SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant |X| Filed by a Party other than the Registrant |_|
Check the appropriate box:
|X| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
RELIV' INTERNATIONAL, INC.
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (check the appropriate box):
|X| No Fee Required
<PAGE>
RELIV' INTERNATIONAL, INC.
136 Chesterfield Industrial Boulevard
Chesterfield, Missouri 63005
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO
BE HELD ON MAY 27, 1999
To: Shareholders of Reliv' International, Inc.
The annual meeting of the shareholders of Reliv' International, Inc.
will be held at the Doubletree Hotel and Conference Center, 16625 Swingley Ridge
Road, Chesterfield, Missouri 63017, on Thursday, May 27, 1999, at 10:00 a.m.,
Central Daylight Savings Time, for the following purposes:
1. To elect 10 directors to hold office during the year following
the annual meeting or until their successors are elected (Item
No. 1 on proxy card);
2. To consent to a proposal to change the state of incorporation
of the Company from Illinois to Delaware by the merger of the
Company into a wholly-owned subsidiary of the Company which is
incorporated under the laws of Delaware, which reincorporation
will cause certain changes to the Company's Articles of
Incorporation, all of which is more fully described in the
accompanying Proxy Statement (Item No. 2 on proxy card);
3. To approve the adoption of the Reliv' International, Inc. 1999
Stock Option Plan (Item No. 3 on proxy card);
4. To ratify the appointment of Ernst & Young L.L.P. as auditors
of the Corporation for 1999 (Item No. 4 on proxy card); and
5. To transact such other business as may properly come before
the meeting.
The close of business on April 12, 1999, has been fixed as the record
date for determining the shareholders entitled to receive notice of and to vote
at the annual meeting.
BY ORDER OF THE BOARD OF DIRECTORS
April 23, 1999 /s/ Stephen M. Merrick
-----------------------------
Stephen M. Merrick, Secretary
YOUR VOTE IS IMPORTANT
It is important that as many shares as possible be represented
at the annual meeting. Please date, sign, and promptly return
the proxy in the enclosed envelope. Your proxy may be revoked
by you at any time before it has been voted.
<PAGE>
RELIV' INTERNATIONAL, INC.
136 Chesterfield Industrial Boulevard
Chesterfield, Missouri 63005
PROXY STATEMENT
Information Concerning the Solicitation
- ---------------------------------------
This statement is furnished in connection with the solicitation of
proxies to be used at the Annual Shareholders Meeting (the "Annual Meeting") of
Reliv' International, Inc. (the "Company"), an Illinois corporation, to be held
on Thursday, May 27, 1999. The proxy materials are being mailed to shareholders
of record at the close of business on April 12, 1999.
The solicitation of proxies in the enclosed form is made on behalf of
the Board of Directors of the Company.
The cost of preparing, assembling and mailing the proxy material and of
reimbursing brokers, nominees and fiduciaries for the out-of-pocket and clerical
expenses of transmitting copies of the proxy material to the beneficial owners
of shares held of record by such persons will be borne by the Company. The
Company does not intend to solicit proxies otherwise than by use of the mail,
but certain officers and regular employees of the Company or its subsidiaries,
without additional compensation, may use their personal efforts, by telephone or
otherwise, to obtain proxies.
Quorum and Voting
- -----------------
Only shareholders of record at the close of business on April 12, 1999,
are entitled to vote at the Annual Meeting. On that day, there were issued and
outstanding _________ shares of Common Stock. Each share has one vote. A simple
majority of the outstanding shares is required to be present in person or by
proxy at the meeting for there to be a quorum for purposes of proceeding with
the Annual Meeting. A simple majority of the shares present in person or by
proxy at the Annual Meeting, at which a quorum is present, is required to elect
directors, to approve adoption of the 1999 Stock Option Plan, and to ratify the
appointment of auditors. The approval of the change in the Company's state of
incorporation will require the vote of a majority of the total issued and
outstanding shares of the Company. Abstentions and withheld votes have the
effect of votes against these matters. Broker non-votes (shares held of record
by a broker for which a proxy is not given) will be counted for purposes of
determining shares outstanding for purposes of a quorum, but will not be counted
as present for purposes of determining the vote on any matter considered at the
meeting.
A shareholder signing and returning a proxy on the enclosed form has
the power to revoke it at any time before the shares subject to it are voted by
notifying the Secretary of the Company in writing. If a shareholder specifies
how the proxy is to be voted with respect to any of the proposals for which a
choice is provided, the proxy will be voted in accordance with such
specifications. If a shareholder fails to so specify with respect to such
proposals, the proxy will be voted "FOR" the
1
<PAGE>
nominees for directors contained in these proxy materials, "FOR" proposal 2,
"FOR" proposal 3, and "FOR" proposal 4.
Stock Ownership by Management and Others
The following table provides information concerning the beneficial
ownership of Common Stock of the Company by each director and nominee for
director, certain executive officers, and by all directors and officers of the
Company as a group as of April 12, 1999. In addition, the table provides
information concerning the beneficial owners known to the Company to hold more
than 5 percent of the outstanding Common Stock of the Company as of April 12,
1999.
<TABLE>
<CAPTION>
Amount and Nature of
Name of Beneficial Owner Beneficial Ownership(1) Percent of Class(1)(2)
------------------------ ----------------------- ----------------------
<S> <C> <C>
Robert L. and Sandra S. Montgomery(3) 2,381,326 23.77%
Carl W. Hastings(4) 683,418 6.96%
David G. Kreher 140,433 1.44%
Stephen M. Merrick(5) 548,924 5.64%
Donald L. McCain 286,643 2.95%
Marvin W. Solomonson 322,425 3.34%
Thomas T. Moody 102,841 1.06%
Thomas W. Pinnock III 66,100 *
John B. Akin 20,880 *
Donald E. Gibbons, Jr. 64,300 *
Frederick S. Cameron 11,000 *
All Directors and Executive Officers
as a Group (12 persons) 4,627,395 43.67%
<FN>
*less than one percent
(1) In each case the beneficial owner has sole voting and investment power.
The figures include the following number of shares of Common Stock for
which an individual has the right to acquire beneficial ownership,
within sixty (60) days from April 12, 1999, through the exercise of
stock options: Mr. Montgomery - 365,665, Dr. Hastings - 171,267, Mr.
Kreher - 134,933, Mr. Merrick - 73, 834, Mr. McCain - 50,167, Mr.
Solomonson - 10,000, Mr. Moody - 15,500, Mr. Pinnock - 32,000, Mr. Akin
- 20,000, Mr. Gibbons - 61,000, and Mr. Cameron - 11,000.
(2) The calculation of percent of class is based upon the number of shares
of Common Stock outstanding as of April 12, 1999.
(Footnotes continued on next page)
2
<PAGE>
(3) Mr. Robert L. Montgomery is Chairman of the Board of Directors, Chief
Executive Officer and President of the Company. Ms. Montgomery is a
director of the Company. The Montgomerys' mailing address is 136
Chesterfield Industrial Boulevard, Chesterfield, Missouri 63005.
(4) Dr. Carl W. Hastings is Executive Vice President and a Director of the
Company. Dr. Hastings' mailing address is 136 Chesterfield Industrial
Boulevard, Chesterfield, Missouri 63005.
(5) Stephen M. Merrick is Senior Vice President and a Director of the
Company. Mr. Merrick's mailing address is 136 Chesterfield Industrial
Boulevard, Chesterfield, Missouri 63005.
</FN>
</TABLE>
PROPOSAL ONE - ELECTION OF DIRECTORS
Ten directors will be elected at the Annual Meeting to serve for terms
of one year expiring on the date of the Annual Meeting in 2000. Each director
elected will continue in office until a successor has been elected. If a nominee
is unable to serve, which the Board of Directors has no reason to expect, the
persons named in the accompanying proxy intend to vote for the balance of those
named and, if they deem it advisable, for a substitute nominee.
Information Concerning Nominees
- -------------------------------
The following is information concerning nominees for election as
directors of the Company. Each of such persons is presently a director of the
Company.
ROBERT L. MONTGOMERY, age 57, Chairman of the Board, Chief Executive
Officer, President and Treasurer of the Company. Mr. Montgomery became Chairman
of the Board of Directors and Chief Executive Officer of the Company on February
15, 1985, and President on July 1, 1985. Mr. Montgomery has been a director of
the Company since 1985. Mr. Montgomery is also the President and director of
Reliv', Inc. and President and a director of Reliv' World Corporation, both
wholly-owned subsidiaries of the Company. Mr. Montgomery was, from 1982 to July,
1985, President of Spectrum Foods, Inc., a corporation engaged in the
development, manufacture and sale of specialized food products utilizing soy as
a base. Mr. Montgomery, together with Dr. Carl W. Hastings, founded Spectrum
Foods in 1981. From 1970 to 1980, Mr. Montgomery was the Executive Vice
President of Modern Income Life Insurance Company and from 1965 to 1979 was an
agent, manager and vice president of Modern American Life Insurance Company. Mr.
Montgomery received a B.A. Degree in Economics from the University of Missouri
in Kansas City, Missouri in 1965.
DR. CARL W. HASTINGS, age 57, Executive Vice President of Manufacturing
and Product Development, Assistant Secretary and a Director of the Company. Dr.
Hastings has been employed by the Company since February, 1991, and became
Executive Vice President of the Company on July 1, 1992. He has been a director
of the Company since February, 1990. Dr. Hastings is also a director of Reliv',
Inc. and Reliv' World Corporation. Dr. Hastings holds B.S. and M.S. Degrees and
a Ph.D. Degree in Food Science from the University of Illinois. For more than
the past 20 years,
3
<PAGE>
Dr. Hastings has been engaged in a variety of employment and consulting
capacities as a food scientist. From May, 1988 to December, 1990, Dr. Hastings
was employed as President of Grove Country Foods, Inc. which was a principal
supplier to Reliv', Inc.
DAVID G. KREHER, age 46, Senior Vice President of Worldwide Sales and
Marketing and Assistant Secretary of the Company. He is also Secretary and a
director of Reliv', Inc. and Reliv' World Corporation. Mr. Kreher was employed
by the Company in August, 1991, and became Senior Vice President on July 1,
1992. Mr. Kreher was placed in charge of Worldwide Sales and Marketing in ____.
From 1988 to August, 1991, Mr. Kreher was owner and president of Creative
Options Corporation in Washington, D.C., a firm that provided specialized
advertising services. From 1981 to 1988, Mr. Kreher was Chief Operating Officer
of Sandven Advertising & Marketing in Kansas City, Missouri. Mr. Kreher holds a
B.S. Degree in Accounting from Southwest Missouri State University. Mr. Kreher
has been a director of the Company since June 1, 1994. Mr. Kreher is the brother
of Sandra S. Montgomery.
STEPHEN M. MERRICK, age 57, became Senior Vice President and Chief
Operating Officer, of the Company in ________. Mr. Merrick has been a director
of the Company since July 20, 1989, and is also Secretary of the Company and
Secretary and a director of Reliv', Inc. and Reliv' World Corporation. Mr.
Merrick is also a principal of the law firm of Merrick & Klimek, P.C. of
Chicago, Illinois, and has been engaged in the practice of law for over 30
years. Mr. Merrick has represented the Company and its subsidiaries since the
founding of the Company. Mr. Merrick received a Juris Doctor Degree from
Northwestern University School of Law in 1966. Mr. Merrick is also Chief
Executive Officer and a director of CTI Industries Corporation (NASDAQ-CTIB).
THOMAS W. PINNOCK III, age 48, independent distributor for Reliv', Inc.
Mr. Pinnock has been an independent distributor for Reliv', Inc. since January
15, 1990. He has been a director of the Company since April 29, 1992. On May 1,
1992, Mr. Pinnock was employed by the Company and held the position of Senior
Vice President - U.S. Sales until June 30, 1994, at which time he, and several
other former distributors in management, resumed their duties as full time
distributors as part of a corporate restructuring designed to promote sales
growth. Mr. Pinnock was commissioned as a U.S. Army Officer in 1978 and
commanded an armored company in the 1st Infantry Division. For a period of more
than five years prior to the time be became a Reliv' distributor, Mr. Pinnock
was a reporter for the Orlando Sentinal. Mr. Pinnock holds a B.A. Degree from
Valencia College, Orlando, Florida and studied journalism at the University of
Florida and the Defense Department School of Journalism.
THOMAS T. MOODY, age 40, independent distributor for Reliv', Inc. Mr.
Moody has been an independent distributor for Reliv', Inc. since July, 1989.
Prior to that time, since July, 1985, he had been employed by the Company in a
variety of capacities. Mr. Moody received a B.A. Degree from St. Mary's College
in Winona, Minnesota in 1981. He has been a director of the Company since
October 20, 1989.
DONALD L. McCAIN, age 55, is the Chairman and co-owner of Robertson
International Incorporated, a remanufacturer and worldwide supplier of mining
equipment and supplies. Mr. McCain acquired his interest in Robertson
International Incorporated in September, 1995, and as part of the transaction,
Coal Age Incorporated, a mining equipment company he acquired in September of
1994, was merged into Robertson International Incorporated. Mr. McCain
co-founded G&T
4
<PAGE>
Resources, Inc., an owner and operator of nursing homes, in 1980 and was engaged
in the management of that company until he sold his interest in September, 1994.
Prior to that time, Mr. McCain was employed with Archer Daniels Midland in the
Food Processing Management Department for fifteen years. Mr. McCain has been a
director of the Company since July 20, 1989, and is also a director of Reliv',
Inc. and Reliv' World Corporation.
JOHN B. AKIN, age 70, retired as Vice President, A.G. Edwards & Sons
and Resident Manager of the Decatur, Illinois branch office in 1995. Mr. Akin
had been associated with A.G. Edwards & Sons as a stock broker, manager and
officer since April, 1973. Mr. Akin holds a B.A. Degree from the University of
Northern Iowa, Cedar Falls, Iowa. Mr. Akin has been a director of the Company
since June, 1986.
SANDRA S. MONTGOMERY, age 53, has been a director of the Company since
April 29, 1992. For more than the past five years, Mrs. Montgomery has been
engaged actively in the business of the Company. Mrs. Montgomery is also a
director of Reliv', Inc. Sandra S. Montgomery and Robert L. Montgomery are
husband and wife.
MARVIN W. SOLOMONSON, age 46, is the ___________. Mr. Solomonson was
the founder and owner of Solomonson Investment Services, engaged in the
marketing of investments and insurance products, and operated that business from
1983 until he sold it in December, 1998. Since 1993, Mr. Solomonson has also
served as President and Chief Executive Officer for the following corporations:
Superior Family Foods, Inc. and Service Contracts, Inc. dba Dealership Services.
Mr. Solomonson has been a director of the Company since June 1, 1994.
Executive Officers Other Than Nominees
- --------------------------------------
DONALD E. GIBBONS, JR., age 43, is Vice President of U.S. Sales of the
Company. Mr. Gibbons was employed by the Company in June, 1991, and became Vice
President of Finance. He became Vice President of Distributor Relations in 1992,
and accepted the position of Vice President of U.S. Sales in June, 1994, a
position he still holds. Mr. Gibbons was an Executive Correspondent for the
Governor of Illinois 1974-1976. From 1978 to 1990, Mr. Gibbons was a Journeyman
Electrician with I.B.E.W. Local 193. In 1981, Mr. Gibbons, with his wife
Elizabeth, became an independent distributor in a network marketing company and
operated that home business for 5 years. Mr. Gibbons received a B.A. Degree in
Accountancy from the University of Illinois, Springfield, graduating with
highest honors.
FREDERICK S. CAMERON, age 57, is Vice President of Asia Pacific Sales
for Reliv' World, a market that the Company is investigating. He was first
employed by the Company in April, 1991, as the sales and marketing manager of
the Company's subsidiary, Reliv' Australia, Pty. Ltd. and Reliv' New Zealand
Ltd. in May, 1992. In January, 1995, he was appointed Director - International
Marketing which position he held until January, 1998, when he was appointed to
his current position. Prior to his joining the Company, he was an independent
distributor with another network marketing company and an executive in the
Australian broadcast media industry.
