SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to .
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Commission File No. 1-12293
NATURAL WAY TECHNOLOGIES, INC.
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(Exact name of small business issuer as specified in its charter)
Nevada 87-0394313
- --------------------------------------- -----------------------------------
(State or other jurisdiction of
incorporation or organization) (IRS Employer Identification Number)
One World Trade Centre, Suite 7865, New York, New York 10048
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(Address of principal executive offices)
(212) 938-0574
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(Issuer's telephone number)
Room 3105, 31/F, Universal Trade Centre
3-5 A Arbuthnot Road, Central, Hong Kong
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(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
----- -----
As of October 31, 1996, 8,200,000 shares of Common Stock of the issuer
were outstanding.
<PAGE>
NATURAL WAY TECHNOLOGIES, INC.
INDEX
<TABLE>
<CAPTION>
Page
Number
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<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - September 30, 1996 and
December 31, 1995................................................ 3
Consolidated Statements of Operations - For the
three and nine month periods ended
September 30, 1996 and 1995...................................... 5
Consolidated Statements of Cash Flows - For the
nine month periods ended September 30, 1996 and 1995............. 6
Notes to Consolidated Financial Statements....................... 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............. 9
PART II - OTHER INFORMATION...........................................11
SIGNATURES..............................................................12
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NATURAL WAY TECHNOLOGIES, INC. and SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)
(Amounts expressed in United States $'000)
<TABLE>
<CAPTION>
September 30, 1996 December 31, 1995
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<S> <C> <C>
ASSETS
Current assets:
Cash $ 2,968 $ 374
Deposits 1,400 -
Accounts receivable, net 9,486 6,528
Prepayments 206 425
Inventories, net 767 862
Amount due from related company 1,248 1,052
Amount due from companies related
to joint venture partners 1,795 -
------- -------
Total current assets 17,870 9,241
------- -------
Deferred value added tax recoverable 143 162
Property, plant and equipment, net 2,163 2,182
------- -------
Total assets $20,176 $11,585
======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
NATURAL WAY TECHNOLOGIES, INC.
Consolidated Balance Sheets (Unaudited)
(Amounts expressed in United States $'000)
(Continued)
<TABLE>
<CAPTION>
September 30, 1996 December 31, 1995
------------------ -----------------
<S> <C> <C>
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities:
Short term borrowings $ 137 $ 4
Accounts payable & accruals 3,597 3,807
Loans from related company 31 -
Loan from director 46 -
Taxes payable 2,061 1,640
--------- -----------
Total current liabilities 5,872 5,451
--------- -----------
Payable to joint venture partners 4,304 46
Minority interests 2,567 -
Shareholders' equity :
Common stock, par value $0.001; authorized
50,000,000 shares, outstanding 1,200,000
shares at September 30, 1996 and 1,000,000
shares at December 31, 1995 1 1
subscribed - 7,000,000 shares at
September 30, 1996 7 -
Preferred stock, Series A convertible and
redeemable, par value $0.001; authorized
15,000 shares, outstanding 5,600 shares at
September 30, 1996 - -
Preferred stock, Series B convertible and
redeemable, par value $0.001; authorized
100,000 shares, outstanding 100,000
shares at September 30, 1996 - -
Additional paid-in capital 5,601 -
Subscription monies receivable - -
Retained earnings 1,639 6,087
Dedicated capital 179 -
Cumulative translation adjustments 6 -
--------- -----------
Total shareholders' equity 7,433 6,088
--------- -----------
Total liabilities and shareholders'
equity $ 20,176 $ 11,585
========= ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
NATURAL WAY TECHNOLOGIES, INC. and SUBSIDIARIES
Consolidated Statements of Operations (Unaudited)
(Amounts expressed in United States $'000)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- ---------------------
1996 1995 1996 1995
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales $ 2,788 $ 2,070 $ 8,255 $ 7,761
Cost of goods sold 586 537 1,734 2,012
---------- ---------- ---------- ----------
Gross profit 2,202 1,533 6,521 5,749
Selling, general and
administrative expenses (1,437) 874 (3,862) (3,278)
Other income, net 17 6 17 15
---------- ---------- ---------- ----------
Income before taxes 782 663 2,676 2,486
Provision for income taxes 31 24 91 90
---------- ---------- ---------- ----------
Income before minority interest 751 639 2,585 2,396
Minority interest 225 173 767 647
---------- ---------- --------- ----------
Net income $ 526 $ 466 $ 1,818 $ 1,749
========== =========== ========= ==========
Net income per common share $ .06 $ .06 $ .22 $ .21
========== =========== ========= ==========
Weighted average number of
shares outstanding 8,200,000 8,200,000 8,200,000 8,200,000
========== =========== ========= ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
NATURAL WAY TECHNOLOGIES, INC. and SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
(Amounts expressed in United States $'000)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1996 1995
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net Income 1,818 1,749
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation of property, plant and equipment 19 19
Minority interest 767 647
(Increase) Decrease in operating assets
Deposit paid (1,400) -
Accounts receivable (2,958) (910)
Inventories 95 72
Prepayments 219 51
Amount due from companies related to joint
venture partners (1,795) -
Amount due from a related company (196) (92)
Deferred value added tax recoverable - 30
Increase (Decrease) in operating liabilities
Accounts payable and accruals (210) (412)
Amount due to a director 46 -
Amount due to a related company 31 9
Taxes payable 421 141
------- -------
Net cash provided by (used in) operating
activities (3,143) 1,304
------- -------
Cash flows from investing activities:
Acquisition of property, plant and equipment - (1,359)
Proceeds from the disposal of property,
plant and equipment - 3
------- -------
Net cash provided by (used in)
investing activities - (1,356)
------- -------
Cash flows from financing activities:
Increase in short-term borrowing 137 -
Proceeds from issuance of preferred stock
- Series A 5,600 -
Repayment of short-term borrowings - (149)
------- -------
Net cash provided by (used in) financing
activities 5,737 (149)
------- -------
Net increase (decrease) in cash 2,594 (201)
Cash as of beginning of period 374 642
------- -------
Cash as of end of period $ 2,968 $ 441
======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
NATURAL WAY TECHNOLOGIES, INC. and SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 1996 (Unaudited)
1. INTERIM FINANCIAL PRESENTATION
The interim financial statements are prepared pursuant to the requirements
for reporting on Form 10-QSB. The December 31, 1995 balance sheet data was
derived from audited financial statements but does not include all
disclosures required by generally accepted accounting principles. The
interim financial statements and notes thereto should be read in
conjunction with the financial statements and notes included in the
Company's Form 10-KSB dated December 31, 1995. In the opinion of
management, the interim financial statements reflect all adjustments of a
normal recurring nature necessary for a fair presentation of the results
for the interim periods presented.
2. CURRENCY PRESENTATION AND FOREIGN CURRENCY TRANSLATION
The Company's financial information is presented in U. S. dollars. The
translation of the financial statements of foreign subsidiaries into United
States dollars is performed for balance sheet accounts using closing
exchange rates in effect at the balance sheet date and for revenue and
expense accounts using an average exchange rate during each reporting
period. The gains or losses resulting from translation are included in
shareholders' equity separately as cumulative translation adjustments.
3. BUSINESS AND ORGANIZATION
Effective July 1, 1996, the Company acquired all of the issued and
outstanding stock of China Medical Development, Co., Ltd. ("CMDC"), in
exchange for 7,000,000 shares of common stock. CMDC is the owner of 70%
interest in Dunhua Huakung Pharmaceutical Co., Ltd., a sino-foreign joint
venture engaged in the manufacture and distribution of Chinese herbal
medicine in The People's Republic of China ("PRC"). Since the acquisition
was accounted for as a pooling of interests, the Company's financial
statements for periods prior to July 1, 1996 have been restated to include
the consolidated results of CMDC.
4. SHAREHOLDERS' EQUITY
As consideration for the acquisition of CMDC, the Company issued 7,000,000
shares of common stock and 100,000 shares of Series B preferred stock and
agreed to fund CMDC with a minimum of $4,200,000.
Common Stock
During the nine months ended September 30, 1996, the Company issued 200,000
common shares for consulting services in connection with the CMDC
acquisition.
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<PAGE>
Series A Convertible Preferred Stock
During the nine months ended September 30, 1996, the Company issued 5,600
shares of Series A convertible preferred stock for $5,600,000. These
shares have no voting rights, a liquidation preference of $1,000 per share
and are convertible into common stock at anytime on or before December 31,
1997 at the lesser of the market price of the common stock or $1,000 per
share.
Series B Preferred Shares
As part of the acquisition of CMDC, the Company issued 100,000 shares of
Series A preferred stock. As a class, these shares are entitled to thirty
percent voting control of the Company in all matters voted on by the
shareholders.
5. EARNINGS PER SHARE
Earnings per share is calculated for each period and the shares outstanding
have been adjusted to give retroactive effect to the acquisition of CMDC.
-8-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
MATERIAL CHANGES IN RESULTS OF OPERATIONS
Net sales for the nine months ended September 30, 1996, increased
$494,000, or 6.4%, to $8.3 million from $7.8 million for the nine months ended
September 30, 1995. The increase in net sales was attributable to increased
sales of GMN, a medication used in the treatment of coronary heart disease.
Cost of goods sold for the nine months ended September 30, 1996, decreased
$278,000, or 13.8%, to $1.7 million from $2.0 million for the nine months ended
September 30, 1995. The decrease in cost of goods sold was attributable to
decreasing prices for raw materials as well as the lower productivity costs of
GMN.
