SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
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 Rule 14a-11(c) or Rule 14a-12
Nu Skin Enterprises, Inc.
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(Name of Registrant as Specified in Its Charter)
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(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:
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[ ] 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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[GRAPHIC OMITTED] Nu Skin Logo
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS OF
NU SKIN ENTERPRISES, INC.
May 10, 2001
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NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Annual Meeting") of Nu Skin Enterprises, Inc., a Delaware corporation (the
"Company"), will be held at 4:00 p.m., Mountain time, on May 10, 2001 at the
corporate offices of the Company, 75 West Center Street, Provo, Utah 84601, for
the following purposes, which are more fully described in the Proxy Statement:
1. To elect a Board of Directors consisting of nine directors to serve
until the next annual meeting of stockholders or until their successors are duly
elected and qualified;
2. To ratify the selection of PricewaterhouseCoopers LLP as the Company's
independent accountants for the fiscal year ending December 31, 2001; and
3. To transact such other business as may properly come before the Annual
Meeting or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on April 3, 2001 as
the record date for determining the stockholders entitled to receive notice of
and to vote at the Annual Meeting or any adjournment or postponement thereof.
You are cordially invited to attend the Annual Meeting in person. However,
to ensure your representation at the Annual Meeting, please mark, sign, date and
return the accompanying proxy as promptly as possible in the enclosed
postage-prepaid envelope. If you attend the Annual Meeting you may, if you wish,
withdraw your proxy and vote in person.
By Order of the Board of Directors,
/s/ Blake M. Roney
BLAKE M. RONEY
Chairman of the Board
Provo, Utah, April 10, 2001
[GRAPHIC OMITTED] Nu Skin Logo
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PROXY STATEMENT
NU SKIN ENTERPRISES, INC.
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 10, 2001
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SOLICITATION OF PROXIES
The accompanying proxy is solicited on behalf of the Board of Directors of
Nu Skin Enterprises, Inc. (the "Company") for use at the Annual Meeting of
Stockholders (the "Annual Meeting") to be held at the corporate offices of the
Company, 75 West Center Street, Provo, Utah 84601, on May 10, 2001 at 4:00 p.m.,
Mountain time, and at any adjournment or postponement thereof, for the purposes
set forth in the accompanying Notice of Annual Meeting of Stockholders. Each
proposal is described in more detail in this Proxy Statement. These proxy
solicitation materials were first sent or given to the Company's stockholders on
or about April 10, 2001.
All shares represented by each properly executed, unrevoked proxy received
in time for the Annual Meeting will be voted as directed by the stockholder. If
no specific voting instructions are given, the proxy will be voted FOR:
(1) The election of the nine nominees to the Board of Directors listed in
the proxy; and
(2) The ratification of the selection of PricewaterhouseCoopers LLP as the
Company's independent accountants for the fiscal year ending December
31, 2001.
If any other matters properly come before the Annual Meeting, including, among
other things, consideration of a motion to adjourn the Annual Meeting to another
time or place, the persons named in the accompanying proxy will vote on such
matters in accordance with their best judgment.
Any proxy duly given pursuant to this solicitation may be revoked by the
person or entity giving it at any time before it is voted by delivering a
written notice of revocation to the Secretary of the Company, by executing a
later-dated proxy and delivering it to the Secretary of the Company or by
attending the Annual Meeting and voting in person (although attendance at the
Annual Meeting will not in and of itself constitute a revocation of the proxy).
The Company will bear the cost of solicitation of proxies. Expenses include
reimbursements paid to brokerage firms and others for their expenses incurred in
forwarding solicitation material regarding the Annual Meeting to beneficial
owners of the Company's voting stock. Solicitation of proxies will be made by
mail. The Company's regular employees may further solicit proxies by telephone
or in person, and will not receive additional compensation for such
solicitation.
OUTSTANDING SHARES AND VOTING RIGHTS
Only stockholders of record at the close of business on April 3, 2001 (the
"Record Date") are entitled to vote at the Annual Meeting. As of the Record
Date, 33,178,235 shares of the Company's Class A Common Stock and 51,792,461
shares of the Company's Class B Common Stock were issued and outstanding. Each
outstanding share of Class A Common Stock will be entitled to one vote and each
outstanding share of Class B Common Stock shall be entitled to ten votes on each
matter submitted to a vote of the stockholders at the Annual Meeting. The Class
A Common Stock and the Class B Common Stock will vote as a single class with
respect to all matters submitted to a vote of the stockholders at the Annual
Meeting. Certain subsidiaries of the Company hold an aggregate of approximately
204,000 shares of the Class A Common Stock. In accordance with the General
Corporate Law of the State of Delaware, these shares may not be voted with
respect to any of the matters presented at the Annual Meeting and shall not be
counted in determining the presence of a quorum. The Class A Common Stock and
the Class B Common Stock are collectively referred to as the "Common Stock" in
this Proxy Statement.
In order to constitute a quorum for the conduct of business at the Annual
Meeting, a majority of the issued and outstanding shares of the Common Stock
entitled to vote at the Annual Meeting must be represented, either in person or
by proxy, at the Annual Meeting. Under Delaware law, shares represented by
proxies that reflect abstentions or "broker non-votes" (i.e., shares held by a
broker or nominee that are represented at the Annual Meeting, but with respect
to which such broker or nominee is not empowered to vote on a particular
proposal) will be counted as shares that are present and entitled to vote for
purposes of determining the presence of a quorum.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Class A Common Stock and Class B Common Stock as of
March 15, 2001 by (i) each person (or group of affiliated persons) who is known
by the Company to own beneficially more than 5% of the outstanding shares of
either the Class A Common Stock or the Class B Common Stock, (ii) each of the
Company's directors, (iii) each of the Company's current executive officers
whose names appear in the summary compensation table under the caption
"Executive Compensation," and (iv) all executive officers and directors of the
Company as a group. Unless otherwise indicated in the footnotes to the table,
the business address of the 5% stockholders is 75 West Center Street, Provo,
Utah 84601, and the stockholders listed have direct beneficial ownership and
sole voting and investment power with respect to the shares beneficially owned.
Each share of Class B Common Stock is convertible at any time at the option of
the holder into one share of Class A Common Stock, and each share of Class B
Common Stock automatically converts into one share of Class A Common Stock upon
the transfer of such share of Class B Common Stock to any person who is not a
permitted transferee as defined in the Company's Certificate of Incorporation.
-2-
Class A Class B Voting
Common Stock Common Stock Power
------------------ ------------------- ------
Directors, Executive
Officers, 5% Stockholders Number % Number % %
- -------------------------------- --------- ---- ---------- ---- ------
Blake M. and Nancy L. Roney(1) 4,520,782 14.3 16,155,378 30.7 29.8
Nedra D. Roney(2) 3,968,461 12.6 10,305,046 19.6 19.2
Sandra N. Tillotson(3) 2,524,412 8.0 6,967,557 13.3 13.0
Craig S. Tillotson(4) 1,268,006 4.0 4,004,587 7.6 7.4
R. Craig Bryson(5) 1,218,007 3.9 3,855,741 7.3 7.1
Steven J. Lund(6) 766,390 2.4 2,678,085 5.1 4.9
Brooke B. Roney(7) 730,478 2.3 2,675,322 5.1 4.9
Max L. Pinegar(8) 45,327 * -- -- *
Daniel W. Campbell(9) 25,000 * -- -- *
E.J. "Jake" Garn(9) 25,000 * -- -- *
Paula F. Hawkins(9) 25,000 * -- -- *
Andrew D. Lipman(10) 22,000 * -- -- *
Takashi Bamba(11) 49,250 * -- -- *
John Chou(12) 45,965 * -- -- *
SAFECO Corporation (13) 2,408,900 7.7 -- -- *
All directors and officers as a 9,453,058 29.8 28,476,342 54.2 52.8
group (18 persons)(14)
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<FN>
*Less than 1%
(1) Includes 4,504,205 shares of Class A Common Stock and 15,203,070 shares of
Class B Common Stock held by a family limited liability company, in which
Blake M. Roney has sole voting and investment control over 50% of such
securities and may be deemed to share voting and investment control over
the other 50% with his spouse, Nancy L. Roney. Also includes 16,577 shares
of Class A Common Stock and 776,143 shares of Class B Common Stock held
indirectly by Blake M. and Nancy L. Roney as co-trustees and with respect
to which they share voting and investment power; and 176,165 shares of
Class B Common Stock held indirectly by Blake M. Roney as trustee and with
respect to which he has sole voting and investment power.
(2) Includes 300,000 shares of Class B Common Stock held indirectly as
co-trustee and with respect to which Ms. Roney shares voting and investment
power.
(3) Includes 250,000 shares of Class A Common Stock held indirectly as trustee
and with respect to which Ms. Tillotson has sole voting and investment
power; 25,000 shares of Class A Common Stock and 20,000 shares of Class B
Common Stock held indirectly as co-trustee and with respect to which she
shares voting and investment power; and 500,000 shares of Class B Common
Stock held indirectly as manager of a limited liability company and with
respect to which she has sole voting and investment power.
(4) Includes 60,000 shares of Class A Common Stock and 52,500 shares of Class B
Common Stock held indirectly as trustee and with respect to which Mr.
Tillotson has sole voting and investment power; 30,000 shares of Class A
Common Stock and 149,765 shares of Class B Common Stock held indirectly as
co-trustee and with respect to which he shares voting and investment power;
and 1,000,000 shares of Class B Common Stock held indirectly as manager of
a limited liability company and with respect to which he has sole voting
and investment power.
