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)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / 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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(4) Date Filed:
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NUTRITION FOR LIFE INTERNATIONAL, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 12, 1997
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 May 12, 1997 at 2:00 P.M. (Central Daylight 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 March 27, 1997 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:
April 10, 1997
Jana Mitcham
Secretary
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 May 12, 1997 at 2:00 P.M. (Central Daylight
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 April 11, 1997. The Company's
Annual Report to Shareholders, including financial statements for the fiscal
year ended September 30, 1996, 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". With respect to the
other proposals a shareholder may, by checking the appropriate box on the Proxy:
(i) vote "FOR" the proposals; (ii) vote "AGAINST" the proposals; or (iii)
"ABSTAIN" from voting on the proposal. 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 5,589,701 shares of Common Stock outstanding
on March 27, 1997 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 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 March 27, 1997, 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 executive officers of the Company named in the Summary Compensation
Table below 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.
Number of
Beneficial Owner Shares Owned Percentage of Ownership
------------------------- ------------ -----------------------
Shermfin Corp. 1,215,390(1) 21.8
150 Signet Dr.
Weston, Ontario, Canada
9ML 1T9
M. F. Florence 1,231,390(1)(2) 22.1
150 Signet Dr.
Weston, Ontario, Canada
M9L 1T9
Bernard Sherman 1,215,390(1) 21.8
150 Signet Dr.
Weston, Ontario, Canada
M9L 1T9
Jana Mitcham 377,304(3) 6.8
10618 Great Plains
Houston, Texas 77064
David P. Bertrand 328,692(4) 5.9
10622 Great Plains
Houston, TX 77064
2
Number of
Beneficial Owner Shares Owned Percentage of Ownership
------------------------- ------------ -----------------------
Gregory Pusey 236,978(5) 4.2
1722 Buffehr Creek Rd
Vail, Colorado 81657
Richard S. Kashenberg 60,372(6) 1.1
15501 First Street
Irwindale, CA 91706
F. Wayne Ballenger 10,000(7) .2
3134 Meadway Drive
Houston, Texas 77082
Barry C. Loder 77,000(8) 1.4
2912 Lafayette
Houston, TX 77005
Ronnie D. Meaux 34,216(9) .6
15410 Windy Cove
Houston, TX 77095
All Officers and Directors 2,366,352(10) 42.5
as a Group (9 Persons)
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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) Messrs. Sherman and Florence do not own any shares of record of the Common
Stock. 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, of which options to acquire 2,000 shares become exercisable in
October 1997, (ii) options to acquire 5,000 shares of Common Stock at
$19.75 per share, and (iii) options to acquire 5,000 shares of Common Stock
at $12.38 per share.
(3) Includes 5,000 Warrants and options to acquire (i) 42,000 shares of Common
Stock at $1.665 per share, of which options to acquire 14,000 shares become
exercisable in October 1997, (ii) 16,800 shares of Common Stock at $1.875
per share, and (iii) 16,800 shares of Common Stock at $2.25 per share.
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. Does
not include options to purchase an aggregate of 45,000 shares of Common
Stock at $13.00 per share, which become exercisable in equal amounts over a
three-year period commencing November 20, 1997.
3
(4) Includes options to acquire (i) 42,000 shares of Common Stock at $1.665 per
share, of which options to acquire 14,000 shares become exercisable in
October 1997, (ii) 19,200 shares of Common Stock at $1.875 per share, and
(iii) 19,200 shares of Common Stock at $2.25 per share. Also includes
40,000 shares owned by his two sons and options held by his wife to acquire
4,800 shares of Common Stock at $1.665 per share. Does not include options
to purchase an aggregate of 47,400 shares of Common Stock at $13.00 per
share, which become exercisable in equal amounts over a three-year period
commencing November 20, 1997.
(5) Includes 3,000 Warrants and options to acquire (i) 6,000 shares of Common
Stock at $1.665 per share of which options to acquire 2,000 shares become
exercisable in October 1997, (ii) 6,000 shares of Common Stock at $1.875
per share, and (iii) 6,000 shares of Common Stock at $2.25 per share. 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. Does not include options to purchase an aggregate of 9,000
shares of Common Stock at $13.00 per share, which become exercisable in
equal amounts over a three-year period commencing November 20, 1997.
