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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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.
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(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):
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(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.
9101 Jameel Road
Houston, Texas 77040
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders:
The annual meeting of shareholders of Nutrition For Life International,
Inc. (the "Company") will be held at 3:30 P.M. on Thursday, April 8, 1999, at
the Ramada Northwest, 12801 Northwest Freeway, Houston,Texas.
The purpose of the meeting is to:
1. Elect five directors to serve one-year terms ending at the next annual
meeting, or until their successors are elected and qualified;
2. To approve the Company's 1995 Stock Option Plan, as amended.
3. To transact such other business as may properly come before the meeting
or any adjournments thereof.
You may vote if you are a shareholder of record on March 1, 1999. It is
important that your shares be represented and voted at the annual meeting. The
management of the Company hopes that you will be able to attend the annual
meeting in person. If you are unable to attend, please vote by MARKING,
SIGNING, DATING AND PROMPTLY RETURNING the enclosed proxy in the enclosed reply
envelope.
By Order Of The Board Of Directors:
March 5, 1999 Jana B. Mitcham
Secretary
<PAGE>
PROXY STATEMENT
Nutrition For Life International, Inc.
ANNUAL MEETING OF SHAREHOLDERS
YOUR VOTE IS VERY IMPORTANT
Voting Procedures
- -----------------
The Board of Directors of the Company is soliciting proxies to be used at
the annual meeting. This proxy statement and the form of proxy will be mailed
to shareholders beginning March 8, 1999.
Who Can Vote
- ------------
Record holders of the Company's Common Stock on March 1, 1999 may vote at
the annual meeting. On March 1, 1999, there were 5,808,595 shares of Common
Stock outstanding.
General Information On Voting
- -----------------------------
You are entitled to cast one vote for each share of Common Stock you own on
the record date. Shareholders do not have the right to vote cumulatively in
electing directors. Shares represented by a proxy marked "abstained" on any
matter will be considered present at the annual meeting for purposes of
determining a quorum and for purposes of calculating the vote, but will not be
considered to have voted in favor of the proposal. Therefore, any proxy marked
"abstain" will have the effect of a vote against the matter. Shares represented
by a proxy as to which there is a "broker non-vote" (for example, where a broker
does not have discretionary authority to vote the shares), or a proxy in which
authority to vote for any matter considered is withheld, will be considered
present at the annual meeting for purposes of determining a quorum, but will
have not effect on the vote.
All shares that have been properly voted and not revoked will be voted at
the annual meeting in accordance with your instructions. If you sign your proxy
but do not give voting instructions, the shares represented by that proxy will
be voted as recommended by the Board of Directors.
If any other matters are properly presented at the annual meeting for
consideration, the persons named in the enclosed proxy will have the discretion
to vote on those matters for you. At the date this proxy statement went to
press, we do not know of any other matter to be raised at the annual meeting.
How You May Revoke Or Change Your Vote
- --------------------------------------
You may revoke your proxy at any time before it is voted at the annual
meeting by:
. Sending written notice of revocation to the Secretary;
<PAGE>
. Submitting another proper proxy; or
. Attending the annual meeting and voting in person. If your shares are
held in the name of a bank, broker or other holder of record, you must
obtain a proxy, executed in your favor, from the holder of record to be
able to vote at the meeting.
Costs Of Solicitation
- ---------------------
The Company will pay for preparing, printing and mailing this proxy
statement. Regular employees or other representatives of the Company without
additional compensation by the Company may solicit proxies personally or by
telephone. The Company will reimburse banks, brokers and other custodians,
nominees and fiduciaries for their costs of sending the proxy materials to
beneficial owners.
Compliance With Section 16(a) Reporting
- ---------------------------------------
The rules of the Securities and Exchange Commission require that the
Company disclose late filings of reports of stock ownership and changes in stock
ownership by its directors and executive officers. To the best of the Company's
knowledge, all of the filings for the Company's executive officers and directors
were made on a timely basis during the fiscal year ended September 30, 1998.
2
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Item 1. Election of Directors
The current members of the Board of Directors are F. Wayne Ballenger,
David P. Bertrand, M. F. Florence, Richard S. Kashenberg, and Jana B. Mitcham.
Each of the current nominees 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 successor is elected and qualified. If any nominee is
unable to serve as a director at the time of the annual meeting, your proxy will
be voted for the election of another person the Board of Directors may nominate
in his or her place, unless you indicate otherwise.
Vote Required
- -------------
The five candidates having the highest number of votes cast in favor of
their election will be elected to the Board of Directors.
The Board of Directors recommends a vote for the election of these
nominees for election as directors.
Information About the Nominees To The Board of Directors
- --------------------------------------------------------
Please review the following information about the nominees for election
to the Board of Directors.
F. WAYNE BALLENGER, age 52, 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 vice president of Southwest Bank of
Texas with commercial lending responsibilities. Mr. Ballenger received a B.B.A.
degree from the University of the South in 1968. He became a director of the
Company in November 1995.
DAVID P. BERTRAND, age 55, has served as President and Chairman of the Board of
Directors of the Company and its predecessors since 1984. He 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 B. Mitcham.
M.F. FLORENCE, age 62, 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. He has served as a
director of the Company since 1994.
3
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RICHARD S. KASHENBERG, age 43, 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 has been 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. He has served as a director of the Company since
1994.
JANA B. MITCHAM, age 51, 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 a Fellow with the Boston BioScience
Research Foundation and a member of the Board of Directors of the Multi-Level
Marketing International Association. She is the sister-in-law of David P.
Bertrand.
Officers
- --------
The Board of Directors of the Company has elected the following executive
officers. 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 61, 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
national and local firms. He 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 51, 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.
Director Meetings and Compensation
- ----------------------------------
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 expenses incurred for attendance at meetings of the Board of
Directors.
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In November 1995, the Board of Directors of the Company adopted the 1995
Non-Discretionary Stock Option Plan (the "Non-Discretionary Plan") for directors
of the Company who are not eligible to participate in the other Plans. 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 months
following the date of grant. During the fiscal year ended September 30, 1998,
the Company granted options to purchase 5,000 shares of Common Stock at a price
of $7.00 per share to each of F. Wayne Ballenger, M.F. Florence and Richard S.