Selling, general and administration expenses for the nine months ended
September 30, 1996, increased $584,000, or 17.8%, to $3.9 million from $3.3
million for the nine months ended September 30, 1995. The increase in selling
general and administration expenses was attributable to costs associated with
promoting the new corporate image and start-up costs of the Beijing Research
and Development Center.
Other income for the nine months ended September 30, 1996, increased
$2,000, or 13.3%, to $17,000 from $15,000 for the nine months ended September
30, 1995. The increase in other income was attributable to additional interest
income on funds received from the sale of convertible preferred stock.
Minority interest represents the allocable share of income or loss
attributable to the 30% share of Dun Hua Huakung Pharmaceutical Co., Ltd. not
owned by the Company during the nine months of 1996.
Net income for the nine months ended September 30, 1996, decreased
$578,000, or 24.1%, to $1.8 million from $2.4 million for the nine months ended
September 30, 1995.
MATERIAL CHANGES IN FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1996, the Company had working capital of $12.0 million
and cash balances of $3.0 million as compared to working capital of $3.8
million and cash balances of $374,000 at December 31, 1995. The improvement in
working capital was attributable to a combination of (i) cash flows from
profitable operations and (ii) the receipt of $5.6 million of net proceeds from
the sale of Series A convertible preferred stock.
As of September 30, 1996, the Company's only long-term obligation
consisted of $4.3 million payable to a joint venture partner relating to the
acquisition of additional operating assets from the joint venture partner.
During the first nine months of 1996, the Company issued 5,000 shares of
Series A convertible preferred stock raising $5,600,000, all of which remains
outstanding and convertible into common stock. The preferred shares are each
convertible into 1,000 shares of common stock at anytime prior to December 31,
1997, have a liquidation preference of $1,000 per share, have no general voting
-9-
<PAGE>
rights and are redeemable by the Company at anytime after December 31, 1997, at
$1,000 per share. Subsequent to September 30, 1996, 400 additional shares of
Series A convertible preferred stock were issued for $400,000. In addition,
the Company issued 200,000 shares of common stock for consulting services
rendered in connection with the acquisition of China Medical Development Co.,
Ltd.
Management believe that with its available equity and financing sources
and its existing capital, the Company has sufficient capital resources to fund
its current operations for the foreseeable future.
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<PAGE>
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
2.1 Conditional Acquisition Agreement between Natural Way
Technologies, Inc. and China Food and Beverage Industrial
Company Limited.
3.1 Amended and Restated Articles of Incorporation.
3.2 Amended Bylaws.
3.3 Certificate of Designation - Series A Convertible Preferred
Stock.
3.4 Certificate of Designation - Series B Preferred Stock.
3.5 Certificate of Designation - Series C Convertible Preferred
Stock.
(b) Reports on Form 8-K
1. Form 8-K dated June 30, 1996, reporting on Items 1 and 2 the
acquisition of China Medical Development Co. and the resulting
change in control of the Company; Item 4, the change of
certifying accountant; and Item 5, the change of the Company's
name and sale of Series A Preferred Stock.
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<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
<TABLE>
<S> <C>
(REGISTRANT) NATURAL WAY TECHNOLOGIES, INC.
BY (SIGNATURE) /s/ Yiu Yat Hung
(NAME AND TITLE) Yiu Yat Hung, Chairman and
Chief Executive Officer
(DATE) November 26, 1996
BY (SIGNATURE) /s/ Yao Yi Le
(NAME AND TITLE) Yao Yi Le, Treasurer and
Chief Financial Officer
(DATE) November 26, 1996
</TABLE>
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<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 2,968
<SECURITIES> 0
<RECEIVABLES> 9,486
<ALLOWANCES> 0
<INVENTORY> 767
<CURRENT-ASSETS> 17,870
<PP&E> 2,163
<DEPRECIATION> 0
<TOTAL-ASSETS> 20,176
<CURRENT-LIABILITIES> 5,872
<BONDS> 4,304
0
0
<COMMON> 8
<OTHER-SE> 7,425
<TOTAL-LIABILITY-AND-EQUITY> 20,176
<SALES> 8,255
<TOTAL-REVENUES> 8,272
<CGS> 1,734
<TOTAL-COSTS> 1,734
<OTHER-EXPENSES> 3,862
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,676
<INCOME-TAX> 91
<INCOME-CONTINUING> 2,585
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,818
<EPS-PRIMARY> .22
<EPS-DILUTED> .22
</TABLE>
CONDITIONAL ACQUISITION AGREEMENT
This Agreement dated this 28th day of June, 1996 by and between Natural
Way Technologies, Inc. (hereinafter "Natural Way"), the shareholders of China
Food and Beverage Industrial Company Limited (hereinafter "Shareholders") and
China Food and Beverage Industrial Company Limited (hereinafter "Food and
Beverage").
RECITALS
WHEREAS, Natural Way is interested in acquiring all of the issued and
outstanding shares of Food and Beverage;
WHEREAS, the Shareholders are desirous of selling their shares to Natural
Way;
WHEREAS, prior to any acquisition, the requisite due diligence must be
completed and the necessary terms and conditions negotiated, and;
WHEREAS, the parties are desirous of having such due diligence commence
so that the terms and conditions can be negotiated and the transaction
finalized;
NOW THEREFORE, in consideration of the foregoing, the adequacy which is
hereby acknowledged, the parties hereto covenant and agrees as follows:
1. Natural Way agrees to deposit with Food and Beverage the sum of
$1,400,000 (U.S.) as a refundable deposit. This deposit is refundable
should Natural Way, upon completion of its due diligence or the
issuance of the Arthur Andersen & Co. report determine that it is not
in its best interest to make this acquisition.
2. The Shareholders hereby grant to Natural Way the unconditional right
to acquire not less than 50% of the shares of Food and Beverage at a
<PAGE>
price/earnings ratio not to exceed eight times earnings for the fiscal
year ended prior to the year of acquisition. This right shall run
from the date of deposit of the funds specified in Paragraph 1 the
later of to a date two months from the date Natural Way completes its
due diligence or the receipt of an audit report on Food and Beverage
from Arthur Andersen & Co.
3. Food and Beverage consents and hereby appoints Arthur Andersen & Co.
to examine its books and records for the previous three fiscal years
and the current years and to prepare a report thereon.
4. In the event Natural Way exercises its option to acquire a minimum of
50% of the issued and outstanding shares (or such similar equity
arrangement), the deposit of $1,400,000 shall be applied toward the
purchase price and any balance owing for such purchase shall be paid
at closing.
5. The parties agree that should the option to purchase a minimum of
fifty percent of the shares of Food and Beverage been exercised a
formal acquisition document shall be executed containing such terms
and conditions as are normal and customary for a share acquisition of
a corporation.
6. This Agreement may not be assigned by either party without the written
consent of both parties.
7. This Agreement constitutes the entire agreement between the parties
and may not be altered, except in writing, signed by all parties
hereto.
NATURAL WAY TECHNOLOGIES, INC.
By:
---------------------------
Its:
--------------------------
<PAGE>
SHAREHOLDERS OF CHINA FOOD AND BEVERAGE CO. LTD.
-----------------------------------
-----------------------------------
CHINA FOOD AND BEVERAGE COMPANY LIMITED
By:
--------------------------------
Its:
-------------------------------
RESTATED ARTICLES OF INCORPORATION
OF
NATURAL WAY TECHNOLOGIES, INC.
We, the undersigned President and Secretary of Natural Way Technologies,
Inc. do hereby certify:
That the board of directors of said corporation at a meeting duly convened
on May 13, 1996, adopted resolutions to amend and restate the Articles of
Incorporation, and
That the number of shares of the corporation outstanding and entitled to
vote on an amendment to the Articles of Incorporation is 1,000,000; that
said amendments have been consented to and approved by a majority vote of
the stockholders holding at least a majority of each class of stock
outstanding and entitled to vote thereon, and
That the text of Articles of Incorporation as amended to date reads as
herein set forth in full:
ARTICLE I
NAME
The name of the corporation (hereinafter called "Corporation") is NATURAL
WAY TECHNOLOGIES, INC.
ARTICLE II
PERIOD OF DURATION
The period of duration of the Corporation is perpetual.
ARTICLE III
PURPOSES AND POWERS
The purpose for which this Corporation is organized is to engage in the
business of investing in investments of all forms and nature and to engage in
any and all other lawful business.
<PAGE>
ARTICLE IV
CAPITALIZATION
The total number of shares of stock which the Corporation shall have the
authority to issue is fifty five million (55,000,000) shares, consisting of
fifty million (50,000,000) shares of Common Stock having a par value of $.001
per share and five million (5,000,000) shares of Preferred Stock having a par
value of $.001 per share.
A. Preferred Stock
The Board of Directors is authorized, subject to the limitations
prescribed by law and the provisions of this Article, to provide for the
issuance of the shares of Preferred Stock in series, and by filing a
certificate pursuant to the applicable law of the State of Nevada, to
establish from time to time the number of shares to be included in each
such series and to fix the designation, powers, preferences and rights of
the shares of each such series and the qualifications, limitations or
restrictions thereof.
