<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / 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 Section 240.14a-11(c) or Section
240.14a-12
NATURE'S SUNSHINE PRODUCTS, 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/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / 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:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
<PAGE>
NATURE'S SUNSHINE PRODUCTS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 20, 1996
To the Shareholders:
Notice is hereby given that the 1996 Annual Meeting of Shareholders of
Nature's Sunshine Products, Inc. ("the Company") will be held at the Company's
corporate offices at 75 East 1700 South, Provo, Utah 84606, on Monday, May 20,
1996, at 10:00 a.m., local time, for the following purposes:
1. To elect two directors, each to serve a term of three years, and
until his or her successor is elected and shall qualify;
2. To consider and vote upon a proposal to approve the adoption of the
Company's 1995 Stock Option Plan; and
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on April 8, 1996 as
the record date for the determination of shareholders entitled to notice of, and
to vote at, the Annual Meeting of Shareholders, and only shareholders of record
at such date will be so entitled to notice and to vote.
YOUR VOTE IS IMPORTANT. PLEASE SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT
PROMPTLY IN THE ENCLOSED RETURN ENVELOPE WHETHER OR NOT YOU EXPECT TO ATTEND THE
MEETING. YOU MAY REVOKE YOUR PROXY AND VOTE IN PERSON SHOULD YOU DECIDE TO
ATTEND THE MEETING.
By Order of the Board of Directors,
BRENT F. ASHWORTH
SECRETARY
Provo, Utah
April 12, 1996
PLEASE FILL IN, DATE, SIGN, AND RETURN THE ENCLOSED PROXY WHICH REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES. A PROXY IS REVOCABLE AT ANY TIME PRIOR
TO THE VOTING OF THE PROXY, BY WRITTEN NOTICE TO THE SECRETARY OF THE COMPANY OR
BY VOTING IN PERSON AT THE MEETING.
<PAGE>
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
OF
NATURE'S SUNSHINE PRODUCTS, INC.
GENERAL
This Proxy Statement is furnished in connection with the solicitation of
Proxies by the Board of Directors of Nature's Sunshine Products, Inc. ("the
Company") for the Annual Meeting of Shareholders of the Company to be held on
May 20, 1996. The Shareholders of the Company will consider and vote upon the
proposals described herein and referred to in the Notice of the Meeting
accompanying this Proxy Statement.
The close of business on April 8, 1996, has been fixed as the record date
for the determination of the shareholders entitled to notice of, and to vote at,
the Annual Meeting. On such date there were 18,501,924 shares of Common Stock
outstanding and entitled to vote. Each share of Common Stock is entitled to one
vote on each matter to be considered at the meeting. For a description of the
principal holders of such stock, see "PRINCIPAL HOLDERS OF COMMON STOCK" below.
Shares represented by Proxies will be voted in accordance with the
specifications made thereon by the shareholders. Any Proxy not specifying the
contrary will be voted in favor of (i) the Board of Directors' nominees for
directors of the Company and (ii) approval of the Company's 1995 Stock Option
Plan.
The Proxies being solicited by the Board of Directors may be revoked by any
shareholder giving the Proxy at any time prior to the Annual Meeting by giving
notice of such revocation to the Company, in writing, at the address of the
Company provided below. The Proxy may also be revoked by any shareholder giving
such Proxy who appears in person at the Annual Meeting and advises the Chairman
of the Meeting of his intent to revoke the Proxy.
The principal executive offices of the Company are located at 75 East 1700
South, Provo, Utah 84606. This Proxy Statement and the enclosed Proxy are being
furnished to shareholders on or about April 15, 1996.
1
<PAGE>
PRINCIPAL HOLDERS OF COMMON STOCK
The following table sets forth information as of March 31, 1996, with
respect to the beneficial ownership of the Company's Common Stock by the
principal shareholders, all directors, and all officers and directors of the
Company as a group.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF SHARES
BENEFICIAL OWNER BENEFICIALLY OWNED(1) PERCENT OF CLASS(2)
- -------------------------------------- -------------------------------------- ---------------------------------------
<S> <C> <C>
Pauline T. Hughes 2,322,014(3) 12.5%
311 East Canal Road
Salem, UT 84653
Kristine F. Hughes 1,819,899(4) 9.7%
Eugene L. Hughes
75 East 1700 South
Provo, UT 84606
Wasatch Advisors, Inc. 1,696,815(5) 9.2%
68 South Main Street, Suite 400
Salt Lake City, UT 84101
Alan D. Kennedy 536,519(6) 2.8%
75 East 1700 South
Provo, UT 84606
Merrill Gappmayer 127,811(7) .7%
1855 South Alta Vista Drive
Orem, UT 84057
All officers and directors as a group 5,721,891(8) 28.7%
(14 persons)
</TABLE>
- ------------------------
(1) Except as otherwise indicated, all shares are directly owned with voting and
investment power held by the person named.
(2) Percentage includes, where applicable, shares subject to presently
exercisable options.
(3) Includes 2,025,228 shares held by Pauline Hughes in trust for the benefit of
herself and her children, 187,171 shares held by a family limited
partnership and 109,615 shares subject to presently exercisable options.
(4) Includes 1,498,959 shares held by Kristine and Eugene Hughes as trustees for
the benefit of themselves and their children, 86,880 shares allocated to Mr.
Hughes' account in a 401(k) Plan and 234,060 shares subject to presently
exercisable options. Does not include 1,685,121 shares held by their
children and grandchildren.
(5) In a Schedule 13G dated February 12, 1996, Wasatch Advisors, Inc. reported
that it had sole voting and dispositive power for 1,131,210 shares
(1,696,815 after the March 1996 stock split).
(6) Includes 18,544 shares allocated to Alan Kennedy's account in a 401(k) Plan
and 354,940 shares subject to presently exercisable options.
2
<PAGE>
(7) Includes 660 shares held by a minor child and 109,615 shares subject to
presently exercisable options.
(8) Includes 287,008 shares allocated to officers in the 401(k) Plan and
1,401,305 shares subject to presently exercisable options.
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
In accordance with the By-Laws of the Company, the Board of Directors has
fixed its number at five members. The incumbent directors were elected for
staggered terms at the last three annual meetings.
Under the Company's Restated Articles of Incorporation, directors are
divided into three classes, each class to consist, as nearly as may be possible,
of one-third of the number of directors then constituting the entire Board of
Directors. Each year one class of directors is elected, each director to serve a
term of three years.
At the Annual Meeting, two directors, Kristine F. Hughes and Alan D.
Kennedy, will stand for election to serve three years and thereafter until each
of their successors are elected and shall qualify.
In the absence of instructions to the contrary, the persons named in the
Proxy will vote the Proxies for the election of the nominees listed below,
unless otherwise specified in the Proxy. The Board of Directors has no reason to
believe that the nominees will be unable to serve, but if either nominee should
become unable to serve, the Proxies will be voted for such other person as the
Board of Directors shall recommend.
Certain information concerning the two nominees to the Board of Directors,
and directors whose terms will continue after the Annual Meeting is set forth
below.
<TABLE>
<CAPTION>
SERVED AS
DIRECTOR
NAME OF NOMINEE AGE COMPANY POSITION HELD SINCE CLASS AND YEAR TERM WILL EXPIRE
- -------------------------- --- -------------------------------- ----------- -----------------------------------
<S> <C> <C> <C> <C>
NOMINEES
Kristine F. Hughes 57 Chairperson of the Board and 1980 Class III 1999 (if re-elected)
Director
Alan D. Kennedy 65 President, Chief Executive 1989 Class III 1999 (if re-elected)
Officer and Director
DIRECTORS WHOSE TERMS ARE CONTINUING
Merrill Gappmayer 54 Director 1980 Class I 1997
Pauline T. Hughes 54 Director 1988 Class I 1997
Eugene L. Hughes 65 Senior Vice President and 1980 Class II 1998
Director
</TABLE>
COMPENSATION OF DIRECTORS
Board members who are also employees of the Company do not receive any
directors fees. The Company pays its non-employee Board members directors' fees
ranging from $36,922 to $41,686 per year, as well as the cost of health and life
insurance coverage. The Company does not pay any fees for
3
<PAGE>
attendance at committee meetings. Under the 1993 Stock Option Plan, each
non-employee director of the Company annually receives an option to purchase
33,000 shares of the Company's Common Stock at an exercise price equal to the
fair market value on the date of grant.
BOARD AND COMMITTEE MEETINGS AND ATTENDANCE
There were twelve meetings of the Board of Directors held during the last
fiscal year. All of the directors attended at least 75 percent of the meetings.
The Board of Directors has a Compensation Committee which consists of
Merrill Gappmayer, Kristine F. Hughes and Pauline T. Hughes. The Compensation
Committee recommends to the Board of Directors the compensation to be paid to
the Company's officers and other key employees. There were eight meetings of the
Compensation Committee during the last fiscal year.
The Board of Directors also has an Audit Committee which consists of Merrill
Gappmayer, Kristine F. Hughes and Pauline T. Hughes. The function of the Audit
Committee is generally to approve the engagement of the Company's independent
public accountants and to review audit and non-audit services provided by such
accountants. There were two meetings of the Audit Committee during the last
fiscal year.
The Board of Directors has also established a Nominating Committee
consisting of Pauline T. Hughes, Kristine F. Hughes and Merrill Gappmayer. The
Nominating Committee considers and recommends nominations for election to the
full Board of Directors. The Nominating Committee will consider recommendations
of shareholders, but there are no specific procedures to be followed by
shareholders in submitting nominations for directors. There were eleven meetings
of the Nominating Committee during the last fiscal year.
4
<PAGE>
OFFICERS AND DIRECTORS
The officers and directors of the Company are:
<TABLE>
<CAPTION>
NAME POSITION AGE
- -------------------------------- ---------------------------------------------------------------- ---
<S> <C> <C>
Kristine F. Hughes Chairperson of the Board and Director 57
Alan D. Kennedy President, Chief Executive Officer and Director 65
Eugene L. Hughes Senior Vice President and Director 65
Merrill Gappmayer Director 54
Pauline T. Hughes Director 54
William E. Spears Executive Vice President and Chief Operating Officer 50
Douglas Faggioli Vice President-Finance, Chief Financial Officer and Treasurer 41
Brent F. Ashworth Vice President-Legal, Secretary and General Counsel 47
Joseph A. Speirs Vice President-Marketing 43
Dale G. Lee Vice President-U.S. Sales 50
Dr. Alvin B. Segelman Vice President-Health Sciences 64
David K. Shunick Vice President-Operations 58
Bruno Vassel III Vice President-Human Resources 52
Dr. Dilip G. Bhatia Vice President-Research and Development 60
</TABLE>
Certain information regarding the business experience of the officers and
directors is set forth below.