Kashenberg. 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 Internal Revenue Code. Accordingly, all of the stock options granted
pursuant to the Non-Discretionary Plan may be deemed to be non-qualified stock
options. The options are generally non-transferable.
Certain Relationships And Related Transactions
- ----------------------------------------------
In March 1995, the Company entered into an agreement with Shermfin Corp.
regarding conversion to Common Stock of debt owned by the Company to Shermfin
Corp. The Company and Shermfin Corp. 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.
NION Laboratories, which was a subsidiary of Shermfin Corp. until June
1995, has been a key supplier to the Company of nutritional supplements and
other consumer-related products. The Company purchased from NION approximately
$494,000, $4,190,000 and $5,234,000 of goods during the fiscal years ended
September 30, 1998, 1997, and 1996, respectively. 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 August and September 1998, the Company purchased approximately 41,000
copies of a book entitled Making a Difference While You're Making a Living,
------------------------------------------------
written by the Company's President, David P. Bertrand, and Mr. Bertrand's son,
J. Mark Bertrand, who is also an employee of the Company. The cost to the
Company was $5 per book. New Paradigm Publishing, a company established by J.
Mark Bertrand, published the book. The Company sold approximately 3,000 copies
of the book at its Annual Convention in August 1998 at an average selling price
of approximately $10.95 per copy. The book has been placed in the Company's
product catalog at per copy prices ranging from $8.95 to $12.95, based upon
quantity ordered, and the Company is using the book as part of the materials
provided to new distributors in the Company's starter kits. Additionally, in
September 1998, approximately 19,000 copies of the book were shipped to
distributors as part of the Company's Business
5
<PAGE>
Training System program for that month. New Paradigm Publishing has agreed to
accept the return of any books ordered, but not sold by the Company, and to
refund to the Company the $5 per book purchase price for any copies returned to
it by the Company.
6
<PAGE>
Item 2. Approval of 1995 Stock Option Plan, As Amended
You are asked to consider and approve amendment of the Company's 1995
Stock Option Plan (the "1995 Plan"). The following is a summary of the 1995
Plan, as amended. Please refer to Appendix A for the full text of the 1995
Plan, as amended.
Purpose
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The purpose of the 1995 Plan is to promote the interests of the Company
and its shareholders by:
. Attracting and retaining key employees;
. Providing participants a significant stake in the performance of the
Company;
. Providing an opportunity for participants to increase their holdings of
the Company's Common Stock.
Administration
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The 1995 Plan is administered by the Option Committee. The Option
Committee consists of the Board of Directors or a committee of the Board of
Directors, as the Board of Directors may from time to time designate, composed
of not less than two members of the Board of Directors, each of whom shall be a
director who is not employed by the Company. The Option Committee currently
consists of the full Board of Directors. The Option Committee has the authority
to select employees and consultants to receive awards, to determine the number
of shares of Common Stock covered by awards, and to set the terms and conditions
of awards. The Option Committee has the authority to establish rules for the
administration of the 1995 Plan, and its determinations and interpretations are
binding.
Eligible Participants
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. Any employee or officer (including executive officers) of the Company
or any of its subsidiaries will be eligible for a stock option grant
under the 1995 Plan if selected by the Option Committee. There are
currently approximately 252 employees of the Company and its
subsidiaries who would be eligible for option grants under the 1995
Plan.
. Any consultant to the Company, including directors, will also be
eligible to receive option grants under the 1995 Plan if authorized by
the Option Committee.
Shares Authorized
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Prior to the amendment, there were 640,000 shares authorized, exclusive
of specific option grants made in 1995 to purchase up to 85,000 shares. The
proposed amendment will increase the authorized shares, exclusive of the
specific option grants, to 900,000. There are currently outstanding options to
purchase up to 526,000 shares. Of the options outstanding, options to purchase
up to 300,000 shares have been issued to executive officers of the Company.
Details regarding these outstanding options are included in "Security Ownership
of Certain Beneficial Owners and Management." Employees other than executive
officers have been authorized to
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<PAGE>
purchase an aggregate of 226,000 shares. Options to employees typically have
vesting periods of three years in annual one-third installments and are
exercisable for ten years. All options granted pursuant to the 1995 Plan were
granted at the fair market value of Common Stock on the respective dates of
grant. If any option grant expires or terminates, all shares which were not
issued under the option grant will become available for additional awards under
the 1995 Plan.
Types of Options
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The 1995 Plan was designed to permit the Option Committee to grant stock
options that qualify as "incentive stock options" ("ISOs") under Section 422 of
the Internal Revenue Code or options that do not so qualify ("Non-ISOs").
All options granted will be subject to the following:
. The exercise price must be paid at the time the option is exercised in
either cash or other shares of Common Stock.
. The exercise price cannot be less than the fair market value of the
Common Stock on the grant date.
. The Option Committee will determine the vesting schedule of options
granted under the 1995 Plan and may also impose additional conditions
on exercise, including performance goals.
. Options are not exercisable for at least six months after they are
granted, and they cannot be exercised more than ten years after grant.
Federal Income Tax Consequences
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The following is a summary of the principal U.S. federal income tax
consequences generally applicable to option grants under the 1995 Plan:
. The grant of an option is not expected to result in any taxable income
for the recipient.
. The holder of an ISO generally will have no taxable income upon
exercising the ISO if certain requirements are met (except that
liability may arise for alternative minimum tax) and the Company will
not be entitled to a tax deduction when an ISO is exercised.
. Upon exercise of a Non-ISO, the holder will recognize ordinary income
equal to the difference between the fair market value of shares of
Common Stock acquired and the exercise price. The Company will be
entitled to a tax deduction for the same amount.
. The tax consequences upon a sale of shares acquired in an exercise of
an option will depend on how long the shares were held prior to sale,
and upon whether such shares were acquired in the exercise of an ISO or
Non-ISO.
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. If shares acquired upon exercise of an ISO are held for at least one
year after exercise and two years from the date that the ISO was
granted, the holder will recognize long-term capital gain or loss in an
amount equal to the difference between the option exercise price and
the sale price of shares. If the shares are not held for that period,
gain on the sale of shares may be treated as ordinary income.
. Any gain realized upon the sale of shares acquired in the exercise of a
Non-ISO for an amount greater than their fair market value on the date
of exercise, will be capital gain and any loss will be capital loss.
