UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
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[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement [ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
AMS HEALTH SCIENCES, INC.
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(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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AMS HEALTH SCIENCES, INC.
711 NE 39th Street
Oklahoma City, Oklahoma 73105
Telephone: (405) 842-0131
NOTICE OF ANNUAL MEETING
TO OUR SHAREHOLDERS:
Our Annual Meeting of Shareholders will be held at the Sheraton Hotel at 1
North Broadway Avenue in Oklahoma City, Oklahoma, on July 29, 2006 commencing at
12:00 P.M. Central Daylight-Savings Time, and thereafter as it may be adjourned
from time to time, for the following purposes:
1. To elect two directors to hold office until the 2009 annual meeting of
shareholders and until their successors shall have been duly elected
and qualified;
2. To consider and approve the AMS Health Sciences, Inc. 2006 Long-Term
Incentive Plan;
3. To consider and act upon a proposal to ratify the appointment of Cole &
Reed P.C. as our independent auditor for 2006; and
4. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Holders of record of common stock at the close of business on May 30, 2006,
are entitled to notice of and to vote at the meeting or any adjournment thereof,
notwithstanding transfer of any stock on our books after such record date. The
accompanying proxy statement contains information regarding the matters to be
considered at the Annual Meeting. Copies of this notice and the accompanying
proxy statement were first mailed to shareholders on or about June 23, 2006. For
reasons set forth in the attached proxy statement, the Board of Directors
recommends a vote "FOR" the matters being voted upon.
Your attendance or proxy is important to assure a quorum at the Annual
Meeting. Shareholders who do not expect to attend the Annual Meeting in person
are requested to complete and return the enclosed Proxy, using the envelope
provided, which requires no postage if mailed from within the United States. Any
person giving a proxy has the power to revoke it at any time prior to its
exercise and, if present at the Annual Meeting, may withdraw it and vote in
person. Attendance at the Annual Meeting is limited to shareholders, their
proxies and our invited guests. All shareholders are cordially invited to attend
the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS:
Robin L. Jacob, Corporate Secretary
Oklahoma City, Oklahoma
June 23, 2006
PROXY STATEMENT
AMS Health Sciences, Inc.
711 NE 39th Street
Oklahoma City, Oklahoma 73105
(405) 842-0131
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 29, 2006
Solicitation and Revocation of Proxies
We at AMS Health Sciences, Inc. are furnishing this proxy statement in
connection with the solicitation of proxies by our Board of Directors to be used
at the Annual Meeting of our shareholders to be held at 12:00 P.M., Central
Daylight-Savings Time, on July 29, 2006, at the Sheraton Hotel at 1 North
Broadway Avenue in Oklahoma City, Oklahoma, and any adjournment thereof. This
proxy statement and the accompanying Notice of Annual Meeting of Shareholders
and Proxy were first mailed on or about June 23, 2006, to our shareholders of
record on May 30, 2006.
If the accompanying proxy is properly executed and returned, the shares of
common stock represented by the proxy will be voted at the Annual Meeting. If
you indicate in your proxy a choice with respect to any matter to be acted upon,
your shares will be voted in accordance with your choice. If no choice is
indicated, your shares will be voted "FOR" the election of the nominees for
director listed below, "FOR" the approval of the AMS Health Sciences, Inc. 2006
Long-Term Incentive Plan, and "FOR" the ratification of the appointment of Cole
& Reed P.C. as our independent auditor for 2006. Our shareholders will also
consider and vote upon such other business as may properly come before the
Annual Meeting or any adjournment thereof. Our Board of Directors knows of no
business that will be presented for consideration at the Annual Meeting, other
than matters described in this proxy statement. You may revoke your proxy by
giving written notice of your revocation to our Secretary at any time before
your proxy is voted, by executing another valid proxy bearing a later date and
delivering the new proxy to our Secretary prior to or at the Annual Meeting, or
by attending the Annual Meeting and voting in person.
Quorum; Absentions; Broker Non-Votes
Neither the corporate laws of the State of Oklahoma, the state in which we
are currently incorporated, nor our Certificate of Incorporation or Bylaws have
any provisions regarding the treatment of abstentions and broker non-votes. Our
policy is (i) to count abstentions or broker non-votes for purposes of
determining the presence of a quorum at the Annual Meeting, (ii) to treat
abstentions and broker non-votes as votes not cast but to treat them as shares
represented at the Annual Meeting for determining results on actions requiring a
majority vote, and (iii) to consider neither abstentions nor broker non-votes in
determining results of plurality votes.
Cost of Proxy Solicitation
The expenses of this proxy solicitation, including the cost of preparing
and mailing this proxy statement and accompanying proxy will be borne by us.
Such expenses will also include the charges and expenses of banks, brokerage
firms and other custodians, nominees or fiduciaries for forwarding solicitation
material regarding the Annual Meeting to beneficial owners of our common stock.
Solicitation of proxies may be made by mail, telephone, personal interviews or
by other means by members of our Board of Directors or our employees who will
not be additionally compensated therefore, but who may be reimbursed for their
out-of-pocket expenses in connection therewith.
Shareholders Entitled to Vote
Shareholders entitled to vote at the Annual Meeting are the holders of
record, at the close of business on May 30, 2006, our record date, of our shares
of common stock then outstanding. As of April 27, 2006, we had 7,775,824 shares
of our common stock outstanding. Each holder of a share of common stock
outstanding on the record date will be entitled to one vote for each share held
on each matter presented at the Annual Meeting. As of April 27, 2006, our
current officers and directors own a total of 386,517 shares, or 4.3% percent
of the issued and outstanding common stock, and intend to vote all of these
shares in favor of the matters to be voted upon at the Annual Meeting. There is
no cumulative voting with respect to the election of directors. The presence in
person or by proxy of the holders of a majority of the shares of common stock
issued and outstanding at the Annual Meeting will constitute a quorum for the
transaction of business. All matters to be brought before the Annual Meeting
will require the affirmative vote of a majority of the shares of common stock
present at the Annual Meeting in person and by proxy and entitled to vote. Votes
will be tabulated by an inspector of election appointed by our Board of
Directors.
PROPOSAL 1
ELECTION OF DIRECTORS
Our Bylaws provide that our Board of Directors shall consist of not less
than one nor more than fifteen directors, as determined from time to time by
resolution of our Board of Directors. The number of directors is currently fixed
at seven (7) directors. After our 2005 shareholders' meeting, our board of
directors consisted of John Hail, David D'Arcangelo, Reggie Cook, Steven M.
Dickey, C. Brent Haggard, M. Thomas Buxton III and Harland C. Stonecipher. Since
that time we have had numerous changes to our Board of Directors.
The following is a list of our directors that have tendered their
resignations since the last annual meeting. None of these directors'
resignations were the result of a disagreement with us related to our
operations, policies or practices.
Director Effective Date of Resignation
----------------------- -----------------------------
David D'Arcangelo May 10, 2005
Reggie Cook December 9, 2005
Harland C. Stonecipher December 9, 2005
C. Brent Haggard January 4, 2006
John Hail February 12, 2006
In February 2006, our Board of Directors appointed Robin L. Jacob to the
Board to fill the vacancy left by Mr. Cook's resignation and appointed Jerry W.
Grizzle to the Board to fill the vacancy left by Mr. Hail's resignation. In
March 2006, our Board of Directors appointed Stephen E. Jones to the Board to
fill the vacancy left by Mr. Haggard's resignation.
In general, our directors are divided into three classes. Class I Directors
hold office for a term expiring at the annual meeting of shareholders to be held
in 2006, Class II Directors hold office for a term expiring at the annual
meeting of shareholders to be held in 2007, and Class III Directors hold office
for a term expiring at the annual meeting of shareholders to be held in 2008.
Each director holds office for the term to which he is elected or until his
successor is duly elected and qualified. Mr. Dickey and Ms. Jacob are serving as
Class I Directors under a term expiring in 2006. Messrs. Grizzle and Buxton are
serving as Class II Directors under a term expiring in 2007 and Mr. Jones is
serving as a Class III Director under a term expiring in 2008. At each of our
annual shareholders meetings, the successor to a director whose term expires at
such meeting will be elected to hold office for a term expiring at the annual
shareholders meeting held in the third year following the year of his election.
Our Board of Directors has nominated Steven M. Dickey and Robin L. Jacob
for re-election as directors for a term ending in 2009 or until their successors
shall have been duly elected and qualified. The persons named as proxies in the
accompanying proxy, who have been designated by our Board of Directors, intend
to vote unless otherwise instructed in the proxy, for the election of Mr. Dickey
and Ms. Jacob. Should any nominee named herein become unable for any reason to
stand for election as a director, the persons named in the proxy will vote for
the election of such other person as our Board of Directors may recommend. We
know of no reason why any nominee will be unavailable or unable to serve.
Information About Each Director and Director Nominee of
AMS Health Sciences, Inc.
Name Age Position with Us
--------------------- ----- -----------------------------------------------
Jerry W. Grizzle(1) 52 Chairman of the Board, Chief Executive Officer,
President and Director
Robin L. Jacob(3)(4) 40 Chief Financial Officer, Secretary,
Treasurer and Director
Steven M. Dickey(3)(4) 58 Director
Stephen E. Jones(2) 36 Director
M. Thomas Buxton III(1) 56 Director
(1) Term as a Director expires in 2007
(2) Term as a Director expires in 2008
(3) Term as a Director expires in 2006
(4) Director Nominee
Jerry W. Grizzle has served as our President, Chief Executive Officer and
Chairman of the Board of Directors since February 2006. Previously, Dr. Grizzle
was the President and CEO of Orbit Finer Foods, Skolniks, and most recently, CD
Warehouse. Prior to his tenure with CD Warehouse, Dr. Grizzle was Vice President
and Treasurer of Sonic Industries. Dr. Grizzle also began a military career as a
Private in 1971 and retired as a Major General in 2005. MG Grizzle commanded the
45th Infantry Brigade in the Oklahoma National Guard. The last three years of
his military career were spent on active duty as the Commander of Joint Task
Force Civil Support (JTF-CS). JTF-CS is trained to respond to a weapons of mass
destruction attach inside the United States. MG Grizzle is the recipient of
numerous military awards and decorations. Dr. Grizzle holds a Masters of
Business Administration degree and a PhD in Business Administration (Marketing).
Robin L. Jacob has served as Vice President, Secretary, Treasurer, Chief
Financial Officer and a director since February 2006. Prior to that time, Ms.
Jacob served as our Controller and Assistant Secretary. She has over 18 years of
accounting and financial reporting experience. Ms. Jacob holds a Bachelor of
Science degree in Accounting, a Masters of Business Administration degree in
Finance, and is a Certified Public Accountant, licensed in the state of
Oklahoma.
Steven M. Dickey has served as one of our directors since October 2002. Mr.
Dickey has been a practicing attorney in the Oklahoma City area since 1973, and
is a principal shareholder in the firm of Dickey and Dickey Attorneys.
Stephen E. Jones has served as one of our directors since March 2006. Mr.
Jones is the Vice President of Mergers & Acquisitions for Newport Capital
Consultants, Inc., a position he has held for the past two years. Prior to
Newport Capital, Mr. Jones was a Territory Manager for Ecolab and
Johnson-Diversey since 1993. Mr. Jones holds a BSB degree in Marketing.
M. Thomas Buxton III has served as one of our directors since June 2001.
Mr. Buxton has practiced as a CPA in the Oklahoma City area and has been a
shareholder in M. Thomas Buxton III, CPA P.C. (formerly Buxton and Cloud, CPA's)
since 1982. Mr. Buxton is a retired lieutenant colonel in the United States Army
Reserve. Mr. Buxton's firm is a registered firm with the Public Companies
Accounting Oversight Board.
Information About Each Executive Officer of AMS Health Sciences, Inc.
Name Age Position with Us
--------------------- ----- -----------------------------------------------
Jerry W. Grizzle(1) 52 President and Chief Executive Officer
Robin L. Jacob(3)(4) 40 Vice President, Chief Financial Officer,
Secretary and Treasurer
Dennis P. Loney 52 Vice President of Operations
Jerry W. Grizzle is listed above in our directors' information.