(5) Includes 573,003 shares of Class A Common Stock and 1,892,621 shares of
Class B Common Stock held by Mr. Bryson's spouse, Kathleen D. Bryson, with
respect to which he may be deemed to share voting and investment power; and
72,000 shares of Class A Common Stock and 70,500 shares of Class B Common
-3-
Stock held indirectly as co-trustee and with respect to which he shares
voting and investment power with his spouse.
(6) Includes 650,324 shares of Class A Common Stock and 2,519,751 shares of
Class B Common Stock held by a family limited liability company in which
Mr. Lund retains voting and investment control over 50% of such securities
and may be deemed to share voting and investment control with his spouse,
Kalleen Lund, with respect to the other 50%; 102,763 shares of Class B
Common Stock held indirectly as trustee and with respect to which he has
sole voting and investment power; and 116,066 shares of Class A Common
Stock and 55,571 shares of Class B Common Stock held indirectly as
co-trustee and with respect to which he shares voting and investment power
with his spouse.
(7) Includes 707,537 shares of Class A Common Stock and 2,642,665 shares of
Class B Common Stock held by a family limited liability company in which
Mr. Roney retains voting and investment control over 50% of such securities
and may be deemed to share voting and investment control with his spouse,
Denise Roney, with respect to the other 50%; and 22,941 shares of Class A
Common Stock and 32,657 shares of Class B Common Stock held indirectly as
co-trustee and with respect to which he shares voting and investment power
with his spouse.
(8) Includes 19,000 shares of Class A Common Stock that may be acquired by Mr.
Pinegar pursuant to presently exercisable non-qualified stock options.
(9) Includes 22,500 shares of Class A Common Stock that may be acquired by each
of Mr. Campbell, Mr. Garn and Ms. Hawkins pursuant to presently exercisable
non-qualified stock options.
(10) Includes 17,500 shares of Class A Common Stock that may be acquired by Mr.
Lipman pursuant to presently exercisable non-qualified stock options.
(11) Includes 36,250 shares of Class A Common Stock that may be acquired by Mr.
Bamba pursuant to presently exercisable non-qualified stock options.
(12) Includes 32,750 shares of Class A Common Stock that may be acquired by Mr.
Chou pursuant to presently exercisable non-qualified stock options.
(13) The information regarding the number of shares beneficially owned or
deemed to be beneficially owned by SAFECO Corporation was taken from a
Schedule 13G filed by that entity with the Securities and Exchange
Commission dated January 22, 2001. The business address of SAFECO
Corporation is 4333 Brooklyn Avenue N.E., Seattle, Washington 98185.
(14) Includes 651,827 shares of Class A Common Stock that may be acquired upon
exercise of presently exercisable options.
</FN>
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PROPOSAL 1
ELECTION OF DIRECTORS
Directors are elected at each Annual Meeting of Stockholders and hold
office until their successors are duly elected and qualified at the next Annual
Meeting of Stockholders. The Company's Bylaws provide that the Board of
Directors will consist of a minimum of five and a maximum of 11 directors, with
the number being designated by the Board of Directors. On February 5, 2001,
Keith R. Halls resigned as a member of the Board of Directors. Consequently, the
Board of Directors has reduced the authorized number of directors from ten to
nine. Each of the nominees for election to the Board of Directors is currently
serving as a director of the Company and was previously elected to his or her
present term of office by the stockholders of the Company.
Directors will be elected by a favorable vote of a plurality of the shares
of Common Stock present and entitled to vote, in person or by proxy, at the
Annual Meeting. The nine nominees receiving the highest number of votes will be
elected to serve as directors. Accordingly, abstentions and broker non-votes as
to the election of directors will not affect the election of the candidates
receiving the plurality of votes. Unless instructed to the contrary, the shares
represented by proxies will be voted FOR the election of the nine nominees named
below. Although it is anticipated that each nominee will be able to serve as a
director, should any nominee become unavailable to serve, proxies will be voted
for such other person or persons as may be designated by the Company's Board of
Directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR EACH OF THE
NINE NOMINEES TO THE COMPANY'S BOARD OF DIRECTORS.
Set forth below are the name, age and business experience of each of the
nine nominees for election as directors of the Company.
Blake M. Roney, 43, has served as Chairman of the Board since the Company's
inception. Mr. Roney was a founder of Nu Skin International, Inc. ("NSI") in
1984 and served as its Chief Executive Officer and President until the Company's
acquisition of NSI in March 1998. Since the Company's acquisition of NSI, Mr.
Roney has served as Chairman of the Board of the Company and each of its
subsidiaries. He received a B.S. degree from Brigham Young University.
Steven J. Lund, 47, has been President, Chief Executive Officer and a
director of the Company since its inception. Mr. Lund was a founding shareholder
of NSI and served as the Executive Vice President of NSI until the Company's
acquisition of NSI. Mr. Lund previously worked as an attorney in private
practice. He received a B.A. degree from Brigham Young University and a J.D.
degree from Brigham Young University's J. Reuben Clark Law School.
Sandra N. Tillotson, 44, has served as a director of the Company since its
inception and as Senior Vice President since May 1998. Ms. Tillotson was a
founding shareholder of NSI and served as a Vice President of NSI from its
formation until the acquisition of NSI. She earned a B.S. degree from Brigham
Young University.
Brooke B. Roney, 38, has served as a director of the Company since its
inception. Mr. Roney has been a Senior Vice President of the Company since May
1998. He was a founding shareholder of NSI and served as a Vice President and
director of NSI until the Company's acquisition of NSI.
Max L. Pinegar, 69, has served as a director of the Company since its
inception. Mr. Pinegar came out of retirement and was appointed to serve as a
Senior Vice President of the Company in January 2000. Mr. Pinegar previously
served as a Senior Vice President of the Company from May 1998 until his
retirement in November 1998. He also served as General Manager of NSI from 1989
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and as Vice President of NSI from 1992 until November 1998. He received a B.A.
degree from Brigham Young University and an M.B.A. degree from the University of
Utah.
Daniel W. Campbell, 46, has served as a director of the Company since March
1997. Mr. Campbell has been a Managing General Partner of EsNet, Ltd., a
privately held investment company, since 1994. From 1992 to 1994, Mr. Campbell
was the Senior Vice President and Chief Financial Officer of WordPerfect
Corporation, a software company, and prior to that was a partner of Price
Waterhouse LLP. He received a B.S. degree from Brigham Young University.
E.J. "Jake" Garn, 68, has served as a director of the Company since March
1997. Senator Garn currently serves as the managing director of Summit Ventures,
LLC, a lobbying firm. He previously served as the Vice Chairman of Huntsman
Corporation, one of the largest privately held companies in the United States,
from 1993 to the beginning of 2000. He currently serves as a director for Morgan
Stanley Dean Witter Advisors, a mutual fund company; United Space Alliance
Board, a prime contractor for the space shuttle; Franklin Covey & Co., Inc., a
provider of time management seminars and products; BMW Bank of North America, an
industrial loan corporation; and Escrow Bank USA, an industrial loan
corporation. From 1974 to 1993, Senator Garn was a member of the United States
Senate and served on numerous Senate Committees. He received a B.S. degree from
the University of Utah.
Paula F. Hawkins, 74, has served as a director of the Company since March
1997. Senator Hawkins has been the principal of Paula Hawkins & Associates,
Inc., a management consulting company, since 1988. From 1980 to 1986, Senator
Hawkins was a member of the United States Senate and served on numerous Senate
Committees.
Andrew D. Lipman, 49, has served as a director of the Company since May
1999. Since 1988, Mr. Lipman has been a partner and head of the
Telecommunications Group of Swidler Berlin Shereff Friedman, LLP, a Washington,
D.C. law firm. He is currently Vice Chairman of the firm. From 1987 to 1997, Mr.
Lipman also served as Senior Vice President for Legal and Regulatory Affairs for
MFS Communications, Co., a competitive telecommunications provider. He also
currently serves as a director of: DSET Corporation, a software provider to
competitive local telephone carriers; NHC Corporation, a telecommunications
equipment manufacturer; and TMNG Inc., a telecommunications- related consulting
firm. He received a B.A. degree from the University of Rochester and a J.D.
degree from Stanford University. Mr. Lipman's law firm provides legal services
to Big Planet, Inc. and the Company from time to time.
Blake M. Roney and Brooke B. Roney are brothers. The Company is not aware
of any other family relationships among any directors or executive officers. The
Certificate of Incorporation of the Company contains provisions eliminating or
limiting the personal liability of directors for violations of a director's
fiduciary duty to the extent permitted by the Delaware General Corporation Law.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
The Board of Directors held seven meetings during the fiscal year ended
December 31, 2000. Each director attended at least 75% of the aggregate of the
total number of meetings of the Board of Directors held during such period and
the total number of meetings held during such period by all committees of the
Board of Directors on which that director served, except for Brooke B. Roney,
who attended 71% of the total Board meetings.
The Company has standing Audit, Compensation and Executive Committees, but
has not established a Nominating Committee.
