Underwriting Agreement

000,000 UNITS, EACH
UNIT CONSISTING OF ONE SHARE OF
COMMON STOCK AND ONE REDEEMABLE WARRANT


HAWAIIAN NATURAL WATER COMPANY, INC.


UNDERWRITING AGREEMENT


New York, New York
May 14, 1997


JOSEPH STEVENS & COMPANY, INC. 33 Maiden Lane, 8th Floor New York, New York 10038


Ladies and Gentlemen:


Hawaiian Natural Water Company, Inc., a Hawaii corporation (the "Company"),confirms its agreement with Joseph Stevens & Company, Inc. (hereinafter referred to as "you" or the "Underwriter"), with respect to the sale by the Company and the purchase by the Underwriter of 2,000,000 units (the "Units"), each Unit consisting of one (1) share of common stock, no par value (the "Common Stock") and one (1) redeemable warrant (the "Redeemable Warrants"). Each Redeemable Warrant is exercisable for one share of Common Stock. The Common Stock and Redeemable Warrants will be separately tradeable upon issuance and are hereinafter referred to as the "Firm Units." The Redeemable Warrants are exercisable commencing May 14, 1997 until May 13, 2002, unless previously redeemed by the Company, at an initial exercise price equal to $6.00 per share, subject to adjustment. The Redeemable Warrants may be redeemed by the Company, in whole, and not in part, at a redemption price of five cents ($.05) per Redeemable Warrant at any time commencing May 14, 1998 on 30 days' prior written notice provided that the average closing bid price of the Common Stock equals or exceeds 150% of the then exercise price per share (subject to adjustment) for any twenty (20) trading days within a period of thirty (30) consecutive trading days ending on the fifth (5th) trading day prior to the date of the notice of redemption and the Company shall have obtained the prior written consent of the Underwriter. Upon the Underwriter's request, as provided in Section 2(b) of this Agreement, the Company shall also issue and sell to the Underwriter up to an additional 300,000 Units for the purpose of covering over-allotments, if any. Such 300,000 Units are hereinafter collectively referred to as the "Option Units." The Company also proposes to issue and sell to the Underwriter or its designees warrants (the "Underwriter's Warrants"), pursuant to the Underwriter's Warrant Agreement (the "Underwriter's Warrant Agreement"), for the purchase of an additional 200,000 shares of Common Stock. The shares of Common


Stock underlying the Underwriter's Warrants are hereinafter collectively referred to as the "Underwriter's Securities." The shares of Common Stock issuable upon exercise of the Redeemable Warrants are hereinafter referred to as the "Warrant Shares." Further, an additional 643,500 Redeemable Warrants (the "Selling Securityholders Warrants") and 643,500 shares of Common Stock underlying the Selling Securityholders Warrants (the "Selling Securityholders Shares"), are being registered for the account of certain selling security holders in connection with this offering (the "Offering") which are not being underwritten by the Underwriter. The Selling Securityholders Warrants and the Selling Securityholders Shares are hereinafter collectively referred to as the "Selling Securityholders Securities." The Firm Units, the Option Units, the Underwriter's Warrants, the Underwriter's Securities, the Selling Securityholders Securities and the Warrant Shares are hereinafter collectively referred to as the "Securities" and are more fully described in the Registration Statement and the Prospectus referred to below.


1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to, and covenants and agrees with, the Underwriter as of the date hereof, and as of the Closing Date (hereinafter defined) and the Option Closing Date (hereinafter defined), if any, as follows:


(a) The Company has prepared and filed with the Securities and Exchange Commission (the "Commission") a registration statement, and amendments thereto, on Form SB-2 (Registration No. 333-18289), including any related preliminary prospectus or prospectuses (each a "Preliminary Prospectus"), for the registration of the Securities (excluding the Underwriter's Warrants and the Underwriter's Securities), under the Securities Act of 1933, as amended (the "Act"), which registration statement and amendment or amendments have been prepared by the Company in conformity with the requirements of the Act, and the rules and regulations of the Commission under the Act. The Company will not file any other amendment to such registration statement which the Underwriter shall have objected to in writing after having been furnished with a copy thereof. Except as the context may otherwise require, such registration statement, as amended, on file with the Commission at the time it becomes effective (including the prospectus, financial statements, schedules, exhibits and all other documents filed as a part thereof or incorporated therein (including, but not limited to, those documents or that information incorporated by reference therein) and all information deemed to be a part thereof as of such time pursuant to paragraph (b) of Rule 430A of the rules and regulations under the Act), is hereinafter called the "Registration Statement," and the form of prospectus in the form first filed with the Commission pursuant to Rule 424(b) of the rules and regulations under the Act is hereinafter called the "Prospectus." For purposes hereof, "Rules and Regulations" mean the rules and regulations adopted by the Commission under either the Act or the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as applicable.