Robin L. Jacob is listed above in our directors' information.
Dennis P. Loney is Vice President of Operations. Mr. Loney has served in
this capacity since July 1995. Prior to his current position, Mr. Loney served
as the Vice President of Administration of TVC Marketing, Inc. Mr. Loney brings
over 22 years of business and network marketing experience.
Board Meetings and Committees
The Board of Directors has the responsibility for establishing our broad
corporate policies and for our overall performance. However, the Board is not
involved in our day-to-day operations. The Board is kept informed of our
business through discussions with our Chief Executive Officer and other
officers, by reviewing analyses and reports provided to it on a regular basis,
and by participating in Board and Committee meetings.
Meetings. The Board of Directors held nine meetings during 2005. During the
periods that they served none of our directors attended fewer than 75% of the
aggregate of the number of Board of Directors meetings and the number of
committee meetings of which he or she served. The Board has established an Audit
Committee and a Compensation Committee. In accordance with our By-laws, the
Board of Directors annually elects from its members the members of each
Committee.
Audit Committee. Members: M. Thomas Buxton III, Steven M. Dickey and
Stephen E. Jones.
The Audit Committee is composed of non-employee directors, each of which is
independent as defined in Section 121 (A) of the American Stock Exchange listing
standards. The Audit Committee annually considers the qualifications of our
independent auditor and makes recommendations to the Board on the engagement of
the independent auditor. The Audit Committee meets with representatives of the
independent auditor and is available to meet at the request of the independent
auditor. During these meetings, the Audit Committee receives reports regarding
our books of accounts, accounting procedures, financial statements, audit
policies and procedures, internal accounting and financial controls, and other
matters within the scope of the Audit Committee's duties. The Audit Committee
reviews the plans for and results of audits for us and our subsidiaries. The
Audit Committee reviews and approves the independence of the independent
auditor, and considers and authorizes the fees for both audit and nonaudit
services of the independent auditor. The duties and obligations of the Audit
Committee are contained in the Audit Committee Charter, a copy of which was
attached as Appendix A to our proxy statement for our 2005 annual shareholders
meeting. See the "Audit Committee Report" included elsewhere herein.
The Board of Directors has determined that Mr. Buxton is a financial expert
as defined in Item 401(h)(2) of Regulation S-K. Mr. Buxton has practiced as a
Certified Public Accountant in the State of Oklahoma since 1982. In addition, he
was previously the Chief Financial Officer for a holding company. As such, Mr.
Buxton possesses the attributes necessary to qualify as an audit committee
financial expert.
Mr. Haggard was a member of the Audit Committee until his resignation from
the Board of Directors, effective January 4, 2006. Mr. Jones replaced Mr.
Haggard on the Audit Committee effective March 10, 2006. During 2005, the Audit
Committee met seven times. Messrs. Buxton and Dickey were present at all
meetings. Mr. Haggard attended one meeting.
We do not have a Corporate Governance and Nominating Committee. After
review, our Board of Directors concluded that formation of a separate committee
would be financially unreasonable and administratively burdensome, based on the
size and nature of the Company. As a result, the Audit Committee acts in place
of a Corporate Governance and Nominating Committee. The Audit Committee acts in
the following capacities:
o Evaluation of our corporate governance effectiveness and
recommendation of such revisions as it deems appropriate to
improve the corporate governance of the Company, the Board or any
committee of the Board; and
o Identification of individuals qualified to become Board members
and recommendation of (i) candidates to fill newly created
director positions or Board vacancies, (ii) whether incumbent
directors should be nominated for re-election to the Board upon
the expiration of their terms, and (iii) directors to serve on
committees of the Board.
In considering possible candidates for election as a director, the Audit
Committee is guided by the principles that each director should be an individual
of high character and integrity and have:
o Independence;
o Wisdom;
o Integrity;
o An understanding and general acceptance of our corporate
philosophies;
o A valid business or professional knowledge and experience that
can bear on our challenges and deliberations and those of our
Board of Directors;
o A proven record of accomplishment with an excellent organization;
o An inquiring mind;
o A willingness to speak one's mind;
o An ability to challenge and stimulate management;
o A willingness to commit time and energy to our business affairs;
and
o International and global experience.
Qualified candidates for membership as a director will be considered
without regard to race, color, religion, gender, ancestry, national origin or
disability. The Audit Committee will review the qualifications and background of
directors and nominees to become directors, without regard to whether a nominee
has been recommended by shareholders. The Audit Committee does not have a
charter specific to nominations of directors. A copy of the resolution setting
forth our nomination process may be obtained by writing AMS Health Sciences,
Inc., 711 NE 39th Street, Oklahoma City, OK 73105, Attn: Corporate Secretary.
If the Committee receives recommendations for nominees to our Board of
Directors from a stockholder or group of stockholders that beneficially own more
than 5% of our voting stock, not less than 120 days prior to the date of our
proxy statement for the previous year's annual meeting, we will include the name
of the recommended nominee, the security holder or holders that recommended such
nominee and disclose whether the Committee chose to nominate the candidate for
election to our Board of Directors in our proxy statement related to that
meeting. Nominations must include the full name of the proposed nominee, a brief
description of the proposed nominee's business experience for at least the
previous five years, and a representation that the nominating shareholder is the
beneficial record owner of our common stock. Such submission must be accompanied
by the written consent of the proposed nominee to be named as a nominee and to
serve as a director, if elected. Nominations should be delivered to the Audit
Committee at the following address: The AMS Health Sciences, Inc. Audit
Committee, c/o Stephen E. Jones, AMS Health Sciences, Inc., 711 NE 39th Street,
Oklahoma City, Oklahoma 73105.
In addition to considering possible candidates for election as directors,
the Audit Committee may, in its discretion, review the qualifications and
backgrounds of existing directors and other nominees (without regard to whether
a nominee has been recommended by shareholders), as well as the overall
composition of our Board of Directors, and recommend the slate of directors to
be nominated for election at the ensuing annual meeting of shareholders.
Currently, we do not employ or pay a fee to any third party to identify or
evaluate, or assist in identifying or evaluating, potential director nominees.
In addition, the Audit Committee will evaluate our corporate governance
effectiveness and recommend such revisions as it deems appropriate to improve
our corporate governance. The areas of evaluation may include such matters as
the size and independence requirements of our Board of Directors, Board
committees, management success and planning, and regular meetings of our
non-management directors without management in executive sessions.
Compensation Committee. Members: M. Thomas Buxton III and Stephen E. Jones.
The members of the Compensation Committee are independent directors, but
are eligible to participate in any of the plans or programs that the
Compensation Committee administers. The Compensation Committee approves the
standards for setting salary ranges for our executive officers, reviews and
approves the salary budgets for all other of our officers, and specifically
reviews and approves the compensation of our senior executives. The Compensation
Committee reviews action taken by management in accordance with the salary
guidelines for executives and establishes the performance objectives for
variable compensation for executives. The Compensation Committee also
administers our stock option plans and approves stock option grants for our
executive officers. See the "Compensation Committee Report on Executive
Compensation" included elsewhere herein. Mr. Haggard was a member of the
Compensation Committee until his resignation from the Board of Directors,
effective January 4, 2006. Mr. Jones replaced Mr. Haggard on the Compensation
Committee effective March 10, 2006. During 2004, the Compensation Committee met
once and Messrs. Buxton and Haggard attended the meeting.
Communications with the Board
You can contact any member of our Board of Directors by writing to him or
her at the same address provided above for delivery of director nominations. Our
shareholders, our employees and any others who wish to contact any
non-management member of our Board of Directors or any member of our Audit
Committee to report complaints or concerns with respect to accounting, internal
accounting, controls or auditing matters, may do so by using the above address.
Information explaining how our shareholders can contact our Board of Directors
is available in the Contact Us section of our website at www.amsonline.com under
the heading "Board of Directors."
Director Attendance at Annual Meeting
We do not have a policy requiring our Board members to attend the Annual
Meeting; however, Mr. Grizzle and Ms. Jacob are required to attend the Annual
Meeting due to their positions as our executive officers. Last year, three
directors attended our Annual Meeting.
Code of Ethics
We have adopted the AMS Health Sciences Code of Ethics for our employees,
officers and directors. Our Code of Ethics is publicly available on our website
at www.amsonline.com. If we make any substantive amendments to our Code of
Ethics or grant any waiver, including any implicit waiver, from a provision of
this Code to our executive officers, we will disclose the nature of such
amendment or waiver on our website.
Compensation of Directors
Directors who are not our employees receive $500 for each Board or
Committee meeting attended. Our Audit Committee chairman receives $1,000 for
each Audit Committee meeting attended, due to his designation as a financial
expert. Directors who are also our employees receive no additional compensation
for serving as directors. We reimburse our directors for travel and
out-of-pocket expenses in connection with their attendance at meetings of the
Board of Directors. Our Bylaws provide for mandatory indemnification of
directors and officers to the fullest extent permitted by Oklahoma law.
Compensation Committee Interlocks and Insider Participation
At December 31, 2005, our Compensation Committee consisted of Messrs.
Buxton and Haggard. No member of the Compensation Committee was one of our
officers or employees, an officer or employee of any of our subsidiaries or
engaged in a related party transaction with us, during 2005. John W. Hail, our
former Chairman of the Board and Chief Executive Officer, serves on the Board of
Directors of Pre-Paid Legal Services, Inc. Harland Stonecipher, the Chairman of
the Board and Chief Executive officer of Pre-Paid Legal Services, Inc. served on
our Board of Directors until his resignation, effective December 9, 2005.
The affirmative vote of the holders of a majority of our common stock
present, in person or by proxy at the Annual Meeting and entitled to vote, is
required for the election of a director. An abstention from voting and broker
non-votes will be tabulated as a vote withheld on the election, but will be
included in computing the number of shares present for purposes of determining
the presence of a quorum for the Annual Meeting and whether a nominee has
received the vote of a majority of the shares present at the Annual Meeting.
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RE-ELECTION OF STEVEN M.
DICKEY AND ROBIN L. JACOB TO THE BOARD OF DIRECTORS. PROXIES SOLICITED BY OUR
BOARD OF DIRECTORS WILL BE SO VOTED UNLESS SHAREHOLDERS SPECIFY A CONTRARY
CHOICE.
PROPOSAL 2
APPROVAL OF AMS HEALTH SCIENCES, INC.
2006 LONG-TERM INCENTIVE PLAN
Subject to approval by the Company's stockholders, our Board of Directors
has approved the AMS Health Sciences, Inc. 2006 Long-Term Incentive Plan, which
we refer to in this document as the "Plan." A copy of the Plan is attached
hereto as Appendix A.
The Plan authorizes the Compensation Committee of our Board of Directors to
grant nonqualified and incentive stock options, restricted stock awards, stock
appreciation rights and performance units to selected employees. The Plan also
authorizes the grant of nonqualified stock options, restricted stock awards,
stock appreciation rights and performance units to non-employee Directors. A
total of 5,000,000 shares of common stock have been authorized for award under
the Plan. Grants will be awarded under the Plan at the discretion of the
Committee. As a result, we are unable to determine, at this time, the
recipients, amounts or values of any future benefits to be received under the
Plan.
In addition to the number of shares authorized for issuance under the Plan,
the Company still has 150,000 shares of common stock available for issuance
under its 2003 Stock Incentive Plan (the "2003 Plan").
Purpose
The purpose of the Plan is to create incentives designed to motivate
selected employees to significantly contribute toward the growth and
profitability of the Company. The shares under the Plan will enable the Company
to attract and retain experienced employees who, by their positions, abilities
and diligence, are able to make important contributions to the Company's
success.
