SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant |X|
Filed by a Party other than the Registrant o
Check the appropriate box:
o Preliminary Proxy Statement o Confidential, For Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
|X| Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Nu Skin Asia Pacific, Inc.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
o Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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o Fee paid previously with preliminary materials:
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o Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement no.:
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(3) Filing Party:
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(4) Date Filed:
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 15, 1997
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NOTICE IS HEREBY GIVEN that the annual meeting of stockholders of Nu
Skin Asia Pacific, Inc., a Delaware corporation (the "Company"), will be held at
the Provo Park Hotel, Provo, Utah, on Thursday, May 15, 1997 at 4:00 p.m., local
time (the "Annual Meeting"), for the following purposes:
1. To elect a Board of Directors consisting of eleven directors to
serve until the next annual meeting of stockholders or until their successors
are duly elected and qualified on their earlier death or removal;
2. To approve the adoption of the Nu Skin Asia Pacific, Inc. 1996
Stock Incentive Plan;
3. To ratify the appointment of Price Waterhouse LLP, independent
public accountants, to audit the financial statements of the Company for
the fiscal year ending December 31, 1997; and
4. To transact such other business as may properly come before the
Annual Meeting or any adjournment(s) thereof.
The Board of Directors has fixed the close of business on April 1, 1997
as the record date (the "Record Date") for determining the stockholders entitled
to receive notice of, and to vote at, the Annual Meeting and any adjournment(s)
thereof.
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON.
HOWEVER, TO ENSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, YOU ARE URGED TO
MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE
POSTAGE-PREPAID ENVELOPE ENCLOSED FOR THAT PURPOSE. ANY STOCKHOLDER ATTENDING
THE ANNUAL MEETING MAY VOTE IN PERSON EVEN IF SUCH STOCKHOLDER HAS PREVIOUSLY
RETURNED A PROXY.
By Order of the Board of Directors
Blake M. Roney
Chairman of the Board
Provo, Utah, April 7, 1997
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PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 15, 1997
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INFORMATION CONCERNING SOLICITATION AND VOTING
General
The enclosed Proxy is solicited on behalf of the Board of Directors of Nu
Skin Asia Pacific, Inc., a Delaware corporation (the "Company"), for use at the
annual meeting of stockholders to be held on Thursday, May 15, 1997 at 4:00
p.m., local time, and at any adjournment(s) thereof (the "Annual Meeting"), for
the purposes set forth herein and in an accompanying Notice of Annual Meeting of
Stockholders. The Annual Meeting will be held at the Provo Park Hotel, Provo,
Utah.
As used herein, the "Company" means Nu Skin Asia Pacific, Inc., including
the Subsidiaries. The "Subsidiaries" means Nu Skin Hong Kong, Inc. ("Nu Skin
Hong Kong"), Nu Skin Japan Company, Limited ("Nu Skin Japan"), Nu Skin Korea,
Inc. ("Nu Skin Korea"), Nu Skin Taiwan, Inc. ("Nu Skin Taiwan"), and Nu Skin
Personal Care (Thailand) Limited ("Nu Skin Thailand"), collectively.
Record Date and Share Ownership
Stockholders of record at the close of business on April 1, 1997 (the
"Record Date") are entitled to vote at the Annual Meeting. At the Record Date,
11,723,011 shares of the Company's Class A Common Stock, $.001 par value per
share ("Class A Common Stock"), 71,696,675 shares of the Company's Class B
Common Stock, $.001 par value per share ("Class B Common Stock," and, together
with the Class A Common Stock, the "Common Stock"), and -0- shares of the
Company's Preferred Stock ("Preferred Stock") were issued and outstanding. Since
no shares of Preferred Stock are outstanding, no shares of Preferred Stock are
entitled to vote at the Annual Meeting. Stockholders of record holding at least
a majority of the outstanding shares of Common Stock, present at the Annual
Meeting in person or by proxy, shall constitute a quorum for the transaction of
business at the Annual Meeting.
Revocability of Proxies
Any Proxy given pursuant to this solicitation may be revoked by the person
or entity giving it at any time before its use by delivering to the Secretary of
the Company a written notice of revocation or a duly executed Proxy bearing a
later date or by attending the Annual Meeting and voting in person; provided,
however, that such action must be taken in sufficient time to permit the
necessary examination and tabulation of the revocation or later dated Proxy
before the vote is taken. An appointment of proxy is revoked upon the death or
incapacity of the stockholder if the Secretary or other officer of the Company
who is authorized to tabulate votes receives notice of such death or incapacity
before the proxy exercises his authority under the appointment.
Voting and Solicitation
Each outstanding share of Class A Common Stock shall be entitled to one (1)
vote and each outstanding share of Class B Common Stock shall be entitled to ten
(10) votes on each matter submitted to a vote of the stockholders at the Annual
Meeting. The Class A Common Stock and the Class B Common Stock will vote as a
single class with respect to all matters submitted to a vote of the stockholders
at the Annual Meeting. A quorum represented by a majority of the issued and
outstanding shares of Common Stock of record present in person or by proxy is
necessary to conduct the Annual Meeting. Assuming a quorum is present, a
plurality of votes cast by the shares entitled to vote in the election of
directors will be required to elect each director. In all other matters,
assuming a quorum is present, a majority of votes cast by the shares present in
person or by proxy and entitled to vote on the subject matter shall decide such
matter, except when a different vote is required by express provision of the
Delaware General Corporation Law, the Company's Certificate of Incorporation or
the Company's Bylaws. In accordance with Delaware law, abstentions will, while
broker nonvotes will not, be treated as present for the purposes of voting. A
broker nonvote is a proxy submitted by a broker in which the broker fails to
vote on behalf of a client on a particular matter for lack of instruction when
such instruction is required by the New York Stock Exchange.
All Proxies, properly executed and returned, will be voted at the Annual
Meeting as directed by the stockholder. Please vote by marking the appropriate
boxes on the enclosed Proxy. If the Proxy is signed and returned without
directions, the shares will be voted "FOR" the election of all directors as
nominated, "FOR" the approval of the adoption of the Nu Skin Asia Pacific, Inc.
1996 Stock Incentive Plan, and "FOR" the ratification of the appointment of
Price Waterhouse LLP, independent public accountants, to audit the financial
statements of the Company for the fiscal year ending December 31, 1997. If other
matters properly come before the meeting, the shares will be voted in accordance
with the best judgment of the persons named as proxies on the Proxy. Any shares
not voted "FOR" a particular director as a result of a direction to withhold
authority or a broker nonvote will not be counted in the director's favor.
These proxy solicitation materials were first sent or given on or about
April 7, 1997 to all stockholders listed in the stockholder records of the
Company as of the Record Date. The principal executive offices of the Company
are located at 75 West Center Street, Provo, Utah 84601, and the Company's
telephone number is (801) 345-6100. The Company will bear the cost of
solicitation of proxies. In addition to the use of the mails, proxies may be
solicited personally, by telephone or by facsimile, and the Company may
reimburse brokerage firms and other persons holding shares of Class A Common
Stock and/or Class B Common Stock in their names or in the names of their
nominees, for their reasonable expenses in forwarding proxy soliciting materials
to the beneficial owners.
Deadline for Receipt of Stockholder Proposals
Proposals of stockholders of the Company intended to be presented at the
Company's 1998 annual meeting of stockholders must be received by the Secretary
of the Company at the Company's principal executive offices by December 2, 1997
in order to be included in the Proxy Statement and form of proxy relating to the
1998 annual meeting of stockholders. The Company currently anticipates that the
1998 annual meeting of stockholders will be held in April 1998.
Matters to Be Brought Before the Annual Meeting
The matters to be brought before the Annual Meeting include: (i) the
election of a Board of Directors consisting of eleven directors; (ii) the
approval of the adoption of the Nu Skin Asia Pacific, Inc. 1996 Stock Incentive
Plan; (iii) the ratification of the appointment of Price Waterhouse LLP,
independent public accountants, to audit the financial statements of the Company
for the fiscal year ending December 31, 1997; and (iv) the transaction of such
other business as may properly come before the Annual Meeting.
ITEM 1
ELECTION OF DIRECTORS
Nominees
The Company's Board of Directors currently consists of eleven directors. It
is proposed that a board of eleven directors be elected at the Annual Meeting.
