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 Section240.14a-11(c) or
Section240.14a-12
NATURE'S SUNSHINE PRODUCTS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
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NATURE'S SUNSHINE PRODUCTS, INC.
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 11, 1998
------------------------
To the Shareholders:
Notice is hereby given that the 1998 Annual Meeting of Shareholders of
Nature's Sunshine Products, Inc. (the "Company") will be held at the Company's
corporate offices at 75 East 1700 South, Provo, Utah 84606, on Monday, May 11,
1998, at 10:00 a.m., local time, for the following purposes:
1. To elect two directors, each to serve a term of three years, and until
each of their successors is elected and shall qualify;
2. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The Board of Directors has fixed the close of business on March 20, 1998 as
the record date for the determination of shareholders entitled to notice of, and
to vote at, the Annual Meeting of Shareholders, and only shareholders of record
at such date will be so entitled to notice and to vote.
YOUR VOTE IS IMPORTANT. PLEASE SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT
PROMPTLY IN THE ENCLOSED RETURN ENVELOPE WHETHER OR NOT YOU EXPECT TO ATTEND THE
MEETING. YOU MAY REVOKE YOUR PROXY AND VOTE IN PERSON SHOULD YOU DECIDE TO
ATTEND THE MEETING.
BY ORDER OF THE BOARD OF DIRECTORS
Brent F. Ashworth
SECRETARY
Dated: April 8, 1998
PLEASE FILL IN, DATE, SIGN, AND RETURN THE ENCLOSED PROXY WHICH REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES. A PROXY IS REVOCABLE AT ANY TIME PRIOR
TO THE VOTING OF THE PROXY, BY WRITTEN NOTICE TO THE SECRETARY OF THE COMPANY OR
BY VOTING IN PERSON AT THE MEETING.
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
OF
NATURE'S SUNSHINE PRODUCTS, INC.
---------------------
GENERAL
This Proxy Statement is furnished in connection with the solicitation of
Proxies by the Board of Directors of Nature's Sunshine Products, Inc. ("the
Company") for the Annual Meeting of Shareholders of the Company to be held at
the Company's corporate offices at 75 East 1700 South, Provo, Utah 84606 on May
11, 1998, at 10:00 a.m., local time. The Shareholders of the Company will
consider and vote upon the proposals described herein and referred to in the
Notice of the Meeting accompanying this Proxy Statement.
The close of business on March 20, 1998 has been fixed as the record date
for the determination of the shareholders entitled to notice of, and to vote at,
the Annual Meeting. On such date there were 18,567,814 shares of Common Stock
outstanding and entitled to vote. Each share of Common Stock is entitled to one
vote on each matter to be considered at the meeting. For a description of the
principal holders of the Company's Common Stock, see "PRINCIPAL HOLDERS OF
COMMON STOCK" below.
Shares represented by Proxies will be voted in accordance with the
specifications made thereon by the shareholders. Any Proxy not specifying the
contrary will be voted in favor of the Board of Directors' nominees for
directors of the Company.
The Proxies being solicited by the Board of Directors may be revoked by any
shareholder giving the Proxy at any time prior to the Annual Meeting by giving
notice of such revocation to the Company, in writing, at the address of the
Company provided below. The Proxy may also be revoked by any shareholder giving
such Proxy who appears in person at the Annual Meeting and advises the Chairman
of the Meeting of his intent to revoke the Proxy.
The principal executive offices of the Company are located at 75 East 1700
South, Provo, Utah 84606. This Proxy Statement and the enclosed Proxy are being
furnished to shareholders on or about April 10, 1998.
PRINCIPAL HOLDERS OF COMMON STOCK
The following table sets forth information as of March 20, 1998, with
respect to the beneficial ownership of the Company's Common Stock by (i) each
person who, to the knowledge of the Company, is the beneficial owner of more
than 5% of the Company's outstanding Common Stock, (ii) each director and
nominee for director, (iii) each of the executive officers named in the Summary
Compensation Table under "Executive Compensation", and all officers and
directors of the Company as a group.
NUMBER OF SHARES
BENEFICIALLY
BENEFICIAL OWNER OWNED(1) PERCENT OF CLASS(2)
- -------------------------------------------------------------------- -------------------- ---------------------
Pauline T. Hughes .................................................. 2,373,104(3) 12.7%
311 East Canal Road
Salem, UT 84653
Kristine F. Hughes..................................................
