ARTICLES OF AMENDMENT OF
ARTICLES OF INCORPORATION
OF
NATURAL HEALTH TRENDS CORP.
Pursuant to the provisions of section 607.1006, Florida Statutes,
Natural Health Trends Corp. (the "Corporation") adopts the following articles of
amendment to its articles of incorporation:
I. ARTICLE IV is hereby amended by adding the following as Part C.
PART C
Series A Preferred Stock
Two thousand two hundred (2,200) of the 1,500,000 authorized
shares of Preferred Stock of the Corporation shall be designated Series A
Preferred Stock (the "Series A Preferred Stock") and shall possess the rights
and privileges set forth below:
A. Par Value, Stated Value, Purchase Price and
Certificates.
1. Each share of Series A Preferred Stock shall
have a par value of $.001, and a stated value (face amount) of One Thousand
Dollars ($1,000) (the "Stated Value").
2. The Series A Preferred Stock shall be
offered at a purchase price of One Thousand Dollars ($1,000) per share.
3. Certificates representing the shares of
Series A Preferred Stock purchased shall be issued by the Corporation to the
purchasers immediately upon acceptance of the subscriptions to purchase such
shares.
B. Dividends.
Holders of the shares of Series A Preferred Stock
shall be entitled to receive out of the assets of the Corporation legally
available therefor cash dividends at the rate of 8% of the Stated Value per
annum, payable upon the conversion of the shares of Common Stock. Such dividend
shall be payable in Common Stock of the Corporation, at the option of the
Corporation. If such dividends are paid in shares of Common Stock, then the
number of shares of Common Stock to be issued on account of the accrued
dividends shall be equal to the amount of the dividend divided by 80% of the
Closing Bid Price, as hereinafter defined, for the five (5) trading days
preceding the Notice Date, as hereinafter defined.
C. Liquidation Preference.
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1. In the event of any liquidation, dissolution
or winding-up of the Corporation, either voluntary or involuntary (a
"Liquidation"), the Holders of shares of the Series A Preferred Stock then
issued and outstanding shall be entitled to be paid out of the assets of the
Corporation available for distribution to its shareholders, whether from
capital, surplus or earnings, before any payment shall be made to the Holders of
shares of the Common Stock or upon any other series of Preferred Stock of the
Corporation, an amount per share equal to the sum of (i) the Stated Value and
(ii) an amount equal to eight percent (8%) of the Stated Value multiplied by the
fraction N/365, where N equals the number of days elapsed since full payment for
the shares of Series A Preferred Stock. If, upon any Liquidation of the
Corporation, the assets of the Corporation available for distribution to its
shareholders shall be insufficient to pay the Holders of shares of the Series A
Preferred Stock and the Holders of any other series of Preferred Stock with a
liquidation preference equal to the liquidation preference of the Series A
Preferred Stock the full amounts to which they shall respectively be entitled,
the Holders of shares of the Series A Preferred Stock and the Holders of any
other series of Preferred Stock with a liquidation preference equal to the
liquidation preference of the Series A Preferred Stock shall receive all the
assets of the Corporation available for distribution and each such Holder of the
Series A Preferred Stock and the Holders of any other series of preferred stock
with a liquidation preference equal to the liquidation preference of the Series
A Preferred Stock shall share ratably in any distribution in accordance with the
amounts due such shareholders. After payment shall have been made to the Holders
of shares of the Series A Preferred Stock of the full amount to which they shall
be entitled, as aforesaid, the Holders of shares of the Series A Preferred Stock
shall be entitled to no further distributions thereon and the Holders of shares
of the Common Stock and of shares of any other series of stock of the
Corporation shall be entitled to share, according to their respective rights and
preferences, in all remaining assets of the Corporation available for
distribution to its shareholders.
2. A merger or consolidation of the Corporation
with or into any other corporation, or a sale, lease, exchange, or transfer of
all or any part of the assets of the Corporation which shall not in fact result
in the liquidation (in whole or in part) of the Corporation and the distribution
of its assets to its shareholders shall not be deemed to be a voluntary or
involuntary liquidation (in whole or in part), dissolution, or winding-up of the
Corporation.
D. Conversion of Series A Preferred Stock.
The Holders of Series A Preferred Stock shall have
the following conversion rights:
1. Right to Convert. Each share of Series A
Preferred Stock shall be convertible, on the Conversion Dates and at the
Conversion Prices set forth below, into fully paid and nonassessable shares of
Common Stock (sometimes referred to herein as "Conversion Shares").