In the event that any director nominee is unable or declines to serve as a
director at the time of the Annual Meeting, the proxy holder will vote the
Proxies received by him for any nominee who shall be designated by the current
Board of Directors to fill the vacancy. In the event that additional persons are
nominated for election as directors, the proxy holder intends to vote all
Proxies received by him in such a manner as will ensure the election of as many
of the nominees listed below as possible. It is not expected that any nominee
will be unable or will decline to serve as a director. The term of office of
each person elected as a director will continue until the next annual meeting of
stockholders, or until such person's successor has been duly elected and
qualified or such person's earlier death or removal. The nominees are as
follows:
Blake M. Roney
Steven J. Lund
Sandie N. Tillotson
Brooke B. Roney
Kirk V. Roney
Keith R. Halls
Max E. Esplin
Max L. Pinegar
E.J. "Jake" Garn
Paula Hawkins
Daniel W. Campbell
Each of the nominees is currently serving as a director of the Company.
Certain information regarding each nominee is set forth hereinbelow.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE ELEVEN NOMINEES TO
THE COMPANY'S BOARD OF DIRECTORS. A PLURALITY OF THE VOTES CAST BY THE SHARES
ENTITLED TO VOTE AT THE ANNUAL MEETING WILL BE REQUIRED TO ELECT EACH DIRECTOR.
Directors and Executive Officers
As of March 3, 1997, the directors and executive officers of the Company
and key managers of the Subsidiaries were as follows:
Name Age Position
Blake M. Roney 38 Chairman of the Board
Steven J. Lund 43 President, Chief Executive Officer
and Director
Renn M. Patch 46 Chief Operating Officer
Corey B. Lindley 32 Vice President of Finance
Michael D. Smith 51 Vice President of Operations
M. Truman Hunt 37 Vice President of Legal Affairs
and Investor Relations
Keith R. Halls 39 Secretary and Director
Takashi Bamba 61 President, Nu Skin Japan
John Chou 50 President, Nu Skin Taiwan
S.T. Han 54 President, Nu Skin Korea
George Mak 43 President, Nu Skin Hong Kong
Sandie N. Tillotson 40 Director
Brooke B. Roney 34 Director
Kirk V. Roney 42 Director
Max L. Pinegar 65 Director
Max E. Esplin 53 Director
E.J. "Jake" Garn 64 Director
Paula Hawkins 70 Director
Daniel W. Campbell 42 Director
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A brief biographical summary of each of the Company's directors and
executive officers and the key managers of the Subsidiaries follows:
Blake M. Roney has served as the Chairman of the Board since the Company's
inception and is a founder of Nu Skin International Inc., an affiliate of the
Company ("NSI"). He has also served as President, Chief Executive Officer and
Chairman of the Board of NSI and certain of its affiliated entities since their
respective inceptions. He received a B.S. degree from Brigham Young University.
He is the brother of Kirk V. Roney and Brooke B. Roney.
Steven J. Lund has been the President, Chief Executive Officer and a
Director of the Company since its inception. Mr. Lund has also served as
Executive Vice President and a Director of NSI since 1985 and as Vice President
and Secretary of certain NSI affiliated entities since their respective
inceptions. Mr. Lund previously worked as an attorney in private practice. He
received a B.A. degree from Brigham Young University and a J.D. degree from
Brigham Young University's J. Reuben Clark Law School.
Renn M. Patch has been the Chief Operating Officer of the Company since its
inception. Since 1992 he has been Vice President of Global Operations and
Assistant General Manager of NSI. From 1991 to 1992, he served as Director of
Government Affairs of NSI. Prior to joining NSI in 1991, Mr. Patch was
associated with the Washington, D.C. consulting firm of Parry and Romani
Associates. Mr. Patch earned a B.A. degree from the University of Minnesota, a
J.D. degree from Hamline University School of Law and an L.L.M. degree from
Georgetown University.
Corey B. Lindley has been the Vice President of Finance of the Company
since its inception. From 1993 to 1996, he served as Managing Director,
International of NSI. Mr. Lindley worked as the International Controller of NSI
from 1991 to 1994 and lived in Hong Kong and Japan during that time. From 1990
to 1991, he served as Assistant Director of Finance of NSI. Mr. Lindley is a
Certified Public Accountant. Prior to joining NSI in 1990, he worked for the
accounting firm of Deloitte and Touche. He earned a B.S. degree from Brigham
Young University and an M.B.A. degree from Utah State University.
Michael D. Smith has been the Vice President of Operations for the Company
since its inception. He has also served as Vice President of Asian Operations of
NSI since February 1996. Prior to that time, he served as General Counsel of NSI
from 1992 to 1996 and as Director of Legal Affairs of NSI from 1989 to 1992. He
earned B.S. and M.A. degrees from Brigham Young University and a J.D. degree
from the University of Utah.
M. Truman Hunt has served as the Vice President of Legal Affairs and
Investor Relations since the Company's inception. He has also served as Counsel
to the President of NSI since 1994. From 1991 to 1994, Mr. Hunt served as
President and Chief Executive Officer of Better Living Products, Inc., an NSI
affiliate involved in the manufacture and distribution of houseware products
sold through traditional retail channels. Prior to that time, he was a
securities and business attorney in private practice. He received a B.S. degree
from Brigham Young University and a J.D. degree from the University of Utah.
Keith R. Halls has served as the Secretary and a Director of the Company
since its inception. He has also served as General Vice President and a Director
of NSI since 1992. He served as Director of Finance of NSI from 1986 to 1992.
Mr. Halls is a Certified Public Accountant. Mr. Halls received a B.A. degree
from Stephen F. Austin State University and a B.S. degree from Brigham Young
University.
Takashi Bamba has served as the President and/or General Manager of Nu Skin
Japan since 1993. Prior to joining Nu Skin Japan in 1993, Mr. Bamba served five
years as President and CEO of Avon Products Co., Ltd., the publicly traded
Japanese subsidiary of Avon Products, Inc. Prior to working at Avon Products
Co., Ltd., he spent 17 years at Avon Products, Inc. He received a B.A. degree
from Yokohama National University.
John Chou has served as the President and/or General Manager of Nu Skin
Taiwan since 1991. Prior to joining Nu Skin Taiwan in 1991, he spent twenty-one
years in international marketing and management with 3M Taiwan Ltd., Amway
Taiwan and Universal PR Co. Mr. Chou is a standing director of the Taiwan ROC
Direct Selling Association. He is also a member of the Kiwanis International,
and the Taiwan American Chamber of Commerce. He received a B.A. degree from Tan
Kang University in Taipei, Taiwan.
S.T. Han has served as the President and/or General Manager of Nu Skin
Korea since 1995. Prior to joining Nu Skin Korea in 1995, Mr. Han spent four
years as the Executive Managing Director of Woosung Film Co., the exclusive
distributor of Konica film in South Korea. He also worked for Amway Korea, Ltd.
during that Company's start-up phase of operations in 1991. Mr. Han graduated
with a B.A. degree from ChungAng University.
George Mak has served as the President and/or General Manager of Nu Skin
Hong Kong since 1991. Prior to joining Nu Skin Hong Kong in 1991, Mr. Mak worked
for Johnson & Johnson as a personnel and administration manager for Hong Kong
and Shanghai from 1989 to 1991. Prior to joining Johnson & Johnson he worked for
10 years in the human resources and accounting fields. He earned an M.B.A.
degree from the University of East Asia, Macau.
Sandie N. Tillotson has served as a Director of the Company since its
inception. She was a founder of NSI and has also served as General Vice
President since 1992 and a Director of NSI since its inception and as a Director
and an executive officer of certain of NSI's affiliated entities since their
respective inceptions. She served as Vice President of Corporate Services of NSI
from 1984 to 1992. She earned a B.S. degree from Brigham Young University.
Brooke B. Roney has served as a Director of the Company since its
inception. He was a founder of NSI and has also served as General Vice President
and a Director of NSI since 1992 and as a Director and an executive officer of
certain of NSI's affiliated entities since their respective inceptions. He
served as Vice President of Distribution of NSI from 1984 to 1992.
He is the brother of Blake M. Roney and Kirk V. Roney.
Kirk V. Roney has served as a Director of the Company since its inception.
He has also served as General Vice President of NSI since 1992 and a Director of
NSI since 1984 and as a Director and an executive officer of certain of NSI's
affiliated entities since their respective inceptions. He served as Vice
President of Planning and Development of NSI from 1984 to 1992. He earned an
M.I.M. degree from the American Graduate School of International Management. He
earned an M.A. degree from Central Michigan University and a B.A. from Brigham
Young University. He is the brother of Blake M. Roney and Brooke B. Roney.
Max L. Pinegar has served as a Director of the Company since September
1996. He has also served as General Manager of NSI since 1989 and as Vice
President of NSI since 1992. He received a B.A. degree from Brigham Young
University and an M.B.A. degree from the University of Utah.