Generally, there will be no tax consequences to the Company in
connection with the disposition of shares acquired in the exercise of
an option, except that the Company may be entitled to a tax deduction
in the case of a sale of ISO shares before the holding periods
described above have been satisfied.
Adjustments
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Certain corporate transactions or events such as stock splits,
recapitalizations, spin-offs, mergers, etc., may directly affect the number of
outstanding shares and/or the value of the outstanding Common Stock. If such
transactions occur, the Option Committee may adjust the number of shares that
may be granted under the 1995 Plan, as well as the limits on individual option
grants. The Option Committee may adjust the number of shares and the exercise
price under outstanding options, and may make other adjustments, which are
thought to be in the best interests of the Company.
Transferability
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Options granted under the 1995 Plan may not be transferred except:
. By will or the laws of descent and distribution; or
. Pursuant to a qualified domestic relations order or the Employee
Retirement Income Security Act.
Amendments
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The Board of Directors may amend or terminate the 1995 Plan at any time.
No amendment, however, may:
. Increase the number of shares reserved for option grants without
shareholder approval;
. Impair the right of a holder under an option previously granted; or
. Increase the benefits accruing to employees under the 1995 Plan.
Term
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The 1995 Plan will continue until February 28, 2005, unless abandoned or
terminated at an earlier time.
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Vote Required
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The affirmative vote of a majority of the outstanding shares of Common
Stock entitled to vote at the annual meeting is required for approval of the
1995 Plan, as amended.
The Board of Directors recommends a vote FOR amendment of the 1995 Stock
Option Plan.
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Security Ownership of Certain Beneficial Owners and Management
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The following table sets forth, as of March 1, 1999, 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 describes in the notes of the
table.
<TABLE>
<CAPTION>
Beneficial Owner Number of Shares Owned Percentage of Ownership
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<S> <C> <C>
Apotex Foundation 650,000/1/ 11.2
150 Signet Dr.
Weston, Ontario, Canada
M9L 1T9
Bernard Sherman 1,215,390/1/ 20.9
150 Signet Dr.
Weston, Ontario, Canada
M9L 1T9
Shermfin Corp. 565,390/1/ 9.7
150 Signet Dr.
Weston, Ontario, Canada
M9L 1T9
M.F. Florence 591,390/1//2/ 10.2
150 Signet Dr.
Weston, Ontario, Canada
M9L 1T9
Jana B. Mitcham 443,704/3/ 7.6
10618 Great Plains
Houston, TX 77064
David P. Bertrand 355,492/4/ 6.1
10622 Great Plains
Houston, TX 77064
Richard S. Kashenberg 70,372/5/ 1.2
11010 Hopkins St., Unit B
Mira Loma, CA 91752
</TABLE>
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<TABLE>
<CAPTION>
Beneficial Owner Number of Shares Owned Percentage of Ownership
- ---------------- ------------------------- ------------------------
<S> <C> <C>
F. Wayne Ballenger 20,000/6/ .3
3134 Meadway Drive
Houston, TX 77082
John R. Brown, Jr. 10,000/7/ .2
2534 Pomeran
Houston, TX 77080
David O. Rodrigue 25,000/8/ .4
17810 Cypress Spring Dr.
Spring, TX 77388
All Officers and Directors 1,515,958 26.1
as a Group (7 Persons)
</TABLE>
________________________________
/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, (iv) options to acquire 5,000 shares of Common Stock at $7.00 per
share and (v) options to acquire 5,000 shares of Common Stock at $2.38 per
share.
/3/ Includes Warrants to purchase 5,000 shares of Common Stock at $3.75 per
share 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, (iv) 37,800 shares of
Common Stock at $13 per share, of which options to acquire 12,600 shares
become exercisable in November 1999 and (v) 20,000 shares of Common Stock
at $5.13 per share. Also includes 11,554 shares of Common Stock owned by
her daughter, 9,000 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 November 1999.
Does not include options to acquire 25,000 shares
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at $3.00 per share which become exercisable in one-third annual
installments commencing in December 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, (iv) 40,200 shares of Common
Stock at $13.00 per share, of which options to acquire 13,400 shares become
exercisable in November 1999 and (v) 20,000 shares of Common Stock at $5.13
per share. 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
exercisable in November 1999. Does not include options to acquire 25,000
shares at $3.00 per share which become exercisable in one-third annual
installments commencing in December 1999.
/5/ 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, and (v) 5,000 shares of Common Stock at $2.38 per
share.
/6/ 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, (iii) 5,000
shares of Common Stock at $7.00 per share and (iv) 5,000 shares of Common
Stock at $2.38 per share.
/7/ 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
September 1999. Does not include options to acquire 10,000 shares which
become exercisable in one-third annual installments commencing in December
1999.
/8/ 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 2000 and January 2001. Does not include options to acquire
15,000 shares at $3.00 per share which become exercisable in one-third
annual installments commencing in December 1999.
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding compensation paid
by the Company to the Chief Executive Officer and each of the five other
executive officers of the Company (the "named executive officers") during the
fiscal years ended September 30, 1996, 1997 and 1998.
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Summary Compensation Table
- --------------------------
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-------------------------------------------------------------
ANNUAL COMPENSATION
---------------------------------------- AWARDS PAYOUTS
-------------------------------------------------------------
Name and Principal Year Salary Bonus Other Annual Restricted Options/SARs LTIP All other
Position ($) Compensation Stock Awards Payouts Compensation($)/1/
<S> <C> <C> <C> <C> <C> <C> <C> <C>
David P. Bertrand 1996 162,000 530,812 15,750 0 0 0 12,885
Chief Executive 1997 412,434 0 0 0 40,200 0 6,485
Officer 1998 363,969 0 0 0 20,000 0 6,744
Jana B. Mitcham 1996 156,000 526,649 15,500 0 0 0 9,013
Executive Vice 1997 387,793 0 0 0 37,800 0 4,985
President 1998 342,172 0 0 0 20,000 0 5,184
Barry C. Loder/2/ 1996 121,184 57,500 11,208 0 0 0 0
Vice President and 1997 161,243 0 0 0 55,000 0 0
Chief Financial 1998 64,762 0 0 0 0 0 0
Officer
Ronnie D. Meaux/3/ 1996 87,430 53,160 9,400 0 0 0 6,392
Vice President, 1997 87,101 0 6,000 0 12,250 0 2,619
Treasurer and 1998 87,739 0 0 0 0 0 0
Assistant Secretary
John R. Brown, Jr./4/ 1996 30,030 6,900 0 0 10,000 0 0
Vice-President-Finance 1997 76,357 0 0 0 0 0 0
1998 88,628 7,500 0 0 0 0 0
David O. Rodrigue/5/ 1996 0 0 0 0 0 0 0
Vice President and 1997 0 0 0 0 0 0 0
Chief Financial 1998 73,431 0 0 0 25,000 0 0
Officer
</TABLE>
________________
/1/ The Company has obtained insurance policies on the lives of Mr.
