<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 21, 1998
REGISTRATION NO. 333-
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
------------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------
HAWAIIAN NATURAL WATER COMPANY, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
HAWAII 99-0314848
(State or other jurisdiction (I.R.S. Employer
of Identification Number)
incorporation or
organization)
</TABLE>
248 MOKAUEA STREET,
HONOLULU, HAWAII 96819
(808) 832-4550
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
<TABLE>
<S> <C>
MARCUS BENDER COPIES OF COMMUNICATIONS TO:
PRESIDENT AND CHIEF EXECUTIVE OFFICER RICHARD P. MANSON, ESQ.
HAWAIIAN NATURAL WATER COMPANY, INC. Graham & James
248 MOKAUEA STREET 801 S. Figueroa Street
HONOLULU, HAWAII 96819 Los Angeles, California
90017
(808) 832-4550 (213) 624-2500
</TABLE>
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: FROM TIME TO
TIME AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT, AS DETERMINED BY
MARKET CONDITIONS AND THE SELLING STOCKHOLDER.
------------------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, other than securities offered only in connection with dividend
or interest reinvestment plans, check the following box: /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering: / /
If delivery of the prospectus is expected to made pursuant to Rule 434,
please check the following box: / /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER SHARE OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, no par value................ 150,000 $4-11/32(3) $ 651,563(3) $ 193
565,000(1)(2) 6.00(4) 3,390,000(4) 1,000
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Total..................................................................................................... $1,193
</TABLE>
(1) Pursuant to Rule 416 under the Securities Act, this Registration Statement
also covers such additional shares of Common Stock as may become issuable to
prevent dilution resulting from stock splits, stock dividends and similar
events.
(2) Issuable upon the exercise of currently outstanding options.
(3) Calculated pursuant to Rule 457(c) under the Securities Act, based upon the
average of the high and low sales prices of the Registrant's Common Stock on
September 15, 1998, as reported by the Nasdaq SmallCap Market.
(4) Calculated pursuant to Rule 457(g) under the Securities Act, based upon the
highest price at which the options exercisable for the shares of Common
Stock registered hereby are exercisable.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVENESS UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A) MAY DETERMINE.
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<PAGE>
SUBJECT TO COMPLETION, DATED SEPTEMBER 21, 1998
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS
715,000 SHARES
HAWAIIAN NATURAL WATER COMPANY, INC.
COMMON STOCK
NO PAR VALUE
---------------------
This Prospectus relates to an offering of up to 715,000 shares (the
"Shares") of common stock, no par value ("Common Stock"), of Hawaiian Natural
Water Company, Inc., a Hawaii corporation (the "Company"), which may be resold
from time to time by the selling stockholder named herein (the "Selling
Stockholder"). See "The Selling Stockholder." For purposes hereof, the Selling
Stockholder includes donees and pledgees selling Shares received from the
Selling Stockholder named herein after the date of this Prospectus. The Shares
consist of 100,000 shares of Common Stock (the "Initial Shares") previously
issued to the Selling Stockholder and an additional 615,000 shares of Common
Stock which may be issued to the Selling Stockholder in the future upon or in
connection with the exercise of options (the "Options"). The Initial Shares and
the Options were issued or granted to the Selling Stockholder in consideration
for the performance of certain financial public relations advisory services. See
"The Advisory Agreement."
All of the Shares offered hereby are being offered for the account of the
Selling Stockholder. The Company will not directly receive any proceeds from the
sale of the Shares; however, the Company could receive aggregate proceeds of up
to $2,190,000 from the exercise of the Options, if all of the Options are
exercised. The Options are exercisable by the Selling Stockholder in its sole
discretion. There can be no assurance that the Selling Stockholder will exercise
any of the Options.
The Selling Stockholder may elect to sell some, all or none of the Shares
offered hereby. The Selling Stockholder may sell Shares from time to time on the
Nasdaq SmallCap Market ("Nasdaq"), in negotiated transactions or otherwise, or
by a combination of these methods, at fixed prices that may be changed, at
market prices prevailing at the time of sale or at negotiated prices. The
Company's Common Stock is quoted on Nasdaq under the symbol "HNWC." On
, 1998, the closing sales price of the Common Stock was $ .
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" COMMENCING ON PAGE 4.
---------------------
The Company is paying the cost of registering the Shares and various related
expenses, but the Selling Stockholder is responsible for all selling
commissions, transfer taxes and other such costs related to the sale of the
Shares. The Selling Stockholder may effect sales of the Shares through one or
more broker-dealers, who may receive compensation in the form of discounts or
commissions from the Selling Stockholder or from purchasers of the Shares for
whom such broker-dealers may act as agents or to whom they may sell as
principals, or both. The Selling Stockholder and any broker-dealers that
participate in the offering of the Shares may, under certain circumstances, be
deemed to be "underwriters" within the meaning of the Securities Act of 1933, as
amended (the "Securities Act"). See "Plan of Distribution."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROSPECTUS IS , 1998.
<PAGE>
FORWARD-LOOKING STATEMENTS
Certain information contained in, or incorporated by reference into, this
Prospectus, includes "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995, as indicated by the use of
such terms as "may," "will," "expect," "believe," "estimate," "anticipate,"
"intend" or other similar terms or the negative of such terms. Such
forward-looking statements include, without limitation, the Company's
expectations with respect to future financial results, capital requirements,
market growth, new product introductions, potential acquisitions and the like.
These statements are based upon information currently available to the Company
and are subject to a number of risks and uncertainties that could cause actual
results to differ materially from those anticipated. The principal risks and
uncertainties are set forth under the heading "Risk Factors" beginning on page 4
of this Prospectus and are described elsewhere herein and in the documents
incorporated herein by reference.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 under the Securities Act with
respect to the Shares offered hereby (the "Registration Statement"). This
Prospectus does not contain all of the information set forth in the Registration
Statement. For further information about the Company and the Shares offered
hereby, reference is made to the Registration Statement and the exhibits and
schedules filed therewith. Statements contained in this Prospectus concerning
the provisions of any contract or other document are not necessarily complete,
and where such contract or other document is filed as an exhibit to the
Registration Statement, such statements are qualified in their entirety by the
provisions of such exhibit, to which reference is hereby made for a full
statement of the provisions thereof. The Registration Statement may be inspected
and copied at the Public Reference Room maintained by the Commission at 450
Fifth Street, N.W., Washington D.C. 20549. Information concerning the operation
of the Public Reference Room may be obtained by calling the Commission at
1-800-SEC-0330. A copy of the Registration Statement may also be accessed
electronically by means of the Commission's home page on the Internet at
http.//www.sec.gov.
The Company is subject to the reporting requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith files
periodic reports, proxy statements and other information with the Commission.
Such materials may be inspected or copied at the public reference facilities of
the Commission described above. Information concerning the Company may also be
accessed electronically by means of the Company's home page on the Internet at
http.//www.hawaiiansprings.com.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents previously filed by the Company with the Commission
under the Exchange Act are incorporated herein by reference:
(1) The Company's Annual Report on Form 10K-SB for the fiscal year ended
December 31, 1997;
(2) The Company's Quarterly Reports on Form 10Q-SB for the quarters ended
March 31, 1998 and June 30, 1998, respectively; and
(3) The description of the Company's Common Stock contained in the Company's
registration statement on Form 8-A dated April 21, 1997.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering made hereby shall be deemed incorporated by
reference into this Prospectus and made a part hereof from the date of filing of
such documents. Any statement incorporated by reference herein shall be deemed
modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document that is
also incorporated herein by reference modifies or supersedes such
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<PAGE>
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide to any person, including any beneficial owner, to
whom a copy of this Prospectus has been delivered a copy of any or all of the
information that has been incorporated by reference into, but not delivered
with, this Prospectus. Such information will be provided without charge, upon
the written or oral request of such person directed to the Secretary of the
Company at 248 Mokauea Street, Honolulu, Hawaii 96819; telephone number (808)
832-4550.