Max E. Esplin has served as a Director of the Company since September 1996.
He has also served as Vice President of Finance of NSI since 1993. He served as
Controller of NSI from 1989 until 1993. Mr. Esplin is a Certified Public
Accountant. He received a B.S. degree from Brigham Young University.
E.J. "Jake" Garn has served as a Director of the Company since March 1997.
Senator Garn has been Vice Chairman of Huntsman Corporation, one of the largest
privately-held companies in the U.S., since 1993. He currently serves as a
director for Dean Witter Funds, John Alden Life Insurance Company and Franklin
Quest & Co., Inc. From 1974 to 1993, Senator Garn was a member of the United
States Senate and served on numerous senate committees. He received a B.A.
degree from the University of Utah.
Paula Hawkins has served as a Director of the Company since March 1997.
Senator Hawkins is the principal of Paula Hawkins & Associates, Inc., a
management consulting company. From 1980 to 1986, Senator Hawkins was a member
of the United States Senate and served on numerous senate committees.
Daniel W. Campbell has served as a Director of the Company since March
1997. Mr. Campbell has been a Managing General Partner of EsNet, Ltd. since
1994. From 1992 to 1994, Mr. Campbell was the Senior Vice President and Chief
Financial Officer of WordPerfect Corporation and prior to that was a Partner of
Price Waterhouse LLP. He received a B.S. degree from Brigham Young University.
Committees of the Board of Directors
In January and March 1997, the Board of Directors established three
additional committees: the Audit Committee, the Compensation Committee and the
Executive Committee.
The Audit Committee members are Daniel W. Campbell and E.J. "Jake" Garn.
Mr. Campbell is the Chairman of the Audit Committee. The Audit Committee, among
other things, makes recommendations to the Board of Directors regarding the
selection of independent certified public accountants to audit annually the
books and records of the Company, reviews the activities and the reports of the
independent certified public accountants, reports the results of such review to
the Board of Directors and considers the adequacy of the Company's internal
controls and internal auditing methods and procedures.
The Compensation Committee members are Keith R. Halls, Max L. Pinegar,
Paula Hawkins and Daniel W. Campbell. Mr. Halls is the Chairman of the
Compensation Committee. The Compensation Committee, among other things, makes
recommendations to the Board of Directors regarding the salaries, bonuses and
other compensation to be paid to the Company's officers.
The Executive Committee members are Blake M. Roney, Steven J. Lund and
Keith R. Halls. Mr. Roney is the Chairman of the Executive Committee. The duties
of the Executive Committee are, to the extent authorized by the Board of
Directors, to exercise all the powers and authority of the Board of Directors
with respect to the management of the business and affairs of the Company.
Meetings
In the fiscal year ended December 31, 1996, the Board of Directors held
four meetings, three of which were held by written consent. All of the
then-current members of the Board of Directors attended the meetings. The
Compensation Committee, the Audit Committee and the Executive Committee were
each formed in 1997 and therefore held no meetings in the fiscal year ended
December 31, 1996.
Compensation of Directors
Directors who do not receive compensation as officers or employees of the
Company, NSI or its affiliates are paid an annual fee of $25,000 and a fee of
$1,000 for each meeting of the Board of Directors or any committee meeting
thereof that they attend.
ITEM 2
APPROVAL OF ADOPTION OF THE
NU SKIN ASIA PACIFIC, INC. 1996 STOCK INCENTIVE PLAN
General
In connection with the Company's initial public offering, which was
consummated on November 27, 1996, the Board of Directors adopted the Nu Skin
Asia Pacific, Inc. 1996 Stock Incentive Plan (the "Plan"). The purpose of the
Plan is to attract and retain executives, other employees, independent
consultants and directors who are important to the success and growth of the
Company and to ensure that their interests are aligned with the interests of the
stockholders of the Company. The following summary of the material terms of the
Plan, a copy of which is attached hereto as Exhibit A, does not purport to be
complete and is qualified in its entirety by the terms of the Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO
APPROVE THE ADOPTION OF THE NU SKIN ASIA PACIFIC, INC. 1996 STOCK
INCENTIVE PLAN. A MAJORITY OF THE VOTES CAST BY THE SHARES
ENTITLED TO VOTE AT THE ANNUAL MEETING WILL BE REQUIRED TO
APPROVE THE PROPOSAL.
Plan Administration
The Plan is administered by the 1996 Stock Incentive Plan Committee (the
"Plan Committee"). The Plan Committee consists of the members of the
Compensation Committee of the Board of Directors. The Plan Committee determines,
from time to time, the individuals to whom awards shall be made, the type of
awards, and the amount, size and terms of each award. The Plan Committee makes
all other determinations necessary or advisable for the administration of the
Plan.
Awards
Awards under the Plan may be in the form of options (both nonqualified
stock options ("NQSOs") and incentive stock options ("ISOs")), contingent stock,
restricted stock, and stock appreciation rights ("SARs"), or such other forms as
the Plan Committee in its discretion may deem appropriate. The maximum number of
awards that may be issued to any one person during the life of the Plan shall be
limited to 10% of the shares reserved for issuance under the Plan. The number of
shares which may be issued under the Plan as well as the terms of any
outstanding awards may be equitably adjusted by the Plan Committee in the event
of a stock split, stock dividend, recapitalization, merger, consolidation,
combination or similar events. In general, any shares subject to an option or
right which for any reason expires or is terminated unexercised shall again be
available under the Plan. No awards may be granted more than ten years after the
effective date of the Plan.
Number of Shares
A total of 4,000,000 shares of the Class A Common Stock have been
authorized to be issued pursuant to the Plan. As of March 3, 1997, the Company
had made stock bonus awards to certain of its employees for an aggregate of
150,959 shares of Class A Common Stock. The shares of Class A Common Stock
underlying each of these stock bonus awards will be issued to the recipient of
the award at a rate of 25% per year commencing in November 1997, provided the
employee remains in the employment of the Company.
Plan Amendment
The Board of Directors may amend the Plan, without stockholder approval,
anytime in any respect unless stockholder approval of the amendment in question
is required under Delaware law, the Code, certain exemptions from Section 16 of
the Securities Exchange Act of 1934, as amended, any national securities
exchange system on which the shares are then listed or reported, by any
regulatory body having jurisdiction with respect to the Plan, or other
applicable laws, rules or regulations. No amendment to the Plan may alter or
impair any award granted under the Plan without the consent of the holders
thereof. The Plan may be terminated at any time by the Board of Directors.
Options
The Plan provides for the grant of ISOs to employees and NQSOs to employees
and independent consultants. In the case of ISOs, the exercise price of an
option may not be less than 100% of the fair market value of a share of Class A
Common Stock at the time of grant (or 110% of such fair market value if the
optionee owns more than 10% of the total voting power of all classes of Company
stock outstanding at the time of grant). In the case of NQSOs, the exercise
price of an option may not be less than 85% of the fair market value of a share
of Class A Common Stock at the time of grant. The Plan Committee may provide for
a reduction in the exercise price of a NQSO by dividends paid on a share of
Class A Common Stock while the NQSO is outstanding. Options will be exercisable
for a term determined by the Plan Committee provided such exercise shall occur
not earlier than six months and not later than ten years (five years if the
optionee owns more than ten percent of the total voting power of all classes of
Company Stock outstanding at the time of grant) after the grant of the option.
The aggregate fair market value of ISO's (determined at the time of grant)
granted to an employee which may become first exercisable in any one calendar
year shall not exceed $100,000. If any option is not granted, exercised, or held
pursuant to the provisions applicable to an ISO, it will be considered to be an
NQSO to the extent that any or all of the grant is in conflict with such
provisions. The Plan Committee has the power to permit acceleration of
previously determined exercise terms under certain circumstances and upon such
terms and conditions as the Plan Committee deems appropriate.
Contingent Stock
The Plan Committee will determine the amount of contingent stock to be
granted to a participant based on the past or expected impact the participant
has had or can have on the financial well being of the Company and other factors
determined by the Plan Committee to be appropriate. A participant receiving an
award of contingent stock will receive the stock upon the satisfaction of
certain objectives. Contingent stock awards made pursuant to the Plan will be
subject to such terms, conditions and restrictions, including obtainment of
performance objectives, for such period or periods as may be determined by the
Plan Committee at the time of grant. The Plan Committee in its discretion may
permit acceleration of the expiration of the applicable restriction period with
respect to part or all of the award to any participant.
Restricted Stock
The Plan Committee will determine the amount of restricted stock to be
granted to a participant based on the past or expected impact the participant
has had or can have on the financial well being of the Company and other factors
deemed by the Plan Committee to be appropriate. Restricted stock is issued to
the participant subject to forfeiture if certain objectives are not met.
