SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
[X] Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
NATURAL WAY TECHNOLOGIES, INC.
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(Name of Registrant As Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1. Title of each class of securities to which transaction applies:
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2. Aggregate number of securities to which transaction applies:
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3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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4. Proposed maximum aggregate value of transaction:
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5. Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1. Amount Previously Paid:
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2. Form, Schedule or Registration Statement No.:
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3. Filing Party:
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4. Date Filed:
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<PAGE>
NATURAL WAY TECHNOLOGIES, INC.
One World Trade Center, Suite 7865
New York, New York 10048
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD WEDNESDAY, JUNE 18, 1997
To the Shareholders of Natural Way Technologies, Inc.:
An Annual Meeting of Shareholders of Natural Way Technologies, Inc. (the
"Company") will be held at the New World Harbour View Hotel, M/F, Boardroom III
and IV, 1 Harbour Road, Wanchai, Hong Kong at 3:00 p.m., on Wednesday, June 18,
1997 for the following purposes:
1. To elect seven directors of the Company to hold office until the
next annual meeting of shareholders or until their successors are duly
elected and qualified.
2. To consider a proposal to adopt the Natural Way Technologies, Inc.
1997 Stock Option Plan.
3. To consider a proposal to ratify the appointment of Arthur Andersen
& Co. as the Company's independent certifying accountants.
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Shareholders of record at the close of business on May 16, 1997 are
entitled to notice of and to vote at the meeting and any adjournment thereof.
You are cordially invited to attend the meeting. Whether or not you are
planning to attend the meeting, you are urged to complete, date and sign the
enclosed proxy card and return it promptly.
YOUR VOTE IS IMPORTANT! PLEASE PROMPTLY MARK, DATE, SIGN, AND RETURN YOUR
PROXY IN THE ENCLOSED ENVELOPE. IF YOU ARE ABLE TO ATTEND THE MEETING AND WISH
TO VOTE YOUR SHARES PERSONALLY, YOU MAY DO SO AT ANY TIME BEFORE THE PROXY IS
VOTED.
By Order of the Board of Directors
Yao Su Zhen
Secretary
New York, New York
May 16, 1997
<PAGE>
NATURAL WAY TECHNOLOGIES, INC.
One World Trade Center, Suite 7865
New York, New York 10048
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 18, 1997
INTRODUCTION
This Proxy Statement is being furnished in connection with the solicitation
of proxies on behalf of the Board of Directors of Natural Way Technologies, Inc.
(the "Company") for use at the 1997 Annual Meeting of Shareholders of the
Company and at any adjournment thereof (the "Annual Meeting"). The Annual
Meeting is scheduled to be held at the New World Harbour View Hotel, M/F,
Boardroom III and IV, 1 Harbour Road, Wanchai, Hong Kong at 3:00 p.m., on
Wednesday, June 18, 1997 at 3:00 p.m. local time. This Proxy Statement and the
enclosed form of proxy will first be sent to shareholders on or about May 16,
1997.
Proxies
The shares represented by any proxy in the enclosed form, if such proxy is
properly executed and is received by the Company prior to or at the Annual
Meeting prior to the closing of the polls, will be voted in accordance with the
specifications made thereon. Proxies on which no specification has been made by
the shareholder will be voted FOR the election to the Board of Directors of the
nominees of the Board of Directors named herein, FOR the adoption of the Natural
Way Technologies, Inc. 1997 Stock Option Plan, FOR the ratification of the
appointment of the designated independent accountants, and as the proxy holders
deem advisable on other matters that may come before the meeting. Proxies are
revocable by written notice received by the Secretary of the Company at any time
prior to their exercise or by executing a later dated proxy. Proxies will be
deemed revoked by voting in person at the Annual Meeting.
Voting Securities
Shareholders of record at the close of business on May 16, 1997 (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting. On
the Record Date, the total number of shares of common stock of the Company,
$.001 par value per share (the "Common Stock"), outstanding and entitled to vote
was 10,200,000. The holders of all outstanding shares of Common Stock are
entitled to one vote for each share of Common Stock registered in their names on
the books of the Company at the close of business on the Record Date. In
addition to the Common Stock, the Company had 100,000 shares of Series B
Preferred Stock (the "Series B Preferred Stock") outstanding and entitled to
vote as of the Record Date. The holders of Series B Preferred Stock, as a class,
are entitled to 30% voting control, or an aggregate of 4,371,429 votes at the
Annual Meeting, in all matters voted on by the shareholders of the Company.
Beautimate Group Limited, a British Virgin Island company controlled by Yiu
Yat Hung, Yiu Yat On, Yao Yi Le and Yao Su Zhen, the officers and directors of
the Company, owns 67.6% of the Common Stock and 100% of the Series B Preferred
Stock. Beautimate Group Limited has advised the Company that it intends to vote
its shares of Common Stock and Series B Preferred Stock for the election of each
of the directors set forth in this Proxy Statement and for Proposals 2 and 3 set
forth herein, thereby ensuring the election of each of the directors and the
approval of the Proposals.
Quorum and Other Matters
The presence at the Annual Meeting, in person or by proxy, of the holders
of a majority of the eligible votes represented by the outstanding shares of
Common Stock and Series B Preferred Stock entitled to vote at the Annual Meeting
is necessary to constitute a quorum.
<PAGE>
Shares of Common Stock and Series B Preferred Stock represented by a
properly dated, signed and returned proxy will be counted as present at the
Annual Meeting for purposes of determining a quorum, without regard to whether
the proxy is marked as casting a vote or abstaining. If a quorum is present, in
person or by proxy, a plurality vote of shares of Common Stock and Series B
Preferred Stock present and entitled to vote at the Annual Meeting, will be
necessary for the election of directors pursuant to proposal 1 and the
ratification of independent accountants pursuant to proposal 3. Accordingly,
abstentions and broker non-votes will not effect the outcome of the election of
directors or the ratification of the appointment of the Company's independent
accountants.
If a quorum is present, the affirmative vote, in person or by proxy, of a
majority of shares of Common Stock and Series B Preferred Stock present and
entitled to vote at the Annual Meeting, will be necessary for the adoption of
the stock option plan pursuant to proposal 2 listed in the Notice of Meeting.
Broker non-votes are treated as not being present in person or by proxy at the
Annual Meeting and, therefore, will not affect the outcome of the voting on
proposal 2. Abstentions are treated as being present and, because the
affirmative vote of a majority of the shares of Common Stock and Series B
Preferred Stock present and entitled to vote on a particular proposal is
necessary for adoption of proposal 2, the effect of an abstention is a vote
against the proposal.
The Board of Directors is not aware of any matters that are expected to
come before the Annual Meeting other than those referred to in this Proxy
Statement. If any other matter should come before the Annual Meeting, the
persons named in the accompanying proxy intend to vote such proxies in
accordance with their best judgment.