1. The authority of the Board with respect to each series shall include,
but not be limited to, determination of the following:
a. The number of shares constituting that series and the distinctive
designation of that series;
b. The dividend rate on the shares of that series, whether dividends
shall be cumulative, and if so, from which date or dates, and the
relative rights of priority, if any, of payment of dividends on
shares of that series;
c. Whether that series shall have voting rights, in addition to the
voting rights provided by law, and if so, the terms of such
voting rights;
d. Whether that series shall have conversion privileges and, if so,
the terms and conditions of such conversion, including provision
<PAGE>
for adjustment of the conversion rate in such events as the Board
of Directors shall determine;
e. Whether or not the shares of that series shall be redeemable and,
if so, the terms and conditions of such redemption, including the
date or dates upon or after which they shall be redeemable and
the amount per share payable in case of redemption, which amount
may vary under different conditions and at different redemption
dates;
f. Whether that series shall have a sinking fund for the redemption
or purchase of shares of that series and, if so, the terms and
amount of such sinking fund;
g. The rights of the shares of that series in the event of voluntary
or involuntary liquidation, dissolution or winding up of the
Corporation, and the relative rights of priority, if any, of
payment of shares of that series; and
h. Any other relative rights, preferences and limitations of that
series.
2. Dividends on outstanding shares of Preferred Stock shall be paid or
declared and set apart for payment, before any dividends shall be
paid or declared and set apart for payment on Common Stock with
respect to the same dividend period.
3. If upon any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, the assets available for distribution
to holders of shares of Preferred Stock of all series shall be
insufficient to pay such holders the full preferential amount to
which they are entitled, then such assets shall be distributed
ratably among the shares of all series of Preferred Stock in
accordance with the respective preferential amounts (including unpaid
cumulative dividends, if any) payable with respect thereto.
4. Unless otherwise provided in any resolution of the Board of Directors
providing for the issuance of any particular series of Preferred
<PAGE>
Stock, no holder of Preferred Stock shall have any pre-emptive right
as such holder to subscribe for, purchase or receive any part of any
new or additional issue of capital stock of any class or series,
including unissued and treasury stock, or obligations or other
securities convertible into or exchangeable for capital stock of any
class or series, or warrants or other instruments evidencing rights
or options to subscribe for, purchase or receive any capital stock of
any class or series, whether now or hereafter authorized and whether
issued for cash or other consideration or by way of dividend.
B. Common Stock
1. Subject to the prior and superior rights of the Preferred Stock and
on the conditions set forth in the foregoing parts of this Article or
in any resolution of the Board of Directors providing for the
issuance of any particular series of Preferred Stock, and not
otherwise, such dividends (payable in cash, stock or otherwise) as
may be determined by the Board of Directors may be declared and paid
on the Common Stock from time to time out of any funds legally
available therefor.
2. Except as otherwise provided by law, by this Certificate of
Incorporation or by the resolution or resolutions of the Board of
Directors providing for the issue of any series of the Preferred
Stock, the Common Stock shall have the exclusive right to vote for
the election of directors and for all other purposes, each holder of
the Common Stock being entitled to one vote for each share held.
3. Upon any liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, and after the holders of the
Preferred Stock of each series shall have been paid in full the
amount to which they respectively shall be entitled, or a sum
sufficient for such payments in assets of the Corporation shall be
distributed pro rata to the holders of the Common Stock in accordance
<PAGE>
with their respective rights and interests, to the exclusion of the
holders of the Preferred Stock.
ARTICLE V
REGISTERED OFFICE AND AGENT
The address of the corporation's current registered office is 502 E. John
Street, Room E., Carson City, Nevada 89706; the name of the corporation's
current registered agent at such address is The Prentice-Hall Corporation
System, Nevada, Inc.
ARTICLE VI
DIRECTORS
The Corporation shall be governed by a Board of Directors consisting of
such number of directors as shall be fixed the Corporation's bylaws. The
number of directors constituting the current board of directors of the
corporation is two and the names and addresses of the directors are as follows:
<TABLE>
<CAPTION>
Name Address
- --------------------- --------------------------------
<S> <C>
Gregory W. Boss 1174 South Foothill Drive #416
Salt Lake City, Utah 84108
Natalie P. Boss 1174 South Foothill Drive #416
Salt Lake City, Utah 84108
</TABLE>
ARTICLE VII
DENIAL OF PREEMPTIVE RIGHTS
There shall be no preemptive right to acquire unissued and/or treasury
shares of the stock of the Corporation.
ARTICLE VIII
LIABILITY OF OFFICERS AND DIRECTORS
A director or officer of the Corporation shall not be liable to the
Corporation or its shareholders for damages for breach of fiduciary duty as a
director or officer unless the act or omission involves intentional misconduct,
fraud, a knowing violation of law or the payment of an unlawful dividend in
violation of NRS 78.300.
<PAGE>
ARTICLE IX
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Corporation shall indemnify any and all persons who may serve or who
have served at any time as directors or officers or who, at the request of the
Board of Directors of the Corporation, may serve or at any time have served as
directors or officers of another corporation in which the Corporation at such
time owned or may own shares of stock or of which it was or may be a creditor,
and their respective heirs, administrators, successors and assigns, against any
and all expenses, including amounts paid upon judgments, counsel fees and
amounts paid in settlement (before or after suit is commenced), actually and
necessarily by such persons in connection with the defense or settlement of any
claim, action, suit or proceeding in which they, or any of them, are made
parties, or a party, or which may be asserted against them or any of them, by
reason of being or having been directors or officers of the Corporation, or of
such other corporation, except in relation to matters as to which any such
director or officer of the Corporation, or of such other corporation or former
director or officer or person shall be adjudged in any action, suit or
proceeding to be liable for his own negligence or misconduct in the performance
of his duty. Such indemnification shall be in addition to any other rights to
which those indemnified may be entitled under any law, by law, agreement, vote
of shareholder or otherwise.
DATED this 17th day of May, 1996.
NATURAL WAY TECHNOLOGIES, INC.
/s/ Yiu Yat Hung
Yiu Yat Hung
President
Attest:
/s/ Ma Li Fing
Ma Li Fing
Secretary
<PAGE>
STATE OF TEXAS S
S
COUNTY OF HARRIS S
On May 17, 1996, personally appeared before me, a Notary Public, Yui Yat
Hung, who acknowledged that she executed the above document in his capacity as
President of Energy Systems, Inc.
/s/ Andrea V. Benson
Andrea V. Benson
Notary Public
STATE OF TEXAS S
S
COUNTY OF HARRIS S
On May 17, 1996, personally appeared before me, a Notary Public, Ma Li
Feng, who acknowledged that he executed the above document in his capacity as
Secretary of Energy Systems, Inc.
/s/ Andrea V. Benson
Andrea V. Benson
Notary Public
BYLAWS
OF
NATURAL WAY TECHNOLOGIES, INC.
ARTICLE I
OFFICES
1.01 REGISTERED OFFICE AND AGENT
The registered office of the Corporation shall be maintained at 502 E.
John Street, Room E., Carson City, Nevada 89706 in the State of Nevada. The
registered office or the registered agent, or both, may be changed by
resolution of the Board of Directors, upon filing the statement required by
law.
1.02 PRINCIPAL OFFICE
The principal office of the Corporation shall be at One World Trading
Centre, Ste. 7865, New York, New York 10048 provided that the Board of
Directors shall have power to change the location of the principal office in
its discretion.
1.03 OTHER OFFICES
The Corporation may also maintain other offices at such places within or
without the State of Nevada as the Board of Directors may from time to time
appoint or as the business of the Corporation may require.
ARTICLE II
SHAREHOLDERS
2.01 PLACE OF MEETING
All meetings of shareholders, both regular and special, shall be held
either at the registered office of the Corporation, or at such other place as
shall be designated in the notice of the meeting.
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2.02 ANNUAL MEETING
The annual meeting of shareholders for the election of directors and for
the transaction of all other business which may come before the meeting shall
be held on the 30th day of April in each year (if not a legal holiday and, if a
legal holiday, then on the next business day following) at the hour specified
in the notice of meeting.
If the election of directors shall not be held on the day above designated
for the annual meeting, the Board of Directors shall cause the election to be
held as soon thereafter as conveniently may be at a special meeting of the
shareholders called for the purpose of holding such election.
The annual meeting of shareholders may be held for any other purpose in
addition to the election of director which may be specified in a notice of such
meeting. The meeting may be called by resolution of the Board of Directors or
by a writing filed with the secretary signed either by a majority of the
directors or by shareholders owning a majority in amount of the entire capital
stock of the Corporation issued and outstanding and entitled to vote at any
such meeting.
2.03 NOTICE OF SHAREHOLDERS' MEETING
A written or printed notice stating the place, day and hour of the
meeting, and in case of a special meeting, the purpose or purposes for which
the meeting is called, shall be delivered not less than ten (10) nor more than
sixty (60) days before the date of the meeting, either personally or by mail,
by or at the direction of the president, secretary or the officer or person
calling the meeting, to each shareholders of record entitled to vote at such
meeting. If mailed, such notice shall be deemed to be delivered when deposited
deemed to be delivered when deposited in the United States mail addressed to
the shareholder at his address as it appears on the share transfer books of the
Corporation, with postage thereon prepaid.
2.04 VOTING OF SHARES
Each outstanding share, regardless of class, shall be entitled to one vote
on each matter submitted to a vote at a meeting of shareholders, except to the
ed by the Articles of Incorporation or by law.
Treasury shares, shares of its own stock owned by another corporation the
majority of the voting stock of which is owned or controlled by this
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Corporation, and shares of its own stock held by this Corporation in a
fiduciary capacity shall not be voted, directly or indirectly, at any meeting,
and shall not be counted in determining the total number of outstanding shares
at any given time.
