SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
General Form for Registration of Securities of
Small Business Issuers
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
HYATON ORGANICS INC.
(Exact name of Small Business Issuer in its charter)
Nevada 86-0913555
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
755 Burrard Street
Suite 440
Vancouver, British Columbia, Canada V6Z IX6
(Address of principal executive offices)
Issuer's telephone number: (604) 602-1981
--------------------------
Securities to be registered under Section 12(b) of the Act:
None
Securities to be registered under Section 12(g) of the Act:
Common Stock
<PAGE>2
With the exception of historical facts stated herein, the following
discussion may contain forward-looking statements regarding events and financial
trends which may affect the Company's future operating results and financial
position. Such statements are subject to risks and uncertainties that could
cause the Company's actual results and financial position to differ materially
from those anticipated in such forward-looking statements. Factors that could
cause actual results to differ materially include, in addition to other factors
identified in this report, the Company's operating losses, its need for
additional capital, its ability to commercially develop its proposed products,
and dependence on key personnel, all of which factors are set forth in more
detail in the sections entitled "Certain Considerations" and "Management's
Discussion and Analysis or Plan of Operation" herein. Readers of this report are
cautioned not to put undue reliance on "forward looking" statements which are,
by their nature, uncertain as reliable indicators of future performance. The
Company disclaims any intent or obligation to publicly update these "forward
looking" statements, whether as a result of new information, future events, or
otherwise.
In this statement, all dollar amounts are expressed in United States
dollars unless otherwise stated.
PART I.
Item 1. Description of Business
BUSINESS DEVELOPMENT
Historical Information
Hyaton Organics Inc. ("Hyaton" or the "Company") was incorporated in
Nevada on August 20, 1996, under the name Hayoton Company Incorporated as a
management company for resorts and hotel properties. In September 24, 1996, the
Company changed its name from Hayoton Company Incorporated to Hyaton Company
Incorporated and then to Hyaton Organics Inc. on October 21, 1999. The Company
was dormant until June of 1997 when the Board reevaluated its business plan and
decided to focus the Company's business on commodity production and/or purchase
and resale of same through strategic alliances with leading environmental
corporations.
As part of the Company's new business plan, on November 2, 1998, the
Company entered into a Plan and Agreement of Reorganization ("Reorganization
Agreement") with Kafus Industries Ltd. ("Kafus"), a British Columbia
corporation. Under the Reorganization Agreement, the Company issued to Kafus
20,000,000 shares of its Common Stock in exchange for all of the Common Shares
of Camden Agro-Systems Inc. ("Camden"), an Ontario corporation, owned by Kafus.
Prior to the reorganization, Kafus owned 9,000 common shares of Camden,
constituting 90% of Camden's outstanding common shares. As a result of the
reorganization, Kafus owns approximately 72.6% of the Company's outstanding
shares of Common Stock and the Company's primary business interest is Camden.
Unless otherwise indicated, reference to "Hyaton" or the "Company" shall mean
Hyaton Organics Inc. and its wholly-owned subsidiary, Camden Agro-Systems Inc.
Further, as part of the Reorganization Agreement, the Company is
required to issue one additional common share to Kafus for each $.20 of
aggregate earnings before interest, taxes, depreciation and amortization of
Camden accumulated during the period beginning on the closing date of the
<PAGE>3
reorganization and ending upon the earlier of: (a) two years from November 2,
1998, or (b) eighteen months from the commencement of commercial operations by a
Camden plant.
Camden Agro-Systems Inc.
The Company's primary asset is its interest in Camden, and all of the
Company's operations are conducted by Camden. Camden is a development stage
company that intends to develop turnkey facilities capable of producing
organic-based fertilizers from animal residues such as hog and poultry manure.
Prior to January 1999, Camden also was planning the development of facilities
for the production of animal feed from food waste.
Camden Agro-Systems Inc. was incorporated under the Ontario Business
Corporation Act (1982) on November 24, 1994 for the purpose of business
management, consulting and product development. For at least the past three
years, Camden has primarily focused its business on the development of
converting organic waste into animal feed and animal residues into organic
fertilizer. Camden believes that there are environmental pollution concerns from
animal residues. Many governmental authorities are invoking stringent
environmental laws and regulations regarding pollution, contamination and the
accumulation and disposal of waste products such as animal residues. Camden
believes that it is developing a waste management process by reducing pollution
in ground and surface waters and by providing a valuable source of nutrients and
organic material for plant production.
Since February 1998, Camden had been operating a pilot program for an
organic waste processing facility at Bartow, Florida ("Bartow Plant"). At the
Bartow Plant, Camden processed organic waste supplied by dairy, bakery and ice
cream makers into animal feed supplements. During the pilot program, Camden
entered into an exclusive marketing distribution agreement with Miracle Feeds of
Canada, Ltd., whereby Miracle Feeds of Canada agreed, subject to certain
conditions, to purchase all of Camden's animal feed supplement produced by
Camden at its Bartow Plant. In light of the agreement with Miracle Feeds of
Canada, Camden began to upgrade its Bartow Plant to full commercial production.
At full production, the Bartow Plant would have been capable of producing
approximately 22,000 short tons of animal feed per year. In addition, Camden was
negotiating a product buy-out agreement with an animal feed supplier, and was in
the planning stages for an animal feed plant in Lakeland, Florida.
In January 1999, Camden decided to discontinued its animal feed from
food waste program and to concentrate its energy and resources on its organic
fertilizer products. Camden believed that in light of its limited capital and
resources, the animal feed market was smaller than the organic fertilizer market
and that such market provided Camden a better and faster opportunity to earn
revenues. Further, because Camden's proposed animal feed processing may be
subject to duplication by competitors, this could have the effect of increasing
Camden's competitors. As a result of this decision, Camden allowed its lease at
the Bartow Plant to expire, and ceased all animal feed research and development
including its operations at the Bartow Plant and proposed construction project
in Lakeland, Florida. Notwithstanding its current decision, the Company may, in
the future, resume the development of animal feed from organic waste.
Organic Fertilizer Products
Since the redirection of Camden's business in January 1999, Camden has
focused on developing organic fertilizer products from animal residues. Camden
believes that the organic fertilizer market provides great potential for the
sale of Camden's organic fertilizers, and justified the continued research and
development of proprietary organic fertilizers. Since 1996, Camden has been
collaborating with
<PAGE>4
experts in crop science, animal sciences, agronomy, fertilizers, and equipment
manufacturers to research and test its organic fertilizer process and proposed
products in Canada, the United States and abroad.
In 1998, Camden narrowed its organic fertilizer research by selecting
organic waste materials, such as animal residues that have been aerobically
processed under specific, optimally controlled conditions. The resulting
materials have then been used to manufacture three new products. These products
were initially marketed under the brand VERDANT ORGANIC. However in 1999, Camden
applied for TRULY ORGANIC(TM) as its trademark in the United States. This
application is currently pending. These proposed products are as follows:
- Pure Organic Fertilizer Blends, to be marketed as TRULY
ORGANIC(TM) MTO series, are a basic product from which all other
Camden fertilizer formulas will be based upon. They are designed
to supply nitrogen (N), phosphorus (P), and potash (K) to plants
as required on a bio-modulated release basis. The composition of
the Pure Organic Fertilizer Blends is designed to restore and
maintain soil organic matter quality and quantity, to improve
soil aggregation and porosity to increase water infiltration and
retention, to enhance gas and cation exchange, to improve root
growth, and to reduce water and wind erosion;
- Enhanced Organic Fertilizer Blends, to be marketed as TRULY
ORGANIC(TM) MTE series, are organic in origin, then enhanced with
chemical nutrients. The chemical nutrients are added to the
organic blend to meet individual crop requirements such as
radishes, lettuce, and tomatoes; and
- Growing Media, to be marketed as TRULY ORGANIC(TM) GROWING MEDIA,
is a new proposed product line that can be used as a substrate
for the cultivation of greenhouse plants, a potting soil or a
soil supplement to home gardens. This product line is
manufactured from organic raw materials which contain sufficient
naturally-occurring quantities of nitrogen, phosphorus, potash
and other essential elements for commercial plant growth.
Camden plans to market Camden's organic fertilizer products by engaging
compatible corporate partners to market and distribute its organic fertilizer
products as well as large volume end users and home and garden
distributors/retailers. For example, Camden is seeking a company for an
exclusive buy-out of all Camden's organic fertilizer products.
As part of its business redirection, Camden is proposing to develop a 52
acre organic fertilizer facility located in North Carolina. Camden proposes to
convert organic fertilizer from animal residues acquired from local farmers.
Camden intends to use its process originally developed at the Bartow Plant as a
template for creating similar organic fertilizer facilities utilizing their
modular design and manufacturing process. Camden has filed a patent application
in the United States for this process. See "Camden Agro-Systems Inc. - Patents
and Trademarks."
The Camden Agro-System Process
The Camden process is a procedure in which animal residues such as
poultry and hog manure is treated and recycled into organic fertilizers. The
principal steps are (a) receipt and mixing of the organic
<PAGE>5
waste materials, (b) aerobic processing (which is similar to composting), (c)
mixing the composting material with plant nutrients, and (d) post aerobic
processing and packaging.
Camden intends to exploit its process by establishing organic fertilizer
manufacturing facilities internationally. In order to meet this objective,
Camden believes that it must:
- Enter into long-term, supply agreements from organic waste
generators such as farmers in the case of animal waste;
- Use its proprietary manufacturing process; and
- Enter into long-term marketing and product buy-out agreements
from reputable companies.
Camden believes that its proposed organic fertilizer manufacturing
facilities can be developed worldwide. In determining an area that may be
conducive to one of Camden's facilities, Camden considers the following:
- Identification of those areas that have documented organic waste
management problems, and can generate sufficient volumes of
animal residues to sustain an organic fertilizer operation;
- Active industry associations that are willing to work with Camden
in identifying solutions for organic waste such as animal
residues; and
- Active local and state governments that are willing to work with
Camden in identifying solutions for organic waste such as animal
residues.
In applying the above criteria, Camden has selected North Carolina as
its first proposed organic fertilizer processing plant. During the evaluation
process, Camden noted that the state of North Carolina had a large number of
both poultry and hog producers, had active state and national associations for
poultry and hog producers, provides incentives to poultry producers to remove
animal residues through a secondary process or where land application is
avoided, and had a mild climate that allowed year-round plant operations and
allowed animal residue transportation without damage due to weather, such as
freezing.
On May 19, 1999, Camden entered into a letter of intent to acquire
approximately 52 acres in Merry Hill, North Carolina. The property is currently
permitted as a composting facility and Camden intends to retrofit it to convert
animal residues into organic fertilizer products. The proposed purchase price is
approximately $750,000 to be paid in part by cash and the assumption of certain
debt. The letter of intent expired on October 15, 1999. However, Camden and the
owner are still in discussion regarding the acquisition. The acquisition of the
property is subject to Camden, through the Company, raising sufficient funds to
pay for the property and no assurance can be given that Camden will be able to
complete the acquisition.
<PAGE>6
Research and Development
Camden has conducted its research and development in conjunction with
universities and governmental agencies. In 1996, Camden conducted two livestock
feeding and fertilizer trials at Kansas State University, Kansas. During the
process, several short tons of organic waste were processed into two livestock
feed supplements and one organic-based fertilizer. The livestock feeding trial
conducted by Kansas State University involved 70 heads of cattle, and the
fertilizer trial consisted of comparing grain sorghum yields in a series of
replicated field plots. The trials indicated that animal residues can be used as
a supplement to livestock feed and that animal residues used in organic-based
fertilizers could exceed commercial fertilizers in yield/acre.
More recently, between September 1998 and February 1999, Camden, in
cooperation with the Eastern Cereal & Oilseed Research Centre, a Division of
Agriculture and Agri-food Canada, Ottawa, Ontario, conducted a joint research
project that assessed the physical, chemical and agronomic characteristics of
Camden's organic fertilizer blends and growing media, TRULY ORGANIC(TM) MTO,
TRULY ORGANIC(TM) MTE, and TRULY ORGANIC(TM) GROWING MEDIA, compared to
traditional growing media and chemical fertilizers. Tests were conducted on
three major types of crops: a leafy crop (lettuce); a root crop (radish); and a
fruit crop (tomato). Results of the trials indicate the performance of Camden's
organic fertilizer blends met or exceeded that of other chemical fertilizers.
Agriculture and Agri-food Canada is a Canadian governmental agency that
promotes the development, adaptation and competitiveness of the agriculture and
agri-food sector through policies and programs that are most appropriately
provided by the Canadian federal government. The overall goal is to help the
sector maximize its contribution to Canada's economic and environmental
objectives and achieve a safe, high quality food supply while maintaining a
foundation for agriculture. Since 1997, Camden has expended approximately
$193,000 for research and development of its organic products, and Camden has
committed an additional Cdn $60,000 for comparative testing and further
development of its organic fertilizer blends at Agriculture and Agri-food
Canada.
The development of Camden's organic fertilizers blends and growing media
is in their initial stages. No assurance can be given that Camden will be able
to produce the same test results under commercial production conditions.
Sources and Availability of Raw Materials
Camden's main source of raw materials for its organic fertilizer
products will be animal residues initially consisting of poultry manure and hog
manure. Camden believes that there is a great supply of these ingredients.
Camden intends to enter into by-products supply agreements with initially
poultry and hog farmers located in North Carolina. Under the by-products supply
agreement, the farmers will supply Camden with animal residues meeting certain
specifications. Camden will pay the farmer for the animal residues with the
right to receive any state incentives for the disposal of the animal residues.
Due to the increase in organic waste material, some states such as North
Carolina provide incentives and/or subsidies to companies that recycle organic
waste.
Customers
At this time, because Camden is in the development stage it has no
customers.
<PAGE>7
Competition
Camden is directly and indirectly in competition with other fertilizer
businesses, including other organic recycling facilities. Further, many of
Camden's competitors have greater production capacity and greater financial
resources and, therefore, may be better able to compete in the domestic and
international market. Competing technology may also be developed by the other
companies in the industry. Further, many of Camden's competitors may take action
such as price reductions to keep their markets and hinder Camden's ability to
sell its products. There can be no assurance that Camden will be able to develop
a competitive position in the fertilizer industry.
Patents and Trademarks
In the course of Camden's ongoing organic fertilizer research, it has
developed various technological innovations in the areas of manufacturing
process as well as products. At June 24, 1999, the Minister of Agriculture and
Agri-food Canada on behalf of Camden applied for patents in the United States
for its three product lines: Pure Organic Fertilizer Blends, Enhanced Organic
Fertilizer Blends, and Growing Media. Collectively, the applications include
composition claims for its organic fertilizers and manufacturing processes. In
conjunction with the evaluation of Camden's organic products, the patents were
transferred to Camden. These patent applications are currently pending.
No assurance can be given that Camden's manufacturing process will be
granted a patent, or if granted, that it will afford protection against a
competitor. Further, any patent issued to Camden could be challenged,
invalidated or circumvented by others. Further, since patent applications in the
United States are maintained in secrecy until the patent is issued, Camden
cannot be certain that others have not filed patent applications directed toward
inventions covered by its pending patent applications or that it was the first
to file patent applications on such inventions. There can also be no assurance
that any application of Camden's technologies will not infringe patents or
proprietary rights of others or that licenses that might be required for
Camden's processes or products would be available on reasonable terms. The
extent to which Camden may be required to obtain licenses from others, the cost
and the availability of such licenses are unknown.
Camden also makes use of its trade secrets or "know-how" developed in
the course of its research and development in the area of manufacturing process.
To the extent that Camden relies upon trade secrets, unpatented know-how and the
development of improvements in establishing and maintaining a competitive
advantage in the market for Camden's products, there can be no assurances that
such proprietary technology will remain a trade secret or that others will not
develop substantially equivalent or superior technology to compete with Camden's
products.
Camden has filed a trademark for "TRULY ORGANIC" in the United States.
The trademark is currently pending.
If Camden becomes involved in litigation regarding its intellectual
property, it could consume a substantial portion of Camden's resources. Camden
may lack the financial resources to defend its intellectual property claims or
to prosecute infringements by others.
<PAGE>8
Environmental Regulations
The location, construction, and operation of organic fertilizer
facilities are regulated by state and federal environmental laws. Obtaining
local approvals and state air, water and operating permits is a detail and
complex process. This may especially be true where the proposed facility is to
be located in or near urban areas. Requisite approvals to be obtained in most
jurisdictions include Local Planning Board, Zoning Boards, Solid Waste and Water
Disposal Boards, Composting Operation Permits, Air Permits and Building Permits.
Employees. As of September 30, 1999, the Company, and its subsidiary, had a
total of eight employees.
CERTAIN CONSIDERATIONS
In addition to the other information presented herein, the following
should be considered carefully in evaluating the Company and its business. This
information contains forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ materially from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed below and
elsewhere herein.
Lack of Profits and Going Concern Opinion. For the years ended September
30, 1997 and 1998, and for the period from October 31, 1998 to December 31,
1998, the Company incurred net losses of $22,059, $268,548, and $126,131,
respectively. For the six months ended June 30, 1999, the Company incurred a
loss of $216,237. As a result of these losses and negative cash flows from
operations, the Company's auditors' report on the Company's consolidated
financial statements include an additional paragraph which refers to
uncertainties as to the Company's ability to continue to operate as a going
concern.
Development Stage Company. Hyaton is in its development stage and, at
this time, is in the research and development stage. The Company has no
commercial products. Although under test conditions, the Company's proposed
organic fertilizers performed as well, if not better, than traditional chemical
fertilizers, no assurance can be given that the Company will be able to achieve
the same results under commercial conditions. Further, Hyaton will face the same
challenges experienced by other development stage companies, including, but not
limited to, developing market acceptance for its proposed products.
Need for Additional Capital. The Company believes that it will need
additional working capital to finance and develop organic fertilizer facilities
and for its operations in 1999 and 2000. No assurance can be given that the
Company will be successful in raising capital for its projects or, if raised,
that it will be on terms favorable to the Company. In the event the Company is
required to raise additional capital through private placement of its equity
securities, such placement of equity securities will have the effect of diluting
existing shareholders' ownership interest in the Company. If the Company is
unable to raise sufficient funds to finance these projects, the Company may not
be able to complete its projects which will have an adverse effect on the
Company's business objectives.