Committees of the Board of Directors
- ------------------------------------
The Company's Board of Directors has standing Management, Compensation,
Option and Audit Committees. The Company has no standing nominating committee.
5
<PAGE>
The Management Committee is composed of Mr. Montgomery, Dr. Hastings,
Mr. Kreher, Mr. McCain and Mr. Merrick. The Management Committee has all of the
authority of the Board of Directors during the interim periods between Board
meetings, except for certain specified powers that are stated in the Company
by-laws. The Management Committee met 7 times during 1998.
The Compensation Committee is composed of Mr. McCain, Mr. Merrick and
Mr. Akin. The Compensation Committee reviews and makes recommendations to the
Board of Directors concerning the compensation of officers and key employees of
the Company. The Compensation Committee met _____ time during 1998.
The Option Committee is composed of Mr. Akin and Mrs. Montgomery. The
Option Committee administers the Company's Stock Option Plan. The Option
Committee met ____ time during 1998.
The Audit Committee is composed of Mr. McCain, Mr. Merrick and Mr.
Solomonson. The Audit Committee reviews and makes recommendations to the Company
about its financial reporting requirements. The Audit Committee met ____ time
during 1998.
The Board of Directors met 5 times during 1998. Each director attended
all meetings of the Board of Directors and each committee of which such director
was a member.
Executive Compensation
- ----------------------
The following table sets forth a summary of the compensation paid
during the last three fiscal years to the Chief Executive Officer of the Company
and to each of the four most highly compensated officers of the Company who were
officers of the Company as at December 31, 1998, and any executive officer who
left during the last fiscal year who would have been included in this group (the
"Named Executives").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
Annual Compensation Awards Payouts
------------------------------------------- -------------------------------- ----------
Other Restricted All Other
Annual Stock LTIP Compen-
Name and Principal Salary Bonus Compen- Award(s) Options/ Payouts sation
Position Year ($) ($) sation($) ($) SARs(#) ($) ($)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert L. Montgomery 1998 $------- $------- -- -- 75,000(2) $______(4)
Chief Executive Officer 1997 $485,000 $121,250(1) -- -- -- -- $12,916(5)
and President 1996 $485,000 $266,125(1) -- -- -- -- $ 1,303(6)
Carl W. Hastings 1998 $------- $------- -- -- 65,000(2) $______(4)
Executive Vice President 1997 $275,000 $ 68,750(1) -- -- -- -- $10,060(5)
1996 $275,000 $150,100(1) -- -- -- -- $ 4,662(6)
David G. Kreher 1998 $------- $------- -- -- 55,000(2) $______(4)
Senior Vice President 1997 $200,000 $ 50,000(1) -- -- -- -- $ 8,298(5)
1996 $200,000 $109,900(1) -- -- -- -- $ 1,288(6)
Donald E. Gibbons, Jr. 1998 $------- $------- -- -- -- $______(4)
Vice President of U.S. 1997 $145,000 $ 79,750 -- -- 50,000(3) -- $ 6,876(5)
Sales 1996 $125,000 $ 31,250 -- -- -- -- $ 2,600(6)
Frederick S. Cameron 1998 $------- $------- -- -- -- $______(4)
Vice President of 1997 $100,000 $ 40,000 -- -- -- -- $ 4,000(5)
Reliv' World 1996 $ 75,000 $ 75,000 -- -- -- -- $ 2,011(6)
(Footnotes continued on next page)
6
<PAGE>
<FN>
(1) Reflects payments under the Company's Annual Executive Incentive
Compensation Plan (See "Compensation Committee Report on Executive
Compensation - Annual Executive Incentive Plan").
(2) Incentive Stock Options issued on December 30, 1998, pursuant to the
Company's 1995 Stock Option Plan (See Option/SAR Grants table below.)
(3) Incentive Stock Options issued on December 18, 1997, pursuant to the
Company's 1995 Stock Option Plan. Under these options Mr. Gibbons is
entitled to purchase Common Stock of the Company at the price of $3.125
per share. The options were exercisable for 30,000 shares upon issuance
and 20,000 shares on December 18, 1998. The options expire five years
from the date of grant.
(4) _______________________
(5) Includes the value of cash contributions by the Company to the Reliv'
International, Inc. 401(K) Plan, a defined contribution plan of $9,500
for Mr. Montgomery, $8,125 for Dr. Hastings, $7,938 for Mr. Kreher and
$6,616 for Mr. Gibbons. Also includes portion of premiums paid by the
Company on life insurance policies on each executive's life
attributable to the death benefit which each executive's estate is
entitled to. Pursuant to agreements with each executive, approximately
two-thirds of the death benefit under a policy is paid to the
executive's beneficiaries. The allocated portion of premium paid was
$3,416 for Mr. Montgomery, $1,935 for Dr. Hastings, $360 for Mr. Kreher
and $260 for Mr. Gibbons. (See "Employment Agreements.")
(6) Reflects the cash value of contributions by the Company to the Reliv'
International, Inc. 401(K) Plan, a defined contribution plan.
</FN>
</TABLE>
The Company has never granted any stock appreciation rights. During the
period from January 1, 1996 to December 31, 1998, there have been no awards or
payments made for long term incentive compensation and there have been no
restricted stock awards to any of the Named Executives.
7
<PAGE>
The following table sets forth the options granted to the Named
Executives during the fiscal year ended December 31, 1998.
Option/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation for
Individual Grants Option Term
----------------------------------------------------- ---------------------
Number
of % of Total
Securities Options/
Underlying SARs
Options/ Granted to Exercise
SARs Employees or Base
Granted in Fiscal Price Expiration
Name (#) Year ($/Sh) Date 5% ($) 10% ($)
- ---- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Robert L. Montgomery 75,000(1) 38.5% $2.3375 12/30/03 $28,095 $81,360
Carl W. Hastings 65,000(2) 33.3% $2.125 12/30/03 $38,162 $84,325
David G. Kreher 55,000(2) 28.2% $2.125 12/30/03 $32,291 $71,352
Donald E. Gibbons, Jr. 0 0 0 -- -- --
Frederick S. Cameron 0 0 0 -- -- --
- ------------------
<FN>
(1) Exercisable for 21,174 shares of Common Stock on January 1, 2000 and
26,913 shares of Common Stock on each of January 1, 2001 and January 1,
2002.
(2) Exercisable for one-third of the shares on each of December 30, 1998,
December 30, 1999 and December 30, 2000.
(3) Value assumes price of Company's Common Stock increases each year by 5%
and 10%, respectively.
The following table provides information related to options to purchase
the Company's Common Stock exercised by the named executive officers during the
fiscal year ended December 31, 1998, and the number and value of such options
held as of the end of such fiscal year:
</FN>
</TABLE>
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised In-
Shares Value Unexercised Options/SARs at the-Money Options/SARs
Acquired on Realized Year End (#) at Fiscal Year End ($)
Name Exercise (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable
- ---- ------------ -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Robert L. Montgomery 0 0 355,665/190,135 $117,076/$54,497(1)
Carl W. Hastings 0 0 171,267/ 91,733 $ 51,665/$25,357(1)
David G. Kreher 0 0 134,933/ 74,067 $ 39,410/$19,330(1)
Donald E. Gibbons, Jr. 0 0 61,000/ 0 $ 8,943/$0(1)
Frederick S. Cameron 0 0 5,500/ 0 $ 4,472/$0(1)
(Footnote on next page)
8
<PAGE>
- ----------------------
<FN>
(1) The value of unexercised in-the-money options is based on the
difference between the exercise price and the fair market value of the
Company's Common Stock on December 31, 1998.
</FN>
</TABLE>
Compensation Committee Report on Executive Compensation
The Compensation Committee has provided the following report on
compensation of executives of the Company:
During 1993, the Compensation Committee undertook an in-depth review of
the executive compensation policies and practices of the Company. The
Compensation Committee retained Ernst & Young L.L.P. to provide consulting
services in the effort including (i) obtaining and reviewing executive
compensation policies and levels in companies similar to the Company in terms of
product line, direct marketing sales methods, sales and sales growth, (ii)
consultation with the Compensation Committee members and the Company's Chief
Executive Officer concerning the Company's existing executive compensation
system and competitive compensation practices and (iii) participation in the
evaluation of, and recommendation for, base, annual and long-term compensation
and incentives.
Based upon this review and study, and the report and recommendation of
Ernst & Young L.L.P., the Compensation Committee recommended, and the Board of
Directors of the Company adopted for 1994 and subsequent years, a substantially
revised compensation structure and program for the senior executives of the
Company.
The philosophy of the Compensation Committee and the Board of Directors
of the Company regarding executive compensation remains substantially the same
as in prior years:
* To attract and retain quality executive talent, which is
regarded as critical to the short and long term success of the
Company, in substantial part by offering compensation programs
which provide attractive rewards for successful effort.
* To make a substantial portion of the compensation of senior
executives of the Company dependent upon the success and
profitability of the Company.
The philosophy of the Compensation Committee, as reflected in the compensation
program, also, is:
* To create a mutuality of interest between executive officers
of the Company and shareholders through compensation
structures that share the rewards and risks of strategic
decision-making and that provide for additional stock
ownership by executives.
* To assure that compensation will continue to be fully tax
deductible.
Prior to 1994, compensation to executives of the Company was
characterized by (i) low base compensation, generally considerably below
competitive rates of base compensation and (ii)
9
<PAGE>
relatively high levels of compensation measured as a percent of the profits of
the Company. In general, the recommendation of the Compensation Committee in
1994, as adopted by the Board of Directors, was to change the compensation
structure (i) to increase base compensation levels to reasonably competitive
levels in the industry and (ii) to provide for annual and long-term incentives,
measured as a percent of base compensation, based upon performance measures
which reflect the Company's business objectives and which the individual
participant can directly affect. The plan also includes intended awards of stock
options to executives. The emphasis on performance, success of the Company and
profitability remains but limits are provided on (i) the amount of incentive
compensation consistent with competitive methods and rates of compensation and
(ii) the amount of fluctuation in total compensation. The Compensation Committee
has recommended, and the Company has determined, to take appropriate action to
comply with the provisions of Section 162(m) of the Internal Revenue Code so
that executive compensation will continue to be deductible as an expense to the
fullest extent allowable.
Base Compensation. Prior to 1994, the Committee's approach to base
compensation had been to offer base salaries to senior executives which had
been, generally, lower than competitive rates coupled with significant incentive
compensation based upon the profitability of the Company. Rates of base
compensation of executives of the Company had, in general, been consistent with
that policy through 1993.
The annual base compensation of the three senior executive officers of
the Company was determined to be well under competitive rates. The Committee,
with the aid of Ernst & Young, compared compensation levels with executives
employed by similar companies. The base compensation of the Chief Executive
Officer was determined to be 61 percent below the median for such similar
companies and the base compensation for the Executive Vice President and Chief
Operating Officer were found to be 33 percent and 35 percent, respectively,
below the median competitive rates.
The Committee recommended that base compensation rates of the senior
executives be raised to competitive levels (in conjunction with elimination of
the previous profit-based incentive program). Base salaries recommended for 1994
and approved by the Board of Directors of the Company were (i) Chief Executive
Officer - $375,000, (ii) Executive Vice President - $200,000, and (iii) Senior
Vice President - $125,000. Over the period 1995 through 1998, the Company
experienced increases in sales and profits. In light of these results and in
consideration of industry standards, the Compensation Committee recommended and
the Board of Directors approved annual base compensation in 1998 for Mr.
Montgomery of $642,626, for Dr. Hastings of $364,375 and for Mr. Kreher of
$265,000. The annual compensation of Donald E. Gibbons, Jr., Vice President of
U.S. Sales was increased to $________. The growth in revenues of the Company
during this period was primarily attributable to increases in U.S. sales.
The Committee has examined market compensation levels and trends in
recommending the base salaries and has considered that information in
recommending base salary levels. The Committee has also considered additional
factors including results of operations of the Company, shareholder returns, the
decision-making responsibilities of each of the positions and the experience,
work performance and team-building skills of each of the individual executives
and has received
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information from the Chief Executive Officer in regard to these matters. The
Committee intends to conduct a structured annual review of base compensation
levels of each of the senior executives of the Company with input from the Chief
Executive Officer. Each of the foregoing factors will be considered in
relatively equal weight.
Annual Executive Incentive Plan. In March 1994, the Compensation
Committee recommended the adoption of a 1994 Annual Incentive Compensation Plan
which covered the three senior executives of the Company. The 1994 Plan was
adopted by the Board of Directors on April 13, 1994, to be effective for 1994
and subsequent years, and supersedes all prior incentive compensation plans. The
purpose of the 1994 Plan is to provide competitive rates of incentive
compensation to executive officers of the Company for accomplishing periodic
financial objectives. Under the Plan, incentive compensation measured as a
percentage of base compensation will be paid to participants based upon
achieving specific objectives. The performance criterion for each executive will
vary and include both corporate and individual results. The criterion may
include profits, return on average equity, sales and expense control and may
include other measures. The measures selected for each executive will reflect
the Company's business objectives which the individual can directly affect.
Target performance levels for each measure of performance are
recommended by the Compensation Committee and approved by the Board of
Directors. The target performance levels will be based upon historic patterns of
Company performance and strategic objectives. Under the 1994 Plan, incentive
compensation is limited to a percentage of each executive's base salary.
For 1998, the target performance levels for annual incentive
compensation under the Plan were determined for each of the three executives
covered by the Plan on the basis of Company net income before income tax. The
target levels were not met and no incentive compensation was paid in 1998.
Incentive payments for Mr. Gibbons and Mr. Cameron in 1998 were based
on performance levels established for these individuals at the beginning of the
year. Mr. Gibbon's payments are based on U.S. sales levels and Mr. Cameron's on
worldwide sales levels.
Incentive Stock Options. As part of the executive compensation program
it presented in April, 1994, the Compensation Committee recommended that a
significant portion of the total compensation to executives be in the form of
incentive stock options and that incentive stock options consistent with
observed market practices be issued to senior executives of the Company during
1994. On December 4, 1995, options to purchase 220,000, 92,400, 70,400, 11,000
and 11,000 shares of the Company's Common Stock were granted to Messrs.
Montgomery, Hastings, Kreher, Gibbons and Cameron, respectively, under the 1995
Stock Option Plan (the "1995 Plan"). On December 18, 1997, options to purchase
50,000 shares of the Company's Common Stock were granted to Mr. Gibbons. On
December 30, 1998, options to purchase 75,000, 65,000 and 55,000 shares of the
Company's Common Stock were issued to Messrs. Montgomery, Hastings and Kreher,
respectively. These options were issued as part of the overall compensation plan
for these executives and are consistent with Ernst & Young L.L.P.'s report and
recommendations. At present, the total number of shares of the Company's Common
Stock authorized for issuance under the Company's 1995 Stock Option Plan have
nearly been exhausted. As a result, in order to maintain a stock option plan
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for the Company for further awards, the Board of Directors have proposed the
adoption of a new 1999 Stock Option Plan containing substantially the same terms
as the Company's 1995 Stock Option Plan. (See Proposal 3 of this Proxy).
CEO Compensation. The base compensation of the Company's Chief
Executive Officer, Robert L. Montgomery, during 1993 was $120,000. In the study
of comparative compensation performed for the Compensation Committee, it was
determined that this base rate of compensation was 61 percent below the median
for similar companies in the comparison. Consistent with the executive
compensation recommendation of the Compensation Committee in April, 1994, the
base annual rate of Mr. Montgomery's compensation was increased to $375,000 for
1994, a rate consistent with the median levels in the study conducted. Mr.
Montgomery's base rate was adjusted by a 5% cost of living increase in 1995 to
$393,750. Based upon the Committee's review and evaluation of performance,
results of operation and industry compensation levels, Mr. Montgomery's annual
base compensation was increased to $485,000 for 1996 and 1997.