A shareholder may vote either in person or by proxy executed in writing by
the shareholder or by his duly authorized attorney-in-fact. No proxy shall be
valid after eleven (11) months from the date of its execution unless otherwise
provided in the proxy. Each proxy shall be revocable unless expressly provided
therein to be irrevocable, and in no event shall it remain irrevocable for a
period of more than eleven (11) months.
At each election for directors and every shareholder entitled to vote at
such election shall have the right to vote, in person or by proxy, the number
of shares owned by him for as many persons as there are directors to be elected
and for whose election he has a right to vote, or unless prohibited by the
Articles of Incorporation, to cumulate his votes by giving one candidate as
many votes as the number of such directors multiplied by the number of his
shares shall equal, or by distributing such votes on the same principal among
any number of such candidates. Any shareholder who intends to cumulate his
votes as herein authorized shall give written notice of such intention to the
secretary of the Corporation on or before the day preceding the election at
which such shareholder intends to cumulate his votes.
2.05 CLOSING TRANSFER BOOKS AND FIXING RECORD DATE
For the purpose of determining shareholders entitled to notice of or to
vote at any meeting of shareholders or any adjournment thereof, or entitled to
receive payment of any dividend, or in order to make a determination of
shareholders for any other proper purpose, the Board of Directors may provide
that the share transfer books shall be closed for a stated period not exceeding
sixty (60) days. If the stock transfer books shall be closed for the purpose
of determining shareholders entitled to notice of or to vote at a meeting of
shareholders, such books shall be closed for at least ten (10) days immediately
preceding such meeting. In lieu of closing the stock transfer books, the
ByLaws or, in the absence of an applicable ByLaw, the Board of Directors may
fix in advance a date as the record date for any such determination of
shareholders, not later than sixty (60) days and, in case of a meeting of
shareholders, not earlier than ten (10) days, prior to the date on which the
particular action requiring such determination of shareholders is to be taken.
If the share transfer books are not closed and no record date is fixed for the
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determination of shareholders entitled to notice of or to vote at a meeting of
shareholders, or shareholders entitled to receive payment of a dividend, the
date on which notice of the meeting is mailed or the date on which the
resolution of the Board of Directors declaring such dividend is adopted, as the
case may be, shall be the record date for such determination of shareholders.
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this section, such determination
shall apply to any adjournment thereof, except where the determination has been
made through the closing of share transfer books and the stated period of
closing has expired.
2.06 QUORUM OF SHAREHOLDERS
Unless otherwise provided in the Articles of Incorporation, the holders of
a majority of the shares entitled to vote, represented in person or by proxy,
shall constitute a quorum at a meeting of shareholders, but in no event shall a
quorum consist of the holders of less than one-third (1/3) of the shares
entitled to vote and thus represented at such meeting. The vote of the holders
of a majority of the shares entitled to vote and thus represented at a meeting
at which a quorum is present shall be the act of the shareholders' meeting,
unless the vote of a greater number is required by law, the Articles of
Incorporation or the ByLaws.
2.07 VOTING LISTS
The officer or agent having charge of the share transfer books for the
shares of the Corporation shall make, at least ten (10) days before each
meeting of shareholders, a complete list of the shareholders entitled to vote
at such meeting or any adjournment thereof, arranged in alphabetical order,
with the address of and the number of shares held by each, which list, for a
period of ten (10) days prior to such meeting, shall be kept on file at the
registered office of the Corporation and shall be subject to inspection by any
shareholders at any time during usual business hours. Such list shall also be
produced and kept open at the time and place of the meeting and shall be
subject to the inspection of any shareholder during the whole time of the
meeting. The original share transfer books shall be prima-facie evidence as to
who are the shareholders entitled to examine such list or transfer books or to
vote at any meeting of shareholders.
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2.08 ACTION BY CONSENT OF SHAREHOLDERS
In lieu of a formal meeting, action may be taken by written consent of
such number of the shareholders as is required by either State law or the
Corporation's Bylaws for passage of such corporate action.
ARTICLE III
DIRECTORS
3.01 BOARD OF DIRECTORS
The business and affairs of the Corporation shall be managed by a Board of
Directors. Directors need not be residents of the State of Nevada or
shareholders in the Corporation.
3.02 NUMBER AND ELECTION OF DIRECTORS
The number of directors shall be two (2) provided that the number may be
increased or decreased from time to time by an amendment to these ByLaws, but
no decrease shall have the effect of shortening the term of any incumbent
director. At each annual election the shareholders shall elect directors to
hold office until the next succeeding annual meeting.
3.03 VACANCIES
Any vacancy occurring in the Board of Directors may be filled by the
affirmative vote of the remaining directors, though less than a quorum of the
Board. A director elected to fill a vacancy shall be elected for the unexpired
term of his predecessor in office. Any directorship to be filled by reason of
an increase in the number of directors shall be filled by election at an annual
meeting or at a special meeting of shareholders called for that purpose.
3.04 QUORUM OF DIRECTORS
A majority of the Board of Directors shall constitute a quorum for the
transaction of business. The act of the majority of the directors present at a
meeting at which a quorum is present shall be the act of the Board of
Directors.
3.05 ANNUAL MEETING OF DIRECTORS
Within thirty (30) days after each annual meeting of shareholders, the
Board of Directors elected at such meeting shall hold an annual meeting at
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which they shall elect officers and transact such other business as shall come
before the meeting.
3.06 REGULAR MEETING OF DIRECTORS
A regular meeting of the Board of Directors may be held at such time as
shall be determined from time to time by resolution of the Board of Directors.
3.07 SPECIAL MEETINGS OF DIRECTORS
The secretary shall call a special meeting of the Board of Directors
whenever requested to do so by the President or by two directors. Such special
meeting shall be held at the time specified in the notice of meeting.
3.08 PLACE OF DIRECTORS MEETINGS
All meetings of the Board of Directors (annual, regular or special) shall
be held either at the principal office of the Corporation or at such other
place, either within or without the State of Nevada, as shall be specified in
the notice of meeting.
3.09 NOTICE OF DIRECTORS MEETINGS
All meetings of the Board of Directors (annual, regular or special) shall
be held upon five (5) days written notice stating the date, place and hour of
meeting delivered to each director either personally or by mail or at the
direction of the president or the secretary or the officer or person calling
the meeting.
In any case where all of the directors execute a waiver of notice of the
time and place of meeting, no notice thereof shall be required, and any such
meeting (whether annual, regular or special) shall be held at the time and at
the place (either within or without the State of Nevada) specified in the
waiver of notice. Attendance of a director at any meeting shall constitute a
waiver of notice of such meeting, except where the directors attends a meeting
for the express purpose of objecting to the transaction of any business on the
ground that the meeting is not lawfully called or convened.
Neither the business to be transacted at, nor the purpose of, any annual,
regular or special meeting of the Board of Directors need be specified in the
notice or waiver of notice of such meeting.
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3.10 COMPENSATION
Directors, as such, shall not receive any stated salary for their
services, but by resolution of the Board of Directors a fixed sum and expenses
of attendance, if any, may be allowed for attendance at each annual, regular or
special meeting of the Board, provided, that nothing herein contained shall be
construed to preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor.
3.11 ACTION BY CONSENT OF DIRECTORS
In lieu of a formal meeting, action may be taken by written consent of
such number of the directors as is required by either State law or the
Corporation's Bylaws for passage of such corporate action.
ARTICLE IV
OFFICERS
4.01 OFFICERS ELECTION
The officers of the Corporation shall consist of a president, one or more
vice presidents, a secretary, and a treasurer. All such officers shall be
elected at the annual meeting of the Board of Directors provided for in Article
III, Section 5. If any office is not filled at such annual meeting, it may be
filled at any subsequent regular or special meeting of the Board. The Board of
Directors at such annual meeting, or at any subsequent regular or special
meeting may also elect or appoint such other officers and assistant officers
and agents as may be deemed necessary. Any two or more offices may be held by
the same person, except the offices of president and secretary.
All officers and assistant officers shall be elected to serve until the
next annual meeting of directors (following the next annual meeting of
shareholders) or until their successors are elected; provided, that any officer
or assistant officer elected or appointed by the Board of Directors may be
removed with or without cause at any regular or special meeting of the Board
whenever in the judgment of the Board of Directors the best interests of the
Corporation will be served thereby, but such removal shall be without prejudice
to the contract rights, if any, of the person so removed. Any agent appointed
shall serve for such term, not longer than the next annual meeting of the Board
of Directors, as shall be specified, subject to like right of removal by the
Board of Directors.
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4.02 VACANCIES
If any office becomes vacant for any reason, the vacancy may be filled by
the Board of Directors.
4.03 POWER OF OFFICERS
Each officer shall have, subject to these ByLaws, in addition to the
duties and powers specifically set forth herein, such powers and duties as are
commonly incident to his office and such duties and powers as the Board of
Directors shall from time to time designate. All officers shall perform their
duties subject to the directions and under the supervision of the Board of
Directors. The president may secure the fidelity of any and all officers by
bond or otherwise.
4.04 PRESIDENT
The president shall be the chief executive officer of the Corporation. He
shall preside at all meetings of the directors and shareholders. He shall see
that all orders and resolutions of the Board are carried out, subject however,
to the right of the directors to delegate specific powers, except such as may
be by statute exclusively conferred on the president, to any other officers of
the Corporation.
He or any vice president shall execute bonds, mortgages and other
instruments requiring a seal, in the name of the Corporation, and, when
authorized by the Board, he or any vice president may affix the seal to any
instrument requiring the same, and the seal when so affixed shall be attested
by the signature of either the secretary or an assistant secretary. He or any
vice president shall sign certificates of stock.