(b) Neither the Commission nor any state regulatory authority has issued any order preventing or suspending the use of any Preliminary Prospectus, the Registration Statement or the Prospectus or any part of any thereof and no proceedings for a stop order suspending the effectiveness of the Registration Statement or any sale of the Company's securities have been instituted or are pending or, to the best knowledge of the Company, threatened. Each of the Preliminary Prospectus and the Registration Statement and the Prospectus, at the time of filing thereof, conformed in all material respects with the requirements of the Act and the Rules and


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Regulations, and none of the Preliminary Prospectus, the Registration Statement nor the Prospectus, at the time of filing thereof, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading; PROVIDED, HOWEVER, that this representation and warranty does not apply to statements made or statements omitted in reliance upon and in conformity with written information furnished to the Company with respect to the Underwriter and its proposed method of distribution of the Units by or on behalf of the Underwriter expressly for use in such Preliminary Prospectus, the Registration Statement or the Prospectus; provided that such written information or omissions only pertain to disclosures in the Preliminary Prospectus, the Registration Statement or Prospectus or any amendment thereof or supplement thereto directly relating to the transactions effected by the Underwriter in connection with this Offering. The Company acknowledges that the statements with respect to the public offering of the Securities set forth under the heading "Underwriting" and the stabilization legend in the Prospectus have been furnished by the Underwriter expressly for use therein and constitute the only information furnished in writing by or on behalf of the Underwriter for inclusion in the Prospectus.


(c) When the Registration Statement becomes effective and at all times subsequent thereto up to the Closing Date and each Option Closing Date, if any, and during such longer period as the Prospectus may be required to be delivered in connection with sales by the Underwriter or a dealer, the Registration Statement and the Prospectus will contain all statements which are required to be stated therein in accordance with the Act and the Rules and Regulations, and will conform to the requirements of the Act and the Rules and Regulations; and, at and through such dates, neither the Registration Statement nor the Prospectus, nor any amendment or supplement thereto, will contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading; PROVIDED, HOWEVER, that this representation and warranty does not apply to statements made or statements omitted in reliance upon and in conformity with written information furnished to the Company with respect to the Underwriter and its proposed method of distribution of the Units by or on behalf of the Underwriter expressly for use in the Registration Statement or the Prospectus or any amendment thereof or supplement thereto; provided that such written information or omissions only pertain to disclosures in the Preliminary Prospectus, the Registration Statement or Prospectus or any amendment thereof or supplement thereto directly relating to the transactions effected by the Underwriter in connection with this Offering. The Company acknowledges that the statements with respect to the Offering set forth under the heading "Underwriting" and the stabilization legend in the Prospectus have been furnished by the Underwriter expressly for use therein and constitute the only information furnished in writing by or on behalf of the Underwriter for inclusion in the Prospectus.


(d) The Company has been duly organized and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation. The Company is duly qualified and licensed and in good standing as a foreign corporation in each jurisdiction in which its operations require such qualification or licensing. The Company does not own, directly or indirectly, an interest in any other corporation, partnership, trust, joint venture or other business entity. The Company has all requisite power and authority (corporate


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and other), and has obtained any and all necessary authorizations, approvals, orders, licenses, certificates, franchises and permits of and from all governmental or regulatory officials and bodies (including, without limitation, those having jurisdiction over environmental or similar matters), to own or lease its properties and conduct its business as conducted on the date hereof and as described in the Prospectus except where the failure to be so qualified or licensed would not have a material adverse effect; the Company is and has been doing business in material compliance with all such authorizations, approvals, orders, licenses, certificates, franchises and permits and with all federal, state, local and foreign laws, rules and regulations to which it is subject; and the Company has not received any notice of proceedings relating to the revocation or modification of any such authorization, approval, order, license, certificate, franchise or permit which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would materially and adversely affect the condition, financial or otherwise, or the earnings, prospects, stockholders' equity, value, operations, properties, business or results of operations of the Company. The disclosure in the Registration Statement concerning the effects of federal, state, local and foreign laws, rules and regulations on the Company's business as currently conducted and as contemplated are correct in all respects and do not omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading.