The Compensation Committee has also recommended that Mr. Montgomery and
other senior executives of the Company receive incentive stock options,
consistent with observed market practices of similar companies, so that a
significant portion of his total compensation will be based upon, and consistent
with, returns to shareholders. As discussed above, Mr. Montgomery was granted
incentive options to purchase up to 220,000 shares of the Company's Common Stock
in late 1995 and 75,000 shares of the Company's Common Stock in late 1998. (See
"Incentive Stock Options" above).
Compensation Committee:
Donald L. McCain, John B. Akin and Stephen M. Merrick
Compensation Committee Interlocks and Insider Participation
- -----------------------------------------------------------
Stephen M. Merrick, a member of the Compensation Committee, is the
Secretary of the Company. Mr. Merrick is a principal of the law firm of Merrick
& Klimek, P.C., which has served as general counsel to the Company and its
subsidiaries since December 1, 1998. Mr. Merrick was a principal of the law firm
of Fishman, Merrick, Miller, Genelly, Springer, Klimek & Anderson, P.C., which
served as general counsel to the Company prior to December 1, 1998. During the
year ended December 31, 1998, the aggregate amounts paid or incurred by the
Company to Merrick & Klimek, P.C. and Fishman, Merrick, Miller, Genelly,
Springer, Klimek & Anderson, P.C. for services to the Company and its
subsidiaries were $_______, and $_______, respectively.
Comparative Stock Price Performance Graph
- -----------------------------------------
The following graph compares, for the period January 1, 1993 to
December 31, 1998, the cumulative total return (assuming reinvestment of
dividends) on the Company's Common Stock with (i) the Standard & Poor's Foods
Index, (ii) NASDAQ Stock Market Index (U.S.) and (iii) a peer group including
the following companies: Herbalife International, Inc., Nature's Sunshine
Products, Inc., Nutrition For Life International, Inc., Rexall
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Showcase International, Inc. and USANA, Inc. For prior years, the Company had
used the S&P 500 Index and the S&P 500 Foods Index as comparative returns. The
Company has decided that, as it is a NASDAQ listed company, the NASDAQ Index
(US) is a better broad market index for comparison then the S&P 500 Index.
Similarly, the peer group consisting of other companies marketing nutritional
products through direct sales was a more representative group for comparing the
companies stock performance. The graph assumes an investment of $100 on January
1, 1993, in each of the Company's Common Stock, the stock comprising the
Standard & Poor's 500 Stock Index, and the Standard & Poor's Foods Index.
[UPDATE]
13
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Comparison of Five Year Cumulative Return
Measurement S&P Food NASDAQ
Period Reliv' S&P 500 Index (US) Peer Group
(Fiscal Year
Covered)
Measurement
Pt-December
31, 1993 100 100 100 100 100
FYE 12/31/94
FYE 12/31/95
FYE 12/31/96
FYE 12/31/97
FYE 12/31/98
The historical stock prices of the Company's Common Stock shown on the
above graph is not necessarily indicative of future price performance.
On March 8, 1993, the Company's common stock was listed on The Emerging
Company Marketplace of the American Stock Exchange (AMEX) and, in July 1993,
graduated to the main board of the AMEX. On September 6, 1996, the Company moved
the listing of its common stock to the NASDAQ National Market Tier of the NASDAQ
Stock Market. Per share value as of December 31, 1993, 1994, 1995, 1996, 1997,
and 1998 is based on the Common Stock's closing price as of such date.
The information under this heading and under the heading "Compensation
Committee Report on Executive Compensation" shall not be deemed incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933 or under the
Securities Exchange Act of 1934 and shall not otherwise be deemed filed under
such Acts.
Employment Agreements
- ---------------------
In June, 1997, the Company entered into an Employment Agreement with
Robert L. Montgomery replacing a prior agreement. The Agreement is for a term of
six years commencing on January 1, 1997, and provides for Mr. Montgomery to
receive base annual compensation during the term of not less than $485,000. Mr.
Montgomery is also to participate in the Annual Incentive Compensation and the
Long-Term Incentive Compensation Plans of the Company adopted in April, 1994,
the Company's Stock Option Plan and such other compensation plans as
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the Company may from time to time have for executives of the Company. In the
event of Mr. Montgomery's death during the term of the Agreement, payments equal
to his total compensation under the Agreement will be made to his heirs for a
period of six months. The Agreement also allows Mr. Montgomery the option, upon
reaching age 60, to reduce his level of service to the Company by approximately
one-half with a corresponding decrease in position and compensation. Mr.
Montgomery also has the option upon reaching age 60 to terminate his active
service, and continue in a consulting capacity. The term of the consulting
period shall be 10 years and Mr. Montgomery will receive approximately 20% of
his prior annual compensation as a consulting fee. The Agreement includes the
obligation of Mr. Montgomery to maintain the confidentiality of confidential
information of the Company and contains a covenant of Mr. Montgomery not to
compete with the Company.
In June, 1997, the Company entered into an Employment Agreement with
Dr. Hastings replacing a prior agreement. The Agreement is for a period of six
years commencing on January 1, 1997, and provides for Dr. Hastings to receive
base annual compensation during the term of not less than $275,000. Dr. Hastings
is also to participate in the Annual Incentive Compensation and Long-Term
Incentive Compensation Plans of the Company adopted in April, 1994, the
Company's Stock Option Plan and such other compensation plans as the Company may
from time to time have for executives of the Company. In the event of Dr.
Hastings' death during the term of the Agreement, payments equal to his total
compensation under the Agreement will be made to his heirs for a period of six
months. The Agreement also allows Dr. Hastings the option, upon reaching age 60,
to reduce his level of service to the Company by approximately one-half with a
corresponding decrease in position and compensation. Dr. Hastings also has the
option upon reaching age 60 to terminate his active service, and continue in a
consulting capacity. The term of the consulting period shall be 10 years and Dr.
Hastings will receive approximately 20% of his prior annual compensation as a
consulting fee. The Agreement includes the obligation of Dr. Hastings to
maintain the confidentiality of confidential information of the Company and to
assign to the Company any and all inventions made or conceived by him during the
term of the Agreement and a covenant of Dr. Hastings not to compete with the
Company.
In April, 1994, the Company entered into an Employment Agreement with
David G. Kreher, Senior Vice President and Chief Operating Officer, effective
from January 1, 1994. The Agreement has been extended through December 31, 1998.
The Agreement provides for Mr. Kreher to receive base annual compensation of not
less than $125,000. Mr. Kreher is also to participate in the Annual Incentive
Compensation and Long-Term Incentive Compensation Plans of the Company adopted
in April, 1994, the Company's Stock Option Plan and such other compensation
plans as the Company may from time to time have for executives of the Company.
In the event of Mr. Kreher's death during the term of the Agreement, payments
equal to his total compensation under the Agreement will be made to his heirs
for a period of six months. The Agreement includes the obligation of Mr. Kreher
to maintain the confidentiality of confidential information of the Company.
In March, 1997, the Company entered into Split Dollar Agreements with
Robert L. Montgomery, Carl W. Hastings, David G. Kreher and Donald E. Gibbons,
whereby the Company pays the premiums on life insurance policies covering these
executive's lives. Upon the death of an executive, the Company shall be entitled
to receive the greater of (i) one-third of the insurance
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proceeds, (ii) the cash surrender value of the policy and (iii) the total
premiums paid under the policy, with the executive receiving the balance of the
insurance proceeds. On termination of the Agreement prior to an executive's
death, the executive shall have the right to purchase the policy for the greater
of (i) the cash surrender value of the policy and (ii) the total premiums paid
under the policy. The policy amounts are $3,124,000 for Mr. Montgomery,
$1,770,000 for Dr. Hastings, $750,000 for Mr. Kreher and $750,000 for Mr.
Gibbons.
In March, 1997, the Company entered into Salary Continuation Plan
Agreements with David G. Kreher and Donald E. Gibbons. The Agreements provide
for continuation of these executive's salaries upon termination of employment or
retirement, after these executives have reached the age of 55 and have been
employed by the Company for 15 years. Salary continuation payments are also made
in the event the executive is terminated prior to reaching these thresholds for
other than cause as defined in the Agreements. Payments are to be made for a
period of 10 years and the amount of the payments are based on the executive's
age at time of retirement or termination of employment.
Compensation of Directors
- -------------------------
Members of the Board of Directors who were not employees of the Company
received $1,000 per attendance at meetings of the Board of Directors and
committees thereof. Members of the Management Committee who were not employees
of the Company also received compensation of $1,000 per month for their services
and $2,500 per attendance at meetings of the Board of Directors or any
committees of the Board. On any date at which a Board member attends more than
one meeting of the Board or committee of the Board, the attendance fee is 150%
of the basic attendance fee. In addition to the options issued to the named
executives as described above, during fiscal 1998 options were issued to Mr.
Merrick (40,000 shares), Mr. McCain (35,000 shares), Mr. Akin (20,000 shares),
Mr. Solomonson (10,000 shares), Mr. Moody (10,000 shares), Mr. Pinnock (10,000
shares), and Mrs. Montgomery (30,000 shares).
Section 16(a) Beneficial Ownership Reporting Compliance
- -------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
and with the NASDAQ Stock Market. Officers, directors and greater than
ten-percent shareholders are required by SEC regulation to furnish the Company
with copies of all Section 16(a) forms they file.
Based solely on a review of the copies of such forms furnished to the
Company, or written representations that no Form 5's were required, the Company
believes that during calendar year 1997, all Section 16(a) filing requirements
applicable to the officers, directors and ten-percent beneficial owners were
complied with.
Board of Directors Affiliations and Related Transactions
- --------------------------------------------------------
During 1998, Mr. Montgomery received advances from the Company against
his anticipated incentive compensation. The highest balance of these advances
was $_______ at December 31, 1998.
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PROPOSAL TWO - REINCORPORATION OF THE COMPANY IN THE STATE OF DELAWARE.
The Company's Board of Directors has unanimously approved the
reincorporation of the Company in the State of Delaware. Through the
reincorporation, the state of incorporation of Reliv' International, Inc. would
be changed from Illinois to Delaware.
To accomplish the proposed change in the state of incorporation (the
"Reincorporation Proposal"), the Board of Directors has unanimously adopted an
Agreement and Plan of Merger (the "Merger Agreement"), a copy of which is
attached as Appendix A to this Proxy Statement, providing for the merger of the
Company into a wholly-owned subsidiary of the Company that has recently been
formed pursuant to the Delaware General Corporation Law (the "DGCL") for this
purpose. The name of the Company after the merger will not be changed. For the
sake of clarity in the discussion of this Proposal Two, the Company before the
merger is sometimes referred to as "Reliv' Illinois" and the Company after the
merger is sometimes referred to as "Reliv' Delaware."
If the Reincorporation Proposal is approved by the shareholders, when
the merger is completed the Company will have a new Certificate of Incorporation
and by-laws and will be governed by Delaware law. The foregoing will, in
general, result in certain changes in the rights of shareholders of the Company.
The same individuals are presently directors of both Reliv' Illinois
and the new Delaware subsidiary, and there will be no change in directors as a
result of the reincorporation.
The Reincorporation Proposal will not result in any change in the
business or management of the Company, nor will it change the Company's name or
the location of its principal executive offices. The Common Stock of Reliv'
International, Inc. is listed on The Nasdaq Stock Market, and application will
be made to list the Reliv' Delaware Common Stock on The NASDAQ Stock Market.
Following the merger, each share of Common Stock of Reliv' Illinois, no par
value, will automatically be converted into one share of Reliv' Delaware Common
Stock, par value $.001 per share. Reliv' Illinois common stock certificates will
be deemed automatically to represent an equal number of shares of Reliv'
Delaware Common Stock. Following the reincorporation, previously outstanding
Reliv' Illinois common stock certificates may be delivered in effecting sales
through a broker, or otherwise, of shares of Reliv' Delaware Common Stock. IT
WILL NOT BE NECESSARY FOR SHAREHOLDERS OF THE COMPANY TO EXCHANGE THEIR EXISTING
STOCK CERTIFICATES FOR STOCK CERTIFICATES OF RELIV' DELAWARE.
If consented to by the Company's shareholders, it is anticipated that
the merger will be completed as soon as practicable after such consent. However,
the merger may be abandoned, and the Merger Agreement may be amended, either
before or after shareholder consent if circumstances arise which, in the opinion
of the Board of Directors, make such action advisable,
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<PAGE>
although subsequent to shareholder consent none of the principal terms may be
amended without further shareholder approval.
No Federal or state regulatory requirements must be complied with or
approval must be obtained in connection with the Reincorporation Proposal other
than Federal securities and state blue sky laws.
Reasons for the Reincorporation Proposal
- ----------------------------------------
For many years Delaware has followed a policy of encouraging
incorporation in that state, and, in furtherance of that policy, has adopted
comprehensive, modern and flexible corporate laws which are updated and revised
periodically to meet changing business needs. Delaware courts have developed
considerable expertise in dealing with corporate issues, and a substantial body
of case law has developed construing Delaware law and establishing public
policies with respect to Delaware corporations. The Board of Directors believes
that this environment provides greater predictability with respect to corporate
legal affairs and allows a corporation to be managed more efficiently.
Certain Changes in the Company's Charter and By-Laws to be Made by the
Reincorporation
- --------------------------------------------------------------------------------
The following discussion summarizes the material differences between
the Certificate of Incorporation and by-laws of Reliv' Delaware and the Articles
of Incorporation and by-laws of Reliv' Illinois. Copies of the Certificate of
Incorporation and by-laws of Reliv' Delaware are attached as Appendix B and
Appendix C, respectively, to this Proxy Statement, and all statements herein
concerning such documents are qualified by reference to the exact provisions
thereof. If the Reincorporation Proposal is approved and the merger under the
Merger Agreement is accomplished, the shareholders of the Company will become
subject to the Certificate of Incorporation and by-laws of Reliv' Delaware.
Takeover Provisions. Delaware and Illinois each have a law that is
similar in concept and which prevents an "interested shareholder" (defined as a
holder who acquires 15% or more of a target company's stock) from entering into
a business combination with the target company within three years after the date
it acquired such stock. However, a business combination is permitted (i) if
prior to the date the shareholder became an interested shareholder, the board of
directors of the target company approved either the business combination or such
acquisition of stock, (ii) if at the time the interested shareholder acquired
such 15% interest, it acquired 85% or more of the outstanding stock of the
corporation, excluding shares held by directors who are also officers and shares
held under certain employee stock plans or (iii) if the business combination is
approved by the target company's board of directors and two-thirds of the
outstanding shares voting at an annual or special meeting of shareholders,
excluding shares held by the interested shareholder. This provision applies
automatically except in the case of corporations with less than 2,000
shareholders of record and without voting stock listed on a national exchange or
authorized for quotation with
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a registered national securities association. Additional exceptions allow
corporations, in certain instances, to adopt charters or by-laws that elect not
to be governed by these provisions. Reliv' Delaware has adopted an amendment to
effect such an election and therefore, if the merger is consummated, the Company
will not have the protection of such provision.
Vote Required for Routine Shareholder Action. The By-Laws of Reliv'
Delaware provide that, unless a different number of votes is required by statute
or the Certificate of Incorporation (such as for the approval of a merger, sale
of all or substantially all of the Company's assets or similar extraordinary
transactions or an amendment to the Certificate of Incorporation), acts of
shareholders may be taken by a majority of the votes cast on the matter where a
quorum (a majority of the outstanding shares) is present. The Illinois Business
Corporation Act ("IBCA") and Reliv' Illinois's by-laws, in contrast, provide
that, unless a greater vote is required by the IBCA or Reliv' Illinois' Articles
of Incorporation or by-laws, such acts may be taken by a majority of the shares
represented in person or by proxy (rather than a majority of the votes cast on
the matter) at any meeting of shareholders at which a quorum (a majority of the
outstanding shares) is present. Thus, if the Reincorporation Proposal is
approved by the shareholders and the merger is consummated, it may be possible
for the shareholders of Reliv' Delaware to take such types of corporate action
with fewer votes than are required by Reliv' Illinois.
Pre-emptive Rights. Under Illinois law and Delaware law shareholders do
not have pre-emptive rights to subscribe for additional shares, except to the
extent provided in the charter. Neither the charter of Reliv' Illinois nor the
charter of Reliv' Delaware grants pre-emptive rights to shareholders.