The president shall be ex-officio a member of all standing committees.
He shall submit a report of the operations of the Corporation for the year
to the directors at their meeting next preceding the annual meeting of the
shareholders and to the shareholders at their annual meeting.
4.05 VICE PRESIDENT
The vice president shall, in the absence or disability of the president,
perform the duties and exercise the powers of the president, and they shall
perform such other duties as the Board of Directors shall prescribe.
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4.06. SECRETARY AND ASSISTANT SECRETARIES
The secretary shall attend all meetings of the Board and all meetings of
the shareholders and shall record all votes and the minutes of all proceedings
and shall perform like duties for the standing committees when required. He
shall give or cause to be given notice of all meetings of the shareholders and
all meetings of the Board of Directors and shall perform such other duties as
may be prescribed by the Board. He shall keep in safe custody the seal of the
Corporation, and when authorized by the Board, affix the same to any instrument
requiring it, and when so affixed, it shall be attested by his signature or by
the signature of an assistant secretary.
The assistant secretary shall, in the absence or disability of the
secretary, perform the duties and exercise the powers of the secretary, and
they shall perform such other duties as the Board of Directors shall prescribe.
In the absence of the secretary or an assistant secretary, the minutes of
all meetings of the Board and shareholders shall be recorded by such person as
shall be designated by the president or by the Board of Directors.
4.07 TREASURER AND ASSISTANT TREASURERS
The treasurer shall have the custody of the corporate funds and securities
and shall keep full and accurate accounts of receipts and disbursements in
books belonging to the Corporation and shall deposit all moneys and other
valuable effects in the name and to the credit of the Corporation in such
depositories as may be designated by the Board of Directors.
The treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements. He shall keep and maintain the Corporation's books of account
and shall render to the president and directors an account of all of his
transactions as treasurer and of the financial condition of the Corporation and
exhibit his books, records and accounts to the president or directors at any
time. He shall disburse funds for capital expenditures as authorized by the
Board of Directors and in accordance with the orders of the president, and
present to the president for his attention any requests for disbursing funds if
in the judgment of the treasurer any such request is not properly authorized.
He shall perform such other duties as may be directed by the Board of Directors
or by the president.
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If required by the Board of Directors, he shall give the Corporation a
bond in such sum and with such surety or sureties as shall be satisfactory to
the Board for the faithful performance of the duties of his office and for the
restoration to the Corporation, in case of his death, resignation, retirement
or removal from office, of all books, papers, vouchers, money and other
property of whatever kind in his possession or under his control belonging to
the Corporation.
The assistant treasurers in the order of their seniority shall, in the
absence or disability of the treasurer, perform the duties and exercise the
powers of the treasurer, and they shall perform such other duties as the Board
of Directors shall prescribe.
ARTICLE V
CERTIFICATES OF STOCK: TRANSFER, ETC.
5.01 CERTIFICATES OF STOCK
The certificates for shares of stock of the Corporation shall be numbered
and shall be entered in the Corporation as they are issued. They shall exhibit
the holder's name and number of shares and shall be signed by the president or
a vice president and the secretary or an assistant secretary or if the Board of
Directors determines, by any one of the afore named officers and shall be
sealed with the seal of the Corporation or a facsimile thereof. If the
Corporation has a transfer agent or a registrar, other than the Corporation
itself or an employee of the Corporation, the signatures of any such officer
may be facsimile. In case any officer or officers who shall have signed or
whose facsimile signature or signatures shall have been used on any such
certificate or certificates shall cease to be such officer or officers of the
Corporation, whether because of death, resignation or otherwise, before said
certificate or certificates shall have been issued, such certificate may
nevertheless be issued by the Corporation with the same effect as though the
person or persons who signed such certificates or whose facsimile signature or
signatures shall have been used thereon had been such officer or officers at
the date of its issuance. Certificates shall be in such form as shall in
conformity to law be prescribed from time to time by the Board of Directors.
The Corporation may appoint from time to time transfer agents and
registrars, who shall perform their duties under the supervision of the
secretary.
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5.02 TRANSFERS OF SHARES
Upon surrender to the Corporation or the transfer agent of 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.
5.03 REGISTERED SHAREHOLDERS
The Corporation shall be entitled to treat the holder of record of any
share or shares of stock as the holder in fact thereof and, accordingly shall
not be bound to recognize any equitable or other claim to or interest in such
share on the part of any other person, whether or not it shall have express or
other notice thereof, except as otherwise provided by law.
5.04 LOST CERTIFICATE
The Board of Directors may direct a new certificate or certificates to be
issued in place of any certificate or certificates theretofore issued by the
Corporation alleged to have been lost or destroyed, upon the making of an
affidavit of that fact by the person claiming the certificate to be lost. When
authorizing such issue of a new certificate or certificates, the Board of
Directors in its discretion and as a condition precedent to the issuance
thereof, may require the owner of such lost or destroyed certificate or
certificates or his legal representative to advertise the same in such manner as
it shall require or to give the corporation a bond with surety and in form
satisfactory to the Corporation (which bond shall also name the Corporation's
transfer agents and registrars, if any, as obligees) in such sum as it may
direct as indemnity against any claim that may be made against the Corporation
or other obligees with respect to the certificate alleged to have been lost or
destroyed, or to advertise and also give such bond.
ARTICLE VI
DIVIDEND
6.01 DECLARATION
The Board of Directors may declare at any annual, regular or special
meeting of the Board and the Corporation may pay, dividends on the outstanding
shares in cash, property or in the shares of the Corporation to the extent
permitted by, and subject to the provisions of, the laws of the State of
Nevada.
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6.02 RESERVES
Before payment of any dividend there may be set aside out of any funds of
the Corporation available for dividends such sum or sums as the directors from
time to time in their absolute discretion think proper as a reserve fund to
meet contingencies or for equalizing dividends or for repairing or maintaining
any property of the Corporation or for such other purpose as the directors
shall think conducive to the interest of the Corporation, and the directors may
abolish any such reserve in the manner in which it was created.
ARTICLE VII
MISCELLANEOUS
7.01 INFORMAL ACTION
Any action required to be taken or which may be taken at a meeting of the
shareholders, directors or members of the executive committee, may be taken
without a meeting if a consent in writing setting forth the action so taken
shall be signed by all of the shareholders, directors, or members of the
executive committee, as the case may be, entitled to vote with respect to the
subject matter thereof, and such consent shall have the same force and effect
as a unanimous vote of the shareholders, directors, or members of the executive
committee, as the case may be, at a meeting of said body.
7.02 SEAL
The corporate seal shall be circular in form and shall contain the name of
the Corporation, the year of its incorporation and the words "State of Nevada",
and "CORPORATE SEAL". The seal may be used by causing it or a facsimile to be
impressed or affixed or in any other manner reproduced. The corporate seal may
be altered by order of the Board of Directors at any time.
7.03 CHECKS
All checks or demands for money and notes of the Corporation shall be
signed by such officer or officers or such other person or persons as the Board
of Directors may from time to time designate.
7.04 FISCAL YEAR
The fiscal year of the Corporation shall begin on the 1st day of January
in each and every year.
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7.05 DIRECTORS ANNUAL STATEMENT
The Board of Directors shall present at each annual meeting of
shareholders a full and clear statement of the business and condition of the
Corporation.
7.06 CLOSE CORPORATIONS: MANAGEMENT BY SHAREHOLDERS
If the Articles of Incorporation of the Corporation and each certificate
representing its issued and outstanding shares states that the business and
affairs of the Corporation shall be managed by the shareholders of the
Corporation rather than by the Board of Directors, then, whenever the context
so requires the shareholders of the Corporation shall be deemed the directors
of the Corporation for the purposes of applying any provision of these ByLaws.
7.07 AMENDMENTS
These ByLaws may be altered, amended or repealed in whole or in part by
the affirmative vote of the Board of Directors.
ARTICLE VIII
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The following Articles describes and sets out the parameters of
indemnification as set out in Article 2.02-1 of the Texas Business Corporations
Act.
"Article 2.02-1 of the Texas Business Corporation Act provides the
following with respect to indemnification of officers and directors:
Art. 2.02-1 Power to Indemnify and to Purchase Indemnity Insurance; Duty
to Indemnify.
A. 1. "Corporation" includes any domestic or foreign predecessor entity
of the corporation in a merger, consolidation, or other
transaction which the liabilities of the predecessor are
transferred to the corporation by operation of law and in any
other transaction in which the corporation assumes the liabilities
of the predecessor but does not specifically exclude liabilities
that are the subject matter of this article.
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A. 2. "Director" means any person who is or was a director of the
corporation and any person who, while a director of the
corporation, is or was serving at the request of the corporation
as a director, officer, partner, venturer, proprietor, trustee,
employee, agent, or similar functionary of another foreign or
domestic corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan, or other enterprise.
A. 3. "Expenses" include court costs and attorney's fees.
A. 4. "Official capacity" means:
a. When used with respect to a director, the office of director
in the corporation, and
b. When used with respect to a person other than a director, the
elective or appointive office in the corporation held by the
officer or the employment or agency relationship undertaken by
the employee or agent in behalf of the corporation, but
c. In both paragraphs (a) and (b) does not include service for
any other foreign or domestic corporation or any partnership,
joint venture, sole proprietorship, trust, employee benefit
plan, or other enterprise.
5. "Proceeding" means any threatened, pending, or completed action,
suit, or proceedings, whether civil, criminal, administrative,
arbitrative, or investigative, any appeal in such an action, suit,
or proceeding, and any inquiry or investigation that could lead to
such an action, suit, or proceeding.