2. Mechanics of Conversion. Commencing sixty
(60) days after the issuance of the shares of Series A Preferred Stock and
provided that the Conversion Shares have been registered under the Securities
Act of 1933, as amended (the "Act"), each Holder of Series
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A Preferred Stock who desires to convert the same into shares of Common Stock
shall provide notice (the "Conversion Notice") via telecopy (or an original) to
the Corporation. The certificate or certificates representing the Series A
Preferred Stock for which conversion is elected, shall be delivered to the
Corporation within five (5) business days of the delivery of the Conversion
Notice. The date upon which a Conversion Notice is received by the Corporation
shall be a "Notice Date."
The Corporation shall use all reasonable efforts to
issue and deliver within five (5) business days after the Notice Date, to such
Holder of Series A Preferred Stock at the address of the Holder on the stock
books of the Corporation, a certificate or certificates for the number of shares
of Common Stock to which the Holder shall be entitled as aforesaid; provided
that the original shares of Series A Preferred Stock to be converted are
received by the transfer agent or the Corporation within five (5) business days
after the Notice Date and the person or persons entitled to receive the shares
of Common Stock issuable upon such conversion shall be treated for all purposes
as the record Holder or Holders of such shares of Common Stock on such date. If
the original certificate(s) representing the shares of Series A Preferred Stock
to be converted are not received by the transfer agent or the Corporation within
five (5) business days after the Notice Date, the Conversion Notice shall become
null and void at the option of the Corporation.
3. Lost or Stolen Certificates. Upon receipt
by the Corporation of evidence of the loss, destruction, theft or mutilation of
any Series A Preferred Stock certificates (the "Certificates") and (in the case
of loss, theft or destruction) of indemnity or security reasonably satisfactory
to the Corporation, and upon surrender and cancellation of the Certificates, if
mutilated, the Corporation shall execute and deliver new Series A Preferred
Stock Certificates of like tenor and date. However, the Corporation shall not be
obligated to re-issue such lost or stolen Series A Preferred Stock Certificates
if the Holder thereof contemporaneously requests the Corporation to convert such
Series A Preferred Stock into Common Stock, in which event the Corporation shall
be entitle to rely on an affidavit of loss, destruction or theft of the Series A
Preferred Stock Certificate or, in the case of mutilation, tender of the
mutilated certificate, and shall issue the Conversion Shares.
4. Conversion Period. The Series A Preferred
Stock shall become convertible into shares of Common Stock at any time
commencing on the later of (i) the effective date of a registration statement
filed under the Act covering the Conversion Shares; or (ii) sixty (60) days
following the date of issuance of the shares of Series A Preferred Stock to be
converted.
5. Conversion Formula/Conversion Price. Each
share of Series A Preferred Stock shall be convertible into the number of
Conversion Shares based upon a conversion price (the "Conversion Price") equal
to 80% of the average Closing Bid Price of the Common Stock for the five (5)
trading days immediately preceding the Notice Date. For purposes hereof, the
term "Closing Bid Price" shall mean the closing bid price on the NASDAQ SmallCap
Stock Market ("NASDAQ"), or if no longer traded thereon, the closing bid price
on the principal national securities exchange on which the Common Stock is so
traded. In the event that the registration statement for the Conversion Shares
has not been declared effective within
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sixty (60) days of the date of issuance of the Series A Preferred Stock then (i)
the Conversion Price shall be reduced to 75% of the average Closing Bid Price
for the five (5) trading days immediately preceding the Notice Date and (ii) the
Holder shall be entitled to the amounts due pursuant to the Registration Rights
Agreement entered into between the Holder and the Corporation.
6. Automatic Conversion. Each share of Series
A Preferred Stock outstanding thirty six (36) months from the date of issuance
automatically shall be converted into Common Stock on such date in accordance
with the Conversion Formula and the Conversion Price then in effect, and such
date shall be deemed to be the Notice Date with respect to such conversion.
7. No Fractional Shares. If any conversion of
the Series A Preferred Stock would create a fractional share of Common Stock or
a right to acquire a fractional share of Common Stock, such fractional share
shall be disregarded and the number of shares of Common Stock issuable upon
conversion, if the aggregate, shall be the next higher number of shares.
