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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
NUTRITION FOR LIFE INTERNATIONAL, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
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NUTRITION FOR LIFE INTERNATIONAL, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 5, 1998
The Annual Meeting of Shareholders of Nutrition For Life International,
Inc. (the "Company") will be held at the Ramada Northwest, 12801 Northwest
Freeway, Houston, Texas on March 5, 1998 at 9:00 A.M. (Central Standard Time) to
consider the following matters:
1. To elect six directors to serve on the Company's Board of Directors;
and
2. To transact such other business as may properly come before the meeting
or any adjournments thereof.
Shareholders of record at the close of business on January 26, 1998 shall
be entitled to notice of and to vote at this Annual Meeting or any adjournments
thereof. The stock transfer books of the Company will remain open. The
management of the Company hopes that you will find it convenient to attend the
Annual Meeting in person. In any event, please mark, sign, date and return the
enclosed Proxy to make sure that your shares are represented at the Meeting.
Shareholders who attend the Meeting may vote their shares personally even though
they have returned Proxies.
By Order of the Board of Directors:
January 28, 1998
Jana Mitcham
Secretary
<PAGE>
NUTRITION FOR LIFE INTERNATIONAL, INC.
9101 Jameel, Suite 180
Houston, Texas 77040
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
Proxies by and on behalf of the Board of Directors of Nutrition For Life
International, Inc. (the "Company") for use at the Annual Meeting of
Shareholders (the "Annual Meeting") to be held at the Ramada Northwest, 12801
Northwest Freeway, Houston, Texas on March 5, 1998 at 9:00 A.M. (Central
Standard Time) and at any adjournment(s) of the Annual Meeting. The Board of
Directors of the Company (the "Board of Directors" or the "Board") is soliciting
Proxies to be voted at the Annual Meeting. The Company anticipates that this
Proxy Statement and the accompanying form of Proxy will be first mailed or given
to the shareholders of the Company on or about January 30, 1998. The Company's
Annual Report to Shareholders, including financial statements for the fiscal
year ended September 30, 1997, accompanies this Proxy Statement but does not
form a part of the Proxy solicitation materials.
The cost of soliciting Proxies will be borne by the Company. Officers and
regular employees of the Company, without compensation other than their regular
compensation, may solicit Proxies by further mailing, by telephone and by
telegraph and by personal conversations. The Company may also request brokerage
houses and other custodians, nominees and fiduciaries to forward soliciting
materials to the beneficial owners of shares of the Company's common stock, $.01
par value (the "Common Stock") held of record by such parties and will reimburse
such parties for their expenses in forwarding such materials. The Company has
no plans to retain any firms or otherwise incur any extraordinary expense, in
connection with the solicitation of shareholders.
Shares of the Common Stock of record represented by Proxies will be voted
as described in this Proxy Statement or as otherwise specified by a shareholder.
As to the election of directors, a shareholder may, by checking the appropriate
box on the Proxy: (i) vote for all director nominees as a group; (ii) withhold
authority to vote for all director nominees as a group; or (iii) vote for all
director nominees as a group except those nominees identified by the shareholder
in the appropriate area. See "Election of Directors". Any Proxy given by a
shareholder may be revoked by the Shareholder at any time prior to the voting of
the Proxy by delivering a written notice of revocation to the Secretary of the
Company, by executing and delivering a later-dated Proxy or by attending the
Annual Meeting and voting in person.
VOTING RIGHTS
The holders of record of the 5,839,886 shares of Common Stock outstanding
on January 26, 1998 will be entitled to one vote for each share held on all
matters coming before the Annual Meeting.
METHOD OF VOTING
The presence, in person or by Proxy, of the holders of one-third of the
outstanding shares of Common Stock entitled to vote is necessary to constitute a
quorum at the Annual Meeting. If a quorum is not present or represented at the
Annual Meeting, the shareholders present at the Annual Meeting or represented by
Proxy, have the power to adjourn the Annual Meeting from time to time, without
notice other than an announcement at the Annual Meeting, until a quorum is
present or represented. At any such
<PAGE>
adjourned Annual Meeting, at which a quorum is present or represented, any
business may be transacted that might have been transacted at the original
Annual Meeting. Abstentions may be specified on all proposals (other than the
election of directors) and will be counted as shares that are present and
entitled to vote for purposes of determining the presence of a quorum. With
respect to the election of directors, votes may be cast in favor or withheld.
Directors are elected by a plurality of the votes cast at the Annual Meeting,
and votes that are withheld will be excluded entirely from the vote and will
have no effect.
Brokers who hold shares in street name for customers are required to vote
those shares in accordance with instructions received from the beneficial
owners. In addition, brokers are entitled to vote on certain items, such as the
election of directors, and other "discretionary items," even when they have not
received instructions from beneficial owners. Brokers are not permitted to vote
for other "non-discretionary" items without specific instructions from the
beneficial owners. Such "broker non-votes" will be counted towards a quorum.
Under applicable Texas law and in accordance with the Company's By-laws, broker
non-votes are not counted in determining the total number of votes cast on a
proposal.
Management knows of no matters other than the election of directors as set
forth in the enclosed Proxy that will be presented for action at the Annual
Meeting. Execution of a Proxy, however, confers on the designated proxyholders'
discretionary authority to vote the shares represented in accordance with their
best judgment on any other business that may properly come before the meeting.
OWNERSHIP OF THE COMPANY'S COMMON STOCK
The following table sets forth, as of January 26, 1998, the ownership of
the Company's Common Stock held by: (i) each person who owns of record or who is
known by the Company to own beneficially more than 5% of such stock, (ii) each
of the directors and nominees for election as directors of the Company, (iii)
each of the current executive officers of the Company and (iv) all of the
Company's directors and executive officers as a group. The number of shares and
the percentage of the class beneficially owned by the persons named in the table
and by all directors and executive officers as a group, includes, in addition to
shares actually issued and outstanding, unissued shares which are subject to
issuance upon exercise of options or warrants.