(e) Except for up to 15,863 additional options granted by the Company, the Company has a duly authorized, issued and outstanding capitalization as set forth in the Prospectus under "Capitalization" and "Description of Capital Stock" and will have the adjusted capitalization set forth therein on the Closing Date and the Option Closing Date, if any, based upon the assumptions set forth therein, and the Company is not a party to or bound by any instrument, agreement or other arrangement providing for it to issue any capital stock, rights, warrants, options or other securities, except for this Agreement, the Underwriter's Warrant Agreement and the Warrant Agreement (as defined in SECTION 1(ff) hereof of this Agreement) and as described in the Prospectus. The Securities and all other securities issued or issuable by the Company on or prior to the Closing Date and each Option Closing Date, if any, conform or, when issued and paid for, will conform, in all respects to the descriptions thereof contained in the Registration Statement and the Prospectus. All issued and outstanding securities of the Company have been duly authorized and validly issued and are fully paid and non-assessable; the holders thereof have no rights of rescission with respect thereto and are not subject to personal liability by reason of being such holders; and none of such securities were issued in violation of the preemptive rights of any holder of any security of the Company or any similar contractual right granted by the Company. The Securities to be issued and sold by the Company hereunder and pursuant to the Underwriter's Warrant Agreement and the Warrant Agreement are not and will not be subject to any preemptive or other similar rights of any stockholder, have been duly authorized and, when issued, paid for and delivered in accordance with the terms hereof and thereof, will be validly issued, fully paid and non-assessable and conform to the descriptions thereof contained in the Prospectus; the holders thereof will not be subject to any liability solely as such holders; all corporate action required to be taken for the authorization, issue and sale of the Securities has been duly and validly taken; and the certificates representing the Securities, when delivered by the Company, will be in due and proper form. Upon the issuance and delivery of the Securities, pursuant to the terms hereof, and pursuant to the Warrant Agreement and the Underwriter's Warrant Agreement, to be sold by the Company


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hereunder and thereunder to the Underwriter, the Underwriter will acquire good and marketable title to such Securities, free and clear of any lien, charge, claim, encumbrance, pledge, security interest, defect or other restriction or equity of any kind whatsoever asserted against the Company or any affiliate (within the meaning of the Rules and Regulations) of the Company.


(f) The financial statements of the Company and the notes thereto included in the Registration Statement, each Preliminary Prospectus and the Prospectus fairly present the financial position, changes in stockholders' equity and the results of operations of the Company at the respective dates and for the respective periods to which they apply. Such financial statements have been prepared in conformity with generally accepted accounting principles and the Rules and Regulations, consistently applied throughout the periods involved. Except as described in the Prospectus, there has been no adverse change or development involving a material prospective change in the condition, financial or otherwise, or in the earnings, prospects, stockholders' equity, value, operations, properties, business or results of operations of the Company, whether or not arising in the ordinary course of business, since the date of the financial statements included in the Registration Statement and the Prospectus; and the outstanding debt, the property, both tangible and intangible, and the business of the Company conform in all respects to the descriptions thereof contained in the Registration Statement and the Prospectus. The financial information set forth in the Prospectus under the headings "The Company," "Summary Financial Information," "Capitalization," "Selected Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" fairly presents, on the basis stated in the Prospectus, the information set forth therein and such financial information has been derived from or compiled on a basis consistent with that of the financial statements included in the Prospectus.


(g) The Company (i) has paid all federal, state, local and foreign taxes for which it is liable, including, but not limited to, withholding taxes and amounts payable under the Internal Revenue Code of 1986, as amended (the "Code"), and has furnished all information returns it is required to furnish pursuant to the Code, (ii) has established adequate reserves for such taxes which are not due and payable, and (iii) does not have any tax deficiency or claims outstanding, proposed or assessed against it.


