SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] Soliciting Material Under Rule
[_] Confidential, For Use of the 14a-12
Commission Only (as permitted
by Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
RELIV' INTERNATIONAL, INC.
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[_] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
________________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
________________________________________________________________________________
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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[_] Fee paid previously with preliminary materials:
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[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
1) Amount previously paid:
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4) Date Filed:
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RELIV' INTERNATIONAL, INC.
136 Chesterfield Industrial Boulevard
Chesterfield, Missouri 63005
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO
BE HELD ON MAY 22, 2003
To: Shareholders of Reliv' International, Inc.
The Annual Meeting of the shareholders of Reliv' International, Inc. will
be held at Reliv' International, Inc., Corporate Headquarters, 136 Chesterfield
Industrial Boulevard, Chesterfield, Missouri 63005, on Thursday, May 22, 2003,
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 approve the adoption of the Reliv' International, Inc. 2003 Stock
Option Plan (Item 2 on the proxy card);
3. To authorize and approve a one-for-four split of the Company's
Common Stock (Item No. 3 on the proxy card).
4. To authorize an amendment to the Company's Certificate of
Incorporation to increase the authorized shares of the Company's
Common Stock, $0.001 par value, from 20,000,000 shares to 30,000,000
shares. (Item No. 4 on proxy card.)
5. To ratify the appointment of Ernst & Young LLP as auditors of the
Company for 2003 (Item No. 5 on proxy card); and
6. To transact such other business as may properly come before the
meeting.
The close of business on March 27, 2003, 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 24, 2003 /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.
1
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"), a Delaware corporation, to be held on
Thursday, May 22, 2003. The proxy materials are being mailed to shareholders of
record on April 24, 2003.
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 March 27, 2003,
are entitled to vote at the Annual Meeting. On that day, there were issued and
outstanding 11,955,960 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, approve the 2003 Stock Option Plan, authorize the one-for-four stock
split and approve the appointment of the Company's auditors. A majority of the
shares entitled to vote at the meeting will be required to authorize the
amendment to the Company's Certificate of Incorporation. 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
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specifications. If a shareholder fails to so specify with respect to such
proposals, the proxy will be voted "FOR" the nominees for directors contained in
these proxy materials, "FOR" approval of the 2003 Stock Option Plan, "FOR"
approval of the Common Stock split, "FOR" approval of the amendment to the
Company's Certificate of Incorporation, and "FOR" the appointment of the
Company's auditors.
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 March 27, 2003. 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 March 27,
2003.
Amount and nature of
Name of beneficial owner beneficial ownership(1) Percent of class(1)(2)
------------------------ ----------------------- ----------------------
Robert L. and Sandra S. Montgomery(3) 3,239,083 25.95%
Carl W. Hastings(4) 1,150,602 9.47%
David G. Kreher 481,233 3.99%
Stephen M. Merrick(5) 795,721 6.6%
Donald L. McCain 494,064 4.05%
Marvin W. Solomonson 408,405 3.42%
Thomas T. Moody 198,361 1.65%
Thomas W. Pinnock III 94,620 *
John B. Akin 50,904 *
Donald E. Gibbons, Jr. 183,969 1.53%
Steven D. Albright 47,550 *
All Directors and Executive Officers as a Group
(12 persons) 7,144,512 53.25%
* less than one percent
(footnotes on next page)
3
(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 March 27, 2003, through the exercise of stock options
or warrants: Mr. Montgomery - 526,578, Dr. Hastings - 190,185, Mr. Kreher
- 112,309, Mr. Merrick -120,238, Mr. McCain - 244,839, Mr. Solomonson - 0,
Mr. Moody - 54,409, Mr. Pinnock - 54,024, Mr. Akin - 41,666, Mr. Gibbons -
81,981, and Mr. Albright - 34,319.
(2) The calculation of percent of class is based upon the number of shares of
Common Stock outstanding as of March 27, 2003.
(3) Mr. Robert L. Montgomery is Chairman of the Board of Directors, Chief
Executive Officer and President of the Company. Mrs. 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 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, Secretary and a director of
the Company. Mr. Merrick's mailing address is 136 Chesterfield Industrial
Boulevard, Chesterfield, Missouri 63005.
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 2004. 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.
THE BOARD OF DIRECTORS RECOMMENDS THE ELECTION OF ALL OF THE NOMINEES.
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 61, Chairman of the Board, Chief Executive
Officer and President 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 a director of
Reliv', Inc. and President and a director of Reliv' World Corporation, both
wholly-owned subsidiaries of the Company. Mr. Montgomery received a B.A. degree
in economics from the University of Missouri in Kansas City, Missouri in 1965.
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DR. CARL W. HASTINGS, age 61, 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 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 30 years, Dr.
Hastings has been engaged in a variety of employment and consulting capacities
as a food scientist.
DAVID G. KREHER, age 50, Senior Vice President, Chief Operating Officer
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 September, 1991, and became Senior Vice President on July 1, 1992.
Mr. Kreher was named Chief Operating Officer in January, 2001. 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 and is the brother of
Sandra S. Montgomery.