THE COMPANY
The Company bottles, markets and distributes "natural water" under the name
"Hawaiian Springs-TM-." The term "natural water" signifies that the bottled
water retains the same chemical composition and mineral content as the water at
the source. Natural water is distinguished from "purified" water, from which
certain chemicals and minerals have been removed by means of reverse osmosis
filtration. There are several purified Hawaiian waters currently on the market;
however, the Company's product is the only bottled natural water available from
Hawaii.
The Company's product is "bottled at the source" with water drawn from a
well located at the base of the Mauna Loa volcano in Kea'au, on the Big Island
of Hawaii. The term "bottled at the source" signifies that the water is pumped
directly from the source to the bottling facility, thereby eliminating handling
and transportation procedures which might lead to contamination. The proprietary
source of the Company's product further distinguishes it from competing purified
waters, which are typically drawn from municipal water supplies.
The Company currently offers its product only in polyethylene therephthalate
("PET") plastic bottles of 1.5 liters or less. The bottles are manufactured at
the Company's bottling facility with blow molding equipment owned and operated
by the Company. The PET "premium" category (bottles of two liters or less are
considered "premium") is currently the fastest growing segment of the
non-sparkling water market in the United States, accounting for approximately
750 million gallons in 1997, up 30% from 1996. The Company is currently
negotiating the purchase of additional bottling equipment which would enable it
to offer its product in PET five liter bottles as well. The Company is also
considering entering the five gallon home and office market, either
independently or through the acquisition of an existing bottler.
The Company began commercial operations in February 1995, selling initially
in the Hawaiian market exclusively. The Company continues to market its product
primarily in Hawaii but has since developed a limited presence on the U.S.
Mainland and in certain international markets (currently Guam, the Middle East
and Japan). Sales in Hawaii accounted for approximately 66% of the Company's
total sales during the first six months of 1998. International sales accounted
for approximately 19% during this period but increased to 27% in the second
quarter ended June 30, 1998. The Company expects continued growth in
international sales, especially in the Pacific Rim, through increased
penetration of existing markets and entrance into new markets, such as Thailand
and Taiwan. The Company's objective is to become a leading provider of premium
quality bottled water on a national and international basis.
A majority of the Company's product is sold through retail channels, such as
convenience stores and supermarkets, although the Company also sells through
food service outlets, such as restaurants, bars, airlines, hotels and country
clubs. Food service distribution was the fastest growing segment of the
Company's business in 1997. The Company markets its water on the basis of
superior quality and taste and on the worldwide reputation of Hawaii.
The Company was incorporated in Hawaii in September 1994. The Company's
principal executive offices are located at 248 Mokauea Street, Honolulu, Hawaii
96819; the Company's telephone number is (808) 832-4550. The Company has no
subsidiaries and no ownership interest in any other company or business.
3
<PAGE>
RISK FACTORS
Prospective investors should carefully consider the risk factors set forth
below, as well as other information contained in this Prospectus, before
deciding to purchase any of the Shares offered hereby. In addition to historical
information, this Prospectus contains certain forward-looking statements
relating to the Company's anticipated future results. The Company's actual
results could differ materially from those anticipated in such forward-looking
statements due to the risk factors set forth below as well as other risks and
uncertainties discussed in the periodic reports filed by the Company under the
Exchange Act and incorporated herein by reference.
CONTINUING LOSSES. The Company has incurred net losses in each year since
inception. The Company incurred a net loss of approximately $2,582,000 ($0.85
per share) in the year ended December 31, 1997, and approximately an additional
$510,000 ($0.13 per share) and $1,054,000 ($0.27 per share) in the three and six
month periods ended June 30, 1998, respectively. As of June 30, 1998, the
Company had an accumulated deficit of approximately $5,700,000. The Company
expects to continue generating losses until such time as it achieves
significantly higher sales levels. There can be no assurance that the Company
will achieve profitability or, if it does, as to the timing thereof.
ADDITIONAL CAPITAL REQUIREMENTS; UNCERTAINTY OF ADDITIONAL FUNDING. Based
upon current expectations, the Company does not believe that cash on hand will
be adequate to fund its operations until such time as the Company is able to
generate positive cash flow from operations. Therefore, the Company will need to
raise additional capital or improve its performance more rapidly than expected
in order to sustain its operations. Additional capital would also be required in
connection with the possible acquisition of other businesses or assets,
anticipated extensions of the Company's product line or improvements to the
Company's bottling facility. The Company is currently negotiating with certain
sources concerning the investment of additional equity capital. See "Possible
Preferred Stock Offerings" below. The Company does not anticipate obtaining bank
financing at this time. There can be no assurance that additional financing will
become available on terms and conditions acceptable to the Company. If such
financing does become available, it could result in the issuance of a
substantial number of additional shares of Common Stock (or securities
convertible into or exercisable for Common Stock) at prices below those then
prevailing in the market. Except in limited circumstances, no stockholder
approval will be required in connection with any such issuance. See "Stockholder
Approval Required Only in Connection With Certain Issuances" below.
POSSIBLE PREFERRED STOCK OFFERINGS. The Company's Articles of Incorporation
currently provide for the issuance of up to 5,000,000 shares of "blank check"
preferred stock. Such preferred stock may be issued in one or more series from
time to time, with such designations, rights, preferences and limitations as the
Board of Directors may determine, in its discretion. Except in certain
circumstances, no stockholder approval is required in connection with any such
issuance. See "Stockholder Approval Required Only in Connection With Certain
Issuances" below. No shares of preferred stock of the Company are currently
outstanding. However, the Company is contemplating one or more offerings of
preferred stock, some or all of which may be convertible into Common Stock at
prices below those then prevailing in the market. Any such preferred stock would
rank senior to the Common Stock upon liquidation and could carry a preferential
dividend potentially calling for substantial cash payments by the Company on an
annual or semi-annual basis.
STOCKHOLDER APPROVAL REQUIRED ONLY IN CONNECTION WITH CERTAIN
ISSUANCES. Under applicable law, the Board of Directors is authorized to issue
additional equity securities of the Company, without stockholder approval,
unless otherwise provided in the Company's charter documents or required by the
rules or regulations of applicable governmental or regulatory agencies. The
Company's charter documents do not contain any such restrictions. The Company's
Common Stock is quoted on Nasdaq; accordingly the Company is subject to the
corporate governance provisions of Nasdaq's Marketplace Rules. Such Rules
require stockholder approval only in connection with substantial issuances of
listed securities, generally
4
<PAGE>
issuances resulting in an increase of 20% in the outstanding shares of the
class. The Company does not expect to propose any additional issuances of
securities which would require stockholder approval pursuant to such Rules. In
the event that stockholder approval is required in connection with a proposed
financing transaction, the closing of such transaction would be delayed pending
submission of the matter to the stockholders. There can be no assurance that
stockholder approval, if solicited, would be obtained.
BROAD MANAGEMENT DISCRETION IN IMPLEMENTATION OF GROWTH STRATEGY. The
Company is currently planning several initiatives designed to develop and expand
its business. These initiatives include, without limitation, (i) improvements to
the Company's bottling facility to increase capacity, enhance efficiency and
produce new products, such as PET five liter bottles; (ii) extensions of the
Company's product line into nutriceutical beverages or other products outside
the pure water category; and (iii) entrance into the five gallon home and office
market through one or more acquisitions and/or internal expansion. The
scheduling and development of the foregoing initiatives are within the
discretion of management and may be effected without stockholder approval,
except to the extent required in connection with a financing as described above.
