SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. ___)
[X] Filed by Registrant
[ ] Filed by a Party other than the Registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant toss.240.14a-11(c) orss.240.14a-12
NATURAL HEALTH TRENDS CORP.
(Name of Registrant As Specified in its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
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to Exchange Act Rule 0-11:(1)
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(1) Set forth the amount on which the filing fee is calculated and state how
it was determined.
[ ] 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 date of its filing.
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NATURAL HEALTH TRENDS CORP.
5605 N. MacArthur Boulevard, 11th Floor
Irving, Texas 75038
February 13, 2003
Dear Shareholders:
You are cordially invited to attend the Annual Meeting of Shareholders of
Natural Health Trends Corp. The meeting will be held on March 11, 2003 at 12901
Hutton Drive, Dallas, Texas 75234 at 10 a.m., central standard time. In the
following pages, you will find the formal notice of our annual meeting and our
proxy statement. After reading the proxy statement, please mark, sign and
promptly return the enclosed proxy card to ensure that your shares are
represented at the meeting.
We hope that many of you will be able to attend our annual meeting in
person. It is important that your shares be represented and voted at the annual
meeting regardless of the size of your holdings. If your shares are registered
in your name and you plan to attend the annual meeting, please mark the
appropriate box on the enclosed proxy card and you will be registered for the
meeting. We urge you to attend the meeting but if you cannot, you may instead
vote by proxy.
We appreciate the continuing interest of our shareholders in our business,
and we look forward to seeing you at the meeting.
Sincerely,
Mark D. Woodburn
President and Chief Financial Officer
NATURAL HEALTH TRENDS CORP.
5605 N. MacArthur Boulevard, 11th Floor
Irving, Texas 75038
----------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MARCH 11, 2003
----------------------------------------
To the Shareholders of Natural Health Trends Corp.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the
"Annual Meeting") of Natural Health Trends Corp. (the "Company") will be held on
March 11, 2003 at 12901 Hutton Drive, Dallas, Texas 75234 at 10 a.m., central
standard time, and thereafter as it may from time to time be adjourned, for the
purposes stated below.
1. To elect two (2) directors to the Board of Directors of the
Company for a one (1) year term and until the next annual
meeting of the Company's shareholders;
2. To effect a reverse stock split of the Company's issued common
stock, par value $.001 per share, on the basis of one (1) new
share of common stock for each one hundred (100) shares of
common stock outstanding;
3. To approve the adoption of the Company's 2002 Stock Plan;
4. To ratify the appointment of Sherb & Co., LLP as independent
public accountants for the Company for fiscal year ending
December 31, 2002;
5. To ratify a certain amendment to the Company's Articles of
Incorporation pursuant to which the Company increased the
number of authorized shares of common stock from 50,000,000
shares to 500,000,000 shares; and
6. To transact such other business as may properly come before
the Annual Meeting or any adjournments thereof.
All shareholders are cordially invited to attend the Annual Meeting. Only
those shareholders of record at the close of business on February 3, 2003 are
entitled to notice of and to vote at the Annual Meeting and any adjournments
thereof. A complete list of shareholders entitled to vote at the Annual Meeting
will be available at the Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
------------------------------------------
February 13, 2003 Mark D. Woodburn
President and Chief Financial Officer
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE SIGN AND DATE THE
ENCLOSED FORM OF PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE TO OUR
TRANSFER AGENT.
NATURAL HEALTH TRENDS CORP.
5605 N. MacArthur Boulevard, 11th Floor
Irving, Texas 75038
PROXY STATEMENT
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Natural Health Trends Corp., a Florida
corporation (the "Company"), for use at an Annual Meeting of the Company's
shareholders to be held at 12901 Hutton Drive, Dallas, Texas 75234 on March 11,
2003 at 10 a.m., central standard time, and at any adjournments thereof (the
"Annual Meeting").
The Annual Meeting has been called to consider and take action on the
following proposals: (i) to elect two (2) directors to the Board of Directors of
the Company for a one (1) year term and until the next annual meeting of the
Company's shareholders; (ii) to effect a reverse stock split of the Company's
issued common stock, par value $.001 per share, on the basis of one (1) new
share of common stock for each one hundred (100) shares of common stock
outstanding (the "Reverse Stock Split"); (iii) to approve the adoption of the
Company's 2002 Stock Plan; (iv) to ratify the appointment of Sherb & Co., LLP as
independent public accountants for the Company for fiscal year ending December
31, 2002; (v) to ratify a certain prior amendment to the Company's Articles of
Incorporation pursuant to which the Company increased the number of authorized
shares of common stock from 50,000,000 shares to 500,000,000 shares (the
"Charter Amendment"); and (vi) to transact such other business as may properly
come before the Annual Meeting or any adjournments thereof. The Board of
Directors knows of no other matters to be presented for action at the Annual
Meeting. However, if any other matters properly come before the Annual Meeting,
the person named in the proxy will vote on such other matters and/or for other
nominees in accordance with his best judgment. The Company's Board of Directors
recommends that the shareholders vote in favor of each of the proposals. Only
holders of record of common stock, $.001 par value (the "Common Stock"), of the
Company at the close of business on February 3, 2003 (the "Record Date") will be
entitled to vote at the Annual Meeting.
The principal executive offices of the Company are located at 5605 N. MacArthur
Boulevard, 11th Floor, Irving, Texas 75038 and its telephone number is (972)
819-2035. The approximate date on which this Proxy Statement, the proxy card and
other accompanying materials are first being sent or given to shareholders is
February 13, 2003. The Company's (i) Annual Report on Form 10-KSB filed with the
Securities and Exchange Commission on April 16, 2002 and (ii) Quarterly Report
on Form 10-QSB for the quarter ended September 30, 2002, are being sent to
shareholders together with this Proxy Statement and are incorporated herein by
reference. In addition, incorporated by reference are the Company's Quarterly
Reports on Form 10-QSB for the quarter ended March 31, 2002 and June 30, 2002.
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INFORMATION CONCERNING SOLICITATION AND VOTING
As of the Record Date, there were 462,873,100 shares of Common Stock
outstanding held by approximately 302 holders of record and 4,231 beneficial
owners. Only holders of shares of Common Stock on the Record Date will be
entitled to vote at the Annual Meeting. The holders of Common Stock are entitled
to one vote on all matters presented at the meeting for each share held of
record. The presence in person or by proxy of holders of record of a majority of
the shares outstanding and entitled to vote as of the Record Date shall be
required for a quorum to transact business at the Annual Meeting. If a quorum
should not be present, the Annual Meeting may be adjourned until a quorum is
obtained. Each nominee to be elected as a director named in Proposal 1 must
receive the vote of a plurality of the votes of the shares of Common Stock
present in person or represented by proxy at the meeting. For the purposes of
election of directors, although abstentions will count toward the presence of a
quorum, they will not be counted as votes cast and will have no effect on the
result of the vote. The affirmative vote of the holders of a majority of the
shares of Common Stock present in person or represented by proxy at the meeting
is required for the approval of the adoption to the Company's 2002 Stock Plan
described in Proposal 3 and the ratification of the appointment of Sherb & Co.,
LLP as independent public accountants of the Company for fiscal year ending
December 31, 2002 described in Proposal 4. The affirmative vote of the holders
of a majority of the shares of Common Stock outstanding is required for approval
of the Reverse Stock Split described in Proposal 2 and the ratification of the
Charter Amendment described in Proposal 5. For purposes of the vote on the
approval of the adoption to the Company's 2002 Stock Plan described in Proposal
3 and the ratification of the appointment of Sherb & Co., LLP as independent
public accountants of the Company for fiscal year ending December 31, 2002
described in Proposal 4, abstentions will not be counted as votes entitled to be
cast on these matters and will have no affect on the result of the vote. "Broker
non-votes," which occur when brokers are prohibited from exercising
discretionary voting authority for beneficial owners who have not provided
voting instructions, will not be counted for the purpose of determining the
number of shares present in person or by proxy on a voting matter and will have
no affect on the outcome of the vote. Brokers who hold shares in street name may
vote on behalf of beneficial owners with respect to Proposal 1 and Proposal 4.
The approval of all other matters to be considered at the Annual Meeting
requires the affirmative vote of a majority of the eligible votes cast at the
Annual Meeting on such matters.
The expense of preparing, printing and mailing this Proxy Statement,
exhibits and the proxies solicited hereby will be borne by the Company. In
addition to the use of the mails, proxies may be solicited by officers and
directors and regular employees of the Company, without additional remuneration,
by personal interviews, telephone, telegraph or facsimile transmission. In
addition, the Company may elect to engage a proxy solicitation firm to solicit
shareholders to vote or grant a proxy with respect to the proposals contained in
this Proxy Statement. The Company will also request brokerage firms, nominees,
custodians and fiduciaries to forward proxy materials to the beneficial owners
of shares of Common Stock held of record and will provide reimbursements for the
cost of forwarding the material in accordance with customary charges.
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Proxies given by shareholders of record for use at the Annual Meeting
may be revoked at any time prior to the exercise of the powers conferred. In
addition to revocation in any other manner permitted by law, shareholders of
record giving a proxy may revoke the proxy by an instrument in writing, executed
by the stockholder or his attorney authorized in writing or, if the shareholder
is a corporation, under its corporate seal, by an officer or attorney thereof
duly authorized, and deposited either at the corporate headquarters of the
Company at any time up to and including the last business day preceding the day
of the Annual Meeting, or any adjournment thereof, at which the proxy is to be
used, or with the chairman of such Annual Meeting on the day of the Annual
Meeting or adjournment thereof, and upon either of such deposits the proxy is
revoked.
ALL PROXIES RECEIVED WILL BE VOTED IN ACCORDANCE WITH THE CHOICES
SPECIFIED ON SUCH PROXIES. PROXIES WILL BE VOTED IN FAVOR OF A PROPOSAL IF NO
CONTRARY SPECIFICATION IS MADE. ALL VALID PROXIES OBTAINED WILL BE VOTED AT THE
DISCRETION OF THE PERSONS NAMED IN THE PROXY WITH RESPECT TO ANY OTHER BUSINESS
THAT MAY COME BEFORE THE ANNUAL MEETING.
Recent Developments
As of January 31, 2003, the Company entered into a Database Purchase
Agreement with NuEworld.com Commerce, Inc., a Delaware corporation ("NuEworld"),
and Lighthouse Marketing Corporation, a wholly owned subsidiary of the Company
("Lighthouse"), pursuant to which Lighthouse purchased a database of
distributors from NuEworld in exchange for the issuance by the Company of 36
million shares of its common stock. NuEworld was engaged in the business of
marketing and selling a variety of products and services through its multi-level
marketing distribution network.