Eugene L. Hughes 1,923,076(4) 10.2%
75 East 1700 South
Provo, UT 84606
Thomas W. Smith .................................................... 1,622,745(5) 8.7%
323 Railroad Avenue
Greenwich, CT 06830
Thomas N. Tryforos ................................................. 1,318,267(6) 7.0%
323 Railroad Avenue
Greenwich, CT 06830
Merrill Gappmayer .................................................. 109,627(7) .6%
1855 South Alta Vista Drive
Orem, UT 84057
Robert H. Daines ................................................... 4,118(8) -0-
660 TNRB, P. O. Box 23131
Provo, UT 84602-3131
Daniel P. Howells .................................................. -0- -0-
75 East 1700 South
Provo, UT 84606
Douglas Faggioli ................................................... 78,782(9) .4%
75 East 1700 South
Provo, UT 84606
Dale G. Lee ........................................................ 159,556(10) .9%
75 East 1700 South
Provo, UT 84606
2
NUMBER OF SHARES
BENEFICIALLY
BENEFICIAL OWNER OWNED(1) PERCENT OF CLASS(2)
- -------------------------------------------------------------------- -------------------- ---------------------
Alvin B. Segelman .................................................. 37,415(11) .2%
75 East 1700 South
Provo, UT 84606
All officers and directors as a group (14 persons).................. 4,891,301(12) 25.8%
- ------------------------
(1) Except as otherwise indicated, all shares are directly owned with voting
and investment power held by the person named. Amounts shown include, where
applicable, shares subject to presently exercisable options.
(2) The percentage includes shown for each beneficial owner is calculated based
upon the outstanding Common Stock, including shares of Common Stock subject
to presently exercisable options held by such beneficial owner which are
deemed to be outstanding.
(3) Includes 1,926,879 shares held by Pauline Hughes in trust for the benefit
of herself and her children, 270,610 shares held by a family limited
partnership and 175,615 shares subject to presently exercisable options.
(4) Includes 16,335 shares held directly, 1,445,959 shares held by Kristine and
Eugene Hughes as trustees for the benefit of themselves and their children,
89,857 shares allocated to Mr. Hughes' account in a 401(k) Plan and 370,925
shares subject to presently exercisable options.
(5) In an Amendment No. 1 to a Schedule 13D dated November 25, 1996, Thomas
Smith reported that he held sole voting and dispositive power for 310,500
shares and shared voting and dispositive power for 1,312,245 shares with
Thomas N. Tryforos.
(6) In an Amendment No. 1 to a Schedule 13D dated November 8, 1996, Thomas
Tryforos reported that he held sole voting and dispositive power for 6,022
shares and shared voting and dispositive power for 1,312,245 shares with
Thomas W. Smith.
(7) Includes 10,627 shares held directly and 99,000 shares subject to presently
exercisable options.
(8) Includes 118 shares held directly and 4,000 shares subject to presently
exercisable options.
(9) Includes 27,696 shares held directly, 22,886 shares allocated in a 401(k)
Plan and 28,200 shares subject to presently exercisable options.
(10) Includes 5,085 shares held directly, 34,571 shares allocated in a 401(k)
Plan and 119,900 shares subject to presently exercisable options.
(11) Includes 18,529 shares held directly, 7,186 shares allocated in a 401(k)
Plan and 11,700 shares subject to presently exercisable options.
(12) Includes 288,592 shares allocated to executive officers in the 401(k) Plan
and 437,650 shares subject to presently exercisable options.
ELECTION OF DIRECTORS
In accordance with the Bylaws of the Company, the Board of Directors has
fixed its number at seven members. Daniel P. Howells and Douglas Faggioli were
appointed by the Board of Directors to fill
3
vacancies on the Board. The other directors were elected for staggered terms at
the last three annual meetings.
Under the Company's Restated Articles of Incorporation, directors are
divided into three classes, each class to consist, as nearly as may be possible,
of one-third of the number of directors then constituting the entire Board of
Directors. Each year one class of directors is elected, each director to serve a
term of three years.
At the Annual Meeting, two directors, Robert H. Daines and Eugene L. Hughes,
will stand for election to serve three years and thereafter until each of their
successors are elected and shall qualify.
In the absence of instructions to the contrary, the persons named in the
Proxy will vote the Proxies for the election of the nominees listed below,
unless otherwise specified in the Proxy. The Board of Directors has no reason to
believe that the nominees will be unable to serve, but if either nominee should
become unable to serve, the Proxies will be voted for such other person as the
Board of Directors shall recommend.
Certain information concerning the two nominees to the Board of Directors,
and directors whose terms will continue after the Annual Meeting is set forth
below.