(h) No transfer tax, stamp duty or other similar tax is payable by or on behalf of the Underwriter in connection with (i) the issuance by the Company of the Securities, (ii) the purchase by the Underwriter of any of the Securities from the Company, (iii) the consummation by the Company of any of its obligations under this Agreement, the Warrant Agreement, or the Underwriter's Warrant Agreement, or (iv) resales of the Securities in connection with the distribution contemplated hereby.


(i) The Company maintains insurance policies, including, but not limited to, general liability, property, personal and product liability insurance, and surety bonds which insure the Company and its employees against such losses and risks generally insured against by comparable businesses. The Company (i) has not failed to give notice or present any insurance claim with respect to any insurable matter under the appropriate insurance policy or surety bond in a due and timely manner, (ii) has no disputes or claims against any underwriter of such insurance policies or surety bonds, nor has the Company failed to pay any premiums due


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and payable thereunder, or (iii) has not failed to comply with all conditions contained in such insurance policies and surety bonds. There are no facts or circumstances under any such insurance policy or surety bond which would relieve any insurer of its obligation to satisfy in full any valid claim of the Company.


(j) There is no action, suit, proceeding, inquiry, arbitration, investigation, litigation or governmental proceeding (including, without limitation, those pertaining to environmental or similar matters), domestic or foreign, pending or, to the best knowledge of the Company, threatened against (or circumstances that may give rise to the same), or involving the properties or business of, the Company which (i) questions the validity of the capital stock of the Company, this Agreement, the Underwriter's Warrant Agreement, the Warrant Agreement or the Consulting Agreement (as defined in Section 1(gg) hereof) or of any action taken or to be taken by the Company pursuant to or in connection with this Agreement, the Underwriter's Warrant Agreement, the Warrant Agreement or the Consulting Agreement, (ii) is required to be disclosed in the Registration Statement which is not so disclosed (and such proceedings as are summarized in the Registration Statement are accurately summarized in all respects), or (iii) might materially and adversely affect the condition, financial or otherwise, or the earnings, prospects, stockholders' equity, value, operations, properties, business or results of operations of the Company.


(k) The Company has full legal right, power and authority to authorize, issue, deliver and sell the Securities, to enter into this Agreement, the Underwriter's Warrant Agreement, the Warrant Agreement and the Consulting Agreement and to consummate the transactions provided for in such agreements; and each of this Agreement, the Underwriter's Warrant Agreement, the Warrant Agreement and the Consulting Agreement have been duly and properly authorized, executed and delivered by the Company. Each of this Agreement, the Underwriter's Warrant Agreement, the Warrant Agreement and the Consulting Agreement constitutes a legal, valid and binding agreement of the Company, enforceable against the Company in accordance with its terms (except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application relating to or affecting the enforcement of creditors' rights and the application of equitable principles in any motion, legal or equitable, and except as obligations to indemnify or contribute to losses may be limited by applicable law). None of the Company's issue and sale of the Securities, execution or delivery of this Agreement, the Underwriter's Warrant Agreement, the Warrant Agreement or the Consulting Agreement, its performance hereunder or thereunder, its consummation of the transactions contemplated herein or therein, or the conduct of its business as described in the Registration Statement and the Prospectus and any amendments or supplements thereto, conflicts with or will conflict with or results or will result in any breach or violation of any of the terms or provisions of, or constitutes or will constitute a default under, or result in the creation or imposition of any lien, charge, claim, encumbrance, pledge, security interest, defect or other restriction or equity of any kind whatsoever upon, any property or assets (tangible or intangible) of the Company pursuant to the terms of (i) the articles of incorporation or by-laws of the Company, (ii) any license, contract, indenture, mortgage, lease, deed of trust, voting trust agreement, stockholders' agreement, note, loan or credit agreement or other agreement or instrument evidencing an obligation for borrowed money, or any other agreement or instrument to which the Company is a party or by which the Company


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is or may be bound or to which its properties or assets (tangible or intangible) are or may be subject, or (iii) any statute, judgment, decree, order, rule or regulation applicable to the Company of any arbitrator, court, regulatory body or administrative agency or other governmental agency or body (including, without limitation, those having jurisdiction over environmental or similar matters), domestic or foreign, having jurisdiction over the Company or any of its activities or properties.