B. A corporation may indemnify a person who was, is or is threatened to
be made a named defendant or respondent in a proceeding because the
person is or was a director only if it is determined in accordance
with Section F of this article that the person:
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1. Conducted himself in good faith;
2. reasonably believed;
a. In the case of conduct in his official capacity as a director
of the corporation, that his conduct was in the corporation's
best interest, and
b. In all other cases, that his conduct was at least not opposed
to the corporation's best interest; and
3. In the case of any criminal proceeding, had no reasonable cause to
believe his conduct was lawful.
C. A director may not be indemnified under Section B of this article for
obligations resulting from a proceeding:
1. In which the person is found liable on the basis that personal
benefit was improperly received by him, whether or not the benefit
resulted from an action taken in the persons' official capacity;
or
2. In which the person is found liable to the corporation.
D. The termination of a proceeding by judgment, order, settlement, or
conviction, or on a plea of nolo contendere or its equivalent is not
of itself determinative that the person did not meet the requirements
set forth in Section B of this article.
E. A person may be indemnified under Section B of this article against
judgments, penalties (including excise and similar taxes), fines,
settlements, and reasonable expenses actually incurred by the person
in connection with the proceeding; but if the proceeding was brought
by or in behalf of the corporation, the indemnification is limited to
reasonable expenses actually incurred by the person in connection with
the proceeding.
F. A determination of indemnification under Section B of this article
must be made:
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1. By a majority vote of a quorum consisting of directors who at the
time of the vote are not named defendants or respondents in the
proceeding;
2. If such a quorum cannot be obtained, by a majority vote of a
committee of the board of directors, designated to act in the
matter by a majority vote of all directors, consisting solely of
two or more directors who at the time of the vote are not named
defendants or respondents in the proceeding.
3. By special legal counsel selected by the board of directors or a
committee of the board by vote as set for in Subsection (1) or (2)
of this section, or, if such quorum cannot be obtained and such a
committee cannot be established, by a majority vote of all
directors; or
4. By the shareholders in a vote that excludes the shares held by
directors who are named defendants or respondents in the
proceeding.
G. Authorization of indemnification and determination as to
reasonableness of expenses must be made in the same manner as the
determination that indemnification is permissible, except that if the
determination that indemnification is permissible is made by special
legal counsel, authorization of indemnification and determination as
to reasonableness of expenses must be made in the manner specified by
Subsection (3) of section F of this article for the selected of
special legal counsel. A provision contained in the article of
incorporation, bylaws, a resolution of shareholders or directors, or
an agreement that makes mandator the indemnification permitted under
section B of this article shall be deemed to constitute authorization
of indemnification in the manner required by this section even though
such provision may not have been adopted or authorized in the same
manner as the determination that indemnification is permissible.
H. A corporation shall indemnify a director against reasonable expenses
incurred by him in connection with a proceeding in which he is a named
defendant or respondent because he is or was a director if he has been
wholly successful, on the merits or otherwise, in the defense of the
proceeding.
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I. If, in a suit for the indemnification required by section H of this
article, a court of competent jurisdiction determines that the
director is entitled to indemnification under that section, the court
shall order indemnification and shall award to the director the
expenses incurred in securing the indemnification.
J. If, upon application of a director, a court of competent jurisdiction
determines, after giving any notice the court considers necessary,
that the director is fairly and reasonably entitled to indemnification
in view of all the relevant circumstances, whether or not he has met
the requirements set forth in section B of this article or has been
abjudged liable in the circumstances described by section C of this
article, the court may order the indemnification that the court
determines is proper and equitable. The court shall limit
indemnification to reasonable expenses if the proceeding is brought by
or on behalf of the corporation or if the director is found liable on
the basis that personal benefit was improperly received by him,
whether or not the benefit resulted from an action taken in the
person's official capacity.
K. Reasonable expenses incurred by a director who was, is, or is
threatened to be made a named defendant or respondent in a proceeding
may be paid or reimbursed by the corporation in advance of the final
disposition of the proceeding after:
1. The corporation receives a written affirmation by the director of
his good faith belief that he has met the standard of conduct
necessary for indemnification under this article and a written
undertaking by or on behalf of the director to repay the amount
paid or reimbursed if it is ultimately determined that he has not
met those requirements; and
2. A determination that the facts then known to those making the
determination would not preclude indemnification under this
article.
L. The written undertaking required by section K of this article must be
an unlimited general obligation of the director but need not be
secured. It may be accepted without reference to financial ability to
make repayment. Determinations and authorizations of payments under
-17-
<PAGE>
section K of this article must be made in the manner specified by
section F of this article for determining that indemnification is
permissible.
M. A provision for a corporation to indemnify or to advance expenses to a
director who was, is, or is threatened to be made a named defendant or
respondent in a proceeding, whether contained in the articles of
incorporation, the bylaws, a resolution of shareholders or directors,
an agreement, or otherwise, except in accordance with section R of
this article, is valid only to the extent it is consistent with this
article as limited by the articles of incorporation, if such a
limitation exists.
N. Notwithstanding any other provision of this article, a corporation may
pay or reimburse expenses incurred by a director in connection with
his appearance as a witness or the participation in a proceeding at a
time when he is not a named defendant or respondent in the proceeding.
O. An officer of the corporation shall be indemnified as, and to the same
extent, provided by section H, I, and J of this article for a director
and is entitled to seek indemnification under those sections to the
same extent as a director. A corporation may indemnify and advance
expenses to an officer, employee, or agent of the corporation to the
same extent that it may indemnify and advance expenses to directors
under this article.
P. A corporation may indemnify and advance expenses to persons who are
not or were not officers, employees, or agents of the corporation but
who are or were serving at the request of the corporation as a
director, officer, partner, venturer, proprietor, trustee, employee,
agent, or similar functionary of another foreign or domestic
corporation, partnership, joint venture, sole proprietorship, trust,
employee benefit plan, or other enterprise to the same extent that it
may indemnify and advance expenses to directors under this article.
Q. A corporation may indemnify and advance expenses to an officer,
employee, agent, or person identified in section P of this article and
who is not a director to such further extent, consistent with law, as
-18-
<PAGE>
may be provided by its articles of incorporation, bylaws, general or
specific action of its board of directors, or contract or as permitted
or required by common law.
R. A corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee, or agent of the
corporation or who is or was serving at the request of the corporation
as a director, officer, partner, venturer, proprietor, trustee,
employee, agent, or similar functionary of another foreign or domestic
corporation, partnership, joint venture, sole proprietorship, trust,
employee benefit plan, or other enterprise, against any liability
asserted against him and incurred by him or in such a capacity or
arising out of his status as such a person, whether or not the
corporation would have the power to indemnify him against that
liability under this article.
S. Any indemnification of or advance of expenses to a director in
accordance with this Article shall be reported in writing to the
shareholders with or before the notice or waiver of notice of the next
shareholders' meeting or with or before the next submission to
shareholders of a consent to action without a meeting pursuant to
section A. Article 9.10 of this Act and, in any case, within the
twelve month period immediately following the date of the
indemnification or advance.
T. For purposes of this article, the corporation is deemed to have
requested a director to serve an employee benefit plan whenever the
performance by him of his duties to the corporation also imposes
duties on or otherwise involves services by him to the plan or
participants or beneficiaries of the plan. Excise taxes assessed on a
director with respect to an employee benefit plan pursuant to
applicable law are deemed fines. Action taken or omitted by him with
respect to an employee benefit plan in the performance of his duties
for a purpose reasonably believed by him to be in the interest of the
participants and beneficiaries of the plan is deemed to be for a
purpose which is not opposed to the best interest of the corporation.
-19-
<PAGE>
U. The articles of incorporation of a corporation may restrict the
circumstances under which the corporation is required or permitted to
indemnify a person under sections H, I, J, O, P, or Q of this
article."
-20-
NATURAL WAY TECHNOLOGIES, INC.
Certificate of Designation, Preferences and Rights
of a Series of 15,000 Shares of Preferred Stock,
$.001 Par Value, Designated
"Series A Preferred Stock"
-------------------------
Natural Way Technologies, Inc., a Nevada Corporation (the "Corporation"),
by way of this Certificate of Designation, Preferences and Rights (as it may
hereafter be amended, modified or supplemented upon vote of the Board of
Directors of the Corporation and approval of all holders of Series A Preferred
Stock, as such term is hereinafter defined, this ("Certificate") certifies
that, pursuant to the authority expressly vested in the Board of Directors by
Article IV of the Corporation's Restated Articles of Incorporation, and in
accordance with the provisions of Section 78.195 of the Nevada Revised
Statutes, the Board of Directors of the Corporation has duly adopted the
following resolutions creating a series of its Preferred Stock designated as
Series A Preferred Stock:
RESOLVED, that pursuant to the authority expressly granted to and
vested in the Board of Directors of the Corporation by the provisions of
Article IV of the Articles of Incorporation of the Corporation, as
amended, this Board of Directors hereby creates a series of Preferred
Stock, $.001 par value, and this Board of Directors hereby fixes the
designation and the voting power, preferences and rights, and the
qualifications, limitations or restrictions thereof, of the shares of such
series (in addition to the powers, preferences and rights, and the
qualifications, limitations or restrictions thereon, set forth in the
Articles of Incorporation, as amended, which are applicable to all series
of Preferred Stock of the Corporation) as follows:
Fifteen thousand (15,000) shares of Preferred Stock, par value $.001
per share, of the Corporation are hereby constituted as a series of
Preferred Stock designated as Series A Convertible Preferred Stock (the
"Series A Convertible Preferred Stock") with the voting powers and the
preferences and rights hereinafter set forth:
Section 1. Dividends. The holders of shares of Series A Convertible
Preferred Stock (the "Preferred Shares") shall be entitled to receive out of
the assets of the Corporation legally available for dividends such dividends in
cash, stock or property as the board of directors shall, in its discretion,
declare from time to time.