(6) Includes options to acquire (i) 6,000 shares of Common Stock at $1.665 per
share, of which options to acquire 2,000 shares become exercisable in
October 1997, (ii) options to acquire 5,000 shares of Common Stock at
$19.75 per share, and (iii) options to acquire 5,000 shares of Common Stock
at $12.38 per share.
(7) Includes options to acquire (i) 5,000 shares of Common Stock at $19.75 per
share; and (ii) options to acquire 5,000 shares of Common Stock at $12.38
per share.
(8) Includes 9,000 Warrants and options to acquire 50,000 shares of Common
Stock at $2.6875 per share. Does not include options to purchase an
aggregate of 25,000 shares of Common Stock at $13.00 per share, which
become exercisable in equal amounts over a three-year period commencing
November 20, 1997 or options to purchase an aggregate of 30,000 shares of
Common Stock at $10.375 per share, which become exercisable in equal
amounts over a three-year period commencing April 9, 1998.
(9) Includes options to acquire (i) 15,500 shares of Common Stock at $1.665 per
share, of which options to acquire 6,000 shares become exercisable in
October 1997, (ii) 4,500 shares of Common Stock at $1.875 per share, and
(iii) 4,500 shares of Common Stock at $2.25 per share. Does not include
options to purchase an aggregate of 12,250 shares of Common Stock at $13.00
per share, which become exercisable in equal amounts over a three-year
period commencing November 20, 1997.
(10) Includes options to acquire 10,000 shares of Common Stock at $11.50 per
share.
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.
4
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 in November 1995.
DAVID P. BERTRAND, age 53, 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 60, 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 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 41, served as President of NION Laboratories
from 1982 to 1996. He presently serves as a consultant to NION. 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 has served as a
director of the Company since 1994. Mr. Kashenberg received a Bachelor's degree
from Vanier College.
JANA MITCHAM, age 49, 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 44, 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, and a co-founder and director of USMX,
Inc., a publicly held mining company. From May 1989 until January 1990, Mr.
Pusey also served as Chief Financial Officer of USMX, Inc. 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 has entered into an agreement with Shermfin Corp. wherein it
has 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.
The current designee is M. F. Florence who shall continue to serve in such
capacity until written notice otherwise is provided by Shermfin Corp. to the
Company. See "Certain Transactions".
5
BOARD OF DIRECTORS AND COMMITTEES
The Company's Board of Directors held five meetings in person or by consent
during the fiscal year ended September 30, 1996. 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, 1996, 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, 1996, the Compensation Committee held one meeting. 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,
1996.
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 59, became Vice President-Finance of the Company in
September, 1996. 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. Mr. Brown received a B.S. in Mechanical Engineering
from Stanford University and an M.B.A. from the University of Texas at Austin.
BARRY C. LODER, age 39, became Chief Operating Officer of the Company in
April 1997. He has served as Vice President and Chief Financial Officer of the
Company since March 1995. From October 1993 until he joined the Company, Mr.
Loder was a financial consultant, performing corporate finance, merger and
acquisition and other financing activities. From January 1992 to October 1993,
he was in Corporate Development with Allwaste, Inc., a publicly held
environmental services company. From December 1989 to December 1991, he was the
Senior Vice President-Finance of Republic Waste Industries, Inc., a publicly
held integrated solid waste management company. Mr. Loder received a B.B.A.
degree in Accounting and Finance from Walsh College and an M.B.A. degree from
Houston Baptist University. He is a Certified Public Accountant and is
currently working towards a Chartered Financial Analyst designation.
6
RONNIE D. MEAUX, age 43, has served in various accounting and finance
capacities for the Company and its predecessors since 1985. He is currently
Vice President and Treasurer of the Company. Mr. Meaux received a B.S. degree
in accounting in 1977 from McNeese State University.
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding compensation
paid by the Company (and its predecessors) to the officers whose total annual
compensation exceeded $100,000 during the fiscal years ended September 30, 1994,
1995 and 1996.