PROPOSAL ONE
ELECTION OF DIRECTORS
---------------------
Under the By-Laws of the Company (the "By-Laws"), the Board of
Directors of the Company is authorized to be not less than one or greater than
ten directors, subject to which limitation the number of directors may be fixed
from time to time by action of the shareholders or of the directors, with all
directors elected by the shareholders each year at the annual shareholder's
meeting. The Company's board presently consists of one (1) director whose term
expires at the Annual Meeting. Officers are elected annually by and serve at the
discretion of the Board of Directors.
The Board has nominated two (2) candidates to serve as directors. The
names and biographical summaries of the two (2) persons who have been nominated
by the Board of Directors to stand for election at the Annual Meeting have been
provided below for your information. The Board of Directors has proposed that
these persons be elected at the Annual Meeting to serve until the next annual
meeting of shareholders. The proxies will be voted for the election of the two
(2) nominees listed below as directors of the Company unless otherwise
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specified on the form provided. A plurality of the votes of shares of Common
Stock present in person or represented by proxy at the Annual Meeting will be
necessary to elect the directors listed below. If, for any reason, any of the
nominees shall be unable or unwilling to serve, the proxies will be voted for a
substitute nominee who will be designated by the Board of Directors at the
Annual Meeting. Shareholders may abstain from voting by marking the appropriate
boxes on the enclosed proxy card. Abstentions shall be counted separately and
shall be used for purposes of calculating quorum.
Biographical Summaries of Nominees for the Board of Directors
Mark D. Woodburn. Mr. Woodburn has been a director of the Company since August
2000 and has been the Chief Financial Officer and Secretary of the Company since
April 1999. From October 1992 until February 1999, Mr. Woodburn served as a
director and the Secretary of Kaire International, Inc. Mr. Woodburn has also
served as the Chief Financial Officer of Lexxus International, Inc. since March
2001. Since September 2000, Mr. Woodburn has also served at the Company's
President.
Terry LaCore. Mr. LaCore has been the Chief Executive Officer of Lexxus
International, Inc. since March 2001. From March 1999 until February 2001,
Mr. LaCore was President of Kaire Neutraceuticals, Inc. From September 1997
until March 1999, Mr. LaCore was President of Visionquest International Inc., a
network marketing company which subsequently changed its name to Netvision
International, Inc. From March 1997 until September 1997, Mr. LaCore was an
independent distributor with Visionquest International, Inc.
Recommendation of the Board of Directors
The Board of Directors unanimously recommends a vote FOR the election
of Messrs. Woodburn and LaCore. Unless otherwise instructed or unless authority
to vote is withheld, the enclosed proxy will be voted FOR the election of the
above listed nominees and AGAINST any other nominees.
Directors and Executive Officers
Certain information concerning the directors and executive officers of
the Company is set forth below:
Name Age Position(s) with the Company
---- --- ----------------------------
Mark D. Woodburn 32 President, Chief Financial Officer,
Secretary and Sole Director
Terry LaCore 30 Chief Executive Officer of Lexxus
International, Inc.
See "Biographical Summaries of Nominees for the Board of Directors" above
for biographical summaries of Messrs. Woodburn and LaCore.
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Director Compensation
Neither the director of the Company nor those of any of its subsidiaries
receive any fixed compensation for their services as directors. Neither the
Company nor any of its subsidiaries paid its directors any cash or other form of
compensation for acting in such capacity, although directors who were also
executive officers received cash compensation for acting in the capacity of
executive officers.
Meetings and Committees of the Board of Directors
The Board of Directors met (or executed written consents in lieu of
meeting) 6 times during the fiscal year ended December 31, 2001. The Board of
Directors does not presently have any committees. It anticipated that following
the Annual Meeting, the Board of Directors will form an audit committee and
compensation committee.
The Audit Committee
It is expected that the Audit Committee of the Board of Directors will
be formed in 2003 and that it will consist solely of newly appointed independent
directors. The Audit Committee will meet during the fiscal year ending December
31, 2003. The Audit Committee will be primarily responsible for reviewing the
services performed by the Company's independent public accountants, evaluating
the Company's accounting policies and its system of internal controls, and
reviewing significant finance transactions.
The audit functions of the Audit Committee will be focused on three
areas:
- the adequacy of the Company's internal controls and financial
reporting process and the reliability of the Company's financial
statements.
- the hiring, replacing, independence and performance of the
Company's independent public accountants.
- the evaluation of the quality of the Company's accounting
principals and financial reporting as well as the Company's
compliance with legal and regulatory requirements.
The Audit Committee will meet with management periodically to consider
the adequacy of the Company's internal controls and the objectivity of its
financial reporting. The Audit Committee will discuss these matters with the
Company's independent public accountants and with appropriate Company financial
personnel. Meetings will be held with the independent public accountants who
will have unrestricted access to the Audit Committee. The Audit Committee will
appoint the independent public accountants and will review periodically their
performance and independence from management. In addition, the Audit Committee
will review the Company's financing plans and report recommendations to the full
Board of Directors to approve and to authorize action. The Directors who will
serve on the Audit Committee will be "Independent" for purposes of stock
exchange listing standards. That is, no member of the Audit Committee will have
had a relationship to the Company that may interfere with its independence
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from the Company and its management. The Board intends to adopt a written
charter setting out the functions the Audit Committee is to perform.
Management has primary responsibility for the Company's financial
statements and the overall reporting process, including the Company's system of
internal controls. The independent public accountants audit the annual financial
statements prepared by management, express an opinion as to whether those
financial statements present fairly the financial position, results of
operations and cash flows of the Company in conformity with generally accepted
accounting principles and will discuss with the Audit Committee any issues they
believe should be raised with the Audit Committee.
The Audit Committee will review the Company's audited financial
statements and meet with both management and Sherb & Co., LLP, the Company's
independent public accountants, to discuss such audited financial statements.
Management will represent to the Audit Committee that the financial statements
are prepared in accordance with generally accepted accounting principles. The
Audit Committee will receive from and discuss with Sherb & Co., LLP the written
disclosure and the letter required by Independence Standards Board Standard No.
1 (Independence Discussions with Audit Committees). These items relate to that
firm's independence from the Company. The Audit Committee will also discuss with
Sherb & Co., LLP any matters required to be discussed by Statement on Auditing
Standards No. 61 (Communication with Audit Committees). Based on these reviews
and discussions, the Audit Committee will make a recommendation to the Board
regarding the Company's audited financial statements and whether they should be
included in the Company's Annual Report on Form 10-KSB for the fiscal year
ending December 31, 2002.
Audit Fees
For the fiscal year ended December 31, 2001, the Company incurred
professional fees to its independent public accountants in the amount of $55,000
related to auditing services.
Financial Information Systems Design and Implementation Fees
For the fiscal year ended December 31, 2001, there were no fees billed
by the Company's independent public accountants for professional services
rendered for information technology services relating to financial information
systems design and implementation.
All Other Fees
For the fiscal year ended December 31, 2001, the Company did not incur
any professional fees from its independent public accountants related to all
other services.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent (10%) of a registered class of the Company's equity securities, to file
with the Securities and Exchange Commission ("SEC") initial reports of ownership
and reports of changes in ownership of common stock and other equity securities
of the Company. Officers, directors and greater than
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ten percent shareholders are required by SEC regulation to furnish the Company
with copies of all Section 16(a) forms they file. To the Company's knowledge,
based solely on its review of the copies of such reports furnished to the
Company during the fiscal year ended December 31, 2001, all Section 16(a) filing
requirements applicable to its officers, directors and greater than ten percent
beneficial owners were satisfied.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Summary Compensation Table
The following table sets forth for each of the last three fiscal years
ended December 31, 2001, December 31, 2000 and December 31, 1999 the
remuneration paid by the Company to its Chief Executive Officer and all other
executive officers that earned in excess of $100,000 in annual salary and bonus
during such fiscal years:
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM
COMPENSATION
AWARDS
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION(1) AWARD(S)($) OPTION/SARs(#)
--------------------------- ---- --------- -------- --------------- ----------- --------------
Mark D. Woodburn 2001 $ 17,000 --- --- --- 3,000,000(3)
President & CFO (2) 2000 $ 34,000 --- --- --- ---
1999 $ 55,750 --- --- --- ---
Terry LaCore 2001 $115,000 --- --- --- 6,000,000(4)
CEO of Lexxus International, Inc. 2000 $100,000 --- 16,016 --- ---
1999 $ 80,769 --- --- --- ---
Robert L. Richards(5) 2001 --- --- --- --- ---
Former President & CEO 2000 $ 68,692 --- --- --- ---
1999 $ 96,923 --- --- --- ---
Joseph P. Grace(6) 1999 $133,333 --- --- --- ---
Former President
------------------
(1) Excludes perquisites and other personal benefits that in the aggregate do
not exceed 10% of each of such individual's total annual salary and bonus.
(2) Mr. Woodburn became the Company's President in September 2000 and the
Company's Secretary in April 1999. Between April 1999 and September 2000,
he served as the Company's Chief Financial Officer.
(3) Includes options issued to Benchmark Consulting Group, an affiliate of Mr.
Woodburn, exercisable for 3,000,000 shares of common stock. Such options
were subsequently assigned to the LaCore and Woodburn Partnership in
September 2002 with respect to which Mr. Woodburn is a general partner. See
"Option Agreements" below.
(4) Includes (i) options exercisable for 3,000,000 shares assigned by Benchmark
Consulting Group to the LaCore and Woodburn Partnership with respect to
which Mr. LaCore is a general partner and (ii) options granted to Mr.
LaCore exercisable for 3,000,000 shares of common stock. See "Option
Agreements" below.
(5) Mr. Richards became the Company's President in September 1999 and
resigned in August 2000.
(6) Mr. Grace resigned in September 1999.
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During the fiscal year ended December 31, 2001, neither the Company's
Chief Executive Officer nor the other executive officers named in the above
Summary Compensation Table exercised any options.
The following table sets forth certain information with respect to options
granted during the last fiscal year to the Company's executive officers named in
the above Summary Compensation Table.
Option/SAR Grants In Last Fiscal Year
Number of Percent of Total
Securities Options/SARS
Underlying Granted to Exercise or
Options/SARS Employees in Base Price
Name Granted (#) Fiscal Year% ($/Sh) Expiration Date
---- ----------- ------------ ------ ---------------
Mark Woodburn 3,000,000(1) 50% $.011/share January 2011
Terry LaCore 6,000,000(2) 100% $.011/share January 2011
(1) Includes options issued to Benchmark Consulting Group, an affiliate of Mr.