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The Audit Committee members are Daniel W. Campbell, E.J. "Jake" Garn,
Paula F. Hawkins and Andrew D. Lipman. Mr. Campbell is the Chairman of the Audit
Committee. The Audit Committee's responsibilities include, among other things,
recommending the selection of the Company's independent public accountants to
the Board of Directors, reviewing the activities and the reports of the
independent public accountants, reviewing the independence of the independent
public accountants and examining the adequacy of the Company's internal controls
and internal auditing methods and procedures. The Audit Committee's specific
responsibilities are included in its written charter attached as Exhibit A to
this Proxy Statement. Each member of the Audit Committee is independent within
the meaning of the listing standards of the New York Stock Exchange. The Audit
Committee met five times during 2000.
The Compensation Committee members currently consist of Daniel W. Campbell,
E.J. "Jake" Garn, Paula F. Hawkins and Andrew D. Lipman. Mr. Campbell is the
Chairman of the Compensation Committee. The Compensation Committee's
responsibilities include, among other things, establishing the salaries, bonuses
and other compensation to be paid to the Company's executive officers and
administering the Company's Second Amended and Restated 1996 Stock Incentive
Plan. The Compensation Committee met seven times during 2000.
The Executive Committee members are Blake M. Roney and Steven J. Lund. Mr.
Roney is the Chairman of the Executive Committee. The duties of the Executive
Committee are, to the extent authorized by the Board of Directors, to exercise
all the powers and authority of the Board of Directors with respect to the
management of the business and affairs of the Company. The Executive Committee
met numerous times during 2000.
COMPENSATION OF DIRECTORS
Each director who does not receive compensation as an officer or
employee of the Company or its affiliates is entitled to receive an annual fee
of $35,000 for serving on the Board of Directors, a fee of $1,000 for each
meeting of the Board of Directors or any committee meeting thereof attended and
an additional fee of $1,000 for each committee meeting attended if such director
is the chairperson of that committee. Each director may be reimbursed for
certain expenses incurred in attending Board of Directors and committee
meetings.
In addition, directors may be granted options or stock bonus awards
under the Second Amended and Restated 1996 Stock Incentive Plan. On May 11,
2000, the Company granted each of E.J. "Jake" Garn, Paula F. Hawkins, Daniel W.
Campbell and Andrew D. Lipman options to acquire 7,500 shares of Class A Common
Stock under the Second Amended and Restated 1996 Stock Incentive Plan at an
exercise price of $7.44 per share. All of such options vest on the day before
the next annual meeting of the stockholders following the date of grant. All
options were granted with an exercise price equal to the fair market value of
the Class A Common Stock on May 11, 2000, the date of the grant. Each of the
non-employee directors of the Company will receive a stock option grant for
7,500 shares of Class A Common Stock on the date of the Annual Meeting in 2001.
-7-
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company and Presidents of the Company's
key subsidiaries as of March 15, 2001 were as follows:
Name Age Position
- ------------------- -- -------------------------------------------------------
Blake M. Roney 43 Chairman of the Board
Steven J. Lund 47 President and Chief Executive Officer
Sandra N. Tillotson 44 Senior Vice President
Brooke B. Roney 38 Senior Vice President
Max L. Pinegar 69 Senior Vice President
Corey B. Lindley 36 Executive Vice President and Chief Financial Officer
M. Truman Hunt 41 Executive Vice President, Secretary and General Counsel
Grant F. Pace 49 President, Nu Skin
Joseph Y. Chang 48 President, Pharmanex
Richard W. King 44 Chief Information Officer and President, Big Planet
Mark L. Adams 49 Vice President Finance and Administration
Michael D. Smith 55 Regional Vice President, North Asia
Takashi Bamba 65 President, Nu Skin Japan
John Chou 55 President, Nu Skin Taiwan
Set forth below is the business background of each of the executive officers of
the Company. Information on the business background of each of Blake M. Roney,
Steven J. Lund, Sandra N. Tillotson, Brooke B. Roney and Max L. Pinegar is set
forth previously under the caption "Election of Directors."
Corey B. Lindley has been the Chief Financial Officer of the Company since
its inception and has been an Executive Vice President since January 2000. From
1993 to 1996, he served as Managing Director, International, of NSI. Mr. Lindley
worked as the International Controller of NSI from 1991 to 1994. From 1990 to
1991, he served as Assistant Director of Finance of NSI. Mr. Lindley is a
Certified Public Accountant. Prior to joining NSI in 1990, he worked for the
accounting firm of Deloitte & Touche LLP. He earned a B.S. degree from Brigham
Young University and an M.B.A. degree from Utah State University.
M. Truman Hunt has served as Vice President and General Counsel since May
1998. In January 2000, he was appointed to serve as an Executive Vice President.
He served as Vice President of Legal Affairs and Investor Relations from the
Company's inception until May 1998. He also served as Counsel to the President
of NSI from 1994 until 1996. From 1991 to 1994, Mr. Hunt served as President and
Chief Executive Officer of Better Living Products, Inc., an NSI affiliate
involved in the manufacture and distribution of houseware products sold through
traditional retail channels. Prior to that time, he was a securities and
business attorney in private practice. He received a B.S. degree from Brigham
Young University and a J.D. degree from the University of Utah.
Grant F. Pace was appointed as the President of the Nu Skin division in
October 1999. Prior to such appointment, he served as Vice President of
Southeast Asia and China from December 1997. From 1992 to 1997, he was Regional
Vice President of Direct Selling in the Asian region for Sara Lee, and from 1988
to 1992, he was President and Regional Managing Director, Southeast Asia for
Avon Products, Inc. He received a J.D. degree from Brigham Young University and
an M.B.A. degree from Harvard University.
-8-
Joseph Y. Chang was appointed as the President of Pharmanex in April 2000.
Prior to such appointment, Dr. Chang served as Vice President of Clinical
Studies and Pharmacology of Pharmanex from 1997. He was the President and Chief
Scientific Officer of Binary Therapeutics, Inc., a development stage company in
the biotechnology industry, from 1994 until 1997. Dr. Chang has nearly 20 years
of pharmaceutical experience. He received a Ph.D. degree from the University of
London and a B.S. degree from Portsmouth University.
Richard W. King has served as the President of Big Planet since its
formation in October 1997. Mr. King was appointed to serve as the Chief
Information Officer of the Company in January 2000. From August 1996 to
September 1997, Mr. King was President of Night Technologies International, Inc.
From August 1993 to April 1996, Mr. King was an Executive Vice President of
Novell, Inc., a leading network software company, where he had responsibility
over NetWare, Novell's flagship product. Mr. King received a B.S. degree in
Computer Science from Brigham Young University.
Mark L. Adams has served as Vice President of Finance and Administration
for the Company since January 2000. He joined NSI in 1994 and has previously
held positions as Vice President of Corporate Services, Vice President of
Finance and International Controller. Mr. Adams also worked for eight years in
the audit division of Arthur Andersen LLP in Salt Lake City. Mr. Adams earned a
B.S. and an M.S. degree from Brigham Young University.
Michael D. Smith has been Regional Vice President of North Asia for the
Company since December 1997. Mr. Smith was Vice President of Operations for the
Company from its inception until December 1997. He also served previously as
Vice President of North Asian Operations for NSI. In addition, he served as
General Counsel of NSI from 1992 to 1996 and as Director of Legal Affairs of NSI
from 1989 to 1992. He earned B.S. and M.A. degrees from Brigham Young University
and a J.D. degree from the University of Utah.
Takashi Bamba has served as President and/or General Manager of Nu Skin
Japan Company, Ltd. ("Nu Skin Japan") since 1993. Prior to joining Nu Skin Japan
in 1993, Mr. Bamba was President and Chief Executive Officer of Avon Products
Co., Ltd., the publicly traded Japanese subsidiary of Avon Products, Inc., from
1988 to 1993. Mr. Bamba also currently serves as a director of the Japan Direct
Selling Association. He received a B.A. degree from Yokohama National
University.
John Chou has served as President and/or General Manager of Nu Skin Taiwan,
Inc. ("Nu Skin Taiwan") since 1991. Prior to joining Nu Skin Taiwan in 1991, he
spent 21 years in international marketing and management with 3M Taiwan Ltd.,
Amway Taiwan and Universal PR Co. Mr. Chou is the Chairman of the Taiwan ROC
Direct Selling Association. He received a B.A. degree from Tan Kang University
in Taipei, Taiwan.
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors and persons who own beneficially more than
10% of a registered class of the Company's equity securities to file with the
Securities and Exchange Commission and the New York Stock Exchange initial
reports of ownership and reports of changes in ownership of the Company's equity
securities. Officers, directors and greater than 10% beneficial owners are
required to furnish the Company with copies of all Section 16(a) reports they
file.
Based solely upon a review of the copies of such reports furnished to the
Company or written representations that no other reports were required, the
Company believes that during the fiscal year
-9-
ended December 31, 2000 the Company's officers, directors and greater than 10%
beneficial owners complied with all applicable Section 16(a) filing
requirements, except that Grant F. Pace filed one late report with respect to
one transaction, and Richard W. King filed one late report with respect to three
transactions. In addition, Craig S. Tillotson and R. Craig Bryson, who each hold
approximately 7% of the combined voting power of the Company, filed late Forms 3
and late reports on Form 5 with respect to 14 transactions and 17 transactions,
respectively. Mr. Bryson and Mr. Tillotson had not previously filed reports
under Section 16 because they did not own more than 10% of any class of Common
Stock and believed that they were not required to file Section 16 reports.
However, because they have determined that there is a possibility they could be
deemed to beneficially own more than 10% of the Class A Common Stock (due to the
method of calculating such percentage for convertible securities pursuant to
Regulation 13-d), Mr. Tillotson and Mr. Bryson have elected to begin to file
Section 16 reports.
