EXHIBIT A
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 G.
PART G
Series E Preferred Stock
One Thousand Seven Hundred Twenty (1,720) of the 1,500,000
authorized shares of Preferred Stock of the Corporation shall be designated
Series E Preferred Stock (the "Series E 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 E 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 E Preferred Stock shall be offered at a purchase price of
One Thousand Dollars ($1,000) per share.
3. Certificates representing the shares of Series E 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 E Preferred Stock shall be entitled to receive
out of the assets of the Corporation legally available therefor cash dividends
at the rate of 10% of the Stated Value per annum, payable upon the conversion of
the shares of Common Stock. Such dividend shall be payable in shares of 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 the lower of (i) the Closing Bid Price, as hereinafter
defined, on the date of issuance (the "Fixed Conversion Price") or (ii) 75% of
the Closing Bid Price, for the five (5) trading days preceding the Notice Date,
as hereinafter defined.
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C. Liquidation Preference.
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 E 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 junior to the Series
E Preferred Stock, an amount per share equal to the sum of (i) the Stated Value
and (ii) an amount equal to ten percent (10%) 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 E 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 E
Preferred Stock and the Holders of any other series of Preferred Stock with a
liquidation preference equal to the liquidation preference of the Series E
Preferred Stock the full amounts to which they shall respectively be entitled,
the Holders of shares of the Series E Preferred Stock and the Holders of any
other series of Preferred Stock with a liquidation preference equal to the
liquidation preference of the Series E Preferred Stock shall receive all the
assets of the Corporation available for distribution and each such Holder of the
Series E Preferred Stock and the Holders of any other series of preferred stock
with a liquidation preference equal to the liquidation preference of the Series
E 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 E Preferred Stock of the full amount to which they shall
be entitled, as aforesaid, the Holders of shares of the Series E 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 E Preferred Stock.
The Holders of Series E Preferred Stock shall have
the following conversion rights:
1. Right to Convert. Each share of Series E 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").
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2. Mechanics of Conversion. Commencing sixty (60) days after the
issuance of the shares of Series E Preferred Stock each Holder of Series E
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 shares of
Series E Preferred Stock for which conversion is elected, shall accompany 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 E
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.
3. Lost or Stolen Certificates. Upon receipt by the Corporation of
evidence of the loss, destruction, theft or mutilation of any Series E 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 E Preferred
Stock Certificates of like tenor and date. However, the Corporation shall not be
obligated to re-issue such lost or stolen Series E Preferred Stock Certificates
if the Holder thereof contemporaneously requests the Corporation to convert such
Series E 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 E
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 E Preferred Stock shall become
convertible into shares of Common Stock at any time commencing sixty (60) days
after the issuance of the shares of Series E Preferred Stock.
5. Conversion Formula/Conversion Price. Each share of Series E
Preferred Stock shall be convertible into the number of Conversion Shares based
upon a conversion price (the "Conversion Price") equal to the lower of (i) the
Closing Bid Price of the Common Stock on the date of issuance of the shares of
Series E Preferred Stock or (ii) 75% 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 SmaIlCap Stock Market ("NASDAQ") as reported by
Bloomberg, LP, or if no longer traded thereon, the closing bid price on the
principal national securities exchange on which the Common Stock is so traded.
(a) In the event that the Corporation shall at any time after the
date of issuance of the Series E Preferred Stock: (i) declare a dividend on the
outstanding Common Stock payable in shares of its capital stock; (ii) subdivide
the outstanding Common Stock; (iii) combine the outstanding Common Stock into a
smaller number of shares; or (iv) issue any shares of its capital stock by
reclassification of the Common Stock (including any such reclassification in
connection with a consolidation or merger in which the Corporation is the
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continuing corporation), then, in each case, the Fixed Conversion Price per
share in effect at the time of the record date for the determination of
stockholders entitled to receive such dividend or distribution or of the
effective date of such subdivision, combination, or reclassification shall be
adjusted so that it shall equal the price determined by multiplying such Fixed
Conversion Price by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such action, and the
denominator of which shall be the number of shares of Common Stock outstanding
after giving effect to such action. Such adjustment shall be made successively
whenever any event listed above shall occur and shall become effective at the
close of business on such record date or at the close of business on the date
immediately preceding such effective date, as applicable.