Woodburn, exercisable for 3,000,000 shares of common stock. Such options
were subsequently assigned to the LaCore and Woodburn Partnership in
September 2002 with respect to which Mr. Woodburn is a general partner.
See "Option Agreements" below.
(2) Includes (i) options exercisable for 3,000,000 shares assigned by
Benchmark Consulting Group to the LaCore and Woodburn Partnership with
respect to which Mr. LaCore is a general partner and (ii) options granted
to Mr. LaCore exercisable for 3,000,000 shares of common stock. See
"Option Agreements" below.
Consulting Agreement
--------------------
In January 2001, the Company entered into a consulting contract with
Benchmark Consulting Group, an affiliate of Mark Woodburn, the Company's sole
director, President and Chief Financial Officer, pursuant to which Benchmark
agreed to advise the Company in connection with the acquisition of, startup of,
and/or merger with other companies introduced to, the Company by Benchmark, and
any divesture of , the Company 's assets, subsidiaries, or the sale of, the
Company itself. The Company issued to Benchmark options to purchase an aggregate
of 3,000,000 shares of Common Stock at an exercise price of $.011 per share. In
September, 2002 such options were assigned to the LaCore and Woodburn
Partnership, a general partnership. See "Option Agreements" below.
Option Agreements
-----------------
On January 18, 2001, the Company granted an option (the "LaCore Option")
to Terry LaCore, the Chief Executive Officer of Lexxus International, Inc. and a
nominee for a director of the Company. The LaCore Option provided Mr. LaCore
with the right to purchase 3,000,000
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shares of the Company's common stock at an exercise price of $.011 per share for
period of ten (10) years. In addition, the LaCore Option provided Mr. LaCore
with certain non-dilution protection. In the event that the Company issued
shares of common stock or securities exercisable or exchangeable for, or
convertible into, shares of common stock, the LaCore Option automatically became
exercisable for additional shares of common stock such that the option holder
had the right to purchase a total number of shares of common stock equal to ten
(10%) of the number of shares of the Company's common stock outstanding on fully
diluted basis (the "Additional Shares"). The exercise price for the Additional
Shares was equal to the amount paid by investors for the additional shares
issued by the Company. As of October 14, 2002, the LaCore Option was amended (i)
to delete the non-dilution provisions and (ii) to fix the exercise price at
$.011 (the original exercise price). As a result, the LaCore Option, as amended,
is presently exercisable for 3,000,000 shares of Common Stock at an exercise
price of $.011 per share.
As of October 14, 2002, in exchange for Mr. LaCore's execution of the
amendment to the LaCore Option and as compensation for Mr. LaCore's exemplary
performance of his duties as CEO of Lexxus International, Inc., the Company
granted to Mr. LaCore options exercisable for 57,000,000 shares of common stock
at an exercise price of $.01 per share (the "New LaCore Option"). The New LaCore
Option is exercisable for a period of ten (10) years and contains cashless
exercise provisions, but does not contain any anti-dilution provisions.
On January 18, 2001, the Company granted an option (the "Benchmark
Option") to Benchmark Consulting Group, an affiliate of Mark Woodburn, the
Company's President, Chief Financial Officer and sole director. The Benchmark
Option provided Benchmark Consulting Group with the right to purchase 3,000,000
shares of the Company's common stock at an exercise price of $.011 per share for
period of ten (10) years. In addition, the Benchmark Option provided Benchmark
Consulting Group with certain non-dilution protection. In the event that the
Company issued shares of common stock or securities exercisable or exchangeable
for, or convertible into, shares of common stock, the Benchmark Option
automatically became exercisable for additional shares of common stock such that
the option holder had the right to purchase a total number of shares of common
stock equal to ten (10%) of the number of shares of the Company's common stock
outstanding on fully diluted basis (the "Additional Shares"). The exercise price
for the Additional Shares was equal to the amount paid by investors for the
shares issued by the Company. As of October 14, 2002, the Benchmark Option was
amended (i) to delete the non-dilution provisions and (ii) to fix the exercise
price at $.011 (the original exercise price). As a result, the Benchmark Option,
as amended, is presently exercisable for 3,000,000 shares of Common Stock at an
exercise price of $.011 per share. In September 2002, the Benchmark Option was
assigned to the LaCore and Woodburn Partnership, a general partnership owned by
Messrs. LaCore and Woodburn (the "Partnership").
As of October 14, 2002, in exchange for Partnership's execution of the
amendment to the Benchmark Option and as compensation for Mr. Woodburn's
exemplary performance of his duties as President and Chief Financial Officer of
the Company, the Company issued to the Partnership options exercisable for
57,000,000 shares of common stock at an exercise price of $.01 per share (the
"Partnership Option"). The Partnership Option is exercisable for a period of
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ten (10) years and contains cashless exercise provisions, but does not contain
any anti-dilution provisions.
Security Ownership Of Certain Beneficial Owners And Management
--------------------------------------------------------------
The following table sets forth information as of the Record Date with
respect to the beneficial ownership of the outstanding shares of the Company's
Common Stock by (i) each person known by the Company to beneficially own five
percent or more of the outstanding shares; (ii) the Company's officers and
directors; and (iii) the Company's officers and directors as a group. A person
is deemed to be a beneficial owner of any securities of which that person has
the right to acquire beneficial ownership within sixty (60) days. See
"Compensation of Directors and Executive Officers."
Amount and
Nature of Percentage
Name and Address Beneficial (%) of
of Beneficial Owner(1) Ownership(2) Class(2)
---------------------- ------------ --------
Mark D. Woodburn(3) 61,295,337(4) 11.7%
Terry LaCore(5) 122,590,674(6) 21.0%
The Endeavor Capital 41,659,783 9.0%
Investment Fund SA
Cumberland House
27 Cumberland Street
Nassau, New Providence
the Bahamas
NuEworld.com 36,000,000 7.8%
Commerce, Inc.
2255 Glades Road
Suite 219A
Boca Raton, Florida
33431
Directors and Officers 122,590,674(4)(6) 21.0%
as a Group (2 persons)
------------------
(1) Unless otherwise indicated, the address of each beneficial owner is c/o
Natural Health Trends Corp., 5605 N. MacArthur Blvd. 11th Floor, Irving,
Texas 75038
(2) Beneficial ownership as reported in the table above has been determined in
accordance with Item 403 of Regulation S-K of the Securities Act of 1933
and Rule 13(d)-3 of the Securities Exchange Act, and based upon
462,873,100 shares of Common Stock outstanding.
(3) Mr. Woodburn serves as the President, Chief Financial Officer, Secretary
and Director of the Company.
(4) Includes (i) 1,295,337 shares held by the LaCore and Woodburn Partnership,
a general partnership owned by Messrs. Woodburn and LaCore and (ii)
60,000,000 shares of common stock issuable upon the exercise of options
held by the LaCore and Woodburn Partnership.
11
(5) Mr. LaCore is the CEO of Lexxus International, Inc., a subsidiary of the
Company, and is a nominee to the Company's Board of Directors.
(6) Includes (i) 1,295,337 shares held by LaCore and Woodburn Partnership, a
general partnership owned by Messrs. Woodburn and LaCore, (ii) 60,000,000
shares issuable upon the exercise of options held by the LaCore and
Woodburn Partnership, and (iii) 60,000,000 shares issuable upon the
exercise of options held by Mr. LaCore.
Certain Transactions
As of December 31, 2001, the Company owed approximately $70,000 to Robert
L. Richards, its former president and a former director, in connection with
liabilities assumed in connection with the acquisition by the Company of Kaire
International, Inc. in February 1999.
See "Consulting Agreement" and "Option Agreements" for other related party
transactions.
The Company believes that the transactions between the Company and any of
the officers, directors and/or five percent (5%) shareholders have been on terms
no less favorable to the Company than could have been obtained from independent
third parties. Future transactions, if any, between the Company and any of its
officers, directors, and/or five percent (5%) shareholders will be on terms no
less favorable to the Company than could be obtained from independent third
parties and will be approved by a majority of the independent, disinterested
directors. In addition, any forgiveness of indebtedness of officers, directors
or five percent (5%) shareholders will be approved by a majority of
disinterested directors who do not have an interest in the transactions and who
have access, at the Company's expense, to counsel.
PROPOSAL TWO
REVERSE STOCK SPLIT
-------------------
General
-------
The shareholders of the Company are being asked to effect a one-for-one
hundred reverse stock split of the outstanding Common Stock of the Company (the
"Reverse Stock Split"). The Reverse Stock Split may be considered a modification
or exchange of securities invoking the requirements of Item 12 of Rule 14a-101
of the Exchange Act. In compliance therewith, the Company has attached hereto
its (i) Annual Report on Form 10-KSB for the fiscal year ended December 31, 2001
and (ii) Quarterly Report on Form 10QSB for the quarter ended September 30,
2002, which are incorporated by reference herein.
The Board of Directors believes that it would be in the best interests of
both the Company and its shareholders to effect the Reverse Stock Split which
has been adopted by the Board of Directors, subject to approval of the Company's
shareholders. Approval will require the affirmative vote of the holders of a
majority of the outstanding shares of Common Stock. The Board of Directors
reserves the right, notwithstanding any such shareholder approval and without
further action by the shareholders, not to proceed with the Reverse Stock Split,
if, at any time prior to filing the relevant implementing documents with the
Secretary of State of the State of Florida, the Board of Directors, in its sole
discretion, determines that the Reverse Stock Split is no longer in the best
interests of the Company and its shareholders.
12
Assuming that Proposal Five is approved by the holders of a majority of
the outstanding shares of Common Stock, the Company is authorized to issue
500,000,000 shares of Common Stock, $.001 par value, of which 462,873,100 shares
were issued and outstanding at the close of business on the Record Date. The
Company is also authorized to issue 1,500,000 shares of Preferred Stock,
$1,000.00 par value, none of which were issued and outstanding at the close of
business on the Record Date. As proposed and if effected, the Reverse Stock
Split would reduce the number of issued and outstanding shares of Common Stock
to approximately 4,628,731, but would not reduce the number of authorized
shares. The proposed Reverse Stock Split would not affect any stockholder's
proportionate equity interest in the Company. Neither the par value of the
Common Stock or Preferred Stock nor any rights presently accruing to holders of
Common Stock or Preferred Stock would be affected by this transaction.