KRISTINE F. HUGHES. Mrs. Hughes is Chairperson of the Board of Directors
and a Director of the Company. Mrs. Hughes was a co-founder in 1972 of Hughes
Development Corporation, a predecessor of the Company, and has served as a
Director of the Company since 1980. In 1984 she was appointed Chairperson of the
Board of Directors. Mrs. Hughes serves on several civic and community boards and
has been recognized for her business achievements. She is the wife of Eugene L.
Hughes.
ALAN D. KENNEDY. Mr. Kennedy is President, Chief Executive Officer and a
Director of the Company. He began his employment with the Company in 1989. From
1986 to 1989, he served as a sales and marketing consultant to several direct
sales companies. He previously served as Vice President-Sales Development of
Avon Products, Inc. (1982 to 1986), a consultant to Shaklee Corporation and Avon
Products, Inc. (1979 to 1982), and Senior Vice President of Shaklee Corporation
(1974 to 1979) and director of Marketing for Avon Products, Inc. (1965 to 1974).
Mr. Kennedy graduated with honors from Colgate University in 1956. He serves as
the Chairman of the Board of Directors of the Direct Selling Association.
EUGENE L. HUGHES. Mr. Hughes is Senior Vice President and a Director of the
Company. Mr. Hughes was a co-founder and appointed president in 1972 of Hughes
Development Corporation, a predecessor of the Company. He has served as an
officer or director of the Company and/or its predecessors since 1972. Mr.
Hughes received a BS degree from Brigham Young University in 1961. He serves on
several community boards. He is the husband of Kristine F. Hughes.
5
<PAGE>
MERRILL GAPPMAYER. Mr. Gappmayer has been a Director of the Company since
1980. He received a BS degree from Brigham Young University and an MBA degree
from the Marriott School of Management at Brigham Young University. He is owner,
president and CEO of Vista Enterprises, a commercial, residential and industrial
land development company located in Orem, Utah. Mr. Gappmayer currently serves
as chairman or as a member of the board of six local and national community
service organizations.
PAULINE T. HUGHES. Mrs. Hughes has been a Director of the Company since
1988. Mrs. Hughes was a co-founder in 1972 of Hughes Development Corporation, a
predecessor of the Company, and has acted as a consultant from time to time to
the Company and its predecessors. She is presently self-employed. Mrs. Hughes
continues her education at Brigham Young University.
WILLIAM E. SPEARS. Mr. Spears is Executive Vice President and Chief
Operating Officer of the Company. He began his employment with the Company in
1994. From 1972 to 1993 he was employed by Avon Products, Inc. in various
capacities, including Vice President of Strategic Operations, North America in
1993 and Southeast Region Vice President from 1989 to 1993. Mr. Spears received
a BS degree in accounting from California State University at Northridge in 1968
and is a Certified Public Accountant.
DOUGLAS FAGGIOLI. Mr. Faggioli is Vice President-Finance, Chief Financial
Officer and Treasurer of the Company. He began his employment with the Company
in 1983 and has served as an officer of the Company since 1989. He obtained a BA
degree in accounting from the University of Utah in 1979 and is a Certified
Public Accountant.
BRENT F. ASHWORTH. Mr. Ashworth is Vice President-Legal, Secretary and
General Counsel for the Company. He obtained a JD degree from the University of
Utah College of Law in 1975. Mr. Ashworth began his employment with the Company
in 1977 when he was appointed Secretary and General Counsel. He was appointed
Vice President-Legal Affairs in 1979.
JOSEPH A. SPEIRS. Mr. Speirs is Vice President-Marketing of the Company. He
began his employment with the Company in 1977 and since 1983 has served as an
officer of the Company. He received a BS degree from Brigham Young University in
1976.
DALE G. LEE. Mr. Lee is Vice President-U.S. Sales of the Company. He began
his employment with the Company in 1978, and has been an officer of the Company
since 1989. Mr. Lee received a BS degree from Southern Utah State College in
1970.
ALVIN B. SEGELMAN, PH.D. Dr. Segelman is Vice President-Health Sciences. He
began his employment with the Company in 1990. From 1971 to 1990, Dr. Segelman
was a professor at the College of Pharmacy, Rutgers University, serving as
Chairman of the Department of Pharmacognosy from 1979 to 1986. Dr. Segelman
received BS and MS degrees in pharmacy from the Massachusetts College of
Pharmacy in 1954 and 1967, respectively, and a PhD in pharmacognosy from the
University of Pittsburgh in 1971. Dr. Segelman has published numerous articles
and served on numerous national and Congressional committees.
DAVID K. SHUNICK. Mr. Shunick is Vice President-Operations. He began his
employment with the Company in 1993. From 1992 to 1993, Mr. Shunick acted as a
management consultant for DKS Associates. From 1989 to 1992 he served as
Director of Material Management for Ares Serono Group. From 1977 to 1989, Mr.
Shunick was employed by Shaklee Corporation in various capacities, including
6
<PAGE>
Vice President-Manufacturing and Material Management. Mr. Shunick received a BS
degree in Management from the University of Illinois at Urbana in 1960 and a MBA
degree from St. Mary's College, Moraga, California in 1981.
BRUNO VASSEL III. Mr. Vassel is Vice President-Human Resources. He began
his employment with the Company in 1993. From 1987 to 1993, Mr. Vassel was
President of HRS, Inc. From 1986 to 1987, he served as Executive Vice President
of Brite Music, Inc. From 1973 to 1986 Mr. Vassel was employed by Avon Products,
Inc. in various capacities, including Corporate Director of Human Resources. Mr.
Vassel received a BA degree from Brigham Young University in 1968.
DILIP G. BHATIA, PH.D. Dr. Bhatia is Vice President-Research and
Development. He began his employment with the Company in 1994. From 1988 to
1994, Dr. Bhatia was Director of Product Development at Hoffmann-La Roche. From
1986 to 1988 he was Manager of the Pharmaceutical Process and Technology Group
of G.D. Searle. From 1977 to 1986, he was employed by McNeil Consumer Products
Company where he served as Manager of Research and Development, from 1982 to
1986. Dr. Bhatia received a PhD in Pharmacy from Washington State University and
a MS in Pharmacy from St. Louis College of Pharmacy.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Based solely upon a review of Forms 3, 4 and 5 and amendments thereto and
written representations provided to the Company by its officers, directors and
10% shareholders, the Company is unaware of any such persons failing to file on
a timely basis any reports required by Section 16(a) of the Exchange Act during
the most recent fiscal year or prior years.
7
<PAGE>
EXECUTIVE COMPENSATION
COMPENSATION SUMMARY
The following table sets forth information concerning the cash and non-cash
compensation, paid or to be paid by the Company to its chief executive officer
and to each of its executive officers named below, for the three fiscal years
ended December 31, 1995. See also "CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS" below for compensation paid to the general managers of the
Company's Mexican and Colombian subsidiaries.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------------------------- -------------
(A) (B) (C) (D) (E) (G) (I)
<S> <C> <C> <C> <C> <C> <C>
NAME AND PRINCIPAL SALARY OTHER ANNUAL STOCK OPTIONS ALL OTHER
POSITION YEAR ($)(1) BONUS ($) COMPENSATION ($)(2) (SHARES) COMPENSATION ($)(3)
- -------------------------- --------- ------------ --------- ------------------- ------------- ---------------------
Alan D. Kennedy, Chief 1995 292,000 243,250 120,000 9,724
Executive Officer 1994 257,953 202,500 19,800 8,933
1993 233,000 217,381 33,000 8,512
William E. Spears, 1995 179,500 134,000 12,432 97,500 2,206
Executive Vice President 1994 122,029 83,152 40,220 49,500 1,310
Douglas Faggioli, Chief 1995 157,500 100,950 97,500 428
Financial Officer 1994 130,138 82,251 16,500 418
1993 115,000 94,710 39,600 288
Eugene L. Hughes, Senior 1995 137,728 100,950 97,500 7,112
Vice President 1994 130,146 83,583 16,500 4,656
1993 129,322 94,344 78,705 4,882
Dale G. Lee, Vice 1995 130,500 60,621 73,500 1,636
President-U.S. Sales 1994 121,829 58,000 16,500 1,129
1993 110,000 72,904 31,350 1,185
</TABLE>
- ------------------------
(1) Includes amounts contributed by the Company to its 401(k) defined
contribution plan.
(2) The Company provides health, disability and other perquisites to each of its
officers, but they do not exceed the lesser of $50,000 or 10% of the
officer's total annual salary and bonus. Amounts listed include relocation
and moving expenses.
(3) Includes excess life insurance premiums.
EMPLOYMENT AGREEMENTS
The Company has Employment Agreements with all eleven of its officers who
receive base annual salaries currently ranging from approximately $109,500 to
$294,500. The Agreements are renewable on an annual basis and generally provide
for an initial term of one year. In the event the Company terminates or does not
renew an officer's employment without cause, the officer is generally entitled
to receive the balance of his base salary for twelve months.
8
<PAGE>
EXECUTIVE INCENTIVE PLANS
The Company has from time to time adopted incentive plans for key management
and sales personnel. The only incentive plan in effect for officers of the
Company for 1995 was the Exempt Employee Incentive Compensation Plan ("Bonus
Plan") that provided for the officers to receive specified bonuses ranging from
0% to 90% of base salary if certain sales and operating income goals were
achieved by the Company. Payments totalling $1,035,771, $803,953 and $739,410
were made to officers for services rendered in 1995, 1994 and 1993 for this or
similar executive incentive plans. Amounts paid, if any, to the officers
participating in the Bonus Plan are included in the Summary Compensation Table.