Beneficial Owner Number of Shares Percentage of
---------------- ---------------- -------------
Owned Ownership
----- ---------
Apotex Foundation 650,000(1) 11.1
150 Signet Dr.
Weston, Ontario, Canada
9ML 1T9
Bernard Sherman 1,215,390(1) 20.8
150 Signet Dr.
Weston, Ontario, Canada
9ML 1T9
2
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Beneficial Owner Number of Shares Percentage of
- ---------------- ---------------- -------------
Owned Ownership
----- ---------
Shermfin Corp. 565,390(1) 9.7
150 Signet Dr.
Weston, Ontario, Canada
9ML 1T9
M.F. Florence 586,390(1)(2) 10.0
150 Signet Dr.
Weston, Ontario, Canada
9ML 1T9
Jana Mitcham 418,704(3) 7.0
10618 Great Plains
Houston, TX 77064
David P. Bertrand 332,492(4) 5.6
10622 Great Plains
Houston, TX 77064
Gregory Pusey 245,978(5) 4.2
1722 Buffehr Creek Rd.
Vail, CO 81657
Richard S. Kashenberg 65,372(6) 1.1
11010 Hopkins St., Unit B
Mira Loma, CA 91752
F. Wayne Ballenger 15,000(7) .3
3134 Meadway Drive
Houston, TX 77082
Ronnie D. Meaux 43,466(8) .7
15410 Windy Cove
Houston, TX 77095
John R. Brown, Jr. 10,000(9) .2
2534 Pomeran
Houston, TX 77080
David O. Rodrigue 25,000(10) .4
17810 Cypress Spring Dr.
Spring, TX 77388
3
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Beneficial Owner Number of Shares Percentage of
---------------- ---------------- -------------
Owned Ownership
----- ---------
All Officers and Directors as a 1,742,402 27.8
Group (9 Persons)
________________________________
All references herein to "Warrants" are to the Warrants issued in the
Company's public offering completed in July 1995 which entitle the holders
to purchase one share of Common Stock for each one Warrant at $3.75 per
share until July 10, 1998, unless earlier called for redemption by the
Company.
(1) Mr. Sherman may be deemed a beneficial owner of the shares held by the
Apotex Foundation due to his affiliations with the Apotex Foundation.
Messrs. Sherman and Florence may be deemed beneficial owners of the shares
held by Shermfin Corp. due to their affiliations with Shermfin Corp. In
July, 1994, Mr. Sherman and Shermfin Corp. consented to the issuance of an
Order of the Securities and Exchange Commission (the "Commission") that
they cease and desist from violations of certain reporting and anti-fraud
provisions of the Securities Exchange Act of 1934. Mr. Sherman and
Shermfin Corp. consented to this Order without admitting or denying the
findings of the Commission that they had failed to file reports of
beneficial ownership of the common stock of Kinesis, Inc. with the
Commission on Form 3 and Schedule 13G. The Company has no relationship
with Kinesis, Inc.
(2) Includes options to acquire (i) 6,000 shares of Common Stock at $1.665 per
share, (ii) options to acquire 5,000 shares of Common Stock at $19.75 per
share, (iii) options to acquire 5,000 shares of Common Stock at $12.38 per
share, and (iv) options to acquire 5,000 shares of Common Stock at $7.00
per share.
(3) Includes 5,000 Warrants and options to acquire (i) 42,000 shares of Common
Stock at $1.665 per share, (ii) 16,800 shares of Common Stock at $1.875 per
share, (iii) 16,800 shares of Common Stock at $2.25 per share, and (iv)
37,800 shares of Common Stock at $13 per share, of which options to acquire
12,600 shares become exercisable in each of November 1998 and November
1999. Also includes 11,554 shares of Common Stock owned by her daughter,
4,000 shares of Common Stock owned by her husband, and options held by her
husband to acquire 4,800 shares of Common Stock at $1.665 per share and
3,600 shares of Common Stock at $13.00 per share, of which options to
acquire 1,200 shares become exercisable in each of November 1998 and
November 1999.
(4) Includes options to acquire (i) 42,000 shares of Common Stock at $1.665 per
share, (ii) 19,200 shares of Common Stock at $1.875 per share, (iii) 19,200
shares of Common Stock at $2.25 per share, and (iv) 40,200 shares of Common
Stock at $13.00 per share, of which options to acquire 13,400 shares become
exercisable in each of November 1998 and November 1999. Also includes
options held by his wife to acquire 4,800 shares of Common Stock at $1.665
per share and 3,600 shares of Common Stock at $13.00 per share, of which
options to acquire 1,200 shares become
4
<PAGE>
exercisable in each of November 1998 and November 1999.
(5) Includes 3,000 Warrants and options to acquire (i) 6,000 shares of Common
Stock at $1.665 per share, (ii) 6,000 shares of Common Stock at $1.875 per
share, (iii) 6,000 shares of Common Stock at $2.25 per share, and (iv)
9,000 shares of Common Stock at $13 per share, of which options to acquire
3,000 shares become exercisable in each of November 1998 and November 1999.
Also includes 45,468 shares of Common Stock and 14,000 Warrants held by
entities which are affiliates of Mr. Pusey, and 20,104 shares of Common
Stock and 1,000 Warrants held by his wife, individually, or as custodian
for their minor children.
(6) Includes options to acquire (i) 6,000 shares of Common Stock at $1.665 per
share, (ii) 5,000 shares of Common Stock at $19.75 per share, (iii) 5,000
shares of Common Stock at $12.38 per share, and (iv) 5,000 shares of Common
Stock at $7.00 per share.
(7) Includes options to acquire (i) 5,000 shares of Common Stock at $19.75 per
share; (ii) 5,000 shares of Common Stock at $12.38 per share, and (iii)
5,000 shares of Common Stock at $7.00 per share.