Bertrand and Ms. Mitcham, of which benefit amounts of $1,060,000 and
$660,000 on the lives of Mr. Bertrand and Ms. Mitcham, respectively,
constitute "keyman" insurance and are payable to the Company.
Approximately 51% of the aggregate insurance benefits on the lives of
Mr. Bertrand and Ms. Mitcham are payable to beneficiaries designated
by Mr. Bertrand and Ms. Mitcham. 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.
/3/ Mr. Meaux resigned his position with the Company in February 1998.
14
<PAGE>
/4/ 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.
/5/ Mr. Rodrigue joined the Company in January 1998.
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 $20 million. The term of each agreement is
three years. Each of the agreements may be earlier terminated upon mutual
agreement, death, disability or conviction of the officer, or a material breach
of the agreement by the officer. In March 1998 each of Mr. Bertrand and Ms.
Mitcham agreed to a 25% reduction in their annual salaries.
15
<PAGE>
Option Grants in Fiscal Year Ended September 30, 1998
- -----------------------------------------------------
The following table sets forth information with respect to stock option grants
to the named executive officers during the fiscal year ended September 30, 1998:
<TABLE>
<CAPTION>
Potential Realizable Value
at
Assumed Annual
Rates of
Stock Price Appreciation
Individual Grants For Option Term
----------------- ----------------------------
Number of Percent of Exercise or
Name Securities Total options/ base price Expiration 5% ($) 10% ($)
- ---- underlying SARs granted to ($/Sh) date ------ -------
Options/SARs employees --------------- ---------------
granted (#) in fiscal year
----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
David P. Bertrand 20,000 31 5.13 03/01 16,172 33,960
Jana B. Mitcham 20,000 31 5.13 03/01 16,172 33,960
Barry C. Loder 0 0 0 0 0 0
Ronnie D. Meaux 0 0 0 0 0 0
John R. Brown, Jr. 0 0 0 0 0 0
David O. Rodrigue 25,000 38 5.75 01/08 90,404 229,100
</TABLE>
16
<PAGE>
Option Exercises and Year-End Values
- ------------------------------------
The following table shows option exercises by the named executive officers
during the fiscal year ended September 30, 1998 and the number and value of
unexercised options at September 30, 1998.
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Number of Value Unexercised Options In-the-Money
Shares Under- Realized At Year End (#) Options at
Lying Options ($) Exercisable/ Year End ($)
Name Exercised (#) ------------- Unexercisable Exercisable/
- ---- ------------------ -------------------------- Unexercisable/1/
---------------------------
<S> <C> <C> <C> <C>
David P. Bertrand 0 0 121,000/28,000 98,478/0
Jana B. Mitcham 0 0 114,600/27,200 93,978/0
Barry C. Loder 50,000 150,400 0/0 0/0
Ronnie D. Meaux 24,500 154,963 0/0 0/0
John R. Brown, Jr. 0 0 6,666/3,334 0/0
David O. Rodrigue 0 0 0/25,000 0/0
</TABLE>
____________________
/1/ Based on the price of the Common Stock of $3.00 on September 30, 1998 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
17
<PAGE>
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 Company entered into employment agreements
with David P. Bertrand, the Company's President and Chief Executive Officer, and
Jana B. Mitcham, the Company's Executive Vice President and Secretary. The
employment agreements are described in "Employment Agreements." The Committee
determined that 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.
In March 1998, after consultation with the Committee, Mr. Bertrand and Ms.
Mitcham agreed to a 25% reduction in their annual salaries. Concurrent with the
salary reductions, the Company granted to each of Mr. Bertrand and Ms. Mitcham
stock options to purchase up to 20,000 shares of the Company's Common Stock at
$5.13 per share, the closing trading price of the Common Stock on the date of
the grant. The Committee recommended these actions in furtherance of its
objectives of linking compensation with Company performance and providing
incentive for key executives.
The Committee also periodically reviews 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 January 1998, David O. Rodrigue joined the Company as Vice President and
Chief Financial Officer. Mr. Rodrigue's annual salary is $105,000 and he is
entitled to receive bonuses as determined by the Company. Mr. Rodrigue was
granted options at the inception of his employment to purchase up to 25,000
shares of the Common Stock at $5.75 per share, the then closing trading price of
the Common Stock. The options are exercisable in one-third annual installments
commencing January 1999. The Committee believes that the
18
<PAGE>
compensation package for Mr. Rodrigue is reasonable in relation to industry
standards and for companies comparable in size and in the Company's geographic
area. The Committee also believes that the compensation program for Mr. Rodrigue
has accomplished the objective of linking shareholder and financial performance
to Mr. Rodrigue's total compensation.
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, 1998 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, 1998, no bonuses were paid to any executive officers other
than John R. Brown, Jr. who received a bonus of $7,500.
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. Options terminate if the employee's employment with
the Company is terminated. 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
outstanding, and the total number of options to be awarded.
In making grants during the fiscal year ended September 30, 1998, the
Committee also considered the number of outstanding options previously granted
to each officer. Due to the decline in the Company's stock price during the
year, all of the options granted to executive officers of the Company in fiscal
1998 were "out-of-the-money" at the fiscal year end of September 30, 1998. 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.
19
<PAGE>
COMPENSATION COMMITTEE
F. Wayne Ballenger
M. F. Florence
Richard S. Kashenberg
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.