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding the annual and
long-term compensation for services rendered in all capacities during the fiscal
years ended December 31, 1998, 1999 and 2000 of those persons who were the
Company's Chief Executive Officer, the other four most highly compensated
executive officers of the Company and the Presidents of the Company's
subsidiaries operating in its two major markets (collectively, the "Named
Officers").
Summary Compensation Table
Long-Term
Annual Compensation Compensation
-------------------------------------------------- ------------
Other Securities
Annual Underlying All Other
Name and Principal Position Year Salary Bonus Compensation Options Compensation
- -------------------------------- ---- ---------- --------- ------------ ------------ ------------
Blake M. Roney 2000 $ 791,666 $ 85,702 -- -- $ 3,272(2)
Chairman of the Board 1999 833,333 -- -- -- 3,272(2)
1998 --(1) 109,833 -- -- --
Steven J. Lund 2000 791,666 85,702 -- -- 3,019(2)
President and Chief Executive 1999 1,000,000 -- -- -- 3,019(2)
Officer 1998 815,000(3) 112,380 -- -- --
Sandra N. Tillotson 2000 463,768 54,057 -- -- 1,928(2)
Senior Vice President 1999 500,000 -- -- -- 1,928(2)
1998 375,000(1) 91,682 -- -- --
Keith R. Halls 2000 427,536 50,980 -- -- 2,925(4)
Former Senior Vice President 1999 500,000 -- -- -- 4,800(4)
and Secretary 1998 375,000(1) 90,055 -- -- 4,800(4)
Brooke B. Roney 2000 463,768 54,057 -- -- --
Senior Vice President 1999 500,000 -- -- -- --
1998 375,000(1) 91,841 -- -- --
Takashi Bamba 2000 392,608 35,568 -- 30,000 --
President, Nu Skin Japan 1999 397,727 15,783 -- 30,000 3,450(5)
1998 330,769 27,564 -- 20,000 3,450(5)
John Chou 2000 315,180 100,000(6) -- 20,000 --
President, Nu Skin Taiwan 1999 306,000 100,000(6) 43,698(7) 20,000 --
1998 300,000 100,000(6) 43,727(7) 18,000 --
- ----------------
-10-
(1) The amounts shown for Blake M. Roney, Sandra N. Tillotson, Keith R. Halls
and Brooke B. Roney do not include amounts paid, or accrued, by NSI prior
to the Company's acquisition of NSI in March 1998.
(2) Term life insurance payment.
(3) During the first three months of 1998, Mr. Lund was an executive officer of
NSI. The compensation presented in the table reflects an allocation of the
time spent by Mr. Lund providing services to the Company and certain
subsidiaries during the first three months of 1998. These salaries and
bonuses are in addition to any amounts received or accrued during the
relevant periods for Mr. Lund from NSI in return for his services to NSI
prior to the acquisition of NSI in March 1998.
(4) Consists of Company matching contributions under the Company's 401(k) plan
and a $2,925 term life insurance payment in 2000.
(5) Annual premium for insurance policy.
(6) Forgiveness of $100,000 of indebtedness. See "Employment Agreements" below.
(7) Consists of payments of approximately $41,000 with respect to a car
provided to Mr. Chou and certain other perquisites.
The following table sets forth certain information with respect to grants of
stock options pursuant to the Second Amended and Restated 1996 Stock Incentive
Plan during 2000 to the Named Officers.
Option Grants in Last Fiscal Year(1)
Percentage Potential
Number of of Total Realizable Value at
Securities Options Exercise Assumed Annual
Underlying Granted to or Base Rates of Stock Price
Options Employees Price for Option Term (2)
Granted in Fiscal per Expiration -------------------
Name (Shares) Year Share Date 5% 10%
- ------------------- ---------- ---------- -------- ---------- -------- --------
Blake M. Roney 0 -- -- -- -- --
Steven J. Lund 0 -- -- -- -- --
Sandra N. Tillotson 0 -- -- -- -- --
Keith R. Halls 0 -- -- -- -- --
Brooke B. Roney 0 -- -- -- -- --
Takashi Bamba 30,000 1.5% $ 6.56 8/31/10 $123,766 $313,649
John Chou 20,000 1.0% 6.56 8/31/10 82,511 209,099
- -------------------
<FN>
(1) All options granted become exercisable in four equal annual installments
beginning on the date of grant. Options are granted for a term of ten
years, subject to earlier termination in certain events, and are not
transferable. The exercise price is equal to the fair market value of the
Class A Common Stock on the date of grant. The Compensation Committee
retains discretion, subject to certain restrictions, to modify the terms of
outstanding options.
(2) Potential gains are net of the exercise price, but before taxes associated
with the exercise. Amounts represent hypothetical gains that could be
achieved for the respective options if exercised at the end of the option
term. The assumed 5% and 10% rates of stock price appreciation are provided
in accordance with the rules of the Securities and Exchange Commission, and
do not represent the Company's estimate or
-11-
projection of the future Class A Common Stock price. Actual gains, if any,
on stock option exercises depend upon the future financial performance of
the Company, overall market conditions and the option holder's continued
employment through the vesting period. This table does not take into
account any actual appreciation in the price of the Class A Common Stock
from the date of grant.
</FN>
The following table sets forth certain information with respect to
unexercised options under the Second Amended and Restated 1996 Stock Incentive
Plan held by the Named Officers as of December 31, 2000. No options were
exercised by any of the Named Officers in 2000.
Aggregated Option/SAR Exercises in Last
Fiscal Year and Fiscal Year-End Option/SAR Values
Number of Unexercised Value of Unexercised
Options In-the-Money Options
at December 31, 2000 at December 31, 2000(1)
--------------------------- ---------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
Blake M. Roney 0 0 $ 0 $ 0
Steven J. Lund 0 0 0 0
Sandra N. Tillotson 0 0 0 0
Keith R. Halls 0 0 0 0
Brooke B. Roney 0 0 0 0
Takashi Bamba 36,250 68,750 0 0
John Chou 32,750 50,250 0 0
- ----------------
[FN]
(1) Based on the closing sales price of the Class A Common Stock on the New
York Stock Exchange on December 31, 2000 of $5.30.
</FN>
EMPLOYMENT AGREEMENT
Messrs. Bamba and Chou have entered into employment agreements with Nu
Skin Japan and Nu Skin Taiwan, respectively. Under these agreements, these
individuals are paid an annual salary and receive various other benefits. These
individuals are also entitled to participate in a cash bonus incentive plan.
Mr. Bamba is employed as the President of Nu Skin Japan at a 2000 annual
salary of approximately (Y)45,150,000. This salary is subject to annual review.
Under the terms of his employment agreement, Mr. Bamba is entitled to
reimbursement of business-related expenses, the use of an automobile provided by
Nu Skin Japan and participation in a retirement plan offered by Nu Skin Japan,
which provides for a retirement payment in an amount determined by multiplying
the final monthly salary of Mr. Bamba by the number of years employed multiplied
by 2. Mr. Bamba also has the right under his employment agreement to have Nu
Skin Japan purchase a country club membership and pay related dues, although he
has not exercised this right. Mr. Bamba also receives a private insurance plan
paid for by Nu Skin Japan, provided the premium for such private insurance plan
does not exceed (Y)300,000 per year. Under his employment agreement, Mr. Bamba
has agreed to certain
-12-
confidentiality obligations. The term of Mr. Bamba's employment is indefinite,
subject to termination by Mr. Bamba or Nu Skin Japan upon three months' notice.
Mr. Chou is employed as the President of Nu Skin Taiwan at a 2000 annual
salary of approximately $315,000. Under the terms of his employment agreement,
Mr. Chou received a personal loan in the amount of $1.0 million. The loan bears
no interest and is payable upon demand if Mr. Chou ceases to be employed by Nu
Skin Taiwan or an affiliate. The loan is to be repaid by applying $100,000 of
the sum earned by Mr. Chou under a bonus incentive plan each year against the
loan balance. If less than $100,000 is earned under the bonus incentive plan in
a given year, $100,000 is nevertheless applied against the loan balance. If Mr.
Chou is terminated "without cause," any outstanding loan balance will be
forgiven. Under the terms of his employment agreement, Mr. Chou is also entitled
to health insurance paid for in part by Nu Skin Taiwan. Nu Skin Taiwan also
provides Mr. Chou with a monthly car allowance. The term of Mr. Chou's
employment agreement currently extends until August 2002. Under his employment
agreement, Mr. Chou has agreed to certain confidentiality and non-competition
obligations.
COMPENSATION PLANS
The Company has adopted a cash bonus incentive plan for its employees,
including the executive officers of the Company. Under the current cash bonus
incentive plan, an executive officer receives a bonus based on the operating
results of the Company compared to targeted performance measures; however, such
bonus is conditioned upon the executive and his/her department meeting certain
previously established goals. The bonus is measured and paid quarterly. The
Company has also, from time to time, paid discretionary cash bonuses to
executives based on local market and individual performance. The Company has
also historically paid a discretionary year-end payment to all of its employees
as more fully described in the Compensation Committee Report.
The Company also maintains two deferred compensation plans for certain of
its executive officers. Under the first plan, $12,000 is accrued as deferred
compensation each year. The total amount of deferred compensation vests after
the earlier of (i) ten years from the date of employment with the Company, or
(ii) the executive officer attaining age 60. Under the second plan, an amount
equal to a set percentage of an executive officer's salary is accrued as
deferred compensation. The total amount of deferred compensation under this plan
vests after the earlier of, (x) 20 years from the date of employment with the
Company, and (y) the executive officer attaining age 60. The amount of deferred
compensation has generally been invested in insurance policies on the lives of
the executive officers.
