commission, or he obtains a no-action letter from the Securities and Exchange Commission with respect to the proposed transfer.

6.         Nontransferability. This ISO shall not be transferable other than by will or by the laws of descent and distribution. During the lifetime of Holder, this ISO shall be exercisable only by Holder.

7.         (a)       Adjustments. In the event of any change in the outstanding Common Stock of the Company by reason of any stock recapitalization, merger, consolidation, combination or exchange of shares, the kind of shares subject to the ISO and their purchase price per share (but not the number of shares) shall be appropriately adjusted consistent with such change in such manner as the Board of Directors of the Company may deem equitable. In the event of a stock dividend or stock split the kind of shares, their purchase price per share and the number of shares shall be appropriately adjusted, consistent with such change in such manner as the Board of Directors may deem equitable. Any adjustment so made shall be final and binding on Holder. No adjustments shall be made that would have the effect of modifying an ISO under Internal Revenue Code §§ 422 and 424.

(b)       Notwithstanding anything else herein to the contrary, upon the occurrence of a change in control (as defined in 7(c) below), 50% of any portion of the option not theretofore exercisable, shall immediately become exercisable and such portion of the option (being the Option to purchase shares of Common Stock subject to the applicable provisions of the Plan and awarded in accordance with the Plan in terms of section 1 above) may, with the consent of the Holder, be purchased by the Company at a fair value (as defined in 7(c) below) less the purchase price payable by Holder to exercise the option as set out in Article 1 above for one (1) share of Common Stock of the Company multiplied by the number of shares of Common Stock which Holder has the option to purchase in terms of Article 1 above.

Further, notwithstanding anything herein to the contrary if, after the occurrence of a change in control (as defined in 7(c) below) the Holder’s employment by the Hansen Natural group is terminated (unless his employment is terminated by the Hansen Natural group for cause as defined above) and on the date of termination any portion of the option has not theretofore become exercisable, then such remaining portion shall immediately become exercisable and that portion of the option (being the option to purchase shares of common stock subject to the applicable provisions of the plan and awarded in accordance with the plan in terms of section 1 above) may, with the consent of Holder, be purchased by the Company for cash at a price equal to the fair market value (defined in 7(c) below) less the purchase price payable by Holder to exercise the option as set out in Article 1 above for one (1) share of common stock of the Company multiplied by the number of shares of common stock which Holder has the option to purchase in terms of Article 1 above.

(c)

For the purposes of this Agreement

 

 

(i)

"Change in Control" means;

(A)              the acquisition of "Beneficial Ownership" by any person (as defined in rule 13(d) - 3 under the Securities Exchange Act 1934), corporation or other entity other than the Company or a wholly owned subsidiary of the Company of 50% or more of the outstanding Stock,

(B)  the sale or disposition of substantially all of the assets of the Company, or

(C)             the merger of the Company with another corporation in which the Common Stock of the Company is no longer outstanding after such merger.

(ii)        "Fair Market Value" means, as of any date, the Closing Price for one share of the common Stock of the company on such date.

8.         No Rights as Stockholder.       Holder shall have no rights as a stockholder with respect to any shares of Common Stock subject to this ISO prior to the date of issuance to him of a certificate or certificates for such shares.

9.         No Right to Continue Employment.      This Agreement shall not confer upon Holder any right with respect to continuance of employment with any member of the Hansen Natural Group nor shall it interfere in any way with the right of any such member to terminate his employment at any time.

10.       Compliance With Law and Regulation. This Agreement and the obligation of the Company to sell and deliver shares of Common Stock hereunder shall be subject to all applicable federal and state laws, rules and regulations and to such approvals by any government or regulatory agency as may be required. If at any time the Board of Directors of the Company shall determine that (i) the listing, registration or qualification of the shares of Common Stock subject or related thereto upon any securities exchange or under any state or federal law, or (ii) the consent or approval of any government regulatory body, is necessary or desirable as a condition of or in connection with the issue or purchase of shares of Common Stock hereunder, this ISO may not be exercised in whole or in part unless such listing, registration, qualification, consent, approval or agreement shall have been effected or obtained free of any conditions not acceptable to the Board of Directors.

11.       Tax Withholding Requirements. The Company shall have the right to require Holder to remit to the Company an amount sufficient to satisfy any federal, state or local withholding tax requirements prior to the delivery of any certificate or certificates for Common Stock.

12.       Fractional Shares.                 Notwithstanding any other provision of this Agreement, no fractional shares of stock shall be issued upon the exercise of this ISO and the Company shall not be under any obligation to compensate Holder in any way for such fractional shares.