STEPHEN M. MERRICK, age 61, Senior Vice President/Corporate and
International Development, Secretary, General Counsel and director of the
Company since July 20, 1989; and Senior Vice President, Secretary and 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 Executive Vice-President and a director of CTI
Industries Corporation (NASDAQ SmallCap Market-CTIB).
THOMAS W. PINNOCK III, age 52, 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. 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 44, independent distributor for Reliv', Inc. Mr.
Moody has been an independent distributor for Reliv', Inc. since July, 1989. 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 59, has been a director of the Company since July
20, 1989, and is also a director of Reliv', Inc. and Reliv' World Corporation.
Mr. McCain is the Corporate Secretary and co-owner of The Baughan Group Inc.,
formerly Robertson International Inc., a worldwide supplier and manufacturer of
mining equipment and supplies with plants and facilities throughout the United
States and South Africa. Mr. McCain acquired his interest in The Baughan Group
in September, 1995. He is also co-owner of Coal Age Incorporated, a mining
equipment manufacturer and rebuilding company. He acquired his interest in Coal
Age, Inc. in September, 1994. Mr. McCain co-founded G&T 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 privately invested in real estate and
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owned and operated Expertune, Inc., a company with two locations that
specialized in fast oil changes. Mr. McCain was employed in the food processing
industry for fifteen years. Most of that time was with Archer Daniels Midland
Company as a manager of plant operations.
JOHN B. AKIN, age 74, has been a director of the Company since June, 1986.
Mr. Akin 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.
SANDRA S. MONTGOMERY, age 57, is a co-founder of the Company as well as a
director since April 29, 1992. For more than the past six years, Mrs. Montgomery
has been engaged actively in the business of the Company. Sandra S. Montgomery
and Robert L. Montgomery are husband and wife.
MARVIN W. SOLOMONSON, age 50, has been a director of the Company since
June 1, 1994. 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.
d/b/a Dealership Services. Mr. Solomonson is currently self-employed as a
marketer of financial services.
Executive Officers Other Than Nominees
DONALD E. GIBBONS, JR., age 47, is Vice President of North American 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. Currently, Mr. Gibbons manages all sales efforts in the U.S. and
Canada. 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.
STEVEN D. ALBRIGHT, Age 41, is Vice-President of Finance/Controller of the
Company. Mr. Albright has been employed by the Company since February 1992 as
Controller. From 1987 to 1992, Mr. Albright was employed as Assistant Controller
for Kangaroos USA, Inc., an athletic shoe importer and distributor. From 1983 to
1987, Mr. Albright was employed by the public accounting firm of Ernst & Young.
Mr. Albright has a B.S. degree in Accountancy from the University of Illinois at
Urbana-Champaign and is a CPA.
Committees of the Board of Directors
The Company's Board of Directors has standing Management, Compensation and
Audit Committees. The Company has no standing nominating committee.
6
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 1 time during 2002.
The Management Committee is composed of Mr. Montgomery, Mrs. Montgomery,
Mr. Kreher, Mr. Merrick, Mr. Gibbons, Mr. Albright, Mr. Scott Montgomery, Mr.
Steve Hastings, Mr. David Barnes, Mr. Ron McCain and Mr. Ryan Montgomery. The
Management Committee is composed of members of the Board of Directors and
management and reviews operations and policies on a monthly basis. The
Management Committee met 13 times during 2002.
Since 2000, the Company has had a standing Audit Committee, which is
composed of Mr. McCain, Mr. Akin and Mr. Solomonson. The Audit Committee held 4
meetings during fiscal year 2002, including quarterly meetings with management
and the independent auditors to discuss the Company's financial statements. Each
appointed member of the Committee satisfies the definition of "independent" as
defined by Rule 4200(a)(14) of the National Association of Securities Dealers
listing standards. The Company's Board of Directors has adopted a written
charter for the Audit Committee. The Audit Committee reviews and makes
recommendations to the Company about its financial reporting requirements.
Information regarding the functions performed by the Committee is set forth in
the "Report of the Audit Committee", included in this annual Proxy Statement
below.
The Board of Directors met 4 times during 2002. No director attended less
than 75% of the combined Board of Director and Committee meetings.
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 at December 31, 2002, and any executive officer who left
during the last fiscal year who would have been included in this group (the
"Named Executives").
