Exhibit 10.5

 

EMPLOYMENT AGREEMENT

 

This Agreement, is effective as of the 20th day of June, 2003 (the “Effective
Date”), and is by and between NATURE’S SUNSHINE PRODUCTS, INC., a Utah
Corporation, having its principal place of business in Provo, Utah (“NSP”), and 
the undersigned individual (“Employee”).

 

RECITALS

 

WHEREAS, NSP is in the business of (i) manufacturing and selling numerous
consumer products and services, including but not limited to herbs, vitamins,
minerals, health foods, food supplements, skin care products and other
health-related products, and (ii) distribution of products and services by the
method of multilevel marketing/direct sales distribution; and

 

WHEREAS, Employee has been employed by NSP since December 18, 1989; and

 

WHEREAS, both NSP and Employee desire to embody the terms and conditions of
Employee’s employment in a written agreement which shall supersede and revoke
any and all prior agreements of employment, whether written or oral.

 

NOW, THEREFORE, in consideration of the mutual agreements herein contained, the
parties hereby agree as follows:

 

GENERAL PROVISIONS

 

1.             Employment:  NSP hereby employs Employee and Employee hereby
agrees to serve NSP as its Vice President, International Europe.  Employee shall
devote Employee’s full time and efforts to NSP during the term of Employee’s
employment and shall act with complete loyalty to NSP.

 

NSP may assign Employee such additional or substitute titles and duties as NSP
shall determine in its sole discretion.  Employee shall at all times act in a
professional manner.  Employee shall perform the duties set forth in
Exhibit “A”, attached hereto, and such other duties as NSP may specify, in a
competent and responsible manner and to NSP’s reasonable satisfaction.  Employee
agrees to abide by the policies and procedures as may be set forth in handbooks,
manuals and other materials provided by NSP.

 

2.             Term:  The term of Employee’s employment shall be twelve months,
and shall hereinafter be referred to as the “Initial Term.”  The Initial Term
shall begin as of the Effective Date.  Unless and until Employee’s employment
with NSP is terminated by NSP or Employee for any reason or no reason, at the
end of the Initial Term this Agreement shall automatically be renewed and
extended for additional periods of twelve months each and Employee’s employment
with NSP shall continue during the extended period.

 

3.             Compensation:

 

(a)           Base Salary:  As compensation, NSP shall pay Employee a base
salary of $117,772 per year (“Base Salary”).  Base Salary shall be paid
according to NSP’s payroll schedule.

 

(b)           Discretionary Bonus:  Employee shall also be eligible to
participate in the executive bonus program or any successor program (the
“EBP”).  Payment of any bonus under the EBP is in NSP’s sole discretion
according to the then current practice and criteria established by NSP.

 

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(c)           Employee’s Benefits:  Until Employee’s employment is terminated,
Employee shall be entitled to all standard employee benefits then in effect for
employees of NSP holding comparable titles or positions (the “Benefits”).

 

(d)           Stock Option:   In addition to the base salary and bonus provided
for in Sections 3(a) and 3(b) above NSP may from time to time grant to Employee
options (the “Options”) to purchase shares of NSP’s common stock (the “Option
Stock”), pursuant to the price, terms and conditions set forth in NSP’s 1995
Stock Option Plan, as amended from time to time.

 

4.             Termination:

 

(a)           Discretionary Termination by NSP: Notwithstanding anything in this
Agreement, during the Initial Term and thereafter NSP may terminate Employee’s
employment immediately for Cause.  NSP may terminate Employee’s employment at
will, subject to this Agreement and NSP’s obligation to pay Severance Pay to
Employee as provided in Section 5.

 

(b)           Discretionary Termination by Employee:  Employee may terminate
Employee’s employment by giving NSP at least two weeks’ notice of said
resignation.