Indemnification. Under Illinois law and Delaware law a corporation may
indemnify directors and officers who are or are threatened to be made parties to
civil, criminal, administrative or investigative proceedings by reason of the
fact that such person was a director or officer of the corporation against
expenses, judgments, fines and amounts paid in settlement if such person acted
in good faith and in a manner reasonably believed to be in, or not opposed to,
the best interests of the corporation and with respect to criminal proceedings
had no reasonable cause to believe that the conduct was unlawful. Both statutes
provide that they shall not be deemed to be exclusive of any rights to which a
person seeking indemnification may be entitled under any by-law, agreement, vote
of shareholders or disinterested directors or otherwise. Both statutes provide
that a corporation may purchase insurance on behalf of any director or officer
against liability incurred by such person in such capacity whether or not the
corporation would have power to indemnify such person against such liability
under the statute. Under Illinois law, expenses incurred by a director or
officer in defending a proceeding may be advanced by the corporation prior to
final disposition of the matter if such person undertakes to repay such amount
unless it shall be ultimately determined that such person is entitled to be
indemnified by the corporation pursuant to the statute. Under Delaware law,
expenses incurred by a director or officer in defending a proceeding may be
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advanced by the corporation prior to final disposition of the matter if such
person undertakes to repay such amount if it shall ultimately be determined that
such person is not entitled to be indemnified by the corporation pursuant to the
statute. The By-Laws of Reliv' Illinois and the charter of Reliv' Illinois
provide for indemnification of directors and officers in accordance with the
foregoing statutory provisions. Under Illinois law, a corporation is required to
notify its shareholders when indemnity has been paid or expenses advanced. There
is no similar provision under Delaware law.
Personal Liability of Directors. Both Illinois and Delaware law permits
a corporation to have in its articles or certificate of incorporation a
provision which limits or eliminates the personal liability of directors to the
corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, subject to certain exceptions. The Company currently has
such a provision in effect and, if the reincorporation is accomplished, Reliv'
Delaware will have such a provision in its new Certificate of Incorporation. The
Company believes that such a provision will permit directors to make corporate
decisions on the merits free from any desire to avoid the risk of personal
liability. This provision has no effect upon any liability that a director may
have to shareholders under Federal securities laws or upon the availability to
shareholders of equitable remedies.
Preferred Stock. Under both Illinois and Delaware law, a corporation
may have an authorized class of preferred stock, the rights of which may be
established by the directors without shareholder approval. Reliv' Delaware will
adopt a provision in its certificate of incorporation whereby 3,000,000 shares
of Preferred Stock (the "Preferred Stock") will be authorized for issuance in
the discretion of the Board of Directors without further stockholder action.
Such additional shares will be issuable for proper corporate purpose, such as
for future financing and acquisition transactions. The Board of Directors of the
Company believes it to be in the best interests of the Company to authorize the
issuance of said Preferred Stock to ensure that an ample number of such shares
are available for issuance if such issuance becomes desirable.
The 3,000,000 shares of Preferred Stock of Reliv' Delaware may be
issued in one or more series at such time or times and for such consideration as
shall be authorized from time to time by the Board of Directors. The Board of
Directors will be authorized to fix the designation of each series of Preferred
Stock and the relative rights, preferences, limitations, qualifications, powers
or restrictions thereof, including the number of shares comprising each series,
the dividend rates, redemption rights, rights upon voluntary or involuntary
liquidation, provisions with respect to a retirement or sinking fund, conversion
rights, voting rights, if any, preemptive rights, other preferences,
qualifications, limitations, restrictions and the special or relative rights of
each series not inconsistent with the provisions of the Certificate of
Incorporation.
Removal of Directors. Under both Delaware and Illinois law, directors
may be removed with or without cause by the vote of the holders of a majority of
the outstanding shares.
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Filling Vacancies on Board of Directors. As permitted by both Delaware
and Illinois law, the By-Laws of the Reliv' Illinois and the By-Laws of Reliv'
Delaware provide that vacancies in the Board of Directors may be filled by the
remaining directors. A director so appointed would, however, serve only until
the next meeting of shareholders at which directors are to be elected.
Cumulative Voting in Election of Directors. The Company currently does
not have, nor will Reliv' Delaware have, cumulative voting in the election of
directors. Cumulative voting gives shareholders the right to cast as many votes
as are equal to the number of directors to be elected times the number of shares
held, which votes may be allocated among the candidates or voted for one
candidate, as the holder desires. As a result, shareholders holding a
significant percentage of the outstanding shares entitled to vote in the
election of directors may be able to assure the election of one or more
directors. Without cumulative voting, holders of a substantial number of the
shares of Common Stock may not have enough voting power to elect any directors.
Vote Required for Extraordinary Events. Under Illinois law the
affirmative vote of the holders of at least two-thirds of outstanding shares
entitled to vote is required in order to approve mergers, consolidations,
mandatory share exchanges, sales of substantially all assets and charter
amendments, unless the charter supersedes that requirement by specifying a
smaller or larger vote requirement. Under Delaware law the affirmative vote of
the holders of a majority of outstanding shares entitled to vote is required in
order to approve such transactions, unless the Certificate of Incorporation
provides for a larger vote requirement. Reliv' Illinois' Articles of
Incorporation specifies a majority vote requirement for approval of such acts,
and Reliv' Delaware's Certificate of Incorporation will not specify a larger
than majority vote. As a result, such acts will be subject to the same vote
requirement after the Reincorporation.
Call of Special Meetings by Shareholders. The IBCA and the by-laws of
Reliv' Illinois permit special meetings of shareholders to be called by the
president, the Board of Directors or the holders of at least one-fifth of all of
the outstanding shares entitled to vote on the matter for which the meeting is
called. The DGCL provides that special meetings of shareholders may be called by
the board of directors or such other persons as may be designated by the
certificate of incorporation or by the by-laws. Since neither the Certificate of
Incorporation nor the By-Laws of Reliv' Delaware will contain a provision
permitting the shareholders to call a special meeting, if the Reincorporation
Proposal is consummated, the shareholders of the Company will no longer have the
authority to call a special meeting of shareholders.
Shareholders Dissenter's Rights. The IBCA permits shareholders to
dissent and receive payment for their shares with respect to: (i) the
consummation of a plan of merger, consolidation or share exchange that requires
shareholder approval or involves the merger of that corporation into its parent
corporation or into another subsidiary corporation of its parent corporation;
(ii) the consummation of a sale, lease or exchange of all or substantially all
of a
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corporation's property and assets other than in the ordinary course of business;
or (iii) an amendment to a corporation's articles of incorporation that
materially and adversely affects a shareholder's rights because it alters or
abolishes preferential or redemption rights. The Company's shareholders are
entitled to exercise certain dissenter's rights in the event the Reincorporation
Proposal is approved by the shareholders. These rights are summarized below
under "Rights of Dissenting Shareholders."
Under the DGCL, shareholders will be entitled to dissenter's rights in
a merger or consolidation involving the Company except that the DGCL does not
provide for dissenter's rights; (i) for shares which are either listed on a
national securities exchange or widely held (by more than 2,000 shareholders) if
the shareholders receive only shares of the surviving corporation, shares of a
listed or widely held corporation, or cash in lieu of fractional shares, (ii) to
shareholders of a corporation surviving certain types of mergers when no vote of
such shareholders is required to approve the merger, or (iii) a merger of a
parent corporation and a subsidiary of the parent corporation, except that the
shareholders of the subsidiary corporation shall have appraisal rights in the
event the parent corporation does not own all of the shares of the subsidiary
corporation. Thus, if the Reincorporation Proposal is consummated, and the
Company's shares become listed on a national securities exchange or held by more
than 2,000 shareholders, dissenter's rights available to the shareholders of the
Company will be more limited under Delaware law than under Illinois law.
Rights of Dissenting Shareholders
- ---------------------------------
Shareholders of the Company who do not consent to the Reincorporation
Proposal and who follow certain other procedures summarized below shall have the
right to dissent from, and obtain payment for, their shares in the event of the
consummation of the Reincorporation Proposal. The following is a summary of the
provisions of the IBCA which specify the procedures which must be followed by
any shareholder who wishes to dissent and demand payment for his or her shares
in the event of consummation of the Reincorporation Proposal. Such provisions of
the IBCA are set forth in their entirety in Appendix D attached to this Proxy
Statement, and this summary is qualified by reference to the exact provisions
thereof.
Because the Company has furnished to shareholders in this Proxy
Statement such material information with respect to the Reincorporation Proposal
as will objectively enable a shareholder to evaluate the Reincorporation
Proposal and to determine whether or not to exercise dissenter's rights, a
shareholder may assert these rights only if (i) the shareholder delivers to the
Company within 30 days from the mailing of this Proxy Statement a written demand
for payment for his or her shares in the event the Reincorporation Proposal is
consummated, and (ii) the shareholder does not consent to the Reincorporation
Proposal. If a shareholder consents to the Reincorporation Proposal, the
shareholder will not be entitled to dissent and demand payment for his or her
shares, and a dissenting vote on the Reincorporation Proposal will not satisfy
the above requirement that a written demand for payment be delivered to the
Company.
22
<PAGE>
Within the later of (i) ten days after the merger under the Merger
Agreement is accomplished or (ii) thirty days after the shareholder delivers to
the Company his or her written demand for payment, the Company will send to each
shareholder delivering such a written demand (a "dissenting shareholder") a
statement setting forth the Company's opinion as to the estimated value of such
shareholder's shares ("statement of value"), the Company's balance sheet as of
the end of its fiscal year ended December 31, 1998, its income statement for its
fiscal year ended December 31, 1998, and its latest interim financial
statements, together with either a commitment to pay for the shares of the
dissenting shareholder at the estimated value thereof upon transmittal to the
Company of the certificate or certificates, or other evidence of ownership with
respect to such shares, or an instruction to the dissenting shareholder to sell
his or her shares within ten days after delivery of the Company's statement to
the shareholder. The Company may instruct the shareholder to sell only if there
is a public market for the shares at which the shares may be readily sold and
since the shares of Reliv' Illinois are traded on NASDAQ, the Company
anticipates that there will be such a public market for the shares of Reliv'
Delaware. If the dissenting shareholder does not sell his shares within such ten
day period after being so instructed by the Company, he shall be deemed to have
sold these shares at the average of the bid and asked price of such shares on
NASDAQ during such ten day period.
If the dissenting shareholder does not agree with the Company's opinion
regarding the estimated value of the shares and wishes to preserve appraisal
rights, the dissenting shareholder shall, within thirty days from the Company's
delivery to the dissenting shareholder of the statement of value, notify the
Company of the dissenting shareholder's estimate of value and demand payment for
the difference between the dissenting shareholder's estimate of value and the
amount of the payment by the Company or the proceeds of sale by the dissenting
shareholder, whichever is applicable because of the procedure for which the
Company opted.
If the Company and the dissenting shareholder are unable to agree on
the value of the shares within sixty days from delivery to the dissenting
shareholder of the Company's statement of value, the Company shall either pay
the difference in value demanded by the dissenting shareholder or file a
petition in the Circuit Court of Cook County, State of Illinois, requesting the
court to determine the fair value of the shares. The Company shall make all
dissenters, whether or not residents of Illinois, whose demands remain
unsettled, parties to the proceeding as an action against their shares, and
shall serve all parties with a copy of the petition. Nonresidents may be served
by registered or certified mail or by publication as required by law.
The jurisdiction of the court in which the proceeding is commenced
under the foregoing paragraph by a corporation is plenary and exclusive. The
court may appoint one or more persons as appraisers to receive evidence and
recommend decision of the question of fair value. The appraisers have the power
described in the order appointing them, or in any amendment to it.
23
<PAGE>
Each dissenting shareholder made a party to the proceeding is entitled
to judgment for the amount, if any, by which the court determines that the fair
value of his or her shares exceeds the amount offered to be paid by the Company
or the proceeds of sale by the shareholder, whichever amount is applicable. The
judgment shall include an allowance for interest at such rate as the court may
find to be fair and equitable in all the circumstances, from the date on which
the Reincorporation Proposal is approved to the date of payment.
The court, in such an appraisal proceeding, shall determine all costs
of the proceeding, including the reasonable compensation and expenses of the
appraisers, if any, and experts employed by any party, but shall exclude the
fees and expenses of counsel for any party. If the fair value of the shares as
determined by the court materially exceeds the amount which the Company offered
to pay for those shares, or if no offer was made, then all or any part of such
expenses may be assessed against the Company.
24
<PAGE>
Federal Income Tax Consequences of the Reincorporation
- ------------------------------------------------------
Although it has not received an opinion of legal counsel with respect
to the tax effects of the merger under the Merger Agreement, the Company
believes that, for Federal income tax purposes, the merger will constitute a
reorganization under the Internal Revenue Code of 1986, as amended, and that no
gain or loss will be recognized by holders of the Common Stock as a result of
the merger. Each shareholder of Reliv' Delaware will have the same tax basis in
his Reliv' Delaware Common Stock as the shareholder had in Reliv' Illinois
Common Stock held by the shareholder immediately prior to the effective time of
the merger under the Merger Agreement, and the holding period of the Reliv'
Delaware Stock will include the period during which the shareholder held Reliv'
Illinois Common Stock, provided that such Reliv' Illinois Common Stock was held
by the shareholder as a capital asset at the effective time of the merger.
If a shareholder exercises dissenter's rights, the receipt of cash for
shares of Common Stock pursuant to the exercise of dissenter's rights will be a
taxable transaction for Federal income tax purposes to the shareholders
receiving such cash and may be a taxable transaction for state or local tax
purposes as well.
The foregoing is only a general description of certain of the Federal
income tax consequences of the merger to shareholders, without regard to the
particular facts and circumstances of each shareholder's tax situation. State,
local or foreign income tax consequences to shareholders may vary from the
Federal tax consequences described above. Accordingly, shareholders are urged to
consult their own tax advisors with respect to the Federal, state, local and
foreign tax consequences of the merger to them.
The Company also believes that it will not recognize gain, loss or
income for Federal income tax purposes as a result of the merger under the
Merger Agreement, and that Reliv' Delaware generally will succeed, without
adjustment, to the tax attributes of Reliv' Illinois as specified in Section
381(c) of the Internal Revenue Code of 1986, as amended.
The Company is currently subject to an annual franchise tax in
Illinois. If the Reincorporation Proposal is approved and the merger is
accomplished under the Merger Agreement, the Company will continue to be subject
to an annual franchise tax in Delaware.
Vote Required
- -------------
Adoption of the Reincorporation Proposal requires the written consent
of a majority of the total number of outstanding voting shares. Consent to the
Reincorporation Proposal by the shareholders will constitute approval of the
Merger Agreement by the shareholders as well as the new Certificate of
Incorporation of Reliv' Delaware.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS CONSENT TO THE
ADOPTION OF THE REINCORPORATION PROPOSAL.
25
<PAGE>
PROPOSAL THREE -APPROVAL OF THE 1999 STOCK OPTION PLAN
General
- -------
In the opinion of the Board of Directors, the Company and its
stockholders will benefit substantially from having certain officers and key
employees acquire shares of the Company's Common Stock pursuant to options
granted under the Company's 1999 Stock Option Plan. Such options, in the opinion
of the Board, will be a highly effective incentive, and will create a
commonality of purpose between the Company's officers and key employees and its
shareholders with respect to the Company's strategies for profitable growth and
share-value appreciation. In the opinion of the Board, the Company's ability to
provide these stock options to its officers and other key employees in the
future will benefit the Company's long-term financial performance. In addition,
the Board believes the interests of the Company would be served if options could
be granted to consultants, advisors and other individuals who can contribute to
the success of the Company's business. The Board of Directors previously adopted
the Company's 1995 Stock Option Plan. Virtually all of the 1,100,000 shares of
Common Stock that were authorized for issuance under that plan have been
exhausted. Accordingly, the Board of Directors believes it is in the Company's
best interests to adopt a new stock option plan which, if adopted, will
authorize the Company to award stock options to its officers and other key
employees and permit the Company to offer options pursuant to the Plan to
certain consultants and advisors.