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SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation Awards
-------------------------- ------------
Salary Bonus Options/ All other
Name and Principal Position Year ($) ($) SARs(#) compensation
($)
- ------------------------------------------------------------------------------------------------------------------------------
Robert L. Montgomery 2002 $642,625 $207,545(1) -- $ 15,227(9)
Chief Executive Officer 2001 $578,364 $ 32,480(1) 250,000(6) $ 13,727(10)
and President 2000 $546,238 -- -- $ 99,893(11)
Carl W. Hastings 2002 $270,000 -- -- $ 11,160(9)
Vice President 2001 $298,868 -- 15,000(7) $ 9,561(10)
2000 $309,719 -- -- $ 39,690(11)
David G. Kreher 2002 $300,000 $124,328(1) -- $ 9,517(9)
Senior Vice President and Chief 2001 $238,500 $ 20,880(1) 120,000(8) $ 7,996(10)
Operating Officer 2000 $225,250 $ 76,824(2) -- $ 19,583(11)
Donald E. Gibbons, Jr 2002 $225,000 $119,932(4) -- $ 8,690(9)
Vice President of U.S. and 2001 $212,500 $ 5,924(1) 60,000(8) $ 7,918(10)
Canada Sales 2000 $175,000 $ 23,488(3) -- $ 11,708(11)
Steven D. Albright 2002 $122,500 $ 37,063(1) -- $ 8,483(9)
Vice President of 2001 $112,500 $ 5,800(1) 23,500(8) $ 5,179(10)
Finance/Controller 2000 $105,000 $ 6,150(5) -- $ 5,721(11)
- ----------
(1) Reflects bonus payments under the Company's 2001 Incentive Compensation
Plan.
(2) Reflects bonus payments totaling $40,299 pursuant to a worldwide sales
incentive program based on worldwide sales volume plus a bonus of $36,525
related to Mr. Kreher's management of the manufacturing operations of the
Company.
(3) Reflects bonus payments totaling $22,488 pursuant to a U.S. sales
incentive program based on U.S. sales volume plus a $1,000 year-end bonus.
(4) Reflects bonus payments of $22,223 under the Company's 2001 Incentive
Compensation Plan and bonus payments totaling $97,709 pursuant to a
U.S./Canadian sales incentive program based on sales volume in these two
countries.
(5) Reflects bonus payment totaling $5,150 pursuant to a worldwide sales
incentive program based on worldwide sales volume plus a $1,000 year-end
bonus.
(footnotes continued on next page)
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(6) Non-qualified and incentive stock options issued on July 17, 2001,
pursuant to the Company's 2001 Stock Option Plan.
(7) Non-Qualified stock options issued on July 17, 2001, pursuant to the
Company's 2001 Stock Option Plan.
(8) Incentive stock options issued on July 17, 2001, pursuant to the Company's
2001 Stock Option Plan.
(9) Includes the value of cash contributions by the Company to the Reliv
International, Inc. 401(k) Plan, a defined contribution plan, of $9,000
for each of Messrs. Montgomery, Hastings, and Kreher, and $8,250 for each
of Messrs. Gibbons and Albright. Also includes the 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. The allocated portion of premium paid was $6,227 for Mr.
Montgomery, $2,160 for Dr. Hastings, $517 for Mr. Kreher, $440 for Mr.
Gibbons and $233 for Mr. Albright. (See "Employment Agreements.")
(10) Includes the value of cash contributions by the Company to the Reliv
International, Inc. 401(k) Plan, a defined contribution plan, of $7,500
for each of Messrs. Montgomery, Hastings, Kreher and Gibbons, and $4,955
for Mr. Albright. Also includes the 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. The
allocated portion of premium paid was $6,227 for Mr. Montgomery, $2,061
for Mr. Hastings, $496 for Mr. Kreher, $418 for Mr. Gibbons and $224 for
Mr. Albright. (See "Employment Agreements.")
(11) Includes the value of cash contributions by the Company to the Reliv'
International, Inc. 401(k) Plan, a defined contribution plan, of $7,500
for each of Messrs. Montgomery, Hastings, Kreher and Gibbons and $3,938
for Mr. Albright. Also includes the 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. The
allocated portion of premium paid was $6,804 for Mr. Montgomery, $2,245
for Dr. Hastings, $675 for Mr. Kreher and $643 for Mr. Gibbons. (See
"Employment Agreements.") The total also includes the taxable fringe
benefit on the exercise of stock options on December 1, 2000. The value
realized upon exercise was $85,589 for Mr. Montgomery, $29,945 for Dr.
Hastings, $11,408 for Mr. Kreher, $3,565 for Mr. Gibbons, and $1,783 for
Mr. Albright.
The Company has never granted any stock appreciation rights. During the
period from January 1, 1997 to December 31, 2002, there have been no awards or
payments made for long term incentive compensation and there have been no
restricted stock awards to any of the Named Executives.
During fiscal year ended December 31, 2002, the Company did not make any
stock option grants to purchase the Company's Common Stock.
9
The following table provides information related to options to purchase
the Company's Common Stock exercised by the Named Executives during the fiscal
year ended December 31, 2002, and the number and value of such options held as
of the end of such fiscal year:
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values
Number of securities Value of unexercised in-
Shares Value underlying unexercised the-money options/SARs
acquired on realized options/SARs at year end at fiscal year end
Name exercise (#) ($) (#) exercisable/unexercisable ($) exercisable/unexercisable
---- ------------ --- ----------------------------- -----------------------------
Robert L. Montgomery 168,586 $ 609,832 529,947/338,130 1,703,404/1,243,744
Carl W. Hastings 197,432 $ 796,791 190,185/0 610,485/0
David G. Kreher 296,745 $1,233,826 112,301/47,619 329,533/179,905
Donald E. Gibbons, Jr 39,050 $ 159,910 81,981/9,920 308,434/37,478
Steven D. Albright 9,529 $ 41,594 34,319/7,937 128,758/29,986
- ----------
(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, 2002.