Section 2. Liquidation Preference. In the event of any liquidation,
dissolution or winding up of the affairs of the Corporation, whether voluntary
or involuntary, the holders of the Preferred Shares shall be entitled to be
paid first out of the assets of the Corporation available for distribution to
holders of the Corporation's capital stock of all classes an amount equal to
$1,000.00 per share of Series A Convertible Preferred Stock, and no more,
before any distribution shall be made to the holders of the Common Stock or any
other class of capital stock or series thereof ranking junior to the Preferred
Shares with respect to the distribution of assets. If the assets of the
Corporation shall be insufficient to permit the payment in full to the holders
of the Preferred Shares of the amounts thus distributable, then the entire
assets of the Corporation available for such distribution shall be distributed
<PAGE>
ratably among the holders of the Preferred Shares in proportion to the full
preferential amount each such holder is otherwise entitled to receive.
Section 3. Voting Rights. The holders of the Series A Preferred Stock
shall have no right to vote with respect to matters requiring the vote of the
holders of the Corporation's capital stock except as set forth below. Without
the approval of holders of a majority of the outstanding Preferred Shares, the
Corporation shall not (a) authorize, create or issue any shares of any class or
series ranking senior to the Preferred Shares as to liquidation rights, (b)
amend, alter or repeal, by any means, the Certificate of Incorporation if the
powers, preferences, or special rights of the Preferred Shares would be
adversely affected, or (c) become subject to any restriction on the Preferred
Shares, other than restrictions arising solely under the General Corporation
Law of the State of Nevada or existing under the Certificate of Incorporation
as in effect on December 31, 1995.
Section 4. Redemption. Preferred Shares shall be subject to redemption,
at the option of the Corporation, in whole or in part, on ten (10) days written
notice, at any time(s) after December 31, 1997 at a price equal to $1,000 per
share plus any accrued dividends.
Section 5. Conversion. (a) The holder of any Preferred Shares shall
have the right, at his option on delivery to the Corporation of written notice
and upon surrender of such shares to the Corporation, to convert part or all of
the Preferred Shares held into shares of Common Stock of the Corporation. In
the event the holder of any Preferred Shares has not notified the Corporation
of his election to convert the Preferred Shares into Common Stock on the terms
set forth herein on or before December 31, 1997, the right of the holders of
such Preferred Shares to convert the same into Common Stock shall expire,
provided, however, that all Preferred Shares remaining outstanding at such date
shall, at the option of the Corporation, be converted into Common Stock of the
Corporation on the terms set forth herein on such date.
(b) Conversion of the Preferred Shares shall be subject to the following
limitation: the outstanding Preferred Shares will become eligible for
conversion on or after the date which is 45 days after the closing date of the
purchase of such Preferred Shares (the "Closing Date"). Each conversion shall
be effected by surrendering the certificate(s) evidencing the Preferred Shares
to be converted to the Company with the form of conversion certificate executed
by the holder thereof as to all or a specified portion of the shares evidenced
by such certificate (subject to the limitations set forth above and provided
that conversions will not be permitted for Preferred Shares having an aggregate
liquidation preference of less than $100,000 except as may be required by the
foregoing limitation on conversion) and accompanied, if required by the
Company, by proper assignment in blank. The date of execution of such
certificate and delivery by facsimile to the Company at (713) 547-9810, shall
be deemed to the be "conversion date", provided that certificates evidencing
the shares so converted are delivered within three (3) business days to the
Company or its designated agent.
(c) The number of shares of Common Stock issuable upon conversion of each
share of Series A Convertible Preferred Stock shall equal the number of shares
of Preferred Shares to be converted multiplied by one thousand (1,000) and
divided by the "Conversion Factor." The Conversion Factor for purposes hereof
shall be equal to the lesser of the Market Price on the Conversion Date, or
$1.00.
<PAGE>
(d) For purposes hereof, the "Market Price" shall be the average closing
bid price of the Corporation's Common Stock as reported on the Nasdaq System
(or such other similar organization which may report such information if Nasdaq
no longer reports such information or, if not so available, the fair market
price as determined by the Board of Directors) for the five business days
preceding the date of notice of conversion.
(e) Neither fractional shares, nor scrip or other certificates evidencing
such shares, shall be issued by the Corporation on conversion of the Preferred
Shares as herein provided, but the Corporation shall round to the nearest whole
number the number of shares issuable in such event.
(f) Preferred Shares so converted shall be restored to the status of
authorized but unissued shares.
(g) The Corporation will reserve from its authorized and unissued shares
of Common Stock, and shall increase the number of reserved shares from time to
time, a number of shares sufficient to permit conversion of the Preferred
Shares.
IN WITNESS WHEREOF, Natural Way Technologies, Inc. has caused this
Certificate to be duly executed and attested effective as of the 17th day of
May, 1996.
NATURAL WAY TECHNOLOGIES, INC.
/s/ Yui Yat Hung
Yiu Yat Hung, President
ATTEST:
/s/ Ma Li Feng
Ma Li Feng, Secretary
STATE OF TEXAS S
S
COUNTY OF HARRIS S
I, ANDREA V. BENSON, a Notary Public, do hereby certify that on this 17th
day of May,1996, personally appeared before me Yui Yat Hung who, being by me
first duly sworn declared that he is the President of NATURAL WAY TECHNOLOGIES,
INC., that he signed the foregoing document as President of the corporation, and
that the statements therein contained are true and correct.
/s/ Andrea V. Benson
Andrea V. Benson
Notary Public in and for the
State of Texas
Printed Name of Notary Public: Andrea V. Benson
My Commission Expires: September 12, 1999
<PAGE>
STATE OF TEXAS S
S
COUNTY OF HARRIS S
I, ANDREA V. BENSON, a Notary Public, do hereby certify that on this 17th
day of May, 1996, personally appeared before me Ma Li Feng who, being by me
first duly sworn declared that he is the Secretary of NATURAL WAY TECHNOLOGIES,
INC., that he signed the foregoing document as Secretary of the corporation,
and that the statements therein contained are true and correct.
/s/ Andrea V. Benson
Andrea V. Benson
Notary Public in and for the
State of Texas
Printed Name of Notary Public: Andrea V. Benson
My Commission Expires: September 12, 1999
NATURAL WAY TECHNOLOGIES, INC.
Certificate of Designation, Preferences and Rights
of a Series of 100,000 Shares of Preferred Stock,
$.001 Par Value, Designated
"Series B Preferred Stock"
--------------------------
Natural Way Technologies, Inc., a Nevada Corporation (the "Corporation"),
by way of this Certificate of Designation, Preferences and Rights (as it may
hereafter be amended, modified or supplemented upon vote of the Board of
Directors of the Corporation and approval of all holders of Series B Preferred
Stock, as such term is hereinafter defined (this "Certificate")) certifies
that, pursuant to the authority expressly vested in the Board of Directors by
Article IV of the Corporation's Restated Articles of Incorporation, and in
accordance with the provisions of Section 78.195 of the Nevada Revised
Statutes, the Board of Directors of the Corporation has duly adopted the
following resolutions creating a series of its Preferred Stock designated as
Series B Preferred Stock:
RESOLVED, that pursuant to the authority expressly granted to and
vested in the Board of Directors of the Corporation by the provisions of
Article IV of the Restated Articles of Incorporation of the Corporation,
this Board of Directors hereby creates a series of Preferred Stock, $.001
par value, and this Board of Directors hereby fixes the designation and
the voting power, preferences and rights, and the qualifications,
limitations or restrictions thereof, of the shares of such series (in
addition to the powers, preferences and rights, and the qualifications,
limitations or restrictions thereon, set forth in the Restated Articles of
Incorporation, as amended, which are applicable to all series of Preferred
Stock of the Corporation) as follows:
One hundred thousand (100,000) shares of Preferred Stock, par value
$.001 per share, of the Corporation are hereby constituted as a series of
Preferred Stock designated as Series B Preferred Stock (the "Series B
Preferred Stock") with the voting powers and the preferences and rights
hereinafter set forth:
Section 1. Dividends. The holders of shares of Series B Preferred Stock
shall be entitled to receive out of the assets of the Corporation legally
available for dividends such dividends in cash, stock or property as the board
of directors shall, in its discretion, declare from time to time.
Section 2. Liquidation Preference. In the event of any liquidation,
dissolution or winding up of the affairs of the Corporation, whether voluntary
or involuntary, the holders of Series B Preferred Stock shall be entitled to be
paid first out of the assets of the Corporation available for distribution to
holders of the Corporation's capital stock of all classes an amount equal to
$.001 per share of Series B Preferred Stock, and no more, before any
distribution of assets. If the assets of the Corporation shall be insufficient
<PAGE>
to permit the payment in full to the holders of the Series A Preferred Stock of
the amounts thus distributable, then the entire assets of the Corporation
available for such distribution shall be distributed ratably among the holders
of the Series B Preferred Stock in proportion to the full preferential amount
each such holder is otherwise entitled to receive.
Section 3. Voting Rights. The holders of the Series B Preferred Stock
shall, as a class, be entitled to such number of votes as shall constitute
thirty percent (30%) of the total eligible votes in all matters voted on by the
shareholders of the Corporation and shall be further entitled to such voting
rights as may be expressly required by law.