Reorganization of the Company
On June 30, 1996, China Medical Development Co., Ltd., a British Virgin
Islands company ("China Medical"), completed a "reverse acquisition" (the
"Exchange") of Energy Systems, Inc. ("ESI"). China Medical operates through
Dunhua Huakang Pharmaceutical Co., Ltd. ("DHPC"), a Sino-Foreign joint venture
formed in March of 1996 to carry on the pharmaceutical operations previously
conducted by Dunhua Huakang Pharmaceutical Plant ("DHPP"), an enterprise owned
by the government of the People's Republic of China. ESI had no operations prior
to the Exchange. Following the Exchange, ESI changed its name to Natural Way
Technologies, Inc. and management of China Medical assumed control of the
Company. As used herein, references to the Company include Natural Way
Technologies, Inc., its wholly-owned subsidiary, China Medical, and China
Medical's 70% interest in the DHPC.
PROPOSAL 1
ELECTION OF DIRECTORS
Seven directors are to be elected to serve until the next annual meeting of
shareholders and until their successors are elected and shall have qualified.
The Board of Directors has nominated Yiu Yat Hung, Yiu Yat On, Yao Yi Le, Yao Su
Zhen, Yao Yi Ming, Jian Yin Jiang and Dr. Keyong Ren to serve as directors (the
"Nominees"). Yiu Yat Hung, Yiu Yat On, Yao Yi Le, Yao Su Zhen and Yao Yi Ming
are currently serving as directors of the Company. The remaining Nominees are
nominated to serve as directors of the Company for the first time. Directors
shall be elected by shareholders holding a plurality of the votes represented by
the shares of Common Stock and Series B Preferred Stock present at the Annual
Meeting. It is the intention of the persons named in the form of proxy, unless
authority is withheld, to vote the proxies given them for the election of all of
the Nominees. In the event, however, that any one of them is unable or declines
to serve as a director, the appointees named in the form of proxy reserve the
right to substitute another person of their choice as nominee, in his place and
stead, or to vote for such lesser number of directors as may be presented by the
Board of Directors in accordance with the Company's Bylaws. The Board of
Directors has no reason to believe that any nominee will be unable to serve or
decline to serve as a director. Any vacancy occurring between shareholders'
meetings, including vacancies resulting from an increase in the number of
directors, may be filled by the Board of Directors. A director elected to fill a
vacancy shall hold office until the next annual shareholders' meeting.
2
<PAGE>
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE
FOR THE ELECTION OF ALL NOMINEES NAMED ABOVE TO THE BOARD OF DIRECTORS.
Served as
Director
Principal Continuously
Name and Age Occupation (1) Since
------------ -------------- ------------
Yiu Yat Hung (45)........ Chairman of the Board and Chief 1996
Executive Officer
Yiu Yat On (42).......... Vice-Chairman and Vice President 1996
Yao Yi Le (39)........... Treasurer 1996
Yao Su Zhen (50)......... Controller and Secretary 1996
Yao Yi Ming (52)......... Chief Operating Officer 1996
Jian Yin Jiang (67)...... Chairman of Shanghai Yan Jiang
Industrial Company since 1991 (2) (4)
Keyong Ren, M.D. (38).... Vice President of CIIC Biomedical
International Group since 1995 (3) (4)
- ------------------------
(1) Unless indicated otherwise in the table or in the section of this Proxy
Statement captioned "Information Regarding Executive Officers," the
individuals named in the table have held their positions for more than five
years.
(2) Mr. Jiang has served as Chairman of Shanghai Yan Jiang Industrial Company,
an investment holding company. Previously, Mr. Jiang served as a law
professor at Shanghai Educational University from 1979 to 1990.
(3) Mr. Ren has served as Vice President of CIIC Biomedical International
Group, a biotechnology holding company, since 1995; as Deputy Director of
China Innovation Center for Life Science, a consulting firm, since 1995; as
Vice President of Cheng Cheng Enterprises (USA), a pharmaceutical holding
company, since 1995; and as a Director of Sino-American Pharmaceutical
Professional Association since 1995. Previously, Mr. Ren was employed as a
Scientist by American Home Products Corp., a major consumer products
company, from 1993 to 1995 and as a consultant to SUN Investment, Inc. on
the U.S. pharmaceutical industry from 1990 to 1995. (4) Nominated for first
term as director.
Information Regarding Executive Officers
Officers and directors are elected on an annual basis. The present terms
for each director will expire at the next annual meeting of shareholders or at
such time as a successor is duly elected. Officers serve at the discretion of
the Board of Directors. See "Beneficial Ownership of Common Stock."
Yiu Yat Hung, Yiu Yat On, Yao Yi Le, Yao Su Zhen and Yao Yi Ming are
brothers and sisters.
The following is a biographical summary of the business experience of the
present executive officers of the Company. Information with respect to
non-employee directors is set forth above.
Yiu Yat Hung is a founder of China Medical and has served as Chairman and
Chief Executive Officer of the Company since the acquisition of China Medical by
the Company in June of 1996. Since 1981, Mr. Yiu has owned and heads a trading
and investment company in Hong Kong. Mr. Yiu is a medical doctor by education,
has a Masters Degree in Political Science and Economics and has spent his entire
career in business.
3
<PAGE>
Yiu Yat On is a co-founder of China Medical and has served as Vice-Chairman
and Vice President of the Company since the Exchange in June of 1996. Mr. Yiu
also serves as chairman of DHPC. For over twenty years, Mr. Yiu has served as a
management consultant to various companies in the PRC and has operated various
companies in the PRC. Mr. Yiu has a graduate degree in business administration.
Yao Yi Le is a co-founder of China Medical and has served as Treasurer and
a director of the Company since the Exchange in June of 1996 and served as Chief
Financial Officer of the Company from June of 1996 until April of 1997. Mr. Yao
has provided management accounting and finance services to various companies in
the PRC for over 14 years. Mr. Yao has a degree in industrial accounting.
Yao Su Zhen is a co-founder of China Medical and has served as Controller,
Secretary and a director of the Company since the Exchange in June of 1996. Ms.
Yao has provided accounting and finance services to various companies in the PRC
for over 14 years. Ms. Yao has a degree in industrial accounting.
Yao Yi Ming is a co-founder of CMDC and has served as Chief Operating
Officer and a director of the Company since the Exchange in 1996. Mr. Yao has
been involved in scientific and market research and the development of new
pharmaceutical businesses for over 24 years. Mr. Yao has a degree in organic
chemistry.
Ken Kangmao Wang, age 48, has served as Chief Financial Officer of the
Company since April of 1997. Prior to joining the Company, from 1994 to 1996,
Mr. Wang served as Senior Executive Director of YTL Power China Ltd., a member
of the YTL Group, a multinational company engaged in infrastructure projects in
Southeast Asia. YTL Group is publicly traded in Tokyo and Kuala Lumper. Prior to
joining YTL, from 1992 to 1994, Mr. Wang served as a Director and Chief
Accounting Officer of Brilliance China Holdings Ltd., a Chinese automobile
manufacturer whose securities are publicly traded on the New York Stock
Exchange.