To effect the Reverse Stock Split stockholder approval is sought to amend
Article IV of the Company's Articles of Incorporation relating to the authorized
capital stock by inserting the following paragraph:
"Each one hundred (100) shares of the Corporation's common stock,
$.001 par value per share, issued and outstanding as of the close of
business on the date these Articles of Amendment is filed, shall
automatically and forthwith upon such filing be converted into and
reclassified as one (1) share of the Corporation's common stock, $.001 par
value per share; provided however, that no fractional interests resulting
from such conversion and reclassification shall be issued, but in lieu
thereof, shareholders who otherwise would be entitled to receive
fractional shares because they hold a number of shares not evenly
divisible by one hundred (100) will be entitled, to receive one (1)
additional share of common stock for any fractional share they may
otherwise be entitled to receive."
Reasons for the Proposed Reverse Stock Split. The Company's Common Stock
is traded on the OTC Bulletin Board. On February 3, 2003, the Company's Common
Stock had a closing price of $.02.
The Board of Directors believes that a relatively low stock price may
affect not only the liquidity of the Common Stock, but also its ability to raise
additional capital through the sale of equity securities. Thus, the Company
believes that the anticipated increase in trading price is expected to be
attractive to the financial community, the investing public, and to users of the
Company's products. However, there can be no assurances as to what effect the
Reverse Stock Split will have on the market price of, or the market for, the
Common Stock. While one may expect a 100 fold increase in the per share trading
price of the Common Stock, this may not occur. The Reverse Stock Split is
expected to increase the number of "odd-lot" Common Stock holdings (i.e.,
holdings of a number of shares that is not divisible by 100), which may be more
difficult to sell and may also result in increased costs.
The Board of Directors is hopeful that a decrease in the number of shares
of Common Stock outstanding, as a consequence of the proposed Reverse Stock
Split, and the anticipated
13
corresponding increase price per share will stimulate interest in the Common
Stock and possibly promote greater liquidity for the Common Stock with respect
to those shares presently outstanding. However, the possibility does exist that
such liquidity could be adversely affected by the reduced number of shares which
would be outstanding if the proposed Reverse Stock Split is effected.
Exchange of Stock Certificates. If the Reverse Stock Split is approved by
the Company's shareholders and becomes effective, the Company will instruct its
transfer agent to act as its exchange agent (the "Exchange Agent") and to act
for holders of Common Stock in implementing the exchange of their certificates.
On or promptly after the effective date of the Reverse Stock Split (the
"Effective Date"), shareholders will be notified and requested to surrender
their certificates representing shares of pre-Reverse Stock Split Common Stock
to the Exchange Agent in exchange for certificates representing post-Reverse
Stock Split common stock ("New Common Stock"). One share of New Common Stock
will be issued in exchange for each one hundred (100) presently issued and
outstanding shares of Common Stock and for any fraction thereof (as described in
the following paragraph). Beginning on the Effective Date, each certificate
representing shares of the Company's Common Stock will be deemed for all
corporate purposes to evidence ownership of shares of New Common Stock.
Liquidation of Fractional Shares. No scrip or fractional certificates will
be issued in connection with the Reverse Stock Split. Shareholders who otherwise
would be entitled to receive fractional shares because they hold a number of
shares of pre-Reverse Stock Split Common Stock not evenly divisible by one
hundred (100) will be entitled to receive, upon surrender to the Exchange Agent,
of certificates representing such shares, one (1) additional share of Common
Stock for any such fractional shares. Shareholders may now hold "odd lots" as a
result of the Reverse Stock Split and as such may be subject to increased
transaction costs on the sale of their Common Stock. Shareholders are encouraged
to surrender their certificates to the Exchange Agent for certificates
evidencing whole shares of the Common Stock due them for fractional interests.
Federal Income Tax Consequences. The Reverse Stock Split should not result
in the recognition of gain or loss for federal income tax purposes (except in
the case of additional shares received for fractional shares as described
below). The holding period of a shareholder's New Common Stock will include the
shareholder's holding period for the shares of Common Stock exchanged therefor,
provided that such shares of Common Stock were held as a capital asset. The
adjusted basis of the shares of New Common Stock will be the same as the
adjusted basis of the Common Stock exchanged therefor, reduced by the basis
applicable to the receipt of additional shares in lieu of fractional shares
described below.
A shareholder who receives an additional whole share in lieu of any
fractional shares will be treated as if the Company has issued to such
shareholder the fraction of a share required to round the fractional shares that
he or she would have otherwise received. Such shareholder should generally
recognize gain or loss, as the case may be, measured by the difference between
the number of additional shares received and the basis of his old Common Stock
applicable to
14
such fractional shares had they actually been issued. Such gain or loss shall be
a capital gain or loss (if such stockholder's Common Stock was held as a capital
asset), any such capital gain or loss shall generally be long-term capital gain
or loss to the extent such stockholder's holding for his Common Stock exceeds
twelve months.
No Dissenter's Rights. Under Florida law, shareholders are not entitled to
dissenter's rights of appraisal with respect to the Reverse Stock Split.
Recommendation of the Board of Directors
The Board of Directors unanimously recommends a vote FOR approval of the
Reverse Stock Split, unless marked to the contrary, proxies received from
stockholders will be voted in favor of the Reverse Stock Split.
PROPOSAL THREE
ADOPTION OF 2002 STOCK OPTION PLAN
----------------------------------
As of November 18, 2002, the Board of Directors of the Company, subject to
stockholder approval, adopted the 2002 Stock Option Plan (the "2002 Plan"). The
purpose of the 2002 Plan is to provide a means whereby directors and selected
employees, officers, agents, consultants and independent contractors of the
Company or of any parent or subsidiary thereof, each as defined through
reference to a 50% ownership threshold, may be granted incentive stock options
and/or nonqualified stock options to purchase shares of Common Stock in order to
attract and retain the services or advice of such directors, employees,
officers, agents, consultants, and independent contractors and to provide an
additional incentive for such persons to exert maximum efforts for the success
of the Company and its affiliates by encouraging stock ownership in the Company.
A copy of the 2002 Plan is attached as Annex A to this Proxy Statement and the
description of the 2002 Plan set forth below is qualified in its entirety by
reference to the full text of the 2002 Plan. In addition, the Company makes no
guarantee as to the tax consequences described below with respect to the grant
or exercise of an option, or sale of the stock covered by an option.
Description of the 2002 Plan
The maximum number of shares of Common Stock with respect to which awards
may be presently granted pursuant to the 2002 Plan is one million (1,000,000)
shares (such number assumes the consummation of the Reverse Stock Split
described in Proposal Two). Shares issuable under the 2002 Plan may be either
treasury shares or authorized but unissued shares. The number of shares
available for issuance will be subject to adjustment to prevent dilution in the
event of stock splits, stock dividends or other changes in the capitalization of
the Company.
Subject to compliance with Rule 16b-3 of the Securities Exchange Act of
1934 (the "Exchange Act"), the 2002 Plan shall be administered by the Board of
Directors of the Company (the "Board") or, in the event the Board shall appoint
and/or authorize a committee, such as the Compensation Committee, of two or more
members of the Board to administer the 2002 Plan, by
15
such committee (the "Plan Administrator"). Except for the terms and conditions
explicitly set forth in the 2002 Plan, and subject to applicable provisions of
the Internal Revenue Code of 1986, as amended (the "Code") the Plan
Administrator shall have the authority, in its discretion, to determine all
matters relating to the options to be granted under the Plan, including, without
limitation, selection of whether an option will be an incentive stock option or
a nonqualified stock option, selection of the individuals to be granted options,
the number of shares to be subject to each option, the exercise price per share,
the timing of grants and all other terms and conditions of the options.
Options granted under the 2002 Plan may be "incentive stock options"
("Incentive Options") within the meaning of Section 422 of the Code or stock
options which are not incentive stock options ("Non-Incentive Options" and,
collectively with Incentive Options, hereinafter referred to as "Options"). Each
Option may be exercised in whole or in part; provided, that only whole shares
may be issued pursuant to the exercise of any Option. Subject to any other terms
and conditions herein, the Plan Administrator may provide that an Option may not
be exercised in whole or in part for a stated period or periods of time during
which such Option is outstanding; provided, that the Plan Administrator may
rescind, modify, or waive any such limitation (including by the acceleration of
the vesting schedule upon a change in control of the Company) at any time and
from time to time after the grant date thereof. During an optionee's lifetime,
any Incentive Options granted under the Plan are personal to such optionee and
are exercisable solely by such optionee.
The Plan Administrator can determine at the time the Option is granted in
the case of Incentive Options, or at any time before exercise in the case of
Non-Incentive Options, that additional forms of payment will be permitted. To
the extent permitted by the Plan Administrator and applicable laws and
regulations (including, without limitation, federal tax and securities laws and
regulations and state corporate law), an Option may be exercised by:
(a) delivery of shares of Common Stock of the Company held by an
optionee having a fair market value equal to the exercise price, such fair
market value to be determined in good faith by the Plan Administrator;
(b) delivery of a properly executed notice of exercise, together
with irrevocable instructions to a broker, all in accordance with the
regulations of the Federal Reserve Board, to promptly deliver to the Company the
amount of sale or loan proceeds to pay the exercise price and any federal,
state, or local withholding tax obligations that may arise in connection with
the exercise; or
(c) delivery of a properly executed notice of exercise, together
with instructions to the Company to withhold from the shares of Common Stock
that would otherwise be issued upon exercise that number of shares of Common
Stock having a fair market value equal to the Option exercise price.
To the extent permitted by applicable law, the Plan Administrator may also
permit any participant to pay the option exercise price upon exercise of an
Option by delivering a full-recourse, interest bearing promissory note payable
in one or more installments and secured by
16
the purchased shares. The terms of any such promissory note (including the
interest rate and the terms of repayment) shall be established by the Plan
Administrator in its sole discretion. In no event may the maximum credit
available to the participant exceed the sum of (i) the aggregate option exercise
price (less the par value of those shares) plus (ii) any federal, state and
local income and employment tax liability incurred by the participant in
connection with the option exercise.
Upon a merger or consolidation in which securities possessing more than
25% of the total combined voting power of the Company's outstanding securities
are transferred to a person different from the person holding those securities
immediately prior to such transaction, the sale, transfer or other disposition
of all or substantially all of the Company's assets in complete liquidation or
dissolution of the Company the sale, transfer or other disposition of all or
substantially all of the Company's assets to an unrelated entity, or a change in
the identity of more than three (3) directors over a two-year period each, a
("Corporate Transaction"), any award carrying a right to exercise that was not
previously exercisable shall become fully exercisable, the restrictions,
deferral limitations and forfeiture conditions applicable to any other award
granted shall lapse and any performance conditions imposed with respect to
awards shall be deemed to be fully achieved. Notwithstanding the foregoing, any
Option granted to an employee shall not become fully vested until such time as
the employee experiences an involuntary termination of employment (other than on
account of misconduct).