(8) Includes options to acquire (i) 15,500 shares of Common Stock at $1.665 per
share, (ii) 4,500 shares of Common Stock at $1.875 per share, (iii) 4,500
shares of Common Stock at $2.25 per share, and (iv) 12,250 shares of Common
Stock at $13.00 per share, of which options to acquire 4,083 shares become
exercisable in each of November 1998 and November 1999.
(9) Includes options to acquire 10,000 shares of Common Stock at $11.50 per
share, of which options to acquire 3,333 shares become exercisable in each
of September 1998 and September 1999.
(10) Includes options to acquire 25,000 shares of Common Stock at $5.75 per
share, of which options to acquire 8,333 shares become exercisable in each
of January 1999, January 2000 and January 2001.
ELECTION OF DIRECTORS
Each of the persons set forth below has been nominated for election to the
Board of Directors to serve for a term of one year until the next annual meeting
of shareholders or until his or her successor is elected and qualified. The
shares represented by Proxies will be voted as specified by the shareholder. If
a shareholder does not specify his or her choice, the shares will be voted in
favor of the election of the nominees listed on the Proxy except that, in the
event any nominee should not continue to be available for election, such Proxies
will be voted for the election of such other person as the Board of Directors
may recommend, unless the Board of Directors reduces the number of directors.
The Company does not presently contemplate that any of the nominees will become
unavailable for election for any reason.
The Board of Directors recommends a vote FOR this proposal.
5
<PAGE>
Nominees For Election as Directors
- ----------------------------------
F. WAYNE BALLENGER, age 50, has served as President of First Commercial
Capital since 1995. He has also served as President of Puncture Guard LLC since
December 1994. From March 1992 to December 1994, he served as director of sales
and marketing for Petrolon, Inc., a multi-level marketing organization.
Immediately prior thereto, he served as a vice president of Southwest Bank of
Texas with commercial lending responsibilities. Mr. Ballenger received at
B.B.A. degree from the University of the South in 1968. Mr. Ballenger became a
director of the Company in November 1995.
DAVID P. BERTRAND, age 54, has served as President and Chairman of the
Board of Directors of the Company and its predecessors since 1984. Mr. Bertrand
received a B.S. degree in education in 1966 and a
Master of Education degree in administration and supervision in 1969, both from
McNeese State University in Lake Charles, Louisiana. Mr. Bertrand is the
brother-in-law of Jana Mitcham.
M. F. FLORENCE, age 61, has served as President of Sherfam Inc. since 1989.
Sherfam Inc. is a holding company, principally of pharmaceutical companies and
is the parent of Shermfin Corp., which is a principal shareholder of the
Company. From 1958 to 1989, Mr. Florence was associated with the firm of Wm.
Eisenberg & Co., a firm of chartered accountants in Canada. He served as a
partner of the firm from 1964 to 1989. Mr. Florence received a Bachelor of
Commerce degree from the University of Toronto. He is the recipient of a
Chartered Accountant degree from the Institute of Chartered Accountants of
Ontario. Mr. Florence is President of Citadel Gold Mines, Inc. Mr. Florence is
also a Director of Barr Laboratories, Inc., a publicly held corporation whose
common shares are listed on the American Stock Exchange. Mr. Florence has
served as a director of the Company since 1994.
RICHARD S. KASHENBERG, age 42, has served as President of Adam Nutrition,
Inc. since November 1997. He served as President of NION Laboratories from 1982
to 1996, and as a consultant to NION through October 1997. NION is a principal
supplier of products sold by the Company. Mr. Kashenberg served as President
and Director of Nutrition Express Corporation of Utah, Inc. from 1991 until its
merger with the Company in 1994. Mr. Kashenberg received a Bachelor's degree
from Vanier College. Mr. Kashenberg has served as a director of the Company
since 1994.
JANA MITCHAM, age 50, has served as Executive Vice President, Secretary and
Director of the Company and its predecessors since 1984. Ms. Mitcham received a
B.A. degree in 1974 in special education from McNeese State University and
undertook graduate work in special education at the Korean Extension of the
University of Maryland. Ms. Mitcham is the sister-in-law of David P. Bertrand.
GREGORY PUSEY, age 45, is primarily engaged in private investment
activities. He has served both as President of Livingston Capital, Ltd. and
President of the General Partner of Graystone Capital, Ltd., venture capital
firms, since 1987. He is also President and a director of Cambridge Holdings,
Ltd., a publicly held real estate firm. Mr. Pusey received a B.S. degree in
Finance from Boston College in 1974. Mr. Pusey became a director of the Company
in 1994.
The Company entered into an agreement in 1995 with Shermfin Corp. wherein
it agreed that, for so long as Shermfin Corp. owns 10% or more of the
outstanding Common Stock of the Company, Shermfin
6
<PAGE>
Corp. will be entitled to designate one person to serve as a member of the
Company's Board of Directors. Shermfin Corp.'s designee is M. F. Florence. See
"Certain Transactions".
BOARD OF DIRECTORS AND COMMITTEES
- ---------------------------------
The Company's Board of Directors held eight meetings in person or by
consent during the fiscal year ended September 30, 1997. None of the incumbent
directors attended fewer than 75% of the aggregate number of meetings of the
Board of Directors and the Committees on which they served that were held during
the period that they served.
The Company's Board of Directors has two standing committees, the Audit
Committee and the Compensation Committee. M.F. Florence and Gregory Pusey serve
as the two members of the Audit Committee. During the fiscal year ended
September 30, 1997, the Audit Committee held two meetings. The primary
functions of the Audit Committee are to review the scope and results of audits
by the Company's independent auditors, internal accounting controls, non-audit
services performed by the independent accountants and the cost of accounting
services. F. Wayne Ballenger, M.F. Florence and Richard S. Kashenberg serve as
the three members of the Compensation Committee. During the fiscal year ended
September 30, 1997, the Compensation Committee held two meetings. The
Compensation Committee reviews stock option and other compensation policies and
programs.