13.       Notices. Any notice hereunder to the Company shall be addressed to it at its office at 1010 Railroad Street, Corona, California 92882, Attention: Rodney C. Sacks with a copy to Benjamin Polk, Schulte Roth & Zabel LLP, 919 Third Avenue, New York, New York 10022, and any notice hereunder to Holder shall be addressed to him at 618 Canterbury Road, Grosse Point Woods, Michigan 48236, subject to the right of either party to designate at any time hereafter in writing some other address.

14.       Amendment.    No modification, amendment or waiver of any of the provisions of this Agreement shall be effective unless in writing specifically referring hereto, and signed by both parties.

15.       Governing Law.                  This Agreement shall be construed according to the laws of the State of Delaware and all provisions hereof shall be administered according to and its validity shall be determined under, the laws of such State, except where preempted by federal laws.

16.       Counterparts.   This Agreement may be executed in one or more counterparts, each of which shall constitute one and the same instrument.

IN WITNESS WHEREOF, Hansen Natural Corporation has caused this Agreement to be executed by a duly authorized officer and Holder has executed this Agreement both as of the day and year first above written.

 

HANSEN NATURAL CORPORATION

 

 

By: /s/Rodney C. Sacks

 

Title: Chairman of the Board

 

 

/s/Michael B. Schott

Michael B. Schott

 

 

 


 

FIRST MODIFICATION TO THE AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

This First Modification to the Amended and Restated Loan and Security Agreement (this "Modification") is entered into July 15, 2005 by and between Hansen Beverage Company, a Delaware corporation, ("Borrower") and COMERICA BANK ("Bank"), whose Western Division Headquarters is located at 333 West Santa Clara Street, San Jose, California.

 

RECITALS

 

This Modification is entered into upon the basis of the following facts and understandings of the parties, which facts and understandings are acknowledged by the parties to be true and accurate:

 

Bank and Borrower previously entered into an Amended and Restated Loan and Security Agreement dated December 1, 2004. The Amended and Restated Credit Agreement, as so modified, and as such may be otherwise modified, amended, restated, revised, supplemented or replaced from time to time prior to the date hereof shall collectively be referred to herein as the “Agreement.”

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as set forth below.

 

AGREEMENT

 

1.         Incorporation by Reference. The Recitals and the documents referred to therein are incorporated herein by this reference. Except as otherwise noted, the terms not defined herein shall have the meaning set forth in the Agreement.

 

2.

Modification to the Agreement. Subject to the satisfaction of the conditions precedent as set forth in Section 3 hereof, the Agreement is hereby modified as set forth below.

 

A.

Section 3.1 of the Agreement is hereby amended by deleting it in its entirety and replacing it with the following:

 

“3.1        This Agreement shall remain in full force and effect until June 1, 2007, unless earlier terminated by notice by Borrower. Notice of such termination by Borrower shall be effectuated by mailing a registered or certified letter not less than thirty (30) days prior to the effective date of such termination, addressed to Bank at the address set forth herein and the termination shall be effective as of the date so fixed in such notice.”

 

3.

Legal Effect.

 

a.          Except as specifically set forth in this Modification, all of the terms and conditions of the Agreement remain in full force and effect. Except as expressly set forth herein, the execution, delivery, and performance of this Modification shall not operate as a waiver of, or as an amendment of, any right, power, or remedy of Bank under the Agreement, as in effect prior to the date hereof. Borrower ratifies and reaffirms the continuing effectiveness of all promissory notes, guaranties, security agreements, mortgages, deeds of trust, environmental agreements, and all other instruments, documents and agreements entered into in connection with the Agreement.

 

b.          Borrower represents and warrants that each of the representations and warranties contained in the Agreement are true and correct as of the date of this Agreement, and that no Event of Default has occurred and is continuing.

 

c.          The effectiveness of this Modification and each of the documents, instruments and agreements entered into in connection with this Modification is conditioned upon receipt by Bank of this Modification and any other documents which Bank may require to carry out the terms hereof.

 

4.

Miscellaneous Provisions.

 

a.          This is an integrated Modification and supersedes all prior negotiations and agreements regarding the subject matter hereof. All Modifications hereto must be in writing and signed by the parties.

 

b.          This Modification may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument.

 

 

 

 

IN WITNESS WHEREOF, the parties have agreed as the date first set forth above.

 

 

HANSEN BEVERAGE COMPANY,

a Delaware corporation

 

 

By: /s/ Rodney C. Sacks

 

Name: Rodney C. Sacks

 

Title: Chairman of the Board

 

 

 

 

COMERICA BANK

 

 

 

By: /s/ Thomas M. Hicks

 

 

Thomas M. Hicks

 

Title: Vice-President – Western Division