6. Automatic Conversion. Each share of Series E Preferred Stock
outstanding twenty four (24) months from the date of issuance automatically
shall be converted into Common Stock based upon 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 E 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. Limitation on the Issuance of shares of Common Stock. In no event
shall the Corporation be required to issue more than 20% of the number of shares
of Common Stock outstanding on the date of issuance of the Series E Preferred
Stock upon the conversion of the shares of Series E Preferred Stock unless the
stockholders of the Corporation approve the issuance of additional shares of
Common Stock upon the conversion of the shares of Series E Preferred Stock or
The NASDAQ Stock Market, Inc. ("NASDAQ") waives the requirements of Market Place
Rule 4460(i)(1)(D). In the event that 20% of the number of shares of Common
Stock outstanding on the date of issuance of the Series E Preferred Stock have
been issued upon the conversion of the Series E Preferred Stock, and (i) NASDAQ
has not waived the requirements of Market Place Rule 4460(i)(1)(D) or (ii) the
stockholders have not approved the issuance of additional shares of Common
Stock, then any shares of Series E Preferred Stock that remain unconverted
shall, at the election of the Holder, be redeemed by the Corporation at a
redemption price equal to 133% percent of the sum of (i) the face amount of the
shares of Series E Preferred Stock and (ii) an amount equal to any accrued and
unpaid dividends thereon, within five (5) business days of the Holder's
election. The Corporation agrees to take such corporate action as may be
necessary to obtain the approval of the stockholders to issue additional shares
of Common Stock upon the conversion of the shares of Series E Preferred Stock.
9. Conversion Defaults.
(a) In the event that the Conversion Shares are not delivered per
the written instructions of the Holder, within five (5) business days after the
Notice Date, then in such event the Corporation shall pay to Holder one percent
(1%) of the Stated Value in cash or shares of Common Stock, based upon the
Conversion Price, at the option of the Purchaser, of the
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shares of Series E Preferred Stock being converted per each day after the fifth
business day following the Notice Date that the certificates for 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 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 cash payments in
immediately available funds or issue such shares of Common Stock incurred under
this Section 9 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 or cancel the conversion for the Corporation's failure
to issue and deliver Common Stock to the Holder within ten (10) 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.
10. Lack of Authorized Shares. 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 E 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 E
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 E
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 E
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 E 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 E 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 E 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 shares of
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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
of the calendar month following the month in which the Authorization Notice was
received, until the expiration of the twenty four month (24) 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. Limitation on Conversion. 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 E Preferred Stock in excess of that number of shares of Series
E Preferred Stock upon conversion of which the sum of(l) 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 E Preferred Stock),
and (2) the number of shares of Common Stock issuable upon the conversion of the
shares of Series E 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 E 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 E Preferred Stock; and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of all then outstanding shares of the Series E
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 E Preferred Stock shall have no voting power
whatsoever, and no Holder of Series E 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 E Preferred Stock
are outstanding, the Corporation shall not, without first obtaining the approval
(by vote or written consent, as provided by Jaw) of the Holders of at least
seventy-five percent (75%) of the then outstanding shares of Series E Preferred
Stock:
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1. alter or change the rights, preferences or privileges of the Series E
Preferred Stock so as to affect adversely the Series E Preferred Stock;
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 E
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 E
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 E 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 E Preferred Stock.
H. Taxes. All shares of Common Stock issued upon conversion of
Series E 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 E 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 E 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 E Preferred Stock against any withholding or similar tax in
respect of such dividends.
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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 August __, 1998.
Signed on August ___, 1998
NATURAL HEALTH TRENDS CORP.
By: Sir Brian Wolfson
Name: Sir Brian Wolfson
Title: Chairman
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