-13-
COMPENSATION COMMITTEE REPORT
This Compensation Committee Report discusses the Company's executive
compensation policies and the basis for the compensation paid to the Company's
executive officers, including its Chief Executive Officer, Steven J. Lund,
during the fiscal year ended December 31, 2000.
Compensation Policy. The Company's policy with respect to executive
compensation has been designed to:
* Adequately and fairly compensate executive officers in relation to
their responsibilities, capabilities and contributions to the Company
and in a manner that is commensurate with compensation paid by
companies of comparable size or within the Company's industry;
* Reward executive officers for the achievement of short-term operating
goals and for the enhancement of the long-term value of the Company;
and
* Align the interests of the executive officers with those of the
Company's stockholders with respect to short-term operating goals and
long-term increases in the price of the Company's Class A Common
Stock.
The Compensation Committee is responsible for reviewing and approving all
compensation paid by the Company to its executive officers and members of the
Company's senior management team. This compensation includes awards and bonuses
made under various incentive plans that the Compensation Committee reviews,
establishes and administers. In this capacity, the Compensation Committee
determines the timing, pricing and amount of all such bonuses and awards granted
under the plans. The Compensation Committee also administers the Seconded
Amended and Restated 1996 Stock Incentive Plan. As such, the Compensation
Committee establishes the timing and terms of all equity awards granted to both
executive officers of the Company as well as all other employee awards.
Components of Compensation. The components of the Company's current
compensation program consists of (i) base salary, (ii) short-term incentives in
the form of cash bonus payments, (iii) long-term incentives in the form of
equity awards, and (iv) certain other benefits provided to the Company's
executive officers. These components and the relationship of each component of
compensation to the Company's performance are discussed below.
Base Salary. Except as provided below, for the fiscal year ended
December 31, 2000, the Compensation Committee reviewed and approved the base
salary paid by the Company to its executive officers and the Presidents of
certain subsidiaries. In reviewing and approving the base salaries paid to its
executive officers, the Compensation Committee considers various factors
including (i) salaries provided by similarly sized companies or companies within
the Company's industry; (ii) the nature of each executive officer's
responsibilities, capabilities and contributions; and (iii) the performance of
the Company (to the extent such performance can fairly be attributed or related
to each executive officer's performance). The Compensation Committee does not
assign any specific weights to these factors, but it places a greater emphasis
on the salaries provided by other companies to ensure that the salaries provided
by the Company are competitive, enabling the Company to attract and retain
qualified and effective executive officers. In connection with this process, the
Compensation Committee reviewed and considered a compensation survey prepared
for the Compensation Committee by an independent consulting firm. The
Compensation Committee believes that the base salaries for the Company's
executive officers are reasonable in relation to the Company's size and
performance in comparison with
-14-
the compensation paid by similarly sized companies or companies within the
Company's industry. The Special Committee of Directors agreed to the salaries
for Blake M. Roney, Steven J. Lund, Sandra N. Tillotson, Keith R. Halls and
Brooke B. Roney following the acquisition of NSI. The Compensation Committee
reviewed the appropriateness of the compensation for these officers in 2000 and
made adjustments to their base salaries.
Annual Incentive Compensation. The Company has established formal
annual incentive plans that provide for cash bonuses based on the achievement of
targeted levels of revenue and operating income. The amount of the bonus that
can be earned under these plans is fixed by a formula and is based on the degree
to which the targeted performance measures have been met or exceeded. In
addition, the percentage of such award that an officer is entitled to receive is
determined based on the degree to which the executive officer has met individual
and department goals. A bonus was paid to corporate employees under these plans
based on the performance of the Company in the second quarter 2000. No bonus was
paid based on the performance of the Company in the second half of the year. In
addition, bonuses were also paid to executives in various foreign markets based
on their performances in 2000. The Compensation Committee also has retained the
right to make discretionary bonuses to officers for extraordinary performance
and other factors. In 2000, the Compensation Committee approved a limited number
of discretionary bonuses based on individual performance. The Compensation
Committee believes the incentive compensation plans for its officers rewards
those individuals for achieving or exceeding the Company's goals and targeted
objectives, thus benefitting the Company and its stockholders. The Compensation
Committee believes the achievement of these goals and targeted objectives will
dictate, in large part, the Company's future operating results. The Compensation
Committee believes that providing incentive-based compensation fairly and
adequately compensates individuals in relation to their responsibilities,
capabilities and contributions to the Company and in a manner that is
commensurate with compensation paid by companies of comparable size or within
the Company's industry.
The Company has also historically made a year-end payment to
corporate employees in the form of a gift certificate or similar merchant credit
arrangement in an amount equal to a percentage of each employee's base salary
(approximately two-weeks' salary). The amount of this year-end payment is
included in the bonus column of the Summary Compensation Table.
Equity Awards. The Company has adopted the Second Amended and
Restated 1996 Stock Incentive Plan that provides the Compensation Committee with
the discretion to grant equity incentive awards to key employees of the Company.
The Compensation Committee has the complete authority to determine the persons
to whom awards will be made and the nature and size of such awards. The Second
Amended and Restated 1996 Stock Incentive Plan provides for options, stock
appreciation rights, contingent stock awards and restricted stock awards. The
Compensation Committee determines the number of awards to be granted and the
persons who are to receive such awards on a subjective basis, taking into
consideration several factors including the level of options generally granted
by similarly sized companies or companies within the Company's industry for
similar positions, the anticipated value of the Company's stock if financial and
operating targets are met, individual salaries and individual performance and
contributions. The Compensation Committee also utilizes the services of an
independent consulting firm to provide advice on the size and frequency of
equity awards.
Other Benefits. The Company maintains certain other plans and
arrangements for the benefit of its executive officers. The Company believes
these benefits are reasonable in relation to the executive compensation
practices of other similarly sized companies or companies within the Company's
industry.
-15-
Tax Limitations on Deductibility. The Compensation Committee takes into
consideration the limitation on deductibility for United States income tax
purposes of compensation in excess of $1 million paid to the Company's highest
paid executive officers when it is determining compensation for its executive
officers. The Compensation Committee has attempted, where possible, to structure
its formal bonus and equity plans to qualify for the "performance-based"
exception to the deduction limitation.
Compensation of the Chief Executive Officer. The salary paid by the
Company to Mr. Lund in 2000 was reviewed and determined in accordance with the
policies set forth above. In particular, the Compensation Committee reviewed and
considered the compensation survey described previously and the mix of Mr.
Lund's compensation. In order to shift more of Mr. Lund's total compensation to
performance-based compensation, the Compensation Committee elected to reduce Mr.
Lund's base salary to $750,000. The Compensation Committee believes Mr. Lund's
salary is commensurate with the compensation paid by companies of comparable
size or within the Company's industry. The Company paid a $62,650 bonus to Mr.
Lund in 2000 based on the Company's revenue and operating profit performance
compared to targeted goals during the second quarter of 2000. In addition, a
year-end payment that was equivalent, on a percentage basis of base salary, to
the year-end payments provided to all corporate employees as described above was
provided to Mr. Lund. The Compensation Committee elected not to make any equity
awards to Mr. Lund in 2000 because of existing incentives tied to the
performance of the Company.
Conclusion. The Compensation Committee believes that the concepts
discussed above further the stockholders' interests and that executive officer
compensation encourages responsible management of the Company. The Compensation
Committee regularly considers the effect of management compensation on
stockholder interests. In the past, the Compensation Committee based its review,
in part, on the experience of its own members and on information requested from
management personnel. The Compensation Committee also regularly seeks input from
an independent executive compensation and benefits consulting firm regarding the
Company's compensation policies and strategies. In the future, these factors,
reports of the Compensation Committee and discussions with and information
compiled by various independent consultants retained by the Company and the
Compensation Committee will be used in determining executive officer
compensation.
COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS
Daniel W. Campbell
E.J. "Jake" Garn
Paula F. Hawkins
Andrew D. Lipman
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is comprised of Daniel W. Campbell, Paula F.
Hawkins, E.J. "Jake" Garn and Andrew D. Lipman. Mr. Lipman is associated with a
law firm that provides legal services to the Company and Big Planet in
connection with contractual and regulatory issues associated with the
telecommunications and enhanced data and voice communications products of Big
Planet. See "Certain Relationships and Transactions" for more information
concerning the relationship described above.
-16-
STOCK PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total stockholder
return (stock price appreciation plus dividends) on the Company's Class A Common
Stock with the cumulative total return of the S&P 500 Index and a market
weighted index of publicly traded peers for the period from November 22, 1996
(the date of the Company's initial public offering) through December 31, 2000.
The graph assumes that $100 is invested in each of the Class A Common Stock, the
S&P 500 Index and the index of publicly traded peers on November 22, 1996 and
that all dividends were reinvested. The publicly traded companies in the peer
group are Tupperware Corporation, Revlon, Inc., Nature's Sunshine Products, Inc.
and Avon Products, Inc. Amway Asia Pacific, Ltd., Amway Japan, Ltd. and Rexall
Sundown, Inc. are no longer included in the peer group as their shares are no
longer publicly traded.