COMPLIANCE WITH SECTION 16a OF THE EXCHANGE ACT
- -----------------------------------------------
Based solely on the Company's review of copies of Section 16(a) reports
filed by officers, directors and greater than 10% shareholders with the
Securities and Exchange Commission, which have been received by the Company and
written representations from these persons that no other reports were required
for those persons, the Company believes that all filing requirements applicable
to those persons were complied with for the fiscal year ended September 30,
1997, except that David P. Bertrand, Barry C. Loder, Ronnie D. Meaux and Jana
Mitcham each filed late a Form 5 reporting their option grants in the fiscal
year ended September 30, 1997.
EXECUTIVE OFFICERS
The following executive officers have been elected by the Board of
Directors. It is expected that the Board will elect officers annually following
each Annual Meeting of Shareholders. Information is provided below regarding
the names and ages of all executive officers of the Company who are not
directors of the Company, their position with the Company and the period they
have served as executive officers of the Company.
JOHN R. BROWN, JR., age 60, became Vice President-Finance of the Company in
September, 1996, and had previously served the Company on a part-time basis
commencing in December 1995. From April, 1989 until he joined the Company, Mr.
Brown was a management consultant performing merger and acquisition services,
systems analyses, financial reporting assistance, and other services for both
publicly and privately held companies. From June, 1987 to March, 1989 he was
Vice President-Finance & Administration for Environmental Protective Industries,
Inc., an environmental services organization. Mr. Brown is a Certified Public
Accountant and has over 20 years experience in public accounting with both
7
<PAGE>
national and local firms. Mr. Brown received a B.S. degree in mechanical
engineering from Stanford University and an M.B.A. degree from the University of
Texas at Austin.
DAVID O. RODRIGUE, age 49, became Vice President and Chief Financial
Officer of the Company in January, 1998. From 1993 until he joined the Company,
Mr. Rodrigue served as Vice President-Finance and Chief Financial Officer of
Positron Corporation, a publicly-held company engaged in medical imaging. From
1989 to 1993, he functioned as a consultative chief financial officer to several
privately-held companies. Mr. Rodrigue is a Certified Public Accountant and was
previously employed by Coopers & Lybrand. He received B.S. and M.B.A. degrees
from Louisiana State University.
RONNIE D. MEAUX, age 44, has served in various accounting and finance
capacities for the Company and its predecessors since 1985. He is currently
Vice President, Treasurer and Assistant Secretary of the Company. Mr. Meaux
received a B.S. degree in accounting in 1977 from McNeese State University.
8
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EXECUTIVE COMPENSATION
The following table sets forth certain information regarding compensation
paid by the Company to the Chief Executive Officer and each of the four other
executive officers of the Company (the "named executive officers") during the
fiscal years ended September 30, 1995, 1996 and 1997.
Summary Compensation Table
- --------------------------
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
----------------------------------------------
ANNUAL COMPENSATION
---------------------------------
AWARDS PAYOUTS
---------- -----------
Name and Principal Year Salary Bonus Other Restricted Options LTIP All other
Position ($) Annual Stock /SARs Payouts Compensa-
Compen- Awards tion(1)
sation
<S> <C> <C> <C> <C> <C> <C> <C> <C>
David P. Bertrand 1995 162,006 143,829 5,250 0 80,400 0 12,885
Chief Executive Officer 1996 162,000 530,812 15,750 0 0 0 12,885
1997 412,434 0 0 0 40,200 0 6,485
Jana Mitcham 1995 157,316 143,829 5,250 0 75,600 0 9,013
Executive Vice President 1996 156,000 526,649 15,500 0 0 0 9,013
1997 387,793 0 0 0 37,800 0 4,985
Barry C. Loder 1995(2) 51,404 7,790 1,500 50,000 0 0 0
Vice President and Chief 1996 121,184 57,500 11,208 0 0 0 0
Financial Officer 1997 161,243 0 0 0 55,000 0 0
Ronnie D. Meaux 1995 81,350 10,000 6,900 0 36,000 0 6,392
Vice President, 1996 87,430 53,160 9,400 0 0 0 6,392
Treasurer and Assistant 1997 87,101 0 6,000 0 12,250 0 2,619
Secretary
John R. Brown, Jr.. 1995(3) 0 0 0 0 0 0 0
Vice-President-Finance 1996 30,030 6,900 0 0 10,000 0 0
1997 76,357 0 0 0 0 0 0
________________
</TABLE>
(1) The Company has obtained insurance policies on the lives of Mr. Bertrand,
Ms. Mitcham and Mr. Meaux, of which benefit amounts of $1,060,000, $660,000
and $467,000 on the lives of Mr. Bertrand, Ms. Mitcham and Mr. Meaux,
respectively, constitute "keyman" insurance and are payable to the Company.
Approximately 51% of the aggregate insurance benefits on the lives of Mr.
Bertrand, Ms. Mitcham and Mr. Meaux are payable to beneficiaries designated
by Mr. Bertrand, Ms. Mitcham and Mr. Meaux. In addition, part of the cash
value may be used as retirement benefits for the executive officers. The
premiums paid by the Company allocable to these items are included in the
table.
(2) Mr. Loder joined the Company as Vice President and Chief Financial Officer
in March 1995, and became Chief Operating Officer in April 1997. He
resigned in January 1998.
9
<PAGE>
(3) Mr. Brown commenced work with the Company on a part-time basis in December
1995 and became a full-time employee and officer of the Company in
September 1996.
EMPLOYMENT AGREEMENTS
- ---------------------
In 1995 the Company entered into employment agreements with Mr. Bertrand
and Ms. Mitcham which expired on September 30, 1996. The terms of the
agreements were essentially identical. Mr. Bertrand received an annual salary
of $162,000 and Ms. Mitcham received an annual salary of $156,000. Each was
also entitled to 5% of the first $2,000,000 of annual pre-tax income of the
Company, 4% of the amount in excess of $2,000,000 but less than $2,500,000, and
3% of the amount over $2,500,000. Mr. Bertrand was also granted the right to
create a special bonus pool for key employees to receive up to 2% of
the pre-tax income between $2,000,001 and $2,500,000 and up to 4% of the pre-tax
income greater than $2,500,000.