NOMINEES
CLASS
AND
SERVED YEAR
AS TERM
DIRECTOR WILL
NAME OF NOMINEE AGE COMPANY POSITION HELD SINCE EXPIRE
- --------------------------------- --- ----------------------------------------------------------------- ------- -------
Robert H. Daines................. 63 Director 1996 Class
II 2001
(if
re-elected)
Eugene L. Hughes................. 67 Senior Vice President and Director 1980 Class
II 2001
(if
re-elected)
DIRECTORS WHOSE TERMS ARE CONTINUING
Kristine F. Hughes............... 59 Chairperson of the Board and Director 1980 Class
III
1999
Daniel P. Howells................ 57 President, CEO and Director 1997 Class
III
1999
Merrill Gappmayer................ 56 Director 1980 Class I
2000
Pauline T. Hughes................ 56 Director 1988 Class I
2000
Douglas Faggioli................. 43 Executive Vice President, COO and Director 1997 Class I
2000
COMPENSATION OF DIRECTORS
Board members who are also employees of the Company do not receive any
directors fees. The Company pays its non-employee Board members directors' fees
of $42,939 and its Chairman of the Board, $120,000 per year, as well as the cost
of health and life insurance coverage. The Company does not pay any fees for
attendance at committee meetings. Robert H. Daines, a non-employee Board member,
received ten year options to purchase an aggregate of 20,000 shares of the
Company's Common Stock in 1997 and 1998. The options were granted at market
value as of the date of grant.
4
BOARD AND COMMITTEE MEETINGS AND ATTENDANCE
There were 14 meetings of the Board of Directors held during the last fiscal
year. All of the directors attended at least 75 percent of the meetings of the
Board and committees of the Board on which they served.
The Board of Directors has a Compensation Committee which consists of
Kristine F. Hughes, Pauline T. Hughes, Merrill Gappmayer and Robert H. Daines.
The Compensation Committee recommends to the Board of Directors the compensation
to be paid to the Company's officers and other key employees. There were two
meetings of the Compensation Committee during the last fiscal year.
The Board of Directors also has an Audit Committee which consists of
Kristine F. Hughes, Pauline T. Hughes, Merrill Gappmayer and Robert H. Daines.
The function of the Audit Committee is generally to approve the engagement of
the Company's independent public accountants and to review audit and non-audit
services provided by such accountants. There was one meeting of the Audit
Committee during the last fiscal year.
The Board of Directors has also established a Nominating Committee
consisting of Kristine F. Hughes, Pauline T. Hughes, Merrill Gappmayer and
Robert H. Daines. The Nominating Committee considers and recommends nominations
for election to the full Board of Directors. The Nominating Committee will
consider recommendations of shareholders, and recommendations should be
submitted to the Nominating Committee c/o the Secretary of the Company in
accordance with the time period in "Shareholder Proposals" below. There were no
meetings of the Nominating Committee during the last fiscal year.
OFFICERS AND DIRECTORS
The officers and directors of the Company are:
NAME POSITION AGE
- --------------------------------- ----------------------------------------------------------------- ---
Daniel P. Howells................ President, Chief Executive Officer and Director 57
Kristine F. Hughes............... Chairperson of the Board and Director 59
Eugene L. Hughes................. Senior Vice President and Director 67
Merrill Gappmayer................ Director 56
Pauline T. Hughes................ Director 56
Robert H. Daines................. Director 63
Douglas Faggioli................. Executive Vice President, Chief Operating Officer and Director 43
Dale G. Lee...................... Executive Vice President, President of the U.S.A. Sales Division 52
Brent F. Ashworth................ Vice President--Legal, Secretary and General Counsel 49
Joseph A. Speirs................. Vice President--Marketing 45
Dr. Alvin B. Segelman............ Vice President--Health Sciences 66
Craig D. Huff.................... Chief Financial Officer 42
Daren G. Hogge................... Vice President of the International Division 35
John R. DeWyze................... Vice President Operations 41
Certain information regarding the business experience of the officers and
directors is set forth below.
DANIEL P. HOWELLS. Mr. Howells is the President, Chief Executive Officer and
a Director of the Company. He began his employment with the Company in October
1997. From 1991-1997 Mr. Howells served as President and CEO of Resorts USA,
Bushkill, PA Division of Rank Group, London, England.
5
From 1985-1990, he served as Executive Vice President and General Manager of the
Marriott Management Service Division, Marriott Corporation. From 1972-1985, Mr.
Howells was employed by Six Flags Corporation, serving as President and CEO from
1982-1985.
KRISTINE F. HUGHES. Mrs. Hughes is the Chairperson of the Board of Directors
of the Company. Mrs. Hughes served as President and Chief Executive Officer of
the Company from September 1996 to October 1997. Mrs. Hughes was a co-founder in
1972 of Hughes Development Corporation, a predecessor of the Company, and has
served as a Director of the Company since 1980. Mrs. Hughes serves on several
civic and community boards and has been recognized for her business
achievements. She is the wife of Eugene L. Hughes.
EUGENE L. HUGHES. Mr. Hughes is Senior Vice President and a Director of the
Company. Mr. Hughes was a co-founder and appointed president in 1972 of Hughes
Development Corporation, a predecessor of the Company. He has served as an
officer or director of the Company and/or its predecessors since 1972. Mr.
Hughes serves on several community boards. He is the husband of Kristine F.
Hughes.