Compliance With Section 16(a) of Exchange Act
Under the securities laws of the United States, the Company's directors,
its executive officers, and any persons holding more than ten percent of the
Company's Common Stock are required to report their initial ownership of the
Company's Common Stock and any subsequent changes in that ownership to the
Securities and Exchange Commission. Specific due dates for these reports have
been established and the Company is required to disclose in this Proxy Statement
any failure to file by these dates during 1996. All of the filing requirements
were satisfied on a timely basis in 1996, except that Yiu Yat Hung, Yiu Yat On,
Yao Yi Le, Yao Su Zhen, Yao Yi Ming and Beautimate Group Limited failed to file
on a timely basis their initial report of their holdings on Form 3. Reports on
Form 3 have since been filed by each of such persons. In making these
disclosures, the Company has relied solely on written statements of its
directors, executive officers and shareholders and copies of the reports that
they filed with the Commission.
Committees and Attendance of the Board of Directors
The Company presently maintains no standing committees of its board of
directors. The Company intends to evaluate the creation of a standing Audit
Committee and a standing Compensation Committee at such time as the board deems
appropriate. Assuming approval of the Company's 1997 Stock Option Plan and the
election of Jian Yin Jiang and Keyong Ren as directors, the board of directors
intends to form a Compensation Committee, consisting initially of Mr. Jiang and
Mr. Ren, to administer such plan.
During the year ended December 31, 1996, the Board of Directors held 3
formal meetings. Each director (during the period in which each such director
served) attended at least 75% of the aggregate of (i) the total number of
meetings of the Board of Directors, plus (ii) the total number of meetings held
by all committees of the Board of Directors on which the director served.
4
<PAGE>
Compensation of Directors
No compensation is presently paid to directors for service in such
capacity. The Company intends to establish appropriate compensation arrangements
for non-employee directors consistent with industry practice following the 1997
Annual Meeting.
Executive Compensation and Other Matters
The following table sets forth information concerning cash and non-cash
compensation paid or accrued for services in all capacities to the Company
during the year ended December 31, 1996 of each person who served as the
Company's Chief Executive Officer during fiscal 1996 and the four other most
highly paid executive officers whose total annual salary and bonus exceeded
$100,000 during the fiscal year ended December 31, 1996 (the "Named Officers").
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
--------------------------------------- ------------
Other Annual Stock
Name and Principal Position Year Salary ($) Bonus ($) Compensation ($) Options (#)
- --------------------------- ---- ---------- --------- ---------------- -----------
<S> <C> <C> <C> <C> <C>
Yiu Yat Hung (1).............. 1996 -0- -0- -0- -0-
Chairman of the Board and 1995 -0- -0- -0- -0-
Chief Executive Officer 1994 -0- -0- -0- -0-
</TABLE>
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(1) Compensation indicated for Mr. Yiu for periods prior to June of 1996
represent amounts paid by the Company's subsidiary, China Medical, prior to
the acquisition of China Medical by the Company.
Employment Contracts
The Company has no employment agreements with any of its officers or
employees.
Beneficial Ownership of Common Stock
The following table is furnished as of April 1, 1997, to indicate
beneficial ownership of shares of the Company's Common Stock by (1) each
shareholder of the Company who is known by the Company to be a beneficial owner
of more than 5% of the Company's Common Stock, (2) each director, Nominee and
named officer of the Company, individually, and (3) all officers and directors
of the Company as a group. The information set out in the following table was
supplied by such persons.
Name and Address of Number of Shares
Beneficial Owner (1) Beneficially Owned (2) Percent
- -------------------- ---------------------- -------
Beautimate Group Limited (3)... 6,900,000 67.6%
Suite 5301, Central Plaza
18 Harbour Road, Wanchai,
Hong Kong
Yiu Yat Hung................... -0- (3) -
Yiu Yat On..................... -0- (3) -
Yao Yi Le...................... -0- (3) -
Yao Su Zhen.................... -0- (3) -
Yao Yi Ming.................... -0- -
Jian Yin Jiang................. -0- -
Keyong Ren..................... -0- -
All officers and directors
as a group (7 persons)........ 6,900,000 67.6%
5
<PAGE>
(1) Unless otherwise noted, each person or group identified possesses sole
voting and investment power with respect to the shares shown opposite the
name of such person or group.
(2) Includes shares of Common Stock not outstanding, but which are subject to
options or warrants exercisable within 60 days of the date of the
information set forth in this table, which are deemed to be outstanding for
the purpose of computing the shares held and percentage of outstanding
Common Stock with respect to the holder of such options or warrants. Such
shares are not, however, deemed to be outstanding for the purpose of
computing the percentage of any other person.
(3) Beautimate Group Limited is controlled by Yiu Yat Hung, Yiu Yat On, Yao Yi
Le and Yao Su Zhen, the officers and directors of the Company. Such
individuals may be deemed to be the beneficial owners of the shares held by
Beautimate Group Limited. However, each of such individuals disclaim
beneficial ownership of the shares indicated as held by Beautimate Group
Limited.
Series B Preferred Stock
The following table is furnished as of April 1, 1997 to indicate beneficial
ownership of the Company's Series B Preferred Stock by each shareholder of the
Company who is known by the Company to be a beneficial owner of more than 5% of
the Company's Series B Preferred Stock.
Name and Address of Number of Shares
Beneficial Owner (1) Beneficially Owned Percent
-------------------- ------------------ --------
Beautimate Group Limited (2)............ 100,000 100.0%
Suite 5301, Central Plaza
18 Harbour Road, Wanchai, Hong Kong
- ------------------------
(1) Unless otherwise noted, each person or group identified possesses sole
voting and investment power with respect to the shares shown opposite the
name of such person or group.
(2) Beautimate Group Limited is controlled by Yiu Yat Hung, Yiu Yat On, Yao Yi
Le and Yao Su Zhen, the officers and directors of the Company. Such
individuals may be deemed to be the beneficial owners of the shares held by
Beautimate Group Limited. However, each of such individuals disclaim
beneficial ownership of the shares indicated as held by Beautimate Group
Limited.
Certain Relationships and Transactions
DHPP, which previously operated the pharmaceutical plant and is a 30% owner
of DHPC, sold products to certain affiliated companies and paid certain
management fees and interest payments to affiliated companies, none of which are
affiliated with the Company.
On June 28,1996, the Company entered into a Conditional Acquisition
Agreement with China Food and Beverage Industrial Company Limited ("China Food
and Beverage") and its shareholders pursuant to which the Company would have the
right to acquire not less than 50% of China Food and Beverage for a price not to
exceed eight times earnings. Pursuant to such agreement, as amended, the Company
has until June 30, 1997 to conduct due diligence with respect to the potential
acquisition of China Food and Beverage. The Company deposited $1,400,000 with
China Food and Beverage which shall be refundable in full with interest at 8%
commencing on January 1, 1997 if the Company elects not to consummate such
acquisition. If the Company elects to pursue the acquisition of China Food and
Beverage the deposit will be applied toward the purchase price.
China Food and Beverage is involved in efforts to form a sino-foreign joint
venture which will own and operate an almond juice manufacturing business
presently operated by a PRC government controlled entity. China Food and
Beverage is owned and controlled by Yiu Yat Hung, a director of the Company.