Key Limitations
Key limitations of the Plan include:
o a prohibition against the repricing of stock options;
o a prohibition against granting options or stock appreciation
rights with an exercise price less than the fair market value of
the Company's common stock on the date of grant;
o of the 5,000,000 shares authorized for issuance under the Plan,
only 1,000,000 may be granted as incentive stock options;
o the Plan contains a readjustment provision in which shares
granted as restricted stock awards or as stock appreciation
rights or performance units settled in shares of common stock
will be counted against this limit as 2.0 shares for each share
granted;
o a maximum ten-year life for any award made under the Plan;
o the following award limits:
oo the maximum number of shares that may be awarded in the form
of options or SARs to an employee in any calendar year is
500,000;
oo the maximum number of shares that may be awarded in the form
of restricted stock awards or performance units to an
employee in any calendar year is 100,000.
Administration
The new long-term incentive plan consists of three separate stock plans:
o Non-executive officer plan: this aspect of the plan is limited to
participants who are not subject to Section 16 of the Securities
Exchange Act of 1934 because they are not executive officers of
the Company. The non-executive officer plan is administered by
the Compensation Committee. However, the Compensation Committee
may, to the extent permitted by law, delegate authority to the
Special Award Committee to administer the non-executive officer
plan. The Company's chief executive officer and other individuals
appointed by the Compensation Committee will comprise the Special
Award Committee. Although the Special Award Committee may be
authorized to administer the non-executive officer plan, it can
only make awards within guidelines set by the Compensation
Committee.
o Executive officer plan: this aspect of the plan is limited to
participants who are executive officers of the Company and who,
therefore, are subject to the reporting requirements of Section
16 of the Securities Exchange Act of 1934. The executive officer
plan is administered exclusively by the Compensation Committee.
Except for administration and the category of participants eligible to
receive awards, the terms of the non-executive officer plan and the executive
officer plan are identical.
o Non-employee director plan: this aspect of the plan is limited to
non-employee directors of the Company and permits only grants of
nonqualified stock options and restricted stock. The Company's
Board of Directors is responsible for selection of non-employee
directors for awards and for determination of the nature of the
award. The Compensation Committee is responsible for the
administration of awards granted to non-employee directors.
As used in the Proxy Statement, the term "Committee" shall mean the Special
Award Committee if it refers to Plan administration affecting non-executive
officer participants or the Compensation Committee if it refers to Plan
administration affecting executive officer participants or non-employee director
participants.
Eligibility for Participation
Any employee of the Company and its subsidiaries and affiliated entities
and any non-employee Director is eligible to participate in the Plan. Subject to
the provisions of the Plan, the Committee has exclusive power in selecting
participants from among the eligible employees and the Board has the exclusive
power to select participants from the non-employee Directors.
Types of Awards
The Plan provides that any or all of the following types of awards may be
granted:
o nonqualified stock options and stock options intended to qualify
as "incentive stock options" under Section 422 of the Internal
Revenue Code;
o restricted stock;
o stock appreciation rights (SARs); and
o performance units,
provided that non-employee Directors may not be awarded incentive stock options.
Stock Options. The Compensation Committee may grant awards under the Plan
in the form of options to purchase shares of the Company's common stock. The
Compensation Committee will have the authority to determine the terms and
conditions of each option, the number of shares subject to the option, and the
manner and time of the option's exercise. As of April 26, 2006, the market value
of the common stock underlying the options available for issuance under the Plan
was $3,500,000.
The exercise price of an option may not be less than the fair market value
of the Company's common stock on the date of grant. The fair market value of
shares of common stock subject to options is determined by the closing price on
the American Stock Exchange on the date the value is to be determined. As of
April 26, 2006, the closing price of the Company's common stock as reported on
the American Stock Exchange was $0.70. The exercise price of an option may be
paid in cash, in shares of the Company's common stock or a combination of both;
provided that, the exercise price (including required withholding taxes) is paid
using shares of the Company's common stock only to the extent such exercise
would not result in a variable compensation expense to the Company for financial
accounting purposes. The Compensation Committee may permit the exercise of stock
options through a broker-dealer acting on a participant's behalf in accordance
with procedures adopted by the Company to ensure that the arrangement will not
constitute a personal loan to the participant. Unless sooner terminated, the
stock options granted under the Plan expire ten years from the date of the
grant.
Restricted Stock Awards. Shares of restricted stock awarded under the Plan
will be subject to the terms, conditions, restrictions and/or limitations, if
any, that the Compensation Committee deems appropriate, including restrictions
on continued employment.
Each restricted stock award will require a minimum restriction period of three
years, unless vesting is based upon specified performance goals and measures or
the shares of restricted stock are issued in lieu of cash compensation.
Stock Appreciation Rights. A stock appreciation right permits the employee
to receive an amount (in cash, common stock, or a combination thereof) equal to
the number of stock appreciation rights exercised by the employee multiplied by
the excess of the fair market value of common stock on the exercise date over
the stock appreciation rights' exercise price. Stock appreciation rights may or
may not be granted in connection with the grant of an option. The term of any
stock appreciation rights granted under the Plan cannot exceed ten years from
the date of the grant. The exercise price of stock appreciation rights granted
under the Plan cannot be less than the fair market value of a share of common
stock on a date the stock appreciation right is granted. A stock appreciation
right may be exercised in whole or in such installments and at such times as
determined by the Compensation Committee.
Performance Units. The Plan permits grants of performance units, which are
rights to receive cash or common stock based upon the achievement of performance
goals established by the Compensation Committee. Such awards are subject to the
fulfillment of conditions that may be established by the Compensation Committee
including, without limitation, the achievement of performance targets based upon
the factors described above relating to restricted stock awards.
Termination of Employment
If a participant's employment is terminated, all unvested awards will
terminate unless the Compensation Committee accelerates vesting of the award.
The Compensation Committee is not permitted to accelerate vesting of an award if
it would result in an acceleration of the minimum vesting periods for restricted
stock described above except in the case of death, disability or retirement.
Vested options, stock appreciation rights and performance units must be
exercised within three months of termination except in the case of death,
disability or retirement. Incentive Stock Options will be exercisable for a
period of one year following termination due to death or disability.
Nonqualified stock options and stock appreciation rights will be exercisable for
the remaining term of the awards if termination of employment is due to death,
disability or retirement.
Eligible Directors will have the remaining term of the award following
termination of service to exercise vested nonqualified stock options or stock
appreciation rights. The unvested portion of any award will be forfeited upon an
eligible Director's termination of service unless vesting is accelerated by the
Compensation Committee.
Amending the Plan
The Company's Board of Directors may amend the Plan at any time. The
Company's Board of Directors, may not, without stockholder approval, adopt any
amendment that would increase the maximum number of shares that may be granted
under the Plan (except for certain antidilution adjustments described in the
"Automatic Adjustment Features" section of this document), materially modify the
Plan's eligibility requirements or materially increase the benefits provided to
participants under the Plan.
Change of Control Event
The unvested portion of any outstanding awards under the Plan will be
accelerated upon a change of control event.
Plan Benefits
No awards will be made under the Plan until shareholder approval.
Future benefits under the Plan are not currently determinable. During
fiscal 2005, stock options were granted under the 2003 Plan to the Company's
named executive officers to purchase 150,000 shares at an exercise price of
$2.00 per share. The number of stock options granted to each named executive
officer is set forth in the table captioned "Option Grants In Last Fiscal Year"
on page 14 of this Proxy Statement. Stock options were granted under the 2003
Plan to all other employees of the Company as a group to purchase 85,500 shares
of common stock at an average exercise price of $2.03 per share. Stock options
were granted to non-employee associates of the Company as a group to purchase
75,000 shares of common stock at an exercise price of $1.81 per share.
Automatic Adjustment Features
The Plan provides for the automatic adjustment of the number and kind of
shares available under it, and the number and kind of shares subject to
outstanding awards in the event the Company's common stock is changed into or
exchanged for a different number or kind of shares of stock or other securities
of the Company or another corporation, or if the number of shares of the
Company's common stock is increased through a stock dividend. The Plan also
provides that the Compensation Committee may adjust the number of shares
available under the Plan and the number of shares subject to any outstanding
awards if, in the Compensation Committee's opinion, any other change in the
number or kind of shares of the Company's outstanding common stock equitably
requires such an adjustment.
U.S. Federal Tax Treatment
Incentive Stock Option Grant/Exercise. A participant who is granted an
incentive stock option does not realize any taxable income at the time of the
grant or at the time of exercise (except for alternative minimum tax).
Similarly, the Company is not entitled to any deduction at the time of grant or
at the time of exercise. If the participant makes no disposition of the shares
acquired pursuant to an incentive stock option before the later of two years
from the date of grant of such option or one year from the date of the exercise
of such shares by the participant, any gain or loss realized on a subsequent
disposition of the shares will be treated as a long-term capital gain or loss.
Under such circumstances, the Company will not be entitled to any deduction for
federal income tax purposes.
Nonqualified Stock Option and Stock Appreciation Right Grant/Exercise. A
participant who is granted a nonqualified stock option or SAR does not have
taxable income at the time of grant. Taxable income occurs at the time of
exercise in an amount equal to the difference between the exercise price of the
shares and the market value of the shares on the date of exercise. The Company
is entitled to a corresponding deduction for the same amount.
Restricted Stock Award. A participant who has been granted an award in the
form of restricted stock will not realize taxable income at the time of the
grant, and the Company will not be entitled to a deduction at the time of the
grant, assuming that the restrictions constitute a substantial risk of
forfeiture for U.S. income tax purposes. When such restrictions lapse, the
participant will receive taxable income (and have tax basis in the shares) in an
amount equal to the excess of the fair market value of the shares at such time
over the amount, if any, paid for such shares. The Company will be entitled to a
corresponding deduction. The participant may elect to include the value of his
restricted stock award as income at the time it is granted under Section 83(b)
of the Code, and the Company will take a corresponding income tax deduction at
such time.
Performance Units. The federal income tax consequences of performance units
will vary depending upon the individual structure of the award. Generally, the
performance unit will be taxable upon payment.
The affirmative vote of the holders of a majority of the total combined
voting power of the shares represented and entitled to vote at the meeting will
be required to approve the adoption of the AMS Health Sciences, Inc. 2006
Long-Term Incentive Plan.
THE COMPANY'S BOARD HAS UNANIMOUSLY APPROVED THE ADOPTION OF THE AMS HEALTH
SCIENCES, INC. 2006 LONG-TERM INCENTIVE PLAN AND UNANIMOUSLY RECOMMENDS A VOTE
"FOR" THE PROPOSAL TO APPROVE THE ADOPTION OF THE AMS HEALTH SCIENCES, INC. 2006
LONG-TERM INCENTIVE PLAN.
PROPOSAL 3
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected Cole & Reed, P.C. as our independent
auditors for the year ending December 31, 2006, and has further directed that
management submit the selection of independent auditors for ratification by the
stockholders at our Annual Meeting. Cole & Reed, P.C. audited our 2005 financial
statements. Representatives of Cole & Reed P.C. are expected to 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.
As previously reported, on June 20, 2005, upon the recommendation of our
Audit Committee and with the approval of our Board of Directors, we dismissed
our principal accountant, Grant Thornton LLP, in order to institute certain cost
saving measures. On the same date, we engaged Cole & Reed, P.C. as our principal
accountant. At no time did any report by Grant Thornton LLP on our financial
statements contain an adverse opinion or a disclaimer of opinion; nor was any
such report qualified or modified as to uncertainty, audit scope or accounting
principles. Also, at no time did we have any disagreements with Grant Thornton
LLP on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements, if not resolved
to the satisfaction of Grant Thornton LLP, would have caused Grant Thornton LLP
to reference the subject matter of the disagreement in connection with their
report on our financial statements.
We did not consult with Cole & Reed, P.C. during our two most recent fiscal
years and any subsequent interim period prior to engaging Cole & Reed, P.C.
regarding either (1) the application of accounting principles to a specified
transaction, either completed or proposed, or the type of audit opinion that
might be rendered on our financial statements, or (2) any matter that was either
the subject of a disagreement or a reportable event, as those terms are defined
in Item 304(a) of Regulation S-K.