MERRILL GAPPMAYER. Mr. Gappmayer has been a Director of the Company since
1980. He is owner, president and CEO of Vista Enterprises, a commercial,
residential and industrial land development company located in Orem, Utah. Mr.
Gappmayer currently serves as chairman or as a member of the board of six local
and national community service organizations.
PAULINE T. HUGHES. Mrs. Hughes has been a Director of the Company since
1988. Mrs. Hughes was a co-founder in 1972 of Hughes Development Corporation, a
predecessor of the Company, and has acted as a consultant from time to time to
the Company and its predecessors.
ROBERT H. DAINES. Mr. Daines has been a Director of the Company since 1996.
Mr. Daines has been employed as a Professor of Business Management at Brigham
Young University, Provo, Utah since 1959. He is also a Director of AT&T
Universal Financial Corporation, Franklin Covey Co. and Alta Technology.
DOUGLAS FAGGIOLI. Mr. Faggioli is Executive Vice President, Chief Operating
Officer of the Company. He began his employment with the Company in 1983 and has
served as an officer of the Company since 1989. He is a Certified Public
Accountant.
DALE G. LEE. Mr. Lee is Executive Vice President, President of U. S. Sales
of the Company. He began his employment with the Company in 1978, and has been
an officer of the Company since 1989.
BRENT F. ASHWORTH. Mr. Ashworth is Vice President--Legal, Secretary and
General Counsel for the Company. Mr. Ashworth began his employment with the
Company in 1977 when he was appointed Secretary and General Counsel. He was
appointed Vice President--Legal in 1979 and is a member of the Utah State Bar.
JOSEPH A. SPEIRS. Mr. Speirs is Vice President--Marketing of the Company. He
began his employment with the Company in 1977 and since 1983 has served as an
officer of the Company.
ALVIN B. SEGELMAN, PH.D. Dr. Segelman is Vice President--Health Sciences. He
began his employment with the Company in 1990. From 1971 to 1990, Dr. Segelman
was a professor at the College of Pharmacy, Rutgers University, serving as
Chairman of the Department of Pharmacognosy from 1979 to 1986. Dr. Segelman has
published numerous articles and served on numerous national and Congressional
committees.
6
JOHN R. DEWYZE. Mr. DeWyze began his employment with the Company in 1995,
and has served as Vice President of Operations since June 1997. From 1983 to
1994, Mr. DeWyze was employed by Bristol-Myers Squibb where he held positions of
increasing responsibility during those years within the operations group
including leading manufacturing and maintenance groups. He received his MBA
degree in 1994.
DAREN G. HOGGE. Mr. Hogge began his employment with the Company in 1993, and
has served as Vice President of the International Division since September 1997.
He is a Certified Public Accountant.
CRAIG D. HUFF. Mr. Huff began his employment with the Company in 1982, and
has served as Chief Financial Officer of the Company since January 1998. He is a
Certified Public Accountant.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of Forms 3, 4 and 5 and amendments thereto and
written representations provided to the Company by its officers, directors and
10% shareholders, the Company is unaware of any such persons failing to file on
a timely basis any reports required by Section 16(a) of the Exchange Act during
the most recent fiscal year, except for Daniel P. Howells and Daren G. Hogge who
inadvertently filed late their Initial Statements of Ownership on Form 3.
7
EXECUTIVE COMPENSATION
COMPENSATION SUMMARY
The following table sets forth information concerning the cash and non-cash
compensation, paid or to be paid by the Company to its chief executive officer
and to each of its executive officers named below, for the three fiscal years
ended December 31, 1997. See also "CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS" below for compensation paid to the general managers of the
Company's Mexican and Colombian subsidiaries.
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
--------------------------------
ANNUAL COMPENSATION
- ------------------------------------------------------------------------------------- (G)
(E) SECURITIES (I)
(C) (D) OTHER ANNUAL UNDER-LYING ALL OTHER
(A) (B) SALARY BONUS COMPENSATION OPTION/SARS COMPENSATION(3)
NAME AND PRINCIPAL POSITION YEAR ($)(1) ($) ($)(2) (SHARES) ($)
- ------------------------------------- --------- --------- --------- ------------- ------------- -----------------
Daniel P. Howells, 1997 49,041 -- 39,037 50,000 822
Chief Executive Officer
Kristine F. Hughes, 1997 100,000 -- -- -- 46,575
Chief Executive Officer (4) 1996 -- -- -- 53,000 43,761
Eugene L. Hughes, 1997 190,934 -- -- -- 7,238
Senior Vice President 1996 155,450 98,700 -- 15,300 7,238
1995 137,728 100,950 -- 97,500 7,112
Douglas Faggioli, 1997 192,352 -- -- -- 1,175
Executive Vice President, Chief 1996 155,662 99,750 -- 10,800 1,003
Operations Officer 1995 157,500 100,950 -- 97,500 428
Dale G. Lee, 1997 173,759 -- -- -- 1,831
Executive Vice President, President 1996 145,200 62,640 -- 11,700 1,629
of the U.S.A. Sales 1995 130,500 60,621 -- 73,500 1,636
Alvin B. Segelman, P.H.D. 1997 159,892 -- -- -- 7,359
Vice President Health Science 1996 135,262 60,225 -- 11,700 9,000
1995 120,342 68,700 -- 73,500 5,756
- ------------------------
(1) Includes amounts contributed by the Company to its 401(k) defined
contribution plan and amounts paid by the Company under its automobile lease
program.