The Plan and Participants
- -------------------------
On ________, 1999, the Board of Directors approved for adoption the
1999 Stock Option Plan (the "Plan") which enables the Company to grant
"incentive stock options," as defined under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), and non-qualified stock options. The Plan
authorizes the grant of options to purchase up to an aggregate of ______ shares
of the Company's Common Stock, to (i) officers and other full-time salaried
employees of the Company and its subsidiaries with managerial, professional or
supervisory responsibilities and (ii) consultants and advisors who render bona
fide services to the Company and its subsidiaries, in each case, where the
Committee determines that such officer, employee, consultant or advisor has the
capacity to make a substantial contribution to the success of the Company. As
used herein with respect to the Plan, references to the Company include
subsidiaries of the Company.
The purposes of the Plan are to enable the Company to attract and
retain persons of ability as officers and other key employees with managerial,
professional or supervisory responsibilities, to retain able consultants and
advisors, and to motivate such persons to use their best efforts on behalf of
the Company by providing them with an equity participation in the Company. The
full text of the Plan is set forth in Appendix E hereto, and the following
description is qualified in its entirety by reference to Appendix E.
26
<PAGE>
The Plan will be administered by the Committee, which will be appointed
by the Company's Board of Directors and must consist of two or more members of
the Board of Directors, each of whom must be a "disinterested" person within the
meaning of Rule 16b-3 under the Securities Exchange Act of 1934. Under the terms
of the Plan, the Committee will have the authority to determine, subject to the
terms and conditions of the Plan, and the persons to whom options are granted,
the number of options granted to each optionee and the terms and conditions of
each option, including its duration.
The Plan can be amended, suspended, reinstated or terminated by the
Board of Directors; provided, however, that without approval of the Company's
shareholders, no amendment shall be made which (i) increases the maximum number
of shares of Common Stock which may be subject to stock options granted under
the Plan, except for specified adjustment provisions, (ii) extends the term of
the Plan (iii) increases the period during which a stock option may be exercised
beyond ten years from the date of the grant, (iv) materially increases the
benefits accruing to optionees under the Plan, (v) materially modifies the
requirements as to eligibility for participation in the Plan or (vi) will cause
stock options granted under the Plan to fail to meet the requirements of Rule
16(b)-3. Unless previously terminated by the Board of Directors, the Plan will
terminate on _________, 2009, and no additional options may be granted under the
Plan after that date.
Option Terms and Grants
- -----------------------
Stock options may be granted to purchase Common Stock under the Plan at
not less than the fair market value of the shares as of the date of grant (or
110% of fair market value in the case of incentive stock options granted to any
officer or employee holding in excess of 10% of the combined voting power of all
classes of the Company's stock as of the date of grant). No optionee may be
granted incentive stock options under the Plan to purchase Common Stock having a
fair market value (determined as of the date of grant) which exceeds $100,000
with respect to incentive stock options which are exercisable for the first time
by such optionee in any calendar year, under all stock option plans of the
Company as of the date of grant. The maximum number of shares for which options
may be issued to an employee of the Company during any calendar year may not
exceed 100,000. Other than the limitations set forth above, there is no
limitation on the number of non-qualified stock options which may be granted to
any optionee pursuant to the Plan.
Incentive stock options may be granted for a term of up to five years
in the case of optionees who own in excess of 10% of the combined voting power
of all classes of the Company's stock and up to ten years, in the Committee's
sole discretion, in the case of all other optionees. Non-qualified stock options
may be granted for a term of up to ten years.
The Plan provides that if a stock option or portion thereof expires or
is terminated, canceled or surrendered for any reason without being exercised in
full, the unpurchased shares of
27
<PAGE>
Common Stock which were subject to such stock option or portion thereof shall be
available for future grants of stock options under the Plan.
Pursuant to the terms of the Plan, the option price for all options
must be paid in cash, by check, bank draft or money order, with Common Stock of
the Company owned by the optionee and having a fair market value on the date of
exercise equal to the aggregate exercise price of the shares to be so purchased,
or a combination thereof.
As of the date hereof, no options have been granted pursuant to the
Plan.
Options granted pursuant to the Plan will not be assignable or
transferable except by will or the laws on intestate succession. Options
acquired pursuant to the Plan may be exercised by the optionee (or the
optionee's legal representative) only while the optionee is employed by the
Company, or within six months after termination of employment due to a permanent
disability, or within three months after termination of employment due to
retirement. The executor or administrator of a deceased optionee's estate or the
person or persons to whom the deceased optionee's rights thereunder have passed
by will or by the laws of descent or distribution shall be entitled to exercise
the option within the sixth months after the decedent's death. Options expire
immediately in the event an optionee is terminated with or without cause or
resigns; provided, however, in the event the Company terminates the employment
of an optionee who at the time of such termination was an officer of the Company
and had been continuously employed by the Company during the two year period
immediately preceding such termination, for any reason except "good cause" (as
defined in the Plan), each stock option held by such optionee (which had not
then previously lapsed or terminated and which had been held by such optionee
for more than six (6) months prior to such termination) shall be exercisable for
a period of three months after such termination to the extent otherwise
exercisable during that period. All of the aforementioned exercise periods set
forth in this paragraph are subject to the further limitation that an option
shall not, in any case, be exercisable beyond its stated expiration date.
The purchase price and the number and kind of shares that may be
purchased upon exercise of options granted pursuant to the Plan, and the number
of shares which may be granted pursuant to the Plan, are subject to adjustment
in certain events, including stock splits, recapitalization and reorganizations.
Federal Tax Aspects of the Plan
- -------------------------------
Set forth below is a general summary of the Federal income tax
consequences associated with the Plan.
An employee will not be deemed to have received income upon the grant
of an incentive stock option or, except as noted below, upon the exercise of
such option. Unless Shares acquired upon exercise are disposed of within two
years of the date of grant or within one year of exercise, upon the sale of such
Shares, the optionee will generally recognize capital gain or loss measured
28
<PAGE>
by the difference between the amount realized on the sale and the price paid for
the Shares. If a sale is made prior to either of such dates, an optionee's gain
on the sale of the Shares will be treated as ordinary income to the extent of
the lesser of the excess of the fair market value of the Shares at the time of
exercise over the option price and the excess of the amount realized on the sale
of stock over the option price. The Company will be allowed a deduction at the
time of sale in the amount of ordinary income recognized by the optionee. The
balance of any gain realized will be treated as long-term or short-term capital
gain depending upon the length of time the Shares were held by the optionee.
Generally, the excess of the fair market value of an incentive stock
option at the time of exercise (or, if the stock subject to the option is
restricted within the meaning of Code Section 83, at such time as the Shares
become transferable or are not longer subject to a substantial risk of
forfeiture) over the option price constitutes an item of tax preference for
purposes of calculating "alternative minimum taxable income" and may result in
imposition of the "alternative minimum tax" for the participant pursuant to
Section 55 of the Code.
Non-qualified options granted under the Plan are not intended to
qualify for the favorable Federal income tax treatment accorded to incentive
stock options under the Plan. An optionee should not recognize any income for
Federal income tax purposes at the time of the grant of non-qualified options
under the Plan. When non-qualified options are exercised, however, the excess of
the fair market value of the shares of Common Stock acquired pursuant to such
exercise, determined at the time of exercise, over the option price will
constitute ordinary income to the optionee. Subject to applicable limitations,
the Company is entitled to a corresponding income tax deduction equal to the
amount of such ordinary income for the taxable year in which the optionee is
required to recognize such income for Federal income tax purposes.
Vote Required for Approval of the Plan
- --------------------------------------
The Company's Board of Directors has approved the Plan. However, the
Plan will not be adopted unless the holders of at least a majority of the shares
of Common Stock present or represented at the meeting and entitled to vote
thereon vote "FOR" approval of the Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
PLAN.
PROPOSAL FOUR - SELECTION OF AUDITORS
The Board of Directors have selected and approved Ernst & Young L.L.P.
as the principal independent auditor to audit the financial statements of the
Company for 1999, subject to ratification by the shareholders. It is expected
that a representative of the firm of Ernst & Young L.L.P. will be present at the
annual meeting and will have an opportunity to make a statement if they so
desire and will be available to respond to appropriate questions.
29
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS SHAREHOLDERS VOTE FOR "FOR" SUCH
RATIFICATION.
Stockholder Proposals for 2000 Proxy Statement
- ----------------------------------------------
Proposals by shareholders for inclusion in the Company's Proxy
Statement and form of proxy relating to the 2000 Annual Meeting of Stockholders,
which is scheduled to be held on May 26, 2000, should be addressed to the
Secretary, Reliv' International, Inc., 136 Chesterfield Industrial Boulevard,
P.O. Box 405, Chesterfield, Missouri 63006-0405, and must be received at such
address no later than January 1, 2000. Upon receipt of any such proposal, the
Company will determine whether or not to include such proposal in the Proxy
Statement and proxy in accordance with applicable law. It is suggested that such
proposal be forwarded by certified mail, return receipt requested.
Other Matters to Be Acted Upon at the Meeting
- ---------------------------------------------
The management of the Company knows of no other matters to be presented
at the meeting. Should any other matter requiring a vote of the shareholders
arise at the meeting, the persons named in the proxy will vote the proxies in
accordance with their best judgment.
BY ORDER OF THE
BOARD OF DIRECTORS
Dated: April 23, 1999
/s/ Stephen M. Merrick
-----------------------------
Stephen M. Merrick, Secretary
30
<PAGE>
APPENDIX A
CERTIFICATE OF OWNERSHIP AND MERGER
OF
RELIV INTERNATIONAL, INC.
(an Illinois corporation)
INTO
RELIV' MERGER CORPORATION
(a Delaware corporation)
It is hereby certified that:
1. Reliv International, Inc. (hereinafter called the "corporation") is
a corporation of the State of Illinois, the laws of which permit a merger of a
corporation of that jurisdiction with a corporation of another jurisdiction.
2. The corporation, as the owner of all of the outstanding shares of
common stock of Reliv' Merger Corporation, hereby merges itself into Reliv'
Merger Corporation, a corporation of the State of Delaware.
3. The following is a copy of the resolutions adopted on the ___ day of
____, 1999, by the Board or Directors of the corporation to merge the
corporation into Reliv' Merger Corporation:
RESOLVED that this corporation be reincorporated in the State
of Delaware by merging itself into Reliv' Merger Corporation
pursuant to the laws of the State of Illinois and the State of
Delaware as hereinafter provided, so that the separate
existence of this corporation shall cease as soon as the
merger shall become effective, and thereupon this corporation
and Reliv' Merger Corporation will become a single
corporation, which shall continue to exist under, and be
governed by, the laws of the State of Delaware.
FURTHER RESOLVED that the terms and conditions of the proposed
merger are as follows:
(a) From and after the effective time of the merger, all of
the estate, property, rights, privileges, powers, and franchises of
this corporation shall become vested in and be held by Reliv' Merger
Corporation as fully and entirely and without change or diminution as
the same were before held and enjoyed by this corporation, and Reliv'
Merger Corporation shall assume all of the obligations of this
corporation.
(b) No pro rata issuance of the shares of stock of Reliv'
Merger Corporation which are owned by this corporation immediately
prior to the effective time of the merger shall be made, and such
shares shall be surrendered and extinguished.
(c) Each share of common stock, no par value, of this
corporation which shall be issued and outstanding immediately prior to
the effective time of the merger shall be converted into one issued and
outstanding share of common stock $.001 par value, of Reliv' Merger
1
<PAGE>
Corporation, and, from and after the effective time of the merger, the
holders of all of said issued and outstanding shares of this
corporation shall automatically be and become holders of shares of
Reliv' Merger Corporation upon the basis above specified, whether or
not certificates representing said shares are then issued and
delivered. Each warrant, option or other derivative security to
purchase common stock of the corporation which is effective
immediately prior to the effective time of the merger shall be
converted into a warrant, option or other derivative security to
purchase common stock of Reliv' Merger Corporation, as of the
effective time of the merger. Such instruments shall be exercisable in
accordance with their terms and conditions. On each matter on which
common stock shall vote each common share shall be entitled to one
vote.
(d) After the effective time of the merger, each holder of
record of any outstanding certificate or certificates theretofore
representing common stock of this corporation may surrender the same to
the American Stock Transfer & Trust , Reliv' Merger Corporation's
transfer agent, at its office in New York, New York and such holder
shall be entitled upon such surrender to receive in exchange therefor a
certificate or certificates representing a like number of shares of
common stock of Reliv' Merger Corporation. Until so surrendered, each
outstanding certificate which prior to the effective time of the merger
represented one or more shares of common stock of this corporation
shall be deemed for all corporate purposes to evidence ownership of
shares of common stock of Reliv' Merger Corporation.
(e) From and after the effective time of the merger, the
Certificate of Incorporation and the By-Laws of Reliv' Merger
Corporation shall be the Certificate of Incorporation and the By-Laws
of Reliv' Merger Corporation as in effect immediately prior to such
effective time and the name of Reliv' Merger Corporation shall be
changed to Reliv' International, Inc.
(f) The members of the Board of Directors and officers of
Reliv' Merger Corporation shall be the members of the Board of
Directors and the corresponding officers of Reliv' Merger Corporation
immediately before the effective time of the merger.
(g) From and after the effective time of the merger, the
assets and liabilities of this corporation and of Reliv' Merger
Corporation shall be entered on the books of Reliv' Merger Corporation
at the amounts at which they shall be carried at such time on the
respective books of this corporation and of Reliv' Merger Corporation,
subject to such inter-corporate adjustments or eliminations, if any, as
may be required to give effect to the merger; and, subject to such
action as may be taken by the Board of Directors of Reliv' Merger
Corporation, in accordance with generally accepted accounting
principles, the capital and surplus of Reliv' Merger Corporation shall
be equal to the capital and surplus of this corporation and of Reliv'
Merger Corporation.
FURTHER RESOLVED that, in the event that the proposed merger
shall not be terminated, the proper officers of this
corporation be and they hereby are authorized and directed to
make and execute a Certificate of Ownership and Merger setting
forth a copy of these resolutions to merge itself into Reliv'
Merger Corporation and the date of adoption thereof, and to
cause the same to be filed and recorded as provided by law,
and to do all acts and things whatsoever, within the States of
Illinois and Delaware in any other appropriate jurisdiction,
necessary or proper to effect this merger.
2
<PAGE>
4. The proposed merger herein certified has been adopted, approved,
certified, executed, and acknowledged by Reliv' International, Inc. in
accordance with the laws under which it is organized.
Signed and attested to on _________________, 1999.
_________________________________________
Robert L. Montgomery, President of Reliv'
International, Inc.
Attest:
____________________________________
Stephen M. Merrick, Secretary
of Reliv' International, Inc.
3
<PAGE>
APPENDIX B
CERTIFICATE OF INCORPORATION
OF
Reliv' Merger Corporation
The undersigned, a natural person, for the purpose of organizing a
corporation for conducting the business and provisions and subject to the
requirements of the law of the State of Delaware (particularly Chapter 1, Title
8 of the Delaware Code and the acts amendatory thereof and supplemental thereto,
and known, identified, and referred to) hereby certifies that:
FIRST: The name of the corporation (hereinafter called the
"corporation") is Reliv' Merger Corporation
SECOND: The address, including street, number, city, and county, of the
registered office of the corporation in the State of Delaware is 1013 Centre
Road, Wilmington, Delaware 19805, County of New Castle, and the name of the
registered agent of the corporation in the State of Delaware at such address is
the Corporation Service Company, Inc.
THIRD: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The authorized capital stock of the Company is:
1. Class Par Value Number of shares authorized
----- --------- ---------------------------
Common $ .001 50,000,000
Preferred $ .001 3,000,000
2. Shares of Preferred Stock may be issued from time to time at the
sole discretion of the Company's Board of Directors, with such designations,
preferences, conversion rights, cumulative, relative, participating, option or
other rights, qualifications, limitations or restrictions thereof as shall be
stated and expressed in the resolution or resolutions providing for the issuance
of such Preferred Stock adopted by the Board of Directors pursuant to the
authority of this paragraph given.