Audit Fees
Audit fees billed to us during the last two fiscal years ended December 31,
2005 for audit or review of our annual financial statements and those financial
statements included in our quarterly reports on Forms 10-Q, and services
normally provided in connection with our regulatory filings, totaled $123,361
for 2004 and $55,815 for 2005, of which $131,381 was billed by Grant Thornton
LLP and $47,795 was billed by Cole & Reed P.C.
Audit-Related Fees
Audit-related fees billed to us during the last two fiscal years ended
December 31, 2005 for assurance and related services reasonable related to the
audit or review of our financial statements, but not otherwise disclosed under
the heading "Audit Fees" above, totaled $4,170 for 2004 and $28,193 for 2005, of
which $11,953 was billed by Grant Thornton LLP and $20,410 was billed by Cole
& Reed P.C. These fees related to the change of auditors from Grant Thornton LLP
to Cole & Reed P.C. and the review of internal control documentation and
preparation of management advisory comments.
Tax Fees
Tax fees billed to us during the last two fiscal years ended December 31,
2005 for tax compliance, tax advice or tax planning totaled $21,365 for 2004 and
$1,660 for 2005, of which $21,365 was billed by Grant Thornton LLP and $1,660
was billed by Cole & Reed P.C. Services provided to us include filing corporate
franchise and income tax returns.
All Other Fees
There were no fees billed to us during the last two fiscal years ended
December 31, 2005 for any other non-audit services. The Audit Committee has
determined that the provision of non-audit services by Cole & Reed P.C. did not
impact the independence of Cole & Reed P.C.
Pursuant to pre-approval policies and procedures set forth in the existing
Audit Committee Charter, the Audit Committee approved 100% of the audit and
audit-related services in 2004. The Audit Committee currently approves in
advance all audit, non-audit and tax services to be performed for us by our
independent accountants.
Stockholder ratification of the selection of Cole & Reed P.C. as our
independent auditors is not required by Cole & Reed P.C., our Bylaws or
otherwise. However, the Board is submitting the selection of Cole & Reed P.C. to
our stockholders for ratification as a matter of corporate practice. If the
stockholders fail to ratify the selection, the Board will reconsider whether or
not to retain that firm. Even if the selection is ratified, the Board in its
discretion may direct the appointment of a different independent accounting firm
at any time during the year if the Board determines that such a change would be
in our best interests and the best interests of our stockholders.
The affirmative vote of the holders of a majority of the total combined
voting power of the shares represented and entitled to vote at the meeting will
be required to ratify the selection of Cole & Reed P.C. as our independent
auditors for the fiscal year ending December 31, 2006.
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF COLE &
REED P.C. AS INDEPENDENT AUDITORS. PROXIES SOLICITED BY OUR BOARD OF DIRECTORS
WILL BE SO VOTED UNLESS SHAREHOLDERS SPECIFY A CONTRARY CHOICE.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Summary Compensation Table
The following Summary Compensation Table sets forth certain information
relating to compensation for services rendered during the years ended December
31, 2005, 2004 and 2003, paid to or accrued for John W. Hail, our former Chief
Executive Officer, and each of our executive officers whose 2005 salary and
bonus exceed $100,000.
Long-Term
Compensation Awards
------------------------
Annual Compensation Securities Exercise
-------------------------------------- Underlying or Base
Name and Principal Position Year Salary Bonus Other Options Price
--------------------------- ------ -------- ---------- --------- ---------- --------
John W. Hail 2005 $312,622 $ - $ - - $ -
Former Chief Executive Officer 2004 $437,161 $ - $ - 25,000 $ 2.84
2003 $498,661 $ - $ - 100,000 $ 1.31
Reggie Cook 2005 $124,625 $ 20,000 $19,386 - $ -
Former Vice President and Chief 2004 $148,300 $ - $ - 75,000 $ 2.79
Financial Officer
2003 $167,985 $ - $ - 100,000 $ 1.31
Dennis Loney 2005 $105,000 $ - $ - - $ -
Vice President of Operations 2004 $175,070 $ - $ - 75,000 $ 2.79
2003 $147,985 $ - $ - 100,000 $ 1.31
---------------------------
Mr.Hail retired effective February 12, 2006. Jerry W. Grizzle was approved
by the Board of Directors as Chairman of the Board, President and Chief
Executive Officer effective February 12, 2006.
Mr. Cook resigned effective December 9, 2005. Robin L. Jacob was approved
by the Board of Directors as Vice President, Secretary, Treasurer and Chief
Financial Officer effective February 12, 2006.
Represents severance payments to Mr. Cook.
Option Grants in Last Fiscal Year
The following table sets forth information related to the grant of stock
options during 2005.
Stock Options Granted
--------------------- Potential Realizable
Percentage of Value at Assumed Annual
Percentage of Rates of Stock
Number of Total Options Price Appreciation for
Shares Granted to Option Term
Underlying Employees Exercise Expiration ---------------------------
Options in 2005 Price Date 5% 10%
---------- ------------ -------- ----------- -------- --------
John W. Hail 150,000 63.7% $2.00 May 13, 2015 $189,000 $478,000
Chief Executive Officer
_______________
Aggregated Option Exercises in Last Fiscal Year and
Fiscal Year-End Option Values
The following table sets forth information related to the exercise of stock
options during 2005 and the number and value of options held by the named
executive officers at December 31, 2005.
Value of Unexercised
Number of Unexercised In-the-Money
Options as of Options as of
Shares December 31, 2005 December 31, 2005
Acquired on Value ------------------------------ -----------------------------
Exercise Realized Exercisable Unexercisable Exercisable Unexercsiable
----------- -------- ----------- ------------- -----------------------------
John W. Hail 150,000 $ 0 325,000 - $ - $ -
Former Chief Executive
Officer
Reggie Cook - $ - 251,119 - $ - $ -
Former Vice President and
Chief Financial Officer
Dennis Loney - $ - 237,000 - $ - $ -
Vice President of
Operations
_______________
The closing sale price of our common stock as reported on the American Stock Exchange on December 31, 2005 was
$0.88. The per-share value is calculated based on the applicable closing price per share, minus the exercise price,
multiplied by the number of shares of our common stock underlying the options.
Mr. Hail exercised options to purchase 150,000 shares of our common stock on May 13, 2005 at an exercise price of
$2.00 per share. The closing price of the common stock as reported on American Stock Exchange on May 13, 2005 was
$1.96 per share.
Equity Compensation Plan Information
The following table gives information about our common stock that may be
issued upon the exercise of options, warrants and rights under our existing
equity compensation plans (including individual compensation arrangements) as of
December 31, 2005.
(a) (b) (c)
Number of
securities remaining
available for
Number of securities future issuance under
to be issued upon Weighted-average equity compensation
exercise of exercise price of plans (excluding
outstanding options, outstanding options, securities reflected
Plan Category warrants and rights warrants and rights in column (a))
------------------------------ -------------------- -------------------- ----------------------
Equity compensation plans
approved by security holders 1,950,009 $3.58 1,174,991
Equity compensation plans not
approved by security holders - - -
--------- ----- ---------
Total 1,950,009 $3.58 1,174,991
========= ===== =========
Employment Agreements
On November 4, 2003, we entered into a written employment agreement with
John W. Hail, our Chief Executive Officer. The contract was for an initial
two-year term, commencing November 4, 2003, and may be extended for up to five
successive one-year terms if we and Mr. Hail agree in writing. The agreement was
extended on November 4, 2005. The contract calls for a base salary of $249,600
per year, a monthly variable salary equal to one percent (1%) of our gross
revenues, and a discretionary year-end bonus determined by a majority vote of
the Board of Directors. On November 4, 2005, we extended Mr. Hail's employment
agreement to November 4, 2006. In connection with the extension, Mr. Hail's
monthly variable salary ceased and was replaced by a fixed supplemental payment
to Mr. Hail, which will be in a gross amount necessary to cover all federal,
state and local taxes and all employment taxes, and pay a net amount of $7,000
per month. Mr. Hail retired as our Chief Executive Officer and Chairman of the
Board effective February 12, 2006. At such time, our obligations under his
employment agreement terminated.
We have entered into a written employment agreement with our Chairman of
the Board, President and Chief Executive Officer, Jerry W. Grizzle. The contract
is for a two-year term, commencing January 25, 2006, for an initial term of two
years, followed by two successive one-year terms unless either party elects not
to renew the Agreement. Mr. Grizzle's base salary is $150,000 per year for the
first year of the Initial Term, $200,000 for the second year of the Initial Term
and $250,000 for each year after the Initial Term. Additionally, Mr. Grizzle
will be eligible to receive certain performance-based incentive bonuses. The
Company granted Mr. Grizzle 250,000 stock options on February 15, 2006, with an
exercise price of $0.62 per share. The options vest in five equal annual
installments beginning February 15, 2007 and expire February 15, 2016.In the
event the Company terminates Mr. Grizzle without cause, he will receive certain
severance pay based upon his length of employment with the Company.
We have entered into a written employment agreement with our Vice
President, Secretary, Treasurer and Chief Financial Officer, Robin L. Jacob. The
contract is for a two-year term, commencing February 12, 2006, followed by two
successive one-year terms unless either party elects not to renew the Agreement.
Ms. Jacob's base salary is $100,000 per year for the first year of the Initial
Term, $112,500 for the second year of the Initial Term and $125,000 for each
year after the Initial Term. Additionally, she is eligible to receive certain
performance-based incentive bonuses. The Company granted Ms. Jacob options to
purchase 150,000 shares of the Company's common stock at an exercise price of
$.64 per share, which was the closing price of the Company's common stock on
March 31, 2006, the last trading day prior to the date the options were granted.
The options vest in five equal annual installments beginning April 1, 2007 and
expire April 1, 2016. In the event the Company terminates Ms. Jacob without
cause, she will receive certain severance pay based upon her length of
employment with the Company.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The 2005 Compensation Committee was composed of Messrs. Buxton and Haggard,
each of whom was one of our independent directors. Mr. Haggard was a member of
the Compensation Committee until his resignation from the Board of Directors
effective January 4, 2006. Mr. Jones replaced Mr. Haggard on the Compensation
committee effective March 10, 2006. The Compensation Committee designs and
administers the compensation programs for our executive officers and other key
employees and makes grants under our stock option plans. The Compensation
Committee, with the aid of internal staff, reviews and evaluates our
compensation programs to determine their effectiveness in attracting, motivating
and retaining highly skilled executive officers.
Compensation Philosophy. Our compensation program for our executive
officers is designed to preserve and enhance stockholder value by heavily
emphasizing performance-based compensation. The program is directed towards
motivating executives to achieve our business objectives, to reward them for
their achievement and to attract and retain executive officers who contribute to
our long-term success. Competition is intense for senior executives within the
network marketing industry, with established companies and start-ups
aggressively recruiting management talent. A key design criterion for our
compensation programs is therefore the retention of senior management and other
key employees.
Compensation Components. Our executive compensation program has four
primary components: base salary, variable salary, performance bonuses and stock
option grants. Each is discussed below.
Base Salary. The level of base salary paid to our executive officers is
determined on the basis of the importance of the position and on market data. In
2005, we did not increase the base salaries of our named executive officers.
Variable Salary. The level of variable salary paid to our executive
officers is determined as a percentage of monthly sales volume. In 2005, the
percentage varied for our named executive officers.
Performance Bonuses. For 2005, we employed a cash incentive compensation
program under which bonus amounts are based on a number of performance factors
that we considered relevant, including the following:
o Overseeing our financial results;
o Building and growing higher margin business;
o Strengthening our organization structure and management team; and
o Controlling non-personnel expenses while growing revenues.
Stock Option Grants. For 2005, we employed a stock option grant program
under which options were granted based on a number of performance factors that
we considered relevant, including the same factors considered for performance
bonuses.
Compensation of the Chief Executive Officer. As described above, we
determine compensation for all executives, including John W. Hail, our Chief
Executive Officer, considering both a pay-for-performance philosophy and market
rates of compensation. Mr. Hail's base salary was $249,600 for fiscal 2005,
which we believe is not inconsistent with the base salaries of chief executive
officers of peer companies. Mr. Hail's variable salary was $63,022 for fiscal
2005.