Report of the Audit Committee
The Audit Committee oversees the Company's financial reporting process on
behalf of the Board of Directors. Management has the primary responsibility for
the financial statements and the reporting process including the systems of
internal controls. In fulfilling its oversight responsibilities, the Committee
reviewed the audited financial statements in the Annual Report with management
including a discussion of the quality, not just the acceptability, of the
accounting principles, the reasonableness of significant judgments, and the
clarity of disclosures in the financial statements.
The Committee reviewed with the independent auditors, who are responsible
for expressing an opinion on the conformity of those audited financial
statements with generally accepted accounting principles, their judgments as to
the quality, not just the acceptability, of the Company's accounting principles
and such other matters as are required to be discussed with the Committee under
generally accepted auditing standards. In addition, the Committee has discussed
with the independent auditors the auditor's independence from management and the
Company including the matters in the written disclosures required by the
Independence Standards Board.
The Committee discussed with the Company's independent auditors the
overall scope and plans for their respective audits. The Committee meets with
the independent auditors, with and without management present, to discuss the
results of their
10
examinations, their evaluations of the Company's internal controls, and the
overall quality of the Company's financial reporting.
In reliance on the reviews and discussions referred to above, the
Committee recommended to the Board of Directors (and the Board has approved)
that the audited financial statements be included in the Annual Report on Form
10-K for the year ended December 31, 2002 for filing with the Securities and
Exchange Commission. The Committee and the Board have also recommended, subject
to shareholder approval, the selection of Ernst & Young LLP as the Company's
independent auditors.
Donald L. McCain, Audit Committee Chair
John B. Akin, Audit Committee Member
Marvin W. Solomonson, Audit Committee Member
Fees Billed By Independent Public Accountants
The following table sets forth the amount of audit fees and all other fees
billed or expected to be billed by Ernst & Young LLP, the Company's principal
accountant, for the year ended December 31, 2002:
Amount
------
Audit fees (1) $160,000
Other audit related fees (2) 38,000
All other fees(3) 61,000
--------
Total fees $259,000
- ----------
(1) Includes the annual financial statement audit and limited quarterly
reviews and expenses.
(2) Includes fees and expenses for other audit related activity provided by
Ernst & Young LLP.
(3) Primarily represents tax services, which include preparation of tax
returns and other tax consulting services.
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors of the Company is
composed of three members of the Board of Directors. The Compensation Committee
is responsible for establishing the standards and philosophy of the Board of
Directors regarding executive compensation, for reviewing and evaluating
executive compensation and compensation programs, and for recommending levels of
salary and other forms of compensation for executives of the Company to the
Board of Directors. The full Board
11
of Directors of the Company is responsible for setting and administering
salaries, bonus payments and other compensation awards to executives of the
Company.
Compensation Philosophy
The philosophy of the Compensation Committee, and of the Board of
Directors of the Company, regarding executive compensation includes the
following principal components:
To attract and retain quality executive talent, which is regarded as
critical to the long and short-term success of the Company, in
substantial part by offering compensation programs which provide
attractive rewards for successful effort.
To provide a reasonable level of base compensation to senior
executives and to provide annual incentive compensation based on the
success and profitability of the Company.
To create a mutuality of interest between executive officers of the
Company and shareholders through long-term compensation structures,
particularly stock option programs, so that executive officers share
the risks and rewards of strategic decision making and its effect on
shareholder value.
The Compensation Committee has recommended, and the Board of Directors 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 be
deductible as an expense to the fullest extent allowable.
The Company's executive compensation program consists of two key elements:
(i) an annual component consisting of base salary and incentive compensation and
(ii) a long-term component, principally stock options.
Annual Base Compensation
The Compensation Committee recommends annual salary levels for each of the
Named Executives, and for other senior executives of the Company, to the Board
of Directors. The recommendations of the Compensation Committee for base salary
levels for senior executives of the Company are determined annually, in part, by
evaluating the responsibilities of the position and examining market
compensation levels and trends for similar positions in the marketplace.
Additional factors which the Compensation Committee considers in
recommending annual adjustments to base salaries include: results of operation
of the Company, sales, shareholder returns, and the experience,
work-performance, leadership and team building skills of each executive. The
Company receives information from the Chief Executive Officer with regard to
these matters. While each of these factors is
12
considered in relatively equal weight, the Compensation Committee does not
utilize performance matrices or measured weightings in its review. Each year,
the Compensation Committee conducts a structured review of base compensation of
senior executives with input from the Chief Executive Officer.
Annual Incentive Compensation.