Dependence on Key Personnel. The Company is dependent on Mr. Robert
Novitsky, President, for his expertise. The loss of Mr. Novitsky could have a
material adverse effect upon the Company.
<PAGE>9
Concentration of Stock Ownership. As of September 30, 1999, Kafus owned
20,000,000 shares of Common Stock of the Company constituting approximately
72.6% of the outstanding shares. As a result of its ownership, Kafus will have
substantial control over corporate matters without seeking other shareholder
approval, including the election of directors and approval of significant
corporate transactions. Further, such concentration of ownership may also have
the effect of delaying or preventing a change in control of the Company.
Authorization of Preferred Stock; Possible Anti-Takeover Effects. The
Board of Directors is authorized to issue Preferred Stock and to determine the
dividend, liquidation, conversion, redemption and other rights, preferences, and
limitations of such shares without further vote or action of the stockholders.
Accordingly, the Board of Directors is empowered, without shareholder approval,
to issue Preference Stock with dividend, liquidation, conversion, or other
rights which could adversely affect the voting power or the rights of the
holders of the Common Stock. In the event of such issuance, the Preferred Stock
could be utilized, under certain circumstances, as a method of discouraging and
delaying or preventing a change in control of the Company.
No Dividends. The Company has not paid cash dividends on its Common
Stock since its inception and does not anticipate any cash dividends on the
Common Stock in the foreseeable future. For the foreseeable future, the Company
intends to reinvest the earnings of the Company, if any, in the development and
expansion of its business.
Item 2. Management's Discussion and Analysis or Plan of Operation
General
The following discusses the Company's financial condition and results of
operations based upon the Company's consolidated financial statements which have
been prepared in accordance with generally accepted accounting principles.
The Company was formed on August 20, 1996, to evaluate businesses for
possible acquisition. Effective November 2, 1998, the Company completed a
reorganization with Kafus whereby the Company issued 20,000,000 shares of its
Common Stock in exchange for Kafus' 9,000 common shares of Camden. Through
Camden, the Company is in the business of management consulting and product
development, and the Company's efforts have focused primarily on the development
of organic fertilizers from animal waste.
The following information discusses the Company's results of operations
for the years ended September 30, 1997 and 1998, three months ended December 31,
1998, and for the six months ended June 30, 1999. Because the Company is in the
development stage, the following financial information may not be indicative of
the Company's operations in the future.
Results of Operations
For the six months ended June 30, 1999.
Revenues. For the six months ended June 30, 1999, the Company's cost of
goods sold exceeded gross revenues by $1,702.
<PAGE>10
Expenses. Total expenses for the six months ended June 30, 1999, were
$214,535. Most of the expenses consisted of consulting and professional fees
related to the development of the Company's organic fertilizers.
Net Loss. The Company incurred a net loss of $216,237 for the six months
ended June 30, 1999, primarily related to the lack of revenues.
For the three months ended December 31, 1998.
Revenues. Revenues for the three months ended December 31, 1998, were
$36,465. Revenues were primarily derived from contract services regarding
environmental studies.
Expenses. Total expenses for the three months ended December 31, 1998, were
$162,596, consisting primarily of consulting and other professional fees,
product development and research costs and administrative and other expenses.
Consulting fees related to engineer and administrative services provided to the
Company. Product development and research costs relate primarily to the
development of organic animal feed from organic waste and organic fertilizers
from animal residues, patent applications for organic fertilizers and project
costs for consulting services rendered. As previously discussed, during the
beginning of 1999, the Company began to concentrate its efforts toward the
development of organic fertilizers from animal residues.
Net Loss. The Company had a net loss of $126,131 for the three months ended
December 31, 1998.
Year ended September 30, 1998 compared to Year ended September 30, 1997.
Revenues. Revenues for the year ended September 30, 1998, were $2,805
compare to no revenues for the year ended September 30, 1997. Revenues were
primarily derived from contract services regarding environmental studies.
Expenses. Total expenses for the year ended September 30, 1998, were
$271,353 compared to total expenses of $22,059 for the year ended September 30,
1997. During the year ended September 30, 1998, expenses increased substantially
in consulting and other professional fees, product development and research
costs and administrative and other expenses. Consulting fees related to engineer
and administrative services provided to the Company. Product development and
research costs relate primarily to the development of organic animal feed and
fertilizers from animal residues.
Net Loss. For the year ended September 30, 1998, the Company had a loss of
$268,548 compared to a loss of $22,059 for the year ended September 30, 1997.
The substantial loss incurred during the year ended September 30, 1998, can be
attributed to the increase in total expenses related to the development of the
Company's proposed products.
Liquidity and Capital Resources
The Company is a development stage company that intends to develop and
market fertilizer derived from animal residues. At this time, the Company has no
substantial revenues, and does not anticipate any substantial revenues until it
is able to develop and sell its products. Previously, the Company has received
<PAGE>11
loans to fund its operations and provide working capital. It is anticipated that
the Company will continue to finance its operations through loans and equity and
debt financings. As of December 31, 1998 and June 30, 1999, the Company's
working capital deficit was $400,782 and $642,916.
Impact of the Year 2000 Issue
The Year 2000 Issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Any of the
Company's, or its suppliers' and customers' computer programs that have
date-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in system failures or miscalculations
causing disruptions of operations including, among other things, a temporary
inability to process transactions, send invoices, or engage in similar normal
business activities.
Because the Company is in the development stage and has no significant
operations, the Company does not anticipate that its software or computer
systems will require any significant modification or replacement in response to
the Year 2000 Issue. In the Company's assessment, the Year 2000 Issue will not
materially affect the specific operations of the Company and its subsidiary.
The Company will ensure that any future proposed plant will comply with
Year 2000 standards.
Item 3. Description of Property
The Company, through Camden, leases 900 square feet of office space in
an office building located at 2285 St. Laurent Boulevard, Unit 16, Ottawa,
Ontario, Canada. The lease has no fixed terms and may be terminated within 30
days written notice. The Company pays a monthly rent of approximately CDN
$1,700.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of October 15, 1999, certain
information with respect to the beneficial ownership of the Company's Common
Stock by (a) each stockholder known by the Company to be the beneficial owner of
more than 5% of the Company's Common Stock, (b) each executive officer and
director of the Company, and (c) each director and executive officer of the
Company and its subsidiary as a group.
Percentage
Number of Beneficially
Name and Address Shares(1) Owned
- ----------------------------- ----------- ------------
Kafus Industries Ltd. 20,000,000 72.6%
755 Burrard Street, Suite 440
Vancouver, British Columbia
Canada V6Z 1X6
Robert Novitsky 245,000(2) *
<PAGE>12
Percentage
Number of Beneficially
Name and Address Shares(1) Owned
- ----------------------------- ----------- ------------
Manfred Schultz 100,000(3) *
Michael McCabe 25,000(3) *
Peter Schlesinger 25,000(3) *
Milton Datsopoulos 25,000(3) *
Gordon C. Robinson 25,000(3) *
Paul McClory 25,000(3) *
Lynda Murdock 10,000(3) *
Fiama Walker 5,000(3) *
All directors and executive officers as a 485,000(3) 1.7%
group (9 persons)
* Represents less than 1%.
(1) Except as otherwise indicated, the Company believes that the beneficial
owners of the Common Stock listed above, based on information furnished
by such owners, have sole investment and voting power with respect to
such shares, subject to community property laws where applicable.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock
subject to options or warrants currently exercisable, or exercisable
within 60 days, are deemed outstanding for purposes of computing the
percentage ownership of the person holding such option or warrants, but
are not deemed outstanding for purposes of computing the percentage
ownership of any other person.
(2) As of October 15, 1999, Mr. Robert Novitsky holds an option to exchange
his ten percent (10%) interest in Camden (which represents 1,000 shares
of Camden's common shares) for 120,000 shares of the Company's Common
Stock. See "Item 7. Certain Relationship and Related Transactions." Also
includes options to purchase 125,000 shares of Common Stock.
(3) Represents options exercisable within 60 days to purchase shares of
Common Stock.
<PAGE>13
Item 5. Directors, Executive Officers, Promoters and Control Persons
MANAGEMENT
Executive Officers and Directors
The directors and executive officers of the Company as of September 30,
1999, are as follows:
<TABLE>
<CAPTION>
Name Age Office or Position Held Position Since
<S> <C> <C> <C>
Executive Officers and Directors
of the Company:
Robert Novitsky 52 President, Director 1999
Manfred Schultz 51 Vice President, Director 1999
Michael McCabe 42 Chief Financial Officer, Director 1998
Peter Schlesinger 65 Director 1999
Milton Datsopoulos 59 Director 1999
Gordon Robinson 59 Director 1999
Paul McClory 59 Director 1999
Lynda Murdock 38 Treasurer 1999
Fiama Walker 54 Secretary 1999
Executive Officers of Camden:
Robert Novitsky 52 President 1996
Manfred Schultz 51 Vice President of Business 1999
Development
</TABLE>
The following sets forth the principal occupations during the past five
years of the directors and certain executive officers of the Company and
executives of its subsidiary.
Robert L. Novitsky has been the President and Director of the Company since
March 1999 and has been with the Company since 1998. Mr. Novitsky has also been
the President of Camden since 1996. Mr. Novitsky was a Director of The CanFibre
Group Ltd. from August 1992 to December 1997. Since 1990, Mr. Novitsky has been
President and Director of Notra Environmental Services Inc. and Notra Marine.
From 1989 to 1990, he was Executive Vice-President in charge of management for
Amtek Engineering Service Incorporated, an engineering consulting company. From
1986 to 1990, he was President of SSI Monenco Limited and responsible for all
corporate activities associated with that professional engineering company. He
has a Bachelor degree in Chemical Engineering from Royal Military College in
Kingston, Ontario, an Ocean Engineer degree from MIT and a Master of Science in
Materials Engineering and Science from MIT.
<PAGE>14
Manfred W. Schultz has been the Vice President of Business Development of
the Company since September 1, 1999, and Director of the Company since August
1999. Mr. Schultz has also worked with Camden on a consultative basis since June
1999. From 1995 to 1999, Mr. Schultz worked as a business consultant for various
businesses and held senior executive and Director positions at Integrated
Resources Corp. and Northern Ostrich Corp. From 1987 to 1995, he founded and was
President and Chief Executive Officer of Koala Beverages Ltd. where he was
responsible for development and overall management. He has a Bachelor of Arts
degree in Economics from the University of Western Ontario.
Michael McCabe has been Chief Financial Officer and a Director of the
Company since 1998. Since 1997, Mr. McCabe has served as President and a
Director of Kafus Industries Ltd. From 1996 until May 1997, Mr. McCabe was
Managing Director of Project Finance for Key Global Finance Ltd. in Boston,
Massachusetts. From 1991 to 1996, he was Senior Vice President of BTM Capital
Corporation. He has a BS in Chemistry and Physics from Bridgewater State
College, an MS in Chemical Engineering from Purdue University, and an MBA in
Finance from Pace University.
Peter Schlesinger has been a Director of the Company since August 1999.
Since December 1993 Mr. Schlesinger has been a Director of, and since March
1998, Chairman of the Board and Chief Financial Officer of, MGPX Ventures Inc.
Now self-employed, Mr. Schlesinger was a partner of a Canadian stockbrokerage
firm, Annett Partners, for ten years and manager of a Bermuda investment
company, Tatra Ltd., since 1974. He was president of Halton Insurance, a Bermuda
insurance company, listed on The Toronto Stock Exchange, from 1988 to 1994. For
ten years he has also served as president of the Canadian Parkinson Disease
Foundation. Mr. Schlesinger has a BS in Psychology and Economics, and a MBA in
Finance from Columbia University.
Milton Datsopoulos became a Director of the Company on October 15, 1999.
Mr. Datsopoulos has also been a director of Kafus since March 25, 1998. Since
1974, Mr. Datsopoulos has been a partner of Datsopoulos, MacDonald & Lind, P.C.,
attorneys at law.
Gordon Robinson became a Director of the Company on October 15, 1999. Mr.
Robinson has also been a director of Kafus since March 25, 1998. Since 1992, Mr.
Robinson owns and operates a home improvement business.
Peter McClory was appointed to the Board of Directors on October 15, 1999.
He was also director of Kafus from June 11, 1996, until 1998. For over the past
five years, Mr. McClory, through his wholly-owned company Willow Holdings, Inc.,
has been a consultant to several public and private companies including Kafus
and North American Tire Recycling Ltd.
Lynda Murdock was appointed Treasurer to the Company on October 15, 1999.
Since July 1999, Ms. Murdock has been Senior Vice President of Taxation, Audit
and Accounting for Kafus. Prior to her time with Kafus, Ms. Murdock has spent
the last 15 years in public accounting practice, most recently as a Tax Partner
with KPMG LLP of Canada. Ms. Murdock is a Chartered Accountant.
Fiama Walker has been Secretary of the Company since September 16, 1999.
Ms. Walker has been Assistant Corporate Secretary and Manager of Compliance of
Kafus since July 7, 1998. For the last 25 years, Ms. Walker worked as a
paralegal and legal assistant for various law firms in British Columbia,
specializing in corporate and commercial law. She has completed diploma courses
in business administration, accounting and law from various colleges and
universities in British Columbia.
<PAGE>15
Item 6. Executive Compensation
Executive Compensation.
None of the Company's directors, officers, or employees or officers and
employees of its subsidiaries earned in excess of $100,000 for the three months
ended December 31, 1998.
The following table sets forth, for each of the compensation of the
Company's president during the last three complete fiscal periods. No other
officers received annual compensation in excess of $100,000 during the last
three complete fiscal periods.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation
------------------------------------------------------
Annual Compensation Awards Payout
---------------------------------------------- ------------------------------ -------------
Restricted Securities
Other Annual Stock Underlying LTIP All Other
Name and Principal Compensation Award(s) Options Payout Compensa-
Position Period Salary Bonus ($) ($) ($) (#) ($) tion ($)
- ----------------------------------------------------------------------------- ---------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert L. Novitsky 1998 $10,149(1) - - - - - -
President
Daniel Hodges(2) 1998 $60,000 - - - - - -
President
</TABLE>
(1) Mr. Novitsky has been receiving a salary in the form of consulting fees
of Cdn $3,383 per month for serving as the president of Camden. The
figure $10,149 represents three months' salary. He currently does not
receive any salary for serving as the President of the Company.
(2) Mr. Hodges resigned as president on November 10, 1998. During 1998,
Mr. Hodges was paid consulting fees of $60,000.
At this time, the Company does not pay its directors compensation as
serving as such and for their attendance at board meetings. Further, at this
time, the Company does not provide pension, retirement or similar benefits to
its officers and directors.
Outstanding Options Granted to Directors and Executive Officers.
The following table provides information relating to share options
granted to executive officers of the Company, and directors and certain
executive officers of the Company and its subsidiary, Camden, as a group, and
outstanding as of October 15, 1999. No options were granted to either officers
or directors of the Company as of December 31, 1998.
<TABLE>
<CAPTION>
Name Number of Options Exercise Price Expiration Date
- ------------------ ----------------- -------------- ---------------
<S> <C> <C> <C>
Robert Novitsky 125,000 $1.50 October 13, 2004
Michael A. McCabe 25,000 $1.50 October 13, 2004
<PAGE>16
Name Number of Options Exercise Price Expiration Date
- ------------------ ----------------- -------------- ---------------
Peter Schlesinger 25,000 $1.50 October 13, 2004
Manfred W. Schultz 100,000 $1.50 October 13, 2004
Milton Datsopoulos 25,000 $1.50 October 13, 2004
Gordon Robinson 25,000 $1.50 October 13, 2004
Paul McClory 25,000 $1.50 October 13, 2004
Lynda Murdock 10,000 $1.50 October 13, 2004
Fiama Walker 5,000 $1.50 October 13, 2004
Officers and Directors as 365,000
a group (9 persons)
</TABLE>
In addition to the foregoing, the Company has granted to its employees
five-year options to purchase, in the aggregate, 55,000 shares of Common Stock
of the Company at $1.50 per share. The Company has also granted an option to
purchase 500,000 shares of Common Stock to The Samarac Corporation Ltd.
("Samarac") for consulting purposes. See "Certain Relationships and Related
Transactions."
Item 7. Certain Relationships and Related Transactions
In connection with the Reorganization, Mr. Novitsky and the Company
entered into an agreement pursuant to which Mr. Novitsky has the option to
exchange his 1,000 shares in Camden, representing 10% of the outstanding Camden
common shares, for 120,000 shares of Common Stock of the Company.
On October 14, 1999, the Company granted a five year option to purchase
500,000 shares of Common Stock of the Company at an exercise price of $1.50 per
share to Samarac. Samarac intends to provide international development contracts
for Hyaton's products. Samarac is an approximate 38.82% shareholder of Kafus,
and is controlled by Mr. Kenneth F. Swaisland, Chief Executive Officer of Kafus.
The Company pays rent for office space to Notra Environmental Services
Incorporation of which Mr. Robert L. Novitsky is also the President and a
Director. Mr. Novitsky is also the President and director of the Company, the
President of Camden, and a minority shareholder of Camden, owning ten percent
(10%) of Camden. For the three months ended December 31, 1998, and the years
ended September 30, 1998, and 1997, the Company paid rent of Cdn $5,100, Cdn
$20,400, and Cdn $20,400, respectively.
During the three months ended December 31, 1998, the Company had loans
outstanding in the aggregate amount of $373,605 due to Kafus and its affiliate.
The loans are non-interest bearing with no specific terms of repayment.
<PAGE>17
Item 8. Description of Securities
The Company is authorized to issue 100,000,000 shares of Common Stock,
par value $.01, of which 27,559,000 were outstanding as of September 30, 1999,
and 25,000,000 shares of Preferred Stock, par value $.01. As of September 30,
1999, no Preferred Stock was outstanding.
Common Stock
Each holder of record of shares of Common Stock is entitled to one vote
for each share so held on all matters requiring a vote of shareholders,
including the election of directors. There are no preferences, conversion
rights, preemptive rights, subscription rights, or restrictions or transfers
attached to the Common Stock. In the event of liquidation, dissolution, or
winding up of the Company, the holders of Common Stock are entitled to
participate in the assets of the Company available for distribution after
satisfaction of Preferred Stock and the claims of creditors.
Preferred Stock
The Board of Directors has not established any series of Preferred
Stock.