<TABLE>
<CAPTION>
Total Return Analysis 7/10/95 9/29/95 9/30/96 9/30/97 9/30/98
- --------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Nutrition For Life $ 100 $ 304.29 $ 506.40 $ 277.08 $ 104.93
Peer Group $ 100 $ 332.96 $ 141.28 $ 404.00 $ 218.69
Nasdaq Composite (US) $ 100 $ 106.85 $ 125.63 $ 172.60 $ 173.43
</TABLE>
Source: Carl Thompson Associates www.ctaonline.com (800) 959-9677. Data from
Bloomberg Financial Markets.
Shareholder Proposals
---------------------
Any proposal to be presented at the next annual meeting of shareholders must
be received by the Company, directed to the attention of the Secretary, no later
than November 30, 1999 in order to be included in the Company's proxy statement
and form of proxy for that meeting.
Other Matters
-------------
The Board of Directors knows of no business that will be presented at the
annual meeting other than that described above. If any matters other than those
referred to above should properly come before the annual meeting, the persons
designated by the Board of Directors to serve as proxies intend to vote such
proxies in accordance with their best judgement.
By Order Of The Board Of Directors:
March 5, 1999 Jana B. Mitcham
Secretary
20
<PAGE>
APPENDIX A
NUTRITION FOR LIFE INTERNATIONAL, INC.
1995 STOCK OPTION PLAN, AS AMENDED
This Stock Option Plan (the "Plan") is adopted in consideration for services
rendered and to be rendered to Nutrition For Life International, Inc. and
related companies.
1. Definitions.
-----------
The terms used in this Plan shall, unless otherwise indicated or required by
the particular context, have the following meanings:
Board: The Board of Directors of Nutrition For Life International, Inc.
-----
Code: The Internal Revenue Code of 1986, as amended.
----
Common Stock: The $.01 par value Common Stock of Nutrition For Life
------------
International, Inc.
Company: Nutrition For Life International, Inc., a corporation incorporated
-------
under the laws of Texas, and any successors in interest by merger, operation of
law, assignment or purchase of all or substantially all of the property, assets
or business of the Company.
Consultant: A Consultant is any person, including any advisor, engaged by the
----------
Company or any Related Company to render consulting services and who is
compensated for such services.
Continuous Status as an Employee or Consultant: The employment by, or
----------------------------------------------
relationship as a Consultant with, the Company is not interrupted or terminated.
The Board, at its sole discretion, may determine whether Continuous Status as an
Employee or Consultant shall be considered interrupted due to personal or other
mitigating circumstances.
Date of Grant: The date on which an Option is granted under the Plan.
-------------
<PAGE>
Employee: An Employee is an employee of the Company or any Related Company.
--------
Fair Market Value: The Fair Market Value of the Option Shares. Such Fair
-----------------
Market Value as of any date shall be reasonably determined by the Option
Committee (see below); provided, however, that if there is a public market for
the Common Stock, the Fair Market Value of the Option Shares as of any date
shall be the officially quoted closing price, if available, through the National
Association of Securities Dealers, Inc. or a stock exchange, or if no officially
quoted closing price is available, the representative closing bid price, on the
date in question. In the event there is no officially quoted closing price or
bid price or the Common Stock is not traded publicly, the Fair Market Value of a
share of Common Stock on any date shall be determined, in good faith, by the
Board or the Option Committee after such consultation with outside legal,
accounting and other experts as the Board or the Option Committee may deem
advisable, and the Board or the Option Committee shall maintain a written record
of its method of determining such value.
Incentive Stock Options ("ISOs"): "Incentive Stock Options" as that term is
--------------------------------
defined in Section 422A of the Code.
Key Employee: A person designated by the Option Committee who either is
------------
employed by the Company or a Related Company (see below) and upon whose
judgment, initiative and efforts the Company or a Related Company is largely
dependent for the successful conduct of its business; provided, however, that
Key Employees shall not include those members of the Board who are not employees
of the Company or a Related Company.
Non-Incentive Stock Options ("Non-ISOs"): Options which are not intended to
----------------------------------------
qualify as "Incentive Stock Options" under Section 422A of the Code.
Option: The rights granted to an Employee or Consultant to purchase Common
------
Stock pursuant to the terms and conditions of an Option Agreement (see below).
Option Agreement: The written agreement (and any amendment or supplement
----------------
thereto) between the Company and an Employee or Consultant designating the terms
and conditions of an Option.
Option Committee: The Plan shall be administered by an Option Committee
----------------
composed of the Board or a committee, selected by the Board, consisting of two
or more persons, each of whom is
2
<PAGE>
not an employee of the Corporation. The foregoing does not apply to Specific
Option Grants.
Option Shares: The shares of Common Stock underlying an Option granted to an
-------------
Employee or Consultant.
Optionee: An Employee or Consultant who has been granted an Option.
--------
Related Company: Any corporation that is a "parent corporation" or a
---------------
"subsidiary corporation" with respect to the Company, as those terms are defined
in Section 425 of the Code. The determination of whether a corporation is a
Related Company shall be made without regard to whether the corporation or the
relationship between the corporation and the Company now exists or comes into
existence hereinafter.
Specific Option Grants: The specific grants of Options as provided in Section
----------------------
9.
2. Purpose and Scope.
-----------------
(a) The purpose of this Plan is to advance the interests of the Company
and its stockholders by affording Employees and Consultants an
opportunity for investment in the Company and the incentive
advantages inherent in stock ownership in this Company.
(b) This Plan authorizes the Option Committee to grant Options to
purchase shares of Common Stock to Employees and Consultants selected
by the Option Committee while considering criteria such as employment
position or other relationship with the Company, duties and
responsibilities, ability, productivity, length of service or
association, morale, interest in the Company, recommendations by
supervisors, and other matters.
3. Administration of the Plan. The Plan shall be administered by the Option
--------------------------
Committee. The Option Committee shall have the authority granted to it under
this section and under each other section of the Plan.
In accordance with and subject to the provisions of the Plan, the Option
Committee shall select the Optionees, shall determine (i) the number of shares
of Common Stock to be subject to each Option, (ii) the time at which each Option
is to be granted, (iii) whether an Option shall be granted in exchange for the
cancellation and termination of a previously granted option or options under the
Plan or otherwise, (iv) the purchase price for the Option Shares, (v) the option
period, and (vi) the manner in which the Option becomes exercisable. Provided,
that, the number of shares of Common Stock to be subject to Options granted to
an
3
<PAGE>
Optionee shall not exceed 50,000 in any fiscal year of the Company. In addition,
the Option Committee shall fix such other terms of each Option as the Option
Committee may deem necessary or desirable. The Option Committee shall determine
the form of Option Agreement to evidence each Option.