(2) Amount listed is for relocation and moving expenses. The Company also
provides health, disability and other perquisites to each of its officers,
but they do not exceed the lesser of $50,000 or 10% of the officer's total
annual salary and bonus.
(3) Amounts listed are for excess life insurance premiums.
(4) Ms. Hughes served as Chief Executive Officer of the Company from September
1996 to October 1997. Ms. Hughes received compensation of $46,575, $41,686
and $39,326 for her services as a director of the Company in 1997, 1996 and
1995, respectively.
8
EMPLOYMENT AGREEMENTS
The Company has Employment Agreements with each of its executive officers
who receive base annual salaries currently ranging from approximately $110,000
to $275,000. The Agreements are renewable on an annual basis and generally
provide for an initial term of one year. In the event the Company terminates or
does not renew an officer's employment without cause, the officer is generally
entitled to receive the balance of his base salary for twelve months.
EXECUTIVE INCENTIVE PLANS
The Company has from time to time adopted incentive plans for key management
and sales personnel. The only incentive plan in effect for officers of the
Company for 1997 was the Exempt Employee Incentive Compensation Plan ("Bonus
Plan") that provided for the officers to receive specified bonuses ranging from
0% to 90% of base salary if certain sales and operating income goals were
achieved by the Company. Payments totaling $0, $794,605 and $1,035,771 were made
to officers for services rendered in 1997, 1996 and 1995 for this or similar
executive incentive plans. Amounts paid, if any, to the officers participating
in the Bonus Plan are included in the Summary Compensation Table
In December 1997, the Board of Directors adopted a new Incentive
Compensation Plan which provides for bonuses ranging from 0% to 90% of base
salary for all employees of the Company depending upon the employee's position
with the Company. Up to 40% of the bonus may be determined by how well an
employee achieves certain specified individual performance objectives, and the
balance will be determined by how well the Company achieves certain sales and
operating income goals. The Plan also provides that certain stock options will
be granted to officers and key employees if the Company and the employee meet
their performance objectives. Management has estimated that the Plan would
require the Company to grant options to purchase between 190,000 and 570,000
shares of the Company's Common Stock, depending upon the financial performance
of the Company in 1998. Options would be granted at fair market value and
require two year vesting.
In 1996, the Company adopted a two year incentive automobile lease program
("Lease Program") that provides for the Company to pay lease payments ranging
from $600 to $1,000 per month for the Company's executive officers if the
Company met certain net income performance levels. The Lease Program also
provided that if such performance levels were met in 1996 and 1997, the Company
would pay from $25,000 to $45,000 for each executive officer towards the buyout
of the leased vehicles. The Lease Program terminated in 1997. Amounts paid to
the officers participating in the Lease Program are included in the Summary
Compensation Table.
STOCK OPTION PLANS
The 1995 Stock Option Plan (the "1995 Plan") authorizes the grant of
incentive and non-qualified stock options to officers and key employees. The
1995 Plan covers a maximum of 1,650,000 shares of the Company's Common Stock
(adjusted for stock splits and dividends).
Options issued under the 1995 Plan must have an exercise price at least
equal to the fair market value on the date of grant and a term of not more than
ten years. Options are generally not transferable and are exercisable in
accordance with vesting schedules established by the Compensation Committee (the
"Committee") of the Board of Directors administering the Plan. The Committee
establishes with respect to each option granted to an employee, and sets forth
in the option agreement, the effect of the
9
termination of employment on the rights and benefits thereunder. In the event of
certain changes in control of the Company, options generally become immediately
exercisable.
As of March 15, 1998 there were 393,085 shares subject to non-qualified
options outstanding under the 1995 Plan and 607,000 shares available for further
issuance (as adjusted for stock splits and dividends). The Company has also
reserved for issuance options to purchase up to 570,000 shares under a incentive
plan adopted in December 1997. See "Executive Incentive Plans" above.
The Company also has 786,961 shares subject to non-qualified options
outstanding which were granted under stock option plans or arrangements that
have been terminated.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth a summary of certain non-qualified stock
options granted to the Company's named officers during 1997 (as adjusted for
stock splits and dividends).