The Company has, from time to time, borrowed funds from New Silver Eagle
Holdings Limited, a company controlled by Yiu Yat Hung and family. At December
31, 1996, the Company had a balance of $410,000 owed to New Silver Eagle
Holdings. Such loans are unsecured, non-interest bearing and have no definitive
repayment terms.
6
<PAGE>
The Company has no existing policy with respect to related party
transactions. However, management believes that each of the transactions
described above was, or will be, on terms at least as favorable to the Company
as could have been obtained from unaffiliated third parties. Other than the
foregoing, management is not aware of any material transactions between the
Company and any officers, directors or five percent shareholders, or affiliates
of such persons.
Other than elections to office, no director, nominee for director,
executive officer or associate of any of the foregoing persons has any
substantial interest, direct or indirect, by security holdings or otherwise, in
any matter to be acted upon at the Annual Meeting.
PROPOSAL 2
APPROVAL OF THE COMPANY'S 1997
STOCK OPTION PLAN
In April of 1997, the Company's Board of Directors adopted and approved a
stock option plan for the Company, the Natural Way Technologies, Inc. 1997 Stock
Option Plan (the "1997 Plan"), under which stock options awards may be made to
employees, directors and consultants of the Company. A copy of the 1997 Plan is
attached hereto as Annex A. The purpose of the 1997 Plan is to promote the
interests of the Company and its shareholders by establishing a direct link
between the financial interests of participating employees, directors and
consultants and the performance of the Company and enabling the Company to
attract and retain highly competent employees, directors and consultants. No
options have been granted to date under the 1997 Plan and the amount of benefits
to be received under the 1997 Plan by any particular person or group is not
determinable at this time. See "New Benefit Plans" below.
General Provisions
Duration of the 1997 Plan; Share Authorization. The 1997 Plan became
effective on the date it was adopted by the Board of Directors, subject to the
approval of the Company's shareholders, and it will remain effective until the
tenth anniversary of the effective date unless terminated earlier by the Board
of Directors. If shareholder approval is not obtained, the 1997 Plan will not be
implemented and any options granted under the 1997 Plan will be void.
The maximum number of shares of Common Stock which may be issued or
delivered and as to which awards may be granted under the 1997 Plan will be
400,000 shares. The exercise price for a stock option must be at least equal to
100% of the fair market value of the Common Stock on the date of grant of such
stock option for "incentive options" and 85% of the fair market value of the
Common Stock on the date of grant of such stock option for "non-qualified
options".
The shares of Common Stock to be issued or delivered under the 1997 Plan
will be authorized and unissued shares or previously issued and outstanding
shares of Common Stock reacquired by the Company. Shares of Common Stock covered
by any unexercised portions of terminated options and shares of Common Stock
subject to any awards which are otherwise surrendered by plan participants
without receiving any payment or other benefit with respect thereto may again be
subject to new awards under the 1997 Plan.
Plan Administration. The 1997 Plan will be administered by a Compensation
Committee to be appointed by the Board of Directors with the advice and
recommendations of senior management. The Compensation Committee will be
comprised solely of non-employee directors of the Company. The Compensation
Committee will determine the employees who will be eligible for and granted
awards, determine the amount and type of awards, establish rules and guidelines
relating to the 1997 Plan, establish, modify and determine terms and conditions
of awards and take such other action as may be necessary for the proper
administration of the 1997 Plan.
7
<PAGE>
Plan Participants. Any employee of the Company may be selected by the
Compensation Committee to receive an award under the 1997 Plan. Presently, there
are approximately 10 employees eligible to participate in the 1997 Plan.
Additionally, non-employee directors of the Company will be eligible to receive
awards of options under the Plan. Finally, key consultants, as determined by the
Compensation Committee, may receive awards of non-qualified options under the
1997 Plan.
Awards Available Under 1997 Plan
Awards under the 1997 Plan may take the form of stock options meeting the
requirements of Section 422 of the Internal Revenue Code of 1986 ("Incentive
Stock Options") and stock options which do not meet such requirements
("Non-Qualified Stock Options"). Only employees of the Company are eligible to
receive Incentive Stock Options under the 1997 Plan. No employee of the Company
may receive options in respect of more than 200,000 shares in any calendar year.
The duration of each option will be determined by the Compensation Committee,
but no option will be exercisable more than ten years from the date of grant
(or, with respect to Incentive Stock Options granted to persons holding ten
percent or more of the outstanding Common Stock, five years from the date of
grant). The exercise price for incentive stock options must be at least equal to
100% of the fair market value of the Common Stock on the date of grant of such
option (or, with respect to Incentive Stock Options granted to persons holding
ten percent or more of the outstanding Common Stock, 110% of the fair market
value of the Common Stock). The exercise price will be payable in cash or in
such other form as the Compensation Committee may approve in the applicable
award agreement, including, without limitation, by a cashless exercise or the
delivery to the Company of shares of Common Stock owned by the participant.
The options may be subject to restrictions on exercise, such as exercise in
periodic installments or upon attainment of specified performance criteria, as
determined by the Compensation Committee. Stock options granted under the 1997
Plan will not be transferable except by will or the laws of descent and
distribution and may be exercised only by a participant during his or her
lifetime.
Unless otherwise determined by the Compensation Committee and provided in
the applicable option agreement, options will be exercisable within three months
of any termination of employment, including termination due to disability, death
or normal retirement (but not later than the expiration date of the option).
Termination and Amendment
The Board may amend or terminate the 1997 Plan at any time but, without an
optionee's consent, no such action will affect or in any way impair the rights
of such optionee under any award granted prior to such action, and no amendment
will be made without the approval of the Company's shareholders if such approval
is required to maintain the compliance of the 1997 Plan with Rule 16b-3 of the
Securities and Exchange Commission or Section 422 of the Internal Revenue Code
of 1986.
Antidilution Provisions
The amount of shares authorized to be issued under the 1997 Plan, and the
terms of outstanding stock options, shall be adjusted to prevent dilution or
enlargement of rights in the event of any stock dividend, reorganization,
reclassification, recapitalization, stock split, combination, merger,
consolidation or other capitalization change of similar effect.
Withholding Obligations
The Company has the right to deduct from an optionee's salary, bonus or
other compensation any taxes required to be withheld with respect to options
granted under the 1997 Plan.
8
<PAGE>
Certain Federal Income Tax Consequences
The following is a brief summary of the principal federal income tax
consequences of awards under the 1997 Plan based upon current federal income tax
laws. The summary is not intended to be exhaustive and, among other things, does
not describe state, local or foreign tax consequences.
An optionee is not subject to federal income tax either at the time of
grant or at the time of exercise of an Incentive Stock Option. However, some
optionees are subject to the "alternative minimum tax" and the amount by which
the fair market value of the Common Stock subject to an Incentive Stock Option
on the date of exercise exceeds the exercise price will generally be added to
the optionee's income for purposes of calculating his or her alternative minimum
taxable income. If an optionee does not dispose of shares of Common Stock
acquired through the exercise of an Incentive Stock Option within one year after
their receipt and within two years after the date of grant of the Incentive
Stock Option (either event, a "disqualifying disposition") the taxable income
recognized upon the sale of such shares will be taxed at the long-term capital
gains rate.