COMPARISON OF CUMULATIVE TOTAL STOCKHOLDER RETURN
AMONG NU SKIN ENTERPRISES, INC.,
PEER GROUP AND BROAD MARKET
[GRAPHIC OMITTED] Line graph of comparison of cummulative total stockholder
return among Nu Skin Enterprises, Inc., peer group and
broad market.
S&P 500 Peer Group
Measurement Period Company Index Index
------------------ ------- ------- ----------
November 22, 1996 $100.00 $100.00 $100.00
December 31, 1996 107.39 98.02 101.02
December 31, 1997 63.48 130.72 98.10
December 31, 1998 82.17 168.08 114.09
December 31, 1999 31.52 203.45 87.05
December 31, 2000 18.48 184.92 123.28
-17-
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The Audit Committee of the Board of Directors is responsible for monitoring
the Company's financial auditing, accounting and financial reporting processes
and its system of internal controls on behalf of the Board of Directors. The
Company's management has primary responsibility for the Company's internal
controls and reporting process. The Company's independent public accountants,
PricewaterhouseCoopers LLP, are responsible for performing an independent audit
of the Company's consolidated financial statements in accordance with generally
accepted auditing standards and issuing an opinion on the conformity of the
Company's audited consolidated financial statements to generally accepted
accounting principles. The Audit Committee's responsibility is to monitor these
processes. In this context, the Audit Committee met and held discussions with
management, the Company's internal auditors, and PricewaterhouseCoopers LLP.
Management represented to the Audit Committee that the consolidated financial
statements for the fiscal year 2000 were prepared in accordance with generally
accepted accounting principles.
The Audit Committee hereby reports as follows:
* The Audit Committee has reviewed and discussed the audited
consolidated financial statements with the Company's management and
PricewaterhouseCoopers LLP. This discussion included
PricewaterhouseCoopers LLP's judgments about the quality, not just the
acceptability, of the accounting principles, the reasonableness of
significant judgments and the clarity of disclosures in the financial
statements.
* The Audit Committee also discussed with PricewaterhouseCoopers LLP the
matters required to be discussed by Statement on Auditing Standards
No. 61 (Communication with Audit Committees).
* PricewaterhouseCoopers LLP also provided to the Audit Committee the
written disclosures and the letter required by Independence Standards
Board Standard No. 1 (Independence Discussions with Audit Committees),
and the Audit Committee has discussed with PricewaterhouseCoopers LLP
the accounting firm's independence. The Audit Committee also
considered whether non-audit services provided by
PricewaterhouseCoopers LLP during the last fiscal year were compatible
with maintaining the accounting firm's independence.
* Based on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited
consolidated financial statements be included in the Company's Annual
Report on Form 10-K for the year ended December 31, 2000, for filing
with the Securities and Exchange Commission. The Audit Committee also
recommended to the Board of Directors, subject to stockholder
ratification, the appointment of PricewaterhouseCoopers LLP to serve
as the Company's independent public accountants for the year ending
December 31, 2001.
AUDIT COMMITTEE OF THE BOARD OF
DIRECTORS
Daniel W. Campbell, Chairman
E.J. "Jake" Garn
Paula F. Hawkins
Andrew D. Lipman
-18-
CERTAIN RELATIONSHIPS AND TRANSACTIONS
DISTRIBUTOR STOCK OPTION OBLIGATION
Maple Hills Investment, Inc. ("Maple Hills"), formerly known as Nu Skin
USA, Inc., has agreed to reimburse the Company for the value of the Class A
Common Stock that the Company is required to issue upon exercise of certain
options granted to distributors of the Company resident in the United States.
This obligation was not assumed or eliminated in connection with the assumption
of the Nu Skin operations in the United States in 1999. A total of $2.2 million
of this obligation was repaid in 2000. Maple Hills currently remains obligated
to reimburse the Company for up to $3.9 million in connection with such options.
Payment of this obligation is due in installments as the options are exercised
and the Company issues the underlying shares of Class A Common Stock. No
interest accrues on the obligation unless Maple Hills fails to make a timely
payment of an installment.
As set forth below, certain of the stockholders of Maples Hills were
directors, executive officers or significant stockholders of the Company in
2000. The following table sets forth the ownership percentage in Maple Hills for
each of the stockholders who is (i) a person known by the Company to own
beneficially more than 5% of the outstanding shares of either the Class A Common
Stock or the Class B Common Stock as of March 10, 2000 (a "5% Stockholder"),
(ii) a director of the Company, (iii) a Named Officer, or (iv) a family member
of the foregoing persons.
Percentage
of
Stockholder Relationship With the Company Ownership
- ------------------- -------------------------------------------- ----------
Blake M. Roney Chairman of the Board and 5% Stockholder 30.3%
Steven J. Lund President, Chief Executive Officer, Director 5.0
and 5% Stockholder
Nedra D. Roney 5% Stockholder 24.3
Sandra N. Tillotson Director, Named Officer and 5% Stockholder 14.2
Craig S. Tillotson 5% Stockholder 7.1
R. Craig Bryson 5% Stockholder 7.1
Brooke B. Roney Director, Named Officer and 5% Stockholder 5.0
Kirk Roney Family Member 5.0
Rick Roney Family Member 1.0
Keith R. Halls Former Director and Named Officer 0.5
BIG PLANET ACQUISITION NOTE
As part of the acquisition of Big Planet, Inc. in 1999, the Company issued a
promissory note in the principal amount of $14.5 million to Maple Hills. The
note accrues interest at the rate of 6.5% and is payable in quarterly
installments over three years. As of March 1, 2001, approximately $7.7 million
remained outstanding.
-19-
LEASES
The Company leases its corporate offices, distribution center and certain
other property pursuant to lease agreements with entities owned by the following
officers, directors, 5% or greater stockholders and respective family members:
Blake M. Roney, Nedra D. Roney, Sandra N. Tillotson, Brooke B. Roney, Steven J.
Lund, Kirk V. Roney, Craig S. Tillotson, R. Craig Bryson and Rick A. Roney. The
lease for the corporate offices is with Scrub Oak, Ltd. ("Scrub Oak") with a
monthly fixed rent of $140,000 in 2000.
The lease for the distribution center is a month-to-month lease between the
Company and Aspen Country, L.L.C. ("Aspen Country"). The monthly rent in 2000
was $56,250. The Company also leases certain additional miscellaneous office and
warehouse space from Scrub Oak and Aspen Country. The monthly payments under
such leases in 2000 were $34,750.
In 2000, the Company incurred lease charges totaling approximately $2.0
million and $800,000, respectively, to Scrub Oak and Aspen Country.
STOCKHOLDERS PARTNERSHIP
R. Craig Bryson and Craig S. Tillotson are major stockholders of the Company
and have been distributors of the Company since 1984. Messrs. Bryson and
Tillotson and Clara McDermott, the mother of Mr. Tillotson, are partners in an
entity (the "Partnership") that receives substantial commissions on product
sales from the Company. For the fiscal year ended December 31, 2000, total
commissions paid to the Partnership were approximately $3.4 million. By
agreement, the Company pays commissions to the Partnership at the highest level
of commissions available to distributors. Management believes that this
arrangement allows Messrs. Bryson and Tillotson and Ms. McDermott the
flexibility of using their expertise and reputations in network marketing
circles to sponsor, motivate and train distributors to benefit the Company's
distributor force generally, without having to focus solely on their own
organizations. In addition, during 2000 Mr. Bryson had a consulting contract
with the Company that paid him $33,333 per month. This contract was terminated
in December 2000.
Craig S. Tillotson has three brothers who are distributors of the Company.
For the year ended December 31, 2000, total commissions paid to these persons or
the partnerships in which they are partners from the sale of Company products
were approximately $2.3 million.
In February 2000, the Company entered into an agreement with I-Link
Incorporated to become the exclusive global distributor of I-Link products and
services in the network marketing channel. In connection with such transaction,
the distributors of I-Link were transitioned and transferred intact to Big
Planet directly under the partnership of Messrs. Bryson and Tillotson, which
agreed to pay part of the cost of acquiring and transferring the I-Link
distributors to Big Planet. The founding distributor of I-Link had previously
been a front-line distributor of Mr. Bryson at Nu Skin. The Company paid the
founding distributor of I-Link $500,000 up front and may pay up to an additional
$650,000 based on achievement of certain sales objectives in order to obtain his
exclusive rights to market I-Link products through the multi-level marketing
channel. As of December 31, 2000, no additional payments had been made based on
sales levels in 2000. In connection with the transfer, the Company received from
the Partnership $150,000 of commissions that would have otherwise been paid to
the Partnership related to the sale of I-Link products and services.
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STOCKHOLDERS AGREEMENT
Effective as of November 28, 1997, the original stockholders of the Company
and certain of their transferees (the "Original Stockholders") entered into an
amended and restated stockholders agreement with the Company (the "Stockholders
Agreement"). The Original Stockholders and certain of their affiliates
beneficially own shares having over 90% of the combined voting power of the
outstanding shares of Common Stock of the Company. Each of the Original
Stockholders has agreed to comply with the volume limitations of Rule 144 even
if they are eligible to sell shares under Rule 144(k).
The Original Stockholders have been granted registration rights by the
Company permitting each such Original Stockholder to register his or her shares
of Class A Common Stock, subject to certain restrictions, on any registration
statement filed by the Company until such Original Stockholder has sold a
specified value of shares of Class A Common Stock. In certain circumstances, the
Original Stockholders are responsible to reimburse the Company for expenses
associated with any registered offering. As of December 31, 1999, the Company
had incurred expenses associated with the prior proposed public offerings and
other related liquidity events and transactions for which the Original
Stockholders remained obligated to reimburse the Company in the amount of
approximately $1.5 million as of December 31, 2000.