Incentive Options granted under the 2002 Plan may not be transferred,
pledged, mortgaged, hypothecated or otherwise encumbered other than by will or
under the laws of descent and distribution, except that the Plan Administrator
may permit transfers of awards for estate planning purposes if, and to the
extent, such transfers do not cause a participant who is then subject to Section
16 of the Exchange Act to lose the benefit of the exemption under Rule 16b-3 for
such transactions.
Additional rules apply under the Code to the grant of Incentive Options.
For instance an Incentive Option must be exercised within 10 years after the
date of grant, unless granted to an individual owning more than 10% of the
Company's stock, in which case the exercise period may not exceed five (5)
years. Similarly, an Incentive Option must be granted at an exercise price that
equals or exceeds 100% of the fair market value of the underlying stock at the
time of grant, a threshold that is increased to 110% of such fair market value
in the case of a grant to an individual owning more than 10% of the Company's
stock.
For federal income tax purposes, the grant to an optionee of a
Non-Incentive Option generally will not constitute a taxable event to the
optionee or to the Company. Upon exercise of a Non-Incentive Option (or, in
certain cases, a later tax recognition date), the optionee will recognize
compensation income taxable as ordinary income, measured by the excess of the
fair market value of the Common Stock purchased on the exercise date (or later
tax recognition date) over the amount paid by the optionee for such Common
Stock, and will be subject to federal income tax withholding. Upon recognition
of income by the optionee, the Company may claim a deduction for the amount of
such compensation. The optionee will have a tax basis in the Common Stock
purchased equal to the amount paid plus the amount of ordinary income recognized
upon exercise of the Non-Incentive Option. Upon the subsequent sale of the
17
Common Stock received upon exercise of the Non-Incentive Option, an optionee
will recognize capital gain or loss equal to the difference between the amount
realized on such sale and his tax basis in the Common Stock, which may be
long-term capital gain or loss if the optionee holds the Common Stock for more
than one year from the exercise date.
For federal income tax purposes, in general, neither the grant nor the
exercise of an Incentive Option will constitute a taxable event to the optionee
or to the Company, assuming the Incentive Option qualifies as an "incentive
stock option" under Code ss.422. If an optionee does not dispose of the Common
Stock acquired upon exercise of an Incentive Option during the statutory holding
period, any gain or loss upon subsequent sale of the Common Stock will be
long-term capital gain or loss, assuming the shares represent a capital asset in
the optionee's hands. The statutory holding period is the later of two years
from the date the Incentive Option is granted or one year from the date the
Common Stock is transferred to the optionee pursuant to the exercise of the
Incentive Option. If the statutory holding period requirements are satisfied,
the Company may not claim any federal income tax deduction upon either the
exercise of the Incentive Option or the subsequent sale of the Common Stock
received upon exercise thereof. If the statutory holding period requirement is
not satisfied, the optionee will recognize compensation income taxable as
ordinary income on the date the Common Stock is sold (or later tax recognition
date) in an amount equal to the lesser of (i) the fair market value of the
Common Stock on that date less the amount paid by the optionee for such Common
Stock, or (ii) the amount realized on the disposition of the Common Stock less
the amount paid by the optionee for such Common Stock; the Company may then
claim a deduction for the amount of such compensation income.
The federal income tax consequences summarized hereinabove are based upon
current law and are subject to change.
The Board may amend, alter, suspend, discontinue or terminate the 2002
Plan at any time, except that any such action shall be subject to stockholder
approval at the annual meeting next following such Board action if such
stockholder approval is required by federal or state law or regulation or the
rules of any exchange or automated quotation system on which the Common Stock
may then be listed or quoted, or if the Board of Directors otherwise determines
to submit such action for stockholder approval. In addition, no amendment,
alteration, suspension, discontinuation or termination to the 2002 Plan may
materially impair the rights of any participant with respect to any vested
Option granted before amendment without such participant's consent. Unless
terminated earlier by the Board, the 2002 Plan shall terminate upon the earliest
to occur of (i) November 17, 2012, (ii) 10 years after the date or which the
Board approves the 2002 Plan or (iii) the date on which all shares of Common
Stock available for issuance under the 2002 Plan shall have been issued as
vested shares. Upon such 2002 Plan termination, all Options and unvested stock
issuances outstanding under the 2002 Plan shall continue to have full force and
effect in accordance with the provisions of the agreements.
New Plan Benefits
-----------------
It is presently not determinable as to whether any benefits or amounts
will be received by or allocated to the Company's executive officers, directors
or employees. Further, had the 2002
18
Stock Plan been in effect during the last completed fiscal year, none of the
Company's executive officers, directors or employees would have received
benefits or amounts under the 2002 Stock Plan.
For the fiscal year ended December 31, 2001, no equity securities were
authorized for issuance by the Company under any compensation plans.
Recommendation of the Board of Directors
The Board of Directors unanimously recommends a vote FOR approval of the
adoption of the 2002 Plan. Unless marked to the contrary, proxies received from
shareholders will be voted in favor of the 2002 Plan.
PROPOSAL FOUR
RATIFICATION OF THE APPOINTMENT OF THE FIRM OF SHERB & CO., LLP
---------------------------------------------------------------
INDEPENDENT PUBLIC ACCOUNTANTS FOR THE COMPANY
----------------------------------------------
The Board of Directors concluded that the continued engagement of Sherb &
Co., LLP as the Company's independent public accountants for the 2002 fiscal
year was in the best interests of the Company. The affirmative vote of the
holders of a majority of the total votes cast on this proposal is needed to
ratify the appointment of the firm of Sherb & Co., LLP as independent public
accountants for the Company. The Company has been advised that a representative
of Sherb & Co., LLP will be present at the meeting.
Recommendation of the Board of Directors
The Board of Directors unanimously recommends a vote FOR the ratification of the
appointment of Sherb & Co., LLP as independent public accountants for the
Company. Unless marked to the contrary, proxies received from shareholders will
be voted in favor of the ratification of the appointment of Sherb & Co., LLP as
independent public accountants for the Company for fiscal year ended December
31, 2002.
PROPOSAL FIVE
RATIFICATION OF PRIOR AMENDMENT TO CHARTER INCREASING
-----------------------------------------------------
AUTHORIZED SHARES
-----------------
A recent review of the Company's official corporate records, undertaken
with the aid of corporate counsel, reveals that on January 17, 2001 an amendment
to the Company's Articles of Incorporation was filed with the Secretary of State
of the State of Florida (the "Prior Amendment") increasing the number of
authorized shares of Common Stock from 50,000,000 to 500,000,000 was approved by
the Board of Directors, but not submitted for a vote to the Company's
shareholders.
19
The Board of Directors determined, upon the advice of corporate counsel,
to now submit the Prior Amendment to the Company's shareholders for
ratification. Any failure by the Company's shareholders to ratify the Prior
Amendment, and thereby fully authorize these shares, may result in their status
as outstanding shares of the capital stock of the Company as being uncertain, as
a legal matter. Moreover, if this Proposal is not approved by shareholders, the
Board of Directors may determine to abandon the Reverse Stock Split set forth in
Proposal Number Two, notwithstanding its approval by the shareholders.
The Board of Directors unanimously recommends a vote FOR the Ratification
of the Prior Amendment.
STOCKHOLDER PROPOSALS AND SUBMISSIONS
FOR THE COMPANY'S 2003 ANNUAL MEETING
If any stockholder wishes to present a proposal for inclusion in the proxy
materials to be solicited by the Company's Board of Directors with respect to
the 2003 Annual Meeting of shareholders, that proposal must be presented to the
Company's secretary prior to March 15, 2003.
Upon the written or oral request by any shareholder, the Company undertakes to
deliver, without change to the requesting shareholder, a copy of the Company's
Quarterly Reports on Form 10-QSB incorporated by reference in this Proxy
Statement. Requests should be directed to the Company at 5605 N. MacArthur
Boulevard, 11th Floor, Irving, Texas 75038, and the telephone number is
972-819-2035.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING, PLEASE SIGN AND
RETURN THE ENCLOSED PROXY PROMPTLY. YOUR VOTE IS IMPORTANT. IF YOU ARE A
STOCKHOLDER OF RECORD AND ATTEND THE ANNUAL MEETING AND WISH TO VOTE IN PERSON,
YOU MAY WITHDRAW YOUR PROXY AT ANY TIME PRIOR TO THE VOTE.
NATURAL HEALTH TRENDS CORP.
February 13, 2003 By:
-------------------------------------
Mark D. Woodburn
President and Chief Financial Officer
20
ANNEX A
2002 STOCK PLAN
NATURAL HEALTH TRENDS CORP.
2002 STOCK OPTION PLAN
----------------------
ARTICLE ONE
GENERAL PROVISIONS
------------------
I. Purpose of the Plan
The Natural Health Trends Corp. 2002 Stock Option Plan (the "Plan")
is intended to assist Natural Health Trends Corp., a Florida corporation (the
"Company"), and its Related Entities (as defined in the Appendix) in recruiting
and retaining employees, directors, officers, agents, consultants, independent
contractors and advisors (collectively, "Participants"), and in compensating
Participants by enabling them to participate in the future success of the
Company and the Related Entities and to associate their interests with those of
the Company, its Related Entities and its shareholders.
Capitalized terms used and not otherwise defined shall have the
meanings assigned to such terms in the attached Appendix.
II. Structure of the Plan
Pursuant to the Plan, eligible persons may, at the discretion of the
Administrator, be granted options ("Stock Options") to purchase shares of the
Company's common stock, par value $.001 per share (the "Common Stock"). The
Stock Options granted under the Plan are intended to be either incentive stock
options ("Incentive Stock Options") within the meaning of Section 422(b) of the
Code or options that do not meet the requirements of Incentive Stock Options
("Non-Statutory Stock Options").
III. Administration of the Plan
A. The Plan shall be administered by the Administrator. The
Administrator shall have authority to grant Stock Options upon such terms (not
inconsistent with the provisions of the Plan) as the Administrator may consider
appropriate. The Administrator may decide, in its sole discretion, to exempt any
grant of Stock Options to a Participant who is a "covered employee" within the
meaning of Section 162(m)(3) of the Code from any applicable limitations of
Section 162(m) of the Code by requiring decisions as to the grant of such Stock
Options to be made by a committee of the Board comprised of two or more "outside
directors" within the meaning of Treasury Regulation Section 1.162-27(e)(3). The
foregoing terms may include conditions (in addition to those contained in this
Plan) on the exercisability, transferability or forfeitability of all or any
part of a Stock Option, including, by way of example and not limitation,
requirements that the Participant complete a specified period of employment with
or service to the Company or a Related Entity, that the Company achieve a
specified level of financial performance or that the Company achieve a specified
level of financial return.