Effective October 1, 1996, the Company entered into new employment
agreements with Mr. Bertrand and Ms. Mitcham. The terms of these agreements are
essentially identical, except that Mr. Bertrand's annual salary is $400,000 and
Ms. Mitcham's annual salary is $376,000. Mr. Bertrand and Ms. Mitcham are each
also entitled to a bonus if the Company has pre-tax annual income between $3
million and $20 million. Each is entitled to receive 5% of any annual pre-tax
income between $3 million and $5 million; four percent of the annual pre-tax
income between $5 million and $10 million; and three percent of the annual pre-
tax income between $10 million and $20 million. The term of each agreement is
three years. Each of the agreements may be earlier terminated upon mutual
agreement, death, disability or conviction of the officer, or a material breach
of the agreement by the officer.
OPTION PLANS
- ------------
In 1993 and 1995 the Company adopted stock option plans for the grant of
options to employees and consultants (the "Plans"). The provisions for each of
the Plans are similar. There are presently outstanding or reserved for issuance
options to acquire up to 595,450 shares of Common Stock. Under the Plans, the
Company may issue options to purchase up to an additional 363,106 shares of
Common Stock. Under the Plans, options may be granted in the form of "incentive
stock options" as defined in Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code") and non-statutory stock options. The Board of Directors
has the authority to fix the terms and number of options to be granted and the
employees to receive the options. The exercise price of each stock option
granted under the Plans may not be less than 100% of the fair market value of
the Common Stock on the date of grant (110% in the case of incentive stock
options granted to employees owning more than 10% of the Common Stock). All of
the outstanding options were granted at exercise prices which were not less than
the fair market value on the respective grant dates. See "Ownership of the
Company's Common Stock" regarding outstanding options to officers and directors
of the Company.
The maximum term of options granted under the Plans is 10 years. The
aggregate fair market value of the Common Stock with respect to which incentive
stock options are first exercisable in any calendar year may not exceed $100,000
per optionee. The number of shares subject to options granted to any individual
in each of the Plans shall not exceed 50,000 in any fiscal year of the Company.
Options granted
10
<PAGE>
under the Plans are non-transferable and generally expire 30 days after the
termination of any optionee's service to the Company. In general, if an optionee
is permanently disabled or dies during his or her service to the Company, such
person's option may be exercised up to 90 days following such disability or
death.
OPTION GRANTS IN FISCAL YEAR ENDED SEPTEMBER 30, 1997
- -----------------------------------------------------
The following table sets forth information with respect to stock option
grants to the named executive officers during the fiscal year ended September
30, 1997:
<TABLE>
<CAPTION>
Potential realizable value at
Assumed Annual Rates of
Individual Grants Stock Price Appreciation
For Option Term
Number of Percent of
Securities Total options/ Exercise or Expiration 5%($) 10%($)
underlying SARs granted base price date
Name Options/SARs to employees ($/Sh)
granted(#) in fiscal year
<S> <C> <C> <C> <C> <C> <C>
David P. Bertrand 40,200 16.3 13.00 11/06 288,124 709,663
Jana Mitcham 37,800 15.3 13.00 11/06 270,923 667,295
Barry C. Loder 25,000 10.1 13.00 11/06 179,182 441,333
30,000 12.2 10.38 04/07 181,685 452,854
Ronnie D. Meaux 12,250 5.0 13.00 11/06 87,799 216,253
John R. Brown, Jr. 0 0 0 0 0 0
</TABLE>
Option Exercises and Year-End Values
The following table shows option exercises by the named executive officers
during the fiscal year ended September 30, 1997 and the number and value of
unexercised options at September 30, 1997.
<TABLE>
<CAPTION>
Value of
Number of Number of Unexercised
Shares Under- Value Unexercised Options In-the-Money
Name Lying Options Realized At Year End (#) Options at
---------- Exercised (#) ($) Exercisable/ Year End ($)
------------- -------- Unexercisable Exercisable/
------------- Unexercisable(1)
-------------
<S> <C> <C> <C> <C>
David P. Bertrand 0 0 80,400/40,200 494,070/0
Jana Mitcham 0 0 75,600/37,800 465,570/0
Barry C. Loder 0 0 50,000/55,000 265,625/0
Ronnie D. Meaux 0 0 24,500/12,250 151,631/0
John R. Brown, Jr. 0 0 3,334/6,666 0/0
____________________
</TABLE>
11
<PAGE>
(1) Based on the price of the Common Stock of $8.00 on September 30, 1997 as
reported by The Nasdaq Stock Market.
COMPENSATION COMMITTEE REPORT
- -----------------------------
The Compensation Committee (the "Committee") of the Board of Directors has
been established by the Board to periodically review the compensation philosophy
for the Company's executives, and to recommend to the Board compensation
packages for the Company's executives. The Committee also reviews and
recommends to the Board any additions to or revisions of the Company's stock
option plans. The Committee consists exclusively of non-employee directors,
appointed by resolution of the entire Board. No member of the Committee is
permitted to receive any award under the Company's incentive stock option plans.
The Committee members receive annual, fixed grants of stock options pursuant to
the Company's 1995 Non-Discretionary Stock Option Plan.
The Committee's objective is to set executive compensation at levels which
(i) are fair and reasonable to the shareholders, (ii) link executive
compensation to long-term and short-term interest of the shareholders, and (iii)
are sufficient to attract, motivate and retain outstanding individuals for
executive positions.
Fairness to the shareholders is balanced with the need to attract, retain
and motivate outstanding individuals by comparing the Company's executive
compensation with the compensation of executives at other companies. The
Committee's overall goal is to achieve strong performance by the Company and its
executives by affording the executives the opportunity to be rewarded for strong
performance. The Committee attempts to provide both short-term and long-term
incentive pay. To accomplish its objectives, the Committee has structured the
executive compensation program with three primary components. These primary
components are base salary, annual incentives, and long-term incentives.