See "Stockholder Approval Required Only in Connection With Certain Issuances."
These initiatives will require substantial investment of management efforts and
financial resources; nevertheless, there can be no assurance that any of these
initiatives will be completed. If completed, these initiatives could
substantially change the Company's business. There can be no assurance that the
implementation of these initiatives, if completed, will enable the Company to
improve its operating results as anticipated.
MAJORITY OF SALES IN HAWAII MARKET; DEPENDENCE ON KEY CUSTOMER. The
Company's objective is to become a provider of premium quality bottled water on
a national and international basis. To date, however, a substantial majority of
the Company's sales have occurred in the Hawaiian market. The Company's
principal distributor in Hawaii, Paradise Beverages ("Paradise") currently
accounts for a majority of the Company's net sales. The Company's distribution
agreement with Paradise is based upon an oral understanding, which is terminable
at will by either party. Termination of this distribution agreement for any
reason could have a material adverse effect on the Company.
CURRENCY FLUCTUATIONS; UNCERTAIN DEMAND IN ASIA. The Company's growth
strategy emphasizes international expansion, especially in developed Asian
countries in the Pacific Rim. Several of these countries have recently
experienced economic downturns and weakening of their currencies relative to the
U.S. dollar. The Company has not been directly affected by currency fluctuations
in these markets, since all of the Company's sales have been quoted in U.S.
dollars. However, currency fluctuations can adversely affect demand for the
Company's product in foreign markets by increasing the price of the product in
local currency. To date, the Company has not been prevented from expanding
distribution into target Asian markets as a result of the strength of the U.S.
dollar relative to local currencies. However, further strengthening of the U.S.
dollar could negatively impact development of the Company's sales initiatives in
these markets.
LEASE OF KEY OPERATING ASSETS. The Company leases its water source and
bottling facility pursuant to a long-term lease agreement with a principal
stockholder. This lease agreement requires the Company to make rental payments
on a monthly basis at a rate equal to the greater of (i) a specified base rent
(currently $5,000 per month), or (ii) 2% of the Company's net revenues, as
defined. The rental payments could be substantial, depending upon the Company's
level of sales. In addition, the lease arrangement results in the Company
exercising less control over its operations than if it had ownership of these
assets. The lessor is entitled to make use of the premises (other than the
existing structures) for the brewing of beer or the manufacture of other
beverages (other than natural water) and is entitled to draw up to 50% of the
water flow from the leased well for such purposes. The lessor currently conducts
no other activity on the leased premises, and the Company believes that the
lessor has no plans to conduct any such activity in the foreseeable future.
5
<PAGE>
DEPENDENCE ON KEY PERSONNEL. The Company has been substantially dependent
upon the services of Marcus Bender, its President and Chief Executive Officer,
for the development and management of its business to date. In October 1996, the
Company entered into an employment agreement with Mr. Bender, pursuant to which
he has been employed as the Company's President for a five year term. Pursuant
to this agreement, Mr. Bender has agreed to devote his full working time and
best efforts to the performance of his duties on behalf of the Company. Mr.
Bender has also agreed not to compete with the Company in the sale of natural
water for a period of two years following the termination of employment
agreement. The Company has obtained $1.0 million in key man life insurance on
the life of Mr. Bender. Nevertheless, the loss of Mr. Bender's services would
have a material adverse effect on the Company. The successful implementation of
the Company's growth strategy will also depend upon the Company's ability to
attract and retain other key personnel, especially in such areas as sales and
marketing and manufacturing. Competition for highly qualified personnel is
intense, and there can be no assurance that the Company will be able to attract
and retain the candidates of its choice.
COMPETITION. The bottled water industry is highly competitive, with
numerous competitors vying to differentiate themselves in the sale of products
often perceived as generic by consumers. Barriers to entry may be low at certain
local levels but increase significantly at the national and international levels
because of the large marketing and distribution costs associated with obtaining
and maintaining a presence at these levels. In California, for example, the
largest U.S. market, substantial "slotting fees" are typically required to be
paid in order to obtain shelf space for new and untested products in major
supermarket chains, which account for a significant percentage of bottled water
sales. The Company's objective is to become a leading provider of premium
quality bottled water on a national and international basis. In both arenas, the
Company competes primarily with large, established foreign and domestic
companies, all of which have significantly greater financial and other resources
than the Company. The Company's principal foreign competitors include Great
Brands of Europe, a French company which distributes under the "Evian," "Volvic"
and "Dannon Natural Spring Water" names, and Perrier, S.A., a French company,
which distributes through its U.S. subsidiary, the Perrier Group, under the
"Arrowhead" and "Poland Springs" names, among others. The Company's principal
domestic competitors include Crystal Geyser Water Co., a California company,
which distributes under the "Crystal Geyser" name, Nora Beverage Co., a
Connecticut company which distributes Canadian sourced water under the "Naya"
name, and Mountain Valley Water Co., an Arkansas company which distributes under
the "Mountain Valley" name.
GOVERNMENTAL REGULATION; QUALITY CONTROL. The bottled water industry is
highly regulated both in the United States and abroad. Various State and Federal
regulations, designed to ensure the quality of the water and the truthfulness of
its marketing claims, require the Company to monitor each aspect of its
production process, including its water source, its bottling operations and its
packaging and labeling practices. Governmental regulations in foreign
jurisdictions are generally similar to, and in certain respects more stringent
than, U.S. regulations. Failure to meet applicable regulations in the U.S. or
foreign markets could lead to costly recalls, loss of certification to sell
product or, even in the absence of governmental action, loss of revenue due to
adverse market reaction to negative publicity. The Company was halted in its
early efforts to build distribution in Japan, when the Japanese Ministry of
Health and Welfare ordered a total recall of all bottled water stocked by
certain competitors. Although the Company's product was not specifically covered
by this order, the Company's then distributor terminated its representation of
the Company due to adverse market conditions and the Company's efforts to
penetrate the Japanese market were impeded for some time. Similar events could
occur again in the future, without notice. The adverse impact on the Company's
marketing efforts in such circumstances could be severe.
NO DIVIDENDS. The Company has never paid any dividends on its Common Stock
and does not currently intend to pay any dividends on its Common Stock in the
foreseeable future. The Company currently intends to retain all of its earnings,
if any, to finance the development and expansion of its business. If the Company
completes an offering of preferred stock as described above, the holders of such
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<PAGE>
preferred stock will have a priority in the payment of dividends. See "Possible
Preferred Stock Offerings" above.
SECURITIES ELIGIBLE FOR FUTURE SALE. The market price of the Company's
Common Stock could be adversely affected by ongoing sales of shares by the
Selling Stockholder and other stockholders of the Company who currently hold
stock which is not freely tradeable. There are currently 1,599,212 shares of
Common Stock held by founding stockholders of the Company which are eligible for
sale without registration pursuant to Rule 144 under the Securities Act ("Rule
144"), subject to the limitations set forth in such Rule. All of these shares
have been subject to restrictions on resale pursuant to lock-up agreements
between the holders and Joseph Stevens & Company, Inc., the managing underwriter
of the Company's initial public offering. Such lock-up agreements terminate on
November 13, 1998, after which date the holders of such shares will be free to
sell them pursuant to Rule 144, subject to the limitations set forth in such
Rule. In addition, the Company has outstanding an aggregate of 422,975 options
to employees, of which 67,192 are currently vested. All of these options are
exercisable at $4.00 per share. The Company has filed a registration statement
on Form S-8 covering these options. The shares underlying these options may be
sold pursuant to such registration statement, subject in certain instances to
lock-up agreements, as described above, expiring on November 13, 1998.