In 1996, the Company adopted a two year incentive automobile lease program
that provides for the Company to pay lease payments ranging from $600 to $1,000
per month for the Company's executive officers if the Company meets or exceeds
certain net income performance levels. The program also provides that if such
performance levels are met in 1996 and 1997, the Company will pay from $25,000
to $45,000 towards the buyout of the leased vehicles.
During 1995 and 1996, the Company granted certain stock options to its
executive officers which were subject to accelerated vesting schedules if the
Company met or exceeded certain net income and sales revenue performance levels.
In February 1996, vesting schedules for options to purchase 249,000 shares of
the Company's Common Stock were accelerated because the Company met the
specified performance levels.
1995 STOCK OPTION PLAN
See "PROPOSAL NO. 2 -- APPROVAL OF 1995 STOCK OPTION PLAN" for a summary
description of this plan.
1993 STOCK OPTION PLAN
The 1993 Stock Option Plan (the "1993 Plan") authorizes the grant of
incentive and nonqualified stock options to officers and key employees. The 1993
Plan also provides for the automatic annual grant of nonqualified stock options
to purchase 33,000 shares (as adjusted for stock splits and dividends) to each
non-employee director of the Company. The 1993 Plan covers a maximum of
1,320,000 shares of the Company's Common Stock (adjusted for stock splits and
dividends) of which options to purchase 825,000 shares may be granted to
officers and key employees and 495,000 shares to non-employee directors. The
1993 Plan terminates in December 1996 at which time no further options may be
granted.
Options issued under the 1993 Plan must have an exercise price at least
equal to the fair market value on the date of grant and a term of not more than
ten years. Options are generally not transferable and are exercisable in
accordance with vesting schedules established by the Compensation Committee (the
"Committee") of the Board of Directors administering the Plan.
The Committee establishes with respect to each option granted to an
employee, and sets forth in the option agreement, the effect of the termination
of employment on the rights and benefits thereunder. If the services of a
non-employee director terminate by reason of death, disability or retirement,
options granted pursuant to the 1993 Plan become immediately exercisable and may
be exercised for up to one year after the date of termination, or until
expiration of the option, if earlier. If the services of a non-employee director
terminate for any other reason, the non-employee director may exercise
9
<PAGE>
any options which were exercisable on the date of termination for up to 90 days
after the date of termination. In the event of certain changes in control of the
Company, options generally become immediately exercisable.
As of March 31, 1996 there were 1,122,000 shares subject to non-qualified
options outstanding under the 1993 Plan and 198,000 shares available for further
issuance (as adjusted for stock splits and dividends).
1990 LONG-TERM INCENTIVE COMPENSATION PLAN
The 1990 Long-Term Incentive Compensation Plan (the "Incentive Plan")
authorizes the grant of incentive stock options, nonqualified stock options,
stock appreciation rights, restricted stock and performance bonuses or any
combination of the foregoing to key executive and management employees.
Options issued under the Incentive Plan must have an exercise price at least
equal to the fair market value on the date of grant and a term of not more than
ten years. Options may not be transferred except by will or the laws of descent
or distribution and are exercisable in accordance with vesting schedules
established by the Committee.
In the event of termination of an option holder's employment for cause, all
outstanding options lapse at the time of such termination, subject to the
discretion of the Committee. In the event of termination by reason of death,
retirement or disability, the option holder may exercise options that are
exercisable through the date of termination within the earlier of one year from
the date of termination or lapse of such option. In the event of termination not
for cause, options must generally be exercised within the earlier of three
months following termination or lapse of the option. In the event of certain
changes in control, options generally become immediately exercisable.
As of March 31, 1996 there were 721,494 shares subject to options
outstanding under the Incentive Plan and 564 shares available for further
issuance (as adjusted for stock splits and dividends).
10
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth a summary of certain nonqualified stock
options granted to the Company's named officers during 1995 (as adjusted for
stock splits and dividends).
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
- ------------------------------------------------------------------------------------------ ----------------------
(A) (B) (C) (D) (E) (F) (G)
<S> <C> <C> <C> <C> <C> <C>
% OF 1,698,000
TOTAL OPTIONS
GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN PRICE ($/ EXPIRATION
NAME GRANTED (#) 1995 SHARE) DATE 5% ($) 10% ($)
- ----------------------------------- ----------- --------------- ----------- ---------- --------- -----------
Alan D. Kennedy 90,000 7.1% 15.67 12/20/05 886,930 2,247,258
30,000 8.83 5/15/05 166,655 422,339
William E. Spears 72,000 5.7% 15.67 12/20/05 709,397 1,797,806
25,500 8.83 5/15/05 141,657 358,988
Douglas Faggioli 72,000 5.7% 15.67 12/20/05 709,397 1,797,806
25,500 8.83 5/15/05 141,657 358,988
Eugene L. Hughes 72,000 5.7% 15.67 12/20/05 709,397 1,797,806
25,500 8.83 5/15/05 141,657 358,988
Dale G. Lee 54,000 4.3% 15.67 12/20/05 532,048 1,348,355
19,500 8.83 5/15/05 108,326 274,520
</TABLE>
OPTION EXERCISES DURING 1995 AND
1995 YEAR-END VALUE TABLE
The following table sets forth certain information regarding the exercise
and value of nonqualified stock options held by the named officers during 1995
(as adjusted for stock splits and dividends).
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN 1995 AND 1995 YEAR-END OPTION VALUE
- --------------------------------------------------------------------------------------------------------------------------
(A) (B) (C) (D) (E)
<S> <C> <C> <C> <C>
DOLLAR VALUE OF
UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT FISCAL FISCAL YEAR-END
SHARES ACQUIRED VALUE REALIZED YEAR-END EXERCISABLE/UNEXERCISABLE
NAME ON EXERCISE (#) ($) EXERCISABLE/UNEXERCISABLE ($)
- --------------------------------- ----------------- --------------- ----------------------- --------------------------
Alan D. Kennedy 0 0 396,440/183,800 4,826,210/971,056
William E. Spears 0 0 33,000/114,000 335,498/425,825
Douglas Faggioli 0 0 116,545/114,000 1,417,563/425,825
Eugene L. Hughes 0 0 126,225/114,000 1,460,938/425,825
Dale G. Lee 0 0 91,190/90,000 1,093,764/356,826
</TABLE>
401(K) PLAN
The Company sponsors a qualified deferred compensation plan ("401(k) Plan")
under Section 401(k) of the Internal Revenue Code, pursuant to which full-time
employees may reduce their salaries
11
<PAGE>
by up to 10% of their compensation limited to a maximum of $9,500 and have the
salary reduction amounts contributed to the 401(k) Plan. Such contributions are
100% matched by the Company, up to a maximum of 5% of the employee's
compensation. Participants are fully vested at all times in their salary
reduction and matching contributions. Participants are eligible to receive
distribution of vested amounts upon retirement, death or disability, or
termination of employment. Contributions by the Company to the 401(k) Plan were
approximately $478,000, $284,000 and $314,000 for 1995, 1994 and 1993,
respectively. Amounts contributed for officers participating in the 401(k) Plan
are included in the Summary Compensation Table above.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors' Compensation Committee is composed of Merrill
Gappmayer, Kristine F. Hughes and Pauline T. Hughes. Kristine F. Hughes,
Chairperson of the Board of Directors, is married to Eugene L. Hughes, an
officer and director of the Company. See "PROPOSAL NO. 1 -- ELECTION OF
DIRECTORS."
THE FOLLOWING REPORT OF THE COMPENSATION COMMITTEE AND THE PERFORMANCE GRAPH
THAT APPEARS IMMEDIATELY AFTER SUCH REPORT SHALL NOT BE DEEMED TO BE SOLICITING
MATERIAL OR TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE
SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF 1934 OR INCORPORATED BY
REFERENCE IN ANY DOCUMENT SO FILED.
12
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
To: The Board of Directors
As members of the Compensation Committee (the "Committee"), it is our duty
to administer various stock option and incentive compensation plans of the
Company. In addition, the Committee recommends to the Board of Directors the
compensation to be paid to the Company's officers and key employees. The
Committee also reviews compensation policies applicable to officers and
considers the relationship of corporate performance to that compensation.
The Committee submits a report to the Board concerning the compensation
policies followed by the Committee in recommending compensation for the
Company's chief executive and other officers. In establishing such compensation
for 1995, the Committee considered a number of factors, including what it
believed to be the competitive level of compensation that is necessary to
attract, retain and motivate qualified officers. In this regard, the Committee
reviewed several salary reports and surveys. The Committee also considered (i)
an officer's contribution to the Company's operating performance, as measured by
increases in sales revenues, profitability and return on assets, (ii) the
officer's contribution to helping the Company meet its other objectives, such as
providing a high level of service to the Company's customers and in maximizing
shareholder value, and (iii) the Chief Executive Officer's evaluation of each of
the officers. For the Chief Executive Officer, the Committee also took into
consideration the Company's overall stock performance as measured against the
stock market and the performance of the Company in its overseas markets. For
1995 salaries, the Committee applying the factors set forth above increased base
salaries from 5% to 10% over 1994 levels for an average increase of
approximately 6%.
The compensation policy of the Company, which is endorsed by the Committee,
is that a substantial portion of the annual compensation of each officer relate
to and be contingent upon the performance of the Company, as well as the
individual contribution of each officer. As a result, much of an officer's
compensation is subject directly to annual bonus compensation measured by the
Company's achievement of certain sales and income goals. Under the Company's
Exempt Employee Incentive Compensation Plan, bonuses are paid based on the
officer's performance and the performance of the entire Company. The Company has
also adopted an automobile lease program where the lease payments are made by
the Company if the Company meets or exceeds certain income goals. The Committee
believes the compensation paid to its officers is reasonable in view of the
Company's performance and the contribution of these officers to that
performance. In this regard, the Committee in 1994 completed a comprehensive
review of the Company's compensation policies and concluded that the Company's
present policies worked well.
All officers and key employees participate in the Company's stock option
plans. Options granted thereunder, may provide for the acceleration of vesting
if the Company meets or exceeds certain income and/or revenue goals. The
Committee believes that stock options have been effective in attracting,
motivating and retaining executives and key employees. During 1995, the
Committee recommended stock option grants in the aggregate amount of 1,599,000
shares (as adjusted for stock splits and dividends) all of which were subject to
accelerated vesting.
No member of the Committee is a former or current officer or employee of the
Company or any of its subsidiaries.