PART II
Item 1. Market Price of and Dividends on the Registrant's Common Equity and
Other Shareholder Matters
The Company's Common Stock began trading on the OTC Bulletin Board under
the symbol "HYTN" on September 30, 1998. The Company has a limited market for
its Common Stock with no real trading volume. The following quotations reflect
inter-dealer prices, without retail mark-up, mark-down or commission and may not
represent actual transactions. The high and low prices of the Company's Common
Stock on a quarterly basis since September 30, 1998, are as follows:
Quarter High Low
- ----------------- ------- -------
December 31, 1998 $2.00 $0.19
March 31, 1999 3.00 $1.50
June 30, 1999 2.25(1) $1.75(1)
(1) Represents date of last know trade of May 28, 1999.
Item 2. Legal Proceedings.
Neither the Company nor Camden is involved in any legal proceeding.
Item 3. Changes in and Disagreements with Accountants
None
<PAGE>18
Item 4. Recent Sales of Unregistered Securities
On April 20, 1998, the Company sold 6,059,000 shares of Common Stock to
approximately 30 purchasers for $60,590. This transaction was exempt from
registration pursuant to Regulation D, Rule 504. No commissions were paid in the
transaction.
On November 2, 1998, the Company issued 20,000,000 shares of Common
Stock to Kafus Industries Ltd. in exchange for all of the common shares of
Camden Agro-Systems Inc. owned by Kafus Industries Ltd. This transaction was
exempt from registration upon reliance of Section 4(2) and Regulation D of the
Securities Act. In connection with the exchange, an unaffiliated party received
500,000 shares of Common Stock of the Company as a finder's fee.
Item 5. Indemnification of Directors and Officers
The Company has adopted Section 78.751 of the Domestic and Foreign
Corporation Laws of the State of Nevada in its bylaws. Section 78.751 states:
1. A corporation may indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, except an action by or in the right of
the corporation, by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other
enterprise, against expenses, including attorneys' fees, judgments,
fines and amounts paid in settlement actually and reasonably incurred by
him in connection with the action, suit or proceeding if he acted in
good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of
nolo contendere or its equivalent, does not, of itself, create a
presumption that the person did not act in good faith and in a manner
which he reasonably believed to be in or not opposed to the best
interests of the corporation, and that, with respect to any criminal
action or proceeding, he had reasonable cause to believe that his
conduct was unlawful.
2. A corporation may indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that he is or was
a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture,
trust or other enterprise against expenses, including amounts paid in
settlement and attorneys' fees actually and reasonably incurred by him
in connection with the defense or settlement of the action or suit if he
acted in good faith and in a manner which he reasonably believed to be
in or not opposed to the best interests of the corporation.
Indemnification may not be made for any claim, issue or matter as to
which such a person has been adjudged by a court of competent
jurisdiction, after exhaustion of all appeals therefrom, to be liable to
the corporation or for amounts paid in settlement to the corporation,
unless and only to the extent that the
<PAGE>19
court in which the action or suit was brought or other court of
competent jurisdiction determines upon application that in view of all
the circumstances of the case, the person is fairly and reasonably
entitled to indemnity for such expenses as the court deems proper.
PART F/S
The Company's financial statements for the years ended September 30,
1997 and 1998, the three months ended December 31, 1998, and for the six months
ended June 30, 1999, are attached to this Registration Statement.
PART III
Item 1. Index to Exhibits
Part III - Item 2.
Item 2. Description of Exhibits
2.1 Plan and Agreement of Reorganization, dated November 2, 1998,
between the Company and Kafus Environmental Industries Ltd.
3.1 Amended and Restated Articles of Incorporation of Hyaton Company
Incorporated
3.2 Amended Articles of Incorporation of Hyaton Company Incorporated
changing its name
to Hyaton Organics Inc.
3.3 Amended and Restated Bylaws of the Company
10.1 Option Agreement between Robert Novitsky and Hyaton Company
Incorporated*
* To be filed by amendment
<PAGE>20
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
HYATON ORGANICS INC.
Dated: October 24, 1999 /s/ Robert Novitsky
-------------------------------
By: Robert Novitsky, President
<PAGE>F-1
HYATON COMPANY INCORPORATED
(a development stage enterprise)
INDEX TO FINANCIAL STATEMENTS
June 30, 1999
Consolidated Balance Sheet...................................................F-2
Consolidated Statements of Operations ad Deficit.............................F-3
Consolidated Statements of Cash Flows........................................F-4
December 31, 1998, and September 30, 1998
Auditors' Report.............................................................F-5
Consolidated Balance Sheet...................................................F-6
Consolidated Statements of Operations and Deficit............................F-7
Consolidated Statements of Cash Flows........................................F-8
Notes to Consolidated Financial Statements...................................F-9
<PAGE>F-2
Hyaton Company Incorporated
(a development stage enterprise)
Consolidated Balance Sheets
(Expressed in U.S. Dollars)
(Unaudited - Prepared Internally by Management)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
June 30, June 30,
1999 1998
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash $ 7,214 $ 4,101
Accounts receivable and other 15,432 10,424
- ----------------------------------------------------------------------------------------------
22,646 14,525
Computer equipment, net of accumulated depreciation of $415 1,527 1,300
- ----------------------------------------------------------------------------------------------
$ 24,173 $ 15,825
- ----------------------------------------------------------------------------------------------
Liabilities and Shareholders' Deficiency
Current liabilities:
Accounts payable and accrued liabilities $ 23,568 $ 1,977
Loans from related parties 641,994 192,611
- ----------------------------------------------------------------------------------------------
665,562 194,588
Shareholders' deficiency:
Capital stock:
Authorized:
100,000,000 common shares with a par value of $0.01
25,000,000 preference shares with a par value of $0.01
Issued:
27,559,000 common shares 276,247 657
Deficit accumulated during the development stage (908,007) (183,490)
Other comprehensive income:
Cumulative translation adjustment (9,629) 4,070
- ----------------------------------------------------------------------------------------------
(641,389) (178,763)
- ----------------------------------------------------------------------------------------------
$ 24,173 $ 15,825
- ----------------------------------------------------------------------------------------------
</TABLE>
<PAGE>F-3
Hyaton Company Incorporated
(a development stage enterprise)
Consolidated Statements of Operations and Deficit
(Expressed in U.S. Dollars)
(Unaudited - Prepared Internally by Management)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Six Month Six Month
Period Ended Period Ended
- ----------------------------------------------------------------------------------------------
June 30, June 30,
1999 1998
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Revenue $ (1,702) $ 5,180
Expenses:
Consulting and other professional fees 154,067 40,655
Product development and research costs 35,770 63,816
Administrative and other expenses 24,698 11,581
- ----------------------------------------------------------------------------------------------
214,535 116,052
- ----------------------------------------------------------------------------------------------
Net loss 216,237 110,872
Deficit accumulated during the
development stage, beginning of period 691,770 72,618
- ----------------------------------------------------------------------------------------------
Deficit accumulated during the
development stage, end of period $ 908,007 $ 183,490
- ----------------------------------------------------------------------------------------------
Basic loss per share $ 0.01 $ 0.01
Weighted average number of shares
outstanding 27,559,000 20,000,000
- ----------------------------------------------------------------------------------------------
</TABLE>
<PAGE>F-4
Hyaton Company Incorporated
(a development stage enterprise)
Consolidated Statements of Cash Flows
(Expressed in U.S. Dollars)
(Unaudited - Prepared Internally by Management)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Six Month Six Month
Period Ended Period Ended
June 30, June 30,
1999 1998
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (216,237) $ (110,872)
Item not involving the use of cash:
Depreciation 19 -
Changes in non-cash operating working capital:
Accounts receivable and other 25,676 (9,714)
Accounts payable and accrued liabilities (14,793) 111
- ----------------------------------------------------------------------------------------------
(205,335) (120,475)
Cash flows from investing activities:
Acquisition of computer equipment - (1,300)
- ----------------------------------------------------------------------------------------------
Cash flows from financing activities: Loans from related parties:
Kafus Industries Ltd. 172,222 12,955
Cameron Strategic Planning Ltd. 54,847 36,191
Mr. Robert L. Novitsky 2,114 41,199
Notra Environmental Services Ltd. - 6,008
- ----------------------------------------------------------------------------------------------
229,183 96,353
Effect of exchange rate changes on foreign
currency cash balances (25,844) 2,482
- ----------------------------------------------------------------------------------------------
Increase (decrease) in cash (1,996) (22,940)
Cash, beginning of period 9,210 27,041
- ----------------------------------------------------------------------------------------------
Cash, end of period $ 7,214 $ 4,101
- ----------------------------------------------------------------------------------------------
Supplementary information:
Interest paid $ - $ -
Income taxes paid 1,354 -
Non-cash transactions:
Issuance of common shares:
For investment in Camden Agro-Systems Inc. - -
As a financing fee - -
- ----------------------------------------------------------------------------------------------
</TABLE>
<PAGE>F-5
Auditors' Report
To the Board of Directors
Hyaton Company Incorporated
We have audited the consolidated balance sheet of Hyaton Company Incorporated (a
development stage enterprise) as at December 31, 1998 and the consolidated
statements of operations and deficit and cash flows for the three months ended
December 31, 1998, the years ended September 30, 1998 and 1997, and the period
from November 24, 1994 (incorporation) through December 31, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing standards
in the United States. Those standards require that we plan and perform an audit
to obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at December 31, 1998
and the results of its operations and its cash flows for the three months ended
December 31, 1998, the years ended September 30, 1998 and 1997, and the period
from November 24, 1994 (incorporation) through December 31, 1998 in accordance
with generally accepted accounting principles in the United States.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in note 1, the
Company is dependent on raising financing to fund the construction of a
manufacturing facility for its patented fertilizer products and the attainment
of profitable operations, which although consistent with management's plans and
intentions raise substantial doubt about its ability to continue as a going
concern. The financial statements do not include any adjustment that might
result from the outcome of this uncertainty.
(Signed) KPMG LLP
Chartered Accountants
Vancouver, Canada
September 14, 1999
<PAGE>F-6
Hyaton Company Incorporated
(a development stage enterprise)
Consolidated Balance Sheet
(expressed in U.S. dollars)
December 31, 1998
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
<S> <C>
Assets
Current assets:
Cash $ 9,210
Accounts receivable and other (note 3) 41,108
- ----------------------------------------------------------------------------------------------
50,318
Computer equipment, net of accumulated depreciation
of $394 (September 30, 1998 - $280) 1,474
- ----------------------------------------------------------------------------------------------
$ 51,792
- ----------------------------------------------------------------------------------------------
Liabilities and Shareholders' Deficiency
Current liabilities:
Accounts payable and accrued liabilities (note 3) $ 38,289
Loans from related parties (note 3) 412,811
- ----------------------------------------------------------------------------------------------
451,100
Shareholders' deficiency:
Capital stock (note 4):
Authorized:
100,000,000 common shares with a par value of $0.01
25,000,000 preference shares with a par value of $0.01
Issued:
27,559,000 common shares 276,247
Deficit accumulated during the development stage (691,770)
Other comprehensive income (note 5):
Cumulative translation adjustment 16,215
- ----------------------------------------------------------------------------------------------
(399,308)
Contingencies (note 6)
- ----------------------------------------------------------------------------------------------
$ 51,792
- ----------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>F-7
Hyaton Company Incorporated
(a development stage enterprise)
Consolidated Statements of Operations and Deficit
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
For the period
Three months November 24,
ended Year ended Year ended 1994 to
December 31, September 30, September 30, December 31,
1998 1998 1997 1998
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue $ 36,465 $ 2,805 $ - $ 48,413
Expenses (note 3):
Consulting and other
professional fees 69,692 97,504 6,676 185,312
Product development and
research costs 64,092 126,770 2,243 193,400
Travel 1,389 22,083 6,022 29,492
Administrative and other expenses 27,423 24,996 7,118 61,389
- ----------------------------------------------------------------------------------------------------
162,596 271,353 22,059 469,593
- ----------------------------------------------------------------------------------------------------
Net loss 126,131 268,548 22,059 421,180
Deficit accumulated during the
development stage, beginning
of period 295,049 26,501 4,442 -
Charge to deficit (note 1) 270,590 - - 270,590
- ----------------------------------------------------------------------------------------------------
Deficit accumulated during the
development stage, end of period $ 691,770 $ 295,049 $ 26,501 $ 691,770
- ----------------------------------------------------------------------------------------------------
Basic loss per share $ 0.01 $ 0.01 $ - $ 0.02
Weighted average number of shares
outstanding 24,847,620 20,000,000 20,000,000 20,297,916
- ----------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>F-8
Hyaton Company Incorporated
(a development stage enterprise)
Consolidated Statements of Cash Flows
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
For the period
Three months November 24,
ended Year ended Year ended 1994 to
December 31, September 30, September 30, December 31,
1998 1998 1997 1998
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash flows from (used in) operating activities:
Net loss $ (126,131) $ (268,548) $ (22,059) $(421,180)
Items not involving the use of
cash:
Depreciation 114 280 - 394
Shares issued as a financing fee 5,000 - - 5,000
Changes in non-cash operating working capital:
Accounts receivable (37,549) 2,403 4,007 (33,663)
Accounts payable 20,550 10,730 9,326 31,355
Deposit on building - 10,158 (10,158) -
- ----------------------------------------------------------------------------------------------------
(138,016) (244,977) (18,884) (418,094)
- ----------------------------------------------------------------------------------------------------
Cash flows used in investing activities:
Capital expenditures - (1,868) - (1,868)
- ----------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Issuance of common shares - - - 657
Loans from related parties:
Kafus Industries Ltd. 132,149 19,900 - 152,049
Cameron Strategic Planning Ltd. 14,470 174,060 32,849 238,390
Mr. Robert L. Novitsky - 39,744 - 39,744
- ----------------------------------------------------------------------------------------------------
146,619 233,704 32,849 430,840
- ----------------------------------------------------------------------------------------------------
Effect of exchange rate changes on
foreign currency cash balances (127) (74) (205) (1,668)
- ----------------------------------------------------------------------------------------------------
Increase (decrease) in cash 8,476 (13,215) 13,760 9,210
Cash, beginning of period 734 13,949 189 -
- ----------------------------------------------------------------------------------------------------
Cash, end of period $ 9,210 $ 734 $ 13,949 $ 9,210
- ----------------------------------------------------------------------------------------------------
Supplementary information:
Interest paid $ - $ - $ - $ -
Income taxes paid - - - -
Non-cash transactions:
Issuance of common shares:
For investment in CASI 270,590 - - 270,590
As a financing fee 5,000 - - 5,000
- ----------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>F-9
Hyaton Company Incorporated
(a development stage enterprise)
Notes to Consolidated Financial Statements
(expressed in U.S. dollars)
1. Nature and continuance of operations:
Hyaton Company Incorporated ("Hyaton") was incorporated pursuant to the laws
of the State of Nevada on August 20, 1996. Effective November 2, 1998,
Hyaton holds a 90% investment in Camden Agro-System Inc. ("CASI"), a
Canadian company, as its sole asset. Prior to that date Hyaton was inactive.
CASI was incorporated under the Ontario Business Corporations Act (1982) on
November 24, 1994 to carry on the business of management consulting and
product development. CASI's efforts have focused primarily on the
development of organic fertilizers and animal feed from animal waste. In
early 1999, CASI's management discontinued its efforts towards the
development of organic animal feed.
Pursuant to the Plan and Agreement of Reorganization dated November 2, 1998,
Hyaton issued 20,000,000 common shares from treasury for 9,000 issued and
outstanding common shares of CASI representing a 90% holding in CASI. In
addition, the agreement provides for the issuance of additional shares of
Hyaton to the vendor of the 9,000 common shares of CASI at a rate of one
common share for every $0.20 of earnings before interest, tax, amortization
and depreciation for the period from November 2, 1998 to the earlier of
November 2, 2000 or 18 months from the commencement of commercial
operations. Furthermore, the agreement provides for additional share
issuances at a rate of one share for every $0.05 of losses incurred by the
vendor under the indemnification granted to the vendor against any legal
claims and other contingencies. Related to the agreement, 500,000 common
shares of Hyaton were issued to Securities Trading Services Inc., an
unrelated party as a financing fee.
The agreement resulted in control of Hyaton passing to the former
shareholders of CASI. Under the accounting for the transaction in accordance
with reverse take-over accounting principles, CASI is identified as the
acquirer and Hyaton as the acquired party. The financial statements reflect
the operations of CASI with the activities of Hyaton consolidated from
November 2, 1998, the date of the acquisition. The comparative figures
presented are those of CASI.
At the date of the reorganization, the net assets of Hyaton were nominal.
The par value of Hyaton shares issued of $275,590 has been included in
capital stock with an offset of $270,590 to the deficit and $5,000 to
consulting fee expense. In accordance with practices adopted in the United
States, the excess of $13,879 of the costs incurred over the cash on hand in
Hyaton at the date of acquisition has been charged to expense. The
contingent shares issuable by Hyaton will be accounted for as an additional
part of the cost of purchase, if and when issued.
Consideration:
Par value of common shares issued $ 275,590
Costs 13,879
$ 289,469
<PAGE>F-10
Hyaton Company Incorporated
(a development stage enterprise)
Notes to Consolidated Financial Statements
(expressed in U.S. dollars)
1. Nature and continuance of operations (continued):
Consideration applied to:
Net assets $ -
Less:
Consulting expense 5,000
Cash costs incurred in excess of cash on hand 13,879
Charge to retained earnings 270,590
- -----------------------------------------------------------------------
$ 289,469
- -----------------------------------------------------------------------
(a) Future operations:
These consolidated financial statements have been prepared on the basis
of a going concern, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The
Company has suffered recurring losses and has not generated profitable
operations since inception. The continuance of the Company as a going
concern is dependent on obtaining financing for continued operations and
the construction of a manufacturing facility for its fertilizers, the
attainment of profitable operations, which are consistent with
management's plans and intentions, and the avoidance of any cash costs
from early redemption of loans from related parties. If the Company is
unable to achieve these objectives, it may be obligated to liquidate
certain assets in settlement of liabilities and the value achieved on
settlement may be less than the assets' carrying values.
(b) Development stage enterprise:
For U.S. accounting purposes the Company is considered to be a
development stage enterprise from the inception of CASI on November 24,
1994 to December 31, 1998 as its efforts are primarily directed towards
the development of a new product. The identification of an entity as a
development stage enterprise does not impact the measurement and
recognition principles applied in these consolidated financial
statements but does require the disclosure of specified cumulation from
inception and other information.