LEASE OF AIRPLANE
The Company periodically charters air service from a charter company,
Keystone Aviation LLC, in which Blake M. Roney, Chairman of the Board of the
Company, currently owns a 50% interest. In 2000, the Company paid $431,984 to
this charter company. Keystone Aviation, LLC, leases from time to time an
aircraft from Arrow Plane, L.C. to provide its charter services to the Company.
Mr. Roney and his spouse directly or indirectly own substantially all of Arrow
Plane, L.C. In 2000, Arrow Plane, L.C. received payments of approximately
$108,810 from Keystone Aviation related to charter services provided to the
Company.
CERTAIN LOANS
As part of his employment agreement, the Company loaned John Chou, the
President of Nu Skin Taiwan, $1.0 million. The loan bears no interest and is
payable upon demand if Mr. Chou ceases to be employed by Nu Skin Taiwan or an
affiliate. The loan is to be repaid by applying $100,000 of the sum earned by
Mr. Chou under the Bonus Incentive Plan per year against the loan balance. If
less than $100,000 is earned under the Bonus Incentive Plan in a given year,
$100,000 is nevertheless applied against the loan balance. If Mr. Chou is
terminated "without cause," any loan balance will be forgiven. The outstanding
balance of the loan at March 1, 2001, was $600,000. See "Executive
Compensation--Employment Agreements."
On December 10, 1997, the Company loaned $5.0 million (the "Original
Principal Amount") to Nedra D. Roney. This loan is secured by a pledge by Ms.
Roney of 349,406 shares of Class B Common Stock. The loan is payable on demand,
or in any event by December 31, 2001, with interest on the Original Principal
Amount at 6.0% per annum. The loan was made in connection with Ms. Roney's
entering into the Stockholders Agreement, as amended. In 2000, $300,000 in
interest was accrued on this loan. As of March 1, 2001, the outstanding
principal balance and accrued interest of this loan was $5.9 million.
In March 2000, the Company loaned $500,000 to Grant F. Pace, President of
the Nu Skin division. This loan is secured by real estate purchased by him for
his primary residence. The loan bears interest
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at 5.8% per annum, payable in semi-annual payments. The principal is due and
payable in full on the earlier of (i) March 1, 2005, (ii) the 180th day
following Mr. Pace's voluntary termination of employment, (iii) the one-year
anniversary of the termination of Mr. Pace's employment if it is terminated by
the Company without cause, and (iv) 30 days after termination of employment if
Mr. Pace is terminated for cause. The outstanding principal balance is currently
$500,000.
On June 23, 1999, the Company loaned $1.5 million to William E. McGlashan,
Jr., the former Executive Vice President of the Company and former President of
Pharmanex. This loan is secured by a pledge by Mr. McGlashan of his shares of
Class A Common Stock. In addition, Mr. McGlashan is required to secure the loan
with any real estate purchased by him for his primary residence. The loan bears
interest at 5.8% per annum, payable in semi-annual payments. The outstanding
principal balance as of March 31, 2001 was $634,249. The remaining principal
balance, together with accrued interest, is due in payable in full on or before
December 31, 2001.
REPURCHASE OF CLASS A COMMON STOCK
On April 17, 2000, the Company repurchased 68,330 shares of Class A Common
Stock for $6.00 per share from Burke Roney, a brother of Blake M. Roney and
Brooke B. Roney, who are directors and officers of the Company. The purchase
price was based on a discount to the market value of the Company's Class A
Common Stock as of the date of the transaction.
OTHER
Andrew D. Lipman, a director of the Company, is a partner in the law firm
Swidler Berlin Shereff Friedman ("Swidler Berlin"). Swidler Berlin provides
legal services to Big Planet and the Company in connection with contractual and
regulatory issues associated with the telecommunications and enhanced data and
voice communications products of Big Planet.
The Company currently employs a brother of Blake M. Roney and Brooke B.
Roney and two brothers-in-law of Blake M. Roney. The Company paid a total of
approximately $229,829 in compensation to these employees in 2000. In addition,
these employees also participated in the employee benefit plans available
generally to employees of the Company.
PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
The firm of PricewaterhouseCoopers LLP, the Company's independent public
accountants for the fiscal year ended December 31, 2000, was selected by the
Board of Directors of the Company to act in the same capacity for the fiscal
year ending December 31, 2001. Representatives of PricewaterhouseCoopers LLP are
expected to be present at the Annual Meeting and will have the opportunity to
make a statement if they so decide and will be available to respond to
appropriate questions.
Fees billed to the Company by PricewaterhouseCoopers LLP for the year
ended December 31, 2000 are as follows:
Audit Fees. Audit fees for the audit of the Company's consolidated
financial statements for the fiscal year ended December 31, 2000 and for reviews
of the Company's financial statements included in the Company's quarterly
reports on Form 10-Q for the last fiscal year totaled approximately $550,000.
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Financial Information Systems Design and Implementation Fees. The
Company did not engage PricewaterhouseCoopers LLP to provide services to the
Company regarding financial information systems design and implementation during
the last fiscal year.
All Other Fees. Fees billed for all other non-audit services, including
tax-related services, provided during the last fiscal year totaled approximately
$1 million.
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
Ratification of PricewaterhouseCoopers LLP as the Company's independent
accountants will require the affirmative vote of a majority of the total number
of votes of outstanding shares of Common Stock present in person or represented
by proxy at the Annual Meeting and entitled to vote. In determining whether
Proposal 2 has received the requisite number of affirmative votes, abstentions
will be counted as shares entitled to vote and will have the same effect as
votes against Proposal 2. Broker non-votes, however, will be treated as not
entitled to vote for purposes of determining approval of Proposal 2 and will not
be counted as votes for or against Proposal 2. Properly executed, unrevoked
proxies will be voted FOR Proposal 2 unless a vote against Proposal 2 or
abstention is specifically indicated in the proxy.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR
RATIFICATION OF THE COMPANY'S SELECTION OF INDEPENDENT ACCOUNTANTS.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors knows of
no other matters to be brought before the Annual Meeting. If other matters are
properly brought before the Annual Meeting or any adjournment or postponement
thereof, it is intended that the persons named in the enclosed proxy will have
discretionary authority to vote on such matters in accordance with their best
judgment, acting together or separately.
STOCKHOLDER PROPOSALS FOR 2002 ANNUAL MEETING
In order for a stockholder proposal to be considered for inclusion in
the Company's proxy statement for next year's annual meeting, the written
proposal must be received by the Company no later than December 11, 2001. Such
proposals also will need to comply with Securities and Exchange Commission
regulations regarding the inclusion of stockholder proposals in
company-sponsored proxy materials. Similarly, in order for a stockholder
proposal to be raised at next year's annual meeting, written notice must be
received by the Company no later than December 11, 2001 and shall contain such
information as required under the Company's Bylaws.
In addition, the Company's Bylaws permit stockholders to nominate
directors at the annual meeting by providing advance written notice to the
Company. In order to make a director nomination at a stockholder meeting, a
stockholder must notify the Company not fewer than 120 days in advance of the
date of the Company's proxy statement released to stockholders in connection
with the previous year's annual meeting. Thus, since April 10th is specified as
the date of this year's proxy statement, in order for any such nomination notice
to be timely for next year's annual meeting, it must be received by the Company
no later than December 11, 2001 (i.e., 120 days prior to April 10th). In
addition, the notice must meet all other requirements contained in the Company's
Bylaws.
-23-
A stockholder may contact the Corporate Secretary of the Company at its
headquarters for a copy of the relevant Bylaw provisions regarding the
requirements for making stockholder proposals and nominating director
candidates.
ANNUAL REPORT TO STOCKHOLDERS
The Annual Report to Stockholders concerning the operation of the
Company for the fiscal year ending December 31, 2000, including financial
statements, is enclosed with this Proxy Statement.
ANNUAL REPORT TO SECURITIES AND EXCHANGE COMMISSION
A copy of the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 2000, as filed with the Securities and Exchange Commission,
without exhibits, may be obtained by stockholders without charge by written
request to Charles N. Allen, Director, Investor Relations, Nu Skin Enterprises,
Inc., 75 West Center Street, Provo, Utah 84601. Exhibits will be provided upon
written request and payment of an appropriate processing fee.
By Order of the Board of Directors,
/s/ Blake M. Roney
Blake M. Roney
Chairman of the Board
DATED: April 10, 2001
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EXHIBIT A
Nu Skin Enterprises, Inc.
Audit Committee Charter
I. PURPOSE
The purpose of the Audit Committee is to assist the Board of Directors in
fulfilling its oversight responsibilities by reviewing: financial reports and
other financial information provided by NSE to any governmental body or the
public; NSE's systems of internal controls regarding finance, accounting, legal
compliance and ethics that management and the Board have established; and NSE's
auditing, accounting and financial reporting processes generally. Consistent
with this function, the Audit Committee should encourage continuous improvement
of, and should foster adherence to, NSE's policies, procedures and practices at
all levels. The Audit Committee's primary duties and responsibilities are to:
* Serve as an independent and objective party to monitor NSE's financial
reporting process and internal control system.
* Review and appraise the audit efforts of NSE's independent accountants
and internal auditing department.
* Provide an open avenue of communication among the independent
accountants, financial and senior management, the internal auditing
department, and the Board of Directors.