THE COMPENSATION COMMITTEE
M. Thomas Buxton III
Stephen E. Jones
AUDIT COMMITTEE REPORT
The Audit Committee of the Board is responsible for providing independent,
objective oversight and review of our accounting functions and internal
controls. Mr. Haggard was a member of the Audit Committee until his resignation
from the Board of Directors effective January 4, 2006. Mr. Jones replaced Mr.
Haggard on the Audit committee effective March 10, 2006. The Audit Committee is
governed by a written Charter adopted and approved by the Board in June, 2000
and amended in October, 2004.
In fulfilling our duties for the 2005 fiscal year pursuant to our Charter,
the Committee has also done each of the following:
o Reviewed our audited financial statements for 2054 and discussed the
financial statements with our management;
o Discussed with Cole & Reed, P.C. the matters required to be discussed
with them by the Auditing Standards Board Statement on Accounting
Standards No. 61 (Codification of Statements on Auditing Standards, AU
380) as may be modified or supplemented;
o Received the written disclosure from Cole & Reed, P.C. required by
Independence Standards Board Standard No. 1 (Independence Discussions
with Audit Committees), about any relationships between them and us
which they believe may effect their independence;
o Received a confirmation letter from Cole & Reed, P.C. that they are
independent of us; and
o Discussed Cole & Reed, P.C.'s independence with them.
Based on the review and discussions above, the Committee recommended to the
Board that the audited financial statements for 2005 be included in our Form
10-KSB filed with the Securities and Exchange Commission.
All of the members of the Audit Committee in 2005 were independent as
defined in Section 121(A) of the American Stock Exchange Listing Standards.
The Committee has considered the non-audit services rendered by our
principal accountant for the most recent fiscal year and has concluded that the
provisions of such services is compatible with maintaining Cole & Reed P.C.'s
independence.
M. Thomas Buxton, III
Steven M. Dickey
Stephen E. Jones
STOCK PERFORMANCE
The following performance graph compares our cumulative total stockholder
return on our common stock against the cumulative total return of the AMEX
Composite Index and the Morgan Stanley Consumer Index (CMR) compiled by
Prudential Securities Group, Inc. for the period from December 31, 2000 through
December 31, 2005. The performance graph assumes that the value of the
investment in our stock and each index was $100 on December 31, 2000 and that
any dividends were reinvested. We have never paid dividends on our common stock.
[GRAPHIC OMITTED]
COMPARE 5-YEAR CUMULATIVE TOTAL RETURN
AMONG AMS HEALTH SCIENCES, INC.
AMEX COMPOSITE INDEX AND MORGAN STANLEY CONSUMER INDEX
December December December December December December
2000 2001 2002 2003 2004 2005
-------- -------- -------- -------- -------- --------
AMS Health Sciences, Inc. 100.00 107.37 55.16 172.21 251.79 37.06
Morgan Stanley Consumer Index 100.00 93.57 83.29 94.21 103.34 105.58
AMEX Composite Index 100.00 96.60 96.07 139.95 175.10 220.18
The industry index chosen is the Morgan Stanley Consumer Index. This index
is an equal dollar weighted index designed to measure the performance of
consumer-oriented, stable growth industries through price changes in 30
component stocks representing 20 industries. Major industries include beverages,
food, pharmaceuticals, tobacco and personal products. To ensure that each
component stock continues to represent approximately equal weight in the index,
adjustments are made annually, based on closing prices on the third Friday in
December.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table presents certain information as to the beneficial
ownership of our common stock as of April 27, 2006, of:
o Each person who is known to us to be the beneficial owner of more than
5% of our common stock;
o Each of our directors, nominees for directors and executive officers;
o Our executive officers and directors as a group; and
o Their percentage holdings of our outstanding shares of common stock.
For purposes of the following table, the number of shares and percent of
ownership of our outstanding common stock that the named person beneficially
owned on April 27, 2006, includes shares of our common stock that such person
has the right to acquire within 60 days of April 27, 2006, upon exercise of
options and warrants. However, such shares are not included for the purposes of
computing the number of shares beneficially owned and percent of our outstanding
common stock of any other named person.
Common Stock
------------------------------
Shares Percent of
Beneficially Shares
Name and Address of Beneficial Owner Owned Outstanding
----------------------------------- ------------ -----------
Jerry W. Grizzle(1) 5,000 *
Steven M. Dickey(1)(2) 52,500 *
M. Thomas Buxton III(1)(3) 42,500 *
Stephen E. Jones (1) 1,000 *
Robin L. Jacob(1)(4) 32,811 *
Dennis P. Loney(1)(5) 252,706 3.2%
John W. Hail (6)(7) 611,955 7.6%
Reggie Cook (8)(9) 253,059 3.2%
Executive Officers and Directors
as a group (eight persons) 1,251,531 14.4%
*Less than 1%
_______________
(1) A director or an executive officer with a business address of 711 NE 39th
Street, Oklahoma City, Oklahoma 73105.
(2) The number of shares and the percentage presented includes 52,500 shares of
our common stock that are subject to currently exercisable stock options.
(3) The number of shares and the percentage presented includes 42,500 shares of
our common stock that are subject to currently exercisable stock options.
(4) The number of shares and the percentage presented includes 32,311 shares
of our common stock that are subject to currently exercisable stock
options.
(5) The number of shares and the percentage presented includes 237,000 shares
of our common stock that are subject to currently exercisable stock
options.
(6) John W. Hail resigned as our Chairman and Chief Executive Officer effective
February 12, 2006. Mr. Hail's current business address is 711 N.E. 3rd
Street, Oklahoma City, OK 73105.
(7) The number of shares and the percentage presented includes 325,000 shares
of our common stock that are subject to currently exercisable stock
options.
(8) Mr. Cook resigned as our Director and Chief, Financial Officer effective
December 9, 2005. Mr. Cook's current business address is 2602 N.W.
Expressway, Oklahoma City, OK 73118.
(9) The number of shares and the percentage presented includes 251,119 shares
of our common stock that are subject to currently exercisable stock
options.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Set forth below is a description of transactions entered into between us
and certain of our officers, directors and shareholders during the last fiscal
year. Certain of these transactions may result in conflicts of interest between
us and such individuals. Although these persons have fiduciary duties to us and
our shareholders, there can be no assurance that conflicts of interest will
always be resolved in our favor or in the favor of our shareholders.
On December 17, 1996, we adopted policies that loans and other transactions
with officers, directors and 5% or more shareholders will be on terms no less
favorable than could be obtained from unaffiliated parties and approved by a
majority of not less than two of the disinterested independent directors.
During 2005, we received approximately $3,900 from Pre-Paid Legal Services,
Inc. ("Pre-Paid Legal"), a shareholder, for commissions on sales of memberships
for the services provided by Pre-Paid Legal. As of July 1, 2000, we began
offering our employees access to the services provided by Pre-Paid Legal through
an employee benefit option. We pay half of the cost for each employee electing
to participate in the plan. During 2005, we paid $4,287 to Pre-Paid Legal for
these services. Our former Chairman of the Board and Chief Executive Officer,
John W. Hail, is a director of Pre-Paid Legal. Additionally, Pre-Paid Legal's
Chairman and chief Executive Officer, Harland C. Stonecipher served on our Board
of Directors until his resignation, effective December 9, 2005.
Also during 2005, we paid Mr. Loney, Vice President of Operations, and his
wife sales bonuses of $13,972. These bonuses were based upon purchases by them
and their downline associates in accordance with our network marketing program
applicable to all independent associates in effect at the time of the sales. Mr.
Loney's wife is the daughter of John W. Hail.
In 2003, we executed an employment agreement with our former Chairman of
the Board, John W. Hail. In 2006, we executed new employment agreements with our
Chairman of the Board, President and Chief Executive Officer, Jerry W. Grizzle,
and with our Vice President, Secretary, Treasurer and Chief Financial Officer,
Robin L. Jacob. The terms of these agreements are summarized elsewhere in this
proxy.
OTHER BUSINESS TO BE BROUGHT BEFORE THE MEETING
Our Board of Directors knows of no business that will be presented for
action at the Annual Meeting other than that described in the Notice of Annual
Meeting of Shareholders and this Proxy Statement. However, if any other matters
should properly come before the Annual Meeting, it is the intention of the
persons named in the accompanying Proxy to vote such Proxies as they deem
advisable in accordance with their best judgment.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our
directors, executive officers, and persons who beneficially own more than 10% of
our common stock to file certain reports with the Securities and Exchange
Commission concerning their beneficial ownership of our equity securities. The
SEC's regulations also require that a copy of all such Section 16(a) forms filed
must be furnished to us by the executive officers, directors, and greater than
10% shareholders. To our knowledge, based solely on a review of the copies of
such forms and amendments thereto received by us with respect to 2005, all
Section 16(a) filing requirements were met, although some were untimely. The
following persons failed to report one or more transactions (as denoted in
parenthesis) in a timely manner: John Hail (2) and Steven G. Kochen (1).
SHAREHOLDERS PROPOSALS FOR 2007 ANNUAL MEETING
Under the existing rules of the Securities and Exchange Commission, any of
our shareholders may present proposals on any matter that is a proper subject
for consideration by our shareholders at the 2007 annual shareholders meeting.
We currently anticipate that our 2007 annual shareholders meeting will be held
on or before June 1, 2007. In order to be included in the proxy statement (or
disclosure statement in the event proxies are not solicited by our Board of
Directors) for the 2007 annual shareholders meeting, any shareholder proposal
must be received by January 30, 2007. It is suggested that a shareholder
desiring to submit a proposal do so by sending the proposal certified mail,
return receipt requested, addressed to us at AMS Health Sciences, Inc., 711 NE
39th Street, Oklahoma City, Oklahoma 73105. Attention: Corporate Secretary.
Detailed information for submitting proposals will be provided upon written
request, addressed to the Corporate Secretary.
In addition, pursuant to Rule 14a-4 under the Securities Exchange Act of
1934, as amended, a shareholder must give notice to us prior to April 30, 2007
of any proposal that such stockholder intends to raise at the 2007 Annual
Meeting. If we receive notice of such proposal on or after April 16, 2007, under
Rule 14a-4, the persons named in the proxy solicited by our Board of Directors
for the 2007 Annual Meeting may exercise discretionary voting with respect to
such proposal.
Your cooperation in giving this matter your immediate attention and in
returning your Proxy promptly will be appreciated.
BY ORDER OF THE BOARD OF DIRECTORS
Robin L. Jacob
Corporate Secretary
June 23, 2006
A copy of our annual report on Form 10-KSB for the fiscal year ended
December 31, 2005, is enclosed herewith, and our annual report on Form 10-KSB,
excluding certain of the exhibits, may be obtained without charge by writing AMS
Health Sciences, Inc., 711 NE 39th Street, Oklahoma City, Oklahoma 73105,
Attention: Corporate Secretary.
Appendix A
AMS HEALTH SCIENCES, INC.
2006 LONG-TERM INCENTIVE PLAN
ARTICLE I
PURPOSE
SECTION 1.1 Purpose. This AMS Health Sciences, Inc. 2006 Long-Term
Incentive Plan (the "Plan") is established by AMS Health Sciences, Inc. (the
"Company") to create incentives which are designed to motivate Participants to
put forth maximum effort toward the success and growth of the Company and to
enable the Company to attract and retain experienced individuals who by their
position, ability and diligence are able to make important contributions to the
Company's success. Toward these objectives, the Plan provides for the grant of
Options, Restricted Stock Awards, SARs and Performance Units to Eligible
Employees and the grant of Nonqualified Stock Options, Restricted Stock Awards,
SARs and Performance Units to Eligible Directors, subject to the conditions set
forth in the Plan.
SECTION 1.2 Establishment. The Plan is effective as of April 1, 2006, and
for a period of ten years thereafter. The Plan shall continue in effect after
such ten-year period until all matters relating to the payment of Awards and
administration of the Plan have been settled.