The Option Committee from time to time may adopt such rules and
regulations for carrying out the purposes of the Plan as it may deem proper and
in the best interests of the Company. The Option Committee shall keep minutes of
its meetings and those minutes shall be distributed to every member of the
Board.
The Board may from time to time make such changes in and additions to the
Plan as it may deem proper and in the best interest of the Company; provided,
however, that no such change or addition shall impair any Option previously
granted under the Plan, and that the approval by the affirmative votes of the
holders of a majority of the Company's securities entitled to vote and
represented at a meeting duly held in accordance with the applicable laws of the
State of Texas, shall be required for any amendment which would:
(a) modify the eligibility requirements for receiving Options under the
Plan;
(b) increase the benefits accruing to Employees under the Plan; or
(c) increase the number of shares of Common Stock that may be issued under
the Plan.
All actions taken and all interpretations and determinations made by the
Option Committee in good faith (including determinations of Fair Market Value)
shall be final and binding upon all Employees, Consultants, the Company and all
other interested persons. No member of the Option Committee shall be personally
liable for any action, determination or interpretation made in good faith with
respect to the Plan, and all members of the Option Committee shall, in addition
to rights they may have if Directors of the Company, be fully protected by the
Company with respect to any such action, determination or interpretation.
4. The Common Stock. In addition to the Specific Option Grants, the Board is
----------------
authorized to appropriate, issue and sell for the purposes of the Plan, and the
Option Committee is authorized to grant Options with respect to, a total number,
not in excess of 900,000 shares of Common Stock, either treasury or authorized
but unissued, or the number and kind of shares of stock or other securities
which in accordance with Section 10 shall be substituted for the 900,000 shares
or into which such 900,000 shares shall be adjusted. All or any unsold shares
subject to an
4
<PAGE>
Option that for any reason expires or otherwise terminates may again be made
subject to Options under the Plan.
5. Eligibility. Options which are intended to qualify as ISOs will be
-----------
granted only to Key Employees. Key Employees and other Employees and
Consultants may hold more than one Option under the Plan and may hold Options
under the Plan and options granted pursuant to other plans or otherwise.
6. Option Price. The Option Committee shall determine the purchase price for
------------
the Option Shares, provided that the purchase price to be paid by Optionees for
the Option Shares whether ISOs or non-ISOs, shall not be less than 100 percent
of the Fair Market Value of the Option Shares on the Date of Grant. The
purchase price for the Option Shares shall be a fixed, and cannot be a
fluctuating, price.
7. Duration and Exercise of Options.
--------------------------------
(a) The option period shall commence on the Date of Grant and shall be as
set by the Option Committee, but not to exceed 10 years in length. No Option
shall be exercised for the period of six months following the Date of Grant;
provided, however, that this limitation shall not apply to the exercise of an
Option pursuant to the terms of the relevant Option Agreement upon the
Optionee's death.
(b) During the lifetime of the Optionee, the Option shall be exercisable
only by the Optionee; provided, that in the event of the legal disability of an
Optionee, the guardian or personal representative of the Optionee may exercise
the Option. However, if the Option is an ISO it may be exercised by the guardian
or personal representative of the Optionee only if such guardian or personal
representative obtains a ruling from the Internal Revenue Service or an opinion
of counsel to the effect that neither the grant nor the exercise of such power
is violative of the Code. Any opinion of counsel must be both from counsel and
in a form acceptable to the Option Committee.
(c) The Option Committee may determine whether any Option shall be
exercisable as provided in Paragraph (a) of this Section 7 or whether the
Options shall be exercisable in installments only; if the Option Committee
determines the latter, it shall determine the number of installments and the
percentage of the Option exercisable at each installment date. All such
installments shall be cumulative.
(d) In the event an Optionee's Continuous Status as an Employee or
Consultant terminates because of the death or permanent and total disability of
the Optionee, any Option held by the Optionee on the date of termination may be
exercised within 90
5
<PAGE>
days after the date of termination, but only to the extent that the Option was
exercisable according to its terms on the date of termination. After such 90-day
period, any unexercised portion of an Option shall expire.
(e) Notwithstanding the provisions of Paragraph (d) of this Section 7, in
the event an Optionee's Continuous Status as an Employee or Consultant
terminates for any reason other than the Optionee's death or permanent and total
disability, any unexercised portion of any Option held by the Optionee on the
date of termination may be exercised within 30 days after the date of
termination, but only to the extent that the Option was exercisable according to
its terms on the date of termination. After such 30-day period, any unexercised
portion of an Option shall expire.
(f) Each Option shall be exercised in whole or in part by delivering to
the office of the Treasurer of the Company written notice of the number of
shares with respect to which the Option is to be exercised and by paying in full
the purchase price for the Option Shares purchased as set forth in Section 8;
provided, that an Option may not be exercised in part unless the purchase price
for the Option Shares purchased is at least $2,000.
(g) No Option may be exercised until the Plan is approved by the
shareholders of the Company as provided in Section 16 below.
(h) No Option Shares may be sold, transferred or otherwise disposed of
within six months of the Date of Grant by any person who is subject to the
reporting requirements of Section 16(a) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act") on the Date of Grant.
(i) No Option Shares may be sold, transferred or otherwise disposed of
within six months of the date of shareholder approval of the Plan by any person
who is subject to the reporting requirements of Section 16(a) of the Exchange
Act on the date of shareholder approval of the Plan.
8. Payment for Option Shares. If the purchase price of the Option Shares
-------------------------
purchased by any Optionee at one time exceeds $2,000, the Option Committee may
permit all or part of the purchase price for the Option Shares to be paid by
delivery to the Company for cancellation shares of the Company's Common Stock
previously owned by the Optionee with a Fair Market Value as of the date of
payment equal to the portion of the purchase price for the Option Shares that
the Optionee does not pay in cash. In the case of all other Option exercises,
the purchase price shall be paid in cash or certified funds upon exercise of the
Option.