FIFTH: The name and the mailing address of the incorporator
is as follows:
NAME MAILING ADDRESS
Scott P. Slykas Merrick & Klimek, P.C.
401 South LaSalle, Suite 1302
Chicago, Illinois 60605
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<PAGE>
SIXTH: The corporation is to have perpetual existence.
SEVENTH: Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
Subsection 291 of Title 8 of the Delaware Code or on the application of trustees
in dissolution or of any receiver or receivers appointed for this corporation
under Subsection 279 of Title 8 of the Delaware Code order a meeting of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this corporation, as the case may be, to be summoned in such a
manner as the said court directs. If a majority in number representing three
fourths in value of the creditors or class of creditors, and or stockholders or
class of stockholders of this corporation, as the case may be, agree to any
compromise or arrangement and to any reorganization of this corporation as
consequence of such compromise or arrangement, the said compromise or
arrangement and the said reorganization shall, if sanctioned by the court to
which the said application has been made, be binding on all creditors or class
of creditors, and/or on all the stockholders or class of stockholders of this
corporation, as the case may be, and also on this corporation.
EIGHTH: For the management of the business and for the conduct of the
affairs of the corporation, and in further definition, limitation, and
regulation of the powers of the corporation and of its directors and of its
stockholders or any class thereof, as the case may be, it is further provided:
1. The management of the business and the conduct of the affairs of the
corporation shall be vested in its Board of Directors. The number of directors
which shall constitute the whole Board of Directors shall be fixed by, or in the
manner provided in, the Bylaws. The phrase "whole Board" and the phrase "total
number of directors" shall be deemed to have the same meaning to wit, the total
number of directors which the corporation would have if there were no vacancies.
No election of directors need be by written ballot.
2. In furtherance and not in limitation of the powers conferred by the
laws of the State of Delaware, the board of directors is expressly authorized
and empowered to make, alter, amend and repeal by-laws, subject to the power of
the stockholders to alter or repeal by-laws made by the board of directors.
NINTH: The personal liability of the directors of the corporation is
hereby eliminated to the fullest extent permitted by paragraph (7) of subsection
(b) of Subsection 102 of the General Corporation Law of the State of Delaware,
as the same may be amended and supplemented.
2
<PAGE>
TENTH: The corporation shall, to the fullest extent permitted by
Subsection 145 of the General Corporation Law of the State of Delaware, as the
same may be amended and supplemented, have the power to indemnify any and all
persons whom it shall have power to indemnify under said section from and
against any and all of the expenses, liabilities, or other matters referred to
in or covered by said section, and the power provided for herein shall not be
deemed exclusive of any other right to which those indemnified may be entitled
under any Bylaw, agreement, vote of stockholders, or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office.
ELEVENTH: The corporation hereby expressly elects not to be governed by
Section 203 of the General Corporation Law of the State of Delaware, in its
entirety, as the same may be amended and supplemented.
TWELFTH: From time to time any of the provisions of this certificate of
incorporation may be amended, altered, or repealed, and other provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted in the manner and at the time prescribed by said laws, and all
rights at any time conferred upon the stockholders of the corporation by this
certificate of incorporation are granted subject to the provisions of this
Article TWELFTH.
Signed on April 9, 1999
/s/ Scott P. Slykas
-------------------------
Incorporator
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APPENDIX C
BY-LAWS
OF
RELIV' MERGER CORP.
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office shall be
established and maintained at 1013 Centre Road, City of Wilmington, in the
County of New Castle in the State of Delaware.
SECTION 2. OTHER OFFICES. The corporation may have other offices,
either within or without the State of Delaware, at such place or places as the
Board of Directors may from time to time appoint or the business of the
corporation may require.
ARTICLE II
MEETING OF STOCKHOLDERS
SECTION 1. ANNUAL MEETINGS. Annual meetings of stockholders for the
election of directors and for such other business as may be stated in the notice
of the meeting, shall be held at such place, either within or without the State
of Delaware, and at such time and date as the Board of Directors, by resolution,
shall determine and as set forth in the notice of the meeting. In the event the
Board of Directors fails to so determine the time, date and place of meeting,
the annual meeting of stockholders shall be held at the main business office of
the corporation at 136 Chesterfield Industrial Boulevard, Chesterfield, Missouri
on the last Thursday of May of each year.
If the date of the annual meeting shall fall upon a legal holiday, the
meeting shall be held on the next succeeding business day. At each annual
meeting, the stockholders entitled to vote shall elect a Board of Directors and
may transact such other corporate business as shall be stated in the notice of
the meeting.
SECTION 2. OTHER MEETINGS. Meetings of stockholders for any purpose
other than the election of directors may be held at such time and place, within
or without the State of Delaware, as shall be stated in the notice of the
meeting.
SECTION 3. VOTING. Each stockholder shall be entitled to vote in
accordance with the terms and provisions of the Certificate of Incorporation and
these By-Laws, in person or by proxy, but no proxy shall be voted after three
years from its date unless such proxy provides for a longer period. All
elections for directors shall be decided by plurality vote; all other questions
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shall be decided by majority vote except as otherwise provided by the
Certificate of Incorporation or the laws of the State of Delaware.
SECTION 4. PROXIES. A stockholder may execute a writing authorizing
another person or persons to act for him as proxy. Execution may be accomplished
by the stockholder or his authorized officer, director, employee or agent
signing such writing or causing his or her signature to be affixed to such
writing by any reasonable means including, but not limited to, by facsimile
signature.
A duly executed proxy shall be irrevocable if it states that it is
irrevocable and if, and only as long as, it is coupled with an interest
sufficient in law to support an irrevocable power. A proxy may be made
irrevocable regardless of whether the interest with which it is coupled is an
interest in the stock itself or an interest in the corporation generally.
SECTION 5. FIXING OF RECORD DATE. For the purpose of determining the
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or to receive payment of any dividend, or other distribution
or allotment of any rights, or to exercise any rights in respect of any change,
conversion or exchange of shares or for the purpose of any other lawful action,
the board of directors of the corporation may fix in advance a record date which
shall not be more than sixty days and not less than ten days, or in the case of
a merger or consolidation, not less than twenty days, before the date of such
meeting. If no record date is fixed, the record date for the determination of
shareholders entitled to notice of or to vote at a meeting of shareholders shall
be at the close of the business day on the day next preceding the day on which
notice is given and the record date for the determination of shareholders for
any other purpose shall be the date on which the board of directors adopts the
resolution relating thereto. A determination of shareholders of record entitled
to notice of or to vote at a meeting of shareholders shall apply to any
adjournment of the meeting.
SECTION 6. QUORUM. In all matters, except as otherwise required by law,
by the Certificate of Incorporation or by these By-Laws, the presence, in person
or by proxy, of stockholders holding a majority of the stock of the corporation
entitled to vote shall constitute a quorum at all meetings of the stockholders.
In case a quorum shall not be present at any meeting, a majority in interest of
the stockholders entitled to vote thereat shall have power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until the requisite amount of stock entitled to vote shall be present.
At any such adjourned meeting at which the requisite amount of stock entitled to
vote shall be represented, any business may be transacted which might have been
transacted at the meeting as originally noticed; but only those stockholders
entitled to vote at the meeting as originally noticed shall be entitled to vote
at any adjournment or adjournments thereof.
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SECTION 7. SPECIAL MEETINGS. Special meetings of the stockholders, for
any purpose, unless otherwise prescribed by statute or by the Certificate of
Incorporation, may be called by Board of Directors.
SECTION 8. NOTICE OF MEETINGS. Written notice, stating the place, date
and time of the meeting, and the general nature of the business to be
considered, shall be given to each stockholder entitled to vote thereat at his
address as it appears on the records of the corporation, not less than ten nor
more than sixty days before the date of the meeting, either personally or by
mail, by or at the direction of the president, or the secretary, or the officer
or persons calling the meeting, to each shareholder of record entitled to vote
at such meeting. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail, addressed to the shareholder at his address
as it appears on the records of the corporation, with the postage thereon
prepaid.
Whenever any notice whatever is required to be given under the
provisions of any law, or under the provisions of the Certificate of
Incorporation of the corporation or these By-Laws, a waiver thereof in writing
signed by the person or persons entitled to said notice, whether before or after
the time stated therein, shall be deemed proper notice.
SECTION 9. ACTION WITHOUT MEETING. Any action that is ordinarily taken
at any annual or special meeting of stockholders may be taken without a meeting,
without prior notice, and without a vote, if a consent or consents in writing,
setting forth the action so taken, shall be signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted, and shall be delivered to the Corporation
by delivery to its registered office, its principal place of business or an
officer or agent of the Corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to the
Corporation's registered office shall be by hand or by certified or regular
mail, return receipt requested.
ARTICLE III
DIRECTORS
SECTION 1. NUMBER. The number of directors shall be ten.
SECTION 2. REGULAR MEETINGS. Regular meetings of the Board of Directors
shall be held at such place or places, on such date or dates, and at such time
or times as shall have been established by the board of directors and publicized
among all directors. A notice of such regular meeting shall not be required.
SECTION 3. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by the President or any two directors and shall be held at such
place, on such date and at such time as they or he shall fix. Notice of the
place, date and time of each such special
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meeting shall be given each director by whom it is not waived, by mailing
written notice not less than two days before the meeting or, by telefaxing the
same not less than 18 hours before the meeting, to each director at his business
address. If mailed, such notice shall be deemed to be delivered, when deposited
in the United States mail so addressed, with postage thereon prepaid. If
transmitted via telefacsimile, said notice shall be deemed to have been
delivered upon confirmation by the facsimile machine of sender. The attendance
of a director at any meeting shall constitute a waiver of notice of such
meeting, except where a director attends a meeting for the express purpose of
objecting to the transaction of any business because the meeting is not lawfully
called or convened. Neither the business to be transacted at, nor the purpose of
any regular or special meeting of the Board of Directors need be specified in
any written waiver of notice.
SECTION 4. QUORUM. At any meeting of the Board of Directors, one-half
of the numbers of directors then in office, but not less than two, shall
constitute a quorum for all purposes. If a quorum shall fail to attend any
meeting, a majority of those present may adjourn the meeting to another place,
date or time without further notice or waiver thereof.
SECTION 5. PARTICIPATION AND MEETINGS BY CONFERENCE TELEPHONE.
Members of the Board of Directors, or of any committee thereof, may participate
in a meeting of such board or committee by means of conference telephone or
similar communications equipment that enables all persons participating in a
meeting to hear each other. Such participation shall constitute presence in
person at such meeting for all purposes.
SECTION 6. CONDUCT OF BUSINESS. The act of a majority of the directors
present at a meeting of which a quorum is present shall be the act of the Board
of Directors, except as otherwise provided herein or provided by law.
SECTION 7. RESIGNATIONS. Any director, member of a committee or other
officer may resign at any time. Such resignation shall be made in writing, and
shall take effect at the time specified therein, and if no time be specified, at
the time of its receipt by the President or Secretary. The acceptance of a
resignation shall not be necessary to make it effective.
SECTION 8. VACANCIES. If the office of any director, member of a
committee or other officer becomes vacant, the remaining directors in office
though less than a quorum by a majority vote, may appoint any qualified person
to fill such vacancy, who shall hold office for the unexpired term and until his
successor shall be duly chosen.
SECTION 9. REMOVAL. Any director or directors may be removed either for
or without cause at any time by the affirmative vote of the holders of a
majority of all the shares of stock outstanding and entitled to vote, at a
special meeting of the stockholders called for this purpose, or by written
consent as provided by law. Any director or directors may be removed for cause
by the majority vote of the other directors.
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SECTION 10. INCREASE OF NUMBER. The number of directors may be
increased or decreased by amendment of these By-Laws by the affirmative vote of
a majority of the directors, though less than a quorum, or, by the affirmative
vote of a majority in interest of the stockholders, at the annual meeting or at
a special meeting called for that purpose, and by like vote the additional
directors may be chosen at such meeting to hold office until the next annual
election and until their successors are elected and qualified.
SECTION 11. COMPENSATION. Directors shall not receive any stated salary
for their services as directors or as member of committees, but by resolution of
the Board of Directors, fixed fees and expenses of attendance may be allowed for
attendance at each meeting. By resolution of the Board of Directors, directors
may also be granted coverage under the Corporation's health insurance, life
insurance or other benefit plans. Nothing herein contained shall be construed to
preclude any director from serving the corporation in any other capacity as an
officer, agent or otherwise, and receiving compensation therefor.
SECTION 12. ACTION WITHOUT MEETING. Any action required or permitted to
be taken at any meeting of the Board of Directors, or of any committee thereof,
may be taken without a meeting, if prior to such action a written consent
thereto is signed by all members of the board, or of such committee as the case
may be, and such written consent is filed with the minutes of proceedings of the
board or committee.
SECTION 13. PRESUMPTION OF ASSENT. A director of the corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be conclusively presumed to have assented to the action
taken unless his dissent shall be entered in the minutes of the meeting or
unless he shall file his written dissent to such action with the person acting
as the secretary of the meeting before the adjournment thereof or shall forward
such dissent by registered mail to the secretary of the corporation immediately
after the adjournment of the meeting. Such right to dissent shall not apply to a
director who voted in favor of such action.
SECTION 14. RELIANCE ON CORPORATE RECORDS. A member of the board of
directors, or a member of any committee designated by the board of directors,
shall, in the performance of his duties, be fully protected in relying in good
faith upon the records of the corporation and upon such information, opinions,
reports or statements presented to the corporation by any of the corporation's
officers or employees, or committees of the board of directors, or by any other
person as to matters the member reasonably believes are within such other
person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the corporation.
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ARTICLE IV
OFFICERS
SECTION 1. OFFICERS. The officers of the corporation shall consist of
the President, Secretary and such other officers as determined by the Board of
Directors. None of the officers of the corporation need be directors. The
officers shall be elected at the first meeting of the Board of Directors after
each annual meeting. More than one office may be held by the same person.
SECTION 2. SALARIES. The salaries of the officers shall be fixed from
time to time by the board of directors and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
corporation.
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ARTICLE V
STOCK
SECTION 1. CERTIFICATES OF STOCK. Every holder of stock in the
corporation shall be entitled to have a certificate, signed by, or in the name
of the corporation by, the chairman or vice-chairman of the board of directors,
or the president or a vice-president and the treasurer or an assistant
treasurer, or the secretary of the corporation, certifying the number of shares
owned by him in the corporation. The designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations, or restrictions of such preferences
and/or rights shall be set forth in full or summarized on the face or back of
the certificate which the corporation shall issue to represent such class or
series of stock provided that, except as otherwise provided in Section 202 of
the General Corporation Law of Delaware, in lieu of the foregoing requirements,
there may be set forth on the face or back of the certificate which the
corporation shall issue to represent such class or series of stock, a statement
that the corporation will furnish without charge to each stockholder who so
requests the powers, designations, preferences and relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights. Where a certificate is countersigned (1) by a transfer agent other than
the corporation or its employee, or (2) by a registrar other than the
corporation or its employee, the signatures of such officers may be facsimiles.
SECTION 2. LOST CERTIFICATES. New certificates of stock may be issued
in the place of any certificate issued by the corporation, alleged to have been
lost or destroyed, and the directors may, in their discretion, require the owner
of the lost or destroyed certificate or his legal representatives, to give the
corporation a bond, in such sum as they may direct, not exceeding double the
value of the stock, to indemnify the corporation against it on account of the
alleged loss of any such new certificate.
SECTION 3. TRANSFER OF SHARES. The shares of stock of the corporation
shall be transferable only upon its books by the holders thereof in person or by
their duly authorized attorneys or legal representatives, and upon such transfer
the old certificates shall be surrendered to the corporation by the delivery
thereof to the person in charge of the stock and transfer books and ledgers, or
to such other persons as the directors may designate, by who they shall be
canceled, and new certificates shall thereupon be issued. A record shall be made
of each transfer and whenever a transfer shall be made for collateral security,
and not absolutely, it shall be so expressed in the entry of the transfer.