The Audit Committee will fulfill these responsibilities by carrying out the
activities enumerated in the "Responsibilities and Duties" Section of this
Charter.
II. COMPOSITION
The Audit Committee shall be comprised of three or more directors as determined
by the Board, each of whom shall be independent directors, and free from any
relationship that, in the opinion of the Board, would interfere with the
exercise of his or her independent judgment as a member of the Committee.
Specifically; 1) an employee of the company or any affiliate in the current year
or any of the past three years is prohibited from serving on the audit committee
and 2) a member of the immediate family of an executive officer who currently
serves in that role or did so in any of the past three years generally is
precluded from serving on the committee. These types of relationships or others
that could impair a committee member's independence should be communicated to
the Board of Directors in writing. The Board has the final judgement on a
Committee member's independence. All members of the Committee shall have a
working familiarity with basic finance and accounting practices, and at least
one member of the Committee shall have accounting or related financial
management expertise. Committee members may enhance their familiarity with
finance and accounting by participating in educational programs conducted by the
Corporation, an outside consultant, or a professional association.
Members of the Committee shall be elected by a simple majority of the Board
during a regularly scheduled Board meeting. Committee members shall, as a
general principle, be appointed to a three-year term - appointment dates
staggered so that the entire Committee is not replaced during the same year.
Audit Committee members, as members of the Board, are subject to annual
re-election and the three-year assignment is, thus, subject to the member's
re-election. Reappointment of committee members after a three-year term is
allowable, as deemed appropriate by the Board. If a Chair is not
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elected by the full Board, the members of the Committee may designate a Chair by
majority vote of the full Committee membership.
III. MEETINGS
The Committee shall meet at least four times annually, or more frequently as
circumstances dictate. As part of its job to foster open communication, the
Committee should meet at least annually with management, the director of the
internal auditing department and the independent accountants in separate
executive sessions to discuss any matters that the Committee or each of these
groups believe should be discussed privately. In addition, the Committee or at
least its Chair should meet with the independent accountants and management
quarterly to review the Corporation's financials.
IV. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties the Audit Committee shall:
General
I. Provide an open avenue of communication between the internal auditor, the
independent accountant, and the board of directors.
II. Review and update the committee's charter annually. State in the annual
proxy statement that the audit committee has adopted a written charter and
include a copy of such charter in the proxy statement every three years.
III. Consider with management and the independent accountant the rationale for
employing audit firms other than the principal independent accountant.
IV. Meet with the internal auditor, the independent accountant, and management
in separate executive sessions to discuss any matters that the committee or
these groups believe should be discussed privately with the audit
committee.
V. Report committee actions to the board of directors with such
recommendations as the committee may deem appropriate.
VI. Prepare a letter for inclusion in the annual report that describes the
committee's composition and responsibilities, and how they were discharged.
VII. Conduct or authorize investigations into any matters within the committee's
scope of responsibilities. The committee shall be empowered to retain
independent counsel, accountants, or others to assist it in the conduct of
any investigation.
VIII.The committee will perform such other functions as assigned by law, the
company's charter or bylaws, or the board of directors.
IX. The audit committee must include a report in the annual proxy statement,
followed by the names of all committee members, stating whether the
committee:
a. Reviewed and discussed the audited financial statements with
management;
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b. Discussed with the auditors the matters requiring discussion by SAS
61;
c. Received the written disclosures and letter from the auditors required
by Independence Standards Board No. 1, and discussed with the auditors
their independence based on the above;
d. Recommended to the full board that the audited financial statements be
included in the company's Annual Report on Form 10-K;
e. Considered whether the information technology and other non-audit
consulting services provided by the auditors could impair the
auditor's independence; and
f. Adopted an Audit Committee Charter and reviewed and modified it as
necessary (see number 2 above).
Independent Audit Oversight
I. The committee shall have ultimate authority and responsibility to select,
evaluate, and, where appropriate, replace the independent outside auditor.
II. Confirm and oversee the independence of the independent accountant,
including a review of management consulting services and related fees
provided by the independent accountant. The committee shall obtain from the
outside auditors a formal written statement delineating all relationships
between the auditor and the company, and its responsibility for discussing
with the auditor any disclosed relationships or services that may impact
auditor objectivity and independence.
III. Inquire of management and the independent accountant about significant
risks or exposures and assess the steps management has taken to minimize
such risk to the company.
IV. Consider, in consultation with the independent accountant, the audit scope
and plan of the internal auditor and the independent accountant.
V. Review the coordination of audit efforts to assure the completeness of
coverage, reduction of redundant efforts, and the effective use of audit
resources.
VI. Consider and review with the independent accountant:
a. The adequacy of the company's internal controls including computerized
information system controls and security.
b. Any related significant findings and recommendations of the
independent accountant and internal auditor together with management's
responses thereto.
VII. Assure the independent accountant communicates to the audit committee any
matters of the types described in SAS No. 61, Communication With Audit
Committees, identified in connection with interim reviews. The above
matters should be communicated to the audit committee, or at least its
chair, and a representative of financial management prior to the filing
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of the Form 10-Q. If that is not possible, the communication should be made
as soon as practicable.
VIII.Meet, at least annually, in executive session with the external auditors
to discuss matters the committee or the auditors may want to discuss in
private - without management.
Internal Audit Oversight
I. The committee shall have the ultimate authority and responsibility for the
appointment, replacement, reassignment, or dismissal of the director of
internal auditing.
II. Confirm and assure the independence of the internal auditor.
III. Meet, at least annually, in executive session with the director of internal
auditing to discuss matters the committee or director may want to discuss
in private - without management.
IV. Consider and review with management and the director of internal auditing:
a. Significant findings during the year and management's responses
thereto.
b. Any difficulties encountered in the course of their audits, including
any restrictions on the scope of their work or access to required
information.
c. Any changes required in the planned scope of their audit plan.
d. The internal auditing department budget and staffing.
e. Internal auditing's compliance with the IIA's Standards for the
Professional Practice of Internal Auditing (Standards).
Financial Statement Review
I. Review with management and the independent accountant at the completion of
the annual examination:
a. The company's annual financial statements and related footnotes.
b. The independent accountant's audit of the financial statements and its
report thereon.
c. Any significant changes required in the independent accountant's audit
plan.
d. Any serious difficulties or disputes with management encountered
during the course of the audit.
e. Other matters related to the conduct of the audit which are to be
communicated to the committee under generally accepted auditing
standards.
II. Review filings with the SEC and other published documents containing the
Corporation's financial statements and consider whether the information
contained in these documents is consistent with the information contained
in the financial statements.
-28-
III. Review with management, the independent accountant, and the internal
auditor the interim financial reports filed with the SEC or other
regulators.
IV. Review legal and regulatory matters that may have a material impact on the
financial statements, related company compliance policies, and programs and
reports received from regulators.
Internal Controls and Code of Ethics
I. Review policies and procedures with respect to officers' expense accounts
and perquisites, including their use of corporate assets, and consider the
results of any review of these areas by the internal auditor or the
independent accountant.
II. Discuss with the internal auditor and the independent accountant the
results of their review of the Corporation's monitoring compliance with the
Corporation's code of conduct.
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APPENDIX A - FORM OF PROXY
NU SKIN ENTERPRISES, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR
THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 10, 2001
The undersigned hereby appoints Steven J. Lund and M. Truman Hunt, as
proxies with full power of substitution and hereby authorizes either of them to
act and to vote, as designated on the reverse, all shares of Class A Common
Stock of Nu Skin Enterprises, Inc. (the "Company") the undersigned is entitled
to vote at the Annual Meeting of Stockholders of the Company to be held at the
corporate offices of the Company, 75 West Center Street, Provo, Utah, May 10,
2001 at 4:00 p.m., Mountain time, and at any adjournments or postponements
thereof, upon all matters referred to on this proxy card and described in the
accompanying Proxy Statement; and, at the proxies discretion, upon any other
matters which may properly come before the meeting.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
[ x ] Please mark your
votes as indicated
in this example.
FOR ALL NOMINEES WITHHOLD AUTHORITY
listed at right (except to vote for all
as marked to the nominees listed at right
contrary below)
1. Elect members of
the Board of [ ] [ ] Nominees: Blake M. Roney
Directors of the Steven J. Lund
Company Sandra N. Tillotson
Brooke B. Roney
Instructions: To WITHHOLD AUTHORITY to vote for any Max L. Pinegar
individual nominee, draw a line through (or otherwise E.J. "Jake" Garn
strike-out) the nominee's name in the list to the right. Paula F. Hawkins
Daniel W. Campbell
Andrew D. Lipman
2. To ratify the selection of PricewaterhouseCoopers FOR AGAINST ABSTAIN
LLP as the Company's independent accountants for [ ] [ ] [ ]
the fiscal year ended December 31, 2001.
Shares represented by all properly executed proxies will be voted in accordance
with instructions appearing on this proxy card and in the discretion of the
proxyholders as to any other matters that may properly come before the meeting.
IN THE ABSENCE OF SPECIFIC INSTRUCTIONS, PROXIES WILL BE VOTED FOR EACH OF THE
NOMINEES AND FOR THE PROPOSALS SET FORTH ABOVE.
(Signature)___________(SEAL) (Signature)__________(SEAL) Dated: __________, 2001
Important: Please sign as name(s) appears on the proxy card. If a joint account,
each joint owner must sign. If signing for a corporation or partnership as
agent, attorney or fiduciary, indicate the capacity in which you are signing.