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
INDIVIDUAL GRANTS PRICE APPRECIATION
- ------------------------------------------------------------------------------------------------- FOR OPTION TERM
(C) ---------------------
(B) % OF TOTAL (D)
OPTIONS OPTIONS GRANTED EXERCISE (E) (F) (G)
(A) GRANTED TO EMPLOYEES PRICE EXPIRATION 5% 10%
NAME (#) IN 1997 ($/SHARE) DATE ($) ($)
- ----------------------------------------- ----------- --------------- ----------- ----------- --------- ----------
Daniel P. Howells........................ 50,000 63% 23.13 9-15-2007 727,159 1,842,765
Kristine F. Hughes....................... 0 -- -- -- -- --
Eugene L. Hughes......................... 0 -- -- -- -- --
Douglas Faggioli......................... 0 -- -- -- -- --
Dale G. Lee.............................. 0 -- -- -- -- --
Alvin B. Segelman........................ 0 -- -- -- -- --
10
OPTION EXERCISES DURING 1997 AND
1997 YEAR-END VALUE TABLE
The following table sets forth certain information regarding the exercise
and value of non-qualified stock options held by the named officers during 1997
(as adjusted for stock splits and dividends).
AGGREGATED OPTION EXERCISES IN 1997 AND 1997 YEAR-END OPTION VALUE
- ----------------------------------------------------------------------------------------------------------------
(A) (B) (C) (D) (E)
DOLLAR VALUE OF
NUMBER OF UNEXERCISED UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL OPTIONS AT FISCAL YEAR-END
SHARES ACQUIRED VALUE RECEIVED YEAR-END EXERCISABLE/UNEXERCISABLE
NAME ON EXERCISE (#) ($) EXERCISABLE/UNEXERCISABLE ($)
- ----------------------- --------------- ----------------- ----------------------- --------------------------
Daniel P. Howells...... -- -- 0/50,000 0/143,750
Kristine F. Hughes..... 16,335 221,896 152,000/0 1,879,500/0
Eugene L. Hughes....... -- -- 218,925/0 3,802,357/0
Douglas Faggioli....... 99,600 1,267,687 28,200/0 244,600/0
Dale G. Lee............ 17,260 284,377 119,900/0 1,855,200/0
Alvin B. Segelman...... 43,050 448,062 11,700/0 70,200/0
401(K) PLAN
The Company sponsors a qualified deferred compensation plan ("401(k) Plan")
under Section 401(k) of the Internal Revenue Code, pursuant to which full-time
employees may reduce their salaries by up to 10% of their compensation limited
to a maximum of $9,500 and have the salary reduction amounts contributed to the
401(k) Plan. Such contributions are 100% matched by the Company, up to a maximum
of 5% of the employee's compensation. Participants are fully vested at all times
in their salary reduction and matching contributions. Participants are eligible
to receive distribution of vested amounts upon retirement, death or disability,
or termination of employment. Contributions by the Company to the 401(k) Plan
were approximately $530,000, $451,000 and $478,000 for 1997, 1996 and 1995,
respectively. Amounts contributed for officers participating in the 401(k) Plan
are included in the Summary Compensation Table above.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors' Compensation Committee is composed of Merrill
Gappmayer, Pauline T. Hughes, Kristine F. Hughes and Robert H. Daines.
THE FOLLOWING REPORT OF THE COMPENSATION COMMITTEE AND THE PERFORMANCE GRAPH
THAT APPEARS IMMEDIATELY AFTER SUCH REPORT SHALL NOT BE DEEMED TO BE SOLICITING
MATERIAL OR TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE
SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF 1934 OR INCORPORATED BY
REFERENCE IN ANY DOCUMENT SO FILED.
11
REPORT OF THE COMPENSATION COMMITTEE
To: The Board of Directors
As members of the Compensation Committee (the "Committee"), it is our duty
to administer various stock option and incentive compensation plans of the
Company. In addition, the Committee recommends to the Board of Directors the
compensation to be paid to the Company's officers and key employees. The
Committee also reviews compensation policies applicable to officers and
considers the relationship of corporate performance to that compensation.
The Committee submits a report to the Board concerning the compensation
policies followed by the Committee in recommending compensation for the
Company's chief executive and other officers. In establishing such compensation
for 1997, the Committee considered a number of factors, including what it
believed to be the competitive level of compensation that is necessary to
attract, retain and motivate qualified officers. In this regard, the Committee
reviewed several salary reports and surveys. The Committee also considered (i)
an officer's contribution to the Company's operating performance, as measured by
increases in sales revenues, profitability and return on assets, (ii) the
officer's contribution to helping the Company meet its other objectives, such as
providing a high level of service to the Company's customers and in maximizing
shareholder value, and (iii) the Chief Executive Officer's evaluation of each of
the officers. For Daniel P. Howells, the Company's new President and Chief
Executive Officer, the Committee set his salary after arms length negotiations
and taking into consideration prevailing salaries paid in the industry. Kristine
F. Hughes, who served as the Company's Chief Executive Officer during nine
months of 1997, was awarded $100,000 for her services by the Board of Directors.