 

(c)           Termination for Cause by NSP:  Notwithstanding anything in this
Agreement, during the Initial Term and thereafter NSP may terminate Employee’s
employment immediately for Cause.  For purposes of this Agreement, “Cause” shall
include (i) material breach by Employee of this Agreement, (ii) performance by
Employee deemed unsatisfactory to NSP acting reasonably, provided NSP’s
expectations for specific improvement are communicated to Employee in writing
with a ninety (90) day probation period allowed for the requisite improvement,
(iii) Employee’s dishonesty or violation of company rules by Employee including
that certain Confidentiality Agreement by and between NSP and Employee, or
(iv) Employee’s conviction of or entrance of a plea of nolo contendere to a
felony or to any other crime punishable by incarceration.

 

(d)           Termination upon Death or Incapacity of Employee:   Employee’s
employment with NSP shall, at the exclusive election of NSP, terminate upon the
death or Incapacity of Employee.  For purposes of Sections 4 and 5, termination
of Employee’s employment by reason of Employee’s death or Incapacity shall be
considered termination of Employee’s employment by NSP without Cause and
Employee shall receive the Severance Pay, if any, pursuant to Section 5.

 

(e)           Definition of Incapacity:  In this Agreement, “Incapacity” shall
mean that Employee is for a period of ninety-five (95) consecutive days or more,
unable to perform Employee’s duties effectively, for reasons such as emotional,
mental or physical illness, deficiency or disability.  In this Agreement, if any
question arises as to the “Incapacity” of Employee, NSP shall promptly engage
three physicians who are members of the American Medical Association to examine
Employee and determine if Employee is able to perform the duties of Employee’s
employment with NSP.  In the event Employee appears to have mental capacity to
act, one of said three physicians shall be selected by Employee, one shall be
selected by NSP, and one shall be selected by the other two physicians.  The
decision of the three physicians shall be conclusive for all purposes of this
Agreement.

 

5.             Effect of Termination on Compensation:

 

(a)           Discretionary Termination by NSP:  If Employee’s employment is
terminated by NSP without Cause, Employee shall be entitled to receive as
severance pay (“Severance

 

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Pay”) the following:  (i) an amount equal to Base Salary for the twelve (12)
months from the date of termination (the “Severance Pay Period”) and
(ii) continuation of any coverage in effect at the date of termination for
Employee and his or her family at NSP’s expense under NSP’s major medical and
life insurance plans during the Severance Pay Period.

 

(b)           Non-Renewal by NSP Without Cause; Death; Incapacity:  If NSP
without Cause does not renew Employee’s employment at the end of the Initial
Term, or the end of any employment period thereafter, or if Employee’s
employment is terminated by reason of Employee’s death or Incapacity, then
Employee (or Employee’s estate or designated beneficiary, as the case may be)
shall receive Severance Pay during the Severance Pay Period.

 

(c)           Termination by Employee; Termination or Non-Renewal by NSP For
Cause:  If Employee’s employment is (i) terminated by Employee, or
(ii) terminated for Cause or for Cause not renewed by NSP, Employee shall
receive only Employee’s Base Salary and the Benefits earned through the date of
such termination.

 

(d)           Payment:  At the option of NSP, Severance Pay may be distributed
in a lump sum or in regular biweekly checks over the Severance Pay Period.  Any
Severance Pay is subject to required payroll deductions and withholdings.

 

(e)           Limitation:  Except as provided in this Section 5, Employee shall
not be entitled to any further or other Severance Pay, Base Salary, Benefits,
compensation, damages or other amounts.  Employee understands and agrees that
notwithstanding anything in this Agreement, NSP’s obligation to pay any Base
Salary, benefits or Severance Pay after termination of employment depends upon
Employee’s compliance with the agreements and covenants of Sections 6 through
9.  Except as otherwise expressly provided in this Agreement, Employee shall not
receive any health or life insurance coverage after the date of termination,
except COBRA benefits, if any, as and to the extent prescribed by law.

 

PROTECTION OF NSP

 

6.             Noncompetition and Nonsolicitation:

 

(a)           Definitions:  In this Section 6, the “Restricted Territory” shall
mean the United States and any country where (on the date the notice terminating
Employee’s employment is received) NSP is doing business or planning to do
business within the next year through a subsidiary or joint venture.  In this
Section 6, the “Restrictive Period” shall mean the period (i) commencing with
the Effective Date, and (ii) ending one year after the later of (x) the date of
termination of Employee’s employment (whether or not employment is terminated by
NSP or Employee, or for Cause or otherwise), or (y) the date of final payment of
Severance Pay was paid to Employee (or would have been paid but for a breach of
this Agreement by Employee or for Cause termination of Employee’s employment).