SECTION 4. RETIREMENT OF STOCK. The corporation, by resolution of its
board of directors, may retire any shares of its capital stock that are issued
but are not outstanding.
Whenever any shares of the capital stock of this corporation are
retired, they shall resume the status of authorized and unissued shares of the
class or series to which they belong unless the certificate of incorporation
otherwise provides.
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SECTION 5. DIVIDENDS. Subject to the provisions of the Certificate of
Incorporation, the Board of Directors may, out of funds legally available
therefor at any regular or special meeting, declare and pay dividends upon the
shares of its capital stock.
ARTICLE VI
FISCAL YEAR
SECTION 1. FISCAL YEAR. The fiscal year of the corporation shall be
determined by resolution of the Board of Directors.
ARTICLE VII
NOTICES
SECTION 1. NOTICES. Whenever notice is required to be given to any
stockholder, director, officer or agent, such requirement shall not be construed
to mean personal notice. Such notice may in any instance be effectively given by
depositing a writing in a post office or letter box in a pre-paid, sealed
wrapper, or by sending a facsimile transmission, addressed to such stockholder,
director, officer or agent at his or her address as the same appears on the
books of the corporation. The time when such notice is dispatched shall be the
time of the giving of the notice.
SECTION 2. WAIVERS. A written waiver of any notice, signed by a
stockholder, director, officer or agent, whether before or after the time of the
event for which notice is to be given, shall be deemed equivalent to the notice
required to be given to such stockholder, director, officer or agent. Neither
the business nor the purpose of any meeting need to be specified in such a
waiver.
ARTICLE VIII
AMENDMENTS
SECTION 1. These By-Laws may be amended and/or repealed and new or
additional By-Laws may be made at any annual meeting of the stockholders or at
any special meeting thereof if notice thereof is contained in the notice of such
special meeting by the affirmative vote of a majority of the stock issued and
outstanding or entitled to vote thereat, or by the regular meeting of the Board
of Directors, or at any special meeting of the Board of Directors, if notice
thereof is contained in the notice of such special meeting.
SECTION 2. A resolution authorizing a proposed amendment to the
certificate of incorporation may provide that at any time prior to the filing of
the amendment with the Secretary of State, notwithstanding authorization of the
proposed amendment by the stockholders of the corporation, the board of
directors or governing body may abandon such proposed amendment without further
action by the stockholders.
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ARTICLE IX
INDEMNIFICATION OF OFFICERS
DIRECTORS, EMPLOYEES AND AGENTS
SECTION 1. The corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director or officer of the corporation or
is or was serving at the request of the corporation as a director or officer of
another corporation, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and in
a manner he reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
SECTION 2. The corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he is or was a director or
officer of the corporation, or is or was serving at the request of the
corporation as a director or officer of another corporation, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation except that no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation, unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine upon application that despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
SECTION 3. No director of the corporation shall be liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability for (a) any breach of the director's
duty of loyalty to the corporation or its stockholders; (b) acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law; (c) acts under Section 174 of the Delaware General Corporation Law; or
(d) any transaction from which the director derived an improper personal
benefit.
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SECTION 4. Expenses incurred in defending a civil or criminal action,
suit or proceeding may be paid by the corporation in advance of the final
disposition of such action, suit or proceeding as authorized by the board of
directors in the specific case upon receipt of an undertaking by or on behalf of
the director or officer, to repay such amount unless it shall ultimately be
determined that he is not entitled to be indemnified by the corporation as
authorized in this Article Ninth. Such expenses (including attorneys' fees)
incurred by other employees or agents may be so paid upon such terms and
conditions, if any, as the board of directors deems appropriate.
SECTION 5. Any indemnification under Section (1) and (2) above (unless
ordered by a Court) shall be made by the corporation only as authorized in the
specific case upon a determination that indemnification of the director or
officer is proper in the circumstances because he has met the applicable
standard of conduct set forth in Sections (1) and (2). Such determination shall
be made (a) by the board of directors by a majority vote of a quorum consisting
of directors who were not parties to such action, suit or proceeding, or (b) if
such a quorum is not obtainable, or, even if obtainable and a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (c) by the stockholders.
SECTION 6. The indemnification provided by this Article Ninth shall not
be deemed exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any by-laws, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director or officer and shall inure to the benefit of the
heirs, executors and administrators of such a person.
SECTION 7. The corporation shall have the power to purchase and
maintain insurance on behalf of any person who is or was a director or officer
of the corporation or is or was serving at the request of the corporation as a
director or officer of another corporation, against any liability asserted
against him and incurred by him in any such capacity, or arising out of his
status as such, whether or not the corporation would have the power to indemnify
him against such liability under the provisions of this Article Ninth.
SECTION 8. For the purposes of this Article Ninth, reference to "the
corporation" shall include all constituent corporations absorbed in a
consolidation or merger as well as the resulting or surviving corporation so
that any person who is or was a director or officer of such a constituent
corporation or is or was serving at the request of such constituent corporation
or other enterprise shall stand in the same position under the provisions of
this section with respect to the resulting or surviving corporation in the same
capacity.
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APPENDIX D
5/11.70 PROCEDURE TO DISSENT. -(a) If the corporate action giving rise
to the right to dissent is to be approved at a meeting of shareholders, the
notice of meeting shall inform the shareholders of their right to dissent and
the procedure to dissent. If, prior to the meeting, the corporation furnishes to
shareholders material information with respect to the transaction that will
objectively enable a shareholder to vote on the transaction and to determine
whether or not to exercise dissenters' rights, a shareholder may assert
dissenters' rights only if the shareholder delivers to the corporation before
the vote is taken a written demand for payment for his or her shares if the
proposed action is consummated, and the shareholder does not vote in favor of
the proposed action.
(b) If the corporation action giving rise to the right to dissent is
not to be approved at a meeting of shareholders, the notice to shareholders
describing the action taken under Section 11.30 or Section 7.10 shall inform the
shareholders of their right to dissent and the procedure to dissent. If, prior
to or concurrently with the notice, the corporation furnishes to the
shareholders material information with respect to the transaction that will
objectively enable a shareholder to determine whether or not to exercise
dissenters' rights, a shareholder may assert dissenter's rights only if he or
she delivers to the corporation within 30 days from the date of mailing the
notice a written demand for payment for his or her shares.
(c) Within 10 days after the date on which the corporate action giving
rise to the right to dissent is effective or 30 days after the shareholder
delivers to the corporation the written demand for payment, whichever is later,
the corporation shall send each shareholder who has delivered a written demand
for payment a statement setting forth the opinion of the corporation as to the
estimated fair value of the shares, the corporation's latest balance sheet as of
the end of a fiscal year ending not earlier than 16 months before the delivery
of the statement, together with the statement of income for that year and the
latest available interim financial statements, and either a commitment to pay
for the shares of the dissenting shareholder at the estimated fair value thereof
upon transmittal to the corporation of the certificate or certificates, or other
evidence of ownership, with respect to the shares, or instructions to the
dissenting shareholder to sell his or her shares within 10 days after delivery
of the corporation's statement to the shareholder. The corporation may instruct
the shareholder to sell only if there is a public market for the shares at which
the shares may be readily sold. If the shareholder does not sell within that 10
day period after being so instructed by the corporation, for purposes of this
Section the shareholder shall be deemed to have sold his or her shares at the
average closing price of the shares, if listed on a national exchange, or the
average of the bid and asked price with respect to the shares quoted by a
principal market maker, if not listed on a national exchange, during that 10 day
period.
(d) A shareholder who makes written demand for payment under this
Section retains all other rights of a shareholder until those rights are
cancelled or modified by the consummation of the proposed corporate action. Upon
consummation of that action, the corporation shall pay to each dissenter who
transmits to the corporation the certificate or other evidence of ownership of
the shares the amount the corporation estimates to be the fair value of the
shares, plus accrued interest, accompanied by a written explanation of how the
interest was calculated.
(e) If the shareholder does not agree with the opinion of the
corporation as to the estimated fair value of the shares or the amount of
interest due, the shareholder, within 30 days
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from the delivery of the corporation's statement of value, shall notify the
corporation in writing of the shareholder's estimated fair value and amount of
interest due and demand payment for the difference between the shareholder's
estimate of fair value and amount of interest due and demand payment for the
difference between the shareholder's estimate of fair value and interest due and
the amount of the payment by the corporation or the proceeds of sale by the
shareholder, whichever is applicable because of the procedure for which the
corporation opted pursuant to subsection (c).
(f) If, within 60 days from delivery to the corporation of the
shareholder notification of estimate of fair value of the shares and interest
due, the corporation and the dissenting shareholder have not agreed in writing
upon the fair value of the shares and interest due, the corporation shall either
pay the difference in value demanded by the shareholder, with interest, or file
a petition in the circuit court of the county in which either the registered
office or the principal office of the corporation is located, requesting the
court to determine the fair value of the shares and interest due. The
corporation shall make all dissenters, whether or not residents of this State,
whose demands remain unsettled parties to the proceeding as an action against
their shares and all parties shall be served with a copy of the petition.
Nonresidents may be served by registered or certified mail or by publication as
provided by law. Failure of the corporation to commence an action pursuant to
this Section shall not limit or affect the right of the dissenting shareholders
to otherwise commence an action as permitted by law.
(g) The jurisdiction of the court in which the proceeding is commenced
under subsection (f) by a corporation is plenary and exclusive. The court may
appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the power described
in the order appointing them, or in any amendment to it.
(h) Each dissenter made a party to the proceeding is entitled to
judgment for the amount, if any, by which the court finds that the fair value of
his or her shares, plus interest, exceeds the amount paid by the corporation or
the proceeds of sale by the shareholder, whichever amount is applicable.
(i) The court, in a proceeding commenced under subsection (f), shall
determine all costs of the proceeding, including the reasonable compensation and
expenses of the appraisers, if any, appointed by the court under subsection (g),
but shall exclude the fees and expenses of counsel and experts for the
respective parties. If the fair value of the shares as determined by the court
materially exceeds the amount which the corporation estimated to be the fair
value of the shares or if no estimate was made in accordance with subsection
(c), then all or any part of the costs may be assessed against the corporation.
If the amount which any dissenter estimated to be the fair value of the shares
materially exceeds the fair value of the shares as determined by the court, then
all or any part of the costs may be assessed against that dissenter. The court
may also assess the fees and expenses of counsel and experts for the respective
parties, in amounts the court finds equitable, as follows:
(1) Against the corporation and in favor of any or all dissenters if
the court finds that the corporation did not substantially comply with the
requirements of subsections (a), (b), (c), (d) or (i).
(2) Against either the corporation or a dissenter and in favor of any
other party if the court finds that the party against whom the fees and expenses
are assessed acted arbitrarily, vexatiously, or not in good faith with respect
to the rights provided by this Section.
If the court finds that the services of counsel for any dissenter were
of substantial benefit
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to other dissenters similarly situated and that the fees for those services
should not be assessed against the corporation, the court may award to that
counsel reasonable fees to be paid out of he amounts awarded to the dissenters
who are benefited. Except as otherwise provided in this Section, the practice,
procedure, judgment and costs shall be governed by the Code of Civil Procedure.
(j) As used in this Section:
(1) "Fair value", with respect to a dissenter's shares, means the value
of the shares immediately before the consummation of the corporate action to
which the dissenter objects excluding any appreciation or depreciation in
anticipation of the corporate action, unless exclusion would be inequitable.
(2) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair and
equitable under all circumstances.
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APPENDIX E
RELIV' INTERNATIONAL, INC.
1999 STOCK OPTION PLAN
1. PURPOSE OF THE PLAN
The purposes of the Reliv' International, Inc. 1999 Stock Option Plan
(the "Plan") are to enable the Company to attract and retain the services of
officers and other key employees with managerial, professional or supervisory
responsibilities, to retain able consultants and advisors and to motivate such
persons to use their best efforts on behalf of the Company.
2. GENERAL PROVISIONS
2.1 Definitions
As used in the Plan:
(a) "Board of Directors" means the Board of Directors of the
Company.
(b) "Code" means the Internal Revenue Code of 1986, including any
and all amendments thereto.
(c) "Committee" means the committee appointed by the Board of
Directors from time to time to administer the Plan pursuant to
Section 2.2.
(d) "Common Stock" means the Company's Common Stock, no par value.
(e) "Fair Market Value" means, with respect to a specific date,
the value of the Common Stock as determined in good faith by
the Committee on the basis of such quotations and other
considerations as the Committee deems appropriate.
(f) "Incentive Stock Option" means an option granted under the
Plan which is intended to qualify as an incentive stock option
under Section 422 of the Code.
(g) "NASDAQ" means the NASDAQ National Market.
(h) "Non-Qualified Stock Option" means an option granted under the
Plan which is not an Incentive Stock Option.
(i) "Participant" means a person to whom a Stock Option has been
granted under the Plan.
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(j) "Rule 16b-3" means Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended from time to time, or any
successor rule.
(k) "Stock Option" means an Incentive Stock Option or a
Non-Qualified Stock Option granted under the Plan.
(l) "Subsidiary" means any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company
if, at the time of the granting of the Stock Option, each of
the corporations other than the last corporation in the
unbroken chain owns 50% or more of the total voting power of
all classes of stock in one of the other corporations in such
chain.
2.2 Administration of the Plan
(a) The Plan shall be administered by the Committee which shall at
all times consist of two (2) or more persons, each of whom
shall be a member of the Board of Directors. Each member of
the Committee shall be a disinterested person (as such term is
defined in Rule 16b-3). The Board of Directors may from time
to time remove members from, or add members to, the Committee.
Vacancies on the Committee, howsoever caused, shall be filled
by the Board of Directors. The Committee shall select one of
its members as Chairman, and shall hold meetings at such times
and places as it may determine.
(b) The Committee shall have the full power, subject to and within
the limits of the Plan, to: (i) interpret and administer the
Plan and Stock Options granted under it; (ii) make and
interpret rules and regulations for the administration of the
Plan and to make changes in and revoke such rules and
regulations (and in the exercise of this power, shall
generally determine all questions of policy and expediency
that may arise and may correct any defect, omission, or
inconsistency in the Plan or any agreement evidencing the
grant of any Stock Option in a manner and to the extent it
shall deem necessary to make the Plan fully effective); (iii)
determine those persons to whom Stock Options shall be granted
and the number of Stock Options to be granted to any person;
(iv) determine the terms of Stock Options granted under the
Plan, consistent with the provision of the Plan; and (v)
generally, exercise such powers and perform such acts in
connection with the Plan as are deemed necessary or expedient
to promote the best interests of the Company. The
interpretation and construction by the Committee of any
provision of the Plan or of any Stock Option shall be final,
binding and conclusive.
(c) The Committee may act only by a majority of its members then
in office; however, the Committee may authorize any one (1) or
more of its members or any officer of the Company to execute
and deliver documents on behalf of the Committee.
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(d) No member of the Committee shall be liable for any action
taken or omitted to be taken or for any determination made by
him or her in good faith with respect to the Plan, and the
Company shall indemnify and hold harmless each member of the
Committee against any cost or expense (including counsel fees)
or liability (including any sum paid in settlement of a claim
with the approval of the Committee) arising out of any act or
omission in connection with the administration or
interpretation of the Plan, unless arising out of such
person's own fraud or bad faith.
2.3 Effective Date
The Plan shall become effective upon its adoption by the Board of
Directors, and Stock Options may be granted upon such adoption and from time to
time thereafter, subject, however, to approval of the Plan by affirmative vote
of the holders of a majority of the shares of the Common Stock, within 12 months
after the adoption of the Plan by the Board of Directors. If the Plan is not
approved at such annual or special meeting or at any adjournments thereof, this
Plan and all Stock Options previously granted thereunder shall become null and
void.
2.4 Duration
If approved by the shareholders of the Company, as provided in Section
2.3, unless sooner terminated by the Board of Directors, the Plan shall remain
in effect for a period of ten (10) years following its adoption by the Board of
Directors.