She also received directors' fees of $46,575. For 1997 salaries, the Committee
applying the factors set forth above increased base salaries approximately 7%
over 1996 levels on a weighted average basis. Salaries for 1998, increased
approximately 6% over 1997 levels on a weighted average basis.
The compensation policy of the Company, which is endorsed by the Committee,
is that a substantial portion of the annual compensation of each officer relate
to and be contingent upon the performance of the Company, as well as the
individual contribution of each officer. As a result, much of an officer's
compensation is subject directly to annual bonus compensation measured by the
Company's achievement of certain sales and income goals. Under the Company's
Exempt Employee Incentive Compensation Plan, bonuses are paid based on the
officer's performance and the performance of the entire Company. The Committee
believes the compensation paid to its officers is reasonable in view of the
Company's performance and the contribution of these officers to that
performance. In this regard, the Committee in 1994 completed a comprehensive
review of the Company's compensation policies and concluded that the Company's
policies worked well.
All officers and key employees participate in the Company's stock option
plans. Options granted thereunder, may provide for the acceleration of vesting
if the Company meets or exceeds certain income and/or revenue goals. The
Committee believes that stock options have been effective in attracting,
motivating and retaining executives and key employees.
12
Except for Kristine F. Hughes, no member of the Committee is a former or
current officer or employee of the Company or any of its subsidiaries. Mrs.
Hughes served as President and CEO of the Company from September 1996 to October
1997.
COMPENSATION COMMITTEE
Dated March 15, 1998
MERRILL GAPPMAYER
PAULINE T. HUGHES
ROBERT H. DAINES
KRISTINE F. HUGHES
CORPORATE STOCK PERFORMANCE
The following graph compares the performance (total return on investment as
measured by the change in the year-end stock price plus reinvested dividends) of
the Common Stock of the Company ("NATR") with that of the Index for NASDAQ Stock
Market (U.S. companies) and the Index for NASDAQ Stock (SIC 2800-2899) (herbal
vitamins companies) for the five years ended December 31, 1997.
13
COMPARISON OF FIVE YEAR-CUMULATIVE TOTAL RETURNS
PERFORMANCE GRAPH FOR
NATURE'S SUNSHINE PRODUCTS, INC.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
SYMBOL CRSP TOTAL RETURNS INDEX FOR: LEGEND
Nature's Sunshine Nasdaq Stock Market
Products, Inc. (US Companies)
12/31/92 $100.0 $100.0
12/31/93 $87.6 $114.8
12/30/94 $97.8 $112.2
12/29/95 $203.8 $158.7
12/31/96 $219.1 $195.2
12/31/97 $319.0 $239.6
Notes:
A. The lines represent monthly index levels derived
from compounded daily returns that include all
dividends.
B. The Indexes are reweighted daily, using the market
capitalization on the previous trading day.
C. If the monthly interval, based on the fiscal
year-end,
is not a trading day, the preceding trading day is used.
D. The index level for all series was set to $100.0 on
12/31/92.
SYMBOL
NASDAQ Stocks (SIC 2800-2899 US Companies)
Chemicals and allied products
12/31/92 $100.0
12/31/93 $89.5
12/30/94 $70.3
12/29/95 $118.9
12/31/96 $120.4
12/31/97 $125.8
Notes:
A. The lines represent monthly index levels derived
from compounded daily returns that include all
dividends.
B. The Indexes are reweighted daily, using the market
capitalization on the previous trading day.
C. If the monthly interval, based on the fiscal
year-end,
is not a trading day, the preceding trading day is used.
D. The index level for all series was set to $100.0 on
12/31/92.
14
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Maria del Carmen Cisneros, the general manager of the Company's Mexican
subsidiary until January 1998, received a total of $726,000 of compensation from
the Company in 1997. Of that amount, $76,000 was salary and bonus and the
balance was for commissions received as an independent distributor of the
Company's products.
Maria Teresa Polo de Abello, the general manager of the Company's Colombian
subsidiary until January 1998, received a total of $352,000 of compensation from
the Company in 1997. Of that amount, $144,000 was salary and bonus and the
balance was for commissions received as an independent distributor of the
Company's products.
RELATIONSHIP WITH
INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee of the Board of Directors of the Company has recommended
to the Board of Directors that Arthur Andersen & Co. be selected again as the
independent public accountants for the Company. The Board of Directors has
accepted this recommendation and has selected Arthur Andersen & Co. to be the
independent public accountants for the Company for the fiscal year ending
December 31, 1998. Arthur Andersen & Co. served as the Company's independent
public accountants for the fiscal year ended December 31, 1997.
Representatives of Arthur Andersen & Co. are expected to attend the 1998
Annual Meeting and will have an opportunity to make a statement if they desire
to do so, and they will be available to answer appropriate questions from
shareholders.