Restricted stock awards made pursuant to the Plan shall be subject to the terms,
conditions and restrictions, including the payment of performance objectives,
and for such period or periods as will be determined by the Plan Committee at
the time of grant. The Plan Committee in its discretion may permit acceleration
of the expiration of the applicable restriction period with respect to part or
all of the award to any participant. Shares of restricted stock may not be sold,
assigned, transferred, pledged, hypothecated or otherwise disposed of, except by
will or the laws of descent and distribution, for such period provided in the
participant's award agreement.
SARs
SARs are rights to receive cash or shares of Company stock, or a
combination thereof, as the Plan Committee may determine in an amount equal to
the excess of (i) the fair market value of the stock with respect to which the
SAR is exercised, or (ii) 100% of the fair market value of such stock at the
time the SAR was granted, less any dividends paid on such shares while the SAR
was outstanding. No cash consideration will be received by the Company for the
grant of any SAR. No SAR may be granted for a period of less than one year or
greater than ten years. SARs may be exercised at such time and subject to such
terms and conditions as are prescribed by the Plan Committee at the time of
grant, subject to certain limitations (including that no SAR shall be
exercisable within one year after the date of grant).
Federal Income Tax Consequences
The participant recognizes no taxable gain or loss when an incentive stock
option is granted or exercised. If the shares acquired upon the exercise of an
incentive stock option are held for at least one year after exercise and two
years after grant (the "Holding Period"), the participant recognizes any gain or
loss recognized upon such sale as long-term capital gain or loss and the Company
is not entitled to a deduction. If the shares are not held for the Holding
Period, the gain is ordinary income to the participant to the extent of the
difference between the exercise price and the fair market value of the Class A
Common Stock on the date the option is exercised and any excess is capital gain.
Also, in such circumstances, the Company is entitled to a deduction equal to the
amount of any ordinary income recognized by the participant.
The participant recognizes no taxable income and the Company receives no
deduction when a nonqualified stock option is granted. Upon exercise of a
nonqualified stock option, the participant recognizes ordinary income and the
Company is entitled to a deduction equal to the difference between the exercise
price and the fair market value of the shares on the date of exercise. The
participant recognizes as a capital gain or loss any subsequent profit or loss
realized on the sale or exchange of any shares disposed of or sold.
A participant granted restricted stock or contingent stock is not required
to include the value of such shares in income until the first time such
participant's rights in the shares are transferable or are not subject to
substantial risk of forfeiture, whichever occurs earlier, unless such
participant timely files an election under Code Section 83(b) to be taxed on the
receipt of the shares. In either case, the amount of such ordinary income will
be equal to the excess of the fair market value of the shares at the time the
income is recognized over the amount (if any) paid for the shares. The Company
is entitled to a deduction, in the amount of the ordinary income recognized by
the participant, for the Company's taxable year in which the participant
recognizes such income.
Upon the grant of an SAR, the participant recognizes no taxable income and
the Company receives no deduction. The participant recognizes ordinary income
and the Company is entitled to a deduction at the time of exercise equal to the
cash and the fair market value of shares payable upon such exercise.
Under certain circumstances, an accelerated vesting or cash out of stock
options, or accelerated lapse of restrictions on other awards, in connection
with a change in control of the Company might be deemed an "excess parachute
payment" for purposes of the golden parachute tax provisions of Code Section
280G. To the extent it is so considered, the participant may be subject to a 20%
excise tax and the Company may be denied a tax deduction.
Awards Made Under the Plan
The following table sets forth certain information regarding stock bonus
awards made pursuant to the Plan to the executive officers named in the Summary
Compensation table during the fiscal year ended December 31, 1996.
Future
Payouts
(Number of
Number of Shares of
Shares of Class A
Class A Common
Common Stock Time Period Stock)
Name (#) Until Payout (#)
- ---- ----- ------------ --------
Steven J. Lund................ -- -- --
Takashi Bamba................. 13,000(1) November 2000 13,000
John Chou..................... 13,000(1) November 2000 13,000
Michael D. Smith.............. 13,000(1) November 2000 13,000
Renn M. Patch................. 13,000(2) November 2000 13,000
- ---------------------------
(1) Award made in November 1996, which will vest ratably over four years
from the date of grant provided the executive officer remains in the
employment of the Company.
(2) Award made in November 1996, pursuant to the Nu Skin International,
Inc. 1996 Stock Incentive Plan, which will vest ratably over four
years from the date of grant provided the executive officer remains in
the employment of NSI. In 1996, Mr. Patch was, and continues to be, an
executive officer of NSI.
ITEM 3
RATIFICATION OF APPOINTMENT OF PRICE WATERHOUSE LLP
The Board of Directors has appointed Price Waterhouse LLP, independent
public accountants, to audit the Company's financial statements for the fiscal
year ending December 31, 1997. Representatives of Price Waterhouse LLP are
expected to be present at the Annual Meeting, and will have the opportunity to
make a statement if they desire, and are expected to be available to respond to
appropriate questions. Price Waterhouse LLP has served as the Company's
independent public accountants since the Company's inception.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF PRICE WATERHOUSE LLP TO AUDIT THE COMPANY'S FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDING DECEMBER 31, 1997. A MAJORITY OF THE VOTES CAST BY
THE SHARES ENTITLED TO VOTE AT THE ANNUAL MEETING WILL BE REQUIRED TO APPROVE
THE PROPOSAL.
ITEM 4
OTHER MATTERS
The Board of Directors knows of no other matters to be brought before the
Annual Meeting. If other matters are properly brought before the Annual Meeting,
it is intended that the persons named in the enclosed form of Proxy will have
discretionary authority to vote on such matters in accordance with their best
judgment acting together or separately.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Company's Class A Common Stock and Class B Common
Stock as of December 31, 1996 by (i) each person (or group of affiliated
persons) who is known by the Company to own beneficially more than 5% of the
outstanding shares of either the Class A Common Stock or the Class B Common
Stock, (ii) each of the Company's directors, (iii) each of the Company's
executive officers whose names appear in the summary compensation table under
the caption "Compensation of Directors and Executive Officers," and (iv) all
executive officers and directors and director nominees of the Company as a
group. The information in this table assumes (a) the exercise of all the options
to purchase shares of Class A Common Stock (the "Distributor Options") offered
in the Company's non-underwritten offering (the "Rule 415 Offerings") which
commenced in connection with the Company's initial public offering, (b) the
issuance of the 109,000 stock bonus awards offered by the Company in the Rule
415 Offerings and the shares of Class A Common Stock underlying such stock bonus
awards, (c) the issuance of the 1,250,000 stock bonus awards offered by NSI and
its affiliates excluding the Company in the Rule 415 Offerings and the shares of
Class A Common Stock underlying such stock bonus awards, and (d) the exercise by
an executive officer of the Company of an option to purchase 250,825 shares of
Class A Common Stock. The business address of the 5% stockholders is 75 West
Center Street, Provo, Utah, 84601.
<TABLE>
<S> <C> <C> <C>
Class A Class B Voting
Common Stock(1) Common Stock(1) Power
Directors, Executive
Officers, 5% Stockholders Number % Number % %
------------------------- ------ ---- ------ ---- -----
Blake M. Roney(2) -- -- 20,629,048 28.8 28.2
Nedra D. Roney(3) -- -- 14,213,895 19.8 19.5
Sandie N. Tillotson(4) -- -- 8,559,510 11.9 11.7
Craig S. Tillotson(5) -- -- 4,411,057 6.2 6.0
R. Craig Bryson(6) -- -- 4,925,736 6.9 6.7
Steven J. Lund(7) -- -- 4,244,653 5.9 5.8
Brooke B. Roney(8) -- -- 3,496,752 4.9 4.8
Kirk V. Roney(9) -- -- 3,246,752 4.5 4.5
Keith R. Halls(10) -- -- 1,361,022 1.9 1.9
Max L. Pinegar(11) 14,000 * -- -- *
Max E. Esplin(12) 14,000 * -- -- *
Daniel W. Campbell -- -- -- -- --
E.J. "Jake" Garn -- -- -- -- --
Paula Hawkins -- -- -- -- --
Renn M. Patch(13) 14,000 * -- -- *
Michael D. Smith(14) 14,000 * -- -- *
Takashi Bamba(15) 13,000 * -- -- *
John Chou(16) 13,215 * -- -- *
BNASIA, Ltd(17) -- -- 20,452,884 28.5 28.1
RCKASIA, Ltd(18) -- -- 4,850,736 6.8 6.7
All directors and officers as 358,373 2.7 41,537,737 57.9 56.9
a group (19 persons)(19)
</TABLE>
- ------------------------
*Less than 1%
(1) Each share of Class B Common Stock is convertible at any time at the
option of the holder into one share of Class A Common Stock and each
share of Class B Common Stock is automatically converted into one share
of Class A Common Stock upon the transfer of such share of Class B
Common Stock to any person who is not a Permitted Transferee as defined
in the Stockholders Agreement entered into by the Company and certain
of its stockholders prior to the Company's initial public offering.