2. Significant accounting policies:
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles in the United States.
(a) Principles of presentation:
These consolidated financial statements include the accounts of Hyaton
and its 90% owned subsidiary, CASI.
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and the disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
these estimates.
<PAGE>F-11
Hyaton Company Incorporated
(a development stage enterprise)
Notes to Consolidated Financial Statements
(expressed in U.S. dollars)
2. Significant accounting policies (continued):
(b) Foreign currency translation:
These consolidated financial statements are presented in U.S. dollars.
Hyaton's functional currency is the U.S. dollar. The functional currency
of CASI is the Canadian dollar as the majority of its operations occur
in Canada and are conducted in Canadian dollars. The Canadian dollar
accounts have been translated into U.S. dollars using the exchange rate
in effect at the balance sheet date for asset and liability amounts and
at the average exchange rate for the period for amounts included in the
determination of income. Any gains or losses from this translation are
included in a separate cumulative translation adjustment account in
shareholders' equity in the consolidated balance sheet.
Transactions denominated in other than the operation's functional
currency are measured at exchange rates in effect at the date of the
transactions with exchange gains and losses included in the
determination of income.
(c) Computer equipment:
Computer equipment is recorded at cost. Depreciation will be calculated
on the declining-balance basis from the date of acquisition.
(d) Loss per share:
Loss per share is calculated using the weighted average number of shares
outstanding during the fiscal period. This average includes as
outstanding common shares, shares issued in a reporting period from the
date of their issuance. Fully diluted per share amounts are not
presented as the effect of outstanding convertible securities and
warrants is anti-dilutive.
(e) Income taxes:
The Company follows the asset and liability method of accounting for
income taxes. Under the asset and liability method of accounting for
income taxes, deferred tax assets and liabilities are recognized based
on the estimated future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates in effect for the year
in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that includes the
enactment date. To the extent that the realizability of the benefit of
deferred tax assets is not more likely than not, a valuation allowance
is provided.
(f) Impairment of long-lived assets:
Long-lived assets and certain identifiable intangibles are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the carrying
amount of an asset to future net cash flows expected to be generated by
the asset. If such assets are considered to be impaired, the impairment
to be recognized is measured by the amount by which the carrying amount
of the assets exceeds the fair value of the assets.
<PAGE>F-12
Hyaton Company Incorporated
(a development stage enterprise)
Notes to Consolidated Financial Statements
(expressed in U.S. dollars)
2. Significant accounting policies (continued):
(g) Concentration of risk:
The Company was formed to develop, operate, finance, and construct a
manufacturing facility which will produce high quality fertilizer
products from animal waste. Because a project of this scope and
technology has not yet been completed, there is concentration of risk
inherent in the Company's business, including, but not limited to,
technology, construction, financing, and operations risk.
(h) Revenue recognition:
Revenue relating to consulting services are recognized when the
professional services have been rendered.
(i) Research and development costs:
Research and developments costs are expensed as incurred.
3. Related party transactions and balances:
Kafus Industries Ltd., a public company is a majority shareholder of the
Company. Cameron Strategic Planning Ltd., a private Canadian company is a
subsidiary of Kafus Industries Ltd.
Mr. Robert L. Novitsky is an officer of the Company and a shareholder and
officer of CASI.
The Company has entered into the following material related party
transactions:
(a) Loans from related parties:
Loans from related parties consist of the following:
- ---------------------------------------------------------------------------
Kafus Industries Ltd. $ 149,457
Cameron Strategic Planning Ltd. 224,148
Mr. Robert L. Novitsky 39,206
- ---------------------------------------------------------------------------
$ 412,811
- ---------------------------------------------------------------------------
The loans from related parties are non-interest bearing with no specific
terms of repayment. The loan from Mr. Robert L. Novitsky is convertible
into common shares of the Company, prior to financing of the first
manufacturing plant, on a mutually acceptable basis.
(b) Accounts payable:
Included in accounts payable is an amount of $5,052 payable to a private
company controlled by an officer of the Company.
(c) The Company has been charged administrative, management and consulting
fees aggregating $34,777 (September 30, 1998 - $70,365; 1997 - $5,481)
by certain officers, directors and private companies controlled by them.
<PAGE>F-13
Hyaton Company Incorporated
(a development stage enterprise)
Notes to Consolidated Financial Statements
(expressed in U.S. dollars)
4. Capital stock:
Issued:
Share capital is comprised of:
- -------------------------------------------------------------------------------
December 31,
1998
- -------------------------------------------------------------------------------
Common shares 276,247
Preference shares -
- -------------------------------------------------------------------------------
276,247
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Number Assigned
of shares value
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Issued for cash at inception, November 24, 1994 1,000 $ 657
- ----------------------------------------------------------------------------------------------
Issued and outstanding at September 30, 1997 and
September 30, 1998 1,000 657
Issued during period ended December 31, 1998:
For investment in CASI 27,058,000 270,590
For financing fee 500,000 5,000
- ----------------------------------------------------------------------------------------------
Issued and outstanding at December 31, 1998 27,559,000 $ 276,247
- ----------------------------------------------------------------------------------------------
</TABLE>
The Company has no stock options outstanding.
5. Comprehensive income:
The Company is required to disclose changes in other comprehensive income,
which include gains and losses that affect shareholders' equity but are
excluded from net income. The components of comprehensive income to the
Company are net loss and changes in the foreign currency cumulative
translation adjustment account.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
For the period
Three months November 24,
ended Year ended Year ended 1994 to
December 31, September 30, September 30, December 31,
1998 1998 1997 1998
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Comprehensive income:
Net loss $ (126,131) $ (268,548) $ (22,059) $(421,180)
Currency translation adjustment 4,261 15,216 (3,339) 16,215
- -------------------------------------------------------------------------------------------------
$ (121,870) $ (253,332) $ (25,398) $(404,965)
- -------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>F-14
Hyaton Company Incorporated
(a development stage enterprise)
Notes to Consolidated Financial Statements
(expressed in U.S. dollars)
6. Contingencies:
(a) Litigation:
In the normal course of business, the Company may be subject to various
claims and contingencies related to lawsuits, taxes and other matters.
Management believes the ultimate liability, if any, arising from such
claims or contingencies is not likely to have a material adverse effect
on the Company's results of operations or financial condition.
(b) Uncertainty due to the Year 2000:
The Year 2000 issue arises because many computerized systems use two
digits rather than four to identify a year. Date sensitive systems may
recognize the year 2000 as 1900 or some other date, resulting in errors
when information using year 2000 dates is processed. In addition,
similar problems may arise in some systems which use certain dates in
1999 to represent something other than a date. The effects of the Year
2000 issue may be experienced before, on, or after January 1, 2000, and
if not addressed, the impact on operations and financial reporting may
range from minor errors to significant systems failure which could
affect the Company's ability to conduct normal business operations. It
is not possible to be certain that all aspects of the Year 2000 issue
affecting the Company, including those related to the efforts of
customers, suppliers, or other third parties, will be fully resolved.
7. Income taxes:
The Company has approximately $360,000 of non-capital losses carried forward
available to reduce taxable income otherwise calculated in Canada. These
losses expire up to 2002.
- --------------------------------------------------------------------------------
Future tax asset:
Non-capital loss carry forwards $ 360,000
Less valuation allowance (360,000)
- --------------------------------------------------------------------------------
Net future tax assets $ -
- --------------------------------------------------------------------------------
Future tax liabilities $ -
- --------------------------------------------------------------------------------
8. Financial instruments:
(a) Fair value:
The fair values of financial instruments included in current assets and
liabilities (excluding loans from related parties) are equal to their
carrying values due to their ability for prompt liquidation or the
short-term to their settlement.
The fair value of loans from related parties cannot be reasonably
estimated due to the nature of the amounts due and their relationship
between the liable party and the Company and the lack of a ready
independent market for such amounts payable.
<PAGE>F-15
Hyaton Company Incorporated
(a development stage enterprise)
Notes to Consolidated Financial Statements
(expressed in U.S. dollars)
8. Financial instruments:
(b) Currency fluctuation risk:
The Company has not entered into any material foreign exchange contracts
to minimize or mitigate the effects of foreign exchange fluctuations on
the Company's operations or these financial statements. However, as the
majority of assets and liabilities are located in Canada and originally
denominated in Canadian dollars, management does not believe it faces
any significant foreign currency fluctuation risk.
9. Segmented information:
At December 31, 1998, the Company's operations were primarily situated in
Canada or related to operations that are situated in Canada. Through CASI,
the Company's primary focus is on the manufacturing of organic fertilizer
from animal waste. Accordingly, the Company is considered to operate in a
single operating and geographic segment.
Exhibit 2.1
PLAN AND AGREEMENT OF REORGANIZATION
BETWEEN
KAFUS ENVIRONMENTAL INDUSTRIES, INC.
AND
HYATON COMPANY INCORPORATED
DATED NOVEMBER 2, 1998
<PAGE>i
TABLE OF CONTENTS
1. TRANSFER OF CAMDEN AGRO SHARES.............................................1
1.1 Transfer and Delivery of Camden Agro Shares.........................1
2. ISSUANCE OF HYATON SHARES..................................................1
2.1 Issuance and Delivery of Hyaton Shares to Kafus.....................1
2.2 Issuance of Additional Hyaton Shares to Kafus.......................1
2.3 Issuance and Delivery of Hyaton Shares to Securities
Trading Services, Inc...............................................2
3. CLOSING....................................................................2
3.1 Closing of Transaction; Closing Date................................2
3.2 Deliveries on the Closing Date by Hyaton............................2
3.3 Deliveries on the Closing Date by Kafus.............................3
3.4 Filings; Cooperation................................................3
4. REPRESENTATIONS AND WARRANTIES BY HYATON...................................3
4.1 Representations and Warranties of Hyaton............................3
a. Organization and Good Standing of Hyaton.....................3
b. Capitalization...............................................3
c. Subsidiaries.................................................4
d. Financial Statements.........................................4
e. Absence of Undisclosed Liabilities...........................4
f. Litigation...................................................4
g. Compliance with Laws.........................................4
h. Employees....................................................4
i. Assets.......................................................5
j. Tax Matters..................................................5
k. Contracts....................................................5
l. Operating Authorities........................................5
m. Books and Records............................................5
n. Authority to Execute Agreement...............................5
o. Finder's, Broker's, Consulting Fees..........................5
p. OTC Bulletin Board Listing...................................6
q. Validity of Hyaton Common Stock..............................6
4.2 Disclosure..........................................................6
5. REPRESENTATIONS AND WARRANTIES BY KAFUS....................................6
5.1 Representations and Warranties of Kafus............................6
a. Organization and Good Standing..............................6
b. No Lien or Encumbrances on Camden Agro Shares...............6
c. Authority to Execute Agreement..............................6
<PAGE>ii
6. REGISTRATION RIGHTS AND REGISTRATION STATEMENT UNDER THE
SECURITIES EXCHANGE ACT OF 1934........................................7
6.1 Registration....................................................7
6.3 Expenses of Registration........................................7
6.4 Registration Procedures.........................................7
6.5 Indemnification In Connection With Registration
Statement.......................................................7
7. CONDUCT OF PARTIES PENDING CLOSING.....................................8
7.1 Conduct of Hyaton Business Pending Closing......................8
8. CONDITIONS PRECEDENT TO CLOSING........................................9
8.1 Conditions Precedent to Closing.................................9
9. ADDITIONAL COVENANTS OF THE PARTIES....................................9
9.1 Cooperation.....................................................9
9.2 Expenses........................................................9
9.3 Publicity.......................................................9
9.4 Confidentiality................................................10
9.5 Indemnification................................................10
9.6 Post-Closing Covenants.........................................10
10. TERMINATION...........................................................11
10.1 Mutual Termination.............................................11
11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES............................11
11.1 As to Hyaton...................................................11
11.2 As to Kafus....................................................11
12. MISCELLANEOUS.........................................................11
12.1 Entire Agreement; Amendments...................................11
12.2 Binding Agreement..............................................12
12.3 Indemnification; Issuance of Additional Shares.................12
12.4 Attorney's Fees................................................12
12.5 Severability...................................................12
12.6 Governing Law..................................................12
12.7 Notices........................................................12
12.8 Counterparts; Signatures.......................................13
<PAGE>1
PLAN AND AGREEMENT OF REORGANIZATION
This PLAN AND AGREEMENT OF REORGANIZATION ("Agreement") is entered into
as of this 2nd day of November, 1998, by and between Kafus Environmental
Industries, Ltd., a British Columbia corporation ("Kafus") and Hyaton Company
Incorporated, a Nevada corporation ("Hyaton").
PLAN OF REORGANIZATION
The transaction contemplated by this Agreement is intended to be a "tax
free" exchange (the "Share Exchange") as contemplated by the provisions of
Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended. Hyaton
wishes to acquire and Kafus wishes to transfer all of its common shares, par
value $.01 per share, of Camden Agro-Systems, Inc., an Ontario corporation
("Camden Agro") which are currently held by Kafus (the "Camden Agro Shares"),
representing ninety percent (90%) of the outstanding common shares of Camden
Agro, in exchange for the issuance of 20 million shares of Hyaton's voting
common stock, par value $0.01 per share (the "Hyaton Common Stock" or the
"Hyaton Shares"). Unless otherwise stated, references to dollars ($) herein
shall mean United States dollars.
AGREEMENT
1. TRANSFER OF CAMDEN AGRO SHARES
1.1 Transfer and Delivery of Camden Agro Shares. Kafus agrees to
transfer and deliver to Hyaton on the Closing Date (as defined in Section 3.1
hereof ) all of its Camden Agro Shares, representing nine thousand (9,000)
common shares or ninety percent (90%) of all of the outstanding common shares of
Camden Agro, in exchange for twenty million (20,000,000) shares of Hyaton Common
Stock, to be issued to Kafus on the Closing Date, subject to subsequent increase
as provided in Sections 2.2 and 12.3 hereof.
2. ISSUANCE OF HYATON SHARES
2.1 Issuance and Delivery of Hyaton Shares to Kafus. As consideration
for the transfer, assignment, conveyance, and delivery of the Camden Agro Shares
hereunder, on the Closing Date, Hyaton shall issue and deliver to Kafus twenty
million (20,000,000) shares of Hyaton Common Stock valued, for the purposes of
this Agreement, at $1,000,000.
2.2 Issuance of Additional Hyaton Shares to Kafus. During the period
beginning on the Closing Date and ending upon the earlier of: (i) two (2) years
from the Closing Date, and (ii) eighteen (18) months from the commencement of
commercial operations by a Camden Agro plant (the "Measurement Period"), Hyaton
shall issue and deliver to Kafus one (1) additional share of Hyaton Common Stock
for each $.20 of aggregate earnings before interest, taxes, depreciation, and
<PAGE>2
amortization accumulated during the Measurement Period, as determined in
accordance with generally accepted accounting principles consistently applied.
Any shares of Hyaton Common Stock to be issued and delivered to Kafus pursuant
to this provision shall be delivered to Kafus within ninety (90) days of the
conclusion of the Measurement Period.
2.3 Issuance and Delivery of Hyaton Shares to Securities Trading
Services, Inc. In connection with the Share Exchange and as a finder's fee, on
the Closing Date Hyaton shall issue and deliver 500,000 shares of Hyaton Common
Stock to Securities Trading Service, Inc. ("STS").
3. CLOSING
3.1 Closing of Transaction; Closing Date. The closing of the Share
Exchange (the "Closing") shall take place when all of the conditions precedent
provided for in Section 8.1 to the Closing shall have been satisfied or waived
and all deliveries provided for in Sections 3.2. and 3.3. have been made, which
shall occur on or before November __, 1998, at 11:00 a.m., Pacific Standard Time
(the "Closing Date"), unless another date shall be mutually agreed upon by the
parties. The Closing shall take place at the offices of Bartel Eng Linn &
Schroder, 300 Capitol Mall, Suite 1100, Sacramento, California, and
simultaneously at such other places mutually agreed to by the parties.
3.2 Deliveries on the Closing Date by Hyaton. Provided that all of the
terms and conditions of this Agreement have been satisfied, Hyaton shall deliver
or cause to be delivered to Kafus the following on or before the Closing Date:
(a) a copy of the Board Minutes and/or Consent of Hyaton's Board
of Directors authorizing Hyaton to take the necessary steps toward closing the
transaction described by this Agreement;
(b) a copy of a Certificate of Good Standing for Hyaton issued
not more than ten (10) days prior to the Closing Date by the Nevada Secretary of
State;
(c) share certificates representing 20,000,000 shares of Hyaton
Common Stock in the name of Kafus pursuant to the terms and conditions of this
Agreement;
(d) a certificate signed by Hyaton's President dated as of the
Closing Date stating that all of Hyaton's representations and warranties set
forth in this Agreement are true and correct and that all of the conditions of
this Agreement applicable to the Closing Date have been satisfied or waived;
(e) letters of resignation from both Daniel Hodges and Frank
Anjakos, current members of the Board of Directors of Hyaton, and a consent
resolution appointing four new members to the Board of Directors of which three
members shall be nominated by Kafus and one member shall be nominated by Camden
Agro; and
<PAGE>3
(f) share certificates representing 500,000 shares of Hyaton
Common Stock in the name of STS pursuant to the terms and conditions of this
Agreement.
3.3 Deliveries on the Closing Date by Kafus. Provided that all of the
terms and conditions of this Agreement have been satisfied, Kafus shall deliver,
or cause to be delivered, to Hyaton the following on or before the Closing Date:
(a) certificates representing the Camden Agro Shares sufficiently
endorsed by stock power for transfer in the name of Hyaton, or any nominee(s) as
may be designated by Hyaton, in the aggregate amount of 9,000 Common Shares;
(b) a copy of the Board Minutes and/or Consents of Kafus' Board
of Directors authorizing Kafus to take the necessary steps toward Closing the
transaction described by this Agreement;
(c) a certificate signed by Kafus' Chief Executive Officer dated
as of the Closing Date stating that all of Kafus's representations and
warranties set forth in this Agreement are true and correct and that all of the
conditions of this Agreement applicable to the Closing Date have been satisfied
or waived.