Compensation Committee
Dated April 12, 1996 MERRILL GAPPMAYER
KRISTINE F. HUGHES
PAULINE T. HUGHES
13
<PAGE>
CORPORATE STOCK PERFORMANCE
The following graph compares the performance (total return on investment as
measured by the change in the year-end stock price plus reinvested dividends) of
the Common Stock of the Company ("NATR") with that of the Index for NASDAQ Stock
Market (U.S. companies) and the Index for NASDAQ Stock (SIC 2800-2899) for the
five years ended December 31, 1995.
COMPARISON OF FIVE YEAR-CUMULATIVE TOTAL RETURNS
PERFORMANCE GRAPH FOR
NATURE'S SUNSHINE PRODUCTS, INC.
PREPARED BY THE CENTER FOR RESEARCH IN SECURITY PRICES
Produced on 04/08/96 including data to 12/29/95
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
NATURE'S SUNSHINE NASDAQ STOCK MARKET NASDAQ STOCKS (SIC 2800-2899 COMPANIES)
PRODUCTS, INC. (US COMPANIES) CHEMICALS AND ALLIED PRODUCTS
<S> <C> <C> <C>
12/30/90 100.0 100.0 100.0
12/31/91 291.5 160.5 229.8
12/31/92 462.5 186.8 198.4
12/31/93 404.9 214.5 177.5
12/30/94 452.4 209.7 139.4
12/29/95 942.6 296.6 236.1
</TABLE>
14
<PAGE>
PROPOSAL NO. 2 -- APPROVAL OF 1995 STOCK OPTION PLAN
The Board of Directors believes that the Company's existing stock option
programs have been effective in attracting and retaining executives and key
employees. In order to increase the number of shares available for grant to
employees and to provide for flexibility and an incentive to key employees, the
Board of Directors has unanimously adopted the Company's 1995 Stock Option Plan
(the "Plan"). At the Annual Meeting, shareholders will be requested to approve
the Plan.
The Plan permits the grant of stock options (collectively referred to
hereinafter as "options" and individually as an "option") to key employees of
the Company and its subsidiaries. The Plan covers a maximum of 1,650,000 shares
of the Company's Common Stock (as adjusted for a March 1996 three-for-two stock
split). The following discussion summarizes the material features of the Plan;
it is, however, qualified in its entirety by reference to the full text of the
Plan, which is attached to this Proxy Statement as Appendix A. As of April 8,
1996, options to purchase 1,494,687 shares of Common Stock were outstanding
under the Plan (subject to shareholder approval of the Plan). On such date, the
market value of the Common Stock issuable under the Plan was $24.50 per share.
SUMMARY DESCRIPTION OF 1995 STOCK OPTION PLAN
ADMINISTRATION. The Plan would be administered by the Compensation
Committee of the Board of Directors of the Company (the "Committee") consisting
of two or more members of the Board of Directors, each of whom is disinterested.
ELIGIBILITY. Under the Plan, options may be granted to any officer (whether
or not a director of the Company) or key employee of the Company. For purposes
of the Plan, the term "key employee" shall also include consultants and advisors
to the Company. Non-employee directors are not eligible to participate in the
Plan. The Committee decides which key employees will participate in the Plan and
the number of options to be granted to each employee. As of March 31, 1996,
approximately 45 employees were eligible for participation in the Plan,
including eleven executive officers of the Company. The following table sets
forth certain information as to the 1,494,687 options presently outstanding
under the Plan:
<TABLE>
<CAPTION>
NUMBER OF
NAME AND POSITION OPTIONS
- ---------------------------------------------------------------------------------- -----------
<S> <C>
Alan D. Kennedy
Chief Executive Officer 90,000
William E. Spears
Executive Vice President 87,300
Douglas Faggioli
Chief Financial Officer 75,087
Eugene L. Hughes
Senior Vice President 87,300
Dale G. Lee
Vice President -- U.S. Sales 65,700
Executive Officer Group 816,687
Non-Executive Director Group 0
Non-Executive Officer
Employee Group 678,000
</TABLE>
15
<PAGE>
TYPES OF OPTIONS. Both incentive and nonqualified stock options may be
granted. In general, the aggregate fair market value (determined on the date of
grant) of shares of Common Stock with respect to which incentive stock options
first become exercisable by an option holder under all plans of the Company may
not exceed $100,000 in any calendar year. There is no such limit in the case of
nonqualified stock options.
DURATION OF OPTIONS. Subject to early termination or acceleration
provisions (which are summarized below), an option is exercisable in whole or in
part from the date specified in the related option agreement until the
expiration date specified by the Committee; however, all options expire not
later than ten years after the date of grant.
PURCHASE PRICE. The purchase price payable upon the exercise of a stock
option granted must be at least equal to the fair market value of the Common
Stock on the date of the grant (defined in the Plan as the closing price of the
Common Stock as reported by NASDAQ). Payment for the exercise by employees may
be made (i) in cash or cash equivalents; (ii) with shares of Common Stock
already owned by the option holder, with certain restrictions; (iii) if
authorized by the Committee, or if specified in the award agreement, by a
promissory note; (iv) by notice and third party payment in such manner as may be
authorized by the Committee; or (v) by any combination thereof.
MODIFICATION. The Committee from time to time may authorize for employees
generally or in specific cases only, any adjustment in the exercise price of,
the number of shares subject to the restrictions upon or the term of an option
granted under the Plan by cancellation of an outstanding option and a subsequent
regranting of an option by amendment by substitution of an outstanding option,
by waiver or by other legally valid means.
TERMINATION OF EMPLOYMENT OR SERVICE. The Committee will establish with
respect to each option granted to an employee, and set forth in the option
agreement, the effect of the termination of employment on the rights and
benefits thereunder.
ACCELERATION OF OPTIONS. Upon the approval by the shareholders of a
dissolution or liquidation, certain agreements to merge or consolidate, the sale
of substantially all of the Company's assets or certain other Changes in
Control, as such term is defined in the Plan, each option will become
immediately exercisable. Such acceleration will automatically occur unless the
Committee, prior to any such event, determines otherwise. The Committee also may
provide for acceleration of the exercisability (vesting) if the Company meets
certain income and revenue performance levels.
TERM; TERMINATION; AMENDMENT. No option may be granted more than three
years after December 20, 1995, the effective date of the Plan. The Board of
Directors may suspend, terminate or amend the Plan, but no amendment may (to the
extent then required by rules promulgated by the Securities and Exchange
Commission), without approval of the shareholders, (i) materially increase the
benefits accruing to participants; (ii) materially increase the aggregate number
of shares which may be issued under the Plan; or (iii) materially modify the
eligibility requirements for participation in the Plan.
FEDERAL INCOME TAX CONSEQUENCES
NONQUALIFIED OPTIONS. An employee receiving a nonqualified option under the
Plan does not recognize taxable income on the date of grant of the option,
assuming (as is usually the case with plans of this type) that the option does
not have a readily ascertainable fair market value at the time it is granted.
However, the employee must generally recognize ordinary income at the time of
exercise of the nonqualified option in the amount of the difference between the
option exercise price and the fair
16
<PAGE>
market value of the Common Stock on the date of exercise. The amount of ordinary
income recognized by an employee is generally deductible by the Company. The
deduction is normally available in the year that the income is recognized. Upon
subsequent disposition, any further gain or loss is taxable either as a
short-term or long-term capital gain or loss, depending upon the length of time
that the shares of Common Stock are held.
INCENTIVE STOCK OPTIONS. An employee who is granted an incentive stock
option under the Plan does not recognize taxable income either on the date of
grant or on the date of its timely exercise. However, the excess of the fair
market value of the Common Stock received upon the exercise of the incentive
stock option over the option exercise price is includable in the employee's
alternative minimum taxable income ("AMTI") and may be subject to the
alternative minimum tax ("AMT"). For AMT purposes only, the basis of the Common
stock acquired by the exercise of an incentive stock option is increased by the
amount of such excess.
Upon disposition of the Common Stock acquired upon exercise of an incentive
stock option, long-term capital gain or loss will be recognized in an amount
equal to the difference between the sales price and the option exercise price
(except that for AMT purposes the gain or loss would be the difference between
the sales price and the employee's basis increased as described in the preceding
paragraph), provided that the employee has not disposed of the Common Stock
within two years after the date of grant or within one year from the date of
exercise. If the employee disposes of the Common Stock without satisfying both
holding period requirements (a "Disqualifying Disposition"), the employee will
generally recognize ordinary income at the time of such Disqualifying
Disposition to the extent of the lesser of: (i) the difference between the
exercise price and the fair market value of the Common Stock on the date the
incentive stock option is exercised or (ii) the difference between the exercise
price and the amount realized on such Disqualifying Disposition. Any remaining
gain or any net loss is treated as a short-term or long-term capital gain or
loss, depending upon the length of time that the Common Stock is held. If a
Disqualifying Disposition occurs at a loss in the same taxable year that the
excess of the fair market value of the Common Stock received on exercise of the
incentive stock option over the exercise price is includable in the employee's
AMTI, the amount includable will not exceed the amount equal to the excess of
the amount realized on the Disqualifying Disposition over the exercise price.
Unlike the case in which a nonqualified option is exercised, the Company is not
entitled to a tax deduction upon either the timely exercise of an incentive
stock option or upon disposition of the Common Stock acquired pursuant to such
exercise, except to the extent that the employee recognizes ordinary income in a
Disqualifying Disposition.
ACCELERATED PAYMENTS. If, as a result of certain changes in control of the
Company, a recipient's options become immediately exercisable, the additional
economic value, if any, attributable to the acceleration may be deemed a
"parachute payment." The additional value will be deemed a parachute payment if
such value, when combined with the value of other payments which are deemed to
result from the change in control, equals or exceeds a threshold amount equal to
300% of the recipient's average annual taxable compensation over the five
calendar years preceding the year in which the change in control occurs, in such
cases, the excess of the total parachute payments over such recipient's average
annual taxable compensation will be subject to a 20% nondeductible excise tax in
addition to any income tax payable. The Company will not be entitled to a
deduction for that portion of any parachute payment which is subject to the
excise tax.