POSSIBLE VOLATILITY OF STOCK PRICES. The trading price of the Common Stock
could be subject to wide fluctuations in response to actual or anticipated
quarterly operating results of the Company, announcements of material
developments by the Company or its competitors and general market conditions,
among other things. The market for small capitalization stocks has generally
experienced extreme volatility in terms of trading price and volume in recent
years. This volatility has often been unrelated to the operating performance of
these companies. The trading prices and volume of the Company's Common Stock
have fluctuated widely over its trading history and especially during the past
several months. Such volatility could continue in the future.
POSSIBLE LIMITATIONS ON CHANGE OF CONTROL. The Company's Articles of
Incorporation contain provisions enabling the Board of Directors to issue
preferred stock in one or more series, with such designations, preferences,
privileges and limitations as the Board of Directors may determine without any
further vote or action by the stockholders. See "Possible Preferred Stock
Offerings" above. In addition, ss.415-172 of the Hawaii Revised Statutes
requires stockholder approval prior to the consummation of a "control share
acquisition" resulting in beneficial ownership by an acquiring person of in
excess of 10% of the voting power of a public corporation incorporated in Hawaii
with at least 100 stockholders and its principal place of business or
substantial assets located in Hawaii. These provisions could reduce the
probability of any change of control or acquisition of the Company without Board
approval. While such provisions are intended to enable the Board of Directors to
maximize stockholder value, they may have the effect of discouraging takeovers
which could be in the best interest of certain stockholders. There is no
assurance that such provisions will not have an adverse effect on the market
value of the Company's stock in the future.
CONTINUED QUOTATION ON NASDAQ; POTENTIAL PENNY STOCK CLASSIFICATION. The
Company's Common Stock is currently quoted on Nasdaq. In order to maintain this
listing, the Company must meet certain maintenance criteria established by
Nasdaq on an ongoing basis. Failure to meet such maintenance criteria could
result in a delisting of the Common Stock by Nasdaq. If the Company were removed
from Nasdaq, trading in the Common Stock would have to be conducted in the
over-the-counter market in the so-called "pink sheets" or, if then available,
Nasdaq's OTC Bulletin Board. As a result, holders of the Common Stock would find
it more difficult to dispose of their shares.
In addition, if the Company were delisted from Nasdaq and the trading price
of the Common Stock were less than $5.00 per share, trading in the Common Stock
would become subject to the requirements of Rule 15g-9 under the Exchange Act.
Under such Rule, broker-dealers who recommend such low priced securities to
persons other than established customers or accredited investors must satisfy
special sales
7
<PAGE>
practice requirements, including the requirement that they make an
individualized written suitability determination for the purchaser and receive
the purchaser's written consent to the transaction. The Securities Enforcement
Remedies and Penny Stock Reform Act of 1990 also requires additional disclosure
in connection with trades involving a stock defined as a penny stock (generally,
any equity security not traded on an exchange or quoted on Nasdaq that has a
market price of less than $5.00 per share, subject to certain exceptions),
including the delivery, prior to any penny stock transaction, of a disclosure
statement explaining the penny stock market and the risks associated therewith.
Such requirements could severely limit the market liquidity of the Common Stock
and the ability of purchasers to sell their shares in the market. There can be
no assurance that the Common Stock will not be delisted by Nasdaq or treated as
a penny stock in the future.
THE ADVISORY AGREEMENT
Effective as of July 31, 1998, the Company entered into an advisory
agreement (the "Advisory Agreement") with 8607 Colonial Group, Inc.
("Colonial"), pursuant to which the Company engaged Colonial as its financial
public relations advisor for a two year term. Pursuant to the Advisory
Agreement, Colonial agreed to act as a liaison between the Company and members
of the securities industry and the financial community including, without
limitation, broker-dealers, industry analysts, institutional investors,
individuals of high net worth and the Internet trading community for the purpose
of increasing the visibility of the Company and its capital stock. As
consideration for such services, the Company issued to Colonial 100,000 shares
of Common Stock (the "Initial Shares") as a non-refundable retainer and also
granted to Colonial options (the "Options") to purchase an aggregate of 565,000
additional shares of Common Stock (the "Option Shares") as follows:
<TABLE>
<CAPTION>
SHARES EXERCISE
PURCHASABLE PRICE/ SHARE INITIAL EXERCISE DATE EXPIRATION DATE
- ----------- ------------- ---------------------- ------------------
<S> <C> <C> <C>
100,000 $ 2.50 September 1, 1998 August 31, 1999
100,000 $ 3.00 October 1, 1998 August 31, 1999
100,000 $ 3.50 November 15, 1998 August 31, 1999
100,000 $ 4.00 January 15, 1999 July 15, 2000
100,000 $ 5.00 March 15, 1999 July 15, 2000
65,000 $ 6.00 May 15, 1999 July 15, 2000
</TABLE>
In addition, if Colonial exercises all of the Options expiring on August 31,
1999, the Company will be obligated to issue to Colonial, for no additional
consideration, 50,000 additional shares of Common Stock (the "Contingent
Shares").
Notwithstanding the exercise period provided above, the Company has the
right, but not the obligation, to redeem any part or all of the Options at a
redemption price of $.05 per Option if and to the extent that the Trading Price
thereof (as defined below) is at least 150% of the Exercise Price thereof for a
period of ten (10) consecutive trading days within a period of fifteen (15)
trading days prior to delivery by the Company to Colonial of a written notice of
redemption (the "Redemption Notice") with respect thereto; provided, however,
that the Company will not be entitled to redeem any Options unless all of the
following conditions are satisfied with respect thereto: (i) the Initial
Exercise Date thereof as provided above has occurred on or prior to the delivery
date of the Redemption Notice; (ii) a registration statement relating to the
Shares is effective as of the delivery date of such Redemption Notice and
remains continuously effective through the date set for redemption (the
"Redemption Date"), which shall be not less than 10 nor more than 20 days
following the delivery date of the Redemption Notice; and (iii) the Common Stock
is quoted on the Nasdaq National Market System or SmallCap Market or is listed
on the New York Stock Exchange or other national or regional stock exchange
(collectively, "Listed") on the delivery date of the Redemption Notice and
remains Listed continuously through the Redemption Date.
8
<PAGE>
Colonial will be entitled to exercise any or all of the Options called for
redemption at any time through the Redemption Date therefor.
For purposes of the foregoing, the term Trading Price with respect to any
given trading day means the greater of (i) the closing sales price, or (ii) the
average of the closing bid and asked prices for the Common Stock on such trading
day as reported on by Nasdaq, or the stock exchange on which the Common Stock is
then Listed.
The Options are non-transferable and are exercisable only for cash. The
Company could receive aggregate proceeds of up to $2,190,000 from the exercise
of the Options. The Options are subject to standard anti-dilution protection in
the event of stock splits, stock dividends and other such events. The Company
has agreed to register the Initial Shares, the Contingent Shares and the Option
Shares under the Securities Act and to bear all of the costs of such
registration, except that the Selling Stockholder will pay all underwriting
discounts and brokerage commissions and will pay its own counsel's fees in the
event that it elects to use counsel separate from the Company's.
The Company believes that the fair market value of the Initial Shares was
approximately $350,000, determined on the date of issuance. The Company believes
that the fair value of the Options was approximately $773,000 determined on the
date of grant, using the Black-Scholes option pricing model with the following
weighted average assumptions: risk-free interest rate of 5.42%; expected
dividend yield of zero; expected life of nine months; and expected volatility of
126%. The aggregate fair market value of the Initial Shares and the Options will
be recorded as a charge to income in the third quarter of 1998. The fair market
value of the Contingent Shares will be recorded as a charge to income upon
issuance.