SHAREHOLDER PROPOSALS
If a shareholder wishes to present a proposal at the 1999 Annual Meeting of
Shareholders, the proposal must be received by Nature's Sunshine Products, Inc.,
75 East 1700 South, Provo, Utah 84606 prior to December 31, 1998. The Board of
Directors will review any proposal which is received by that date and determine
whether it is a proper proposal to present to the 1999 Annual Meeting.
VOTE REQUIRED
A majority of the 18,567,814 issued and outstanding shares of Common Stock
of the Company shall constitute a quorum at the Annual Meeting. Under the Utah
Revised Business Corporation Act, directors are elected by a plurality of the
votes cast by the shares entitled to vote in the election at the Annual Meeting
provided a quorum is present. The affirmative vote of at least a majority of the
shares represented at the meeting is required for all other proposals to come
before the meeting. The Company does not have any specific charter or by-law
provisions dealing with the method by which votes will be counted; however, in
prior years the Company has counted abstentions and broker non-votes for quorum
purposes but the votes represented by such shares are not counted in computing
the results of the election of directors or other resolutions.
Votes cast by shareholders who attend and vote in person or by proxy at the
Annual Meeting will be counted by inspectors to be appointed by the Company (it
is anticipated that the inspectors will be employees, attorneys or agents of the
Company).
15
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors of the
Company does not intend to present and has not been informed that any other
person intends to present a matter for action at the 1998 Annual Meeting other
than as set forth herein and in the Notice of Annual Meeting. If any other
matter properly comes before the meeting, it is intended that the holders of
Proxies will act in accordance with their best judgment. The Board of Directors
may read the minutes of the 1997 Annual Meeting of Shareholders and make
reports, but shareholders will not be requested to approve or disapprove such
minutes or reports.
In addition to the solicitation of Proxies by mail, certain of the officers
and employees of the Company, without extra compensation, may solicit Proxies
personally or by telephone. The Company will also request brokerage houses,
nominees, custodians and fiduciaries to forward soliciting materials to the
beneficial owners of Common Stock held of record and will reimburse such persons
for forwarding such material. The cost of this solicitation of Proxies will be
borne by the Company.
COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K (INCLUDING FINANCIAL
STATEMENTS AND FINANCIAL STATEMENT SCHEDULES) FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION MAY BE OBTAINED WITHOUT CHARGE BY WRITING TO THE
COMPANY--ATTENTION: INVESTOR RELATIONS DEPARTMENT, 75 EAST 1700 SOUTH, PROVO,
UTAH 84606. Copies of the Company's 1997 Annual Report to Shareholders are being
mailed with this Proxy Statement. Additional copies may also be obtained by
writing to the Company's Investor Relations Department, at the above address.
The enclosed Proxy is furnished for you to specify your choices with respect
to the matters referred to in the accompanying notice and described in this
Proxy Statement. If you wish to vote in accordance with the Board's
recommendations, merely sign, date and return the Proxy in the enclosed envelope
which requires no postage if mailed in the United States. A prompt return of
your Proxy will be appreciated.
Dated: April 8, BY ORDER OF THE BOARD OF DIRECTORS
1998 BRENT F. ASHWORTH
SECRETARY
16
PROXY
NATURE'S SUNSHINE PRODUCTS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Kristine F. Hughes and Brent F. Ashworth and
each of them as Proxies, with full power of substitution, and hereby authorizes
them to represent and vote, as designated on the reverse, all shares of Common
Stock of the Company held of record by the undersigned on March 20, 1998, at the
Annual Meeting of Shareholders to be held at the Company's corporate offices at
75 East 1700 South, Provo, Utah 84606, on Monday, May 11, 1998, at 10:00 a.m.,
local time, or at any adjournment thereof.
(TO BE SIGNED ON REVERSE SIDE.)
/X/ PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
For Against Abstain
Nominees: Robert H. Daines 2. In their discretion, the Proxies are / / / / / /
Eugene L. Hughes authorized to vote upon such other
business as may properly come
For Withheld before the Annual Meeting.
1. Election of / / / /
Directors.
(INSTRUCTIONS: To withhold authority to vote for any
individual nominee, write that nominee's name on the
space provided below.) THIS PROXY WHEN PROPERLY EXECUTED
WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED
SHAREHOLDER. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1 AND 2.
Please sign and date this Proxy where shown below
and return it promptly:
No postage is required if this Proxy is returned in the
enclosed envelope and mailed in the United States.
SIGNATURE(S) ____________________________________________________________________________ DATE _____________
NOTE: Please sign above exactly as the shares are issued. When shares are held by joint tenants, both should sign. When signing
as attorney, executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign in full
corporate name by President or other authorized officer. If a partnership, please sign in partnership name by authorized person.)