6
<PAGE>
9. Specific Option Grants. The Company hereby grants to the following Key
-----------------------
Employees, Options to purchase the Option Shares set forth opposite their
respective names below in this Section 9, and at Exercise Prices set forth
opposite their respective names, such Options to be exercisable commencing six
months from the date of Shareholder approval of this Plan, and to expire seven
years from the date of Grant, unless earlier terminated in accordance with the
provisions of this Plan:
<TABLE>
<CAPTION>
Name of Optionee Number of Shares Exercise Price
------------------- ---------------- --------------
<S> <C> <C>
David P. Bertrand 16,000 $2.25
David P. Bertrand 16,000 $2.70
Jana Mitcham 14,000 $2.25
Jana Mitcham 14,000 $2.70
Ronnie Meaux 7,500 $2.25
Ronnie Meaux 7,500 $2.70
Gregory Pusey 5,000 $2.25
Gregory Pusey 5,000 $2.70
</TABLE>
10. Change in Stock, Adjustments, Etc. In the event that each of the
----------------------------------
outstanding shares of Common Stock (other than shares held by dissenting
shareholders which are not changed or exchanged) should be changed into, or
exchanged for, a different number or kind of shares of stock or other securities
of the Company, or, if further changes or exchanges of any stock or other
securities into which the Common Stock shall have been changed, or for which it
shall have been exchanged, shall be made (whether by reason of merger,
consolidation, reorganization, recapitalization, stock dividends,
reclassification, split-up, combination of shares or otherwise), then there
shall be substituted for each share of Common Stock that is subject to the Plan
but not subject to an outstanding Option thereunder, the number and kind of
shares of stock or other securities into which each outstanding share of Common
Stock (other than shares held by dissenting shareholders which are not changed
or exchanged) shall be so changed or for which each outstanding share of Common
Stock (other than shares held by dissenting shareholders) shall be exchanged.
Any securities so substituted shall be subject to similar successive
adjustments.
In the event of any such changes or exchanges, the Option Committee shall
determine whether, in order to prevent dilution or enlargement of rights, an
adjustment should be made in the number, or kind, or option price of the shares
or other securities then subject to an Option or Options granted pursuant to the
Plan and the Option Committee shall make any such adjustment, and such
adjustments shall be made and shall be effective and binding for all purposes of
the Plan.
11. Relationship to Employment or Position. Nothing
--------------------------------------
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contained in the Plan, or in any Option granted pursuant to the Plan, shall
confer upon any Optionee any right with respect to continuance of employment by
the Company, as an Employee or as a Consultant or interfere in any way with the
right of the Company to terminate the Optionee's employment as an Employee or
position as a Consultant, at any time.
12. Nontransferability of Option. No Option granted under the Plan shall be
----------------------------
transferable by the Optionee, either voluntarily or involuntarily, except by
will or the laws of descent and distribution, or except pursuant to a qualified
domestic relations order as defined in the Code, the Employee Retirement Income
Security Act, or rules promulgated thereunder. Except as provided in the
preceding sentence, any attempt to transfer the Option shall void the Option.
13. Rights as a Stockholder. No person shall have any rights as a
-----------------------
shareholder with respect to any share covered by an Option until that person
shall become the holder of record of such share and, except as provided in
Section 10, no adjustments shall be made for dividends or other distributions or
other rights as to which there is an earlier record date.
14. Securities Laws Requirements. No Option Shares shall be issued unless
----------------------------
and until, in the opinion of the Company, any applicable registration
requirements of the Securities Act of 1933, as amended, any applicable listing
requirements of any securities exchange on which stock of the same class is then
listed, and any other requirements of law or of any regulatory bodies having
jurisdiction over such issuance and delivery, have been fully complied with.
Each Option and each Option Share certificate may be imprinted with legends
reflecting federal and state securities laws, restrictions and conditions, and
the Company may comply therewith and issue "stop transfer" instructions to its
transfer agent and registrar in good faith without liability.
15. Disposition of Shares. Each Optionee, as a condition of exercise, shall
---------------------
represent, warrant and agree, in a form of written certificate approved by the
Company, as follows: (a) that all Option Shares are being acquired solely for
his own account and not on behalf of any other person or entity; (b) that no
Option Shares will be sold or otherwise distributed in violation of the
Securities Act of 1933, as amended, or any other applicable federal or state
securities laws; (c) that if he is subject to reporting requirements under
Section 16(a) of the Exchange Act, he will (i) not violate Section 16(b) of the
Exchange Act, (ii) furnish the Company with a copy of each Form 4 and Form 5
filed by him, and (iii) timely file all reports required under the federal
securities laws; and (d) that he will report all sales of Option Shares to the
Company in writing on a form prescribed by the
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Company.
16. Effective Date of Plan; Termination Date of Plan. Subject to the
------------------------------------------------
approval of the Plan by the affirmative vote of the holders of a majority of the
Company's securities entitled to vote and represented at a meeting duly held in
accordance with applicable law, the Plan shall be deemed effective as of March
3, 1995. The Plan shall terminate at midnight on February 28, 2005, except as
to Options previously granted and outstanding under the Plan at that time. No
Options shall be granted after the date on which the Plan terminates. The Plan
may be abandoned or terminated at any earlier time by the Board, except with
respect to any Options then outstanding under the Plan.
17. Limitation on Amount of Option. To the extent that the aggregate Fair
------------------------------
Market Value (determined at the Date of Grant) of Common Stock with respect to
which ISOs are exercisable for the first time by any Optionee during any
calendar year under all plans of the Company and Related Company exceeds
$100,000, the Options or portions thereof which exceed such limit (according to
the order in which they were granted) shall be treated as Non-ISOs.
18. Ten Percent Shareholder Rule. With respect to ISO's, no Option may be
----------------------------
granted to a Key Employee who, at the time the Option is granted, owns stock
possessing more than 10 percent of the total combined voting power of all
classes of stock of the Company or of any "parent corporation" or "subsidiary
corporation", as those terms are defined in Section 425 of the Code, unless at
the time the Option is granted the purchase price for the Option Shares is at
least 110 percent of the Fair Market Value of the Option Shares on the Date of
Grant and such Option by its terms is not exercisable after the expiration of
five years from the Date of Grant. For purposes of the preceding sentence,
stock ownership shall be determined as provided in Section 425 of the Code.