9
<PAGE>
USE OF PROCEEDS
All of the Shares offered hereby are being offered for the account of the
Selling Stockholder. The Company will not directly receive any proceeds from the
sale of the Shares; however, the Company could receive aggregate proceeds of up
to $2,190,000 from the exercise of the Options, if all of the Options are
exercised. The actual amount received, if any, will equal the number of Options
exercised, multiplied by the exercise price of such Options as shown above. See
"The Advisory Agreement." The Options are exercisable by the Selling Stockholder
in its sole discretion. There can be no assurance that the Selling Stockholder
will exercise any of the Options. The Company will use any proceeds received
from the exercise of the Options for working capital and general corporate
purposes.
THE SELLING STOCKHOLDER
The following table sets forth certain information concerning the Selling
Stockholder and its beneficial ownership of the Shares:
<TABLE>
<CAPTION>
SHARES SHARES
BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OFFERED OWNED AFTER THE
NAME OF SELLING STOCKHOLDER THE OFFERING(1) % OF CLASS(2) HEREBY OFFERING(3)
- ----------------------------------------------- ----------------- ------------- ---------- -----------------
<S> <C> <C> <C> <C>
8607 Colonial Group, Inc.(4)................... 400,000 9.3% 715,000(5) --
</TABLE>
- ------------------------
(1) A person is deemed to be the beneficial owner of securities that can be
acquired within 60 days through the exercise of any option, warrant or
right. The Selling Stockholder currently holds 100,000 Shares plus options
to purchase an aggregate of 565,000 Shares, of which 300,000 are currently
exercisable or exercisable within 60 days. Therefore, the Selling
Stockholder would be deemed the beneficial owner of the Shares underlying
these Options. The Selling Stockholder would be deemed the beneficial owner
of the remaining 265,000 Shares, at such time as the related Options become
exercisable within 60 days. The Selling Stockholder is also entitled to
receive 50,000 Contingent Shares, which may be issued at an indefinite time
in the future upon the ocurrence of certain events. See "The Advisory
Agreement" above.
(2) Shares of Common Stock subject to options, warrants or rights that are
currently exercisable or exercisable within 60 days are deemed outstanding
for purposes of computing the percentage ownership of the person holding
such options, warrants or rights, but are not deemed outstanding for
purposes of computing the percentage ownership of any other person.
(3) Assumes that the Selling Stockholder sells all of the Shares offered hereby.
The Selling Stockholder may elect to sell, from time to time, some, all or
none of the Shares offered hereby, in its sole discretion. The Company is
unable to determine the number of Shares which will be owned by the Selling
Stockholder after completion of this offering.
(4) 8607 Colonial Group, Inc. is a New York corporation, wholly owned by Michael
Gaggi, a New York resident. Mr. Gaggi may be deemed to be the beneficial
owners of the Shares offered hereby.
(5) Includes (i) 100,000 currently outstanding Shares, (ii) an aggregate of
565,000 Shares issuable upon exercise of the Options, and (iii) 50,000
Contingent Shares issuable for no additional consideration in the event that
the Selling Stockholder exercises all of the Options expiring on August 31,
1999. See "The Advisory Agreement" above.
10
<PAGE>
PLAN OF DISTRIBUTION
This Prospectus covers the resale by the Selling Stockholder of up to
715,000 Shares of Common Stock previously issued or issuable in the future upon
or in connection with the exercise of the Options described above. See "The
Advisory Agreement." The Selling Stockholder may elect to exercise some, all or
none of the Options, in its sole discretion. There can be no assurance that the
Selling Stockholder will exercise any of the Options.
The Company is registering the Shares on behalf of the Selling Stockholder.
As used herein, "Selling Stockholder" includes donees and pledgees selling
Shares received from the Selling Stockholder named herein after the date of this
Prospectus. All costs, expenses and fees in connection with the registration of
the Shares offered hereby will be borne by the Company, except for the fees and
expenses of the Selling Stockholder's separate counsel. Brokerage commissions
and similar selling expenses, if any, attributable to the sale of Shares will be
borne by the Selling Stockholder. Sales of Shares may be effected by the Selling
Stockholder from time to time in one or more types of transactions (which may
include block transactions), in the over-the-counter market, in negotiated
transactions, through put or call options transactions relating to the Shares,
through short sales, or a combination of such methods of sale, at market prices
prevailing at the time of sale, or at negotiated prices. Such transactions may
or may not involve brokers or dealers. The Selling Stockholder has advised the
Company that it has not entered into any agreements, understandings or
arrangements with any underwriters or broker-dealers regarding the sale of the
Shares, nor is there an underwriter or coordinating broker acting in connection
with the proposed sale of Shares by the Selling Stockholder.
The Selling Stockholders may effect transactions by selling Shares directly
to purchasers or to or through broker-dealers, which may act as agents or
principals. Such broker-dealers may receive compensation in the form of
discounts, concessions, or commissions from the Selling Stockholder and/or the
purchasers of Shares for whom such broker-dealers may act as agents or to whom
they sell as principal, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions).
The Selling Stockholder and any broker-dealers that participate in the
offering of the Shares may, under certain circumstances, be deemed to be
"underwriters" within the meaning of Section 2(11) of the Securities Act. Any
commissions received by such broker-dealers and any profits realized by them on
the resale of the Shares may be deemed to be underwriting discounts and
commissions under the Securities Act. Because the Selling Stockholder and
participating broker-dealers may be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act, the Selling Stockholder will be
subject to the prospectus delivery requirements of the Securities Act. The
Company has informed the Selling Stockholder that the anti-manipulative
provisions of Regulation M promulgated under the Exchange Act may apply to sales
in the market.
Upon the Company being notified by the Selling Stockholder that any material
arrangement has been entered into with a broker-dealer for the sale of Shares
through a block trade, special offering, exchange distribution or secondary
distribution or a purchase by a broker or dealer, a supplement to this
Prospectus will be filed, if required, pursuant to Rule 424(b) under the
Securities Act, disclosing (i) the names of any such broker-dealer(s), (ii) the
number of Shares involved, (iii) the price at which the Shares are to be sold,
(iv) the commissions paid or discounts or concessions allowed to such
broker-dealer(s), (v) where applicable, that such broker-dealer(s) did not
conduct any investigation to verify the information set forth or incorporated by
reference into this Prospectus, and (vi) other facts material to the
transaction. A Prospectus supplement will also be filed in connection with any
sale of more than 500 Shares by any donee or pledgee of the Selling Stockholder.
The Company has filed with the Commission a registration statement on Form
S-3 under the Securities Act covering the offering of the Shares offered hereby.
Pursuant to the Advisory Agreement, the Company agreed to file the registration
statement and to keep it effective for a period of one year thereafter.
11
<PAGE>
The Selling Stockholder is required to provide the Company and its transfer
agent with a Notice of Transfer, in the form attached hereto as Appendix A, each
time the Selling Stockholder sells Shares using this Prospectus. Delivery of
this notice is a prerequisite to the transfer of Shares pursuant to this
Prospectus.
LEGAL MATTERS
The validity of the securities offered hereby has been passed upon for the
Company by Graham & James LLP, Los Angeles, California.
EXPERTS
The financial statements of the Company for the fiscal year ended December
31, 1997, incorporated by reference in this Prospectus and elsewhere in the
Registration Statement, have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect thereto and are
included herein in reliance upon the authority of such firm as experts in
accounting and auditing in giving such report.