TAX WITHHOLDING. Upon any exercise or vesting of any option, the Company
may require a participant to pay the amount of any taxes that the Company may be
required to withhold with
17
<PAGE>
respect to such transaction. If withholding is required in connection with the
delivery of Common Stock under the Plan, the Committee may grant to the
participant the right to elect, subject to certain conditions, to have the
Company reduce the number of shares to be delivered by the number of shares,
valued at their fair market value, that would satisfy the withholding
obligation.
RECOMMENDATION OF YOUR BOARD OF DIRECTORS "FOR" THIS PROPOSAL
The Board of Directors believes that the adoption of the Plan will promote
the interests of the Company and its shareholders and enable the Company to
attract, retain and reward persons important to the Company's success through
the recognition of the attainment of long-term Company goals and objectives
reflected in share values. To approve the Plan, the affirmative vote of holders
of a majority of the shares present or represented and entitled to vote on the
proposal at the meeting is required.
The members of the Board also believe that the adoption of the Plan is in
the best interests of the Company and its shareholders. Accordingly, the Board
of Directors has approved the adoption of the Plan and recommends that the
shareholders vote "FOR" the proposal to adopt the Plan. Proxies solicited by the
Board of Directors will be so voted unless shareholders specify otherwise.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Maria del Carmen Cisneros, the general manager of the Company's Mexican
subsidiary, received a total of $536,459 of compensation from the Company in
1995. Of that amount, $87,910 was salary and bonus and the balance was for
commissions received as an independent distributor of the Company's products.
Ms. Cisneros also borrowed $250,000 from the Company in 1995, pursuant to a
two-year secured 9% promissory note. As of March 31, 1996, the outstanding
balance on the note was $141,317.
Maria Teresa Polo de Abello, the general manager of the Company's Colombian
subsidiary, received a total of $217,709 of compensation from the Company in
1995. Of that amount, $114,650 was salary and bonus and the balance was for
commissions received as an independent distributor of the Company's products.
In 1992, the Company adopted a key officer loan program to assist certain of
its officers in purchasing Common Stock of the Company. The loans are due 90
days after demand or termination of employment. The loans are secured by the
Common Stock purchased and bear interest at 6% per annum.
From time to time, the Company has made personal loans to assist certain of
its officers and key employees. Loans made to officers are secured by Common
Stock of the Company, and are due 90 days after demand. Outstanding loans bear
interest at 6% per annum.
The following table provides certain information about each director or
officer who was indebted to the Company since January 1, 1995, in an amount in
excess of $60,000. Included in the table is the name of each such director or
officer, the amount and nature of the indebtedness and of the transaction in
which it was incurred, the largest aggregate amount of indebtedness outstanding
by each such
18
<PAGE>
person since January 1, 1995 and the amount thereof outstanding as of March 31,
1996. For the nature of each such person's relationship to the Company see
"ELECTION OF DIRECTORS -- Officers and Directors" above.
<TABLE>
<CAPTION>
LARGEST AGGREGATE
AGGREGATE BALANCE AT
NAME NATURE OF INDEBTEDNESS AMOUNT 3/31/96
- ------------------------ ------------------------- ----------- -----------
<S> <C> <C> <C>
Alan D. Kennedy Stock Purchase Loan $ 146,019 $ 243,598
Personal Loan 100,232
Eugene L. Hughes Personal Loans 120,480 0
Dale G. Lee Stock Purchase Loan 66,965 0
Joseph A. Speirs Stock Purchase Loan 66,419 0
</TABLE>
RELATIONSHIP WITH
INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee of the Board of Directors of the Company has recommended
to the Board of Directors that Arthur Andersen & Co. be selected again as the
independent public accountants for the Company. The Board of Directors has
accepted this recommendation and has selected Arthur Andersen & Co. to be the
independent public accountants for the Company for the fiscal year ending
December 31, 1996. Arthur Andersen & Co. served as the Company's independent
public accountants for the fiscal year ended December 31, 1995.
Representatives of Arthur Andersen & Co. are expected to attend the 1996
Annual Meeting and will have an opportunity to make a statement if they desire
to do so, and they will be available to answer appropriate questions from
shareholders.
SHAREHOLDER PROPOSALS
If a shareholder wishes to present a proposal at the 1997 Annual Meeting of
Shareholders, the proposal must be received by Nature's Sunshine Products, Inc.,
75 East 1700 South, Provo, Utah 84606 prior to December 15, 1996. The Board of
Directors will review any proposal which is received by that date and determine
whether it is a proper proposal to present to the 1997 Annual Meeting.
VOTE REQUIRED
A majority of the 18,501,924 issued and outstanding shares of Common Stock
of the Company shall constitute a quorum at the Annual Meeting. Under the Utah
Revised Business Corporation Act, directors are elected by a plurality of the
votes cast by the shares entitled to vote in the election at the Annual Meeting
provided a quorum is present. The affirmative vote of at least a majority of the
shares represented at the meeting is required for adoption of the 1995 Stock
Option Plan and all other proposals to come before the meeting. The Company does
not have any specific charter or by-law provisions dealing with the method by
which votes will be counted. Historically, the Company has counted abstentions
and broker non-votes for quorum purposes but the votes represented by such
shares are not counted in computing the results of the election of directors or
other resolutions.
19
<PAGE>
Votes cast by shareholders who attend and vote in person or by proxy at the
Annual Meeting will be counted by inspectors to be appointed by the Company (it
is anticipated that the inspectors will be employees, attorneys or agents of the
Company).
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors of the
Company does not intend to present and has not been informed that any other
person intends to present a matter for action at the 1996 Annual Meeting other
than as set forth herein and in the Notice of Annual Meeting. If any other
matter properly comes before the meeting, it is intended that the holders of
Proxies will act in accordance with their best judgment. The Board of Directors
may read the minutes of the 1995 Annual Meeting of Shareholders and make
reports, but shareholders will not be requested to approve or disapprove such
minutes or reports.
In addition to the solicitation of Proxies by mail, certain of the officers
and employees of the Company, without extra compensation, may solicit Proxies
personally or by telephone. The Company will also request brokerage houses,
nominees, custodians and fiduciaries to forward soliciting materials to the
beneficial owners of Common Stock held of record and will reimburse such persons
for forwarding such material. The cost of this solicitation of Proxies will be
borne by the Company.
COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K (INCLUDING FINANCIAL
STATEMENTS AND FINANCIAL STATEMENT SCHEDULES) FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION MAY BE OBTAINED WITHOUT CHARGE BY WRITING TO THE COMPANY --
ATTENTION: INVESTOR RELATIONS DEPARTMENT, 75 EAST 1700 SOUTH, PROVO, UTAH 84606.
Copies of the Company's 1995 Annual Report to Shareholders are being mailed with
this Proxy Statement. Additional copies may also be obtained by writing to the
Company's Investor Relations Department, at the above address.
The enclosed Proxy is furnished for you to specify your choices with respect
to the matters referred to in the accompanying notice and described in this
Proxy Statement. If you wish to vote in accordance with the Board's
recommendations, merely sign, date and return the Proxy in the enclosed envelope
which requires no postage if mailed in the United States. A prompt return of
your Proxy will be appreciated.
By Order of the Board of Directors
BRENT F. ASHWORTH
SECRETARY
Provo, Utah
April 12, 1996
20
<PAGE>
APPENDIX A
NATURE'S SUNSHINE PRODUCTS, INC.
1995 STOCK OPTION PLAN
TABLE OF CONTENTS
<TABLE>
<C> <S> <C>
I. THE PLAN
1.1 PURPOSE....................................................................... A-1
1.2 ADMINISTRATION AND AUTHORIZATION; POWER AND PROCEDURE......................... A-1
1.3 PARTICIPATION................................................................. A-2
1.4 SHARES AVAILABLE FOR OPTIONS.................................................. A-2
1.5 GRANT OF OPTIONS.............................................................. A-2
1.6 TERM OF OPTIONS............................................................... A-3
1.7 LIMITATIONS ON EXERCISE OF OPTIONS............................................ A-3
1.8 ACCEPTANCE OF NOTES TO FINANCE EXERCISE....................................... A-3
1.9 NO TRANSFERABILITY............................................................ A-4
II. EMPLOYEE OPTIONS.................................................................... A-4
2.1 GRANTS........................................................................ A-4
2.2 OPTION PRICE.................................................................. A-5
2.3 LIMITATIONS ON GRANT AND TERMS OF INCENTIVE STOCK OPTIONS..................... A-5
2.4 LIMITS ON 10% HOLDERS......................................................... A-5
2.5 OPTION REPRICING/CANCELLATION AND REGRANT/WAIVER OF RESTRICTIONS.............. A-5
III. OTHER PROVISIONS................................................................. A-5
3.1 RIGHTS OF ELIGIBLE EMPLOYEES, PARTICIPANTS AND BENEFICIARIES.................. A-5
3.2 ADJUSTMENTS; ACCELERATION..................................................... A-6
3.3 EFFECT OF TERMINATION OF EMPLOYMENT........................................... A-7
3.4 COMPLIANCE WITH LAWS.......................................................... A-7
3.5 TAX WITHHOLDING............................................................... A-7
3.6 PLAN AMENDMENT, TERMINATION AND SUSPENSION.................................... A-8
3.7 PRIVILEGES OF STOCK OWNERSHIP................................................. A-8
3.8 EFFECTIVE DATE OF THE PLAN.................................................... A-8
3.9 TERM OF THE PLAN.............................................................. A-8
3.10 GOVERNING LAW; CONSTRUCTION; SEVERABILITY..................................... A-9
3.11 CAPTIONS...................................................................... A-9
3.12 EFFECT OF CHANGE OF SUBSIDIARY STATUS......................................... A-9
3.13 NON-EXCLUSIVITY OF PLAN....................................................... A-9
IV. DEFINITIONS......................................................................... A-9
4.1 DEFINITIONS................................................................... A-9
</TABLE>
i
<PAGE>
NATURE'S SUNSHINE PRODUCTS, INC.
1995 STOCK OPTION PLAN
I. THE PLAN
1.1 PURPOSE
The purpose of this Plan is to promote the success of the Company by
providing an additional means through the grant of stock options to attract,
motivate, retain and reward key employees, including officers, whether or not
directors, of the Company with incentives for high levels of individual
performance and improved financial performance of the Company. "Corporation"
means Nature's Sunshine Products, Inc., a Utah corporation, and "Company" means
the Corporation and its Subsidiaries, collectively. These terms and other
capitalized terms are defined in Article IV.