During the fiscal year ended September 30, 1997, the Committee determined
to undertake a review of the Company's executive compensation program, with
particular emphasis on the Company's Chief Executive Officer and Executive Vice
President. The Company had experienced dramatic growth in the fiscal year ended
September 30, 1996, but also was experiencing problems due to regulatory
scrutiny and negative media reports. The Committee determined that it would be
in the best interest of the Company and its shareholders for the Committee to
review the existing compensation arrangements and to provide a compensation
program which recognized, among other factors, the Company's growth, problem
areas which could result in short-term performance difficulties, and appropriate
incentives to provide impetus for the long-term growth of the Company. The
Company retained an independent compensation consultant to assist it in its
review of the executive compensation program. The review included compensation
programs of publicly traded peer companies similar in characteristics to the
Company, as well as compensation paid by other network marketing companies with
different product lines.
Effective in October 1996, the start of the Company's most recent fiscal
year, the Company entered into employment agreements with David P. Bertrand, the
Company's President and Chief Executive Officer, and Jana Mitcham, the Company's
Executive Vice President and Secretary. The employment agreements are described
in "Employment Agreements." The Committee determined that
12
<PAGE>
the base salaries for Mr. Bertrand and Ms. Mitcham should be increased, based on
the progress made by the Company, the tremendous effort and energy devoted by
them to the Company's business, and the recommendations of the independent
compensation consultant based on review of base salaries of other companies.
The Committee also reviewed other executive salaries. In addition to the
external competitive compensation market, base salary levels reflect each
officer's performance over time and each individual's role in the Company.
Consequently, employees with higher levels of sustained performance over time
and/or employees assuming greater responsibilities will typically be paid
correspondingly higher salaries. Individual performance criteria used to assess
performance include leadership, professionalism, initiative and dependability.
However, individual performance assessments are made qualitatively and in total,
and no specific weightings are attached to these performance indicators, nor is
a formula utilized in determining appropriate salary increases or salary levels.
In April 1997, Barry C. Loder, who was then the Company's Vice President-Finance
and Chief Financial Officer, was elected by the Board as Chief Operating Officer
and assumed additional operating responsibilities. During the fiscal year ended
September 30, 1997, Mr. Loder's salary was increased, and he was granted
additional stock options.
In reviewing the employment agreements of Mr. Bertrand and Ms. Mitcham, the
Committee recommended that their annual compensation relate to and be contingent
upon the performance of the Company. As a result, much of their compensation
package is subject directly to annual bonus compensation measured by the
Company's achievement of certain specified income criteria. No bonus was paid
to either of these persons in the fiscal year ended September 30, 1997 due to
the failure to achieve these income criteria.
The Committee periodically reviews the performance of other executive
officers to determine whether bonuses should be paid to those persons. The
Committee has not established specific performance measures for determining the
award of bonuses. The Committee believes that bonuses should be provided to
reward key employees based on Company and individual performance and to provide
competitive cash compensation opportunities to the Company's executives.
However, based primarily on the Company's financial results in the fiscal year
ended September 30, 1997, no bonuses were paid to any executive officers.
The Company's stock option plans are designed to focus executive efforts on
long-term goals of the Company and to maximize total return to the Company's
shareholders. The Committee believes that stock options advance the interests
of employees and shareholders by providing value to the executives through stock
price appreciation only. All stock options granted to officers and other
employees during the fiscal year ended September 30, 1997 have a ten-year term
before expiration. Options will terminate earlier if the employee's employment
with the Company is terminated. All options granted during this period are
vested during a three-year period, in equal installments of one-third each
beginning on the first anniversary from the date of grant. All options awarded
must have an exercise price of at least 100% of fair market value on the date of
grant.
The exact number of shares actually granted to a particular participant
reflects both the participant's performance and role in the Company, as well as
the Company's financial success, and its future business plans. All of these
factors are assessed subjectively and are not weighted. In determining each
grant, the Committee also considers the number of stock options which are
13
<PAGE>
outstanding, and the total number of options to be awarded.
In making grants during the fiscal year ended September 30, 1997, the
Committee used as a benchmark the number of outstanding options previously
granted to each officer. In addition, a larger grant of options was made to
Barry C. Loder in connection with Mr. Loder's assumption of increased operating
responsibilities as Chief Operating Officer of the Company. Due to the decline
in the Company's stock price during the year, all of the options granted to
executive officers of the Company were "out-of-the-money" at the fiscal year end
of September 30, 1997. The Committee believes that its awards were consistent
with the Company's compensation philosophy to increase the emphasis placed on
long-term incentives and to be competitive in its total compensation program.
Under Section 162(m) of the Internal Revenue Code of 1986, as amended,
public companies are precluded from receiving a tax deduction on compensation
paid to executive officers in excess of $1,000,000, unless the compensation is
excluded from the $1,000,000 limit as a result of being classified performance-
based. At this time, the Company's executive officers cash compensation levels
do not exceed the payment limit and will most likely not be affected by the
regulations in the near future. Nonetheless, the Committee intends to review
its executive pay plans over time in light of these regulations.
COMPENSATION COMMITTEE
F. Wayne Ballenger
M. F. Florence
Richard S. Kashenberg
COMPENSATION OF DIRECTORS
- -------------------------
Directors who are not employees of the Company receive $18,000 per year,
$400 for each Board meeting attended, and $200 for each committee meeting of the
Board attended. Directors who are also employees of the Company receive no
additional compensation for serving as Directors. The Company reimburses its
Directors for travel and out-of-pocket expenses in connection with their
attendance at meetings of the Board of Directors. The Company may also utilize
the services of its directors as consultants to the Company. During the fiscal
year ended September 30, 1996, the Company paid Mr. Pusey $58,000, and $12,000
to each of Mr. Kashenberg and Mr. Florence. During the fiscal year ended
September 30, 1997, Mr. Pusey was paid $77,200.
