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.


 

















 


(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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