1.2 ADMINISTRATION AND AUTHORIZATION; POWER AND PROCEDURE
(a) COMMITTEE. This Plan shall be administered by and all Options to
Eligible Employees shall be authorized by the Committee. Action of the Committee
with respect to the administration of this Plan shall be taken pursuant to a
majority vote or by written consent of its members.
(b) PLAN OPTIONS; INTERPRETATION; POWERS OF COMMITTEE. Subject to the
express provisions of this Plan, the Committee shall have the authority:
(i) to determine from among those persons eligible the particular
Eligible Employees who will receive any Options;
(ii) to grant Options to Eligible Employees, determine the price at
which the Options may be exercised (equal to at least Fair Market Value),
the amount of securities to be subject to such Options, and determine the
other specific terms and conditions of such Options consistent with the
express limits of this Plan, and establish the installments (if any) in
which such Options shall become exercisable, or determine that no delayed
exercisability is required, and establish the events of termination of such
Options;
(iii) to approve the forms of Option Agreements (which need not be
identical either as to type of option or as among Participants);
(iv) to construe and interpret this Plan and any agreements defining the
rights and obligations of the Company and employee Participants under this
Plan, further define the terms used in this Plan, and prescribe, amend and
rescind rules and regulations relating to the administration of this Plan;
(v) to cancel, modify, or waive the Corporation's rights with respect
to, or modify, discontinue, suspend, or terminate any or all outstanding
Options held by Eligible Employees, subject to any required consent under
Section 3.6;
(vi) to accelerate or extend the exercisability or extend the term of any
or all such outstanding Options within the maximum ten-year term of Options
under Section 1.6; and
(vii) to make all other determinations and take such other action as
contemplated by this Plan or as may be necessary or advisable for the
administration of this Plan and the effectuation of its purposes.
A-1
<PAGE>
(c) BINDING DETERMINATIONS. Any action taken by, or inaction of, the
Corporation, any Subsidiary, the Board or the Committee relating or pursuant to
this Plan shall be within the absolute discretion of that entity or body and
shall be conclusive and binding upon all persons. No member of the Board or
Committee, or officer of the Corporation or any Subsidiary, shall be liable for
any such action or inaction of the entity or body, of another person or except
in circumstances involving bad faith, of himself or herself. Subject only to
compliance with the express provisions hereof, the Board and Committee may act
in their absolute discretion in matters within their authority related to this
Plan.
(d) RELIANCE ON EXPERTS. In making any determination or in taking or not
taking any action under this Plan, the Committee or the Board, as the case may
be, may obtain and may rely upon the advice of experts, including professional
advisors to the Corporation. No director, officer or agent of the Company shall
be liable for any such action or determination taken or made or omitted in good
faith.
(e) DELEGATION. The Committee may delegate ministerial, non-discretionary
functions to individuals who are officers or employees of the Company.
1.3 PARTICIPATION
Options may be granted by the Committee only to those persons that the
Committee determines to be Eligible Employees. An Eligible Employee who has been
granted an Option may, if otherwise eligible, be granted additional Options if
the Committee shall so determine. Non-Employee Directors shall not be eligible
to receive any Options through this Plan.
1.4 SHARES AVAILABLE FOR OPTIONS
Subject to the provisions of Section 3.2, the capital stock that may be
delivered under this Plan shall be shares of the Corporation's authorized but
unissued Common Stock and any shares of its Common Stock held as treasury
shares. The shares may be delivered for any lawful consideration.
(a) NUMBER OF SHARES. The maximum number of shares of Common Stock that
may be issued pursuant to Options granted to Eligible Employees under this Plan
is 1,100,000 shares, subject to adjustments contemplated by Section 3.2.
(b) CALCULATION OF AVAILABLE SHARES AND REPLENISHMENT. Shares subject to
outstanding Options that are derivative securities (as defined in Rule 16a-1(c)
under the Exchange Act) shall be reserved for issuance. If any Option shall
expire or be canceled or terminated without having been exercised in full, the
unpurchased share subject thereto shall again be available for the purposes of
the Plan, subject to any applicable limitations under Rule 16b-3. If the
Corporation withholds shares of Common Stock pursuant to Section 3.5, the number
of shares that would have been deliverable with respect to an Option but that
are withheld pursuant to the provisions of Section 3.5 may in effect not be
issued, but the aggregate number of shares issuable with respect to the
applicable Option and under the Plan shall be reduced by the number of shares
withheld and such shares shall not be available for additional Options under
this Plan.
1.5 GRANT OF OPTIONS
Subject to the express provisions of this Plan, the Committee shall
determine the number of shares of Common Stock subject to each Option and the
exercise price thereof. Each Option shall be evidenced by an Option Agreement
signed by the Corporation and by the Participant.
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1.6 TERM OF OPTIONS
Each Option and all executory rights or obligations under the related Option
Agreement shall expire on such date as shall be determined by the Committee but
not later than ten (10) years after the Grant date.
1.7 LIMITATIONS ON EXERCISE OF OPTIONS
(a) PROVISIONS FOR EXERCISE. No Option shall be exercisable until at least
six months after the later of (i) the initial Grant Date or (ii) stockholder
approval of the Plan, and once exercisable an Option shall remain exercisable
until the expiration or earlier termination of the Option, unless the Committee
otherwise provides. Notwithstanding the foregoing, the Committee may reduce or
eliminate the six month requirement for Participants who are not subject to
Section 16 of the Exchange Act.
(b) PROCEDURE. Any exercisable Option shall be deemed to be exercised when
the Treasurer of the Corporation receives written notice of such exercise from
the Participant, together with the required payment made in accordance with
Section 2.2(b) or 5.3, as the case may be.
(c) FRACTIONAL SHARES/MINIMUM ISSUE. Fractional share interests shall be
disregarded, but may be accumulated. The Committee, however, may determine in
the case of Eligible Employees that cash, other securities or other property
will be paid or transferred in lieu of any fractional share interests. No fewer
than 100 shares may be purchased on exercise of any Option at one time unless
the number purchased is the total number at the time available for purchase
under the Option.
1.8 ACCEPTANCE OF NOTES TO FINANCE EXERCISE
The Corporation may, with the Committee's approval, accept one or more notes
from any Eligible Employee in connection with the exercise or receipt of any
outstanding Option, provided that any such note shall be subject to the
following terms and conditions:
(a) The principal of the note shall not exceed the amount required to be
paid to the Corporation upon the exercise or receipt of one or more Options
under the Plan and the note shall be delivered directly to the Corporation
in consideration of such exercise or receipt.
(b) The initial term of the note shall be determined by the Committee;
provided that the term of the note, including extensions, shall not exceed a
period of 10 years.
(c) The note shall provide for full recourse to the Employee Participant
and shall bear interest at a rate determined by the Committee but not less
than the applicable imputed interest rate specified by the Code.
(d) If the employment of the Employee Participant terminates, the unpaid
principal balance of the note shall become due and payable on the 10th
business day after such termination; provided, however, that if a sale of
such shares would cause such Employee Participant to incur liability under
Section 16(b) of the Exchange Act, the unpaid balance shall become due and
payable on the 10th business day after the first day on which a sale of such
shares could have been made without incurring such liability assuming for
these purposes that there are no other transactions by the Employee
Participant subsequent to such termination.
(e) The note shall be secured by a pledge of any shares or rights
financed thereby in compliance with applicable law.
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(f) The terms, repayment provisions, and collateral release provisions
of the note and the pledge securing the note shall conform with applicable
rules and regulations of the Federal Reserve Board as then in effect.
1.9 NO TRANSFERABILITY
Options may be exercised only by, and shares issuable pursuant to an Option
shall be issued only to (or registered only in the name of), the Participant or,
if the Participant has died, the Participant's Beneficiary or, if the
Participant has suffered a Disability, the Participant's Personal
Representative, if any, or if there is none, the Participant, or (to the extent
permitted by applicable law and Rule 16b-3) to a third party pursuant to such
conditions and procedures as the Committee may establish. Other than by will or
the laws of descent and distribution or pursuant to a QDRO or other exception to
transfer restrictions under Rule 16b-3 (except to the extent not permitted in
the case of an Incentive Stock Option), no right or benefit under this Plan or
any Option, shall be transferrable by the Participant or shall be subject in any
manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance or charge (other than to the Corporation) and any such attempted
action shall be void. The Corporation shall disregard any attempt at transfer,
assignment or other alienation prohibited by the preceding sentences and shall
deliver such shares of Common Stock in accordance with the provisions of this
Plan. The designation of a Beneficiary hereunder shall not constitute a transfer
for these purposes.
II. EMPLOYEE OPTIONS
2.1 GRANTS
One or more Options may be granted under this Article to any Eligible
Employee. Each Option granted may be either an Option intended to be an
Incentive Stock Option, or an Option not so intended, and such intent shall be
indicated in the applicable Option Agreement.
2.2 OPTION PRICE
(a) PRICING LIMITS. The purchase price per share of the Common Stock
covered by each Option shall be determined by the Committee at the time the
Option is granted, but in the case of Incentive Stock Options shall not be less
than 100% (110% in the case of a Participant who owns or is deemed to own under
Section 424(d) of the Code more than 10% of the total combined voting power of
all classes of stock of the Corporation) of the Fair Market Value of the Common
Stock on the Grant Date.
(b) PAYMENT PROVISIONS. The purchase price of any shares purchased on
exercise of an Option granted under this Article shall be paid in full at the
time of each purchase in one or a combination of the following methods: (i) in
cash or by electronic funds transfer; (ii) by check payable to the order of the
Corporation; (iii) if authorized by the Committee or specified in the applicable
Option Agreement, by a promissory note of the Participant consistent with the
requirements of Section 1.8; (iv) by notice and third party payment in such
manner as may be authorized by the Committee; or (v) by the delivery of shares
of Common Stock of the Corporation already owned by the Participant, provided,
however, that the Committee may in its absolute discretion limit the
Participant's ability to exercise an Option by delivering such shares. Shares of
Common Stock used to satisfy the exercise price of an Option shall be valued at
their Fair Market Value on the date of exercise and any such shares used in
payment shall have been owned by the Participant at least six months prior to
the date of exercise.