8. Redemption Terms. The Corporation shall have
the right, at its sole option, to redeem all or part of the Series A Preferred
Stock within 240 days of the date of issuance. In the event the Corporation
exercises such right of redemption it shall pay to the Holder (i) if within
sixty (60) days of the date of issuance, One Hundred Twenty Five Percent (125%)
of the Stated Value of the redeemed shares of Series A Preferred Stock, or (ii)
if within sixty one (61) days and two hundred forty (240) days of the date of
issuance, One Hundred Thirty (130%) percent of the Stated Value of the redeemed
shares of Series A Preferred Stock and the Holder shall be entitled to the
amounts due pursuant to the Registration Rights Agreement entered into between
the Holder and the Corporation. Redemption by the Corporation shall be effected
by the Corporation notifying the Holder by facsimile of the Corporation's
intention to exercise its right of redemption. The Corporation shall state in
such notice the number of shares of Series A Preferred Stock it intends to
redeem, the amount that it will pay to effectuate such redemption and the date
by which the Holder must deliver the shares of Series A Preferred Stock
redeemed. The Corporation shall give the Holder at least two (2) business days'
notice of the above information with respect to the shares of Series A Preferred
Stock for which a Conversion Notice has not been received by the Corporation.
The Holder shall not be entitled to send a Conversion Notice to the Corporation
with respect to the shares of Series A Preferred Stock being redeemed during
such period.
9. (a) If the Conversion Shares have been
registered and have not been delivered within ten (10) business days after the
Notice Date, then and in such event the Corporation shall pay to Holder one
percent (1%) in cash, of the Stated Value of the Series A Preferred Stock being
converted per each day after the tenth business day following the Notice Date
that the Conversion Shares are not delivered.
(b) To the extent that the failure of the
Corporation to issue the Conversion Shares is due to the unavailability of
authorized but unissued shares of Common
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Stock, the provisions of this Section 9 shall not apply but instead the
provisions of Section 10 shall apply.
(c) The Corporation shall make any payments incurred under
this Section 9 in immediately available funds within three (3) business days
from the date of issuance of the applicable shares of Common Stock. Nothing
herein shall limit a Holder's right to pursue actual damages for the
Corporation's failure to issue and deliver Common Stock to the Holder within
five (5) business days after the Notice Date.
(d) If the original certificate(s)
representing the Conversion Shares have not been delivered to the Holder within
ten (10) business days after the Notice Date, the Conversion Notice shall become
null and void at the option of the Holder. In the event that the Holder does not
declare the Conversion Notice null and void, then paragraph 9(a) shall apply.
10. If, at any time a Holder submits a Notice of
Conversion and the Corporation does not have sufficient authorized but unissued
shares of Common Stock available to effect, in full, a conversion of the shares
of Series A Preferred Stock (a "Conversion Default"), the date of such default
being referred to herein as the "Conversion Default Date"), the Corporation
shall issue to the Holder all of the shares of Common Stock which are available,
and the Notice of Conversion as to any shares of Series A Preferred Stock
requested to be converted but not converted (the "Unconverted Shares"), upon
Holder's sole option, may be deemed null and void. The Corporation shall provide
notice of such Conversion Default ("Notice of Conversion Default") to all
existing Holders of outstanding shares of Series A Preferred Stock, by
facsimile, within one (1) business day of such default (with the original
delivered by overnight or two day courier), and the Holder shall give notice to
the Corporation by facsimile within five (5) business days of receipt of the
original Notice of Conversion Default (with the original delivered by overnight
or two day courier) of its election to either nullify or confirm the Notice of
Conversion.
The Corporation agrees to pay all Holders of outstanding
shares of Series A Preferred Stock payments for a Conversion Default
("Conversion Default Payments") in the amount of (N/365) x (.24) x the initial
Stated Value of the outstanding and/or tendered but not converted shares of
Series A Preferred Stock held by each Holder where N = the number of days from
the Conversion Default Date to the date (the "Authorization Date") that the
Corporation authorizes a sufficient number of shares of Common Stock to effect
conversion of all remaining shares of Series A Preferred Stock by the fifth day
of the following calendar month. The Corporation shall send notice
("Authorization Notice") to each Holder of outstanding shares of Series A
Preferred Stock that additional shares of Common Stock have been authorized, the
Authorization Date and the amount of Holder's accrued Conversion Default
Payments. The accrued Conversion Default Payments shall be paid in cash or shall
be convertible into Common Stock at the Conversion Price, at the Holder's
option, payable as follows: (i) in the event Holder elects to take such payment
in cash, cash payments shall be made to such Holder or (ii) in the event that
the Holder elects to take such payment in Common Stock, the Holder may convert
such payment amount into Common Stock at the Conversion Price at anytime after
the fifth day
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of the calendar month following the month in which the Authorization Notice was
received, until the expiration of the thirty six month (36) conversion period.
Nothing herein shall limit the Holder's
right to pursue actual damages for the Corporation's failure to maintain a
sufficient number of authorized shares of Common Stock.