12
<PAGE>
APPENDIX A
NOTICE OF TRANSFER PURSUANT TO REGISTRATION STATEMENT
DATE
Continental Stock Transfer & Trust Company
2 Broadway
New York, New York 10004
Attention: Compliance Department
Re: Hawaiian Natural Water Company, Inc. (the "Company")
Ladies and Gentlemen:
Please be advised that 8607 Colonial Group, Inc. has sold shares
of the Company's common stock pursuant to a Registration Statement on Form S-3
(File No. 333- ). We hereby certify that (1) the above-named beneficial owner
of the transferred shares is named as a "Selling Stockholder" in the related
Prospectus dated , 1998, (2) the transferred Shares are included
in such Prospectus opposite such owner's name and (3) the prospectus delivery
requirements of the Securities Act of 1933, as amended, have been satisfied.
Sincerely,
--------------------------------------
(Name)
By:
--------------------------------------
(Authorized Signature)
Name:
- --------------------------------------------------------------------------------
Title:
--------------------------------------
cc: Hawaiian Natural Water Company, Inc.
248 Mokauea Street
Honolulu, Hawaii 96819
Attn: Secretary
A-1
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO UNDERWRITER, DEALER, SALES REPRESENTATIVE, OR ANY OTHER PERSON HAS BEEN
AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION
WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR THE SELLING STOCKHOLDER. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY BY ANY PERSON IN ANY JURISDICTION WHERE SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Forward Looking Statements................................................ 2
Available Information..................................................... 2
Documents Incorporated by Reference....................................... 2
The Company............................................................... 3
Risk Factors.............................................................. 4
The Advisory Agreement.................................................... 8
Use of Proceeds........................................................... 10
The Selling Stockholder................................................... 10
Plan of Distribution...................................................... 11
Legal Matters............................................................. 12
Experts................................................................... 12
</TABLE>
[LOGO]
HAWAIIAN NATURAL
WATER COMPANY, INC.
715,000 SHARES
COMMON STOCK
NO PAR VALUE
---------------------
PROSPECTUS
---------------------
, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various estimated expenses in connection
with the sale and distribution of the securities registered hereby, other than
sales commissions:
<TABLE>
<S> <C>
Registration Fee................................................... $ 1,193
Legal Fees and Expenses............................................ 8,000*
Accounting Fees and Expenses....................................... 4,000*
Printing and Engraving Expenses.................................... 7,000*
Miscellaneous Expenses............................................. 2,000*
---------
TOTAL............................................................ 22,193*
</TABLE>
All of the foregoing expenses will be borne by the Registrant. The Selling
Stockholder will not bear any of such expenses.
- ------------------------
* Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article IX of the Registrant's Articles of Incorporation provides as
follows:
"Each director or officer of this corporation, and his legal
representatives, shall be indemnified by the corporation against
liabilities, expenses, counsel fees and costs reasonably incurred by him or
his estate in connection with, or arising out of, any action, suit,
proceeding or claim in which he is made a party by reason of his being or
having been such a director or officer; and any person who, at the request
of this corporation, serves as director or officer of another corporation in
which this corporation owned corporate stock, and his legal representative,
shall in like manner be indemnified by this corporation; provided, that in
neither case shall the corporation indemnify such director or officer with
respect to any matter as to which he shall be finally adjudged liable for
negligence or misconduct in the performance of this duty to the corporation
unless and only to the extent that the Court in which such action or suit
was brought shall determine upon application that, despite the adjudication
of liability but in view of all circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which such
Court shall deem proper, and shall further be indemnified as to any
compromise or settlement of any such action, suit or proceeding or claim
asserted against such director or officer (including expenses, counsel fees
and costs reasonably incurred in connection therewith), provided the Board
of Directors shall have first approved such proposed compromise settlement
and determined the officer or director involved was not guilty of negligence
or misconduct; but, in taking such action, any director involved shall not
be qualified to vote thereon, and if for this reason a quorum of the Board
cannot be obtained to vote on such matter, it shall be determined by a
committee of three (3) persons appointed by the shareholders at a duly
called special meeting or a regular meeting. In determining whether or not a
director or officer was guilty of negligence or misconduct in relation to
any such matter, the Board of Directors or committee appointed by the
shareholders, as the case may be, may rely conclusively upon an opinion of
independent counsel selected by such Board or Committee. The right to
indemnification herein provided shall not be exclusive of any other right to
which such director or officer may be lawfully entitled.
The Registrant maintains liability insurance on behalf of its officers and
directors. The Registrant has not entered into any indemnity agreements, and has
no indemnification arrangements, with any of its officers and directors except
as described above.
II-1
<PAGE>
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- --------------------------------------------------------------------------------------------------------
<C> <S>
4.1 Specimen Stock Certificate for the Registrant's Common Stock (Incorporated by reference to Exhibit 4.1
to the Registrant's Quarterly Report on Form 10Q-SB for the quarter ended June 30, 1997)
4.2 Option Agreement between the Registrant and 8607 Colonial Group, Inc.
5.1 Opinion of Graham & James LLP re legality
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Graham & James (included in Exhibit 5.1 hereto)
24.1 Power of Attorney (included on page II-4)
</TABLE>
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made
pursuant to Rule 415 under the Securities Act, a post-effective amendment to
this Registration Statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events arising after the
effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information in this Registration
Statement. Notwithstanding the foregoing, any increase or decrease in the
total dollar value of securities offered, if the total dollar value of
securities offered would not exceed that which was registered and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement;
(iii) Include any additional or changed material information with
respect to the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information in the
Registration Statement.
Provided, however, That paragraphs (a)(1)(i) and (a)(1)(ii) of this
section do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic
reports filed with or furnished to the Commission by the Registrant pursuant
to section 13 or section 15(d) of the Exchange Act that are incorporated by
reference in this Registration Statement.
(2) That, for purposes of determining any liability under the Securities
Act, treat each such post-effective amendment as a new registration statement of
the securities offered, and the offering of such securities at that time as the
initial bona fide offering thereof.
(3) To file a post-effective amendment to remove from registration any of
the securities being registered that remain unsold at the termination of the
offering.
II-2
<PAGE>
Insofar as the indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 15 above, or
otherwise, the Registrant has been advised that in the opinion of the Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form S-3 and authorized this registration
statement to be signed on its behalf by the undersigned in the City of Honolulu,
State of Hawaii on September 17, 1998.
<TABLE>
<S> <C> <C>
HAWAIIAN NATURAL WATER COMPANY, INC.
By: /S/ MARCUS BENDER
------------------------------------------
Marcus Bender
PRESIDENT & CHIEF EXECUTIVE OFFICER
</TABLE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Marcus Bender and David Laeha, and each of them,
his attorneys-in-fact, each with the power of substitution, for him in any and
all capacities, to sign (i) any amendments to this registration statement, (ii)
any other registration statement relating to the offering registered hereby that
is to be effective upon filing pursuant to Rule 462(b) under the Securities Act
of 1933, or (iii) any amendment to such other registration statement, and to
file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact, or his substitute or
substitutes, may do or cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
President and Chief
/S/ MARCUS BENDER Executive Officer and
- ------------------------------ Director (Principal September 17, 1998
Marcus Bender Executive Officer)
/S/ DAVID LAEHA Chief Financial Officer
- ------------------------------ (Principal Financial and September 17, 1998
David Laeha Accounting Officer)
/S/ BRIAN BARBATA
- ------------------------------ Director September 17, 1998
Brian Barbata
/S/ MICHAEL CHAGAMI
- ------------------------------ Director September 17, 1998
Michael Chagami
/S/ KEIJIRO SORIMACHI
- ------------------------------ Director September 17, 1998
Keijiro Sorimachi
II-4
<PAGE>
EXHIBIT 4.2
HAWAIIAN NATURAL WATER COMPANY, INC.