A-1
Notwithstanding any such conditions, the Administrator may, in its sole
discretion, accelerate the time at which a Stock Option may be exercised,
transferred or become nonforfeitable. The Administrator shall have the absolute
discretion to determine whether specific grants shall be of Incentive Stock
Options or Non-Statutory Stock Options. In addition, the Administrator shall
have complete authority to interpret all provisions of the Plan, to prescribe
the form of the documents evidencing the grant of Stock Options under the Plan
("Agreements"), to adopt, amend, and rescind rules and regulations pertaining to
the administration of the Plan and to make all other determinations necessary or
advisable for the administration of this Plan. The express grant in the Plan of
any specific power to the Administrator shall not be construed as limiting any
power or authority of the Administrator. Any decision made, or action taken, by
the Administrator or in connection with the administration of the Plan shall be
final and conclusive. Neither the Administrator nor any member of the Board
shall be liable for any act done in good faith with respect to the Plan, any
Agreements or Stock Options. All expenses of administering this Plan shall be
borne by the Company.
B. The Board, in its discretion, may appoint a committee of the
Board and delegate to such committee all or part of the Board's authority and
duties with respect to the Plan. The Board may revoke or amend the terms of a
delegation at any time but such action shall not invalidate any prior actions of
the Board's delegate or delegates that were consistent with the terms of the
Plan.
IV. Eligibility
A. The persons eligible to participate in the Plan are as follows:
(i) Employees, directors and officers of the Company or any
Related Entity;
(ii) non-employee members of the Board or non-employee members of
the board of directors of any Related Entity; and
(iii) consultants, agents and other independent advisors who
provide services to the Company or to any Related Entity.
V. Stock Subject to the Plan
A. Shares Issued. Upon the exercise of a Stock Option, the Company
may issue to the Participant (or the Participant's broker if the Participant so
directs), shares of Common Stock from its authorized but unissued Common Stock
or reacquired Common Stock.
B. Aggregate Limit. The maximum aggregate number of shares of Common
Stock that may be issued under the Plan shall not exceed one hundred million
(100,000,000) shares (on a pre-reverse stock split basis).
C. Reallocation of Shares. If a Stock Option is terminated, in whole
or in part, for any reason other than its exercise, the number of shares of
Common Stock allocated to the Stock Option or portion thereof may be reallocated
to other Stock Options to be granted under the Plan and shall be counted against
the maximum number of shares set forth in the last
A-2
sentence of B above. Unvested shares issued under the Plan and subsequently
repurchased by the Company, at the option exercise or direct issue price paid
per share, pursuant to the Company's repurchase rights under the Plan, shall be
added back to the number of shares of Common Stock reserved for issuance under
the Plan and shall accordingly be available for reissuance through one or more
subsequent Stock Options under the Plan.
D. Stock Split; Recapitalization. Should any change be made to the
Common Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class, without the Company's receipt of
consideration, appropriate adjustments shall be made to (i) the maximum number
of shares of Common Stock issuable under the Plan and (ii) the number of shares
of Common Stock and the exercise price per share in effect under each
outstanding Stock Option, in order to prevent the dilution or enlargement of
benefits thereunder. The adjustments determined by the Administrator shall be
final, binding and conclusive. In no event shall any such adjustments be made in
connection with the conversion of one or more shares of the Company's preferred
stock which are outstanding on the date of issuance of any Stock Option into
shares of Common Stock.
ARTICLE TWO
STOCK OPTION GRANTS
-------------------
I. Stock Option Terms
Each Stock Option shall be evidenced by an Agreement, consisting of
one or more documents in the form approved by the Administrator; provided,
however, that each such document shall comply with the terms specified below.
Each Agreement evidencing an Incentive Stock Option, shall, in addition, be
subject to the provisions of the Plan applicable to Incentive Stock Options.
A. Exercise Price.
1. The exercise price per share for Common Stock purchased upon the
exercise of a Non-Statutory Stock Option shall be determined by the
Administrator on the date of grant.
2. The exercise price per share of Common Stock purchased upon the
exercise of an Incentive Stock Option shall be such amount as the Administrator
shall, in its best judgment, determine to be not less than the Fair Market Value
on the date the Incentive Stock Option is granted; provided, however, that in
the case of an Incentive Stock Option granted to a Participant who, at the time
such Incentive Stock Option is granted, is a 10% Stockholder, the exercise price
per share of Common Stock purchased upon the exercise of such Incentive Stock
Option shall be such amount as the Administrator shall, in its best judgment,
determine to be not less than one hundred and ten percent (110%) of the Fair
Market Value on the date such Incentive Stock Option is granted.
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3. Unless otherwise provided by the Agreement, the exercise price
shall become immediately due upon exercise of a Stock Option and shall, subject
to the provisions of Section I of Article Three and the Agreement, be payable in
cash or check made payable to the Company.
4. Should the Common Stock be registered under Section 12 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") at the time a
Stock Option is exercised, then the exercise price may also be paid as follows:
(i) in shares of Common Stock held for the lesser of (A) six
months or (B) the requisite period necessary to avoid a charge to the
Company's earnings for financial reporting purposes and valued at Fair
Market Value on the exercise date, or
(ii) to the extent the option is exercised for vested shares,
through a special sale and remittance procedure pursuant to which the
Participant shall concurrently provide irrevocable instructions (A) to a
Company-designated brokerage firm to effect the immediate sale of the
purchased shares and remit to the Company, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
exercise price payable for the purchased shares plus all applicable
Federal, state and local income and employment taxes required to be
withheld by the Company by reason of such exercise and (B) to the Company
to deliver the certificates for the purchased shares directly to such
brokerage firm in order to complete the sale.
Notwithstanding the foregoing, payment of the applicable exercise
pursuant to this Section I.A.4 is subject to the approval of the Administrator
(which approval may be delayed, conditioned or withheld in its sole and absolute
discretion) and compliance with applicable law. In addition, an officer or
director of the Company or any Related Entity may pay the exercise price of a
Stock Option in shares of Common Stock only if the stockholder approval or
"non-employee director" approval requirements described in Article III, Section
VIII are satisfied. Moreover, no "cashless exercise" under this Plan shall be
permitted by the Administrator if such cashless exercise would contravene any
provision of applicable law.
Except to the extent such sale and remittance procedure is utilized,
payment of the exercise price for the purchased shares must be made on the
exercise date.
B. Effect of Termination of Service.
1. The following provisions shall govern the exercise of any Stock
Options held by a Participant at the time of cessation of Service or death:
(i) Should the Participant cease to remain in Service for any
reason other than death, Disability or Misconduct, then the Participant
shall have a period of three (3) months following the date of such
cessation of Service during which to exercise each outstanding Stock
Option held by such Participant.
(ii) Should Participant's Service terminate by reason of
Disability, then the Participant shall have a period of twelve (12) months
following the date of such
A-4
cessation of Service during which to exercise each outstanding Stock
Option held by such Participant.
(iii) If the Participant dies while holding an outstanding
Stock Option, then the personal representative of his or her estate or the
person or persons to whom the Stock Option is transferred pursuant to the
Participant's will or the laws of descent and distribution shall have a
period of twelve (12) month following the date of the Participant's death
during which to exercise each outstanding Stock Option previously held by
such Participant.
(iv) Under no circumstances, however, shall any such Stock
Option be exercisable after the specified expiration of the option term.
(v) During the applicable post-Service exercise period, the
Stock Option may not be exercised in the aggregate for more than the
number of vested shares for which the Stock Option is exercisable on the
date of the Participant's cessation of Service. Upon the expiration of the
applicable post-Service exercise period or (if earlier) upon the
expiration of the option term, the Stock Option shall terminate and cease
to be outstanding for any vested shares for which the Stock Option has not
been exercised. However, the Stock Option shall, immediately upon the
Participant's cessation of Service, terminate and cease to be outstanding
with respect to any and all option shares for which the Stock Option is
not otherwise at the time exercisable or in which the Participant is not
otherwise at that time vested.
(vi) Should Participant's Service be terminated for
Misconduct, then all outstanding Stock Options held by the Participant
shall terminate immediately and cease to remain outstanding.
(vii) Notwithstanding (i), (ii) or (iii) above, in the case of
the grant of a Non-Statutory Stock Option, the exercise period shall
extend for such period of time following cessation of Service or death as
the Administrator shall set forth in the applicable Agreement.
2. The Administrator shall have the discretion, exercisable either
at the time a Stock Option is granted or at any time while the Stock Option
remains outstanding, to:
(i) extend the period of time for which the Stock Option is to
remain exercisable, following a Participant's cessation of Service or
death, from the limited period otherwise in effect for that Stock Option
to such greater period of time as the Administrator shall deem
appropriate, but in no event beyond the expiration of the option term;
and/or
(ii) permit the Stock Option to be exercised, during the
applicable post-Service exercise period, not only with respect to the
number of vested shares of Common Stock for which such Stock Option is
exercisable at the time of the Participant's cessation of Service but also
with respect to one or more additional installments in which
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the Participant would have vested under the Stock Option had the
Participant continued in Service.
C. Stockholder Rights. The holder of a Stock Option shall have no
stockholder rights with respect to the shares subject to the Stock Option until
such person shall have exercised the Stock Option, paid the exercise price and
become the record holder of the purchased shares.
D. Unvested Shares. The Administrator shall have the discretion to
grant Stock Options which are exercisable for unvested shares of Common Stock.
Should the Participant cease Service while holding such unvested shares, the
Company shall have the right to repurchase, at the exercise price paid per
share, any or all of those unvested shares. The terms upon which such repurchase
right shall be exercisable (including the period and procedures for exercise and
the appropriate vesting schedule for the purchased shares) shall be established
by the Administrator and set forth in the document evidencing such repurchase
right; provided, however, that no such repurchase right shall be exercised by
the Company earlier than six (6) months following the later of (i) the date on
which the Stock Option is granted or (ii) the date of which the Stock Option is
exercised.
E. Limited Transferability of Stock Options. During the lifetime of
the Participant, an Incentive Stock Option shall be exercisable only by the
Participant and shall not be assignable or transferable other than by will or by
the laws of descent and distribution following the Participant's death.