The Company will not receive any tax deduction in connection with the
exercise of an Incentive Stock Option unless there is a disqualifying
disposition. If there is a disqualifying disposition, the optionee will be
treated as receiving compensation subject to ordinary income tax in the year of
the disqualifying disposition and the Company will be entitled to an equal
deduction for compensation expense. The tax will be imposed on the lesser of (i)
the difference between the fair market value of the stock at the time of
exercise and the exercise price or (ii) the amount of gain realized on the
disposition. Any appreciation in value after the time of exercise will be taxed
as capital gain and will not result in any deduction by the Company.
If Non-Qualified Stock Options are granted to an optionee, there are no
federal income tax consequences at the time of grant. Upon exercise of the
option, the optionee will recognize ordinary income in an amount equal to the
difference between the exercise price and the fair market value of the Common
Stock on the date of exercise. When the optionee thereafter sells the shares,
the difference between any amount realized on such sale and the fair market
value of the shares at the time of exercise will be taxed as capital gain or
loss, which will be short-term or long-term, depending on whether the applicable
capital gain holding period has been satisfied.
New Plan Benefits
No options have been granted to date under the 1997 Plan. Accordingly, the
amount of benefits to be received under the 1997 Plan by any particular person
or group is not determinable at this time.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE
COMPANY'S 1997 STOCK OPTION PLAN.
PROPOSAL 3
INDEPENDENT AUDITORS
The Board of Directors has selected Arthur Andersen & Co. as independent
auditors for the year ending December 31, 1997, and recommends that the
shareholders vote for ratification of such appointment. Arthur Andersen & Co.
were also the Company's independent auditors in fiscal year 1996 and served as
the independent auditors for China Medical and DHPP with respect to the
financial statements of such company for fiscal years 1995 and 1994. In the
event of a negative vote on such ratification, the Board of Directors will
reconsider its selection.
Representatives of Arthur Andersen & Co. are expected to be present at the
Annual Meeting, will be afforded an opportunity to make a statement if they
desire to do so, and are expected to be available to respond to appropriate
inquiries from shareholders.
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Following the acquisition of China Medical by the Company, in June of 1996,
the Company's Board of Directors selected Arthur Andersen & Co. to serve as its
new independent accountants and dismissed D. Brian Macbeth, Certified Public
Accountant, of Spring, Texas, who previously served as the independent
accountant for Energy Systems, Inc.
D. Brian Macbeth's reports on the financial statements of Energy Systems
for the fiscal years 1995 and 1994 contain no adverse opinion or disclaimer of
opinion and were not qualified or modified as to uncertainty, audit scope, or
accounting principles. In connection with its audits for fiscal years 1995 and
1994 and through July 31, 1996, there were no disagreements with D. Brian
Macbeth on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements if not resolved
to the satisfaction of D. Brian Macbeth would have caused him to make reference
thereto in his reports on the financial statements for such years.
The information described above regarding the Company's decision to dismiss
D. Brian Macbeth as its independent accountant and select Arthur Andersen & Co.
as its new independent accountants, along with a letter from D. Brian Macbeth
stating that he agrees with the above information regarding the Company's change
of accountants, was fully disclosed in a Form 8-K filed with the SEC.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR RATIFICATION OF
THE APPOINTMENT OF ARTHUR ANDERSEN & CO. AS INDEPENDENT ACCOUNTANTS FOR THE
COMPANY.
DATE FOR SUBMISSION OF SHAREHOLDER PROPOSALS
In order for shareholder proposals to be included in the Company's Proxy
Statement and proxy relating to the Company's 1998 Annual Meeting of
Shareholders, such proposals must be received by the Company at its principal
executive offices not later than January 31, 1998.
EXPENSES OF SOLICITATION
All of the expenses of soliciting proxies from shareholders, including the
reimbursement of brokerage firms and others for their expenses in forwarding
proxies and proxy statements to the beneficial owners of the Company's Common
Stock, will be borne by the Company.
OTHER MATTERS
The Board of Directors does not intend to bring any other matters before
the Annual Meeting and has not been informed that any other matters are to be
presented by others. In the event any other matters properly come before the
Annual Meeting, the persons named in the enclosed form of proxy will vote all
such proxies in accordance with their best judgment on such matters.
Whether or not you are planning to attend the Annual Meeting, you are urged
to complete, date and sign the enclosed proxy and return it in the enclosed
stamped envelope at your earliest convenience.
By Order of the Board of Directors
Yao Su Zhen
Secretary
New York, New York
May 16, 1997
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"ANNEX A"
NATURAL WAY TECHNOLOGIES, INC.
1997 STOCK OPTION PLAN
1. Purpose. The purpose of this Natural Way Technologies, Inc. 1997 Stock
Option Plan ("Plan") is to encourage ownership of common stock, $.001 par value
("Common Stock"), of Natural Way Technologies, Inc., a Nevada corporation (the
"Company"), by eligible key employees, consultants and directors of the Company
and its Affiliates (as defined below) and to provide increased incentive for
such employees, consultants and directors to render services and to exert
maximum effort for the business success of the Company. In addition, the Company
expects that this Plan will further strengthen the identification of employees,
consultants and directors with the shareholders. Certain options to be granted
under this Plan are intended to qualify as Incentive Stock Options ("ISOs")
pursuant to Section 422 of the Internal Revenue Code of 1986, as amended
("Code"), while other options granted under this Plan will be nonqualified
options which are not intended to qualify as ISOs ("Nonqualified Options"),
either or both as provided in the agreements evidencing the options as provided
in Section 6 hereof. As used in this Plan, the term "Affiliates" means any
"parent corporation" of the Company and any "subsidiary corporation" of the
Company within the meaning of Sections 424(e) and (f), respectively, of the
Code.
2. Administration.
2.1 Composition of the Compensation Committee. This Plan shall be
administered by the Compensation Committee (the "Committee") designated by the
Board of Directors of the Company (the "Board"), which shall also designate the
Chairman of the Committee. If the Company is governed by Rule 16b-3 promulgated
by the Securities and Exchange Commission ("Commission") pursuant to the
Securities Exchange Act of 1934, as amended ("Exchange Act"), no director shall
serve as a member of the Committee unless the director is a "non-employee
director" within the meaning of such Rule 16b-3. Members of such Committee shall
only be eligible to receive stock options under this Plan if such stock options
are granted in accordance with Rule 16b-3.
2.2 Committee Action. The Committee shall hold its meetings at such times
and places as it may be determine. A majority of its members shall constitute a
quorum, and all determinations of the Committee shall be made by not less than a
majority of its members. Any decision or determination reduced to writing and
signed by a majority of the members shall be fully effective as if it had been
made by a majority vote of its members at a meeting duly called and held. The
Committee may designate the Secretary of the Company or other Company employees
to assist the Committee in the administration of this Plan, and may grant
authority to such persons to execute award agreements or other documents on
behalf of the Committee and the Company. Any duly constituted committee of the
Board satisfying the qualifications of this Section 2 may be appointed as the
Committee.