The Plan is subject to the approval by the holders of a majority of the
outstanding shares of Common Stock present, or represented, and entitled to vote
at a meeting called for such purpose, which approval must occur within the
period ending twelve months after the date the Plan is adopted by the Board. No
Awards under the Plan may be granted prior to receipt of shareholder approval.
SECTION 1.3 Shares Subject to the Plan. Subject to the limitations set
forth in the Plan, Awards may be made under this Plan for a total of 5,000,000
shares of Common Stock. Any shares granted as Restricted Stock Awards or as SARs
or Performance Units settled in shares of Common Stock shall be counted against
this limit as 2.0 shares for each share granted. Any shares granted as Options
shall be counted against this limit as one share for each share granted.
Provided further, that a maximum of 1,000,000 shares of the total authorized
under this Section 1.3 may be granted as Incentive Stock Options. The
limitations of this Section 1.3 shall be subject to the adjustment provisions of
Article IX.
ARTICLE II
DEFINITIONS
SECTION 2.1 "Account" means the recordkeeping account established by the
Company to which will be credited an Award of Performance Units to a
Participant.
SECTION 2.2 "Affiliated Entity" means any corporation, partnership or
limited liability company or other form of legal entity in which a majority of
the partnership or other similar interest thereof is owned or controlled,
directly or indirectly, by the Company or one or more of its Subsidiaries or
Affiliated Entities or a combination thereof. For purposes hereof, the Company,
a Subsidiary or an Affiliated Entity shall be deemed to have a majority
ownership interest in a partnership or limited liability company if the Company,
such Subsidiary or Affiliated Entity shall be allocated a majority of
partnership or limited liability company gains or losses or shall be or control
a managing director or a general partner of such partnership or limited
liability company.
SECTION 2.3 "Award" means, individually or collectively, any Option,
Restricted Stock Award, SAR or Performance Unit granted under the Plan to an
Eligible Employee by the Committee or any Nonqualified Stock Option, Performance
Unit, SAR or Restricted Stock Award granted under the Plan to an Eligible
Director by the Board.
SECTION 2.4 "Award Agreement" means any written instrument that establishes
the terms, conditions, restrictions, and/or limitations applicable to an Award
in addition to those established by this Plan and by the Committee's exercise of
its administrative powers.
SECTION 2.5 "Board" means the Board of Directors of the Company.
SECTION 2.6 "Change of Control Event" means each of the following:
(i) Any transaction in which shares of voting securities of the
Company are sold or transferred by the Company or shareholders of the Company as
a result of which those persons and entities who own voting securities of the
Company prior to such transaction own less than fifty percent (50%) of the
outstanding voting securities of the Company after such transaction; provided,
however, that the following acquisitions shall not constitute a Change of
Control: (v) any acquisition directly from the Company, (w) any acquisition by
the Company; or (x) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation controlled by
the Company; or
(ii) The merger or consolidation of the Company with or into another
entity as a result of which less than fifty percent (50%) of the outstanding
voting securities of the surviving or resulting entity are beneficially owned by
those persons and entities who beneficially own voting securities of the Company
prior to such merger or consolidation; or
(iii) The sale of all or substantially all of the Company's assets to
an entity of which less than fifty percent (50%) of the outstanding voting
securities of such entity are beneficially owned by those persons and entities
who own voting securities of the Company at the time of such asset sale.
SECTION 2.7 "Code" means the Internal Revenue Code of 1986, as amended.
References in the Plan to any section of the Code shall be deemed to include any
amendments or successor provisions to such section and any regulations under
such section.
SECTION 2.8 "Committee" has the meaning set forth in Section 3.1.
SECTION 2.9 "Common Stock" means the common stock, par value $.0001 per
share, of the Company, and after substitution, such other stock as shall be
substituted therefore as provided in Article IX.
SECTION 2.10 "Date of Grant" means the date on which the grant of an Award
is authorized by the Committee or the Board or such later date as may be
specified by the Committee or the Board in such authorization.
SECTION 2.11 "Disability" means the Participant is unable to continue
employment by reason of any medically determinable physical or mental impairment
which can be expected to result in death or can be expected to last for a
continuous period of not less than 12 months. For purposes of this Plan, the
determination of Disability shall be made in the sole and absolute discretion of
the Committee.
SECTION 2.12 "Eligible Employee" means any employee of the Company, a
Subsidiary, or an Affiliated Entity as approved by the Committee.
SECTION 2.13 "Eligible Director" means any member of the Board who is not
an employee of the Company, a Subsidiary or an Affiliated Entity.
SECTION 2.14 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
SECTION 2.15 "Executive Officer Participants" means Participants who are
subject to the provisions of Section 16 of the Exchange Act with respect to the
Common Stock.
SECTION 2.16 "Fair Market Value" means (i) during such time as the Common
Stock is listed upon the American Exchange or other exchanges or the
Nasdaq/National Market System, the closing price of the Common Stock as reported
by such stock exchange or exchanges or the Nasdaq/National Market System on the
day for which such value is to be determined, or, if no sale of the Common Stock
shall have been made on any such stock exchange or the Nasdaq/National Market
System that day, on the next preceding day on which there was a sale of such
Common Stock, or (ii) during any such time as the Common Stock is not listed
upon an established stock exchange or the Nasdaq/National Market System, the
mean between dealer "bid" and "ask" prices of the Common Stock in the
over-the-counter market on the day for which such value is to be determined, as
reported by the National Association of Securities Dealers, Inc.
SECTION 2.17 "Incentive Stock Option" means an Option within the meaning of
Section 422 of the Code.
SECTION 2.18 "Non-Executive Officer Participants" means Participants who
are not subject to the provisions of Section 16 of the Exchange Act.
SECTION 2.19 "Nonqualified Stock Option" means an Option which is not an
Incentive Stock Option.
SECTION 2.20 "Option" means an Award granted under Article V of the Plan
and includes both Nonqualified Stock Options and Incentive Stock Options to
purchase shares of Common Stock.
SECTION 2.21 "Participant" means an Eligible Employee to whom an Award has
been granted by the Committee or an Eligible Director to whom an Award has been
granted by the Board under the Plan.
SECTION 2.22 "Performance Units" means those monetary units that may be
granted to Eligible Employees or Eligible Directors pursuant to Article VIII
hereof.
SECTION 2.23 "Plan" means AMS Health Sciences, Inc. 2006 Long-Term
Incentive Plan.
SECTION 2.24 "Regular Award Committee" means the Compensation Committee of
the Board.
SECTION 2.25 "Restricted Stock Award" means an Award granted to an Eligible
Employee or Eligible Director under Article VI of the Plan.
SECTION 2.26 "Retirement" means the termination of an Eligible Employee's
employment with the Company, a Subsidiary or an Affiliated Entity on or after
ten years of service and attainment of age 55.
SECTION 2.27 "SAR" means a stock appreciation right granted to an Eligible
Employee or Eligible Director under Article VII of the Plan.
SECTION 2.28 "Special Award Committee" means a committee designated by the
Board which shall consist of the Company's Chief Executive Officer and other
individuals appointed by the Regular Award Committee.
SECTION 2.29 "Subsidiary" shall have the same meaning set forth in Section
424 of the Code.
ARTICLE III
ADMINISTRATION
SECTION 3.1 Administration of the Plan by the Committee. The Special Award
Committee shall administer the Plan with respect to Non-Executive Officer
Participants, including the grant of Awards, and the Regular Award Committee
shall administer the Plan with respect to Executive Officer Participants,
including the grant of Awards. Accordingly, as used in the Plan, the term
"Committee" shall mean the Special Award Committee if it refers to Plan
administration affecting Non-Executive Officer Participants or the Regular Award
Committee if it refers to Plan administration affecting Executive Officer
Participants. If in either case the Committee does not exist, or for any other
reason determined by the Board, the Board may take any action under the Plan
that would otherwise be the responsibility of the Committee.
Unless otherwise provided in the by-laws of the Company or resolutions
adopted from time to time by the Board establishing the Committee, the Board may
from time to time remove members from, or add members to, the Committee.
Vacancies on the Committee, however caused, shall be filled by the Board. The
Committee shall hold meetings at such times and places as it may determine. A
majority of the members of the Committee shall constitute a quorum, and the acts
of a majority of the members present at any meeting at which a quorum is present
or acts reduced to or approved in writing by a majority of the members of the
Committee shall be the valid acts of the Committee.
Subject to the provisions of the Plan, the Committee shall have exclusive
power to:
(a) Select Eligible Employees to participate in the Plan.
(b) Determine the time or times when Awards will be made to Eligible
Employees.
(c) Determine the form of an Award, whether an Incentive Stock Option,
Nonqualified Stock Option, Restricted Stock Award, SAR or Performance Unit, the
number of shares of Common Stock or Performance Units subject to the Award, the
amount and all the terms, conditions (including performance requirements),
restrictions and/or limitations, if any, of an Award, including the time and
conditions of exercise or vesting, and the terms of any Award Agreement.
(d) Determine whether Awards will be granted singly or in combination.
(e) Accelerate the vesting, exercise or payment of an Award or the
performance period of an Award except as limited by the terms of this Plan.
(f) Take any and all other action it deems necessary or advisable for the
proper operation or administration of the Plan.
SECTION 3.2 Administration of Grants to Eligible Directors. The Board shall
have the exclusive power to select Eligible Directors to participate in the Plan
and to determine the number of Nonqualified Stock Options, Performance Units,
SARs or shares of Restricted Stock awarded to Eligible Directors selected for
participation. The Committee shall administer all other aspects of the Awards
made to Eligible Directors.
SECTION 3.3 Committee to Make Rules and Interpret Plan. The Committee in
its sole discretion shall have the authority, subject to the provisions of the
Plan, to establish, adopt, or revise such rules and regulations and to make all
such determinations relating to the Plan, as it may deem necessary or advisable
for the administration of the Plan. The Committee's interpretation of the Plan
or any Awards and all decisions and determinations by the Committee with respect
to the Plan shall be final, binding, and conclusive on all parties.
ARTICLE IV
GRANT OF AWARDS
SECTION 4.1 Grant of Awards. Awards granted under this Plan shall be
subject to the following conditions:
(a) Subject to Article IX, the aggregate number of shares of Common Stock
made subject to the grant of Options and/or SARs to any Eligible Employee in any
calendar year may not exceed 500,000.
(b) Subject to Article IX, the aggregate number of shares of Common Stock
made subject to the grant of Restricted Stock Awards and/or Performance Unit
Awards to any Eligible Employee in any calendar year may not exceed 100,000.
(c) Any shares of Common Stock related to Awards which terminate by
expiration, forfeiture or cancellation without the issuance of shares of Common
Stock, shall be available again for grant under the Plan and shall not be
counted against the shares authorized under Section 1.3. Shares of Common Stock
which are tendered in payment of an Option, tendered or withheld in payment of
taxes or repurchased using Option proceeds, shall not be added back to the
shares authorized under Section 1.3.
(d) Common Stock delivered by the Company in payment of an Award under the
Plan may be authorized and unissued Common Stock or Common Stock held in the
treasury of the Company.
(e) The Committee shall, in its sole discretion, determine the manner in
which fractional shares arising under this Plan shall be treated.
(f) Separate certificates or a book-entry registration representing Common
Stock shall be delivered to a Participant upon the exercise of any Option.
(g) The Committee shall be prohibited from canceling, reissuing or
modifying Awards if such action will have the effect of repricing the
Participant's Award.
(h) Subject to Article IX, the aggregate number of shares of Common Stock
made subject to the grant of Nonqualified Stock Options and/or SARs to any
individual Eligible Director in any calendar year may not exceed 20,000.
(i) Subject to Article IX, in no event shall more than 5,000 shares of
Restricted Stock Awards and/or Performance Unit Awards be awarded to any
individual Eligible Director in any calendar year.
(j) The maximum term of any Award shall be ten years.
ARTICLE V
STOCK OPTIONS
SECTION 5.1 Grant of Options. The Committee may, from time to time, subject
to the provisions of the Plan and such other terms and conditions as it may
determine, grant Options to Eligible Employees. These Options may be Incentive
Stock Options or Nonqualified Stock Options, or a combination of both. The Board
may, subject to the provisions of the Plan and such other terms and conditions
as it may determine, grant Nonqualified Stock Options to Eligible Directors.