In November 1995, the Board of Directors of the Company adopted the 1995
Non-Discretionary Stock Option Plan for directors of the Company who are not
eligible to participate in the other Plans (the "Non-Discretionary Plan.") The
Non-Discretionary Plan provides that the Company grant options to purchase 5,000
shares of the Company's Common Stock to each eligible director on the date of
adoption of the Non-Discretionary Plan (November 28, 1995), to each person who
thereafter becomes a director of the Company and, as of December 1 of each year
(commencing in 1996), options to purchase an additional 5,000 shares of Common
Stock will be granted to each eligible director. The exercise price of the
options is the fair market value of the Common Stock on the date the options are
granted. The options are exercisable in full as of the date of grant. The
shares acquired upon exercise of these options cannot be sold for six
14
<PAGE>
months following the date of grant. In November 1995, the Company granted
options to purchase 5,000 shares of Common Stock at a price of $19.75 per share
to each of F. Wayne Ballenger, M.F. Florence and Richard S. Kashenberg. In
December 1996 the Company granted options to purchase 5,000 shares of Common
Stock at a price of $12.38 per share to each of F. Wayne Ballenger, M.F.
Florence and Richard S. Kashenberg. These persons each received options to
purchase 5,000 shares of Common Stock at a price of $7.00 per share in December
1997. Each option granted pursuant to the Non-Discretionary Plan will expire
five years from the date of grant, except that an option will expire, if not
exercised, 30 days after the optionee ceases to be a director of the Company.
Options granted pursuant to the Non-Discretionary Plan will not qualify for
the special tax benefits given to incentive stock options under Section 422 of
the Code. Accordingly, all of the stock options granted pursuant to the Non-
Discretionary Plan may be deemed to be non-statutory stock options. The options
are generally non-transferable.
CORPORATE PERFORMANCE GRAPH
The following graph compares the yearly cumulative return on the Company's
Common Stock since July 10, 1995 (the date the Company's Common Stock began
trading on The Nasdaq Stock Market) with that of the Index for The Nasdaq Stock
Market (U.S. Companies) and a peer group including the following companies:
BeautiControl Cosmetics, Inc., Herbalife International, Inc., Nature's Sunshine
Products, Inc and Reliv' International, Inc.
[PERFORMANCE GRAPH APPEARS HERE]
TOTAL RETURN ANALYSIS
7/10/95 9/29/95 9/30/96 9/30/97
- -----------------------------------------------------------------------------
NUTRITION FOR LIFE
INTERNATIONAL $ 100 $ 304 $ 506 $ 277
- -----------------------------------------------------------------------------
PEER GROUP $ 100 $ 333 $ 414 $ 404
- -----------------------------------------------------------------------------
NASDAQ COMPOSITE (US) $ 100 $ 107 $ 126 $ 173
- -----------------------------------------------------------------------------
Source: Carl Thompson Associates www.ctaonline.com (303) 494-5472.
Data from Bloomberg Financial Markets
15
<PAGE>
INDEMNIFICATION AND LIMITATION ON DIRECTORS' AND OFFICERS' LIABILITY
The Company's Articles of Incorporation provide for the indemnification of
directors and officers of the Company. In general, the Company will indemnify
its officers and directors against expenses incurred by them in connection with
the defense of any action, suit or proceeding in which they are made parties,
except in relation to matters to which any such director or officer is adjudged
in such action, suit or proceeding to be liable for gross negligence or willful
misconduct in the performance of duty. The Company has no director and officer
liability insurance. There are no pending claims for indemnification, nor is
the Company aware of any pending or threatened claims which would result in a
claim for indemnification.
In addition, the Company's Articles of Incorporation eliminate liability of
directors to the Company and its shareholders for monetary damages for an act or
omission in the director's capacity as a director except in the case of
liability: (i) for a breach of the director's duty of loyalty to the Company or
its shareholders; (ii) for acts or omissions not in good faith or that
constitute a breach of duty of the director to the Company or an act or omission
that involves intentional misconduct or a knowing violation of law, (iii) a
transaction from which the director received an improper benefit, whether or not
the benefit resulted from an action taken within the scope of the director's
office or (iv) an act or omission for which the liability of a director is
expressly provided by an applicable statute. It does not limit the rights of
third parties, nor does it limit or eliminate the rights of the Company or any
shareholder, to seek non-monetary relief such as an injunction or rescission if
a director breaches his duty of care. The provision applies only to the duty of
care and not to any other fiduciary duties to the Company and its shareholders.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
CERTAIN TRANSACTIONS
- --------------------
The Company and its predecessors borrowed an aggregate of $650,000 from
Shermfin Corp. during the period from 1988 to 1991. The loans were evidenced by
promissory notes with interest at rates ranging from 9% to 11% per annum with
maturity dates from October 1995 to October 1996. The promissory notes were
convertible at the option of Shermfin Corp. into an aggregate of 966,834 shares
of Common Stock. In March 1995 the Company entered into an agreement with
Shermfin Corp. pursuant to which it was agreed that Shermfin Corp. would convert
$130,500 of debt from the note in the principal amount of $250,000 into 360,000
shares of the Company's Common Stock at the closing of the Company's public
offering of securities that year. It was further agreed that the remaining
principal balance of $119,500 of the promissory note in the principal amount of
$250,000, plus the entire principal balances of the other three notes (an
aggregate of $400,000) would be repaid to Shermfin Corp. at the closing of the
offering. These transactions were finalized upon the closing of the offering in
July 1995. The Company believes that the borrowing arrangements with Shermfin
Corp. were made on terms at least as favorable as could be obtained from third
parties.
16
<PAGE>
In its March 1995 agreement with Shermfin Corp., the Company agreed to
register the 360,000 shares to be issued to Shermfin Corp. during the period
commencing one year after the date of commencement of the offering (July 10,
1995) and ending four years after the date of the offering (July 10, 1999). At
the request of Shermfin Corp., the Company filed a registration statement in the
fiscal year ended September 30, 1997. The Company also agreed that, for so long
as Shermfin Corp. owns 10% or more of the outstanding Common Stock of the
Company, Shermfin Corp. will be entitled to designate one person to serve as a
member of the Company's Board of Directors. Shermfin Corp. designated M.F.