2.5 Shares Subject to the Plan
The maximum number of shares of Common Stock which may be subject to
Stock Options granted under the Plan shall be _______. The Stock Options shall
be subject to adjustment in accordance with Section 4.1, as appropriate, and
shares to be issued upon exercise of Stock Options may be either authorized and
unissued shares of Common Stock or authorized and issued shares of Common Stock
purchased or acquired by the Company for any purpose. If a Stock Option or
portion thereof shall expire or is terminated, cancelled or surrendered for any
reason without being exercised in full, the unpurchased shares of Common Stock
which were subject to such Stock Option or portion thereof shall be available
for future grants of Stock Options under the Plan.
2.6 Amendments
The Plan may be suspended, terminated or reinstated, in whole or in
part, at any time by the Board of Directors. The Board of Directors may from
time to time make such amendments to the Plan as it may deem advisable,
including, with respect to Incentive Stock Options, amendments deemed necessary
or desirable to comply with Section 422 of the Code and any
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regulations issued thereunder; provided, however, that without the approval of
the Company's shareholders no amendment shall be made which:
(a) Increases the maximum number of shares of Common Stock which
may be subject to Stock Options granted under the Plan (other
than as provided in Section 4.1, as appropriate); or
(b) Extends the term of the Plan; or
(c) Increases the period during which a Stock Option may be
exercised beyond ten (10) years from the date of grant; or
(d) Otherwise materially increases the benefits accruing to
Participants under the Plan;
(e) Materially modifies the requirements as to eligibility for
participation in the Plan; or
(f) Will cause Stock options granted under the Plan to fail to
meet the requirements of Rule 16b-3.
Except as otherwise provided herein, termination or amendment of the Plan shall
not, without the consent of a Participant, affect such Participant's rights
under any Stock Options previously granted to such Participant.
2.7 Participants and Grants
Stock Options may be granted by the Committee to (i) officers and other
salaried employees of the Company and its Subsidiaries with managerial,
professional or supervisory responsibilities and (ii) consultants and advisors
who render bona fide services to the Company and its Subsidiaries, in each case,
where the Committee determines that such officer, employee, consultant or
advisor has the capacity to make a substantial contribution to the success of
the Company. The Committee may grant Stock Options to purchase such number of
shares of Common Stock (subject to the limitations of Sections 2.5, 3.6 and 3.9)
as the Committee may, in its sole discretion, determine. In granting Stock
Options under the Plan, the Committee, on an individual basis, may vary the
number of Incentive Stock Options or Non-Qualified Stock Options as between
Participants and may grant Incentive Stock Options and/or Non-Qualified Stock
Options to a Participant in such amounts as the Committee may determine in its
sole discretion.
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3. STOCK OPTIONS
3.1 General
All Stock Options granted under the Plan shall be evidenced by written
agreements executed by the Company and the Participant to whom granted, which
agreement shall state the number of shares of Common Stock which may be
purchased upon the exercise thereof and shall contain such investment
representations and other terms and conditions as the Committee may from time to
time determine, or, in the case of Incentive Stock Options, as may be required
by Section 422 of the Code, or any other applicable law.
3.2 Price
Subject to the provisions of Section 3.6(d) and 4.1, the purchase price
per share of Common Stock subject to a Stock Option shall, in no case, be less
than one hundred percent (100%) of the Fair Market Value of a share of Common
Stock on the date the Stock Option is granted; provided, however, that the Board
of Directors may authorize the grant of a NonQualified Stock Option with a
purchase price per share less than the Fair Market Value if the amount of the
difference between the option purchase price and the Fair Market Value is
designated in the resolution authorizing the option.
3.3 Period
The duration or term of each Stock Option granted under the Plan shall
be for such period as the Committee shall determine but in no event more than
ten (10) years from the date of grant thereof.
3.4 Exercise
Subject to Section 4.4, Stock Options may be exercisable immediately
upon granting of the Stock Option or at such other time or times as the
Committee shall specify when granting the Stock Option. Once exercisable, a
Stock Option shall be exercisable, in whole or in part, by delivery of a written
notice of exercise to the Secretary of the Company at the principal office of
the Company specifying the number of shares of Common Stock as to which the
Stock Option is then being exercised together with payment of the full purchase
price for the shares being purchased upon such exercise. Until the shares of
Common Stock as to which a Stock Option is exercised are issued, the Participant
shall have none of the rights of a shareholder of the Company with respect to
such shares.
3.5 Payment
The purchase price for shares of Common Stock as to which a Stock
Option has been exercised and any amount required to be withheld, as
contemplated by Section 4.3, may be paid:
(a) In United States dollars in cash, or by check, bank draft or
money order payable in United States dollars to the order of
the Company; or
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(b) By the delivery by the Participant to the Company of whole
shares of Common Stock having an aggregate Fair Market Value
on the date of payment equal to the aggregate of the purchase
price of Common Stock as to which the Stock Option is then
being exercised or by the withholding of whole shares of
Common Stock having such Fair Market Value upon the exercise
of such Stock Option; or
(c) By a combination of both (a) and (b) above.
The Committee may, in its discretion, impose limitations, conditions and
prohibitions on the use by a Participant of shares of Common Stock to pay the
purchase price payable by such Participant upon the exercise of a Stock Option.
3.6 Special Rules for Incentive Stock Options
Notwithstanding any other provision of the Plan, the following
provisions shall apply to Incentive Stock Options granted under the Plan:
(a) Incentive Stock Options shall only be granted to Participants
who are employees of the Company or its Subsidiaries.
(b) To the extent that the aggregate Fair Market Value of Common
Stock, with respect to which Incentive Stock Options are
exercisable for the first time by a Participant during any
calendar year under this Plan and any other Plan of the
Company or a Subsidiary exceeds $100,000, such Stock Options
shall be treated as Non-Qualified Stock Options.
(c) Any Participant who disposes of shares of Common Stock
acquired upon the exercise of an Incentive Stock Option by
sale or exchange either within two (2) years after the date of
the grant of the Incentive Stock Option under which the shares
were acquired or within one (1) year of the acquisition of
such shares, shall promptly notify the Secretary of the
Company at the principal office of the Company of such
disposition, the amount realized, the purchase price per share
paid upon the exercise and the date of disposition.
(d) No Incentive Stock Option shall be granted to a Participant
who, at the time of the grant, owns stock representing more
than ten percent (10%) of the total combined voting power of
all classes of stock either of the Company or any parent or
Subsidiary of the Company, unless the purchase price of the
shares of Common Stock purchasable upon exercise of such
Incentive Stock Option is at least one hundred ten percent
(110%) of the Fair Market Value (at the time the Incentive
Stock Option is granted) of the Common Stock and the Incentive
Stock Option is not exercisable more than five (5) years from
the date it is granted.
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3.7 Termination of Employment
(a) In the event a Participant's employment by, or relationship
with, the Company shall terminate for any reason other than
those reasons specified in Sections 3.7(b), (c), (d) or (e)
hereof while such Participant holds Stock Options granted
under the Plan, then all rights of any kind under any
outstanding Option held by such Participant which shall not
have previously lapsed or terminated shall expire immediately.
(b) If a Participant's employment by, or relationship with, the
Company or its Subsidiaries shall terminate as a result of
such Participant's total disability, each Stock Option held by
such Participant (which has not previously lapsed or
terminated) shall be exercisable by such Participant for a
period of six months after termination but only to the extent
the Option is otherwise exercisable during that period.
Notwithstanding the foregoing, the Committee may in the event
of such disability accelerate the date after which a Stock
Option is exercisable, in whole or in part, which change shall
be in the Committee's sole discretion and be final, binding
and conclusive. For purposes of this paragraph, "total
disability" shall mean permanent mental or physical disability
as determined by the Committee.
(c) In the event of the death of a Participant, each Stock Option
held by such Participant (which has not previously lapsed or
terminated) shall be exercisable by the executor or
administrator of the Participant's estate or by the person or
persons to whom the deceased Participant's rights thereunder
shall have passed by will or by the laws of descent or
distribution, for a period of six (6) months after such
Participant's death but only to the extent the Option is
otherwise exercisable during that period. Notwithstanding the
foregoing, the Committee may in the event of such death
accelerate the date after which a Stock Option is exercisable,
in whole or in part, which change shall be in the Committee's
sole discretion and be final, binding and conclusive.
(d) If a Participant's employment by the Company shall terminate
by reason of such Participant's retirement in accordance with
Company policies, each Stock Option held by such Participant
at the date of termination (which has not previously lapsed or
terminated) shall be exercisable for a period of three (3)
months after termination, but only to the extent the Option is
otherwise exercisable during that period.
(e) In the event the Company terminates the employment of a
Participant who at the time of such termination was an officer
of the Company and had been continuously employed by the
Company during the two (2) year period immediately preceding
such termination, for any reason except "good cause"
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(hereafter defined) and except upon such Participant's death,
total disability or retirement in accordance with Company
policies, each Stock Option held by such Participant (which
has not previously lapsed or terminated and which has been
held by such Participant for more than six (6) months prior to
such termination) shall be exercisable for a period of three
(3) months after such termination, but only to the extent the
Option is otherwise exercisable during that period. A
termination for "good cause" shall be deemed to have occurred
only if the Participant in question (i) is terminated by
written notice for dishonesty, because of his conviction of a
felony, or because of his violation of any material provision
of any employment or other agreement with the Company or any
of its Subsidiaries, or (ii) shall voluntarily resign or
terminate his employment with the Company or any of its
Subsidiaries under or followed by such circumstances as would
constitute a breach of any material provision of any
employment or other agreement between him and the Company or
any of its Subsidiaries, or (iii) shall have committed an act
of dishonesty not discovered by the Company or any of its
Subsidiaries prior to the cessation of his employment with the
Company or any of its Subsidiaries, but which would have
resulted in his discharge if discovered prior to such date, or
(iv) shall, either before or after cessation of his employment
with the Company or any of its Subsidiaries, without the
written consent of the company or any of its Subsidiaries, use
(except for the benefit of the Company or any of its
Subsidiaries) or disclose to any other person any confidential
information relating to the business or any trade secrets of
the Company or any of its Subsidiaries obtained as a result of
or in connection with such employment.
3.8 Effect of Leaves of Absence
It shall not be considered a termination of employment when a
Participant is on military or sick leave or such other type leave of absence
which is considered as continuing intact the employment relationship of the
Participant with the Company or any of its Subsidiaries. In case of such leave
of absence, the employment relationship shall be deemed to have continued until
the later of (i) the date when such leave shall have lasted ninety (90) days in
duration, or (ii) the date as of which the Participant's right to employment
shall have no longer been guaranteed either by statute or contract.
3.9 Limitation on Number of Options Granted to Employees
The maximum number of shares for which options may be granted to an
employee of the Company during any calender year shall not exceed ________.
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4. MISCELLANEOUS PROVISIONS
4.1 Adjustments Upon Changes in Capitalization
(a) In the event of changes to the outstanding shares of Common
Stock of the Company through reorganization, merger,
consolidation, recapitalization, reclassification, stock
split-up, stock dividend, stock consolidation or otherwise, or
in the event of a sale of all or substantially all of the
assets of the Company, an appropriate and proportionate
adjustment shall be made in the number and kind of shares as
to which Stock Options may be granted. A corresponding
adjustment changing the number or kind of shares and/or the
purchase price per share of unexercised Stock Options or
portions thereof which shall have been granted prior to any
such change shall likewise be made.
(b) Notwithstanding the foregoing, in the case of a
reorganization, merger or consolidation, or sale of all or
substantially all of the assets of the Company, in lieu of
adjustments as aforesaid, the Committee may in its discretion
accelerate the date after which a Stock Option may or may not
be exercised or the stated expiration date thereof.
Adjustments or changes under this Section shall be made by the
Committee, whose determination as to what adjustments or
changes shall be made, and the extent thereof, shall be final,
binding and conclusive.
4.2 Non-Transferability
No Stock Option shall be transferable except by will or the laws of
descent and distribution, nor shall any Stock Option be exercisable during the
Participant's lifetime by any person other than the Participant or his guardian
or legal representative.
4.3 Withholding
The Company's obligations under this Plan shall be subject to
applicable federal, state and local tax withholding requirements. Federal, state
and local withholding tax due at the time of a grant or upon the exercise of any
Stock Option may, in the discretion of the Committee, be paid in shares of
Common Stock already owned by the Participant or through the withholding of
shares otherwise issuable to such Participant, upon such terms and conditions as
the Committee shall determine. If the Participant shall fail to pay, or make
arrangements satisfactory to the Committee for the payment, to the Company of
all such federal, state and local taxes required to be withheld by the Company,
then the Company shall, to the extent permitted by law, have the right to deduct
from any payment of any kind otherwise due to such Participant an amount equal
to any federal, state or local taxes of any kind required to be withheld by the
Company.
4.4 Compliance with Law and Approval of Regulatory Bodies
No Stock Option shall be exercisable and no shares will be delivered
under the Plan except in compliance with all applicable federal and state laws
and regulations including, without limitation, compliance with all federal and
state securities laws and withholding tax requirements and with the rules of
NASDAQ and of all other domestic stock exchanges on which the Common
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Stock may be listed. Any share certificate issued to evidence shares for which a
Stock Option is exercised may bear legends and statements the Committee shall
deem advisable to assure compliance with federal and state laws and regulations.
No Stock Option shall be exercisable and no shares will be delivered under the
Plan, until the Company has obtained consent or approval from regulatory bodies,
federal or state, having jurisdiction over such matters as the Committee may
deem advisable. In the case of the exercise of a Stock Option by a person or
estate acquiring the right to exercise the Stock Option as a result of the death
of the Participant, the Committee may require reasonable evidence as to the
ownership of the Stock Option and may require consents and releases of taxing
authorities that it may deem advisable.
4.5 No Right to Employment
Neither the adoption of the Plan nor its operation, nor any document
describing or referring to the Plan, or any part thereof, nor the granting of
any Stock Options hereunder, shall confer upon any Participant under the Plan
any right to continue in the employ of the Company or any Subsidiary, or shall
in any way affect the right and power of the Company or any Subsidiary to
terminate the employment of any Participant at any time with or without
assigning a reason therefore, to the same extent as might have been done if the
Plan had not been adopted.
4.6 Exclusion from Pension Computations
By acceptance of a grant of a Stock Option under the Plan, the
recipient shall be deemed to agree that any income realized upon the receipt or
exercise thereof or upon the disposition of the shares received upon exercise
will not be taken into account as "base remuneration", "wages", "salary" or
"compensation" in determining the amount of any contribution to or payment or
any other benefit under any pension, retirement, incentive, profit-sharing or
deferred compensation plan of the Company or any Subsidiary.
4.7 Abandonment of Options
A Participant may at any time abandon a Stock Option prior to its
expiration date. The abandonment shall be evidenced in writing, in such form as
the Committee may from time to time prescribe. A Participant shall have no
further rights with respect to any Stock Option so abandoned.
4.8 Severability
If any of the terms or provisions of the Plan conflict with the
requirements of Rule 16b-3, then such terms or provisions shall be deemed
inoperative to the extent they so conflict with the requirements of Rule 16b-3.
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4.9 Interpretation of the Plan
Headings are given to the Sections of the Plan solely as a convenience
to facilitate reference, such headings, numbering and paragraphing shall not in
any case be deemed in any way material or relevant to the construction of the
Plan or any provision hereof. The use of the masculine gender shall also include
within its meaning the feminine. The use of the singular shall also include
within its meaning the plural and vice versa.
4.10 Use of Proceeds
Funds received by the Company upon the exercise of Stock Options shall
be used for the general corporate purposes of the Company.
4.11 Construction of Plan
The place of administration of the Plan shall be in the State of
Illinois, and the validity, construction, interpretation, administration and
effect of the Plan and of its rules and regulations, and rights relating to the
Plan, shall be determined solely in accordance with the laws of the State of
Illinois.
BOARD OF DIRECTORS APPROVAL _______________________
SHAREHOLDER APPROVAL _____________________________
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