3.4 Filings; Cooperation. Hyaton and Kafus shall, on request and without
further consideration, cooperate with one another by furnishing or using their
best efforts to cause others to furnish any additional information and/or
executing and delivering or using their best efforts to cause others to execute
and deliver any additional documents and/or instruments, and doing or using
their best efforts to cause others to do any and all such other things as may be
reasonably required by the parties or their counsel to consummate or otherwise
implement the transaction contemplated by this Agreement.
4. REPRESENTATIONS AND WARRANTIES BY HYATON
4.1 Representations and Warranties of Hyaton. Subject to the schedules,
attached hereto and incorporated herein by this reference (which schedules shall
be acceptable to Kafus), as of the date of this Agreement, Hyaton represents and
warrants to Kafus as follows:
a. Organization and Good Standing of Hyaton. The Articles of
Incorporation of Hyaton and all amendments thereto as presently in effect, and
the Bylaws of Hyaton as presently in effect, have been delivered to Kafus and
are complete and correct, and since the date of such delivery, there has been no
amendment, modification, or other change thereto.
b. Capitalization. Hyaton's authorized capital stock currently
consists of 100,000,000 shares of voting common stock, of which 7,059,000 are
validly issued, fully paid, non-assessable, and outstanding, and 25,000,000
shares of Preferred Stock, of which none are issued and outstanding. All shares
that have been issued and are outstanding have been validly issued
<PAGE>4
(including, without limitation, issued in compliance with all applicable federal
and state securities laws) and are fully paid and nonassessable. Hyaton has no
outstanding rights of first refusal, preemptive rights, or other rights,
warrants, options, conversion privileges, subscriptions, contracts, or other
rights or agreements obligating Hyaton either directly or indirectly to issue,
sell, purchase, or redeem any securities of Hyaton.
c. Subsidiaries. Hyaton has no subsidiaries and no other
investments, direct or indirect, or other financial interest in any other
corporation or business organization, joint venture, or partnership of any kind
whatsoever.
d. Financial Statements. Hyaton has delivered to Kafus its
financial statements at and for each of the fiscal years ended December 31, 1996
and 1997 and for the period ended April 30, 1998 ("collectively "Financial
Statements") as set forth as Schedule 4.1(d). The Financial Statements are
complete and correct in all material respects and have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
indicated. The Financial Statements accurately set out and describe the
financial condition and operating results of Hyaton as of the date and for the
periods indicated therein and do not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the Financial
Statements, in light of the circumstances under which they were made, not
misleading. Since the date of the Financial Statements, there has not been any
change in the business, properties, prospects, or financial condition of Hyaton
except, as of the date of this Agreement, Hyaton has less than $50 in cash.
e. Absence of Undisclosed Liabilities. Hyaton has no liabilities
as of the Closing Date.
f. Litigation. There are no outstanding orders, judgments,
injunctions, awards, or decrees of any court, governmental or regulatory body,
or arbitration tribunal, against Hyaton or its properties. There are no actions,
suits, or proceedings pending, or, to the knowledge of Hyaton, threatened
against or affecting Hyaton, any of its officers or directors relating to their
positions as such, or any of its properties, at law or in equity, or before or
by any federal, state, municipal, or other governmental department, commission,
board, bureau, agency, or instrumentality, domestic or foreign, in connection
with the business, operations, or affairs of Hyaton, which might result in any
adverse change in the operations or financial condition of Hyaton, or which
might prevent or impede the consummation of the transaction under this
Agreement.
g. Compliance with Laws. To the best of its knowledge, the
operations and affairs of Hyaton do not violate any law, ordinance, rule, or
regulation currently in effect, or any order, writ, injunction, or decree of any
court or governmental agency, the violation of which would substantially and
adversely affect the business, financial condition, or operations of Hyaton.
h. Employees. There are no collective bargaining, bonus, profit
sharing, compensation, or other plans, agreements, or arrangements between
Hyaton and any of its directors, officers, or employees, and there is no written
<PAGE>5
employment, consulting, severance, or indemnification agreements between Hyaton
on the one hand, and any current or former directors, officers, or employees of
Hyaton on the other hand. Except for Daniel Hodges, the President of Hyaton, and
Frank Anjakos, the Secretary of Hyaton, Hyaton has no employees.
i. Assets. Hyaton has no assets other than cash of less than $50.
j. Tax Matters. All federal, foreign, state, and local tax
returns, reports, and information statements required to be filed by or with
respect to the activities of Hyaton have been timely filed. Such returns,
reports, and information statements are true and correct in all material
respects insofar as they relate to the activities of Hyaton.
k. Contracts. Hyaton is not a party to or is bound by any
contracts, agreements, or commitments.
l. Operating Authorities. To the best of its knowledge, Hyaton
has all material operating authorities, governmental certificates and licenses,
permits, authorizations, and approvals (collectively, the "Permits") required to
conduct its business as presently conducted. Since its inception, there has not
been any notice or adverse development regarding such Permits; such Permits are
in full force and effect; no material violations are or have been recorded in
respect of any Permit; and no proceeding is pending or threatened to revoke or
limit any Permit.
m. Books and Records. The books and records of Hyaton are
complete and correct, are maintained in accordance with good business practice,
and accurately present and reflect, in all material respects, all of the
transactions therein described, and there have been no transactions involving
Hyaton which properly should have been set forth therein and which have not been
accurately so set forth.
n. Authority to Execute Agreement. The Board of Directors of
Hyaton, pursuant to the power and authority legally vested in it, has duly
authorized the execution and delivery by Hyaton of this Agreement, and has duly
agreed to the transaction hereby contemplated. Hyaton has the power and
authority to execute and deliver this Agreement, to approve the transaction
hereby contemplated, and to take all other actions required to be taken by it
pursuant to the provisions hereof. Hyaton has taken all actions required by law,
its Articles of Incorporation, as amended, or otherwise, in order to authorize
the execution and delivery of this Agreement. This Agreement is valid and
binding upon Hyaton in accordance with its terms. Neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby will constitute a violation or breach of the Articles of Incorporation,
as amended, or the Bylaws, as amended, of Hyaton, or any agreement, stipulation,
order, writ, injunction, decree, law, rule, or regulation applicable to Hyaton.
o. Finder's, Broker's, Consulting Fees. Hyaton is not liable or
obligated to pay any finder's, agent's, broker's, or consultant's fee arising
out of or in connection with this Agreement or the transactions contemplated by
<PAGE>6
this Agreement, other than a finder's fee to be paid to STS in an amount equal
to two-and-one-half percent (2 1/2 %) of the number of shares to be issued to
Kafus, or 500,000 total shares.
p. OTC Bulletin Board Listing. Hyaton has applied and its Common
Stock is qualified to be listed for quotation on the OTC Bulletin Board, and
Hyaton has not been informed or has no knowledge that its Common Stock will not
be eligible for continued quotation on the OTC Bulletin Board.
q. Validity of Hyaton Common Stock. The shares of Hyaton Common
Stock to be issued pursuant to this Agreement: (i) will be upon issuance, free
and clear of any security interest, liens, claims or other encumbrances created
by Hyaton or any other person; (ii) have been duly and validly authorized and,
when issued and paid for in accordance with the terms hereof, will be duly and
validly issued, fully paid, and non-assessable; (iii) will not have been issued
or sold in violation of any preemptive or similar rights; and (iv) will not be
subject the holder thereof to personal liability by reason of being such
holders.
4.2 Disclosure. As of the date of this Agreement, Hyaton has disclosed
all events, conditions, and facts affecting the business and prospects of
Hyaton. Hyaton has not withheld knowledge of any such events, conditions, or
facts which Hyaton knows, or has reasonable grounds to know, may affect Hyaton's
business and prospects. No representation or warranty by Hyaton in this
Agreement nor any certificate, exhibit, schedule, or other written document or
statement, furnished to Kafus by Hyaton in connection with the transactions
contemplated by this Agreement, contains or will contain any untrue statement of
a material fact or omits or will omit to state a material fact necessary to be
stated in order to make the statements contained herein or therein not
misleading.
5. REPRESENTATIONS AND WARRANTIES BY KAFUS
5.1 Representations and Warranties of Kafus. Kafus represents and
warrants to Hyaton as follows:
a. Organization and Good Standing. Kafus is a corporation duly
organized, validly existing, and in good standing under the laws of the province
of British Columbia.
b. No Lien or Encumbrances on Camden Agro Shares. The Camden
Agro Shares owned by Kafus and to be delivered to Hyaton shall be free and clear
of all liens, mortgages, pledges, encumbrances, or charges, whether disclosed
or undisclosed, except as Hyaton and Kafus shall have otherwise agreed in
writing.
c. Authority to Execute Agreement. The Board of Directors of
Kafus, pursuant to the power and authority legally vested in it, has duly
authorized the execution and delivery by Kafus of this Agreement, and has duly
agreed to the transaction hereby contemplated. Kafus has the power and authority
to execute and deliver this Agreement, to approve the transaction hereby
<PAGE>7
contemplated, and to take all other actions required to be taken by it pursuant
to the provisions hereof. Kafus has taken all actions required by law, its
Articles of Incorporation, as amended, or otherwise, to authorize the execution
and delivery of this Agreement. This Agreement is valid and binding upon Kafus.
Neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will constitute a violation or breach of the
Articles of Incorporation, as amended, or the Bylaws, as amended, of Kafus, or
any agreement applicable to Kafus.
6. REGISTRATION RIGHTS AND REGISTRATION STATEMENT UNDER THE
SECURITIES EXCHANGE ACT OF 1934
6.1 Registration. Within ninety (90) days of the Closing Date, Hyaton
shall prepare and file a registration statement with the Securities and Exchange
Commission ("Commission") registering all twenty million (20,000,000) Hyaton
Shares issued to Kafus and five hundred thousand (500,000) shares of Common
Stock of Hyaton issue to STS pursuant to the this Agreement (hereinafter
referred to as the "Registrable Securities"). In this respect, and in connection
with all Registrable Securities, Hyaton will, as soon as practicable, use its
best efforts to have such registration statement declared effective.
Furthermore, within ninety days of the issuance of those additional Hyaton
Shares as provided in Section 2.2 hereof, Hyaton shall prepare and file a
registration statement with the Commission registering all such Hyaton Shares
issued to Kafus under Section 2.2.
In addition, Kafus shall have the right to one piggy-back
registration to register the Registrable Securities in the event Hyaton
subsequently files a registration statement registering its shares of Common
Stock.
6.2 Registration Statement Under the Securities Exchange Act of 1934. In
addition to the registration statement required by Section 6.1, within ninety
(90) days of the Closing Date, Hyaton shall prepare and file a registration
statement with the Commission registering Hyaton Common Stock under the
Securities Exchange Act of 1934.
6.3 Expenses of Registration. All registration expenses relating to the
Registrable Securities incurred in connection with any registration,
qualification, or compliance pursuant to this Sections 6.1 and 6.2 shall be
borne by Hyaton.
6.4 Registration Procedures. Hyaton will keep Kafus advised in writing
as to the initiation of registration and as to the completion thereof including
without limitation all filings with and all correspondence from the Commission.
6.5 Indemnification In Connection With Registration Statement.
a. Hyaton will indemnify and hold harmless Kafus and each of its
directors and officers against all claims, losses, damages, and liabilities (or
<PAGE>
actions in respect thereof) arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any registration
statement, prospectus, offering circular, or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse
Kafus and its directors and officers for any legal or any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability, or action.
b. If Kafus is entitled to indemnification under this Section
6.5, Kafus shall give notice to Hyaton after Kafus has actual knowledge of any
claim as to which indemnity may be sought, and shall permit Hyaton to assume the
defense of any such claim or any litigation resulting therefrom, provided that
counsel for Hyaton, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by Kafus (whose approval shall
not unreasonably be withheld or delayed), and Kafus may participate in such
defense at its own expense (except in the event Kafus may not be represented by
the counsel retained by Hyaton due to a conflict of interest, in which case
Hyaton shall pay the counsel fees incurred by Kafus), and provided further that
the failure of Kafus to give notice as provided herein shall not relieve Hyaton
of its obligations under this Section 6.5. Hyaton, in the defense of any such
claim or litigation, shall not, except with the consent of Kafus, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to Kafus of a
release from all liability in respect to such claim or litigation alleged by
such claimant or plaintiff. Kafus shall furnish such information regarding
itself or the claim in question as Hyaton may reasonably request in writing and
as shall be reasonably required in connection with defense of such claim and
litigation resulting therefrom.
c. The indemnification provided for under this Agreement will
survive the transfer of Registrable Securities by Kafus.
7. CONDUCT OF PARTIES PENDING CLOSING
7.1 Conduct of Hyaton Business Pending Closing. Hyaton covenants that
pending the Closing Date:
a. Hyaton's business will be conducted only in the ordinary course.
b. No change will be made in Hyaton's Articles of Incorporation
or Bylaws other than such changes as may be first approved in writing by Kafus.
c. Hyaton will not consider any inquiries or proposals relating
to the possible merger or reorganization of Hyaton or its assets, except to the
extent that they may be legally obligated to do so in which case Kafus would be
notified in writing.
d. No contract or commitment will be entered into by or on behalf
of Hyaton or indebtedness otherwise incurred, except with the prior written
approval by Kafus.
<PAGE>9
e. No dividends shall be declared, no stock bonuses or options
shall be granted, and no increases in compensation to employees, including
officers, shall be declared and no new employment agreements shall be entered
into with officers or directors of Hyaton, except with prior written approval by
Kafus.
f. Subject to the protection provided by Section 9.4 herein,
Hyaton has given or will give to Kafus, its accountants, attorneys, and other
representatives, full access during normal business hours throughout the period
prior to the Closing Date, to all of Hyaton's properties, books, contracts,
commitments, and records, and has furnished Kafus during such period with all
such information concerning Hyaton's affairs as Kafus may reasonably request.
8. CONDITIONS PRECEDENT TO CLOSING
8.1 Conditions Precedent to Closing. All obligations of Kafus and Hyaton
under this Agreement are subject to the fulfillment, prior to or at the Closing
Date, of all conditions set forth herein, including, but not limited to, receipt
by the appropriate party of all deliveries required by Section 3 herein, and
fulfillment, prior to the Closing Date, of each of the following conditions:
a. Each of Hyaton's, and Kafus' representations, warranties, and
covenants contained in this Agreement shall be true at the time of the Closing
Date as though such representations, warranties, and covenants were made at such
time.
b. Hyaton shall have performed and complied with all agreements
and conditions required by this Agreement to be performed or complied with prior
to or at the Closing Date.
9. ADDITIONAL COVENANTS OF THE PARTIES
9.1 Cooperation. Hyaton and Kafus will cooperate with each other and
their respective agents in carrying out the transactions contemplated by this
Agreement, and in delivering all documents and instruments deemed reasonably
necessary or useful by the other party.
9.2 Expenses. Each of the parties hereto shall pay all of its respective
costs and expenses (including attorneys' and accountants' fees, finder's and
consultant's fees, costs and expenses) incurred in connection with this
Agreement and the consummation of the transactions contemplated herein.
9.3 Publicity. Prior to the Closing Date, any written news releases
and/or other shareholder communication by any party pertaining to this Agreement
or the transactions contemplated herein shall be submitted to the other parties
for their review and approval prior to such news release and/or other
shareholder communication provided, however, that (a) such approval shall not be
unreasonably withheld, and (b) such review and approval shall not be required of
<PAGE>10
disclosures required to comply, in the judgment of counsel, with federal or
state securities or corporate laws or policies.
9.4 Confidentiality. While each party is obligated to provide access to
and furnish information in accordance with this Agreement, it is understood and
agreed that such disclosure and information obtained as a result of such
disclosures are proprietary and confidential in nature. Each party agrees to
hold such information in confidence and not to reveal any such information to
any person who is not a party to this Agreement, or an officer, director, or key
employee thereof, and not to use the information obtained for any purpose other
than assisting in its due diligence inquiry. This Section 9.4 shall survive the
execution and delivery of this Agreement, the Closing, and the consummation of
the transaction called for by this Agreement and shall be limited to the time
period of three (3) years.
9.5 Indemnification.
a. Daniel L. Hodges shall personally indemnify and hold harmless
Hyaton and Kafus and each of their directors and officers against all claims,
losses, damages, and liabilities (or actions in respect thereof) arising out of
or based on any claims, acts, breaches, omissions, debts, contracts, torts,
judgments, liabilities, or causes of action of every kind and nature, which
relate to or arise out of any act, event, or omission of Hyaton or their
directors or officers prior to the Closing Date, and shall reimburse Hyaton and
Kafus and their directors and officers for any legal or any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability, or action.
b. Hyaton shall indemnify and hold harmless Hodges against all
claims, losses, damages, and liabilities (or actions in respect thereof) arising
out of or based on any claims, acts, breaches, omissions, debts, contracts,
torts, judgments, liabilities, or causes of action of every kind and nature,
which relate to or arise out of any act, event, or omission of Hyaton occurring
subsequent to the Closing Date, and shall reimburse Hodges for any legal or any
other expenses reasonably incurred in connection with investigating or defending
any such claim, loss, damage, liability or action.
9.6 Post-Closing Covenants. The parties hereto agree to the following
covenants to be performed after the Closing:
a. Within 30 days after the Closing, Hyaton shall conduct a
private placement of Hyaton Common Stock at market prices in order to raise in
the aggregate up to one million dollars ($1,000,000). Kafus and Hyaton shall use
reasonable efforts in finding potential investors to invest in the private
placement. The remaining terms and conditions with respect to the issuance of
additional Hyaton shares of common stock shall be subject to approval by the
newly constituted board of directors. The proceeds from the private placement
shall be used for general corporate and working capital purposes.
<PAGE>11
b. Effective as of the Closing Date, the current members of
Hyaton's board of directors shall take all steps necessary to set the authorized
number of directors to four (4), of which one (1) director shall be nominated by
Camden Agro, and three (3) directors shall be nominated by Kafus.
c. In accordance with the terms of Section 2.2 hereof, and on the
date designated therein, Hyaton shall issue and deliver to Kafus such number of
shares of Hyaton Common Stock as provided under Section 2.2.
10. TERMINATION
10.1 Mutual Termination. Hyaton and Kafus may agree to mutually
terminate this Agreement prior to the Closing without any liability to each
other.
10.2 Termination for Breach or Misrepresentation. If either party
breaches any of its obligations hereunder, or if either party's representations
are discovered to be materially false prior to the Closing, the non-breaching
party may, at its sole option, terminate the transactions proposed to be
effected under this Agreement.