During 2001, the Compensation Committee recommended and the Board of
Directors approved an annual incentive compensation plan for members of
management. Under the terms of the plan, a percentage of net income above the
annual rate of income of $250,000 is allocated to be paid to senior executives
and managers of the Corporation. The amount of profit and incentive compensation
for each participant is determined on a quarterly basis. During 2002, incentive
compensation under the plan was paid to Robert L. Montgomery, David G. Kreher,
Donald E. Gibbons, Jr, Steven D. Albright, Stephen M. Merrick, Scott Montgomery,
David Barnes, Steve Hastings, Ron McCain and Ryan Montgomery and 13 other
managers of the Company.
Long-Term Component - Stock Options
The long-term component of compensation provided to executives of the
Company has been in the form of stock options. The Compensation Committee has
recommended to the Board of Directors that a significant portion of the total
compensation to executives be in the form of incentive stock options. Stock
options are granted with an exercise price equal to or greater than the fair
market value of the Company's Common Stock on the date of the grant. Stock
options are exercisable between one and ten years from the date granted. Such
stock options provide incentive for the creation of shareholder value over the
long-term since the full benefit of the compensation package for an executive
cannot be realized unless an appreciation in the price of the Company's Common
Stock occurs over a specified number of years.
The magnitude of the stock option awards are determined annually by the
Compensation Committee and the Board of Directors. Generally, the relative
number of options granted to an executive has been based on the relative salary
level of the executive.
On December 4, 1995, options to purchase 220,000, 92,400, 70,400, 11,000
and 5,500 shares of the Company's Common Stock were granted to Messrs.
Montgomery, Hastings, Kreher, Gibbons, and Albright, respectively, under the
1995 Stock Option Plan (the "1995 Plan"). These options expired on December 4,
2000. On December 18, 1997, options to purchase 50,000 and 5,000 shares of the
Company's Common Stock were granted to Messrs. Gibbons and Albright. 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. On December 15, 1999, options to purchase 200,000, 140,000,
125,000, 50,000 and 20,000 shares of the Company's Common Stock were granted to
Messrs. Montgomery, Hastings, Kreher, Gibbons and Albright, respectively, under
the 1999 Stock Option Plan (the "1999 Plan").
13
In addition to the incentive stock options that were issued in 1999,
non-qualified stock options to purchase 250,800, 105,600, and 83,600 shares of
the Company's Common Stock were granted in 1999 to Messrs. Montgomery, Hastings,
and Kreher, respectively, to replace incentive stock options that were
previously issued in 1994 and expired in December 1999 unexercised. These
options were issued as part of the overall compensation plan for these
executives. At present, options have been granted under the Company's 1999 Plan
to purchase substantially all of the shares of Common Stock authorized for
issuance under the 1999 Plan.
On July 17, 2001, incentive stock options to purchase up to 196,000,
120,000, 60,000 and 23,500 shares of the Company's Common Stock were granted to
Messrs. Montgomery, Kreher, Gibbons, and Albright, respectively, under the 2001
Stock Option Plan (the "2001 Plan"). In addition, on July 17, 2001,
non-qualified stock options to purchase up to 54,000 and 15,000 shares of the
Company's Common Stock were granted to Messrs. Montgomery and Hastings
respectively, under the 2001 Plan.
There were no stock options granted to any of the Named Executives in
2002.
CEO Compensation
The Compensation Committee utilizes the same standards and methods for
recommending annual base compensation for the Chief Executive Officer of the
Company as it does for other senior executive officers of the Company.
In 1997, the Company entered into an Employment Agreement with Robert L.
Montgomery, Chief Executive Officer of the Company, providing that Mr.
Montgomery's base annual compensation would not be less than $485,000. During
1999, Mr. Montgomery received an overall annual base compensation of $589,073.
In mid-2000, the annualized base rate of Mr. Montgomery's compensation was
increased by one-half of the amount of a reduction that was made in 1999. In
2000, 2001 and 2002 annual incentive compensation was paid to Mr. Montgomery in
the amounts of $0, $32,480 and $207,545, respectively, under the Company's
annual incentive compensation plan based on profits of the Company.
The Compensation Committee recommended that Mr. Montgomery (and other
senior executives of the Company), receive incentive and non-qualified stock
options, consistent with observed market practices, so that a significant
portion of his total compensation will be based upon, and consistent with,
returns to shareholders. Mr. Montgomery was granted incentive options to
purchase up to 200,000 shares of the Company's Common Stock in 1999. In
addition, Mr. Montgomery was granted non-qualified stock options to purchase up
to 250,800 shares of the Company's Common Stock in 1999 to replace incentive
stock options that had expired unexercised. In 2000, no stock options were
granted to Mr. Montgomery by the Company. In 2001, Mr. Montgomery was granted
incentive stock options to purchase up to 196,000 shares of the Company's Common
Stock, and non-qualified stock options to purchase up to 54,000
14
shares of the Company's Common Stock. In 2002, no stock options were granted to
Mr. Montgomery.
Compensation Committee:
Donald L. McCain, John B. Akin, Stephen M. Merrick
Compensation Committee Interlocks and Insider Participation
Stephen M. Merrick, a member of the Compensation Committee, is a Senior
Vice President of the Company. Mr. Merrick is a principal of the law firm of
Merrick & Klimek, P.C. and has served as General Counsel to the Company and its
subsidiaries since the founding of the Company. During the year ended December
31, 2002, the aggregate amounts paid or incurred by the Company to Merrick &
Klimek, P.C. and Stephen M. Merrick for services to the Company and its
subsidiaries was $315,000.