11. Except in the case of the provisions
contained in Section 6, in no event shall the Holder be entitled to convert any
shares of Series A Preferred Stock in excess of that number of shares of Series
A Preferred Stock upon conversion of which the sum of (1) the number of shares
of Common Stock beneficially owned by the Holder and its affiliates (other than
shares of Common Stock which may be deemed beneficially owned through the
ownership of the unconverted portion of the shares of Series A Preferred Stock),
and (2) the number of shares of Common Stock issuable upon the conversion of the
shares of Series A Preferred Stock with respect to which the determination of
this provision is being made, would result in beneficial ownership by the Holder
and its affiliates of more than 4.9% of the outstanding shares of Common Stock
of the Corporation. For purposes of this provision, beneficial ownership shall
be determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended, and Regulation 13 D-G thereunder, except as otherwise provided
in clause (1) above.
12. Reservation of Stock Issuable Upon Conversion.
The Corporation shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock, solely for the purpose of
effecting the conversion of the shares of the Series A Preferred Stock, such
number of its shares of Common Stock as shall from time to time be sufficient to
effect the conversion of all then outstanding shares of Series A Preferred
Stock; and if at any time the number of authorized but unissued share of Common
Stock shall not be sufficient to effect the conversion of all then outstanding
shares of the Series A Preferred Stock, the Corporation will take such corporate
action as may be necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient for such purpose.
E. Voting. Except as otherwise provided below or by the
Florida Statutes, the Holders of the Series A Preferred Stock shall have no
voting power whatsoever, and no Holder of Series A Preferred Stock shall vote or
otherwise participate in any proceeding in which action shall be taken by the
Corporation or the shareholders thereof or be entitled to notification as to any
meeting of the Board of Directors or the shareholders.
F. Protective Provisions. So long as shares of Series A
Preferred Stock are outstanding, the Corporation shall not, without first
obtaining the approval (by vote or written consent, as provided by law) of the
Holders of at least seventy-five percent (75%) of the then outstanding shares of
Series A Preferred Stock:
1. alter or change the rights, preferences or
privileges of the Series A Preferred Stock so as to affect adversely the Series
A Preferred Stock;
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2. do any act or thing not authorized or
contemplated by this Article IV which would result in taxation of the Holders of
shares of the Series A Preferred Stock under Section 305 of the Internal Revenue
Code of 1986, as amended (or any comparable provision of the Internal Revenue
Code as hereafter from time to time amended); or
3. enter into a merger in which the Corporation
is not the surviving corporation; provided, however, that the provisions of this
subparagraph (3) shall not be applicable to any such merger if the authorized
capital stock of the surviving corporation immediately after such merger shall
include only classes or series of stock for which no such consent or vote would
have been required pursuant to this section if such class or series had been
authorized by the Corporation immediately prior to such merger or which have the
same rights, preferences and limitations and authorized amount as a class or
series of stock of the Corporation authorized (with such consent or vote of the
Series A Preferred Stock) prior to such merger and continuing as an authorized
class or series at the time thereof.
G. Status of Converted Stock. In the event any shares of
Series A Preferred Stock shall be converted as contemplated by this Article IV,
the shares so converted shall be canceled, shall return to the status of
authorized but unissued Preferred Stock of no designated class or series, and
shall not be issuable by the Corporation as Series A Preferred Stock.
H. Taxes. All shares of Common Stock issued upon conversion of
Series A Preferred Stock will be validly issued, fully paid and nonassessable.
The Corporation shall pay any and all documentary stamp or similar issue or
transfer taxes that may be payable in respect of any issue or delivery of shares
of Common Stock on conversion of Series A Preferred Stock pursuant hereto. The
Corporation shall not, however, be required to pay any tax which may be payable
in respect of any transfer involved in the issue and delivery of shares of
Common Stock in a name other than that in which the Series A Preferred Stock so
converted were registered, and no such issue or delivery shall be made unless
and until the person requesting such transfer has paid to the Corporation the
amount of any such tax or has established to the satisfaction of the Corporation
that such tax has been paid or that no such tax is payable. The Corporation
shall adjust the amount of dividends paid or accrued so as to indemnify the
Holders of Series A Preferred Stock against any withholding or similar tax in
respect of such dividends.
II. These Articles of Amendment of Articles of Incorporation were
adopted by the Board of Directors without shareholder action and shareholder
action was not required on May 22, 1997.
Signed on May 22, 1997
NATURAL HEALTH TRENDS CORP.
By: _/S/__Neal R. Heller___________________
Name: Neal R. Heller
Title: President
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