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2.3 Committee Expenses. All expenses and liabilities incurred by the
Committee in the administration of this Plan shall be borne by the Company. The
Committee may employ attorneys, consultants, accountants or other persons.
3. Stock Reserved. Subject to adjustment as provided in Section 6.11
hereof, the aggregate number of shares of Common Stock that may be optioned
under this Plan is 400,000. The shares subject to this Plan shall consist of
authorized but unissued shares of Common Stock and such number of shares shall
be and is hereby reserved for sale for such purpose. Any of such shares which
may remain unsold and which are not subject to outstanding options at the
termination of this Plan shall cease to be reserved for the purpose of this
Plan, but until termination of this Plan or the termination of the last of the
options granted under this Plan, whichever last occurs, the Company shall at all
times reserve a sufficient number of shares to meet the requirements of this
Plan. Should any option expire or be canceled prior to its exercise in full, the
shares theretofore subject to such option may again be made subject to an option
under this Plan.
4. Eligibility. The persons eligible to participate in this Plan as a
recipient of options ("Optionee") shall include only key employees, consultants
and directors of the Company or its Affiliates at the time the option is
granted. An employee or consultant who has been granted an option hereunder may
be granted an additional option or options, if the Committee shall so determine.
5. Grant of Options.
5.1 Committee Discretion. The Committee shall have sole and absolute
discretionary authority (i) to determine, authorize, and designate those key
employees, consultants and directors of the Company or its Affiliates who are to
receive options under this Plan, (ii) to determine the number of shares of
Common Stock to be covered by such options and the terms thereof, and (iii) to
determine the type of option granted: ISOs, Nonqualified Options or a
combination of ISOs and Nonqualified Options; provided that consultants and
directors who are not employees of the Company may not receive any ISOs and
provided, further, that no employee may be awarded Options in respect of more
than 200,000 shares of Common Stock in any one year. The Committee shall
thereupon grant options in accordance with such determination as evidenced by a
written option agreement. Subject to the express provisions of this Plan, the
Committee shall have discretionary authority to prescribe, amend and rescind
rules and regulations relating to this Plan, to interpret this Plan, to
prescribe and amend the terms of the option agreements (which need not be
identical) and to make all other determinations deemed necessary or advisable
for the administration of this Plan.
5.2 Shareholder Approval. All options granted under this Plan are subject
to, and may not be exercised before, the approval of this Plan by the
shareholders prior to the first anniversary date of the Board meeting held to
approve this Plan, by the affirmative vote of the holders of a majority of the
outstanding shares of the Company present, or represented by proxy, and entitled
to vote thereat or written consent in accordance with the laws of the State of
Nevada; provided that if such approval by the shareholders of the Company is not
forthcoming, all options previously granted under this Plan shall be void.
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<PAGE>
5.3 Limitation on Incentive Stock Options. The aggregate fair market value
(determined in accordance with Section 6(b) of this Plan at the time the option
is granted) of the Common Stock with respect to which ISOs may be exercisable
for the first time by any Optionee during any calendar year under all such plans
of the Company and its Affiliates shall not exceed $100,000.
6. Terms and Conditions. Each option granted under this Plan shall be
evidenced by an agreement, in a form approved by the Committee, which shall be
subject to the following express terms and conditions and to such other terms
and conditions as the Committee may deem appropriate.
6.1 Option Period. The Committee shall promptly notify the Optionee of the
option grant and a written agreement shall promptly be executed and delivered by
and on behalf of the Company and the Optionee, provided that the option grant
shall expire if a written agreement is not signed by said Optionee (or his agent
or attorney) and returned to the Company within 60 days from date of receipt by
the Optionee of such agreement. The date of grant shall be the date the option
is actually granted by the Committee, even though the written agreement may be
executed and delivered by the Company and the Optionee after that date. Each
option agreement shall specify the period for which the option thereunder is
granted (which in no event shall exceed ten years from the date of grant in the
case of an ISO) and shall provide that the ISO shall expire at the end of such
period. If the original term of an option is less than ten years from the date
of grant, the option may be amended prior to its expiration, with the approval
of the Committee and the Optionee, to extend the term so that the term as
amended is not more than ten years from the date of grant. However, in the case
of an ISO granted to an individual who, at the time of grant, owns stock
possessing more than 10 percent of the total combined voting power of all
classes of stock of the Company or its Affiliate ("Ten Percent Stockholder"),
such period shall not exceed five years from the date of grant.
6.2 Exercise Price. The exercise price of each share of Common Stock
subject to each option granted pursuant to this option is granted and, in the
case of ISOs, shall not be less than 100% of the fair market value of a share of
Common Stock on the date the option is granted, as determined by the Committee.
In the case of ISOs granted to a Ten Percent Stockholder, the exercise price
shall not be less than 110% of the fair market value of a share of Common Stock
on the date the option is granted. The exercise price of each share of Common
Stock subject to a Nonqualified Option under this Plan shall be determined by
the Committee prior to granting the option. The Committee shall set the exercise
price for each share subject to a Nonqualified Option at such price as the
Committee in its sole discretion shall determine, provided that the exercise
price of each share of Common Stock subject to a Nonqualified Option shall not
be less than 85% of the fair market value of a share of Common Stock on the date
the option is granted as determined by the Committee.
3
<PAGE>
For all purposes under this Plan, the fair market value of a share of
Common Stock on a particular date shall be equal to the mean of the reported
high and low sales prices of the Common Stock on the Nasdaq Stock Market on that
date, or if no prices are reported on that date, on the last preceding date on
which such prices of the Common Stock are so reported. If the Common Stock is
not traded on the Nasdaq Stock Market at the time a determination of its fair
market value is required to be made hereunder, its fair market value shall be
deemed to be equal to the average between the closing bid and ask prices of the
Common Stock on the most recent date the Common Stock was publicly traded. In
the event the Common Stock is not publicly traded at the time a determination of
its value is required to be made hereunder, the determination of its fair market
value shall be made by the Committee in such manner as it deems appropriate.
6.3 Exercise Period. The Committee may provide in the option agreement that
an option may be exercised immediately or over the period of the grant and in
whole or in increments. However, no portion of any option may be exercisable by
an Optionee prior to the approval of this Plan by the shareholders of the
Company.
6.4 Procedure for Exercise. Options shall be exercised by the delivery by
the Optionee of written notice to the Secretary of the Company setting forth the
number of shares of Common Stock with respect to which the option is being
exercised. The notice shall be accompanied by, at the election of the Optionee
and as permitted by the Committee in the Agreement granting such options, (i)
cash, cashier's check, bank draft, or postal or express money order payable to
the order of the Company, (ii) certificates representing shares of Common Stock
theretofore owned by the Optionee duly endorsed for transfer to the Company,
(iii) an election by the Optionee to have the Company withhold the number of
shares of Common Stock the fair market value, less the exercise price, of which
is equal to the aggregate exercise price of the shares of Common Stock issuable
upon exercise of the option, or (iv) any combination of the preceding, equal in
value to the full amount of the exercise price. Notice may also be delivered by
telecopy provided that the exercise price of such shares is received by the
Company via wire transfer on the same day the telecopy transmission is received
by the Company. The notice shall specify the address to which the certificates
for such shares are to be mailed. An option to purchase shares of Common Stock
in accordance with this Plan, shall be deemed to have been exercised immediately
prior to the close of business on the date (i) written notice of such exercise
and (ii) payment in full of the exercise price for the number of share for which
options are being exercised, are both received by the Company and the Optionee
shall be treated for all purposes as the record holder of such shares of Common
Stock as of such date.