STOCK OPTION AGREEMENT
This Stock Option Agreement (this "Agreement") is made and entered into
as of July 31, 1998 by and between Hawaiian Natural Water Company, Inc., a
Hawaii corporation (the "Company"), and 8607 Colonial Group, Inc., a New York
corporation ("Colonial"), with respect to the following:
WHEREAS, Colonial and the Company have entered into a letter agreement,
dated as of the date hereof (the "Engagement Agreement"), pursuant to which the
Company has agreed to engage Colonial as the Company's financial public
relations advisor for a two year term; and
WHEREAS, as its sole compensation for services to be provided pursuant
to the Engagement Agreement, the Company has agreed to issue to Colonial
100,000 shares (the "Initial Shares") of common stock, no par value (the
"Common Stock"), of the Company and to grant to Colonial certain options to
purchase additional shares of Common Stock, as more fully described herein;
NOW, THEREFORE, in consideration of the premises and the covenants and
conditions contained herein, the parties hereto agree as follows:
1. GRANT OF OPTIONS. The Company hereby grants to Colonial the right
and option, but not the obligation, to purchase an aggregate of Five Hundred
Sixty-Five Thousand (565,000) shares of Common Stock (the "Option Shares"),
subject to adjustment as provided herein, on the terms and conditions set
forth herein (the "Options"). The Options are intended to be non-statutory
options and NOT incentive stock options within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended.
2. VESTING. The Options shall be fully vested on the date hereof.
3. EXERCISE PERIOD; EXERCISE PRICE. The Options may be exercised during
the periods (in each case, the "Exercise Period") and at the exercise prices per
Share (in each case, the "Exercise Price") set forth below. The Exercise Price
shall be subject to adjustment as provided herein.
1
<PAGE>
INITIAL
SHARES EXERCISE PRICE/ EXERCISE EXPIRATION
PURCHASABLE SHARE DATE DATE
100,000 $2.50 9/1/98 8/31/99
100,000 $3.00 10/1/98 8/31/99
100,000 $3.50 11/15/98 8/31/99
100,000 $4.00 1/15/99 7/15/00
100,000 $5.00 3/15/99 7/15/00
65,000 $6.00 5/15/99 7/15/00
The foregoing notwithstanding, in the event that the Registration
Statement (as defined in Section 11 below) has not been declared and remained
continuously effective for a period of at least thirty (30) days prior to
July 15, 1999, the Expiration Date of the Options as shown above shall be
extended until the date which is thirty (30) days following the earlier of
(i) the effective date of the Registration Statement, or (ii) receipt by
Colonial of an opinion of counsel to the Company to the effect that the
Initial Shares may be sold pursuant to Rule 144 under the Securities Act of
1933, as amended (the "Securities Act"), subject to the volume limitations,
manner of sale and Form 144 filing requirements set forth therein.
4. OPTIONAL REDEMPTION. Notwithstanding the Exercise Period provided
in Section 3 above, the Company shall have the right, but not the obligation,
to redeem any part or all of the Options at a redemption price of $.05 per
Option if and to the extent that the Trading Price thereof (as hereinafter
defined) is at least 150% of the Exercise Price thereof for a period of ten
(10) consecutive trading days within a period of fifteen (15) trading days
prior to delivery by the Company to Colonial of a written notice of
redemption (the "Redemption Notice") with respect thereto; provided, however,
that the Company shall not be entitled to redeem any Options unless all of
the following conditions are satisfied with respect thereto: (i) the Initial
Exercise Date thereof as provided in Section 3 above has occurred on or prior
to the delivery date of the Redemption Notice therefor; (ii) the
Registration Statement is effective as of the delivery date of such
Redemption Notice and remains continuously effective through the date set for
redemption (the "Redemption Date"); and (iii) the Common Stock is quoted on
the Nasdaq National Market System or SmallCap Market or is listed on the New
York Stock Exchange or other national or regional stock exchange
(collectively, "Listed") on
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the delivery date of the Redemption Notice and remains Listed continuously
through the Redemption Date . The Redemption Notice shall state (i) the
number of Options to be redeemed, (ii) the Exercise Price(s) thereof, (iii)
the Trading Price of the Common Stock during the applicable ten (10) day
trading period, and (iv) the applicable Redemption Date therefor, which shall
be not less than ten (10) nor more than twenty (20) days following the
delivery date of the Redemption Notice. Colonial shall be entitled to
exercise any or all of the Options called for redemption at any time through
the Redemption Date therefor. Thereafter, Colonial's right to exercise such
Options shall cease and its sole right with respect thereto shall be to
receive payment of the Redemption Price therefor.
As used herein, the term Trading Price with respect to any given trading
day means the greater of (i) the closing sales price, or (ii) the average of
the closing bid and asked prices for the Common Stock on such trading day as
reported on by Nasdaq, or the stock exchange on which the Common Stock is
then Listed.
5. MANNER OF EXERCISE. The Options may be exercised in lots of 100
Option Shares or multiples thereof during the Exercise Period as provided
above, by written notice delivered to the Board. Such notice shall state the
number of Option Shares with respect to which Options are being exercised and
shall be accompanied by payment of the purchase price in full in cash. As
soon as practicable after any such exercise of Options, the Company shall
issue and register in the name of and deliver to Colonial a certificate or
certificates for the Option Shares issuable upon such exercise.
6. ADJUSTMENT PROVISIONS. If, at any time or from time to time during
the Exercise Period, any of the following events shall occur, the Exercise
Price and the number of and kind of Option Shares then subject to the Options
shall in each instance be adjusted as follows:
a. STOCK DIVIDENDS, SPLIT-UPS
AND COMBINATIONS
If a change is effected in the number of outstanding shares of Common
Stock by a stock dividend in Common Stock or by a subdivision or combination
of such shares, the Exercise Price shall be proportionately reduced or
increased, as the case may be, so that it will bear the same ratio to the
Exercise Price in effect immediately before such change as the number of
shares outstanding immediately before such change bears to the number
outstanding immediately thereafter.
Upon any adjustment of the Exercise Price as provided above, the number
of Option Shares subject to the Options shall be increased or decreased, as
appropriate, so that it will bear the same ratio to the number of Option
Shares subject to the Options immediately before such change as the number of
shares outstanding immediately after such change bears to the number of
outstanding immediately prior thereto.
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b. OTHER CHANGES IN CAPITAL STRUCTURE
In the case of any reclassification or other change in the outstanding
Common Stock not covered by the foregoing provisions, other than a change in
par value, or from par value to no par value, or from no par value to par
value, or in the case of any consolidation or merger of the Company with or
into another corporation (other than a merger in which the Company is the
continuing corporation and which does not result in any reclassification or
change of outstanding shares of the Company), or in the case of any sale or
conveyance to another corporation of the property of the Company as an
entirety, or substantially as an entirety, Colonial shall have the right,
upon exercise of the Options, to receive solely a like amount and kind of
shares of stock and other securities and property receivable upon such
reclassification, change, consolidation, merger, sale or conveyance as
Colonial would have been entitled to receive if the Options, to the extent
not previously exercised, had been exercised in full immediately prior to
such reclassification, change, consolidation, merger, sale or conveyance.
c. NOTICE OF ADJUSTMENT
Upon any adjustment of the Exercise Price and change in the number of
Option Shares or other securities purchasable hereunder, the Company shall
give written notice thereof to Colonial, stating the new price and the
increased or decreased number of Option Shares or other securities
purchasable upon exercise of the Options and setting forth in reasonable
detail the method of calculation and the pertinent facts upon which such
calculation is based.