Each grant of an Option shall be evidenced by an Award Agreement executed by the
Company and the Participant, and shall contain such terms and conditions and be
in such form as the Committee may from time to time approve, subject to the
requirements of Section 5.2.
SECTION 5.2 Conditions of Options. Each Option so granted shall be subject
to the following conditions:
(a) Exercise Price. As limited by Section 5.2(e) below, each Option shall
state the exercise price which shall be set by the Committee at the Date of
Grant; provided, however, no Option shall be granted at an exercise price which
is less than the Fair Market Value of the Common Stock on the Date of Grant.
(b) Form of Payment. The exercise price of an Option may be paid (i) in
cash or by check, bank draft or money order payable to the order of the Company;
(ii) by tendering shares of Common Stock having a Fair Market Value on the date
of payment equal to the amount of the exercise price, but only to the extent
such exercise of an Option would not result in variable accounting consequences
for the Company for financial accounting purposes unless otherwise determined by
the Committee; or (iii) a combination of the foregoing. In addition to the
foregoing, the Committee may permit an Option granted under the Plan to be
exercised by a broker-dealer acting on behalf of a Participant through
procedures approved by the Committee.
(c) Exercise of Options. Options granted under the Plan shall be
exercisable, in whole or in such installments and at such times, and shall
expire at such time, as shall be provided by the Committee in the Award
Agreement. Exercise of an Option shall be by written notice to the Secretary of
the Company at least two business days in advance of such exercise stating the
election to exercise in the form and manner determined by the Committee. Every
share of Common Stock acquired through the exercise of an Option shall be deemed
to be fully paid at the time of exercise and payment of the exercise price and
applicable withholding taxes.
(d) Other Terms and Conditions. Among other conditions that may be imposed
by the Committee, if deemed appropriate, are those relating to (i) the period or
periods and the conditions of exercisability of any Option; (ii) the minimum
periods during which Participants must be employed by the Company, its
Subsidiaries, or an Affiliated Entity, or must hold Options before they may be
exercised; (iii) the minimum periods during which shares acquired upon exercise
must be held before sale or transfer shall be permitted; (iv) conditions under
which such Options or shares may be subject to forfeiture; (v) the frequency of
exercise or the minimum or maximum number of shares that may be acquired at any
one time; (vi) the achievement by the Company of specified performance criteria;
and (vii) non-compete and protection of business matters.
(e) Special Restrictions Relating to Incentive Stock Options. Options
issued in the form of Incentive Stock Options shall only be granted to Eligible
Employees of the Company or a Subsidiary, and not to Eligible Employees of an
Affiliated Entity unless such entity shall be considered as a "disregarded
entity" under the Code and shall not be distinguished for federal tax purposes
from the Company or the applicable Subsidiary.
(f) Application of Funds. The proceeds received by the Company from the
sale of Common Stock pursuant to Options will be used for general corporate
purposes.
(g) Shareholder Rights. No Participant shall have a right as a shareholder
with respect to any share of Common Stock subject to an Option prior to purchase
of such shares of Common Stock by exercise of the Option.
ARTICLE VI
RESTRICTED STOCK AWARDS
SECTION 6.1 Grant of Restricted Stock Awards. The Committee may, from time
to time, subject to the provisions of the Plan and such other terms and
conditions as it may determine, grant a Restricted Stock Award to any Eligible
Employee. Restricted Stock Awards shall be awarded in such number and at such
times during the term of the Plan as the Committee shall determine. The Board
may, from time to time, subject to the provisions of the Plan and such other
terms and conditions as it may determine, grant a Restricted Stock Award to an
Eligible Director. Each Restricted Stock Award may be evidenced in such manner
as the Committee deems appropriate, including, without limitation, a book-entry
registration or issuance of a stock certificate or certificates, and by an Award
Agreement setting forth the terms of such Restricted Stock Award.
SECTION 6.2 Conditions of Restricted Stock Awards. The grant of a
Restricted Stock Award shall be subject to the following:
(a) Restriction Period. The Committee shall determine the employment,
service and/or performance requirements which shall apply to the shares of
Common Stock covered by each Restricted Stock Award. Unless (i) vesting
requirements are based upon specified performance goals and measures set forth
in the Award Agreement at the time of the Award that require at least a
twelve-month performance period, (ii) vesting is accelerated upon the occurrence
of a Change of Control Event under Section 10.5 or by the Committee as provided
below in this paragraph or (iii) the shares of Restricted Stock are issued in
lieu of cash compensation, the shares shall vest over a minimum three-year
period, with up to one-third of the shares available for vesting on or after the
first annual anniversary date of the Award, up to an additional one-third of the
shares available for vesting on or after the third annual anniversary date. In
addition to any time vesting conditions determined by the Committee, Restricted
Stock Awards may be subject to the achievement by the Company of specified
performance criteria based upon the Company's achievement of operational,
financial or stock performance criteria as established by the Committee. The
employment, service and/or performance requirements are collectively referred to
as a "Restriction Period." At the end of the Restriction Period, assuming the
fulfillment of any other specified vesting conditions, the restrictions imposed
by the Committee shall lapse with respect to the shares of Common Stock covered
by the Restricted Stock Award or portion thereof. In addition to acceleration of
vesting upon occurrence of a Change of Control Event as provided in Section
10.5, the Committee may, in its discretion, accelerate the vesting of a
Restricted Stock Award in the case of death, Disability or Retirement of the
Participant who is an Eligible Employee or resignation of a Participant who is
an Eligible Director.
(b) Restrictions. The holder of a Restricted Stock Award may not sell,
transfer, pledge, exchange, hypothecate, or otherwise dispose of the shares of
Common Stock represented by the Restricted Stock Award during the applicable
Restriction Period. The Committee shall impose such other restrictions and
conditions on any shares of Common Stock covered by a Restricted Stock Award as
it may deem advisable including, without limitation, restrictions under
applicable Federal or state securities laws, and may legend the certificates
representing Restricted Stock to give appropriate notice of such restrictions.
(c) Rights as Shareholders. During any Restriction Period, the Committee
may, in its discretion, grant to the holder of a Restricted Stock Award all or
any of the rights of a shareholder with respect to the shares, including, but
not by way of limitation, the right to vote such shares and to receive
dividends. If any dividends or other distributions are paid in shares of Common
Stock, all such shares shall be subject to the same restrictions on
transferability as the shares of Restricted Stock with respect to which they
were paid.
ARTICLE VII
STOCK APPRECIATION RIGHTS
SECTION 7.1 Grant of SARs. The Committee may from time to time, in its sole
discretion, subject to the provisions of the Plan and subject to other terms and
conditions as the Committee may determine, grant a SAR to any Eligible Employee
or the Board may grant a SAR to an Eligible Director. SARs may be granted in
tandem with an Option, in which event, the Participant has the right to elect to
exercise either the SAR or the Option. Upon the Participant's election to
exercise one of these Awards, the other tandem award is automatically
terminated. SARs may also be granted as an independent Award separate from an
Option. Each grant of a SAR shall be evidenced by an Award Agreement executed by
the Company and the Participant and shall contain such terms and conditions and
be in such form as the Committee may from time to time approve, subject to the
requirements of the Plan. The exercise price of the SAR shall not be less than
the Fair Market Value of a share of Common Stock on the Date of Grant of the
SAR.
SECTION 7.2 Exercise and Payment. SARs granted under the Plan shall be
exercisable in whole or in installments and at such times as shall be provided
by the Committee in the Award Agreement. Exercise of a SAR shall be by written
notice to the Secretary of the Company at least two business days in advance of
such exercise. The amount payable with respect to each SAR shall be equal in
value to the excess, if any, of the Fair Market Value of a share of Common Stock
on the exercise date over the exercise price of the SAR. Payment of amounts
attributable to a SAR shall be made in shares of Common Stock or cash as
established by the Committee in the Award Agreement.
SECTION 7.3 Restrictions. In the event a SAR is granted in tandem with an
Incentive Stock Option, the Committee shall subject the SAR to restrictions
necessary to ensure satisfaction of the requirements under Section 422 of the
Code. In the case of a SAR granted in tandem with an Incentive Stock Option to
an Eligible Employee who owns more than 10% of the combined voting power of the
Company or its Subsidiaries on the date of such grant, the amount payable with
respect to each SAR shall be equal in value to the applicable percentage of the
excess, if any, of the Fair Market Value of a share of Common Stock on the
exercise date over the exercise price of the SAR, which exercise price shall not
be less than 110% of the Fair Market Value of a share of Common Stock on the
date the SAR is granted.
ARTICLE VIII
PERFORMANCE UNITS
SECTION 8.1 Grant of Awards. The Committee may, from time to time, subject
to the provisions of the Plan and such other terms and conditions as it may
determine, grant Performance Units to Eligible Employees and Eligible Directors.
Each Award of Performance Units shall be evidenced by an Award Agreement
executed by the Company and the Participant, and shall contain such terms and
conditions and be in such form as the Committee may from time to time approve,
subject to the requirements of Section 8.2.
SECTION 8.2 Conditions of Awards. Each Award of Performance Units shall be
subject to the following conditions:
(a) Establishment of Award Terms. Each Award shall state the target,
maximum and minimum value of each Performance Unit payable upon the achievement
of performance goals.
(b) Achievement of Performance Goals. The Committee shall establish
performance targets for each Award for a period of no less than a year based
upon operational, financial or performance criteria established by the
Committee. The Committee shall also establish such other terms and conditions as
it deems appropriate to such Award. The Award may be paid out in cash or Common
Stock as established by the Committee in the Award Agreement.
ARTICLE IX
STOCK ADJUSTMENTS
In the event that the shares of Common Stock, as constituted on the
effective date of the Plan, shall be changed into or exchanged for a different
number or kind of shares of stock or other securities of the Company or of
another corporation (whether by reason of merger, consolidation,
recapitalization, reclassification, stock split, spin-off, combination of shares
or otherwise), or if the number of such shares of Common Stock shall be
increased through the payment of a stock dividend, or a dividend on the shares
of Common Stock, or if rights or warrants to purchase securities of the Company
shall be issued to holders of all outstanding Common Stock, then there shall be
substituted for or added to each share available under and subject to the Plan,
and each share theretofore appropriated under the Plan, the number and kind of
shares of stock or other securities into which each outstanding share of Common
Stock shall be so changed or for which each such share shall be exchanged or to
which each such share shall be entitled, as the case may be, on a fair and
equivalent basis in accordance with the applicable provisions of Section 424 of
the Code; provided, however, with respect to Options, in no such event will such
adjustment result in a modification of any Option as defined in Section 424(h)
of the Code. In the event there shall be any other change in the number or kind
of the outstanding shares of Common Stock, or any stock or other securities into
which the Common Stock shall have been changed or for which it shall have been
exchanged, then if the Committee shall, in its sole discretion, determine that
such change equitably requires an adjustment in the shares available under and
subject to the Plan, or in any Award, theretofore granted, such adjustments
shall be made in accordance with such determination, except that no adjustment
of the number of shares of Common Stock available under the Plan or to which any
Award relates that would otherwise be required shall be made unless and until
such adjustment either by itself or with other adjustments not previously made
would require an increase or decrease of at least 1% in the number of shares of
Common Stock available under the Plan or to which any Award relates immediately
prior to the making of such adjustment (the "Minimum Adjustment"). Any
adjustment representing a change of less than such minimum amount shall be
carried forward and made as soon as such adjustment together with other
adjustments required by this Article IX and not previously made would result in
a Minimum Adjustment. Notwithstanding the foregoing, any adjustment required by
this Article IX which otherwise would not result in a Minimum Adjustment shall
be made with respect to shares of Common Stock relating to any Award immediately
prior to exercise, payment or settlement of such Award. No fractional shares of
Common Stock or units of other securities shall be issued pursuant to any such
adjustment, and any fractions resulting from any such adjustment shall be
eliminated in each case by rounding downward to the nearest whole share.