Comparative Stock Price Performance Graph
The following graph compares, for the period January 1, 1998 to December
31, 2002, the cumulative total return (assuming reinvestment of dividends) on
the Company's Common Stock with (i) NASDAQ Stock Market Index (U.S.) and (ii) a
peer group including the following companies: Mannatech, Inc., Nature's Sunshine
Products, Inc., Advanced Nutraceuticals, Inc. Rexall Sundown, Inc. and USANA
Health Sciences, Inc. The peer group consists of other companies marketing
nutritional products through direct sales. The graph assumes an investment of
$100 on January 1, 1998, in the Company's Common Stock and each of the other
investment categories.
Annual Return Percentage
Years Ending
Company Name / Index Dec98 Dec99 Dec00 Dec01 Dec02
- -----------------------------------------------------------------------------------------------------------
RELIV INTERNATIONAL INC -30.78 -49.75 21.21 0.00 343.81
NASDAQ STOCK MARKET (U.S) 40.99 85.46 -39.80 -20.67 -30.88
PEER GROUP -48.56 -32.54 -49.64 72.30 15.74
INDEXED RETURNS
Base Years Ending
Period
Company Name / Index Dec97 Dec98 Dec99 Dec00 Dec01 Dec02
- -----------------------------------------------------------------------------------------------------------
RELIV INTERNATIONAL INC 100 69.22 34.78 42.16 42.16 187.12
NASDAQ STOCK MARKET (U.S) 100 140.99 261.48 157.42 124.89 86.33
PEER GROUP 100 51.44 34.70 17.47 30.11 34.85
Peer Group Companies
- -----------------------------------------------------------------------------------------------------------
ADVANCED NUTRACEUTICALS INC
MANNATECH INC
NATURES SUNSHINE PRODS INC
REXALL SUNDOWN INC (Acquired 8/2000)
USANA HEALTH SCIENCES INC
15
The historical stock prices of the Company's Common Stock shown on the
above graph are not necessarily indicative of future price performance. Per
share value as of December 31, 1997, 1998, 1999, 2000, 2001 and 2002 is based on
the Common Stock's closing price as of such date.
The information under this heading and under the headings "Report of the
Audit Committee" and "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 was originally
for a term of six years commencing on January 1, 1997 with a provision for
automatic one year renewal terms, 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 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 January, 2002, the Company entered into a Services Agreement with Dr.
Hastings replacing a prior Employment Agreement. The Services Agreement is for a
period of twenty years. The employment of Dr. Hastings shall be for a term
commencing on July 1, 2001 and expiring on June 30, 2006. During the initial
term of employment, the Company shall pay Dr. Hastings a basic salary at the
rate of $22,500 per month. Upon expiration of the term of employment, Dr.
Hastings shall be retained to provide consulting services to the Company for the
remainder of the term of the Services Agreement. During the consulting term, the
Company shall pay Dr. Hastings the sum of $10,000 per month. During the term of
the Services Agreement, the Company shall be entitled to use of the name and
likeness of Dr. Hastings in connection with promotional materials and activities
of the Company. The Services Agreement also includes the obligation of Dr.
Hastings to maintain the confidentiality of confidential information of
16
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, 2002, the Company entered into Employment Agreements with David
G. Kreher, Senior Vice President and Chief Operating Officer and Donald E.
Gibbons, Jr., Vice President of North American Sales. The initial terms of the
agreements expire in April, 2003, thereafter automatically renewing for one year
terms unless written notice is given more than 30 days prior to expiration of
the term. The Agreements provide for Mr. Kreher and Mr. Gibbons to receive base
annual compensation of not less than $300,000 and $225,00, respectively. Both
are 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. The Agreements include the
obligation of Mr. Kreher and Mr. Gibbons 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, Donald E. Gibbons, Jr.
and Steven D. Albright, 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 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 each of Messrs. Kreher and
Gibbons, and $500,000 for Mr. Albright.
In March, 1997, the Company entered into Salary Continuation Plan
Agreements with David G. Kreher, Donald E. Gibbons, Jr. and Steven D. Albright.
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 the 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. One member of the Board who is not an employee of the
Company received compensation of $1,000 per month for his services and $2,000
per attendance at meetings
17
of the Board of Directors or any Committees of the Board. If a Board member
attends more than one meeting of the Board or Committee of the Board during the
same month, the attendance fee is 150% of the basic attendance fee. In 2002, no
stock options were issued to any member of the Board of Directors. (See "Stock
Ownership by Management and Others").
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 2002, all Section 16(a) filing requirements
applicable to the officers, directors and ten percent beneficial owners were
complied with except Donald McCain filed two late reports covering 13
transactions and Thomas Moody filed one late report covering 8 transactions.