LONG TERM COMPENSATION
-----------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
----------------------------------------- ------------------- -------
Other
Annual Restricted All Other
Name and Principal Salary compensa- Stock Options/ LTIP Compensa-
Position Year ($) Bonus tion Awards SARs Payouts tion(1)
- ------------------ ---- ------- ------- --------- ---------- -------- ------- ---------
David P. Bertrand 1994 143,256 24,000 -0- -0- -0- -0- 12,885
Chief Executive Officer of the Company 1995 162,006 143,829 5,250 -0- 80,400 -0- 12,885
1996 162,000 530,812 15,750 -0- -0- -0- 12,885
Jana Mitcham 1994 144,826 24,000 -0- -0- -0- -0- 9,013
Executive Vice President of the Company 1995 157,316 143,829 5,250 -0- 75,600 -0- 9,013
1996 156,000 526,649 15,500 -0- -0- -0- 9,013
Barry C. Loder 1994(2) -0- -0- -0- -0- -0- -0- -0-
Vice President and Chief Financial Officer 1995(2) 51,404 7,790 1,500 50,000 -0- -0- -0-
of the Company 1996 121,184 57,500 11,208 -0- -0- -0- -0-
Ronnie D. Meaux 1994 74,626 -0- -0- -0- -0- -0- 6,392
Vice President and Assistant Secretary of 1995 81,350 10,000 6,900 -0- 36,000 -0- 6,392
the Company 1996 87,430 53,160 9,400 -0- -0- -0- 6,392
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(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 in March 1995.
7
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 541,650 shares of Common Stock. Under the Plans, the
Company may issue options to purchase up to an additional 426,790 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 $100,000
per optionee. The number of shares subject to options granted to any individual
in each of the Plans shall not exceed 50,000 in any fiscal year of the Company.
Options granted under the Plans are non-transferable and generally expire 30
days after the termination of any optionee's service to the Company. In
general, if an optionee is permanently disabled or dies during his or her
service to the Company, such person's option may be exercised up to 90 days
following such disability or death.
OPTION GRANTS IN FISCAL YEAR ENDED SEPTEMBER 30, 1997
No stock options were granted by the Company during the fiscal year ended
September 30, 1996 to any executive officer named in the Summary Compensation
Table.
OPTION EXERCISES AND YEAR-END VALUES
The following table shows option exercises by the named executive officers
during the fiscal year ended September 30, 1996. Also reported are the year-end
values for their unexercised "in-the-money" options, which represent the
positive spread between the exercise price of any such option and the market
price of the Common Stock on September 30, 1996.
8
Value of
Number of Unexercised
Unexercised In-the-Money
Number of Options Options at
Shares Under- Value At Year End (#) Year End ($)
lying Options Realized Exercisable/ Exercisable/
Name Exercised (#) ($) Unexercisable Unexercisable
---- ------------- -------- --------------- -------------
David P. Bertrand -- -- 66,400/14,000 853,580/183,190
Jana Mitcham -- -- 61,600/14,000 792,680/183,190
Barry C. Loder -- -- 33,333/16,667 402,079/201,040
Ronnie D. Meaux -- -- 18,500/6,000 238,495/78,510
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 outside directors as consultants to the Company. During the
fiscal year ended September 30, 1995 the Company paid Mr. Pusey $40,000, Mr.
Kashenberg $12,000 and Mr. Florence $2,000 for consulting services. 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.
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 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. 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.
9
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 the promissory note in the principal amount of $250,000
($119,500), 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. 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.
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). The
Company intends to file a registration statement in the near future. 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.
The current designee is M.F. Florence who shall continue to serve in such
capacity until written notice otherwise is provided by Shermfin Corp. to the
Company. See "Election of Directors."
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
10
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, 1994 and 1995, the Company purchased
approximately $1,706,000 and $2,258,000 of goods, respectively, from NION.
During the year ended September 30, 1996, the Company purchased $5,234,000 of
goods from NION. In addition, Richard S. Kashenberg, a director of the Company,
served as the chief executive officer of NION until December 31, 1996. Mr.
Kashenberg is currently a consultant to NION. It is anticipated that this
relationship will continue in the future and 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. The Company intends to file a registration
statement in the near future.
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, 1996. 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, 1997.
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, 1996.
SHAREHOLDER PROPOSALS
Any proposal which a shareholder may desire to present to the Annual
Meeting of Shareholders for the fiscal year ending September 30, 1997, must be
received in writing by the Secretary of the Company prior to October 1, 1997.
ANNUAL REPORT
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE FISCAL YEAR
ENDED SEPTEMBER 30, 1996 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.
11
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
April 10, 1997.
12
NUTRITION FOR LIFE INTERNATIONAL, INC.
9101 JAMEEL, STE. 180
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 other 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 Shareholders of Nutrition For Life
International, Inc. (the "Company") to be held at 2:00 p.m. (local time) on May
12, 1997 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: _____________________________