 

(b)           Employee Noncompetition and Nonsolicitation Covenants:  Employee
hereby covenants and agrees that Employee shall not, directly or indirectly, in
the Restricted Territory during the Restricted Period, do any of the following:

 

(i)            own an interest in (other than less than one percent of a
publicly traded company), operate, join, control, participate in or be a
distributor, agent, consultant, independent contractor, employee, officer,
director, partner, principal or shareholder of any individual, person or entity
having ten percent (10%) or more of its gross sales from distribution of herbs
and/or vitamins;

 

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(ii)           plan for or organize any business which competes or would compete
with any herb or vitamin product of NSP, or combine with any other employee or
representative of NSP to organize any such competitive business;

 

(iii)         solicit, induce or influence (or seek to induce or influence) any
person under contract with NSP (including any associate or distributor of NSP)
to terminate or alter his or her relationship with NSP; or

 

(iv)          solicit any customer of NSP where the identity or any significant
information about such customer was or is Confidential Information of NSP (as
such term is defined in that certain Confidentiality Agreement by and between
Employee and NSP).

 

(c)           Extension of Restrictive Period:  Employee agrees that NSP, in its
sole discretion, may extend the Restrictive Period and the foregoing restrictive
covenants in Section 6(b) for up to an additional year.  To do so, NSP must
(i) give Employee at least ninety days prior notice of its intention to extend
the restrictive covenant, and (ii) pay Employee an amount equal to the Base
Salary for and during the period of such extension.  Any such payments shall be
paid according to NSP’s regular payroll schedule.

 

(d)           Intentions:  It is the intention of the parties that the foregoing
restrictive covenant be enforced as written, and, in any other event, enforced
to the greatest extent (but to no greater extent) in time, territory and degree
of participation as permitted by applicable law.

 

7.             Non-Disparagement:  Employee hereby also covenants not to
disparage, orally or in writing, NSP or its management (including NSP’s
products, practices and policies) to any NSP employee, associate, distributor or
member of the public or press.  Employee understands and agrees that Employee
may lose any right to Severance Pay if Employee breaches this covenant not to
disparage.

 

8.             Acknowledgement:  Employee acknowledges that Employee’s covenants
and agreements in Sections 6 and 7 are reasonable and necessary to protect the
legitimate interests and Confidential Information of NSP.  Employee acknowledges
that Section 6 is not so broad as to prevent Employee from earning a livelihood
or practicing Employee’s chosen profession after termination of Employee’s
employment.  The parties acknowledge and agree that the compensation and
benefits provided for under this Agreement are in substantial part consideration
for Employee’s covenants in Sections 6 and 7.

 

9.             Enforcement:  For any breach of Section 6, 7, 8 or 9, Employee
agrees that NSP is entitled to equitable and other injunctive relief which may
include, but shall not be limited to restraining Employee from rendering any
service or performing or participating in any activity in breach of this
Agreement.  However, no remedy available under this Agreement (including this
Section 9) is intended to be exclusive of any other remedy, and each and every
remedy shall be cumulative and shall be in addition to every other available
remedy or now hereafter existing at law or in equity, by statute or otherwise.

 

MISCELLANEOUS

 

10.          Entire Agreement:  This Agreement (including the recitals and
Exhibit “A”, attached hereto) sets forth the entire agreement and understanding
between Employee and NSP and cannot be modified or altered, nor can any
provision hereof be waived, except in writing signed by Employee and a duly
authorized officer of NSP.

 

11.          Interpretation:  The Section and other headings in this Agreement
are for reference only and shall not affect the construction of this Agreement. 
Whenever the context requires, the singular shall include the plural, the plural
shall include the singular, and the whole shall include any part thereof.