PROPOSAL TWO -APPROVAL OF THE 2003 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 2003 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 2001 Stock Option Plan. Virtually all of the 1,000,000 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.
18
The Plan and Participants
On March 20, 2003, the Board of Directors approved for adoption the 2003
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 1,000,000
shares of the Company's Common Stock (the shares subject to the Plan will remain
at 1,000,000 even if Proposal Three is approved), 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 A hereto, and the following
description is qualified in its entirety by reference to Appendix A.
The Plan will be administered by the Company's Board of Directors or a
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
non-employee Director 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, 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 March 20, 2013, and no additional options may be granted under the
Plan after that date.
19
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 Common 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 200,000. 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 Common 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 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 by: (1) cash, check, bank draft or money order; (2) Common Stock of the
Company owned by the participant and having a fair market value on the date of
exercise equal to the aggregate exercise price of the shares to be so purchased;
(3) a special sale and remittance procedure whereby the participant may pay the
exercise price of the stock option with shares issuable upon exercise of the
stock option; or (4) a combination thereof.
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
20
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 or other similar activity, recapitalization and
reorganizations.
As of the date hereof, no options have been granted pursuant to the Plan.
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 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
21
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 THREE - A ONE-FOR-FOUR SPLIT OF COMMON STOCK
The Board of Directors of the Company has adopted a resolution, subject to
shareholder approval, to effect a one-for-four split of the Common Stock of the
Company effective at the discretion of the Board upon a time of its choosing.
This means that, on the effective date, one share of the Company's Common Stock
will be issued for every four shares owned by a shareholder. If approved by the
shareholders, the stock split would be in the nature of a stock dividend. This
should result in a twenty percent (20%) decrease in the market price of the
Common Stock, although there is no assurance that such a result will occur. The
Company believes that the increase in the number of the Company's shares of
Common Stock outstanding and the anticipated lower market price will provide a
more efficient market for the Company's Common Stock.
If Proposal Three is adopted by the Company's shareholders as set forth in
this Proxy Statement, the Company will establish and give notice of a record
date. Each record owner of Common Stock at the close of business on that record
date would become the record owner and be entitled to receive a new stock
certificate representing one common share for every four old shares of Common
Stock owned as of that date. The Company, through its transfer agent, will
provide instructions to the holders of Common Stock regarding the procedure
which should be followed to obtain new stock certificates representing such new
shares held on the record date. Existing certificates would continue to
represent the number of shares they currently represent.
If the proposed stock split is effected after receiving the shareholder
approval described in this Proxy Statement it would result in no gain or loss or
realization of taxable income to owners of Common Stock under existing United
States Federal income tax laws. The cost basis for tax purposes of each share
would be equal to 80% of the cost
22
basis for tax purposes of the corresponding shares immediately preceding the
stock split. In addition, the holding period for the Common Stock issued
pursuant to the stock split would be deemed to be the same as the holding period
for the original shares. The laws of jurisdictions other than the United States
may impose income taxes on the issuance of the additional shares and shareowners
are urged to consult their tax advisors.
The Company will apply to list the additional shares to be issued in the
stock split on NASDAQ, where the Common Stock is currently listed.
To the extent that the one-for-four split results in shareholders
receiving fractions of shares, the Company intends to pay cash for such
fractions in an amount per share equal to the closing price for the Company's
Common Stock on the NASDAQ National Market on the record date. Fractional shares
will not be issued.
Vote Required for Approval of the Split
The Company's Board of Directors has approved a one-for-four stock split
in the nature of a dividend. However, the split 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 split.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSED ONE-FOR-FOUR
STOCK SPLIT.
PROPOSAL FOUR - AMENDMENT TO CERTIFICATE OF INCORPORATION TO INCREASE AUTHORIZED
SHARES
The Board of Directors of the Company has adopted a resolution, subject to
shareholder approval, that would amend the Company's Certificate of
Incorporation to increase the number of shares of authorized Common Stock from
20,000,000 to 30,000,000, with a par value of $0.001. The Company currently has
enough authorized shares of Common Stock to accommodate the proposed stock split
described in Proposal Three and the shares subject to issuance under the
proposed 2003 Stock Option Plan described in Proposal Two, as well as shares
subject to issuance under other options and warrants issued or to be issued
under the Company's other plans. However, there would be a very limited number
of authorized but unissued shares of Common Stock remaining if all such options
and warrants were issued and exercised.
The Company currently has no specific plans, understandings or
arrangements for issuing any of the additional Common Stock to be authorized by
the proposed amendment. However, the additional Common Stock will provide the
Board of Directors with flexibility to issue additional shares for proper
corporate purposes, such as stock dividends, stock splits, acquisitions, and
other similar purposes, which could include public offerings or private
placements. Moreover, it is possible that additional Common Stock could be
issued for the purpose of making an acquisition by an unwanted suitor of a
controlling interest in the Company more difficult, time consuming or costly or
to
23
otherwise discourage an attempt to acquire control of the Company. If the
shareholder approvals that are described in this Proxy Statement are obtained,
the Board of Directors could authorize the issuance of any authorized but
unissued Common Stock, including those authorized by the proposed amendments, on
terms determined by it without further action by the holders of the Common Stock
unless the shares were issued in a transaction otherwise requiring their
approval, such as a merger or consolidation. Holders of Common Stock should also
note that issuance of additional Common Stock may tend to indirectly affect the
voting, dividend, liquidation and other rights of the Common Stock presently
outstanding.