(2) Includes shares beneficially owned or deemed to be owned beneficially
by Blake M. Roney as follows: 20,452,884 shares of Class B Common Stock
as general partner of BNASIA, Ltd., a limited partnership, and with
respect to which he shares voting and investment power with his wife
Nancy L. Roney as set forth in footnote 17 below; and 176,165 shares of
Class B Common Stock as trustee and with respect to which he has sole
voting and investment power. Blake M. Roney is the Chairman of the
Board of Directors of the Company and Chairman of the Board of
Directors, an executive officer and a shareholder of NSI.
(3) Includes shares beneficially owned or deemed to be owned
beneficially by Nedra D. Roney as follows: 14,213,895 shares of Class
B Common Stock directly and with respect to which she has sole voting
and investment power. Nedra D. Roney is a Director and shareholder of
NSI.
(4) Includes shares beneficially owned or deemed to be owned beneficially
by Sandie N. Tillotson as follows: 7,634,743 shares of Class B Common
Stock directly and with respect to which she has sole voting and
investment power; 424,767 shares of Class B Common Stock as trustee and
with respect to which she has sole voting and investment power; and
500,000 shares of Class B Common Stock as manager of a limited
liability company and with respect to which she has sole voting and
investment power. Sandie N. Tillotson is a Director of the Company and
a Director, executive officer and shareholder of NSI.
(5) Includes shares beneficially owned or deemed to be owned beneficially
by Craig S. Tillotson as follows: 3,032,912 shares of Class B Common
Stock directly and with respect to which he has sole voting and
investment power; 112,500 shares of Class B Common Stock as trustee and
with respect to which he has sole voting and investment power; 265,645
shares of Class B Common Stock as co-trustee and with respect to which
he shares voting and investment power; and 1,000,000 shares of Class B
Common Stock as manager of a limited liability company and with respect
to which he has sole voting and investment power. Craig S. Tillotson is
a shareholder of NSI.
(6) Includes shares beneficially owned or deemed to be owned beneficially
by R. Craig Bryson as follows: 4,850,736 shares of Class B Common Stock
as general partner of RCKASIA, Ltd., a limited partnership, and with
respect to which he shares voting and investment power with his wife
Kathleen D. Bryson as set forth in footnote 18 below; and 75,000 shares
of Class B Common Stock as co-trustee and with respect to which he
shares voting and investment power with Kathleen D. Bryson. R. Craig
Bryson is a shareholder of NSI.
(7) Includes shares beneficially owned or deemed to be owned beneficially
by Steven J. Lund as follows: 3,271,752 shares of Class B Common Stock
as general partner of a limited partnership and with respect to which
he shares voting and investment power with his wife Kalleen Lund;
897,901 shares of Class B Common Stock as trustee and with respect to
which he has sole voting and investment power; and 75,000 shares of
Class B Common Stock as co-trustee and with respect to which he shares
voting and investment power with Kalleen Lund. Steven J. Lund is a
Director and President of the Company and a Director, executive officer
and shareholder of NSI.
(8) Includes shares beneficially owned or deemed to be owned
beneficially by Brooke B. Roney as follows: 3,496,752 shares of Class
B Common Stock as general partner of a limited partnership and with
respect to which he shares voting and investment power with his wife
Denice R. Roney. Brooke B. Roney is a Director of the Company and a
Director, executive officer and shareholder of NSI.
(9) Includes shares beneficially owned or deemed to be owned beneficially
by Kirk V. Roney as follows: 3,171,752 shares of Class B Common Stock
as general partner of a limited partnership and with respect to which
he shares voting and investment power with his wife Melanie K. Roney;
and 75,000 shares of Class B Common Stock as co-trustee and with
respect to which he shares voting and investment power with Melanie K.
Roney and Lee S. McCullough. Kirk V. Roney is a Director of the Company
and a Director, executive officer and shareholder of NSI.
(10) Includes shares beneficially owned or deemed to be owned beneficially
by Keith R. Halls as follows: 593,758 shares of Class B Common Stock as
general partner of a limited partnership and with respect to which he
shares voting and investment power with his wife Anna Lisa Massaro
Halls; 50,000 shares of Class B Common Stock as the manager of a
limited liability company and with respect to which he has sole voting
and investment power; 704,764 shares of Class B Common Stock as trustee
and with respect to which he has sole voting and investment power; and
12,500 shares of Class B Common Stock as co-trustee and with respect to
which he shares voting and investment power with Anna Lisa Massaro
Halls. Keith R. Halls is a Director and Secretary of the Company and a
Director, executive officer and shareholder of NSI.
(11) Includes shares beneficially owned or deemed to be owned beneficially
by Max L. Pinegar as follows: 1,000 shares of Class A Common Stock
directly and with respect to which he has sole voting and investment
power; and 13,000 shares of Class A Common Stock issued to Mr. Pinegar
as an employee stock bonus award which will vest ratably, according to
its terms, over four years following the date of the award. Max L.
Pinegar is a Director of the Company and an executive officer of NSI.
(12) Includes shares beneficially owned or deemed to be owned beneficially
by Max E. Esplin as follows: 1,000 shares of Class A Common Stock
directly and with respect to which he has sole voting and investment
power; and 13,000 shares of Class A Common Stock issued to Mr. Esplin
as an employee stock bonus award which will vest ratably, according to
its terms, over four years following the date of the award. Max E.
Esplin is a Director of the Company and an executive officer of NSI.
(13) Includes shares beneficially owned or deemed to be owned beneficially
by Renn M. Patch as follows: 1,000 shares of Class A Common Stock
directly and with respect to which he has sole voting and investment
power; and 13,000 shares of Class A Common Stock issued to Mr. Patch as
an employee stock bonus award which will vest ratably, according to its
terms, over four years following the date of the award. Renn M. Patch
is Chief Operating Officer of the Company and an executive officer of
NSI.
(14) Includes shares beneficially owned or deemed to be owned beneficially
by Michael D. Smith as follows: 1,000 shares of Class A Common Stock
directly and with respect to which he has sole voting and investment
power; and 13,000 shares of Class A Common Stock issued to Mr. Smith as
an employee stock bonus award which will vest ratably, according to its
terms, over four years following the date of the award. Michael D.
Smith is Vice President of Operations of the Company.
(15) Includes shares beneficially owned or deemed to be owned beneficially
by Takashi Bamba as follows: 13,000 shares of Class A Common Stock
issued to Mr. Bamba as an employee stock bonus award which will vest
ratably, according to its terms, over four years following the date of
the award. Takashi Bamba is President of Nu Skin Japan.
(16) Includes shares beneficially owned or deemed to be owned beneficially
by John Chou as follows: 215 shares of Class A Common Stock directly
and with respect to which he has sole voting and investment power; and
13,000 shares of Class A Common Stock issued to Mr. Chou as an employee
stock bonus award which will vest ratably, according to its terms, over
four years following the date of the award. John Chou is President of
Nu Skin Taiwan.
(17) Includes 20,452,884 shares of Class B Common Stock owned by BNASIA,
Ltd., a limited partnership of which Blake M. Roney and his wife Nancy
L. Roney are the general partners and who share voting and investment
power.
(18) Includes 4,850,736 shares of Class B Common Stock owned by RCKASIA,
Ltd., a limited partnership of which R. Craig Bryson and his wife
Kathleen D. Bryson are the general partners and who share voting and
investment power.
(19) Class A Common Stock includes: 250,825 shares subject to a stock option
which has been granted to an executive officer of the Company and which
is exercisable until January 1, 2004; 5,748 shares owned directly by
certain directors and executive officers; and 101,800 shares issued to
certain directors and executive officers as employee stock bonus awards
which will vest ratably, according to their terms, over four years
following the date of the awards.
COMPLIANCE WITH SECTION 16(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's officers and directors and persons who own beneficially
more than 10% of a registered class of the Company's equity securities to file
with the Securities and Exchange Commission and the New York Stock Exchange
initial reports of ownership and reports of changes in ownership of the
Company's equity securities. Officers, directors and greater than 10% beneficial
owners are required to furnish the Company with copies of all Section 16(a)
reports they file.