ARTICLE X
GENERAL
SECTION 10.1 Amendment or Termination of Plan. The Board may alter, suspend
or terminate the Plan at any time. In addition, the Board may, from time to
time, amend the Plan in any manner, but may not without shareholder approval
adopt any amendment which would (i) increase the aggregate number of shares of
Common Stock available under the Plan (except by operation of Article IX), (ii)
materially modify the requirements as to eligibility for participation in the
Plan, or (iii) materially increase the benefits to Participants provided by the
Plan.
SECTION 10.2 Termination of Employment; Termination of Service. If an
Eligible Employee's employment with the Company, a Subsidiary or an Affiliated
Entity terminates as a result of death, Disability or Retirement, the Eligible
Employee (or personal representative in the case of death) shall be entitled to
exercise all or any part of any (i) vested Incentive Stock Option for a period
of up to three months from such date of termination (one year in the case of
death or Disability (as defined above) in lieu of the three-month period), or
(ii) vested Nonqualified Stock Option or SAR during the remaining term. If an
Eligible Employee's employment terminates for any other reason, the Eligible
Employee shall be entitled to exercise all or any part of any vested Option or
SAR for a period of up to three months from such date of termination. In no
event shall any Option or SAR be exercisable past the term established in the
Award Agreement. Any vested Option or SAR which is not exercised before the
earlier of the dates provided above or its term, shall expire. The Committee
may, in its sole discretion, accelerate the vesting of unvested Awards in the
event of termination of employment of any Participant except as provided in
Section 6.2(a). Unless otherwise accelerated, all unvested Awards shall be
forfeited upon termination of employment.
In the event an Eligible Director terminates service as a director of the
Company, the unvested portion of any Award shall be forfeited unless otherwise
accelerated pursuant to the terms of the Eligible Director's Award Agreement or
by the Board. The Eligible Director shall have a period of three years following
the date he ceases to be a director to exercise any Nonqualified Stock Options
or SARs which are otherwise exercisable on his date of termination of service.
SECTION 10.3 Limited Transferability - Options. The Committee may, in its
discretion, authorize all or a portion of the Nonqualified Stock Options granted
under this Plan to be on terms which permit transfer by the Participant to (i)
the ex-spouse of the Participant pursuant to the terms of a domestic relations
order, (ii) the spouse, children or grandchildren of the Participant ("Immediate
Family Members"), (iii) a trust or trusts for the exclusive benefit of such
Immediate Family Members, or (iv) a partnership or limited liability company in
which such Immediate Family Members are the only partners or members. In
addition there may be no consideration for any such transfer. The Award
Agreement pursuant to which such Nonqualified Stock Options are granted must
expressly provide for transferability in a manner consistent with this
paragraph. Subsequent transfers of transferred Nonqualified Stock Options shall
be prohibited except as set forth below in this Section 10.3. Following
transfer, any such Nonqualified Stock Options shall continue to be subject to
the same terms and conditions as were applicable immediately prior to transfer,
provided that for purposes of Section 10.2 hereof the term "Participant" shall
be deemed to refer to the transferee. The events of termination of employment of
Section 10.2 hereof shall continue to be applied with respect to the original
Participant, following which the Nonqualified Stock Options shall be exercisable
by the transferee only to the extent, and for the periods specified in Section
10.2 hereof. No transfer pursuant to this Section 10.3 shall be effective to
bind the Company unless the Company shall have been furnished with written
notice of such transfer together with such other documents regarding the
transfer as the Committee shall request. With the exception of a transfer in
compliance with the foregoing provisions of this Section 10.3, all other types
of Awards authorized under this Plan shall be transferable only by will or the
laws of descent and distribution; however, no such transfer shall be effective
to bind the Company unless the Committee has been furnished with written notice
of such transfer and an authenticated copy of the will and/or such other
evidence as the Committee may deem necessary to establish the validity of the
transfer and the acceptance by the transferee of the terms and conditions of
such Award.
SECTION 10.4 Withholding Taxes. Unless otherwise paid by the Participant,
the Company, its Subsidiaries or any of its Affiliated Entities shall be
entitled to deduct from any payment under the Plan, regardless of the form of
such payment, the amount of all applicable income and employment taxes required
by law to be withheld with respect to such payment or may require the
Participant to pay to it such tax prior to and as a condition of the making of
such payment. In accordance with any applicable administrative guidelines it
establishes, the Committee may allow a Participant to pay the amount of taxes
required by law to be withheld from an Award by (i) directing the Company to
withhold from any payment of the Award a number of shares of Common Stock having
a Fair Market Value on the date of payment equal to the amount of the required
withholding taxes or (ii) delivering to the Company previously owned shares of
Common Stock having a Fair Market Value on the date of payment equal to the
amount of the required withholding taxes. However, any payment made by the
Participant pursuant to either of the foregoing clauses (i) or (ii) shall not be
permitted if it would result in an adverse accounting charge with respect to
such shares used to pay such taxes unless otherwise approved by the Committee.
SECTION 10.5 Change of Control. Notwithstanding any other provision in this
Plan to the contrary, Awards granted under the Plan to any Eligible Employee or
Eligible Director shall be immediately vested, fully earned and exercisable upon
the occurrence of a Change of Control Event.
SECTION 10.6 Amendments to Awards. Subject to the limitations of the Plan,
the Committee may at any time unilaterally amend the terms of any Award
Agreement, whether or not presently exercisable or vested, to the extent it
deems appropriate. However, amendments which are adverse to the Participant
shall require the Participant's consent.
SECTION 10.7 Regulatory Approval and Listings. The Company shall use its
best efforts to file with the Securities and Exchange Commission as soon as
practicable following approval by the shareholders of the Company of the Plan as
provided in Section 1.2 of the Plan, and keep continuously effectively, a
Registration Statement on Form S-8 with respect to shares of Common Stock
subject to Awards hereunder. Notwithstanding anything contained in this Plan to
the contrary, the Company shall have no obligation to issue shares of Common
Stock under this Plan prior to:
(a) the obtaining of any approval from, or satisfaction of any waiting
period or other condition imposed by, any governmental agency which the
Committee shall, in its sole discretion, determine to be necessary or advisable;
(b) the admission of such shares to listing on the stock exchange on which
the Common Stock may be listed; and
(c) the completion of any registration or other qualification of such
shares under any state or Federal law or ruling of any governmental body which
the Committee shall, in its sole discretion, determine to be necessary or
advisable.
SECTION 10.8 Right to Continued Employment. Participation in the Plan shall
not give any Eligible Employee any right to remain in the employ of the Company,
any Subsidiary, or any Affiliated Entity. The Company or, in the case of
employment with a Subsidiary or an Affiliated Entity, the Subsidiary or
Affiliated Entity reserves the right to terminate any Eligible Employee at any
time. Further, the adoption of this Plan shall not be deemed to give any
Eligible Employee or any other individual any right to be selected as a
Participant or to be granted an Award.
SECTION 10.9 Reliance on Reports. Each member of the Committee and each
member of the Board shall be fully justified in relying or acting in good faith
upon any report made by the independent public accountants of the Company and
its Subsidiaries and upon any other information furnished in connection with the
Plan by any person or persons other than himself or herself. In no event shall
any person who is or shall have been a member of the Committee or of the Board
be liable for any determination made or other action taken or any omission to
act in reliance upon any such report or information or for any action taken,
including the furnishing of information, or failure to act, if in good faith.
SECTION 10.10 Construction. Masculine pronouns and other words of masculine
gender shall refer to both men and women. The titles and headings of the
sections in the Plan are for the convenience of reference only, and in the event
of any conflict, the text of the Plan, rather than such titles or headings,
shall control.
SECTION 10.11 Governing Law. The Plan shall be governed by and construed in
accordance with the laws of the State of Oklahoma except as superseded by
applicable Federal law.
SECTION 10.12 Other Laws. The Committee may refuse to issue or transfer any
shares of Common Stock or other consideration under an Award if, acting in its
sole discretion, it determines that the issuance or transfer of such shares or
such other consideration might violate any applicable law or regulation or
entitle the Company to recover the same under Section 16(b) of the Exchange Act,
and any payment tendered to the Company by a Participant, other holder or
beneficiary in connection with the exercise of such Award shall be promptly
refunded to the relevant Participant, holder or beneficiary.
SECTION 10.13 No Trust or Fund Created. Neither the Plan nor an Award shall
create or be construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Company and a Participant or any other
person. To the extent that a Participant acquires the right to receive payments
from the Company pursuant to an Award, such right shall be no greater than the
right of any general unsecured creditor of the Company.
PROXY PROXY
AMS HEALTH SCIENCES, INC.
711 NORTHEAST 39TH STREET
OKLAHOMA CITY, OKLAHOMA 73105
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF AMS HEALTH SCIENCES, INC.
THE UNDERSIGNED HEREBY APPOINT JERRY W. GRIZZLE AND ROBIN L. JACOB AS PROXIES,
EACH WITH THE POWER TO APPOINT HIS SUBSTITUTE, AND HEREBY APPOINTS AND
AUTHORIZES EACH OF THEM TO REPRESENT AND VOTE AS DESIGNATED BELOW, ALL THE
SHARES OF COMMON STOCK, $0.0001 PAR VALUE, OF AMS HEALTH SCIENCES, INC. (THE
"COMPANY") HELD OF RECORD BY THE UNDERSIGNED ON MAY 30, 2006, AT THE ANNUAL
MEETING OF SHAREHOLDERS TO BE HELD ON SATURDAY JULY 29, 2006, OR ANY ADJOURNMENT
THEREOF.
1. To consider and act upon the re-election of Steven M. Dickey, as a
director for a term ending in 2009, and until his successor shall have
been duly elected and qualified. A vote "For" will represent a vote
for the nominee director.
/ / FOR / / WITHHOLD AUTHORITY
2. To consider and act upon the election of Robin L. Jacob, as a director
for a term ending in 2009, and until her successor shall have been
duly elected and qualified. A vote "For" will represent a vote for the
nominee director.
/ / FOR / / WITHHOLD AUTHORITY
3. To approve the AMS Health Sciences, Inc. 2006 Stock Incentive Plan. A
vote "For" will represent a vote for such approval.
/ / FOR / / AGAINST / / ABSTAIN
4. To consider and act upon the ratification and the appointment of Cole
& Reed P.C. as the Company's independent auditor for the fiscal year
ending December 31, 2006. A vote "For" will represent a vote for such
ratification and appointment.
/ / FOR / / AGAINST / / ABSTAIN
To transact such other business as may properly come
before the meeting or any adjournment thereof.
AMS HEALTH SCIENCES, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
YOU CAN VOTE IN ONE OF TWO WAYS
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VOTE BY INTERNET
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Its fast, convenient, and your vote is immediately confirmed and posted.
1. Read the accompanying Proxy Statement.
2. Go to the website http://www.eproxyvote.com/amm and follow the
instructions on the screen.
Please note that all votes cast by Internet must be made prior to 5:00 p.m. CDT,
July 25, 2006.
IF YOU VOTE BY INTERNET, PLEASE DO NOT RETURN YOUR PROXY CARD BY MAIL
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VOTE BY MAIL
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To vote by mail, read the accompanying Proxy Statement then complete, sign and
date the proxy card below. Detach the card and return it in the envelope
provided herein.
IF YOU ARE NOT VOTING BY INTERNET, DETACH PROXY CARD AND RETURN.
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THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR ALL PROPOSALS.
PLEASE SIGN EXACTLY AS THE NAME APPEARS TO LEFT. WHEN SHARES ARE HELD BY JOINT
TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY, AS EXECUTOR, ADMINISTRATOR,
TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A CORPORATION, PLEASE
SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER AUTHORIZED OFFICER. IF A
PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY AUTHORIZED PERSON.
DATE: _________________, 2006
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Signature
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Signature if held jointly
PLEASE MARK, SIGN, DATE AND
RETURN THIS PROXY PROMPTLY
USING THE ENCLOSED ENVELOPE.