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2.3 LIMITATIONS ON GRANT AND TERMS OF INCENTIVE STOCK OPTIONS
(a) $100,000 LIMIT. To the extent that the aggregate "fair market value"
of stock with respect to which incentive stock options first become exercisable
by a Participant in any calendar year exceeds $100,000, taking into account both
Common Stock subject to Incentive Stock Options under this Plan and stock
subject to incentive stock options under all other plans of the Company, such
options shall be treated as nonqualified stock options. For this purpose, the
"fair market value" of the stock subject to options shall be determined as of
the date the options were optioned. In reducing the number of options treated as
incentive stock options to meet the $100,000 limit, the most recently granted
options shall be reduced first. To the extent a reduction of simultaneously
granted options is necessary to meet the $100,000 limit, the Committee may, in
the manner and to the extent permitted by law, designate which shares of Common
Stock are to be treated as shares acquired pursuant to the exercise of an
Incentive Stock Option.
(b) OPTION PERIOD. Each Incentive Stock Option and all rights thereunder
shall expire no later than ten years after the Grant Date.
(c) OTHER CODE LIMITS. here shall be imposed in any Option Agreement
relating to Incentive Stock Options such terms and conditions as from time to
time are required in order that the Option be an "incentive stock option" as
that term is defined in Section 422 of the Code.
2.4 LIMITS ON 10% HOLDERS
No Incentive Stock Option may be granted to any person who, at the time the
Option is granted, owns (or is deemed to own under Section 424(d) of the Code)
shares of outstanding Common Stock possessing more than 10% of the total
combined voting power of all classes of stock of the Corporation, unless the
exercise price of such Option is at least 110% of the Fair Market Value of the
stock subject to the Option and such Option by its terms is not exercisable
after the expiration of five years from the date such Option is granted.
2.5 OPTION REPRICING/CANCELLATION AND REGRANT/WAIVER OF RESTRICTIONS
Subject to Section 1.4 and Section 3.6 and the specific limitations on
Options contained in this Plan, the Committee from time to time may authorize,
generally or in specific cases only, for the benefit of any Eligible Employee,
any adjustment in the exercise price, the number of shares subject to or the
term of, an Option granted under this Article by cancellation of an outstanding
Option and a subsequent regranting of an Option, by amendment, by substitution
of an outstanding Option, by waiver or by other legally valid means. Such
amendment or other action may result among other changes in an exercise price
which is higher or lower than the exercise or purchase price of the original or
prior Option, provide for a greater or lesser number of shares subject to the
Option, or provide for a longer or shorter vesting or exercise period.
III. OTHER PROVISIONS
3.1 RIGHTS OF ELIGIBLE EMPLOYEES, PARTICIPANTS AND BENEFICIARIES
(a) EMPLOYMENT STATUS. Status as an Eligible Employee shall not be
construed as a commitment that any Option will be granted under this Plan to an
Eligible Employee or to Eligible Employees generally.
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(b) NO EMPLOYMENT CONTRACT. Nothing contained in this Plan (or in any
other documents related to this Plan or to any Option) shall confer upon any
Eligible Employee or other Participant any right to continue in the employ or
other service of the Company or constitute any contract or agreement of
employment or other service, nor shall interfere in any way with the right of
the Company to change such person's compensation or other benefits or to
terminate the employment of such person, with or without cause, but nothing
contained in this Plan or any document related hereto shall adversely affect any
independent contractual right of such person without his or her consent thereto.
(c) PLAN NOT FUNDED. No Participant, Beneficiary or other person shall
have any right, title or interest in any fund or in any specific asset
(including shares of Common Stock, except as expressly otherwise provided) of
the Company by reason of any Option hereunder. Neither the provisions of this
Plan (or of any related documents), nor the creation or adoption of this Plan,
nor any action taken pursuant to the provisions of this Plan shall create, or be
construed to create, a trust of any kind or a fiduciary relationship between the
Company and any Participant, Beneficiary or other person.
3.2 ADJUSTMENTS; ACCELERATION
(a) ADJUSTMENTS. If there shall occur any extraordinary dividend or other
extraordinary distribution in respect of the Common Stock (whether in the form
of cash, Common Stock, other securities, or other property), or any
recapitalization, stock split (including a stock split in the form of a stock
dividend), reverse stock split, reorganization, merger, combination,
consolidation, split-up, spin-off, combination, repurchase, or exchange of
Common Stock or other securities of the Corporation, or there shall occur any
other like corporate transaction or event in respect of the Common Stock, then
the Committee shall, in such manner and to such extent (if any) as it deems
appropriate and equitable (1) proportionately adjust any or all of (a) the
number and type of shares of Common Stock (or other securities) which thereafter
may be made the subject of Options (including the specific maximum and numbers
of shares set forth elsewhere in this Plan), (b) the number, amount and type of
shares of Common Stock (or other securities or property) subject to any or all
outstanding Options, (c) the grant, purchase, or exercise price of any or all
outstanding Options, (d) the securities issuable upon exercise of any
outstanding Options, or (2) in the case of an extraordinary dividend or other
distribution, merger, reorganization, consolidation, combination, sale of
assets, split up, exchange, or spin off, make provision for a cash payment or
for the substitution or exchange of any or all outstanding Options or the
securities deliverable to the holder of any or all outstanding Options based
upon the distribution or consideration payable to holders of the Common Stock of
the Corporation upon or in respect of such event; provided, however, in each
case, that with respect to Incentive Stock Options, no such adjustment shall be
made which would cause the Plan to violate Section 424(a) of the Code or any
successor provisions thereto.
(b) ACCELERATION OF OPTIONS UPON CHANGE IN CONTROL. As to any Eligible
Employee Participant, unless prior to a Change in Control Event the Committee
determines that, upon its occurrence, there shall be no acceleration of benefits
under Options or determines that only certain or limited benefits under Options
shall be accelerated and the extent to which they shall be accelerated, and/or
establishes a different time in respect of such Event for such acceleration,
then upon the occurrence of a Change in Control Event each Option shall become
immediately exercisable. The Committee may override the limitations on
acceleration in this Section 3.2(b) by express provision in the Option
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Agreement and may accord any Eligible Employee a right to refuse any
acceleration, whether pursuant to the Option Agreement or otherwise, in such
circumstances as the Committee may approve. Any acceleration of Options shall
comply with applicable regulatory requirements, including, without limitation,
Section 422 of the Code.
(c) POSSIBLE EARLY TERMINATION OF ACCELERATED OPTIONS. If any Option or
other right to acquire Common Stock under this Plan has been fully accelerated
as permitted by Section 3.2(b) but is not exercised prior to (i) a dissolution
of the Corporation, or (ii) a reorganization event described in Section 3.2(a)
that the Corporation does not survive, or (iii) the consummation of
reorganization event described in Section 3.2(a) that results in a Change of
Control approved by the Board, and no provision has been made for the survival,
substitution, exchange or other settlement of such Option or right, such Option
or right shall thereupon terminate.
3.3 EFFECT OF TERMINATION OF EMPLOYMENT
The Committee shall establish in respect of each Option granted to an
Eligible Employee the effect of a termination of employment on the rights and
benefits thereunder and in so doing may make distinctions based upon the cause
of termination.
3.4 COMPLIANCE WITH LAWS
This Plan, the granting and vesting of Options under this Plan and the
issuance and delivery of shares of Common Stock under this Plan or under Options
granted hereunder are subject to compliance with all applicable federal and
state laws, rules and regulations (including, but not limited to, state and
federal securities laws and federal margin requirements) and to such approvals
by any listing, regulatory or governmental authority as may, in the opinion of
counsel for the Corporation, be necessary or advisable in connection therewith.
Any securities delivered under this Plan shall be subject to such restrictions,
and the person acquiring such securities shall, if requested by the Corporation,
provide such assurances and representations to the Corporation as the
Corporation may deem necessary or desirable to assure compliance with all
applicable legal requirements.
3.5 TAX WITHHOLDING
(a) CASH OR SHARES. Upon any exercise or vesting of any Option or upon the
disposition of shares of Common Stock acquired pursuant to the exercise of an
Incentive Stock Option prior to satisfaction of the holding period requirements
of Section 422 of the Code, the Company shall have the right at its option to
(i) require the Participant (or Personal Representative or Beneficiary, as the
case may be) to pay or provide for payment of the amount of any taxes which the
Company may be required to withhold with respect to such transaction or (ii)
deduct from any amount payable in cash the amount of any taxes which the Company
may be required to withhold with respect to such cash amount. In any case where
a tax is required to be withheld in connection with the delivery of shares of
Common Stock under this Plan, the Committee may grant (either at the time the
Option is granted or thereafter) to the Participant the right to elect, pursuant
to such rules and subject to such conditions as the Committee may establish, to
have the Corporation reduce the number of shares to be delivered by (or
otherwise reacquire) the appropriate number of shares valued at their then Fair
Market Value, to satisfy such withholding obligation.
(b) TAX LOANS. The Committee may, in its discretion, authorize a loan to
an Eligible Employee in the amount of any taxes which the Company may be
required to withhold with respect to shares of Common Stock received (or
disposed of, as the case may be) pursuant to a transaction described in
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subSection (a) above. Such a loan shall be for a term, at a rate of interest and
pursuant to such other terms and conditions as the Committee, under applicable
law, may establish and such loan must comply with the provisions of Section 1.8.
3.6 PLAN AMENDMENT, TERMINATION AND SUSPENSION
(a) BOARD AUTHORIZATION. The Board may, at any time, terminate or, from
time to time, amend, modify or suspend this Plan, in whole or in part. No
Options may be granted during any suspension of this Plan or after termination
of this Plan, but the Committee shall retain jurisdiction as to Options then
outstanding in accordance with the terms of this Plan.
(b) STOCKHOLDER APPROVAL. If any amendment would (i) materially increase
the benefits accruing to Participants under this Plan, (ii) materially increase
the aggregate number of securities that may be issued under this Plan, or (iii)
materially modify the requirements as to eligibility for participation in this
Plan, then to the extent then required by Rule 16b-3 to secure benefits
thereunder or to avoid liability under Section 16 of the Exchange Act(and Rules
thereunder) or required under Section 425 of the Code or any other applicable
law, or deemed necessary or advisable by the Board, such amendment shall be
subject to stockholder approval.