19. Withholding Taxes. The Company, or any Related Company, may take such
-----------------
steps as it may deem necessary or appropriate for the withholding of any taxes
which the Company, or any Related Company, is required by any law or regulation
or any governmental authority, whether federal, state or local, domestic or
foreign, to withhold in connection with any Option including, but not limited
to, the withholding of all or any portion of any payment or the withholding of
issuance of Option Shares to be issued upon the exercise of any Option.
20. Effect of Changes in Control and Certain Reorganizations.
--------------------------------------------------------
(a) In the event of a Change in Control of the Company (as defined below), the
Option Committee may, in its discretion,
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<PAGE>
make any or all of the following adjustments: (i) provide that all Options
granted pursuant to the Plan shall become exercisable immediately upon such
Change in Control (or such other time as the Committee shall determine), subject
to Section 17 with respect to ISOs; (ii) provide for the payment to an Optionee
upon surrender of an Option (or portion thereof) of an amount in cash equal to
the excess of (a) the higher of (I) the aggregate Fair Market Value of the
Option Shares covered by such Option (or portion thereof) on the date of
surrender or (II) the average price per share paid for the most highly priced
one percent of the Common Stock acquired in connection with the Change in
Control times the number of Option Shares covered by such Option (or portion
thereof) over (b) the aggregate exercise price, except that in no event shall an
Optionee have a right to receive with respect to any ISO an amount in excess of
the Fair Market Value on the date of surrender of the total number of Option
Shares with respect to which such Option is surrendered, less the exercise price
which the Optionee would otherwise have been required to pay upon purchase of
such Option Shares had he exercised the Option; (iii) make any other
adjustments, or take such other action, as the Option Committee, in its
discretion, shall deem appropriate. In the event that the Option Committee
provides for the surrender of Options pursuant to clause (ii) above, to the
extent any Option is surrendered, it shall be deemed to have been exercised for
purposes of Section 4. For purposes of this Section 20, a "Change in Control" of
the Company shall mean a change in control of a nature that would be required to
be reported in response to Item 6(e) of Schedule 14A of Regulation 14A
promulgated under the Exchange Act, whether or not the Company is then subject
to such reporting requirement; provided that, without limitation, a Change in
Control shall be deemed to have occurred if (i) any individual, partnership,
firm, corporation, association, trust, unincorporated organization or other
entity, or any syndicate or group deemed to be a person under Section 14(d)(2)
of the Exchange Act, is or becomes the "beneficial owner" (within the meaning of
Section 13(d) of the Exchange Act and the rules and regulations promulgated
thereunder), directly or indirectly, of securities of the Company representing
35% or more of the combined voting power of the Company's then outstanding
securities entitled to vote in the election of directors of the Company; or (ii)
during any period of two consecutive years (not including any period prior to
the adoption of this Plan), individuals who at the beginning of such period
constituted the Board and any new directors, whose appointment by the Board or
nomination for election by the Company's shareholders was approved by a vote of
at least a majority of the directors then still in office who either were
directors at the beginning of the period or whose appointment or nomination for
election was previously so approved, cease for any reason to constitute a
majority thereof.
(b) In the event that (i) the Company is merged or
10
<PAGE>
consolidated with another corporation, (ii) one person becomes the beneficial
owner of all of the issued and outstanding equity securities of the Company (for
purposes of this Section 20(b), the terms "person" and "beneficial owner" shall
have the meanings assigned to them in Section 13(d) of the Exchange Act and the
rules and regulations promulgated thereunder), (iii) a division or subsidiary of
the Company is acquired by another corporation, person or entity, (iv) all or
substantially all of the assets of the Company are acquired by another
corporation, (v) the Company is reorganized, dissolved or liquidated (each such
event in (i), (ii), (iii), (iv) or (v) being hereinafter referred to as a
"Reorganization Event"), or (vi) the Board shall propose that the Company enter
into a Reorganization Event, then the Option Committee may, in its sole
discretion, make any or all of the following adjustments: (A) by written notice
to each Optionee provide that such Optionee's Options shall be terminated or
cancelled, unless exercised within thirty (30) days (or such other period as the
Option Committee shall determine) after the date of such notice; (B) subject to
Section 17 with respect to ISOs, advance the dates upon which any or all
outstanding Options shall be exercised; (C) provide for the payment upon
termination or cancellation of an Option of an amount in cash or securities
equal to the excess, if any, of the Fair Market Value of the Option Shares
subject to the Option at the time of such termination or cancellation over the
exercise price of such Option; and (D) make any other adjustments, or take such
other action, as the Option Committee, in its discretion, shall deem
appropriate. Any action taken by the Option Committee may be made conditional
upon the consummation of the applicable Reorganization Event.
21. Other Provisions.
----------------
(a) The use of a masculine gender in the Plan shall also include within
its meaning the feminine, and the singular may include the plural, and the
plural may include the singular, unless the context clearly indicates to the
contrary.
(b) Any expenses of administering the Plan shall be borne by the Company.
(c) This Plan shall be construed to be in addition to any and all other
compensation plans or programs. Neither the adoption of the Plan by the Board
nor the submission of the Plan to the shareholders of the Company for approval
shall be construed as creating any limitations on the power of authority of the
Board to adopt such other additional incentive or other compensation
arrangements as the Board may deem necessary or desirable.
(d) The validity, construction, interpretation, administration and effect
of the Plan and of its rules and regulations, and the rights of any and all
personnel having or
11
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claiming to have an interest therein or thereunder shall be governed by and
determined exclusively and solely in accordance with the laws of the State of
Texas.
* * * * * * * *
12
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Nutrition For Life International, Inc.
9101 JAMEEL
HOUSTON, TEXAS 77040
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 3:30 p.m. (local time) on
April 8, 1999, 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 B. Mitcham
FOR all Nominees [_] WITHHELD for all Nominees [_]
FOR, except for the following Nominee(s):
[_] ________________________________________________
2. Amendment Of 1995 Stock Option Plan
[_] FOR [_] AGAINST [_] ABSTAIN
3. 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 and for the
amendment of the 1995 Stock Option Plan. 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: __________________________________
