DALLAS, Texas, Feb. 16 /Xinhua-PRNewswire-FirstCall/ -- Mr. Rudy Ru and a group of stockholders of Natural Health Trends (the "company"; Nasdaq: BHIP), an international direct selling company, announced today they filed a schedule 13-D on February 14, 2007.
The Item 4 section of the schedule 13-D filing is as follows:
Item 4. PURPOSE OF TRANSACTION
The Reporting Persons represent approximately 5.5% of the Issuer's outstanding Common Stock and, as distributors of the Company's products, account for the substantial majority of the Issuer's sales volume in the Hong Kong area.
The Reporting Persons no longer have trust or confidence in two of the Company's current board members, specifically Mr. Colin J. O'Brien and Mr. Terrence M. Morris. Accordingly, on February 12, 2007, the following letter was sent on behalf of the Reporting Persons to each member of the Issuer's Board of Directors:
February 12, 2007
Natural Health Trends Corp. Board of Directors
Natural Health Trends Corp.
2050 Diplomat Drive
Dallas, TX 75234
Ladies and Gentlemen:
We are writing to you on behalf of our client, Rudy Ru. Mr. Ru and a number of Chinese stockholders and distributors (such stockholders and distributors are hereinafter collectively referred to as the "Chinese Stockholders") collectively own approximately 5.5% of the Company and account for the substantial majority of the Company's Hong Kong-based sales volume.
Mr. Ru and the Chinese Stockholders no longer have trust or confidence in two of the Company's current board members, specifically, Mr. Colin J. O'Brien and Mr. Terrence M. Morris. Accordingly, our client has asked us to write to you on his and the Chinese Stockholders' behalf to demand the immediate resignations of Messrs. O'Brien and Morris from the Board of Directors and to inform you that, if such resignations do not occur immediately, our client believes that the Company's key distributors in the greater Chinese area will take their business elsewhere. Our client has also asked us to inform you that (i) he and the Chinese Stockholders would like to recommend two replacement board members to fill the board seats vacated by Messrs. O'Brien and Morris and (ii) certain of the Chinese Stockholders may be willing to invest additional capital directly into the Company, but will not consider doing so unless Messrs. O'Brien and Morris resign.
Although Mr. Ru and the Chinese Stockholders hope that Messrs. O'Brien and Morris can be persuaded to leave the Company voluntarily, they are prepared to explore all alternatives available to them to remove Messrs. O'Brien and Morris from the board. Mr. Ru and the Chinese Stockholders anticipate filing their Schedule 13D with the Securities and Exchange Commission, thereby making their demands public, on or about February 14, 2007. Our client also informs us that he and the Chinese Stockholders intend to issue a press release outlining their concerns and demands that same day.
Our client believes that Messrs. O'Brien and Morris should resign for the following reasons:
Our client and the Chinese Stockholders believe that Messrs. O'Brien and Morris were the main force behind the decision to recruit and hire a new chief executive officer (the "CEO") who has no industry experience. This ill-conceived hiring occurred during a time when the Company desperately needed a chief executive officer with significant industry expertise and a proven track record in order to turn the Company's business around. Instead, the new CEO must now be trained on the job, which will result in a continuous drain of the Company's time and resources. Our client is of the view that the Company has lost credibility with its world-wide distributors as a result of this hire.
Our client believes that Messrs. O'Brien and Morris are attempting to micro-manage the Company's business, causing delays in critical initiatives and inflicting damage on the Company's business. In the process, employees and distributors have been alienated. Morale among employees and distributors has collapsed. Sales and stock price have plummeted.
The new CEO, supported by Messrs. O'Brien and Morris, recently hired, for a significant compensation package, a chief operating officer that also has no industry experience. Our client is of the view that the substantial sums of money expended by the Company in connection with the new chief operating officer's employment package (including, without limitation, his hefty severance and relocation benefits and the guarantee by the Company of his home equity value in a declining housing market) would be better invested in the markets in which the Company does business, especially Greater China.
At a time when the Company's cash reserves are dwindling, our client believes that Messrs. O'Brien and Morris are not acting in the best interest of the Company or its stockholders by staying in luxury hotels and flying first class.
In addition, our client demands that the Board take the following actions:
(i) Cause the Company to implement the necessary measures to protect the Company's investment in its Chinese and Hong Kong subsidiaries and reduce wasteful spending elsewhere;
(ii) Terminate Gerard (sik) Senke's employment agreement and invest the resultant savings in the greater Chinese market; and
(iii) Until the resignations of Messrs. O'Brien and Morris, refrain from taking any action with respect to (x) arrangements concerning current management or directors (other than the termination of Mr. Senke) or (y) material corporate financing and spending decisions.
Our client would like to emphasize that any action outside the ordinary course of business, and not in furtherance of the foregoing demands, will be viewed as unacceptable. Our client would also like to stress that he believes that the continued board membership of Messrs. O'Brien and Morris puts the Company's major source of revenue - the greater Chinese market - at risk.
Our client, finally, sincerely hopes that you will act in accordance with this letter and in the stockholders' and the Company's best interests, and believes that your fiduciary duties as a director of a Delaware corporation require no less than the actions described in this letter. Should you fail to act promptly to implement these changes, our client and the Chinese Stockholders intend to do everything in their power to hold you personally liable for the consequences.
Very truly yours,
/s/ Robin B. Connor
Robin B. Connor
In addition to the concerns outlined in the above letter, the Reporting Persons are deeply dismayed by the Issuer's failure to timely reach an amicable settlement agreement with Terry L. LaCore and Mark D. Woodburn, the founders of the Issuer. The Reporting Persons believe that the Issuer should have attempted to reach an agreement with Messrs. La Core and Woodburn, thereby allowing them to bring their invaluable industry expertise back to the Issuer at a time when the Issuer badly needed it, much sooner than October 2006.
Depending on market conditions and other factors that the Reporting Persons may deem material to their investment decision, the Reporting Persons may purchase additional Common Stock in the open market or in private transactions. Depending on these same factors, the Reporting Persons may sell all or a portion of their Common Stock on the open market or in private transactions.
Except as set forth in this Item 4, the Reporting Persons have no present plans or proposals that relate to or that would result in any of the actions specified in clauses (a) through (j) of Item 4 of Schedule 13D of the Act.
Media Contact:
Ms. Ling Chan
Tel: +852-3542-5667