Florence to serve on the Board.
Prior to the Merger of the Company's predecessors, Nutrition Express
Corporation of Colorado, Inc., and Nutrition Express Corporation of Utah, Inc.
("NEC-Utah"), into the Company in 1994, Shermfin Corp. held, among other
securities, all of the outstanding shares of the Series A Preferred Stock of
NEC-Utah. In exchange for the agreement of Shermfin Corp. to convert the Series
A Preferred Stock into common stock of NEC-Utah, NEC-Utah agreed to reduce the
conversion rate. As a result, the Company recognized a conversion expense
against net income applicable to common stock of $181,243 in the fiscal year
ended September 30, 1994.
One of the largest suppliers of products to the Company is NION
Laboratories, which was a subsidiary of Shermfin Corp. until June 1995. NION is
a manufacturer of pharmaceutical and consumer-related products. During the
fiscal years ended September 30, 1995, 1996 and 1997, the Company purchased
approximately $2,258,000, $5,234,000 and $4,190,000 of goods, respectively, from
NION. In addition, Richard S. Kashenberg, a director of the Company, served as
the chief executive officer of NION until December 31, 1996 and as a consultant
to NION through October 31, 1997. The Company believes that the terms it has
obtained from NION are at least as favorable as could have been obtained from
third parties.
In October 1995 Shermfin Corp. sold 50,000 shares of Common Stock to KT
Corp., an affiliate of Kevin Trudeau, a significant distributor of the Company,
and 70,000 shares of Common Stock to Nightingale-Conant Corporation, a supplier
of self improvement audio tapes to the Company (including memory improvement
tapes prepared by Mr. Trudeau). The Company agreed to register these shares at
the request of the holders, and filed a registration statement in the fiscal
year ended September 30, 1997.
In October 1995 the Company granted to Kevin Trudeau, a key distributor of
the Company, warrants to purchase 500,000 shares of Common Stock at $12.50 per
share exercisable from April 15, 1996 to October 14, 1998. The exercise price
of the warrants on the date of grant was not less than the market price of the
Company's Common Stock on that date. In April 1996 Mr. Trudeau agreed to the
cancellation of these warrants and they are no longer outstanding.
INDEPENDENT PUBLIC ACCOUNTANTS
The firm of BDO Seidman, LLP, Certified Public Accountants, has served as
the Company's independent auditors for the year ended September 30, 1997. A
representative of BDO Seidman is expected to be present at the Annual Meeting
and available to respond to appropriate questions and, although the firm has
indicated that no statement will be made, an opportunity for a statement will be
provided. Management has not made an appointment of auditors for the fiscal
year ending September 30, 1998.
17
<PAGE>
The Company does not believe there were any disagreements with the
Company's principal independent accountants on any matter of accounting
principles or practices, financial statement disclosures, or auditing scope or
procedure during the fiscal year ended September 30, 1997.
SHAREHOLDER PROPOSALS
Any proposal which a shareholder may desire to present to the Annual
Meeting of Shareholders for the fiscal year ending September 30, 1998, must be
received in writing by the Secretary of the Company prior to October 1, 1998.
ANNUAL REPORT
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED SEPTEMBER 30, 1997 HAS BEEN ENCLOSED WITH, BUT IS NOT A PART OF, THIS
PROXY STATEMENT. AN ADDITIONAL COPY IS AVAILABLE TO
EACH RECORD AND BENEFICIAL OWNER OF THE COMPANY'S SECURITIES WITHOUT CHARGE UPON
WRITTEN REQUEST TO THE SECRETARY, NUTRITION FOR LIFE INTERNATIONAL, INC., 9101
JAMEEL, SUITE 180, HOUSTON, TEXAS 77040.
OTHER MATTERS
The Board does not know of any other matters to be brought before the
Annual Meeting. If any other matters should properly come before the Annual
Meeting, it is the intention of the persons named in the accompanying Proxy to
vote such Proxy as in their discretion as they deem advisable.
By Order of the Board of Directors
Jana Mitcham
Secretary
January 28, 1998.
18
<PAGE>
NUTRITION FOR LIFE INTERNATIONAL, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
The undersigned hereby appoint David P. Bertrand and Jana Mitcham, or
either of them, as Proxies or __________________________ (shareholder may strike
the Proxy Committee designated by management and insert the name and address of
another person(s) with power of substitution to vote all the shares of the
undersigned with all of the powers which the undersigned would possess if
personally present at the Annual Meeting of the Shareholders of Nutrition For
Life International, Inc. (the "Company") to be held at 9:00 a.m. (local time) on
March 5, 1998 at Houston, Texas, or any adjournment thereof, on the following
matters:
1. ELECTION OF DIRECTORS
NOMINEES: F. Wayne Ballenger, David P. Bertrand, M.F. Florence, Richard S.
Kashenberg, Jana Mitcham, Gregory Pusey
FOR all Nominees / / WITHHELD for all Nominees / /
FOR, except for the following Nominee(s):
/ /______________________________________________________________
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
Unless contrary instructions are given, the shares represented by this Proxy
will be voted for the election of all nominees for directors. THIS PROXY IS
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF NUTRITION FOR LIFE
INTERNATIONAL, INC. EVEN IF YOU PLAN TO ATTEND THE MEETING, PLEASE VOTE, DATE,
SIGN AND RETURN THIS PROXY IN THE ACCOMPANYING ENVELOPE.
Please sign exactly as shown on your stock certificate and on the envelope
in which this Proxy was mailed. When signing as Partner, Officer, Trustee,
etc., give full title as such and sign your own name as well. If stock is held
jointly, each joint owner should sign.
Signature(s):
---------------------------------
Signature(s):
---------------------------------
Date:
-----------------------------------------