II. Incentive Stock Options
The terms specified below shall be applicable to all Incentive Stock
Options. Except as modified by the provisions of this Section II, all the
provisions of Articles One, Two and Three shall be applicable to Incentive Stock
Options. Stock Options which are specifically designated as Non-Statutory Stock
Options shall not be subject to the terms of this Section II.
A. Eligibility. Incentive Stock Options may only be granted to
Employees.
B. Exercise Price. The exercise price per share shall not be less
than one hundred percent (100%) of the Fair Market Value per share of Common
Stock on the option grant date, provided, however, that in the case of an
Incentive Stock Option granted to a 10% Stockholder, the exercise price per
share of Common Stock purchased upon the exercise of such Incentive Stock Option
shall be such amount as the Administrator shall, in its best judgment, determine
to be not less than one-hundred and ten percent (110%) of the Fair Market Value
on the date such Incentive Stock Option is granted.
C. Dollar Limitation. The aggregate Fair Market Value of the shares
of Common Stock (determined as of the respective date or dates of grant) for
which one or more Stock Options granted to any Employee under the Plan (or any
other option plan of the Company or any Related Entity) may for the first time
become exercisable as Incentive Stock Options during any one (1) calendar year
shall not exceed the sum of One Hundred Thousand Dollars
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($100,000). To the extent the Employee holds two (2) or more such Incentive
Stock Options which become exercisable for the first time in the same calendar
year, the foregoing limitation on the exercisability of such options as
Incentive Stock Options shall be applied on the basis of the order in which such
Incentive Stock Options are granted.
D. Term of Incentive Stock Options. The maximum period in which an
Incentive Stock Option shall be exercisable shall be ten (10) years from the
date of grant, provided, however, that if any Employee to whom an Incentive
Stock Option is granted is a 10% Stockholder, then the option term shall not
exceed five (5) years measured from the option grant date.
E. Holding Period. Except as permitted under the Code, Participant
shall not have the right to sell, pledge, hypothecate or otherwise transfer any
share of Common Stock acquired pursuant to the exercise of any Incentive Stock
Option prior to the later of (i) two (2) years from the date of the grant of the
Incentive Stock Option or (ii) one (1) year after the transfer to him of such
share of Common Stock.
III. Corporate Transaction
A. The shares subject to each Stock Option outstanding under the
Plan at the time of a Corporate Transaction shall automatically vest in full so
that each such Stock Option shall, immediately prior to the effective date of
the Corporate Transaction, become fully exercisable for all of the shares of
Common Stock at the time subject to that Stock Option and may be exercised for
any or all of those shares as fully vested shares of Common Stock; provided,
however, that shares of Common Stock subject to an outstanding Stock Option
granted to an Employee shall not automatically vest pursuant to this Section
III, A until such time as the Employee experiences an Involuntary Termination
following such Corporate Transaction.
B. The portion of any Incentive Stock Option accelerated in
connection with a Corporate Transaction shall remain exercisable as an Incentive
Stock Option only to the extent the applicable $100,000 limitation set forth in
Section II, C above is not exceeded. To the extent such dollar limitation is
exceeded, the accelerated portion of such Incentive Stock Option shall be
exercisable as a Non-Statutory Option under the Code.
C. The grant of Stock Options under the Plan shall in no way affect
the right of the Company to adjust, reclassify, reorganize or otherwise change
its capital or business structure or to merge, consolidate, dissolve, liquidate
or sell or transfer all or any part of its business or assets.
IV. Cancellation and Regrant of Stock Options
The Administrator shall have the authority to effect, at any time
and from time to time, with the consent of the affected Participants, the
cancellation of any or all outstanding Stock Options under the Plan and to grant
in substitution therefor new Stock Options covering the same or different number
of shares of Common Stock, but with an exercise price per share based on the
Fair Market Value per share of Common Stock on the new option grant date. No
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such replacement Stock Option shall be granted with a lower exercise price than
the Stock Option for which it is substituted either six (6) months before or six
(6) months after the cancellation.
ARTICLE THREE
MISCELLANEOUS
-------------
I. Financing
To the extent permitted by applicable law, the Administrator may
permit any Participant to pay the option exercise price upon exercise of a Stock
Option by delivering a full-recourse, interest bearing promissory note payable
in one or more installments and secured by the purchased shares. The terms of
any such promissory note (including the interest rate and the terms of
repayment) shall be established by the Administrator in its sole discretion. In
no event may the maximum credit available to the Participant exceed the sum of
(i) the aggregate option exercise price (less the par value of those shares)
plus (ii) any Federal, state and local income and employment tax liability
incurred by the Participant in connection with the option exercise.
II. Effective Date and Term of Plan
A. The Plan shall become effective on the date on which it is
adopted by the Board (the "Effective Date"), provided, however, that if the Plan
is not approved by a vote of the shareholders of the Company within twelve (12)
months after the Effective Date, the Plan and any benefits granted under the
Plan shall terminate.
B. The Plan shall terminate upon the earliest to occur of (i)
November 17, 2012, (ii) ten (10) years from the Effective Date or (iii) the date
on which all shares of Common Stock available for issuance under the Plan shall
have been issued as vested shares. In addition the Board, in its sole
discretion, may terminate the Plan at any time and for any reason it deems
appropriate. Upon Plan termination, all Stock Options and vested stock issuances
outstanding under the Plan shall continue to have full force and effect in
accordance with the provisions of the Agreements.
III. Amendment of the Plan
A. The Board shall have complete and exclusive power and authority
to amend or modify the Plan in any or all respects. However, no such amendment
or modification shall adversely affect the rights and obligations with respect
to Stock Options or vested stock issuances at the time outstanding under the
Plan unless the Participant consents to such amendment or modification. In
addition, certain amendments may require the approval of the Company's
shareholders pursuant to applicable laws and regulations.
B. Stock Options may be granted under the Plan which are in excess
of the number of shares of Common Stock then available for issuance under the
Plan, provided any excess shares actually issued shall be held in escrow until
there is obtained the approval of the Company's shareholders of an amendment
sufficiently increasing the number of shares of
A-8
Common Stock available for issuance under the Plan. If such stockholder approval
is not obtained within twelve (12) months after the date the first such excess
grants are made, then (i) any unexercised Stock Options granted on the basis of
such excess shares shall terminate and cease to be outstanding and (ii) the
Company shall promptly refund to the Participants the exercise or purchase price
paid for any excess shares issued under the Plan and held in escrow, together
with interest (at the applicable Short Term Federal Rate under Section 1274(d)
of the Code) for the period the shares of Common Stock were held in escrow, and
such shares shall thereupon be automatically cancelled and cease to be
outstanding.
IV. Use of Proceeds
Any cash proceeds received by the Company from the sale of shares of
Common Stock under the Plan shall be used for general corporate purposes.
V. Withholding
The Company's obligation to deliver shares of Common Stock upon the
exercise of any Stock Options under the Plan shall be subject to the
satisfaction of all applicable Federal, state and local income and employment
tax withholding requirements.
VI. Regulatory Approvals
The implementation of the Plan, the granting of any Stock Options
under the Plan and the issuance of any shares of Common Stock upon the exercise
of any Stock Option shall be subject to the Company's procurement of all
approvals and permits as the Company, in its sole discretion determines to be
required by regulatory authorities having jurisdiction over the Plan and the
Stock Options granted under it.
VII. No Employment or Service Rights
Nothing in the Plan shall confer upon a Participant any right to
continue in Service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Company or any Related Entity
employing or retaining a Participant, which rights are hereby expressly
reserved, to terminate a Participant's Service at any time for any reason, with
or without cause.
VIII. Grants to Officers and Directors
Notwithstanding any provision of this Plan to the contrary a Stock
Option granted to an officer or director of the Company or any Related Entity
must be (i) approved by the Board or a Committee of the Board comprised solely
of two or more "non-employee directors" within the meaning of Rule 16b-3(b)(3)
of the Exchange Act or (ii) approved by the Company's shareholders or ratified
by them, no later than the next Special meeting of the Company's shareholders,
in accordance with Rule 16b-3(d)(2) of the Exchange Act. The foregoing
requirement as to Board, non-employee director or stockholder approval shall not
apply if the terms of the applicable Agreement provide that at least six (6)
months must elapse from the date
A-9
on which the Stock Option is granted to the date of disposition of the Stock
Option (other than upon exercise or conversion) or such Stock Option's
underlying shares of Common Stock.
IX. Sarbanes-Oxley Act Compliance
Notwithstanding any provision of the Plan to the contrary, the
Administrator, in accordance with any applicable rules or regulations
promulgated by the Securities and Exchange Commission (the "SEC") and/or the
United States Department of Labor, shall (i) notify in a timely manner any
Participant qualifying as a beneficial owner of more than 10% of any class of
equity security of the Company or any Related Entity registered under Section 12
of the Exchange Act or an officer or director of the Company or any Related
Entity (each, a "reporting person" or "insider") of any transaction occurring
under the Plan or any Agreement on or after August 29, 2002 that requires
reporting by the reporting person or insider on SEC Form 4 or 5, as applicable,
each as revised pursuant to amendments to Exchange Act rules 16a-3, 16a-6 or
16a-8, as applicable, made by the SEC pursuant to Section 403 of the
Sarbanes-Oxley Act of 2002, P.L. No. 107-204 (the "Act"); and (ii) otherwise
comply with all notice, disclosure and reporting requirements applicable to the
Plan pursuant to such Act.
A-10
APPENDIX to PLAN
----------------
The following definitions shall be in effect under the Plan:
A. Administrator shall mean either the Board or the Committee acting
in its capacity as administrator of the Plan.
B. Board shall mean the Company's Board of Directors.
C. Code shall mean the Internal Revenue Code of 1986, as amended.
D. Committee shall mean a committee of two (2) or more Board members
appointed by the Board to exercise one or more administrative functions under
the Plan.
E. Corporate Transaction shall mean any of the following
stockholder-approved transactions to which the Company is a party or affecting
the composition of the Board, as the case may be:
(i) a merger or consolidation in which securities possessing
more than fifty percent (50%) of the total combined voting power of the
Company's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to
such transaction,
(ii) the sale, transfer or other disposition of all or
substantially all of the Company's assets in complete liquidation or
dissolution of the Company,
(iii) the sale, transfer or other disposition of all or
substantially all of the Company's assets to an entity which, immediately
prior to such transfer, is not a Related Entity, or
(iv) a change in the identity of more than three (3) members
of the Board over any two-year period.