11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES
11.1 As to Hyaton. The representations and warranties of Hyaton
contained herein shall survive the execution and delivery of this Agreement, the
Closing, and the consummation of the transaction called for by this Agreement
for a period of 2 years from the date of this Agreement, unless a lesser time
period is specified.
11.2 As to Kafus. The representations and warranties of Kafus contained
herein shall survive the execution and delivery of this Agreement, the Closing,
and the consummation of the transaction called for by this Agreement for a
period of 2 years from the date of this Agreement unless a lesser time period is
specified.
12. MISCELLANEOUS
12.1 Entire Agreement; Amendments. This Agreement (including the
Exhibits and Schedules hereto) contains the entire agreement between the parties
with respect to the transactions contemplated hereby, and supersedes all
negotiations, representations, warranties, commitments, offers, contracts, and
writings prior to the date hereof. No waiver and no modification or amendment of
any provision of this Agreement shall be effective unless specifically made in
writing and duly signed by the parties to this Agreement.
<PAGE>12
12.2 Binding Agreement. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective assigns and successors
in interest; provided, that neither this Agreement nor any right hereunder shall
be assignable by Kafus or Hyaton without the prior written consent of the other
parties.
12.3 Indemnification; Issuance of Additional Shares. Notwithstanding
Section 9.5 hereof, Hyaton covenants and agrees to defend, indemnify, and hold
harmless each of the officers, directors, employees, agents, and advisors of
Kafus, as such persons existed prior to the Closing Date (collectively, the
"Kafus Indemnitees") from and against any loss, liability, damage, or expense
(including reasonable attorney's fees and costs) which the Kafus Indemnitees may
suffer, sustain or become subject to, as a result of a breach of any
representation, warranty, or covenant by Hyaton contained in this Agreement. In
recognition that after the consummation of this Agreement that Kafus shall be
the controlling shareholder of Hyaton and may not be adequately compensated for
any loss, liability, damage, or expense which the Kafus Indemnitees may suffer
as a result of any breach of any representation warranty, or covenant by Hyaton,
at the sole election of Kafus, Kafus may unwind the transactions effected
pursuant to this Agreement, or Kafus may require Hyaton to issue to Kafus,
without further consideration, additional shares of Hyaton Common Stock in a
number equal to the loss, liability, damage or expense incurred by Kafus divided
by five cents ($.05).
12.4 Attorney's Fees. Except as otherwise provided for in Section 12.3
above, in the event of any controversy, claim, or dispute among the parties to
this Agreement arising out of or relating to this Agreement or breach thereof,
each party hereto shall pay its own legal expenses, attorney's fees, and costs.
12.5 Severability. If any provision hereof shall be held invalid or
unenforceable by any court of competent jurisdiction or as a result of future
legislative action, such holding or action shall be strictly construed and shall
not affect the validity or effect on any other provisions hereof.
12.6 Governing Law. In any action or proceeding arising out of or
related to this Agreement, the laws of British Columbia shall be followed,
without regard to the application of conflicts of laws provisions.
12.7 Notices. All notices or other communications required hereunder
shall be in writing and shall be sufficient in all respects and shall be deemed
delivered after five (5) days if sent via mail, postage prepaid; the next day if
sent by overnight courier service; or upon completion of transmission if sent by
facsimile to the following:
If to Hyaton:
Mr. Daniel L. Hodges, President
Hyaton Company Incorporated
5505 North Indian Trail
Tucson, Arizona 85750
Fax: 520-577-7197
<PAGE>13
If to Kafus:
Mr. Mike McCabe, President
Kafus Environmental Industries, Inc.
270 Bridge Street
Dedham, MA 95051
Fax: 781-326-5105
12.8 Counterparts; Signatures. This Agreement may be executed in one or
more counterparts, each of which may be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement may be
executed by a party and sent to the other parties via facsimile transmission and
the facsimile transmitted copy shall have the same integrity, force and effect
as an original document.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
KAFUS ENVIRONMENTAL INDUSTRIES, INC.
By:____________________________________________
Its:___________________________________________
HYATON COMPANY INCORPORATED
By:____________________________________________
Its:___________________________________________
DANIEL L. HODGES (with respect to Section 9.5(a) hereof)
Daniel L. Hodges
Exhibit 3.1
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF HYATON COMPANY INCORPORATED
Pursuant to the provisions of the Nevada Revised Statutes, Title 7,
Chapter 78, the undersigned officers do hereby certify:
I
The name of this corporation is HYATON COMPANY INCORPORATED.
II
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General
Corporation Law of Nevada other than the banking business, the trust
company business, or the practice of a profession permitted to be
incorporated by the Nevada Corporations Law.
III
The corporation's registered office in the State of Nevada is located at
502 East John Street, Room E, Carson City, Nevada, 89706. The
corporation's resident agent is:
CSC Services of Nevada, Inc.
IV
The governing board of this corporation shall be known as directors, and
the number of directors may from time to time be increased or decreased
in such manner as shall be provided by the Bylaws of this corporation,
provided that the number of directors shall not be reduced to fewer than
one (1).
V
This corporation is authorized to issue two classes of shares, which
shall be known as Common Stock, $.001 par value, and Preferred Stock,
$.001 par value.
VI
The total number of shares of Common Stock which this corporation is
authorized to issue is one hundred million (100,000,000), and the total
<PAGE>
number of shares of Preferred Stock which this corporation is
authorized to issue is twenty-five million (25,000,000).
VII
Shares of Preferred Stock may be issued from time to time in one or more
series. The Board of Directors shall determine the designation of each
series and the authorized number of shares of each series. The Board of
Directors is authorized to determine and alter the rights, preferences,
privileges, and restrictions granted to or imposed upon any wholly
unissued series of shares of Preferred Stock and to increase or decrease
(but not below the number of shares of such series then outstanding) the
number of shares of any such series subsequent to the issue of shares of
that series. If the number of shares of any series of Preferred Stock
shall be so decreased, the shares constituting such decrease shall
resume the status which they had prior to the adoption of the resolution
originally fixing the number of shares of such series.
VIII
The personal liability of the directors and officers of this corporation
to the corporation or its stockholders for damages shall be limited to
the fullest extent permissible under Nevada law. If, after the effective
date of this Article, Nevada law is amended in a manner which permits a
corporation to limit the damages or other liability of its directors or
officers to a greater extent than is permitted on such effective date,
the references in this Article to "Nevada law" shall to that extent be
deemed to refer to Nevada law as so amended.
Executed at ____________, this 15th day of March, 1999.
HYATON COMPANY INCORPORATED
/s/ Robert Novitsky
____________________________________
Robert Novitsky, President
/s/ Michael McCabe
____________________________________
Michael McCabe, Assistant Secretary
Exhibit 3.2
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
HYATON COMPANY INCORPORATED
We, Robert Novitsky and Peter Schlesinger, hereby certify that:
1. They are the President and Secretary, respectively, of Hyaton Company
Incorporated, a Nevada Corporation (the "Corporation").
2. The Board of Directors of the Corporation adopted resolutions to
amend Article I of the Corporation's Articles of Incorporation on September 30,
1999.
3. Article I shall be amended and restated as follows:
"Article I
The name of the corporation is HYATON ORGANICS INC"
4. The amendment was approved by the shareholders. The number of votes
cast for the amendment was sufficient for approval.
Executed this 30th day of September, 1999.
/s/ Robert Novitsky
-----------------------------
Robert Novitsky
President
/s/ Peter Schlesinger
-----------------------------
Peter Schlesinger
Secretary
Exhibit 3.3
BYLAWS
OF
HYATON COMPANY INCORPORATED
A Nevada Corporation
<PAGE>i
TABLE OF CONTENTS
TO THE
BYLAWS OF
HYATON COMPANY INCORPORATED
Page
ARTICLE I - OFFICES............................................................1
Section 1. Principal Executive Office........................................1
Section 2. Registered Office.................................................1
Section 3. Change of Location................................................1
Section 4. Other Offices.....................................................1
ARTICLE II - MEETINGS OF SHAREHOLDERS..........................................1
Section 1. Place of Meetings.................................................1
Section 2. Annual Meetings...................................................3
Section 3. Special Meetings..................................................3
Section 4. Notice of Shareholders' Meetings..................................3
Section 5. Manner of Giving Notice; Affidavit of Notice......................4
Section 6. Adjourned Meetings and Notice Thereof.............................4
Section 7. Voting at Meetings of Shareholders................................5
Section 8. Record Date for Shareholder Notice, Voting and Giving Consents....5
Section 9. Quorum............................................................6
Section 10. Waiver of Notice or Consent by Absent Shareholders...............6
Section 11. Shareholder Action by Written Consent Without Meeting............7
Section 12. Proxies..........................................................8
Section 13. Inspectors of Election...........................................9
ARTICLE III - DIRECTORS........................................................9
Section 1. Powers............................................................9
Section 2. Number and Qualification of Directors............................10
Section 3. Election and Term of Office......................................10
Section 4. Vacancies........................................................10
Section 5. Removal of Directors.............................................11
Section 6. Resignation of Director..........................................11
Section 7. Place of Meeting.................................................12
Section 8. Annual Meeting...................................................12
Section 9. Special Meetings.................................................12
Section 10. Adjournment.....................................................13
Section 11. Notice of Adjournment...........................................13
Section 12. Waiver of Notice................................................13
Section 13. Quorum and Voting...............................................13
<PAGE>ii
Section 14. Fees and Compensation...........................................13
Section 15. Action Without Meeting..........................................14
ARTICLE IV - OFFICERS.........................................................14
Section 1. Officers.........................................................14
Section 2. Election.........................................................14
Section 3. Subordinate Officers.............................................14
Section 4. Removal and Resignation..........................................14
Section 5. Vacancies........................................................15
Section 6. Chairman of the Board............................................15
Section 7. President........................................................15
Section 8. Vice Presidents..................................................15
Section 9. Secretary........................................................16
Section 10. Assistant Secretaries...........................................16
Section 11. Chief Financial Officer (Treasurer).............................16
Section 12. Assistant Financial Officers....................................17
Section 13. Salaries........................................................17
ARTICLE V - SHARES OF STOCK...................................................17
Section 1. Share Certificates...............................................17
Section 2. Transfer of Shares...............................................17
Section 3. Lost or Destroyed Certificate....................................18
ARTICLE VI - COMMITTEES.......................................................18
Section 1. Committees.......................................................18
ARTICLE VII - INDEMNIFICATION OF DIRECTORS,
OFFICERS, EMPLOYEES, AND OTHER AGENTS.........................................19
Section 1. Agents, Proceedings and Expenses.................................19
Section 2. Indemnification..................................................19
Section 3. Insurance........................................................19
ARTICLE VIII - RECORDS AND REPORTS............................................19
Section 1. Shareholder Inspection of Articles and Bylaws....................19
Section 2. Maintenance and Inspection of Records of Shareholders............20
Section 3. Shareholder Inspection of Corporate Records......................20
Section 4. Inspection by Directors..........................................21
Section 5. Annual Statement of General Information..........................21
ARTICLE IX - MISCELLANEOUS....................................................21
Section 1. Checks, Drafts, Evidence of Indebtedness.........................21
Section 2. Contracts, Etc., How Executed....................................21
Section 3. Representation of Shares of Other Corporations...................21
<PAGE>iii
ARTICLE X - AMENDMENTS TO BYLAWS..............................................22
Section 1. Amendment by Shareholders........................................22
Section 2. Amendment by Directors...........................................22
<PAGE>1
BYLAWS
OF
HYATON COMPANY INCORPORATED
ARTICLE I - OFFICES
Section 1. Principal Executive Office
The principal executive office for the transaction of the business of
the corporation is hereby fixed and located at 755 Burrard Street, Suite 440,
Vancouver, B.C., Canada V6Z 1X6
Section 2. Registered Office
The registered office of the corporation in the State of Nevada is: 502
East John Street, Room E, Carson City, Nevada, 89706.
Section 3. Change of Location
The board of directors is hereby granted full power and authority to
change the principal executive office and the registered office from one
location to another, and to fix the location of the principal executive office
of the corporation at any place within or outside the State of Nevada. If the
principal executive office is located outside this State, and the corporation
has one or more business offices in this State, the board of directors shall fix
and designate a principal executive office in the State of Nevada.
Section 4. Other Offices
Branch or subordinate offices may at any time be established by the
board of directors at any place or places where the corporation is qualified to
do business.
ARTICLE II - MEETINGS OF SHAREHOLDERS
Section 1. Place of Meetings
All annual and all other meetings of shareholders shall be held at the
location designated by the board of directors pursuant to a resolution or as set
forth in a notice of the meeting, within or outside of the State of Nevada. If
no such location is set forth in a resolution or in the notice of the meeting,
the meeting shall be held at the principal executive office of the corporation.
<PAGE>2
Section 2. Annual Meetings
The annual meetings of shareholders shall be held on the second
Wednesday of June of each year at 10:00 a.m., or on such other date or such
other time as may be fixed by the board of directors.
Section 3. Special Meetings
Special meetings of the shareholders, for any purpose or purposes
whatsoever, may be called at any time by the president or by the board of
directors or the chairman of the board. Special meetings may not be called by
any other person or persons. Each special meeting shall be held on such date and
at such time as is determined by the person or persons calling the meeting.
Section 4. Notice of Shareholders' Meetings
All notices of meetings of shareholders shall be sent or otherwise given
in accordance with Section 5 of this Article II not less than ten (10) or more
than sixty (60) days before the date of the meeting to each shareholder entitled
to vote thereat. The notice shall specify the place, date, and hour of the
meeting.
In the case of a special meeting the notice shall specify the general
nature of the business to be transacted and no other business may be transacted
at the meeting.
In the case of the annual meeting the notice shall specify those matters
which the board of directors, at the time of the mailing of the notice, intends
to present for action by the shareholders, but any proper matter may be
presented at the meeting. The notice shall also state the general nature of the
business or proposal to be considered or acted upon at such meeting before
action may be taken at such meeting for approval of (i) any transaction governed
by Section 78.140 of the General Corporation Law of Nevada including a proposal
to enter into a contract or other transaction between the corporation and one or
more of its directors, or between the corporation and any corporation, firm, or
association in which one or more of the corporation's directors has a material
financial interest or in which one or more of its directors are directors; or
(ii) a proposal to amend the articles of incorporation in any manner other than
may be accomplished by the board of directors alone as permitted by Section
78.380 of the General Corporation Law of Nevada; or (iii) a proposal to
reorganize the corporation under Sections 78.411 through 78.466 of the General
Corporation Law of Nevada; or (iv) a proposal to wind up and dissolve the
corporation under Section 78.580 of the General Corporation Law of Nevada; or
(v) if the corporation is in the process of winding up and has both preferred
and common shares outstanding, a proposal for a plan of distribution of the
shares, obligations, or securities of any other corporation, domestic or
foreign, or assets other than money which is not in accordance with the
liquidation rights of the preferred shares as specified in the articles of
incorporation of this corporation.
<PAGE>3
The notice of any meeting at which directors are to be elected shall
include the name of any candidates intended at the time of the notice to be
presented by the board of directors for election. Shareholders who intend to
present their own slate of candidates must give notice to the board of directors
of the name(s), address(es), and telephone number(s) of such candidate(s) not
less than seventy (70) days prior to the meeting date as set forth in these
Bylaws or by resolution of the board. Notice shall be deemed submitted to the
board if it is delivered to the Secretary of the corporation personally or by
first-class mail, by telegraph, facsimile, or other form of written
communication, charges prepaid, addressed to the corporation's principal
executive office. Notice shall be deemed to have been given at the time
delivered personally, deposited in the mail, delivered to a common carrier for
transmission to the recipient, or actually transmitted by facsimile or
electronic means to the recipient by the person giving the notice.
Section 5. Manner of Giving Notice; Affidavit of Notice
Notice of any shareholders' meeting or any distribution of reports
required by law to be given to shareholders shall be given to shareholders
either personally or by first-class mail, by telegraph, facsimile, or other form
of written communication, charges prepaid, sent to each shareholder at the
address of that shareholder appearing on the books of the corporation or given
by the shareholder to the corporation for the purpose of notice. If no such
address appears on the corporation's books or has been so given, notice shall be
deemed to have been given if sent to that shareholder by first-class mail, by
telegraph, facsimile, or other written communication to the corporation's
principal executive office, or if published at least once in a newspaper of
general circulation in the county where that office is located. Notice shall be
deemed to have been given at the time when delivered personally, deposited in
the mail, delivered to a common carrier for transmission to the recipient, or
actually transmitted by facsimile or other electronic means to the recipient by
the person giving the notice.
If any notice or report sent to a shareholder at the address of that
shareholder appearing on the books of the corporation is returned to the
corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice or report to the
shareholder at that address, all future notices or reports shall be deemed to
have been duly given without further mailing if these shall be available to the
shareholder on written demand of the shareholder at the principal executive
office of the corporation for a period of one year from the date of the giving
of the notice or report to all other shareholders.
An affidavit of the mailing or other means of giving any notice of any
shareholders' meeting or report may be executed by the secretary, assistant
secretary, or any transfer agent of the corporation giving the notice, and filed
and maintained in the minute book of the corporation.
Section 6. Adjourned Meetings and Notice Thereof
Any shareholders' meeting, annual or special, whether or not a quorum is
present, may be adjourned from time to time by the vote of the majority of the
<PAGE>4
shares, the holders of which are either present in person or represented by
proxy thereat, but in the absence of a quorum, no other business may be
transacted at such meeting except in the case of the withdrawal of a shareholder
from a quorum as provided in Section 9 of this Article II.
When any shareholders' meeting, either annual or special, is adjourned
for more than forty-five (45) days, or if after the adjournment a new record
date is fixed for the adjourned meeting, notice of the adjourned meeting shall
be given to each shareholder of record entitled to vote at the adjourned meeting
in accordance with the provisions of Sections 4 and 5 of this Article II. Except
as provided above, it shall not be necessary to give any notice of an
adjournment or of the business to be transacted at an adjourned meeting other
than by announcement at the meeting at which such adjournment is taken. The
corporation may transact any business at any adjourned meetings that might have
been transacted at the regular meeting.