 

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12.          Invalidity of Provision:  If any provisions in this Agreement are
held invalid, illegal or unenforceable in any respect for any reason, such
invalid, illegal or unenforceable provision(s) shall be limited, construed or
eliminated to the extent necessary to remove such invalidity, illegality or
unenforceability and the other provisions of this Agreement shall not be
affected thereby.

 

13.          Binding Effect:  This Agreement shall inure to the benefit of and
be binding upon Employee and Employee’s heirs and personal representatives, and
upon NSP and its successors and assigns.  Employee’s covenants and agreements of
Sections 6 through 9 shall survive the termination of Employee’s employment by
any means, reason or party.

 

14.          Waiver:  No waiver of any provision of this Agreement shall
constitute a waiver of any other provision, whether or not similar, nor shall
any waiver constitute a continuing waiver.

 

15.          Notice:  Any notice given under this Agreement shall be in writing
and shall be sufficient if personally delivered or sent by registered or
certified mail and addressed, if to Employee, to Employee’s address set forth in
NSP’s records, or if to NSP, to its principal office.  Such notice shall be
deemed given when delivered if delivered personally, or, if sent by registered
or certified mail, at the earlier of actual receipt or three days after mailing
in United States mail, addressed as aforesaid with postage prepaid.

 

16.          Governing Law:  This Agreement shall be governed by the laws of the
State of Utah and any litigation arising out of it shall be conducted in
applicable state courts located in Utah County or federal courts located in Salt
Lake County, Utah.  The parties expressly consent to such jurisdiction and
venue.

 

AGREED TO AND ACCEPTED AS OF THE DATE FIRST ABOVE WRITTEN:

 

Employee:

 

Employer:

 

 

 

ROBERT W. SHAFFER

 

NATURE’S SUNSHINE PRODUCTS, INC.

 

 

 

  \s\ Robert W. Shaffer

 

By

  \s\Douglas Faggioli

Signature

 

 

 

 

Name

Douglas Faggioli

 

 

 

 

 

Title

C.O.O.

 

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EXHIBIT “A”

TO

EMPLOYMENT AGREEMENT

BETWEEN

NATURE’S SUNSHINE PRODUCTS, INC.

AND

ROBERT W. SHAFFER

 

03062

NATURE’S SUNSHINE PRODUCTS, INC.

JOB DESCRIPTION

 

Job Title: Vice President-International-Europe

 

Effective: March, 2002

Department:

International

 

Status: Exempt

Reports to:

President-International

 

 

 

GENERAL SUMMARY

 

Performs the following types of duties:  directs, coordinates and administers
certain international operations under assigned area of responsibility;
responsible for the attainment of profitability, sales growth and other
strategic goals for international business units; manages efforts of general
managers; works to develop current and long-range objectives, policies and
procedures; supports conceptual, strategic and policy formulation functions
related to assigned areas or responsibility; is a member of the International
Executive Committee; performs other related duties as assigned.

 

ESSENTIAL DUTIES & RESPONSIBILITIES

 

40%

 

Directs the development of international strategies, budgets and personnel plans
to achieve corporate objectives. Directly supervises the activities of
international general managers and department staff members as assigned.

20%

 

Participates with the Vice President of International in business decision
making, strategic planning and operating plans for international units of the
company to ensure achievement of objectives.

20%

 

Develops and interprets company policies. Plans, organizes, staffs and directs
efforts associated with the management of existing international businesses.

20%

 

Provides strategic information to the Vice President of International concerning
the operation of international business units. Further analyzes international
business performances and situations by frequent international travel to local
business units.

 

KNOWLEDGE, SKILLS, AND ABILITIES REQUIRED

 

Knowledge:  Broad and extensive international business knowledge specific to
direct sales and MLM business.

 

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Skill:  Highly developed analytical, marketing, communication and leadership
skills involving worldwide operations.

Ability to deal effectively at the highest corporate level and with members of
NSP’s international businesses.  To provide effective support and counsel to the
Vice President of International.

 

EXPERIENCE/EDUCATION

 

The equivalent of a Masters degree in international business plus more than five
years international, general, and marketing/sales management experience in the
direct sales or MLM industry, with two of the five years acting as a General
Manager in a foreign country.

 

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