Based solely upon a review of the copies of such reports furnished to
the Company and written representations that no other reports were required, the
Company believes that during the fiscal year ended December 31, 1996 the
Company's officers, directors and greater than 10% beneficial owners complied
with all applicable Section 16(a) filing requirements, except that Messrs. John
Chou, S.T. Han and George Mak each inadvertently filed one report, relating to
one transaction, after its due date.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
The Company believes that stockholders should be provided information
about director and executive officer compensation consistent with the rules of
the Securities and Exchange Commission. As a result, this Proxy Statement
contains the following sections of information regarding executive compensation:
Summary Compensation Table; Employment Agreements; 1996 Stock Incentive Plan;
Bonus Incentive Plan; Compensation Committee Interlocks and Insider
Participation; Executive Compensation Report of the Board of Directors; and
Stock Performance Graph.
Summary Compensation Table
The following table sets forth a summary of all compensation awarded or
paid to or earned by the chief executive officer and the four other most highly
compensated executive officers of the Company in the last fiscal year for
services rendered in all capacities to the Company for the fiscal years ended
December 31, 1995 and 1996. Except for the employee stock bonus awards
referenced elsewhere herein, no options or long-term incentive plan awards were
granted or made to the referenced executive officers during the referenced
periods, except as provided below.
The Company was formed in September 1996, and consequently paid no
compensation to the executive officers named in the table below during the
fiscal year ended December 31, 1995 and during the first eight months of the
fiscal year ended December 31, 1996. However, salary, bonus and other
compensation is presented in the table below for 1995 and 1996 based on payments
by NSI and the Subsidiaries and, for the last quarter of 1996, by the Company to
the named executive officers as if the Company had been in existence during all
of 1995 and 1996. During 1995 and 1996, Messrs. Bamba and Chou were, and
continue to be, employed full time as the General Managers and/or Presidents of
Nu Skin Japan and Nu Skin Taiwan, respectively, and received all of their
compensation from the Company through these Subsidiaries. During 1995 and 1996,
Messrs. Lund, Smith and Patch were, and Messrs. Lund and Patch continue to be,
executive officers of NSI. The compensation presented in the table below
reflects an allocation of the time spent by Messrs. Lund, Smith and Patch
providing services to the Company and the Subsidiaries during 1995 and 1996.
These salaries and bonuses are in addition to any amounts received by these
officers from NSI in return for their services to NSI.
<TABLE>
Annual Compensation
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Other
Annual All Other
Name and Principal Position Year Salary Bonus Compensation Compensation
- --------------------------- ---- ------ ----- ------------ ------------
Steven J. Lund......................... 1996 $259,973 $89,345(1) $ -- $ --
President and Chief 1995 236,364 82,529(1) -- --
Executive Officer
Takashi Bamba.......................... 1996 364,138 174,557(2) 195,401(3) 3,297(4)
President, Nu Skin Japan 1995 361,028 105,563(2) 98,063(3) 3,297(4)
John Chou.............................. 1996 211,000 56,232(2) 77,897(5) --
President, Nu Skin 1995 185,370 75,786(2) 63,730(5) --
Taiwan
Michael D. Smith....................... 1996 157,812 13,090(1) 25,676(6) 24,390(7)
Vice President of 1995 -- -- -- --
Operations
Renn M. Patch.......................... 1996 98,638 20,437(1) 13,800 5,542(7)
Chief Operating Officer 1995 97,175 104,765(8) 18,750(9) --
</TABLE>
- ---------------------------
(1) Cash bonus paid to the recipient not pursuant to a formal bonus plan.
(2) Cash bonus paid during the year reported pursuant to a cash bonus long-
term incentive plan for the Presidents of the Subsidiaries.
(3) Includes deferred portion of a bonus accrued during the year reported
pursuant to a cash bonus long-term incentive plan for the Presidents of
the Subsidiaries and annual lease payments for an automobile.
(4) Annual premium for pension insurance policy.
(5) Includes deferred portion of a bonus accrued during the year reported
pursuant to a cash bonus long-term incentive plan for the Presidents of
the Subsidiaries and annual payments for an automobile and club dues.
(6) Includes deferred portion of a bonus accrued during the year reported
not pursuant to a formal bonus plan.
(7) Includes compensation in the form of the cash value of the use of certain
NSI-owned property and other perquisites.
(8) Noncash bonus paid to Mr. Patch, not pursuant to a formal bonus plan.
(9) Includes $16,500 of accrued deferred compensation and $2,250 of vested
deferred compensation awarded to Mr. Patch under NSI's deferred
compensation plan.
Employment Agreements
Messrs. Bamba, Chou and Han have entered into employment agreements
with Nu Skin Japan, Nu Skin Taiwan and Nu Skin Korea, respectively. Under these
agreements, these individuals are paid an annual salary and receive various
other benefits. These individuals, together with Mr. Mak, are also entitled to
participate in a cash bonus long-term incentive plan.
Mr. Bamba is employed as the President of Nu Skin Japan at a 1977
annual salary of approximately $394,000. This salary is subject to annual
review. Under the terms of his employment agreement, Mr. Bamba is entitled to
reimbursement of business-related expenses, the use of an automobile provided by
Nu Skin Japan, and participation in any retirement plan offered by Nu Skin
Japan. Mr. Bamba also has the right under his employment agreement to have Nu
Skin Japan purchase a country club membership and pay related dues, although he
has not exercised this right. Mr. Bamba is also provided with a private
insurance plan paid for by Nu Skin Japan provided the premium for such private
insurance plan does not exceed (Y)300,000 per year. Under his employment
agreement, Mr. Bamba has agreed to certain confidentiality obligations. The term
of Mr. Bamba's employment is indefinite, subject to termination by Mr.
Bamba or Nu Skin Japan upon three months' notice.
Mr. Chou is employed as the President of Nu Skin Taiwan at a 1977
annual salary of approximately $230,000. Under the terms of his employment
agreement, Mr. Chou is entitled to health insurance paid for in part by Nu Skin
Taiwan. Nu Skin Taiwan also provides Mr. Chou with a monthly car allowance. The
term of Mr. Chou's employment agreement currently extends until June 1997. Under
his employment agreement, Mr. Chou has agreed to certain confidentiality
obligations.
Mr. Han is employed as the President of Nu Skin Korea at a 1977 annual
salary of approximately $140,000. Under the terms of his employment agreement,
Mr. Han is entitled to the use of an automobile and driver provided by Nu Skin
Korea, as well as medical insurance and pension benefits. Mr. Han's employment
is for a three year term ending January 1, 1999, subject to the right of Nu Skin
Korea or Mr. Han to terminate the agreement on 60 days' advance notice. Once Mr.
Han had been employed by Nu Skin Korea for 12 months, he became entitled to
receive, upon termination, severance pay equal to two months' salary for each
consecutive year of service. Under his employment agreement, Mr. Han has agreed
to certain confidentiality and noncompetition obligations.
1996 Stock Incentive Plan
The Board of Directors has adopted the Nu Skin Asia Pacific, Inc. 1996
Stock Incentive Plan. The purpose of the Plan is to attract and retain
executives, other employees, independent consultants and directors who are
important to the success and growth of the Company. A summary of the material
terms of the Plan, a copy of which is attached hereto as Exhibit A, is set forth
above in "Item 2 -- Approval of Adoption of the Nu Skin Asia Pacific, Inc. 1996
Stock Incentive Plan."
Bonus Incentive Plan
The Company has adopted a bonus incentive plan for the Presidents of
the Subsidiaries. This bonus incentive plan is patterned after a similar plan
under which Messrs. Bamba, Chou, Han and Mak were compensated prior to the
Company's initial public offering. Under the new bonus incentive plan, Messrs.
Bamba, Chou, Han and Mak are entitled to receive an annual cash bonus based upon
the prior year's operating results of the Subsidiary for which they are
responsible. Participants in this bonus incentive plan are able to receive a
bonus equal to 100% of their respective salaries, conditioned on meeting certain
performance criteria and subject to cash availability and approval of the Board
of Directors of the Company. One half of this bonus is payable by February 15 of
the year following the year in which the bonus is earned and the remaining one
half is deferred and vests ratably over 10 years or at age 65, whichever occurs
first.
Compensation Committee Interlocks and Insider Participation
Several members of the Company's Board of Directors are also directors
of NSI and have set or will set compensation for certain executive officers of
the Company who have been or may in the future be executive officers of NSI.
Executive Compensation Report of the Board of Directors
The Compensation Committee was not formed until March 1997.