Section 7. Voting at Meetings of Shareholders
The shareholders entitled to vote at any meeting of shareholders shall
be determined in accordance with the provisions of Section 8 of this Article II,
subject to the provisions of Sections 78.350 to 78.365, inclusive, of the
General Corporation Law of Nevada. Each shareholder shall be entitled to one
vote for each share of stock registered on the books of the corporation in his
name, whether represented in person or by proxy. Every shareholder entitled to
vote shall have the right to vote in person, or as provided in Section 12 of
this Article II, by proxy. The shareholders' vote may be by voice vote or by
ballot; provided, however, that any election for directors must be by ballot if
demanded by any shareholder before the voting has begun. On any matter other
than the election of directors, any shareholder may vote part of the shares in
favor of or in opposition to the proposal and refrain from voting the remaining
shares, but if the shareholder fails to specify the number of shares which the
shareholder is voting, it will be conclusively presumed that the shareholder's
vote is with respect to all shares that the shareholder is entitled to vote.
The affirmative vote of a majority of the shares represented at the
meeting and entitled to vote on any matter (which shares voting affirmatively
also constitute at least a majority of the required quorum) shall be the act of
the shareholders, unless the vote of a greater number or voting by classes is
required by the General Corporation Law of Nevada or by the articles of
incorporation.
Section 8. Record Date for Shareholder Notice, Voting and Giving Consents
In order that the corporation may determine the shareholders entitled to
notice of or to vote at, any meeting of shareholders or any adjournment thereof,
or to express consent to corporate action in writing without a meeting, or
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful action,
the Board of Directors may fix a record date, which record date shall not
<PAGE>5
precede the date upon which the resolution fixing the record date is adopted by
the Board of Directors and which record date: (1) in the case of determination
of shareholders entitled to vote at any meeting of shareholders or adjournment
thereof, shall, unless otherwise required by law, not be more than 60 nor less
than 10 days before the date of such meeting; (2) in the case of determination
of shareholders entitled to express consent to corporate action in writing
without a meeting, shall not be more than 10 days from the date upon which the
resolution fixing the record date is adopted by the Board of Directors; and (3)
in the case of any other action, shall not be more than 60 days prior to such
other action. If no record date is fixed: (1) the record date for determining
shareholders entitled to notice of or to vote at a meeting of shareholders shall
be at the close of business on the date next preceding the day on which notice
is given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held; (2) the record date for
determining shareholders entitled to express consent to corporate action in
writing without a meeting when no prior action of the Board of Directors is
required by law, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
corporation in accordance with applicable law, or, if prior action by the Board
of Directors is required by law, shall be at the close of business on the day on
which the Board of Directors adopts the resolution taking such prior action; and
(3) the record date for determining shareholders for any other purpose shall be
at the close of business on the day on which the Board of Directors adopts the
resolution relating thereto. A determination of shareholders of record entitled
to notice of or to vote at a meeting of shareholders shall apply to any
adjournment of the meeting; provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting.
Section 9. Quorum
A majority of the shares entitled to vote, represented in person or by
proxy, shall constitute a quorum at the meeting of shareholders. The
shareholders present at a duly called or held meeting at which a quorum is
present may continue to transact business until adjournment, notwithstanding the
withdrawal of enough shareholders to leave less than a quorum, if any action
taken (other than adjournment) is approved by at least a majority of the shares
required to constitute a quorum and by any greater number of shares otherwise
required to take such action by applicable law or in the articles of
incorporation. In the absence of a quorum, any meeting of shareholders may be
adjourned from time to time by the vote of a majority of the shares represented
either in person or by proxy, but no business may be transacted except as
hereinabove provided.
Section 10. Waiver of Notice or Consent by Absent Shareholders
The transactions of any meeting of shareholders, either annual or
special, however called and noticed and wherever held, shall be as valid as
though had at a meeting duly held after regular call and notice, if a quorum be
present either in person or by proxy, and if, either before or after the
meeting, each of the shareholders entitled to vote, who was not present in
person or by proxy, signs a written waiver of notice or a consent to the holding
<PAGE>6
of such meeting or an approval of the minutes thereof. The waiver of notice or
consent need not specify either the business to be transacted or the purpose of
any annual or special meeting of shareholders, except that if action is taken or
proposed to be taken for approval of any of those matters specified in the
second paragraph of Section 4 of this Article II, the waiver of notice or
consent shall state the general nature of the proposal. All such waivers,
consents or approvals shall be filed with the corporate records or made a part
of the minutes of the meeting.
Attendance by a person at a meeting shall also constitute a waiver of
notice of that meeting, except when the person objects, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened, and except that attendance at a meeting is not a waiver of
any right to object to the consideration of matters not included in the notice
of the meeting if the objection is expressly made at the meeting.
Section 11. Shareholder Action by Written Consent Without Meeting
Any action which may be taken at any annual or special meeting of
shareholders may be taken without a meeting and without prior notice if a
consent in writing, setting forth the action so taken, shall be signed by the
holders of outstanding shares having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted. Notwithstanding the
previous sentence, directors may be elected by written consent without a meeting
only if the unanimous written consent of all outstanding shares entitled to vote
is obtained, except that a vacancy in the board (other than a vacancy created by
removal of a director) not filled by the board may be filled by the written
consent of the holders of a majority of the outstanding shares entitled to vote.
Unless the consents of all shareholders entitled to vote have been
solicited in writing, the secretary shall give to those shareholders entitled to
vote who have not consented in writing notice of such approval at least ten (10)
calendar days before the consummation of the action authorized by such approval
for any of the following:
(i) Any transaction governed by Section 78.140 of the General
Corporation Law of Nevada including contracts or other
transactions between the corporation and one or more of its
directors, or between the corporation and any corporation, firm
or association in which one or more of its directors has a direct
or indirect financial interest or in which one or more of its
directors are directors;
(ii) Indemnification to be made by the corporation to any person who
is or was a director, officer, employee or other agent of the
corporation or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other
enterprise, or was a director, officer, employee or agent of a
corporation which was a predecessor corporation to which such
person was or is a party or is threatened to be made a party as
provided for in Section 78.751 of the General Corporation Law of
Nevada;
<PAGE>7
(iii) An amendment to the articles of incorporation in any manner other
than may be accomplished by the board of directors alone as may
be permitted by Section 78.380 of the General Corporation Law of
Nevada;
(iv) The principal terms of a reorganization of the corporation under
Sections 78.411 through 78.466 of the General Corporation Law of
Nevada; or
(v) In case the corporation in the process of winding up has both
preferred and common shares outstanding, a plan of distribution
of the shares, obligations or securities of any other
corporation, domestic or foreign, or assets other than money
which is not in accordance with the liquidation rights of the
preferred shares as specified in the articles of incorporation.
Unless the consents of all shareholders entitled to vote have been
solicited in writing, prompt notice shall be given of the taking of any other
corporate action approved by shareholders without a meeting by less than
unanimous written consent, to those shareholders entitled to vote who have not
consented in writing. Such notice shall be given in accordance with Section 5 of
this Article II.
All such waivers, consents, or approvals shall be filed with the
secretary of the corporation and shall be maintained in the corporate records.
Any shareholder giving a written consent, or the shareholder's proxyholders, or
a transferee of the shares or a personal representative of the shareholder or
their respective proxyholders, may revoke the consent by a writing received by
the corporation prior to the time that written consent of the number of shares
required to authorize the proposed action has been filed with the secretary of
the corporation, but may not do so thereafter. Such revocation is effective upon
its receipt by the secretary of the corporation.
Section 12. Proxies
Every shareholder entitled to vote for directors or on any other matter
shall have the right to do so either in person or by one or more agents
authorized by a written proxy signed by the shareholder. A proxy shall be deemed
signed if the shareholder's name is placed on the proxy (whether by manual
signature, typewriting, telegraphic transmission, facsimile or other electronic
transmission, or otherwise) by the shareholder or the shareholder's attorney in
fact. A validly executed proxy that does not state that it is irrevocable shall
continue in full force and effect unless (i) revoked by the person executing it,
before the vote pursuant to that proxy, by a writing delivered to the
corporation stating that the proxy is revoked, or by a subsequent proxy executed
by, or as to any meeting by attendance at the meeting and voting in person by,
the person executing the proxy; or (ii) written notice of the death or
incapacity of the maker of that proxy is received by the corporation before the
vote pursuant to that proxy is counted; provided, however, that no proxy shall
be valid after the expiration of eleven (11) months from the date of the proxy,
unless otherwise provided in the proxy. The revocability of a proxy that states
<PAGE>8
on its face that it is irrevocable shall be governed by the provisions of
Section 78.355 of the General Corporation Law of Nevada.
Section 13. Inspectors of Election
Before any meeting of shareholders, the board of directors may appoint
any persons other than nominees for office to act as inspectors of election at
the meeting or its adjournment. If inspectors of election are not so appointed,
the chairman of the meeting may, and on the request of any shareholder or a
shareholder's proxy shall, appoint inspectors of election at the meeting. The
number of inspectors shall be either one (1) or three (3). If inspectors are
appointed at a meeting on the request of one or more shareholders or proxies,
the holders of a majority of shares or their proxies present at the meeting
shall determine whether one (1) or three (3) inspectors are to be appointed. If
any person appointed as inspector fails to appear or fails or refuses to act,
the chairman of the meeting may, and upon the request of any shareholder or a
shareholder's proxy shall, appoint a person to fill that vacancy.
These inspectors shall:
(a) Determine the number of shares outstanding and the voting
power of each, the shares represented at the meeting, the existence of a quorum,
and the authenticity, validity and effect of proxies;
(b) Receive votes, ballots or consents;
(c) Hear and determine all challenges and questions in any way
arising in connection with the right to vote;
(d) Count and tabulate all votes or consents;
(e) Determine when the polls shall close;
(f) Determine the result; and
(g) Do any other acts that may be proper to conduct the election
or vote with fairness to all shareholders.
ARTICLE III - DIRECTORS
Section 1. Powers
Subject to the provisions of Section 78.120 et seq. of the General
Corporation Law of Nevada and any limitations in the articles of incorporation
and the Bylaws of this corporation relating to action required to be approved by
<PAGE>9
the shareholders or by the outstanding shares, or by a less than majority vote
of a class or series of preferred shares, the business and affairs of the
corporation shall be managed and all corporate powers shall be exercised by or
under the direction of the board of directors. The board may delegate the
management of the day-to-day operation of the business of the corporation to a
management company or other person provided that the business and affairs of the
corporation shall be managed and all corporate powers shall be exercised under
the ultimate direction of the board.
Section 2. Number and Qualification of Directors
The authorized number of directors of the corporation shall not be less
than two nor more than nine with the exact number of directors to be fixed,
within the limits specified, by approval of the board. Each director must be at
least eighteen (18) years of age. A director need not be a shareholder of this
corporation or a resident of the State of Nevada. After the issuance of shares,
a bylaw specifying or changing a fixed number of directors or the maximum or
minimum number or changing from a fixed to a variable board or vice versa may
only be adopted by approval of the majority of the outstanding shares entitled
to vote; provided that an amendment reducing the number to less than five cannot
be adopted if the votes cast against its adoption at a meeting or the shares not
consenting in the case of action by written consent are equal to more than 16
2/3 percent of the outstanding shares entitled to vote.
Section 3. Election and Term of Office
Except as provided in Section 78.330 of the General Corporation Law of
Nevada, at each annual meeting of shareholders, directors shall be elected to
hold office until the next annual meeting. Each director, including the director
elected to fill a vacancy, shall hold office until the expiration of the term
for which elected and until a successor has been elected and qualified.
Section 4. Vacancies
Vacancies in the board of directors may be filled by a majority of the
remaining directors, though less than a quorum, or by a sole remaining director.
Each director so elected shall hold office until his successor is elected at an
annual or special meeting of the shareholders.
A vacancy or vacancies in the board of directors shall be deemed to
exist in case of the death, resignation or removal of any director, or if the
board of directors by resolution declares vacant the office of a director who
has been declared of unsound mind by an order of court or convicted of a felony,
or if the authorized number of directors is increased, or if the shareholders
fail, at any annual or special meeting of shareholders at which any director or
directors are elected, to elect the full authorized number of directors to be
voted for at that meeting.
The shareholders may elect a director or directors at any time to fill
any vacancy or vacancies not filled by the directors. If, after the filling of
any vacancy by the directors, the directors then in office who have been elected
<PAGE>10
by the shareholders shall constitute less than a majority of the directors then
in office, any holder or holders of an aggregate of five percent (5%) or more of
the total number of shares at the time outstanding having the right to vote for
such directors may call a special meeting of the shareholders, to be held to
elect the entire board of directors. If the board of directors accepts the
resignation of a director tendered to take effect at a future time, the board or
the shareholders shall have the power to elect a successor to take office when
the resignation is to become effective.
No reduction of the authorized number of directors or amendment reducing
the number of classes of directors shall have the effect of removing any
director prior to the expiration of such director's term of office.
Section 5. Removal of Directors
Any or all of the directors may be removed without cause if any such
removal is approved by the outstanding shares, subject to the following: (1)
Except for a corporation whose board of directors is classified pursuant to
Section 78.330 of the General Corporation Law of Nevada, no director may be
removed (unless the entire board of directors is removed) when the votes cast
against removal, or not consenting in writing to the removal, would be
sufficient to elect the director if voted cumulatively at an election at which
the same total number of votes were cast, (or, if the action is taken by written
consent, all shares entitled to vote were voted) and the entire number of
directors authorized at the time of the directors' most recent election were
then being elected, (2) When by the provisions of the articles of incorporation
of this corporation the holders of the shares of any class or series, voting as
a class or series, are entitled to elect one or more directors, any director so
elected may be removed only by the applicable vote of the holders of the shares
of that class or series.
A director of a corporation whose board of directors is classified
pursuant to Section 78.330 of the General Corporation Law of Nevada may not be
removed if the votes cast against removal of the director, or not consenting in
writing to the removal, would be sufficient to elect the director if voted
cumulatively (without regard to whether shares may otherwise be voted
cumulatively) at an election at which the same total number of votes were cast
(or, if the action is taken by written consent, all shares entitled to vote were
voted) and either the number of directors elected at the most recent annual
meeting of shareholders, or if greater, the number of directors for whom removal
is being sought, were then being elected.
Section 6. Resignation of Director
Any director may resign effective upon giving written notice to the
chairman of the board, the president, the secretary or the board of directors of
the corporation, unless the notice specifies a later time for the effectiveness
of such resignation. If the resignation is effective at a future date, a
successor may be elected to take office when the resignation becomes effective.
<PAGE>11
Section 7. Place of Meeting
Regular meetings of the board of directors shall be held at any place
within or outside the State of Nevada which has been designated from time to
time by resolution of the board of directors. In the absence of such
designation, regular meetings shall be held at the corporation's principal
executive office.
Special meetings of the board may be held either at a place within or
outside the State of Nevada which has been designated by resolution of the board
of directors or as set forth in a notice of the meeting. If no such location is
set forth in a resolution or in the notice of the meeting, the meeting shall be
held at the principal executive office of the corporation.
Members of the board may participate in a meeting through use of a
conference telephone or similar communication equipment, so long as all members
participating in such meeting can hear one another. Participation in a meeting
by means of the above-described procedure shall constitute presence in person at
such meeting.
Section 8. Annual Meeting
Immediately following each annual meeting of shareholders, the board of
directors shall hold a regular meeting for the purpose of organization, election
of officers and the transaction of other business. Notice of such meeting is
hereby dispensed with.
Section 9. Special Meetings
Special meetings of the board of directors for any purpose or purposes
may be called at any time by the chairman of the board or the president or vice
president or the secretary or any two directors.
Written notice of the date, time and place of special meetings shall be
delivered personally to each director or sent to each director by first-class
mail, by telegraph, facsimile or by other form of written communication, charges
prepaid, sent to him at his address as it appears upon the records of the
corporation or, if it is not so shown or is not readily ascertainable, at the
place in which the meetings of directors are regularly held. The notice need not
state the purpose for the meeting. In case such notice is mailed, it shall be
deposited in the United States mail at least four (4) days prior to the time of
the meeting. In case such notice is delivered personally, transmitted by
facsimile or other electronic means, or telegraphed, it shall be so delivered,
deposited with the telegraph company or electronically transmitted at least
forty-eight (48) hours prior to the time of the meeting. Such delivery, mailing,
telegraphing, or transmitting as above provided, shall be due, legal and
personal notice to such director. Notice of a meeting need not be given to any
director who signs a waiver of notice, whether before or after the meeting, or
who attends the meeting without protesting, prior thereto or at its
commencement, the lack of notice to such director.
<PAGE>12
Section 10. Adjournment
A majority of the directors present, whether or not a quorum is present,
may adjourn any directors' meeting to another time and place.
Section 11. Notice of Adjournment
If a meeting is adjourned for more than twenty-four (24) hours, notice
of any adjournment to another time or place shall be given prior to the time of
the adjourned meeting to the directors who were not present at the time of
adjournment.
Section 12. Waiver of Notice
The transactions at any meeting of the board of directors, however
called and noticed, or wherever held, shall be as valid as though such
transactions had occurred at a meeting duly held after regular call and notice
if a quorum be present and if, either before or after the meeting, each of the
directors not present signs a written waiver of notice of or consent to holding
the meeting or an approval of the minutes thereof. All such waivers, consents or
approvals shall be filed with the corporate records or made a part of the
minutes of the meeting. The waiver of notice need not state the purpose for
which the meeting is or was held.
Section 13. Quorum and Voting
A majority of the authorized number of directors shall be necessary to
constitute a quorum for the transaction of business, except to adjourn as
hereinabove provided. In no event shall a quorum be less than two (2) unless the
authorized number of directors is one (1), in which case one (1) director
constitutes a quorum. Every act or decision done or made by a majority of the
directors at a meeting duly held at which a quorum is present shall be regarded
as an act of the board of directors subject to the provisions of Section 78.140
of the General Corporation Law of Nevada requiring shareholder approval of a
contract or other transaction in which a director has a direct or indirect
financial interest, Section 78.125 of that Law as to appointment of committees,
and Section 78.751 of that Law requiring shareholder approval of indemnification
of directors, officers, employees or other agents of the corporation. However, a
meeting at which a quorum is initially present may continue to transact business
notwithstanding the withdrawal of directors, if any action taken is approved by
at least a majority of the required quorum for such meeting.