If this proposal is adopted by the Company's shareholders as set forth in
this Proxy Statement, the Company will file a Restated and Amended Certificate
of Incorporation with the Delaware Secretary of State. A form of Restated and
Amended Certificate of Incorporation is attached as Appendix B.
Vote Required for Approval of the Amendment of the Certificate of Incorporation
The Company's Board of Directors has approved an Amendment of the
Certificate of Incorporation. However, the amendment will not be adopted unless
the holders of at least a majority of the shares of Common Stock entitled to
vote thereon vote "FOR" approval of the amendment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSED AMENDMENT TO
THE CERTIFICATE OF INCORPORATION.
PROPOSAL FIVE - SELECTION OF AUDITORS
Ratification of Appointment of Independent Auditors
The Board of Directors has selected and approved Ernst & Young LLP as the
principal independent auditor to audit the financial statements of the Company
for 2003, subject to ratification by the shareholders. It is expected that a
representative of the firm of Ernst & Young LLP 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.
THE BOARD OF DIRECTORS RECOMMENDS SHAREHOLDERS VOTE FOR "FOR" SUCH
RATIFICATION.
Stockholder Proposals for 2004 Proxy Statement
Proposals by shareholders for inclusion in the Company's Proxy Statement
and form of Proxy relating to the 2004 Annual Meeting of stockholders, which is
scheduled to be held on May 27, 2004, should be addressed to the Secretary,
Reliv' International, Inc., 136 Chesterfield Industrial Boulevard, Chesterfield,
Missouri 63005, and must be received at such address no later than December 25,
2003. Upon receipt of any such
24
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 24, 2003
/s/ Stephen M. Merrick
-----------------------------
Stephen M. Merrick, Secretary
25
APPENDIX A
RELIV' INTERNATIONAL, INC.
2003 STOCK OPTION PLAN
1. PURPOSE OF THE PLAN
The purposes of the Reliv' International, Inc. 2003 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, par value $.001.
(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 Stock 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.
(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 Board of Directors or a
Committee appointed by the Board of Directors, which Committee 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 non-employee director (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.
(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 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 1,000,000. 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
3
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.
4
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.
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
5
(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. Such shares
delivered to the Company in satisfaction of the purchase price shall
have been owned by the Participant for a minimum of six (6) months;
or
(c) The Company may make available, in its sole discretion, a special
sale and remittance procedure pursuant to which a Participant
exercising a Stock Option concurrently provides irrevocable written
instructions (i) to a Company-designated brokerage firm to effect
the immediate sale of a portion of the shares to be received
pursuant to the Stock Option, and remit to the Company, out of the
proceeds available on the settlement date, the minimum amount of
funds required to cover the aggregate exercise price payable for the
shares, plus all applicable federal, state and local income and
employment taxes required to be withheld by the Company by reason of
such exercise, and (ii) to the Company to deliver the certificates
for the necessary shares directly to such brokerage firm in order to
complete the sale. If the Company makes such a special sale and
remittance procedure available, a Participant exercising a Stock
Option may pay the exercise price of the Stock Option with shares
issuable upon exercise of the Stock Option. In all other events, a
Participant exercising a Stock Option may not pay the exercise price
of the Stock Option with shares issuable upon the Stock Option"s
exercise.
(d) By any combination of (a), (b) and (c) 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.
6
(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.
3.7 Termination of Employment or Relationship with Company
(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
7
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" (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.
8
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 100,000.
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 Canceled Options
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 Common Stock which were subject to such Stock Option or portion
thereof shall be available for future grants of stock options under the Plan.
9
4.3 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.
4.4 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.
4.5 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 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.
4.6 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
10
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.
4.7 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.
4.8 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.
4.9 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.
4.10 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.
4.11 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.
4.12 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,
11
and rights relating to the Plan, shall be determined solely in accordance with
the laws of the State of Illinois.
BOARD OF DIRECTORS APPROVAL March 20, 2003
SHAREHOLDER APPROVAL May 22, 2003
12
APPENDIX B
SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
RELIV' INTERNATIONAL, INC.
(formerly "Reliv' Merger Corporation")
Pursuant to the Delaware General Corporation Law Sections 242 and 245,
Reliv' International, Inc. restates, integrates and amends their Certificate of
Incorporation, initially filed on April 16, 1999 as follows.
FIRST: The name of the corporation (hereinafter called the "corporation")
is Reliv' International, Inc. (formerly 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.
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 30,000,000
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
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.
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
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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: __________, 2003
RELIV' INTERNATIONAL, INC.
By: /s/ Robert L. Montgomery
-------------------------------
Robert L. Montgomery, Chief
Executive Officer and President
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