7. NON-TRANSFERABILITY OF OPTIONS. The Options may be exercised only by
Colonial and may not be transferred in any manner, except with the prior written
consent of the Company.
8. REPRESENTATIONS OF COLONIAL. Colonial acknowledges that it has been
informed that the Option Shares subject to the Options, if and when issued, will
not be registered under the Securities Act. Colonial understands that the
Company is granting the Options in reliance upon exemptions contained in the
Securities Act and the General Rules and Regulations under the Securities Act as
promulgated and from time to time amended by the Securities and Exchange
Commission (the "SEC") on the grounds that, subject to Section 11 hereof, the
grant of the Options and the issuance and sale of the Option Shares subject
thereto are transactions not involving any public offering and that,
consequently, such transactions are exempt from registration under the
Securities Act by virtue of the provisions of Section 4(2) thereof. Colonial
acknowledges that reliance upon this exemption is predicated in part upon its
representation that it has no intention of dividing its participation or any
interest in the Options and the Option Shares with others or otherwise
distributing all or any part thereof but that any Option Shares acquired by it
upon exercise of the Options will be acquired for its own account and for
investment only, subject to Section 11 below. In
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addition, Colonial specifically authorizes the Company to place an
appropriate legend on the Option Shares in the form set forth in Section 10
below.
9. REPRESENTATION OF THE COMPANY. The Company represents and warrants
that the Option Shares issuable upon any exercise of the Options, when
purchased and paid for as herein provided, will be validly issued, fully paid
and non-assessable.
10. LEGEND. The certificates representing the Option Shares issued
upon any exercise of the Options granted hereby shall bear the following
legend:
THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED,
PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER
THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS,
OR UNLESS, IN THE OPINION OF COUNSEL SATISFACTORY TO THE
ISSUER, IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER,
SUCH OFFER, SALE, TRANSFER, PLEDGE OR HYPOTHECATION IS
EXEMPT FROM REGISTRATION OR IS OTHERWISE IN COMPLIANCE WITH
THE SECURITIES ACT AND SUCH LAWS.
11. REGISTRATION RIGHTS. On or prior to August 31, 1998 (the "Filing
Date"), the Company shall prepare and file with the SEC a registration
statement (the "Registration Statement") on Form S-3 or such other applicable
form as the Company may determine covering the Initial Shares and the Option
Shares (collectively, the "Shares") and permitting the Shares to be offered
and resold on a continuous basis pursuant to Rule 415 (or any similar rule)
under the Securities Act. The Company shall use its reasonable best efforts
to cause the Registration Statement to become effective as soon as
practicable, and in any event not more than sixty (60) days, following the
Filing Date and to remain effective for a period of twelve (12) months or, if
earlier, until all the Shares have been sold. The foregoing notwithstanding,
the Company may, one time during such period for up to a maximum of ninety
(90) days, suspend the effectiveness of the Registration Statement, if the
Company shall determine, upon advice of counsel, that it would be required to
disclose any significant corporate development, which disclosure would have a
material adverse effect on the Company, by giving notice to Colonial in
accordance with Section 12 below; provided, however, that the period of time
that the Registration Statement is required to kept effective as provided
above shall be increased by the number of days in such suspension period.
The Company shall pay all expenses of registering the Shares pursuant to this
Section 11, except that Colonial shall pay any underwriting discounts or
commissions attributable to the sale of
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Shares and shall pay its own counsel's fees should it elect to use counsel
separate from the Company's.
12. Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be personally delivered, transmitted
by facsimile, telex or cable, or transmitted by postage prepaid, registered
or certified mail with return receipt requested, or by FedEx or other similar
overnight delivery service, addressed as follows:
If to Colonial, to it at:
601 Stage Road
Monroe, New York 10950
Attn: Michael Gaggi
Fax:
With a copy to:
Vincent McGill, Esq.
Phillips Nizer Benjamin Krim & Ballon LLP
666 Fifth Avenue
New York, New York 10103-0084
Fax: (212) 262-5152
If to the Company, to it at:
248 Mokauea Street
Honolulu, Hawaii 96819
Fax: (808) 832-4559
Attn: Marcus Bender, President
With a copy to:
Richard P. Manson, Esq.
Graham & James LLP
801 S. Figueroa Street, Los Angeles, CA 90017
Fax: (213) 623-4581
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Notices shall be deemed to have been given: (i) on the fifth business
day after posting, if mailed first class, (ii) on the date of receipt if
delivered personally, or (iii) on the next business day after transmission if
transmitted by facsimile, telex or cable (and appropriate answerbacks have
been received) or overnight delivery service. Either party hereto may change
its address for purposes hereof by notice to the other party in accordance
with this Section 12.
13. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Hawaii.
IN WITNESS WHEREOF, the parties have executed this Stock Option Agreement
as of the date first above written.
HAWAIIAN NATURAL WATER COMPANY, INC.
(the "Company")
By: _______________________________
Marcus Bender, President
8607 COLONIAL GROUP, INC.
___________________________________
By: Michael Gaggi, President
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EXHIBIT 5.1
[Letterhead of Graham & James LLP]
September 18, 1998
Hawaiian Natural Water Company, Inc.
248 Mokauea Street
Honolulu, Hawaii 96819
Gentlemen:
We have acted as special counsel to Hawaiian Natural Water Company,
Inc., a Hawaii corporation (the "Company"), in connection with the
preparation of a registration statement (the "Registration Statement") on
Form S-3 relating to the resale by the selling stockholder named therein (the
"Selling Stockholder"), of an aggregate of up to 715,000 shares of Common
Stock, no par value, of the Company (collectively, the "Shares"), including
(i) 100,000 Shares currently outstanding (the "Initial Shares"), (ii) an
aggregate of 565,000 Shares issuable upon the exercise of options (the
"Options") granted to the Selling Stockholder (the "Option Shares"), and
(iii) 50,000 Shares contingently issuable to the Selling Stockholder in
connection with the exercise of certain Options (the "Contingent Shares").
In connection with the opinion expressed herein, we have examined, among
other things, certified copies of the Company's Articles of Incorporation and
By-Laws, as amended to date, as well as records of corporate proceedings and
other actions taken by the Company in connection with the issuance and sale
of the Shares and the Options. We have also examined the form of Option
Agreement between the Company and the Selling Stockholder (the "Option
Agreement"), pursuant to which the Options were granted.
Based upon our examination of the foregoing, and such other matters of
fact or law as we have deemed necessary for purposes hereof, it is our
opinion that:
<PAGE>
Hawaiian Natural Water Company, Inc.
March 6, 1997
Page 2
1. The Initial Shares have been duly authorized and are validly
issued, fully paid and non-assessable.
2. When issued and paid for upon exercise of the Options in accordance
with the terms and conditions of the Option Agreement, the Option Shares and
the Contingent Shares will be validly issued, fully paid and non-assessable.
We hereby consent to the reference to our firm in the prospectus
contained in the Registration Statement under the heading "Legal Matters"
and to the use of this opinion as an exhibit to the Registration Statement.
Very truly yours,
GRAHAM & JAMES LLP
By: /s/ Richard P. Manson
---------------------
Richard P. Manson,
Of Counsel
<PAGE>
EXHIBIT 23.1
[Arthur Andersen LLP letterhead]
As independent accountants, we hereby consent to the incorporation by
reference into this registration statement of our report dated March 20,
1998, included in the Annual Report on Form 10K-SB of Hawaiian Natural Water
Company, Inc. for the year ended December 31, 1997, and to all references to
our Firm included in this registration statement.