Accordingly, the Board of Directors performed the functions of the Compensation
Committee for the fiscal year ended December 31, 1996.
Notwithstanding anything to the contrary set forth in any of the
previous filings made by the Company under the Securities Act of 1933, as
amended, or the Securities Act of 1934, as amended, that might incorporate
future filings, including, but not limited to, this Proxy Statement, in whole or
in part, the following Executive Compensation Report and the performance graph
appearing herein shall not be deemed to be incorporated by reference into any
such future filings.
This Executive Compensation Report discusses the Company's executive
compensation policies and the basis for the compensation paid to the Company's
executive officers, including its Chief Executive Officer, Steven J. Lund,
during the fiscal year ended December 31, 1996.
Compensation Policy. The Company's policy with respect to executive
compensation has been designed to:
o Adequately and fairly compensate executive officers in
relation to their responsibilities, capabilities and
contributions to the Company and in a manner that is
commensurate with compensation paid by companies of comparable
size or within the Company's industry;
o Reward executive officers for the achievement of short-term
operating goals and for the enhancement of the long-term
value of the Company; and
o Align the interests of the executive officers with those of
the Company's stockholders with respect to short-term
operating goals and long-term increases in the price of the
Company's Common Stock.
The components of compensation paid to certain executive officers
consist of: (a) base salary, (b) incentive compensation in the form of annual
bonus payments and other awards made by the Company under the Company's bonus
incentive plans for the Presidents of the Subsidiaries and the Nu Skin Asia
Pacific, Inc. 1996 Stock Incentive Plan, respectively, and (c) certain other
benefits provided to the Company's executive officers. In the absence of a
Compensation Committee, the Board of Directors has been responsible for
reviewing and approving cash compensation paid by the Company to its executive
officers and members of the Company's senior management team, including annual
bonuses and awards made under the aforementioned incentive plans, selecting the
individuals who will receive such bonuses and awards and determining the timing,
pricing and amount of all such bonuses and awards granted.
As described above, the Company has adopted a bonus incentive plan for
the Presidents of the Subsidiaries. The Company has not yet adopted a formal
bonus incentive plan for other executive officers. During 1996, bonuses made to
executive officers other than the Presidents of the Subsidiaries were
discretionary and based on achievement of business targets and objectives. The
Company believes its incentive compensation plan for Presidents of the
Subsidiaries rewards those officers when the Company and its stockholders have
benefited from achieving the Company's goals and targeted objectives, all of
which the Board of Directors feels will dictate, in large part, the Company's
future operating results. The Board of Directors believes that its policy of
compensating certain of its executive officers with incentive-based compensation
fairly and adequately compensates those individuals in relation to their
responsibilities, capabilities and contribution to the Company, and in a manner
that is commensurate with compensation paid by companies of comparable size or
within the Company's industry.
Components of Compensation. The primary components of compensation paid
by the Company to its executive officers and senior management personnel, and
the relationship of such components of compensation to the Company's
performance, are discussed below:
Base Salary. For the fiscal year ended December 31, 1996, the
Board of Directors reviewed and approved the base salary paid by the
Company to its executive officers and the Presidents of the Subsidiaries. Annual
adjustments to base salaries are determined based upon a number of factors,
including the Company's performance (to the extent such performance can fairly
be attributed or related to each executive's officer's performance), as well as
the nature of each executive officer's responsibilities, capabilities and
contributions. In addition, for the fiscal year ended December 31, 1996, the
Board of Directors reviewed the base salaries of its executive officers in an
attempt to ascertain whether those salaries fairly reflect job responsibilities
and prevailing market conditions and rates of pay. The Board of Directors
believes that base salaries for the Company's executive officers have been
reasonable in relation to the Company's size and performance in comparison with
the compensation paid by similarly sized companies or companies within the
Company's industry.
Incentive Compensation. As discussed above, a substantial portion of
the compensation paid to the Presidents of the Subsidiaries is in the form of
incentive compensation designed to reward the achievement of operating goals and
long-term increases in shareholder value. Under the terms of the bonus incentive
plan for the Presidents of the Subsidiaries and the Nu Skin Asia Pacific, Inc.
1996 Stock Incentive Plan, the Board of Directors and the Compensation Committee
have authority, within the terms of such plans, to select the executive officers
and employees who will be granted bonuses and other awards and to determine the
timing, pricing and amount of any such bonuses or awards.
Other Benefits. The Company maintains certain other plans and
arrangements for the benefit of its executive officers. The Company believes
these benefits are reasonable in relation to the executive compensation
practices of other similarly sized companies or companies within the Company's
industry.
Compensation of the Chief Executive Officer. Steven J. Lund, the
Company's President and Chief Executive Officer, is also Executive Vice
President of NSI and an officer of certain other NSI affiliates. During 1995 and
1996, even after the Company's formation in September 1996, Mr. Lund continued
to receive all of his cash compensation from NSI. This practice will likely
continue during 1997. The amounts set forth in the table above reflect that
portion of Mr. Lund's salary and bonus which is allocated to the Company based
on the relative amount of time spent on the Company's affairs.
Conclusion. The Board of Directors believes that the concepts discussed
above further the stockholders' interests and that officer compensation
encourages responsible management of the Company. The Board of Directors
regularly considers the effect of management compensation on stockholder
interests. In the past, the Board of Directors based its review on the
experience of its own members and on information requested from management
personnel. In the future, these factors, reports of the Compensation Committee
and discussions with and information compiled by various independent consultants
retained by the Company will be used in determining officer compensation.
Board of Directors(1)
Blake M. Roney
Steven J. Lund
Sandie N. Tillotson
Brooke B. Roney
Kirk V. Roney
Keith R. Halls
Max E. Esplin
Max L. Pinegar
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(1) For the fiscal year ended December 31, 1996, the entire Board of Directors
then serving acted as the Compensation Committee. A Compensation Committee
consisting of Keith R. Halls, Max L. Pinegar, Paula Hawkins and Daniel W.
Campbell was established on March 3, 1997. In addition, on that date E. J.
"Jake" Garn, Paula Hawkins and Daniel W. Campbell were appointed to the
Board of Directors.
Stock Performance Graph
The following graph compares the cumulative total stockholder return
(stock price appreciation plus dividends) on the Company's Class A Common Stock
with the cumulative total return of the S&P 500 Index and a market weighted
index of publicly traded peers for the period from November 21, 1996 (the date
the Class A Common Stock was priced in connection with the Company's initial
public offering) though December 31, 1996. The returns are calculated by
assuming an investment in the Class A Common Stock and each index of $100 on
November 21, 1996. The publicly traded companies in the peer group are: Amway
Asia Pacific, Ltd., Amway Japan, Ltd., The Estee Lauder Companies, Inc.,
Tupperware Corporation, Revlon, Inc. and Avon Products.
Measurement Period Company S&P 500 Index Peer Group Index
------------------ ------- ------------- ----------------
November 21, 1996 $100.00 $100.00 $100.00
December 31, 1996 102.49 99.90 97.11
[Stock Performance Graph]
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Reorganization
Prior to the Company's initial public offering, the shareholders of Nu
Skin Japan, Nu Skin Taiwan, Nu Skin Korea, Nu Skin Hong Kong and Nu Skin
Personal Care (Thailand) Limited contributed their shares of capital stock to
the capital of the Company in a transaction intended to qualify under Section
351 of the Internal Revenue Code of 1986, as amended, in exchange for shares of
the Company's Class B Common Stock (the "Reorganization"). As a result of the
Reorganization, each of the Subsidiaries became a wholly-owned subsidiary of the
Company, and all of the outstanding shares of Class B Common Stock are now held
by these shareholders (the "Original Stockholders") and certain of their
affiliates.
S Corporation Distribution
Prior to the Reorganization, each Subsidiary elected to be treated as
an "S" corporation under Subchapter S of the Code and comparable state tax laws.
On November 19, 1996, the Subsidiaries' S corporation status was terminated (the
"S Termination Date"). Prior to the S Termination Date, the Company declared a
distribution to the Original Stockholders that included all of the Subsidiaries'
previously earned and undistributed S corporation earnings through the S
Termination Date (the "S Corporation Distribution"). As of the date of the
Reorganization, the Subsidiaries' aggregate undistributed taxable S corporation
earnings were $86.5 million. The S Corporation Distribution was distributed in
the form of promissory notes, which are expected to be paid during 1997, bearing
interest at 6% per annum (the "S Distribution Notes"). From the proceeds of the
Company's initial public offering, $15.0 million was used to pay a portion of
the S Distribution Note balance of $71.5 million at December 31, 1996.