(c) AMENDMENTS TO OPTIONS. Without limiting any other express authority of
the Committee under but subject to the express limits of this Plan, the
Committee by agreement or resolution may waive conditions of or limitation on
Options to Eligible Employees that the Committee in the prior exercise of its
discretion has imposed, without the consent of a Participant, and may make other
changes to the terms and conditions of Options that do not affect in any manner
materially adverse to the Employee Participant, his or her rights and benefits
under an Option.
(d) LIMITATIONS ON AMENDMENT TO PLAN AND OPTIONS. No amendment, suspension
or termination of the Plan or change of or affecting any outstanding Option
shall, without written consent of the Participant, affect in any manner
materially adverse to the Participant any rights or benefits of the Participant
or obligations of the Corporation under any Option granted under this Plan prior
to the effective date of such change. Changes contemplated by Section 3.2 shall
not be deemed to constitute changes or amendments for purposes of this Section
3.6.
3.7 PRIVILEGES OF STOCK OWNERSHIP
Except as otherwise expressly authorized by the Committee or this Plan, a
Participant shall not be entitled to any privilege of stock ownership as to any
shares of Common Stock not actually delivered to and held of record by him or
her. No adjustment will be made for dividends or other rights as a stockholders
for which a record date is prior to such date of delivery.
3.8 EFFECTIVE DATE OF THE PLAN
This Plan shall be effective as of December 20, 1995, the date of Board
approval, subject to stockholder approval within 12 months thereafter.
3.9 TERM OF THE PLAN
No Option shall be granted more than three years after the effective date of
this Plan (the "termination date"). Unless otherwise expressly provided in this
Plan or in an applicable Option Agreement, any Option theretofore granted may
extend beyond such date, and all authority of the Committee with respect to
Options hereunder shall continue during any suspension of this Plan and in
respect of outstanding Options on such termination date.
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3.10 GOVERNING LAW; CONSTRUCTION; SEVERABILITY
(a) CHOICE OF LAW. This Plan, the Options, all documents evidencing
Options and all other related documents shall be governed by, and construed in
accordance with the laws of the State of Utah.
(b) SEVERABILITY. If any provision shall be held by a court of competent
jurisdiction to be invalid and unenforceable, the remaining provisions of this
Plan shall continue in effect.
(c) PLAN CONSTRUCTION. It is the intent of the Corporation that this Plan
and Options hereunder satisfy and be interpreted in a manner that in the case of
Participants who are or may be subject to Section 16 of the Exchange Act
satisfies the applicable requirements of Rule 16b-3 so that such persons will be
entitled to the benefits of Rule 16b-3 or other exemptive rules under Section 16
of the Exchange Act and will not be subjected to avoidable liability thereunder.
If any provision of this Plan or of any Option would otherwise frustrate or
conflict with the intent expressed above, that provision to the extent possible
shall be interpreted and deemed amended so as to avoid such conflict, but to the
extent of any remaining irreconcilable conflict with such intent as to such
persons in the circumstances, such provision shall be deemed void.
3.11 CAPTIONS
Captions and headings are given to the sections and subsections of this Plan
solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
the Plan or any provision thereof.
3.12 EFFECT OF CHANGE OF SUBSIDIARY STATUS
For purposes of this Plan and any Option hereunder, if an entity ceases to
be a Subsidiary a termination of employment shall be deemed to have occurred
with respect to each employee of such Subsidiary who does not continue as an
employee of another entity within the Company.
3.13 NON-EXCLUSIVITY OF PLAN
Nothing in this Plan shall limit or be deemed to limit the authority of the
Board or the Committee to grant options or authorize any other compensation,
with or without reference to the Common Stock, under any other plan or
authority.
IV. DEFINITIONS
4.1 DEFINITIONS
(a) "Beneficiary" shall mean the person, persons, trust or trusts entitled
by will or the laws of descent and distribution to receive the benefits
specified in the Option Agreement and under this Plan in the event of a
Participant's death, and shall mean the Participant's personal representative,
executor or administrator if no other Beneficiary is identified and able to act
under the circumstances.
(b) "Board" shall mean the Board of Directors of the Corporation.
(c) "Change in Control Event" shall mean any of the following:
(i) Approval by the stockholders of the Corporation of the dissolution
or liquidation of the Corporation;
(ii) Approval by the stockholders of the Corporation of an agreement to
merge or consolidate, or otherwise reorganize, with or into one or more
entities that are not Subsidiaries, as a
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result of which less than 50% of the outstanding voting securities of the
surviving or resulting entity immediately after the reorganization are, or
will be, owned by stockholders of the Corporation immediately before such
reorganization (assuming for purposes of such determination that there is no
change in the record ownership of the Corporation's securities from the
record date for such approval until such reorganization and that such record
owners hold no securities of the other parties to such reorganization);
(iii) Approval by the stockholders of the Corporation of the sale of
substantially all of the Corporation's business and/or assets to a person or
entity which is not a Subsidiary;
(iv) Any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) (other than a person having such ownership at the time of
adoption of this Plan) becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities of the
Corporation representing more than 50% of the combined voting power of the
Corporation's then outstanding securities entitled to then vote generally in
the election of directors of the Corporation; or
(v) During any period not longer than two consecutive years, individuals
who at the beginning of such period constituted the Board cease to
constitute at least a majority thereof, unless the election, or the
nomination for election by the Corporation's stockholders, of each new Board
member was approved by a vote of at least three-fourths of the Board members
then still in office who were Board members at the beginning of such period
(including for these purposes, new members whose election or nomination was
so approved).
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
(e) "Commission" shall mean the Securities and Exchange Commission.
(f) "Committee" shall mean a committee appointed by the Board to administer
this Plan, which committee shall be comprised only of two or more directors or
such greater number of directors as may be required under applicable law, each
of whom, during such time as one or more Participants may be subject to Section
16 of the Exchange Act, shall be Disinterested.
(g) "Common Stock" shall mean the Common Stock of the Corporation and such
other securities or property as may become subject to Options, pursuant to an
adjustment made under Section 3.2 of this Plan.
(h) "Company" shall mean, collectively, the Corporation and its
Subsidiaries.
(i) "Corporation" shall mean Nature's Sunshine Products, Inc., a Utah
corporation, and its successors.
(j) "Disinterested" shall mean disinterested within the meaning of any
applicable regulatory requirements, including Rule 16b-3.
(k) "Eligible Employee" shall mean an officer (whether or not a director) or
key employee of the Company. For purposes of this Plan, the term "key employee"
shall also include consultants and advisors to the Company.
(l) "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
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(m) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
(n) "Fair Market Value" shall mean (i) if the stock is listed or admitted to
trade on a national securities exchange, the closing sales price of the stock on
the Composite Tape, as published in the Western Edition of THE WALL STREET
JOURNAL, of the principal national securities exchange on which the stock is so
listed or admitted to trade, on such date, or, if there is no trading of the
stock on such date, then the closing price of the stock as quoted on such
Composite Tape on the next preceding date on which there was trading in such
shares; (ii) if the stock is not listed or admitted to trade on a national
securities exchange, the last sales price for the stock on such date, as
furnished by the National Association of Securities Dealers, Inc. ("NASD")
through the NASDAQ National Market Reporting System or a similar organization if
the NASD is no longer reporting such information; (iii) if the stock is not
listed or admitted to trade on a national securities exchange and is not
reported on the National Market Reporting System, the mean between the bid and
asked price for the stock on such date, as furnished by the NASD or a similar
organization; or (iv) if the stock is not listed or admitted to trade on a
national securities exchange, is not reported on the National Market Reporting
System and if bid and asked prices for the stock are not furnished by the NASD
or a similar organization, the value as established by the Committee at such
time for purposes of this Plan.
(o) "Grant Date" shall mean the date upon which the Committee took the
action granting an Option or such later date as the Committee designates as the
Grant Date at the time of the Option is granted.
(p) "Incentive Stock Option" shall mean an Option which is designated as an
incentive stock option within the meaning of Section 422A of the Code, the award
of which contains such provisions as are necessary to comply with that section.
(q) "Nonqualified Stock Option" shall mean an Option that is designated as a
Nonqualified Stock Option and shall include any Option intended as an Incentive
Stock Option that fails to meet the applicable legal requirements thereof. Any
Option granted hereunder that is not designated as an Incentive Stock Option
shall be deemed to be designated a Nonqualified Stock Option under this Plan and
not an incentive stock option under the Code.
(r) "Non-Employee Director" shall mean a member of the Board of Directors of
the Corporation who is not an officer or employee of the Company.
(s) "Option" shall mean an option to purchase Common Stock under this Plan.
The Committee shall designate any Option granted to an Eligible Employee as a
Nonqualified Stock Option or an Incentive Stock Option.
(t) "Option Agreement" shall mean any writing setting forth the terms of an
Option that has been authorized by the Committee.
(u) "Option Period" shall mean the period beginning on the Grant Date and
ending on the expiration date of such Option.
(v) "Participant" shall mean an Eligible Employee who has been granted an
Option under this Plan.
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(w) "Personal Representative" shall mean the person or persons who, upon the
disability or incompetence of a Participant, shall have acquired on behalf of
the Participant, by legal proceeding or otherwise, the power to exercise the
rights or receive benefits under this Plan and who shall have become the legal
representative of the Participant.
(x) "Plan" shall mean this 1995 Stock Option Plan.
(y) "QDRO" shall mean a qualified domestic relations order as defined in
Section 414(p) of the Code or Title I, Section 206(d)(3) of ERISA (to the same
extent as if this Plan were subject thereto), or the applicable rules
thereunder.
(aa) "Retirement" shall mean retirement with the consent of the Company.
(bb) "Rule 16b-3" shall mean Rule 16b-3 as promulgated by the Commission
pursuant to the Exchange Act.
(cc) "Securities Act" shall mean the Securities Act of 1933, as amended
from time to time.
(dd) "Subsidiary" shall mean any corporation or other entity a majority
of whose outstanding voting stock or voting power is beneficially owned
directly or indirectly by the Corporation.
(ee) "Total Disability" shall mean a "permanent and total disability
within the meaning of Section 22(e)(3) of the Code and such other
disabilities, infirmities, afflictions or conditions as the Committee by
rule may include.
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