For purposes of this definition, "substantially all" shall mean at least
90% of the fair market value of the Company's net assets and at least 70% of the
fair market value of the Company's gross assets, such fair market value to be
determined by the Administrator in its sole discretion immediately prior to the
transfer. "Net Assets" shall mean total assets as reported on the Company's most
recent audited financial statements issued prior to the transfer less any
short-term liabilities. "Gross Assets" shall mean total assets as reported on
such financial statements.
F. Disability shall mean the inability of the Participant to engage
in any substantial gainful activity by reason of any medically determinable
physical or mental impairment that can be expected to result in death or to be
of long-continued and indefinite duration. An individual shall not be considered
to have experienced Disability unless a
A-11
determination of such is made by the Administrator on the basis of such medical
evidence as the Administrator deems warranted under the circumstances.
G. Employee shall mean an individual who is in the employ of the
Company or any Related Entity, subject to the control and direction of the
employer entity as to both the work to be performed and the manner and method of
performance.
H. Fair Market Value per share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq
National Market, the SmallCap Market or the OTC Bulletin Board, then the
Fair Market Value shall be the closing selling price per share of Common
Stock on the date in question, as such price is reported on the Nasdaq
National Market, the SmallCap Market or the OTC Bulletin Board, as the
case may be. If there is no closing selling price for the Common Stock on
the date in question, then the Fair Market Value shall be the closing
selling price on the last preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling price
per share of Common Stock on the date in question on the Stock Exchange
determined by the Administrator to be the primary market for the Common
Stock, as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no closing selling price for
the Common Stock on the date in question, then the Fair Market Value shall
be the closing selling price on the last preceding date for which such
quotation exists.
(iii) If the Common Stock is at the time neither listed on any
Stock Exchange nor traded on the Nasdaq National Market or SmallCap Market
or the OTC Bulletin Board, then the Fair Market Value shall be determined
by the Administrator taking into account such factors, as the
Administrator shall deem appropriate, which are determinative of an arm's
length transaction between a willing seller and a willing buyer, neither
being under an obligation to transact business, including but not limited
to appropriate price to sales ratio factors.
I. Involuntary Termination shall mean the termination of the Service
of any individual which occurs by reason of:
(i) such individual's involuntary dismissal or discharge by
the Company for reasons other than Misconduct, or
(ii) such individual's voluntary resignation following (A) a
change in his or her position with the Company which materially reduces
his or her duties and responsibilities or the level of management to which
he or she reports, or (B) a reduction in his or her level of "base
salary", as determined by the Administrator in its sole discretion, by
more than 80 percent (80%) over a continuous 12-month period.
A-12
J. Misconduct shall having the meaning ascribed to such term or
words of similar import in the Participants written employment or service
contract with the Company or any Related Entity and, in addition, shall include
(i) the Participant's breach of any provision of any employment, non-disclosure,
non-competition, non-solicitation or other similar agreement executed by the
Participant for the benefit of the Company or any Related Entity, as determined
by the Administrator in its sole discretion; (ii) the Participant's conviction
of, or plea of nolo contendere to, a felony or crime involving moral turpitude;
(iii) the Participant's commission any act of fraud, embezzlement or dishonesty
with respect to the funds or property of the Company or any Related Entity; (iv)
any unauthorized use or disclosure by the Participant of confidential
information or trade secrets of the Company or any Related Entity; or (v) any
other intentional misconduct by the Participant adversely affecting the business
or affairs of the Company or any Related Entity in a material manner. The
foregoing definition shall not be deemed to be inclusive of all the acts or
omissions which the Administrator may consider as grounds for the dismissal or
discharge of any Participant on account of "Misconduct".
K. Related Entity A "parent corporation" of the Company or a
"subsidiary corporation" of the Company within the meaning of Section 424(e) and
(f) of the Code respectively.
L. Service shall mean the provision of services to the Company or
any Related Entity by a person in the capacity of an Employee, a non-employee
member of the Board or the Board of Directors of any Related Entity or a
consultant or independent advisor, except to the extent otherwise specifically
provided in the documents evidencing the option grant.
M. Stock Exchange shall mean either the American Stock Exchange or
the New York Stock Exchange.
N. 10% Stockholder shall mean the owner of stock (as determined
under Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company (or any Related
Entity).
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ANNEX B
AMENDMENT TO ARTICLES OF INCORPORATION
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
NATURAL HEALTH TRENDS CORP.
---------------------------
Pursuant to the provisions of section 607.1006, Florida Statutes, this Florida
profit corporation adopts the following articles of amendment to its articles of
incorporation:
FIRST: Article IV is hereby amended by inserting the following paragraph after
the first paragraph of Article IV:
Each one hundred (100) shares of the Corporation's common stock,
$.001 par value per share, issued and outstanding as of the close of
business on the date this Articles of Amendment is filed, shall be
converted into one (1) share of the Corporation's common stock, $.001 par
value per share, so that each share of the corporation's common stock
issued and outstanding is hereby converted and reclassified. No fractional
interests resulting from such conversion shall be issued, but in lieu
thereof, shareholders who ostensibly would be entitled to receive
fractional shares because they hold a number of shares not evenly
divisible by one hundred (100) will be entitled, upon surrender to the
Exchange Agent of certificates representing such shares, to receive one
(1) additional share of common stock for any fractional share they may be
entitled to.
SECOND: The date of amendment's adoption: March ___, 2003
THIRD: Adoption of Amendment(s) (CHECK ONE)
[X] The amendment(s) was/were approved by the shareholders. The number
of votes cast for the amendment(s) was/were sufficient for approval.
[ ] The amendment(s) was/were approved by the shareholders through
voting groups. The following statement must be separately provided
for each voting group entitled to vote separately on the
amendment(s):
"The number of votes cast for the amendment(s) was/were
sufficient for approval by ________________________________."
(voting group)
[ ] The amendment was adopted by the board of directors on _____, 2003
without shareholder action and shareholder action was not required.
[ ] The amendment(s) was/were adopted by the incorporators without
shareholder action and shareholder action was not required.
FOURTH: The amendment to the articles of incorporation does not adversely affect
the rights or preferences of the holders of outstanding shares of any class or
series and does not result in the percentage of authorized shares that remain
unissued after the division or combination exceeding the percentage of
authorized shares that were unissued before the division or combination.
FIFTH: This amendment shall become effective on March __, 2003.
Signed this __ day of March, 2003
_____________________________________
Mark D. Woodburn
President and Chief Financial Officer
B-1
PROXY
NATURAL HEALTH TRENDS CORP.
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PLEASE CLEARLY INDICATE A RESPONSE BY CHECKING ONE OF THE BOXES ([FOR] [WITHHOLD
AUTHORITY] [AGAINST] OR [ABSTAIN]) NEXT TO EACH OF THE FIVE (5) PROPOSALS
The undersigned hereby appoint(s) Mark Woodburn as a proxy (the
"Proxy") for the undersigned, with the power of substitution and resubstitution
to vote any and all shares of capital stock of Natural Health Trends Corp. (the
"Company") which the undersigned would be entitled to vote as fully as the
undersigned could do if personally present at the Annual Meeting of the Company,
to be held on March 11, 2003, at 10 A.M. central standard time, and at any
adjournments thereof, hereby revoking any prior proxies to vote said stock, upon
the following items more fully described in the notice of and proxy statement
for the Special Meeting (receipt of which is hereby acknowledged):
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS NO. 1, 2, 3, 4 AND 5.
1. ELECTION OF DIRECTORS
---------------------
VOTE
[ ] FOR ALL nominees listed below EXCEPT as marked to the
contrary below
[ ] WITHHOLD AUTHORITY to vote for ALL nominees listed below
(INSTRUCTION: To withhold authority to vote for any individual
nominee strike a line through the nominee's name below.)
[ ] ABSTAIN
Mark D. Woodburn and Terry LaCore.
2. APPROVAL OF THE REVERSE STOCK SPLIT
-----------------------------------
[ ] FOR the Reverse Stock Split
[ ] AGAINST
[ ] ABSTAIN
3. ADOPTION OF THE 2002 STOCK PLAN
-------------------------------
[ ] FOR the Adoption of the 2002 Stock Plan
[ ] AGAINST
[ ] ABSTAIN
4. RATIFICATION OF THE APPOINTMENT OF SHERB & CO., LLP AS INDEPENDENT
PUBLIC ACCOUNTANTS FOR THE COMPANY FOR FISCAL YEAR ENDED DECEMBER 31, 2002
[ ] FOR the Ratification of the Appointment of Sherb & Co., LLP
[ ] AGAINST
[ ] ABSTAIN
5. RATIFICATION OF A PRIOR AMENDMENT TO ARTICLES OF INCORPORATION
[ ] FOR the Ratification of a Prior Amendment to Articles of
Incorporation
[ ] AGAINST
[ ] ABSTAIN
THIS PROXY WILL BE VOTED AS SPECIFIED ABOVE; UNLESS OTHERWISE
INDICATED, THIS PROXY WILL BE VOTED (1) FOR THE ELECTION OF THE TWO NOMINEES
NAMED IN ITEM 1, (2) FOR THE APPROVAL OF THE REVERSE STOCK SPLIT NAMED IN ITEM
2, (3) FOR THE ADOPTION OF THE 2002 STOCK PLAN IN ITEM 3, (4) FOR THE
RATIFICATION OF THE APPOINTMENT OF SHERB & CO., LLP AS INDEPENDENT PUBLIC
ACCOUNTANTS FOR THE COMPANY FOR FISCAL YEAR ENDED DECEMBER 31, 2002 IN ITEM 4,
(5) FOR THE RATIFICATION OF A PRIOR AMENDMENT TO THE ARTICLES OF INCORPORATION
IN ITEM 5 AND (5) IN THE DISCRETION OF THE PROXY ON ANY OTHER MATTER THAT MAY
PROPERLY COME BEFORE THE MEETING.
In his discretion, Mark Woodburn (or his substitute (s)) is
authorized to vote upon such other business as may properly come before the
meeting.
Please mark, sign, date and return this Proxy promptly using the
accompanying postage pre-paid envelope. THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF NATURAL HEALTH TRENDS CORP.
Dated:___________________________________
_________________________________________
Signature
_________________________________________
Signature if jointly owned:
_________________________________________
Print name:
Please sign exactly as the name appears on your stock certificate. When shares
of capital stock are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee, guardian, or corporate officer,
please include full title as such. If the shares of capital stock are owned by a
corporation, sign in the full corporate name by an authorized officer. If the
shares of capital stock are owned by a partnership, sign in the name of the
partnership by an authorized officer.
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY PROMPTLY
IN THE ENCLOSED ENVELOPE