(l) No consent, approval, authorization or order of, and no filing with, any arbitrator, court, regulatory body, administrative agency, government agency or other body, domestic or foreign, is required for the issuance of the Securities pursuant to the Prospectus and the Registration Statement, this Agreement, the Underwriter's Warrant Agreement and the Warrant Agreement, the performance of this Agreement, the Underwriter's Warrant Agreement, the Warrant Agreement and the Consulting Agreement and the transactions contemplated hereby and thereby, except such as have been obtained under the Act, state securities or Blue Sky laws and the rules of the National Association of Securities Dealers, Inc. (the "NASD") in connection with the issuance and sale of the Securities by the Company and the Underwriter's purchase and distribution of the Firm Units and the Option Units.


(m) All executed agreements, contracts or other documents or copies of executed agreements, contracts or other documents filed as exhibits to the Registration Statement to which the Company is a party or by which the Company may be bound or to which its assets, properties or business may be subject have been duly and validly authorized, executed and delivered by the Company, and constitute legal, valid and binding agreements of the Company, enforceable against the Company, in accordance with their respective terms (except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application relating to or affecting the enforcement of creditors' rights and the application of equitable principles in any motion, legal or equitable, and except as obligations to indemnify or contribute to losses may be limited by applicable law). The descriptions in the Registration Statement of agreements, contracts and other documents are accurate and fairly present the information required to be shown with respect thereto by Form SB-2; and there are no agreements, contracts or other documents which are required by the Act to be described in the Registration Statement or filed as exhibits to the Registration Statement which are not described or filed as required; and the exhibits which have been filed are complete and correct copies of the documents of which they purport to be copies.


(n) Subsequent to the respective dates as of which information is set forth in the Registration Statement and the Prospectus, and except as may otherwise be indicated or contemplated herein or therein, the Company has not (i) issued any securities other than up to 15,863 options or incurred any liability or obligation, direct or contingent, for borrowed money, (ii) entered into any transaction other than in the ordinary course of business, or (iii) declared or paid any dividend or made any other distribution on or in respect of any class of its capital stock; and, subsequent to such dates, and except as may otherwise be disclosed in the Prospectus, there has not been any change in the capital stock, debt (long or short term) or liabilities of the Company or any material change in the condition, financial or otherwise, or the earnings, prospects, stockholders' equity, value, operations, properties, business or results of operations of the Company.


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(o) Except as described in the Prospectus, no default exists in the due performance and observance of any term, covenant or condition of any material license, permit, contract, indenture, mortgage, lease, deed of trust, voting trust agreement, stockholders' agreement, note, loan or credit agreement or any other agreement or instrument evidencing an obligation for borrowed money, or any other agreement or instrument to which the Company is a party or by which the Company is or may be bound or to which the property or assets (tangible or intangible) of the Company is or may be subject.


(p) The Company has generally enjoyed a satisfactory employer-employee relationship with its employees and the Company is in material compliance with all federal, state, local and foreign laws, rules and regulations respecting employment, employment practices, terms and conditions of employment and wages and hours. There are no pending investigations involving the Company by the United States Department of Labor or any other governmental agency responsible for the enforcement of any federal, state, local or foreign laws, rules and regulations relating to employment. There is no unfair labor practice charge or complaint against the Company pending before the National Labor Relations Board or any strike, picketing, boycott, dispute, slowdown or stoppage pending or, to the knowledge of the Company, threatened against or involving the Company, or any predecessor entity, and none has ever occurred. No representation question exists respecting the employees of the Company, and no collective bargaining agreement or modification thereof is currently being negotiated by the Company. No grievance or arbitration proceeding is pending under any expired or existing collective bargaining agreements of the Company. No labor dispute with the employees of the Company exists or, to the knowledge of the Company, is imminent.


(q) The Company does not maintain, sponsor or contribute to any program or arrangement that is an "employee pension benefit plan," an "employee welfare benefit plan" or a "multiemployer plan," as such terms are defined in Sections 3(2), 3(1) and 3(37), respectively, of the Employee Retirement Income Security Act of 1974, as amended ("ERISA") ("ERISA Plans") other than the Company's unfunded group health plans and the Company's disability plan. The Company does not maintain or contribute, now or at any time previously, to a defined benefit plan, as defined in Section 3(35) of ERISA. No ERISA Plan (or an ...