As promptly as practicable after receipt of such written notice and
payment, the Company shall deliver to the Optionee certificates for the number
of shares with respect to which such option has been so exercised, issued in the
Optionee's name or such other name as Optionee directs; provided, however, that
such delivery shall be deemed effected for all purposes when a stock transfer
agent of the Company shall have deposited such certificates in the United States
mail, addressed to the Optionee at the address specified pursuant to this
Section 6.4.
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<PAGE>
6.5 Termination of Employment. If an employee to whom an option is granted
ceases to be employed by the Company or its affiliates for any reason other than
death or disability or if a director or consultant to whom an option is granted
ceases to serve on the Board or as a consultant for any reason other than death
or disability, any option which is exercisable on the date of such termination
of employment or cessation of serving on the Board or cessation of service as a
consultant shall expire three-months from the date of such termination or
cessation but in no event may the option be exercised after its expiration under
the terms of the option agreement.
6.6 Disability or Death. In the event the Optionee dies or is determined
under this Plan to be disabled while the Optionee is employed by the Company or
its Affiliates, acts as consultant or while serves on the Board of the Company,
the options previously granted to the Optionee may be exercised (to the extent
the Optionee would have been entitled to do so at the date of death or the
determination of disability) at any time and from time to time, within a
three-month period after such death or determination of disability, by the
Optionee, the guardian of the Optionee's estate, the executor or administrator
of the Optionee's estate or by the person or persons to whom the Optionee's
rights under the option shall pass by will or the laws of descent and
distribution, but in no event may the option be exercised after its expiration
under the terms of the option agreement. An Optionee shall be deemed to be
disabled if, in the opinion of a physician selected by the Committee, the
Optionee is incapable of performing services for the Company of the kind the
Optionee was performing at the time the disability occurred by reason of any
medically determinable physical or mental impairment which can be expected to
result in death or to be of long, continued and indefinite duration. The date of
determination of disability for purposes hereof shall be the date of such
determination by such physician.
6.7 Transferability. An option granted pursuant to this Plan shall not be
assignable or otherwise transferable by the Optionee otherwise than by
Optionee's will or by the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined in the code or Title I of the
Employee Retirement Income Security Act, as amended, or the rules thereunder.
During the lifetime of an Optionee, an option shall be exercisable only by such
Optionee. Any heir or legatee of the Optionee shall take rights granted herein
and in the option agreement subject to the terms and conditions hereof and
thereof. No such transfer of any option to heirs or legatees of the Optionee
shall be effective to bind the Company unless the Company shall have been
furnished with written notice thereof and a copy of such evidence as the
Committee may deem necessary to establish the validity of the transfer and the
acceptance by the transferee or transferees of the terms and conditions hereof.
6.8 Incentive Stock Options. Each option agreement may contain such terms
and provisions as the Committee may determine to be necessary or desirable in
order to qualify under the Code of option designated as an incentive stock
option.
6.9 No Rights as Shareholder. No Optionee shall have any rights as a
shareholder with respect to shares covered by an option until the option is
exercised by written notice and accompanied by payment as provided in Section
6.4 above.
5
<PAGE>
6.10 Extraordinary Corporate Transactions. The existence of outstanding
options shall not affect in any way the right or power of the Company or its
shareholders to make or authorize any or all adjustments, recapitalizations,
reorganizations, exchanges, or other changes in the Company's capital structure
or its business, or any merger or consolidation of the Company, or any issuance
of Common Stock or other securities or subscription rights thereto, or any
issuance of bonds, debentures, preferred or prior preference stock ahead of or
affecting the Common Stock or the rights thereof, or the dissolution or
liquidation of the Company, or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding, whether of a
similar character or otherwise. If the Company recapitalizes or otherwise
changes its capital structure, or merges, consolidates, sells all of its assets
or dissolves (each of the forgoing a "Fundamental Change"), then thereafter upon
any exercise of an option theretofore granted the Optionee shall be entitled to
purchase under such option, in lieu of the number of shares of Common Stock as
to which option shall then be exercisable, the number and class of shares of
stock and securities to which the Optionee would have been entitled pursuant to
the terms of the Fundamental Change if, immediately prior to such Fundamental
Change, the Optionee had been the holder of record of the number of shares of
Common Stock as to which such option is then exercisable. If (i) the Company
shall not be the surviving entity in any merger or consolidation (or survives
only as a subsidiary of another entity), (ii) the Company sells all or
substantially all of its assets to any other person or entity (other than a
wholly-owned subsidiary), (iii) any person or entity (including a "group" as
contemplated by Section 13(d)(3) of the Exchange Act) acquires or gains
ownership or control of (including, without limitation, power to vote) more than
50% of the outstanding shares of Common Stock, (iv) the Company is to be
dissolved and liquidated, or (v) as a result of or in connection with a
contested election of directors, the persons who were directors of the Company
before such election shall cease to constitute a majority of the Board (each
such event in clauses (i) through (v) above is referred to herein as a
"Corporate Change"), the committee, in its sole discretion, may accelerate the
time at which all or a portion of an Optionee's options may be exercised for a
limited period of time before or after a specified date.
6.11 Changes in Capital Structure. If the outstanding shares of Common
Stock or other securities of the Company, or both, for which the option is then
exercisable shall at any time be changed or exchanged by declaration of a stock
dividend, stock split, combination of shares or recapitalization, the number and
kind of shares of Common Stock or other securities which are subject to this
Plan or subject to any options theretofore granted, and the exercise prices,
shall be appropriately and equitably adjusted so as to maintain the
proportionate number of shares or other securities without changing the
aggregate exercise price.
6.12 Acceleration of Options. Except as hereinbefore expressly provided,
(i) the issuance by the Company of shares of stock of any class of securities
convertible into shares of stock of any class, for cash, property, labor or
services, upon direct sale, upon the exercise of rights or warrants to subscribe
therefor, or upon conversion of shares or obligations of the Company convertible
into such shares or other securities, (ii) the payment of a dividend in property
other than Common Stock, or (iii) the occurrence of any similar transaction, and
in any case whether or not for fair value, shall not affect, and no adjustment
by reason thereof shall be made with respect to, the number of shares of Common
Stock subject to options thereto fore granted or the purchase price per share,
6
<PAGE>
unless the Committee shall determine in its sole discretion that an adjustment
is necessary to provide equitable treatment to Optionee. Notwithstanding
anything to the contrary contained in this Plan, the Committee may in its sole
discretion accelerate the time at which any option may be exercised, including,
but not limited to, upon the occurrence of the events specified in this Section
6.