Section 4. Rights Otherwise Identical. In all other respects, each share
of Series B Preferred Stock and the shares of all other series shall have
identical rights and privileges in every respect.
IN WITNESS WHEREOF, Natural Way Technologies, Inc. has caused this
Certificate to be duly executed and attested effective as of the 27th day of
September, 1996.
NATURAL WAY TECHNOLOGIES, INC.
/s/ Yiu Yat Hung
Yiu Yat Hung, President
ATTEST:
- ---------------------
Secretary
<PAGE>
STATE OF TEXAS S
S
COUNTY OF HARRIS S
I, ANDREA V. BENSON, a Notary Public, do hereby certify that on this 27th
day of September, 1996, personally appeared before me Yiu Yat Hung, who, being
by me first duly sworn declared that he is the President of NATURAL WAY
TECHNOLOGIES, INC., that he signed the foregoing document as President of the
corporation, and that the statements therein contained are true and correct.
/s/ Andrea V. Benson
Andrea V. Benson
Notary Public in and for the
State of Texas
Printed Name of Notary Public: Andrea V. Benson
My Commission Expires: September 12, 1996
NATURAL WAY TECHNOLOGIES, INC.
Certificate of Designation, Preferences and Rights
of a Series of 10,000 Shares of Preferred Stock,
$.001 Par Value, Designated
"Series C Convertible Preferred Stock"
--------------------------------------
Natural Way Technologies, Inc., a Nevada Corporation (the "Corporation"),
by way of this Certificate of Designation, Preferences and Rights (as it may
hereafter be amended, modified or supplemented upon vote of the Board of
Directors of the Corporation and approval of all holders of Series C Preferred
Stock, as such term is hereinafter defined, this ("Certificate") certifies
that, pursuant to the authority expressly vested in the Board of Directors by
Article IV of the Corporation's Restated Articles of Incorporation, and in
accordance with the provisions of Section 78.195 of the Nevada Revised
Statutes, the Board of Directors of the Corporation has duly adopted the
following resolutions creating a series of its Preferred Stock designated as
Series C Convertible Preferred Stock:
RESOLVED, that pursuant to the authority expressly granted to and
vested in the Board of Directors of the Corporation by the provisions of
Article IV of the Articles of Incorporation of the Corporation, as
amended, this Board of Directors hereby creates a series of Preferred
Stock, $.001 par value, and this Board of Directors hereby fixes the
designation and the voting power, preferences and rights, and the
qualifications, limitations or restrictions thereof, of the shares of such
series (in addition to the powers, preferences and rights, and the
qualifications, limitations or restrictions thereon, set forth in the
Articles of Incorporation, as amended, which are applicable to all series
of Preferred Stock of the Corporation) as follows:
Ten thousand (10,000) shares of Preferred Stock, par value $.001 per
share, of the Corporation are hereby constituted as a series of Preferred
Stock designated as Series C Convertible Preferred Stock (the "Series C
Convertible Preferred Stock" ) with the voting powers and the preferences
and rights hereinafter set forth:
Section 1. Dividends. The holders of shares of Series C Convertible
Preferred Stock (the "Preferred Shares") shall be entitled to receive out of
the assets of the Corporation legally available for dividends such dividends in
cash, stock or property as the board of directors shall, in its discretion,
declare from time to time.
Section 2. Liquidation Preference. In the event of any liquidation,
dissolution or winding up of the affairs of the Corporation, whether voluntary
or involuntary, the holders of the Preferred Shares shall be entitled to be
paid first out of the assets of the Corporation available for distribution to
holders of the Corporation's capital stock of all classes an amount equal to
$1,000.00 per share of Series C Convertible Preferred Stock, and no more,
before any distribution shall be made to the holders of the Common Stock or any
<PAGE>
other class of capital stock or series thereof ranking junior to the Preferred
Shares with respect to the distribution of assets. If the assets of the
Corporation shall be insufficient to permit the payment in full to the holders
of the Preferred Shares of the amounts thus distributable, then the entire
assets of the Corporation available for such distribution shall be distributed
ratably among the holders of the Preferred Shares in proportion to the full
preferential amount each such holder is otherwise entitled to receive.
Section 3. Voting Rights. The holders of the Series C Preferred Stock
shall have no right to vote with respect to matters requiring the vote of the
holders of the Corporation's capital stock except as set forth below. Without
the approval of holders of a majority of the outstanding Preferred Shares, the
Corporation shall not (a) authorize, create or issue any shares of any class or
series ranking senior to the Preferred Shares as to liquidation rights, (b)
amend, alter or repeal, by any means, the Certificate of Incorporation if the
powers, preferences, or special rights of the Preferred Shares would be
adversely affected, or (c) become subject to any restriction on the Preferred
Shares, other than restrictions arising solely under the General Corporation
Law of the State of Nevada or existing under the Certificate of Incorporation
as in effect on December 31, 1995.
Section 4. Redemption. Preferred Shares shall be subject to redemption,
at the option of the Corporation, in whole or in part, on ten (10) days written
notice, at any time(s) after December 31, 1997 at a price equal to $1,000 per
share plus any accrued dividends.
Section 5. Conversion. (a) The holder of any Series C Preferred Shares
shall have the right, at his option on delivery to the Corporation of written
notice and upon surrender of such shares to the Corporation, to convert part or
all of the Preferred Shares held into shares of Common Stock of the
Corporation. In the event the holder of any Series C Preferred Shares has not
notified the Corporation of his election to convert the Preferred Shares into
Common Stock on the terms set forth herein on or before December 31, 1997, the
right of the holders of such Preferred Shares to convert the same into Common
Stock shall expire, provided, however, that all Preferred Shares remaining
outstanding at such date shall, at the option of the Corporation, be converted
into Common Stock of the Corporation on the terms set forth herein on such
date.
(b) Conversion of the Series C Preferred Shares shall be subject to the
following limitation: the outstanding Preferred Shares will become eligible
for conversion on or after the date which is 45 days after the closing date of
the purchase of such Preferred Shares (the "Closing Date"). Each conversion
shall be effected by surrendering the certificate(s) evidencing the Preferred
Shares to be converted to the Company with the form of conversion certificate
executed by the holder thereof as to all or a specified portion of the shares
evidenced by such certificate (subject to the limitations set forth above and
provided that conversions will not be permitted for Preferred Shares having an
aggregate liquidation preference of less than $100,000 except as may be
required by the foregoing limitation on conversion) and accompanied, if
required by the Company, by proper assignment in blank. The date of execution
of such certificate and delivery by facsimile to the Company at (713) 547-9810,
shall be deemed to the be "conversion date", provided that certificates
evidencing the shares so converted are delivered within three (3) business days
to the Company or its designated agent.
<PAGE>
(c) The number of shares of Common Stock issuable upon conversion of each
share of Series C Convertible Preferred Stock shall equal the number of shares
of Series C Preferred Shares to be converted multiplied by one thousand (1,000)
and divided by the "Conversion Factor." The Conversion Factor for purposes
hereof shall be equal to the lesser of the Market Price on the Conversion Date,
or $3.00.
(d) For purposes hereof, the "Market Price" shall be the average closing
bid price of the Corporation's Common Stock as reported on the Nasdaq System
(or such other similar organization which may report such information if Nasdaq
no longer reports such information or, if not so available, the fair market
price as determined by the Board of Directors) for the five business days
preceding the date of notice of conversion.
(e) Neither fractional shares, nor scrip or other certificates evidencing
such shares, shall be issued by the Corporation on conversion of the Preferred
Shares as herein provided, but the Corporation shall round to the nearest whole
number the number of shares issuable in such event.
(f) Preferred Shares so converted shall be restored to the status of
authorized but unissued shares.
(g) The Corporation will reserve from its authorized and unissued shares
of Common Stock, and shall increase the number of reserved shares from time to
time, a number of shares sufficient to permit conversion of the Preferred
Shares.
IN WITNESS WHEREOF, Natural Way Technologies, Inc. has caused this
Certificate to be duly executed and attested effective as of the 21st day of
November, 1996.
NATURAL WAY TECHNOLOGIES, INC.
/s/ Yui Yat Hung
Yui Yat Hung, President
ATTEST:
/s/Yiu Yat On
Yiu Yat On, Secretary
<PAGE>
STATE OF TEXAS S
S
COUNTY OF HARRIS S
I, T. MICHELE HANLON, a Notary Public, do hereby certify that on this 21
day of November, 1996, personally appeared before me Yui Yat Hung who, being
by me first duly sworn declared that he is the President of Natural Way
Technologies, Inc., that he signed the foregoing document as President of the
corporation, and that the statements therein contained are true and correct.
/s/ T. Michele Hanlon
T. Michele Hanlon
Notary Public in and for the
State of Texas
Printed Name of Notary Public: T. Michele Hanlon
My Commission Expires: June 26, 1999
STATE OF TEXAS S
S
COUNTY OF HARRIS S
I, T. MICHELE HANLON, a Notary Public, do hereby certify that on this 21
day of November, 1996, personally appeared before me Yiu Yat On who, being by
me first duly sworn declared that he is the Secretary of Natural Way
Technologies, Inc., that he signed the foregoing document as Secretary of the
corporation, and that the statements therein contained are true and correct.
/s/ T. Michele Hanlon
T. Michele Hanlon
Notary Public in and for the
State of Texas
Printed Name of Notary Public: T. Michele Hanlon
My Commission Expires: June 26, 1999