Section 14. Fees and Compensation
Directors shall not receive any stated salary for their services as
directors, but, by resolution of the board, a fixed fee, with or without
expenses of attendance, may be allowed to directors not receiving monthly
<PAGE>13
compensation for attendance at each meeting. Nothing herein contained shall be
construed to preclude any director from serving the corporation in any other
capacity, as an officer, agent, employee or otherwise, from receiving
compensation therefor.
Section 15. Action Without Meeting
Any action required or permitted to be taken by the board of directors
under the General Corporation Law of Nevada may be taken without a meeting if
all members of the board individually or collectively consent in writing to such
action. Such consent or consents shall be filed with the minutes of the meetings
of the board. Such action by written consent shall have the same force and
effect as a unanimous vote of such directors. Any certificate or other document
filed under the provision of the General Corporation Law of Nevada which relates
to action so taken shall state that the action was taken by unanimous written
consent of the board of directors without a meeting and that the Bylaws
authorized the directors to so do.
ARTICLE IV - OFFICERS
Section 1. Officers
The officers of the corporation shall be a president, a secretary, and a
chief financial officer (treasurer) and such other officers with such titles and
duties as may be appointed in accordance with the provisions of Section 3 of
this Article, including chairman of the board. Any number of offices may be held
by the same person. All officers must be natural persons and any natural person
may hold two or more offices.
Section 2. Election
The officers of the corporation, except such officers as may be
appointed in accordance with the provisions of Section 3 or Section 5 of this
Article, shall be chosen annually by the board of directors, and each shall hold
his office until he shall resign or shall be removed or otherwise disqualified
to serve or until his successor shall be elected and qualified.
Section 3. Subordinate Officers
The board of directors may appoint such other officers as the business
of the corporation may require, each of whom shall hold office for such period,
have such authority and perform such duties as are provided in the Bylaws or as
the board of directors may from time to time determine.
Section 4. Removal and Resignation
Any officer may be removed, either with or without cause, by a majority
of the directors at the time in office, at any regular or special meeting of the
<PAGE>14
board, or, except in the case of an officer chosen by the board of directors, by
any officer upon whom such power of removal may be conferred by the board of
directors.
Any officer may resign at any time by giving written notice to the board
of directors or to the president or to the secretary of the corporation. Any
such resignation shall take effect at the date of the receipt of such notice or
any later time specified therein; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
Section 5. Vacancies
A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner prescribed in
the Bylaws for regular appointments to such office.
Section 6. Chairman of the Board
The chairman of the board, if there shall be such an officer, shall, if
present, preside at all meetings of the board of directors and shareholders and
exercise and perform all such other powers and duties as may from time to time
be assigned to him by the board of directors or prescribed by the Bylaws.
Section 7. President
The president, or if there is no president the chairman of the board,
shall be the general manager and chief executive officer of the corporation and
shall, subject to the board of directors, have general supervision, direction
and control of the business and of other officers and employees of the
corporation. He shall preside at all meetings of the shareholders and, if there
is no regular, appointed chairman of the board or if such chairman is absent, at
all meetings of the board of directors. He shall be an ex officio member of all
standing committees, including the executive committee, if any, and shall have
general powers and duties of management usually vested in the office of the
president of a corporation, and shall have such other powers and duties as may
be prescribed by the board of directors or the Bylaws.
Section 8. Vice Presidents
In the absence or disability of the president and the chairman of the
board, the vice presidents, if any, in order of their rank as fixed by the board
of directors or, if not ranked, the vice president designated by the board of
directors, shall perform all the duties of the president and, when so acting,
shall have all the powers of and be subject to all the restrictions upon the
president and chairman of the board. Each vice president shall have such other
powers and shall perform such other duties as from time to time may be
prescribed for him by the board of directors or the Bylaws, and the president or
the chairman of the board.
<PAGE>15
Section 9. Secretary
The secretary shall keep, or cause to be kept, at the principal
executive office, or such other place as the board of directors may order, a
book of minutes of all meetings of directors and shareholders, with the time and
place of holding, whether regular or special and, if special, how authorized,
the notice thereof given, the names of those present at directors' meetings, the
number of shares present or represented at shareholders' meeting and the
proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office or at the office of the corporation's transfer agent, a share
register or a duplicate share register showing the names of the shareholders and
their addresses, the number and classes of shares held by each, the number and
the date of certificates issued for the same, and the number and date of
cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all the
meetings of the shareholders and of the board of directors required by the
Bylaws or by law to be given, shall keep the seal of the corporation in safe
custody and shall have such other powers and shall perform such other duties as
from time to time may be prescribed by the board of directors or the Bylaws.
Section 10. Assistant Secretaries
In the absence or disability of the secretary, the assistant secretaries
in order of their rank as fixed by the board of directors or, if not ranked, the
assistant secretary designated by the board of directors shall perform all the
duties of the secretary and, when so acting, shall have all the powers of and be
subject to all the restrictions upon the secretary. Each assistant secretary
shall have such other powers and shall perform such other duties as from time to
time may be prescribed for him by the board of directors or the Bylaws.
Section 11. Chief Financial Officer (Treasurer)
The chief financial officer shall be the treasurer. The treasurer shall
keep and maintain, or cause to be kept and maintained, adequate and correct
accounts of the properties and business transactions of the corporation,
including accounts of its assets, liabilities, receipts, disbursements, gains,
losses, capital, surplus and shares.
The treasurer shall deposit all moneys and other valuables in the name
and to the credit of the corporation with such depositaries as may be designated
by the board of directors. He shall be responsible for the proper disbursement
of the funds of the corporation as may be ordered by the board of directors and
shall render to the president or directors, whenever they request it, an account
of all of his transactions as treasurer and of the financial condition of the
corporation. The treasurer shall prepare a proper annual budget of income and
expenses for each calendar year, revised quarterly, for approval of or revision
<PAGE>16
by the board of directors and shall be responsible for the handling of finances
in connection therewith. He shall have such other powers and shall perform such
other duties as may be prescribed by the board of directors. He shall see that
all officers signing checks are bonded in such amounts as may be fixed from time
to time by the board of directors.
Section 12. Assistant Financial Officers
In the absence of or disability of the treasurer, the assistant
financial officers in order of their rank or, if not ranked, the assistant
financial officer designated by the board of directors shall perform all the
duties of the treasurer and, when so acting, shall have the powers of and be
subject to all the restrictions upon the treasurer. Each assistant financial
officer shall have such other powers and perform such other duties as from time
to time may be prescribed for him by the board of directors or the Bylaws.
Section 13. Salaries
Salaries of officers and other shareholders employed by the corporation
shall be fixed periodically by the board of directors or established under
agreements with the officers or shareholders approved by the board of directors.
No officer shall be prevented from receiving this salary because he is also a
director of the corporation.
ARTICLE V - SHARES OF STOCK
Section 1. Share Certificates
The certificates of shares of the corporation shall be in such form
consistent with the articles of incorporation and the laws of the State of
Nevada as shall be approved by the board of directors. A certificate or
certificates for shares of the capital stock of the corporation shall be issued
to each shareholder when any of these shares are fully paid, and the board of
directors may authorize the issuance of certificates or shares as partly paid
provided that these certificates shall state the amount of the consideration to
be paid for them and the amount paid. All such certificates shall be signed by
the chairman or vice chairman of the board or the president or a vice president,
and by the treasurer or an assistant financial officer or the secretary or any
assistant secretary, certifying the number of shares and the class or series of
shares owned by the shareholder. Any or all of the signatures on the certificate
may be facsimile.
Section 2. Transfer of Shares
Subject to the provisions of law, upon the surrender to the corporation
of a certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.
<PAGE>17
Section 3. Lost or Destroyed Certificate
The holder of any shares of stock of the corporation shall immediately
notify the corporation of any loss or destruction of the certificate therefor,
and the corporation may issue a new certificate in the place of any certificate
theretofore issued by it alleged to have been lost or destroyed, upon approval
of the board of directors. The board may, in its discretion, as a condition to
authorizing the issue of such new certificate, require the owner of the lost or
destroyed certificate, or his legal representative, to make proof satisfactory
to the board of directors of the loss or destruction thereof and to give the
corporation a bond or other security, in such amount and with such surety or
sureties as the board of directors may determine, as indemnity against any claim
that may be made against the corporation on account of any such certificate so
alleged to have been lost or destroyed.
ARTICLE VI - COMMITTEES
Section 1. Committees
The board of directors may, by resolution adopted by a majority of the
authorized number of directors, designate one or more committees, each
consisting of one (1) or more directors, to serve at the pleasure of the board.
The board may designate one or more directors as alternate members of any
committee, who may replace any absent member at any meeting of the committee.
Any such committee, to the extent provided by resolution of the board, shall
have all authority of the board, except with respect to: (i) the approval of any
action requiring shareholder approval as enumerated in subsection (i) through
(vi) of Section 4 of Article II of these Bylaws and requiring notice to
shareholders of such action; (ii) the filling of vacancies on the board of
directors or on any committee; (iii) the fixing of compensation of the board of
directors for serving on the board or on any committee; (iv) the amendment or
repeal of Bylaws or the adoption of new Bylaws; (v) the amendment or repeal of
any resolution of the board of directors which by its expressed terms is not so
amenable or repealable; (vi) a distribution to the shareholders of the
corporation, except at a rate or in a periodic amount within a price range
determined by the board of directors; or (vii) the appointment of other
committees of the board of directors or the members of these committees.
The provisions of these Bylaws for notice to directors of meetings,
place of meetings, regular meetings, special meetings and notice, quorum, waiver
of notice, adjournment, notice of adjournment, and actions without meetings,
without such changes in the context of those Bylaws as may be necessary to
substitute the committee and its members for the board of directors and its
members, apply also to the committees of the board of directors and action by
such committees, except that the time of regular meetings of committees may be
determined either by resolution of the board of directors or by resolution of
the committee.
<PAGE>18
ARTICLE VII - INDEMNIFICATION OF DIRECTORS,
OFFICERS, EMPLOYEES, AND OTHER AGENTS
Section 1. Agents, Proceedings and Expenses
For purposes of this Article, an "agent" of the corporation includes any
person who is or was a director, officer, employee or other agent of the
corporation; or is or was serving at the request of the corporation as a
director, officer, employee or agent of another foreign or domestic corporation,
partnership, joint venture, trust or other enterprise; or was a director,
officer, employee or agent of a foreign or domestic corporation which was a
predecessor corporation of the corporation or of another enterprise at the
request of such predecessor corporation; "proceeding" means any threatened,
pending or completed action or proceeding, whether civil, criminal,
administrative or investigative; and "expenses" include, without limitation,
attorneys' fees, judgments, fines, settlements, and other amounts actually and
reasonably incurred in connection with any proceeding arising by reason of the
fact any such person is or was an agent of the corporation.
Section 2. Indemnification
The corporation shall, to the maximum extent permitted by Nevada law,
have the power to indemnify each of its agents against expenses and shall have
the power to advance to each such agent expenses incurred in defending any such
proceeding to the maximum extent permitted by that law.
Section 3. Insurance
The corporation may, upon the resolution of the directors, purchase and
maintain insurance on behalf of any agent of the corporation against any
liability asserted against or incurred by the agent in such capacity or arising
out of the agent's status as such, whether or not the corporation would have the
power to indemnify the agent against such liability under the provisions of this
Article VII.
ARTICLE VIII - RECORDS AND REPORTS
Section 1. Shareholder Inspection of Articles and Bylaws
The corporation shall keep at its registered office in Nevada, a copy
certified by the secretary of state of its articles of incorporation and any
amendments thereto, a copy certified by the corporation's secretary of the
Bylaws and any amendments thereto, which shall be open to inspection by
shareholders at all reasonable times during office hours.
<PAGE>19
Section 2. Maintenance and Inspection of Records of Shareholders
The corporation shall keep at its registered office, or at the office of
its transfer agent or registrar, if either be appointed and as determined by
resolution of the board of directors, a record of its shareholders, giving the
names and addresses of all shareholders and the number and class of shares held
by each shareholder.
Any person who has been a shareholder of record of the corporation for
at least six months preceding his demand, or any shareholder or shareholders
holding at least five percent (5%) in the aggregate of the outstanding voting
shares of the corporation, or any shareholder or shareholders who hold at least
one percent (1%) of such voting shares and have filed a Schedule 14B with the
United States Securities and Exchange Commission relating to the election of
directors of the corporation shall have an absolute right to do either or both
of the following: (i) inspect and copy the records of shareholders' names,
addresses and shareholdings, during usual business hours on five (5) days' prior
written demand on the corporation, or (ii) obtain from the transfer agent of the
corporation, on written demand and on the tender of such transfer agent's usual
charges for such list (the amount of which charges shall be stated to the
shareholder by the transfer agent upon request), a list of the shareholders'
names and addresses, who are entitled to vote for the election of directors, and
their shareholdings, as of the most recent record date for which that list has
been compiled or as of a date specified by the shareholder after the date of
demand. This list shall be made available to any such shareholder or
shareholders by the transfer agent on or before the later of five (5) days after
the demand is received or the date specified in the demand as the date as of
which the list is to be compiled. The record of shareholders shall also be open
to inspection on the written demand of any shareholder or holder of a voting
trust certificate, at any time during usual business hours, for a purpose
reasonably related to the holder's interests as a shareholder or as the holder
of a voting trust certificate. Any inspection and copying under this Section 2
may be made in person or by an agent or attorney of the shareholder or holder of
a voting trust certificate making the demand.
Section 3. Shareholder Inspection of Corporate Records
The accounting books and records and minutes of proceedings of the
shareholders and the board of directors and any committee or committees of the
board of directors shall be kept at such place or places designated by the board
of directors, or, in the absence of such designation, at the principal executive
office of the corporation. The minutes shall be kept in written form, and the
accounting books and records shall be kept either in written form or in any
other form capable of being converted into written form. The minutes and
accounting books and records shall be open to inspection upon the written demand
on the corporation of any shareholder or holder of a voting trust certificate,
at any reasonable time during usual business hours, for a purpose reasonably
related to the holder's interests as a shareholder or as the holder of a voting
trust certificate. The inspection may be made in person or by an agent or
attorney and shall include the right to copy and make extracts. These rights of
<PAGE>20
inspection shall extend to the records of each subsidiary corporation of the
corporation and may not be limited by the articles and Bylaws.
Section 4. Inspection by Directors
Every director shall have the absolute right at any reasonable time to
inspect all books, records and documents of every kind and to inspect the
physical properties of the corporation and each of its subsidiary corporations,
domestic or foreign. This inspection by a director may be made in person or by
an agent or attorney and the right of inspection includes the right to copy and
make extracts of documents.
Section 5. Annual Statement of General Information
The corporation shall, each year during the calendar month in which its
articles of incorporation originally were filed with the Nevada Secretary of
State, file with the Secretary of State, on the prescribed form, a statement
setting forth the names and complete business or residence addresses of all
incumbent directors, the names and complete business or residence addresses of
the president, secretary and treasurer, and the corporation's duly appointed
resident agent in charge of the registered office in the State of Nevada upon
whom process can be served, all in compliance with Section 78.150 of the General
Corporation Law of Nevada.
ARTICLE IX - MISCELLANEOUS
Section 1. Checks, Drafts, Evidence of Indebtedness
All checks, drafts or other orders for payment of money, notes or other
evidences of indebtedness, issued in the name of or payable to the corporation,
shall be signed or endorsed by such person or persons and in such manner as from
time to time shall be determined by resolution of the board of directors.
Section 2. Contracts, Etc., How Executed
The board of directors, except as otherwise provided in these Bylaws,
may authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances;
and, unless so authorized by the board of directors, no officer, agent or
employee shall have any power or authority to bind the corporation by any
contract or engagement or to pledge its credit to render it liable for any
purpose or to any amount.
Section 3. Representation of Shares of Other Corporations
The president or, in the event of his absence or inability to serve, any
vice president and the secretary or assistant secretary of this corporation are
<PAGE>21
authorized to vote, represent and exercise, on behalf of this corporation, all
rights incidental to any and all shares of any other corporation standing in the
name of this corporation. The authority herein granted to the officers to vote
or represent on behalf of this corporation any and all shares held by this
corporation in any other corporation may be exercised either by such officers in
person or by any person authorized to do so by proxy or power of attorney duly
executed by the officers.
ARTICLE X - AMENDMENTS TO BYLAWS
Section 1. Amendment by Shareholders
New Bylaws may be adopted or these Bylaws may be amended or repealed by
the vote or written consent of the shareholders entitled to exercise a majority
of the voting power of the corporation; except as provided in these Bylaws, a
bylaw amendment reducing the number or the minimum number of directors cannot be
adopted if the votes cast against its adoption at a meeting or the shares not
consenting in the case of action by written consent would be sufficient to elect
at least one (1) director if voted cumulatively at an election at which all of
the outstanding shares entitled to vote were voted and the entire number of
previously authorized directors were then being elected.
Section 2. Amendment by Directors
Subject to the rights of the shareholders as provided in Section 1 of
this Article X to adopt, amend or repeal Bylaws, Bylaws may be adopted, amended,
or repealed by the board of directors; except as provided in these Bylaws, a
bylaw specifying or changing a fixed number of directors or the maximum or
minimum number or changing from a fixed to variable Board or vice versa may only
be adopted by the affirmative vote of a majority of the outstanding shares
entitled to vote.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Form 10-SB
filed by Hyaton Organics Inc. and is qualified in its entirety by reference to
such Financial Statements.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> Dec-31-1998 Dec-31-1998
<PERIOD-END> Jun-30-1999 Dec-31-1998
<CASH> 7,214 9,210
<SECURITIES> 0 0
<RECEIVABLES> 15,432 41,108
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 22,646 50,318
<PP&E> 1,942 1,868
<DEPRECIATION> 415 394
<TOTAL-ASSETS> 24,173 51,792
<CURRENT-LIABILITIES> 665,562 451,100
<BONDS> 0 0
0 0
0 0
<COMMON> 276,247 276,247
<OTHER-SE> (917,636) (675,555)
<TOTAL-LIABILITY-AND-EQUITY> 24,173 51,792
<SALES> 0 0
<TOTAL-REVENUES> (1,702) 36,465
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 214,535 162,596
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (216,237) (126,131)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (216,237) (126,131)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (216,237) (126,131)
<EPS-BASIC> (.01) (.01)
<EPS-DILUTED> (.01) (.01)
</TABLE>