Control By Original Stockholders
As of March 3, 1997, approximately 98.4% of the combined voting power
of the outstanding shares of Common Stock was held by the Original Stockholders
and certain of their affiliates. Consequently, as of such date, the Original
Stockholders and certain of their affiliates had the ability, acting in concert,
to elect all directors of the Company and approve any action requiring approval
by a majority of the stockholders of the Company. As of March 3, 1997, certain
of the Original Stockholders also owned 100% of the outstanding shares of NSI.
As a result of this ownership, these Original Stockholders will consider the
short-term and the long-term impact of all stockholder decisions on the
consolidated financial results of NSI and the Company. The interests of NSI, on
the one hand, and of the Company, on the other hand, may differ from time to
time.
Operating Agreements; Relationship with NSI
NSI has licensed to the Company, through the Subsidiaries, rights
to distribute NSI products and to use certain NSI property in the Company's
markets, and an NSI affiliate, Nu Skin International Management Group, Inc.
("NSIMG"), provides management support services to the Company and the
Subsidiaries, pursuant to distribution, trademark/tradename license, licensing
and sales, and management services agreements with the Subsidiaries
(collectively, the "Operating Agreements"). Virtually all of the products sold
by the Company are purchased from NSI pursuant to distribution agreements. The
Company also manufactures itself, or through third-party manufacturers, certain
products and commercial materials which it then sells using NSI trademarks or
tradenames licensed under trademark/tradename license agreements. In addition,
the Company does not have its own sales or distribution network but licenses the
right to use NSI's distribution network and global distributor compensation plan
pursuant to licensing and sales agreements. NSIMG also provides a broad range of
management, administrative and technical support to the Company pursuant to
management services agreements.
During the fiscal year ended December 31, 1996, NSI and NSIMG charged
the Company approximately $219.9 million and $4.2 million, respectively, for
goods and services provided to the Company under the Operating Agreements.
The Operating Agreements were approved by the original Board of
Directors of the Company, which was composed entirely of officers and
shareholders of NSI. In addition, two of the executive officers of the Company,
including the Chief Executive Officer, are also executive officers of NSI. It is
expected that they will continue to spend a portion of their time on the affairs
of NSI, for which they will continue to receive compensation from NSI, in
addition to amounts received from the Company for services to the Company.
During 1996, Nu Skin Japan paid NSI a royalty of 8% of the revenue from
sales of products manufactured by a third party manufacturer under a license
agreement between Nu Skin Japan and NSI. In the fiscal year ended December 31,
1996, Nu Skin Japan paid NSI $2.9 million in royalties under this agreement.
Pursuant to wholesale distribution agreements, Nu Skin Hong Kong
distributes certain NSI products to Nu Skin Personal Care Australia, Inc. and Nu
Skin New Zealand, Inc., affiliates of NSI. Pursuant to these agreements, Nu Skin
Hong Kong was paid approximately $4.6 million in fiscal year 1996 by Nu Skin
Personal Care Australia, Inc. and Nu Skin New Zealand, Inc.
Concurrently with the Company's initial public offering, the Company
purchased from NSI for $25 million, the exclusive rights to distribute NSI
products in Thailand, Indonesia, Malaysia, the Philippines, the People's
Republic of China, Singapore and Vietnam. As of March 3, 1997, the Company had
paid $15 million of this amount. In addition, the Company and NSI have entered
into a mutual indemnification agreement pursuant to which NSI has agreed to
indemnify the Company for certain claims, losses and liabilities relating to the
operations of the Subsidiaries prior to the Reorganization, and the Company has
agreed to indemnify NSI for certain claims, losses and liabilities relating to
the operations of the Subsidiaries after the Reorganization.
Stockholders' Partnership
Craig Bryson and Craig S. Tillotson are major stockholders of the
Company and have been NSI distributors since 1984. Messrs. Bryson and
Tillotson are partners in an entity (the "Partnership") which receives
substantial commissions from NSI, including commissions on sales generated
within the Company's markets. For the fiscal year ended December 31, 1996, total
commissions paid to the Partnership on sales originating in the Company's then
open markets (Japan, Taiwan, Hong Kong and South Korea) were approximately $1.2
million. By agreement, NSI pays commissions to the Partnership at the highest
level of commissions available to distributors. Management believes that this
arrangement allows Messrs. Bryson and Tillotson the flexibility of using their
expertise and reputations in network marketing circles to sponsor, motivate and
train distributors to benefit NSI's distributor force generally, without having
to focus solely on their own organizations.
Stockholders' Agreement
The Original Stockholders have entered into a stockholders' agreement
with the Company (the "Stockholders' Agreement"). As of March 3, 1997, the
Original Stockholders and certain of their affiliates beneficially owned shares
having approximately 98.4% of the combined voting power of the outstanding
shares of Common Stock. In order to ensure the qualification of the
Reorganization under Section 351 of the Code, the Original Stockholders have
agreed not to transfer any shares they own through November 28,1997 without the
consent of the Company except for certain transfers relating to the funding of
the Distributor Options and the grant of the employee stock bonus awards. After
such date and subject to any volume limitations imposed by Rule 144 under the
Securities Act of 1933, as amended, no such stockholder is permitted to transfer
in any one-year period a number of shares equal to the greater of (i) 10% of the
total number of shares of Common Stock originally issued to such stockholder in
connection with the Reorganization, or (ii) 1.25% of the total Common Stock
issued and outstanding at the time of such proposed transfer. The Original
Stockholders have been granted registration rights by the Company permitting
each such Original Stockholder to register his or her shares of Class A Common
Stock, subject to certain restrictions, on any registration statement filed by
the Company until such Original Stockholder has sold a specified value of shares
of Class A Common Stock.
Agreements and Arrangements with Management
Prior to the Company's initial public offering, the Company entered
into indemnification agreements with its officers and directors
indemnifying them against liability incurred by them in the course of their
service to the Company. Pursuant to the Nu Skin Asia Pacific, Inc. 1996 Stock
Incentive Plan, and as set forth in "Item 2 -- Approval of Adoption of the Nu
Skin Asia Pacific, Inc. 1996 Stock Incentive Plan," as of March 3, 1997, the
Company had granted stock bonus awards to certain executive officers of the
Company for an aggregate of 150,959 shares of Class A Common Stock. The shares
of Class A Common Stock underlying each of these stock bonus awards will be
issued to the recipient of the award at a rate of 25% per year commencing in
November 1997, subject to certain restrictions. In January 1994, NSI
stockholders agreed to grant to an individual who is now an executive officer of
the Company an option, which became immediately exercisable upon consummation of
the Reorganization, to purchase 267,500 shares of Class A Common Stock at an
aggregate exercise price of $500,000, which reflects the agreed upon fair market
value of this equity interest in January 1994. As of March 3, 1997, the
executive officer had exercised a portion of this option and purchased 16,675
shares of Class A Common Stock, which he then sold in the Company's initial
public offering. The Company has employment agreements with certain of its
executive officers, as set forth in "Compensation of Directors and Executive
Officers -- Employment Agreements."
Distributor Options
Prior to the Company's initial public offering, the Original
Stockholders converted 1,605,000 shares of Class B Common Stock into Class A
Common Stock and contributed such shares to the Company for use in implementing
an NSI distributor equity incentive program, and the Company granted to NSI an
option to acquire such 1,605,000 shares of Class A Common Stock (the Distributor
Options). NSI will assign the Distributor Options to qualifying distributors of
NSI in connection with the Company's non-underwritten offering which commenced
in connection with the Company's initial public offering (the Rule 415
Offerings). The Distributor Options are subject to certain conditions related to
distributor performance and will vest on December 31, 1997. The Company will
record distributor incentive expense for the Distributor Options.
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
The Board of Directors has approved stock bonus awards to certain
executive officers of the Company. See "Item 3 -- Approval of Adoption of
the Nu Skin Asia Pacific, Inc. 1996 Stock Incentive Plan."
ANNUAL REPORT TO STOCKHOLDERS
The Annual Report to Stockholders concerning the operation of the
Company for the fiscal year ending December 31, 1996, including financial
statements, is enclosed herewith.
ANNUAL REPORT TO SECURITIES AND EXCHANGE COMMISSION
A copy of the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996, as filed with the Securities and Exchange Commission,
without exhibits may be obtained by stockholders without charge by written
request to Charles N. Allen, Nu Skin Asia Pacific, Inc., 75 West Center Street,
Provo, Utah 84601. Exhibits will be provided upon written request and payment of
an appropriate processing fee.
By Order of the Board of Directors
Blake M. Roney
Chairman of the Board
DATED: April 7, 1997