7. Amendments or Termination. The Board may amend, alter or discontinue
this Plan, but no amendment or alteration shall be made which would impair the
rights of any Optionee, without his consent, under any option theretofore
granted, or which, without the approval of the shareholders, would: (i) except
as is provided in Section 6.11 of this Plan, increase the total number of shares
reserved for the purposes of this Plan, (ii) change the class of persons
eligible to participate in this Plan as provided in Section 4 of this Plan,
(iii) extend the applicable maximum option period provided for in Section 6.1 of
this Plan, (iv) extend the expiration date of this Plan set forth in Section 14
of this Plan, (v) except as provided in Section 6.11 of this Plan, decrease to
any extent the exercise price of any option granted under this Plan or (vi)
withdraw the administration of this Plan from the Committee.
8. Compliance With Other Laws and Regulations. This Plan, the grant and
exercise of options thereunder, and the obligation of the Company to sell and
deliver shares under such options, shall be subject to all applicable federal
and state laws, rules and regulations and to such approvals by any governmental
or regulatory agency as may be required. The Company shall not be required to
issue or deliver any certificates for shares of Common Stock prior to the
completion of any registration or qualification of such shares under any federal
or state law or issuance of any ruling or regulation of any government body
which the Company shall, in its sole discretion, determine to be necessary or
advisable. Any adjustments provided for in Sections 6.10, .11 and .12 of this
Plan shall be subject to any shareholder action required by Nevada corporate
law.
9. Purchase for Investment. Unless the options and shares of Common Stock
covered by this Plan have been registered under the Securities Act of 1933, as
amended, or the Company has determined that such registration is unnecessary,
each person exercising an option under this Plan may be required by the Company
to give a representation in writing that such person is acquiring such shares
for his or her own account for investment and not with a view to, or for sale in
connection with, the distribution of any part thereof.
10. Taxes.
10.1 The Company may make such provisions as it may deem appropriate for
the withholding of any taxes which it determines is required in connection with
any options granted under this Plan.
10.2 Notwithstanding the terms of Section 10.1, each Optionee must pay all
taxes required to be withheld by the Company or paid by the Optionee in
connection with the exercise of a Nonqualified Option.
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<PAGE>
11. Replacement of Options. The Committee from time to time may permit an
Optionee under this Plan to surrender for cancellation any unexercised
outstanding option and receive from the Company in exchange an option for such
number of shares of Common Stock as may be designated by the Committee. The
Committee may, with the consent of the person entitled to exercise any
outstanding option, amend such option, including reducing the exercise price of
any option to not less than the fair market value of the Common Stock at the
time of the amendment and extending the term thereof.
12. No Right to Employment. Employees shall be considered to be in the
employment of the Company so long as they remain employees of the Company or its
Affiliates. Any questions as to whether and when there has been a termination of
such employment and the cause of such termination shall be determined by the
Committee, and its determination shall be final. Nothing contained herein shall
be construed as conferring upon the Optionee the right to continue in the employ
of the Company or its Affiliates, nor shall anything contained herein be
construed or interpreted to limit the "employment at will" relationship between
the Optionee and the Company or its Affiliates. The option agreements may
contain such provisions as the Committee may approve with reference to the
effect of approved leaves of absence.
13. Liability of Company for Non-Issuance of Shares and Tax Consequences.
The Company and any Affiliates which is in existence or hereafter comes into
existence shall not be liable to an Optionee or other persons as to:
13.1 The non-issuance or sale of shares as to which the Company has been
unable to obtain from any regulatory body having jurisdiction the authority
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any shares hereunder; and
13.2 Any tax consequence expected, but not realized, by any Optionee or
other person due to the exercise of any option granted hereunder.
14. Effectiveness and Expiration of Plan. This Plan shall be effective on
the date of adoption by the Board. If the shareholders of the Company fail to
approve this Plan within twelve months of the date of the Board adoption, this
Plan shall terminate and all options previously granted under this Plan shall
become void and of no effect. This Plan shall expire ten years after the date of
the Board adopts this Plan and thereafter no option shall be granted pursuant to
this Plan.
15. Non-Exclusivity of this Plan. Neither the adoption by the Board nor the
submission for approval of this Plan to the shareholders of the Company shall be
construed as creating any limitations on the power of the Board to adopt such
other incentive arrangements as it may deem desirable, including without
limitation, the granting of restricted stock or stock options otherwise than
under this Plan, and such arrangements may be either generally applicable or
applicable only in specific cases.
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<PAGE>
16. Governing Law. This Plan and any agreements hereunder shall be
interpreted and construed in accordance with the laws of the State of Nevada and
applicable federal law.
17. Cashless Exercise. The Committee also may allow cashless exercises as
permitted under the Federal Reserve Board's Regulation T, subject to applicable
securities law restrictions, or by any other means which the Committee
determines to be consistent with this Plan's purpose and applicable law. The
proceeds from such a payment shall be added to the general funds of the Company
and shall be used for general corporate purposes.
9
<PAGE>
Appendix
NATURAL WAY TECHNOLOGIES, INC.
One World Trade Center, Suite 7865
New York, New York 10048
Proxy for Annual Meeting of Shareholders
to be held on June 18, 1997
This Proxy is solicited on behalf of the Board of Directors
The undersigned hereby appoints Yiu Yat Hung and Yiu Yat On, and each of
them, as Proxies, with full power of substitution in each of them, in the name,
place and stead of the undersigned, to vote at an Annual Meeting of Shareholders
(the "Meeting") of Natural Way Technologies, Inc., a Nevada corporation (the
"Company"), on June 18, 1997, at 3:00 p.m., or at any adjournment or
adjournments thereof, in the manner designated below, all of the shares of the
Company's common stock that the undersigned would be entitled to vote if
personally present.
1. GRANTING WITHHOLDING authority to vote for the
---------- ----------
election as directors of the Company the following nominees: Yiu Yat Hung, Yiu
Yat On, Yao Yi Le, Yao Su Zhen, Yao Yi Ming, Jian Yin Jiang and Dr. Keyong Ren.
(Instructions: To withhold authority to vote for any individual nominee, strike
a line through the nominee's name.)
2. Proposal to adopt the Natural Way Technologies, Inc. 1997 Stock Option
Plan.
FOR AGAINST ABSTAIN
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3. Proposal to ratify the appointment of Arthur Andersen & Co. as the
Company's independent certifying accountants.
FOR AGAINST ABSTAIN
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4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Meeting or any adjournments thereof.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS GIVEN ABOVE. IF NO
INSTRUCTIONS ARE GIVEN, THIS PROXY WILL BE VOTED FOR EACH OF PROPOSALS 2 AND 3
AND FOR THE ELECTION OF ALL NOMINEES AS DIRECTORS.
Please sign exactly as your name appears
hereon. When shares are held by joint
tenants, both should sign. When signing
as an attorney, executor, administrator,
trustee, guardian, or corporate officer,
please indicate the capacity in which
signing.
DATED: , 199
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Signature
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Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE
