Exhibit 10.1
Execution Copy
SETTLEMENT AND VOTING
AGREEMENT
THIS SETTLEMENT AND VOTING AGREEMENT
(this “Agreement”) is made and executed as of the
22 nd day of May, 2009 (the
“Effective Date”), by, between and among Nature’s
Sunshine Products, Inc., a Utah corporation organized under
the Utah Revised Business Corporation
Act (“URBCA”) (the “Company”);
Prescott Group Aggressive Small Cap Master Fund, G.P., an
Oklahoma general partnership (the “Shareholder”);
Kristine F. Hughes, Pauline Hughes Francis and Eugene L. Hughes
(collectively, the “Hughes Parties”). !
RECITALS
A.
As of the date of this Agreement,
the Shareholder Beneficially Owns 1,865,383 shares of common stock
of the Company, representing approximately twelve percent (12%) of
the issued and outstanding common stock of the Company, and
previously has been granted proxies described on Exhibit A
hereto to vote an aggregate of 6,151,675 shares of common stock of
the Company (the “Proxies”).
B.
By letter dated
February 27, 2009, the Shareholder made a written demand
(the “Meeting Demand”) pursuant to
Section 16-10a-702(1)(b) of the URBCA that the
Company hold a special meeting of shareholders, or in lieu thereof
an annual meeting of the shareholders, for the purpose of electing
the slate of directors proposed by the Shareholder.
C.
By letter dated
March 10, 2009, the Shareholder or its Affiliates made a
written demand (the “Inspection Demand”) pursuant to
Section 16-10a-1602(2) of the URBCA that the
Shareholder be allowed to inspect and copy the record of
shareholders required to be maintained by the Company pursuant to
Section 16-10a-1601(3) of the URBCA. The
Company provided to the Shareholder the information requested in
the Inspection Demand.
D.
The Shareholder filed but has not
served an action in the Fourth Judicial District Court for
Utah County, Utah, styled Prescott Group Aggressive Small Cap
Master Fund, G.P. v. Nature’s Sunshine Products, Inc.,
Civil No. 090401518 (the “Civil Action”), asking
the court to order an annual meeting of the Company’s
shareholders.
E.
The Company, the Shareholder and the
Hughes Parties have agreed that, among other things, if the
Company’s Board of Directors (the “Board”) is
reconstituted as set forth herein, the Shareholder will withdraw
the Meeting Demand, the Shareholder will terminate, withdraw or
dismiss all legal actions taken with respect to the Company or the
Board; the Shareholder and the Hughes Parties will release the
Shareholder, the Hughes Parties, the Company and the Board from all
claims relating to the Meeting Demand, the Inspection Demand and
the Civil Action; and the Shareholder and the Hughes Parties will
vote its shares for the election of the members of the
reconstituted Board in the next annual meeting of the
Company’s shareholders. The parties desire to
memorialize their compromise in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of
the foregoing premises and mutual covenants contained herein, and
for other good and valuable consideration, the receipt and
sufficiency of which are acknowledged, the parties agree as
follows:
1.
Certain Definitions
. For purposes of this
Agreement:
1.1
“Affiliate” has
the meaning set forth in Rule 12b-2 promulgated by the SEC
under the Exchange Act.
1.2
“Beneficial
Owner,” “Beneficial Ownership” and
“Beneficially Own” have the same meaning as set forth
in Rule 13d-3 promulgated by the SEC under the Exchange
Act.
1.3
“SEC”
means the Securities and Exchange Commission.
1.4
“Voting
Shares” means (i) all equity securities of the
Company Beneficially Owned by the Shareholder or the Hughes
Parties, respectively, as of the date of this Agreement less any
such shares disposed of by the Shareholder after the Effective Date
in compliance with Section 8.10 and (ii) all
additional equity securities of the Company of which the
Shareholder or the Hughes Parties may acquire Beneficial Ownership
during the period from the date of this Agreement through the
Voting Agreement Termination Date.
2.
Withdrawal of Meeting Demand and
Acknowledgement Regarding Inspection Demand . The Shareholder
hereby irrevocably withdraws the Meeting Demand and acknowledges
the Company satisfied the Inspection Demand.
3.
Distribution of
Section 14(f) Statement . Within three
(3) business days following the execution of this Agreement,
the Company will distribute to its shareholders the information
statement (the “Section 14(f) Statement”)
required by Section 14(f) of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”) and
Rule 14f-1 promulgated pursuant thereto.
4.
Board Changes
. The
following actions shall be effective immediately following the
tenth (10th) day after the Company distributes to its
shareholders the Section 14(f) Statement:
4.1
The number of
directors constituting the Board shall be increased to
eight (8) in accordance with Section 3.2 of the
Bylaws of the Company and one of the newly created vacancies shall
be assigned to Class II and the other newly created vacancy
shall be assigned to Class III in accordance with
Article IX of the Company’s Restated Articles of
Incorporation.
4.2
The resignations
of Robert K. Bowen, Larry K. Deppe, Pauline Hughes
Francis, and Eugene L. Hughes as members of the Board attached
as Exhibits B-1 though B-4 and previously tendered to the
Company shall become effective in accordance with their terms
leaving Kristine F. Hughes as the sole remaining incumbent
director assigned to Class III and creating four vacancies on
the Board in addition to the fifth vacancy previously created
by
2
Franz Cristiani’s
prior resignation as a director effective March 1, 2007
and the sixth and seventh vacancies created by the increase in the
size of the Board of directors as described in
Section 4.1.
4.3
Each of the seven
persons identified on Exhibit C as an “Appointee”
(collectively, the “Appointees”) shall be appointed,
pursuant to Section 3.10 of the Bylaws of the Company and
Section 16-10a-810(1)(c) of the URBCA, to fill the
seven vacancies on the Board and serve as directors until the next
shareholders’ meeting at which directors are elected and
until their respective successors shall be duly elected and
qualified, unless they resign, are removed or are otherwise
disqualified from serving as a director of the Company, and each
such Appointee shall serve in the class set forth next to his or
her name on Exhibit C.
5.
Annual Meetings of the
Shareholders . The Company shall use
commercially reasonable efforts to hold an annual meeting of the
shareholders no later than December 31, 2009 unless
otherwise agreed by the then serving Board of Directors (the
“Next Annual Meeting”).
6.
Voting Agreement
.
6.1
The Shareholder
and the Hughes Parties agree that from the date of this Agreement
and until immediately following the Next Annual Meeting or any
adjournment or postponement thereof or December 31, 2009,
whichever is earlier (the “Voting Agreement Termination
Date”), at the Next Annual Meeting or any other meeting of
shareholders of the Company or any adjournment or postponement
thereof, and on every action or approval by written consent of the
shareholders of the Company, if any, the Shareholder and the Hughes
Parties will take such actions as are necessary to effect the
intent of this Agreement, including but not limited to the
following:
6.1.1
Vote all of the
Voting Shares in favor of the Director nominees recommended to the
shareholders by the Board, which Director nominees shall be the
individuals listed in Exhibit C for the terms listed in
Exhibit C (unless they or any of them prior thereto shall have
resigned or been removed as a director or otherwise shall have
refused to stand for election);
6.1.2
Appear, or cause
the holder of record of any Voting Shares on any applicable record
date to appear at such meeting or otherwise cause the Voting Shares
to be counted as present for purposes of establishing a quorum;
and
6.1.3
None of the
Shareholder or the Hughes Parties shall take any position, make any
statement or take any action inconsistent with the
foregoing.
6.2
In order to
secure the performance of the Shareholder’s and the Hughes
Parties’ obligations under this Agreement, each such party
hereby irrevocably grants a proxy appointing Kristine F. Hughes and
Pauline Hughes Francis each as such party’s attorney-in-fact
and proxy, with full power of substitution, for and in its name,
place and stead, to vote, express consent or dissent, or otherwise
to utilize such party’s Voting Shares solely to vote for the
Directors or nominees listed on Exhibit C at the Next Annual
Meeting or any other meeting of shareholders of the Company or any
adjournment or postponement thereof prior to the Voting Agreement
Termination Date, in each case in a manner consistent with
Section 6.1. Each of the Shareholder and the Hughes
Parties hereby represents and warrants that any proxies
heretofore
3
given in respect of the
Voting Shares are not irrevocable and that any such proxies are
hereby revoked. Each such party hereby affirms that THE PROXY
AND POWER OF ATTORNEY SET FORTH IN THIS AGREEMENT IS IRREVOCABLE
AND COUPLED WITH AN INTEREST and shall expire on the Voting
Agreement Termination Date.
7.
Dismissal of Civil
Action . The Shareholder
concurrently with the execution of this Agreement has directed its
attorney of record in the Civil Action to file with the court a
notice of dismissal pursuant to Utah R.
Civ. P. 41(a)(1) dismissing all claims in the Civil
Action without prejudice in the form attached hereto as
Exhibit D.
8.
Standstill
. From and
after the Effective Date until the Voting Agreement Termination
Date, the Shareholder and the Hughes Parties and their respective
agents, employees, officers, directors, managers, control persons,
representatives, successors, assigns, parent corporations,
subsidiaries, Affiliates and all other persons acting in concert
with or under the control or direction of any of the Shareholder or
the Hughes Parties shall not, directly or indirectly, in any manner
without the prior consent of the Company:
8.1
advise,
encourage, support or influence any person with respect to the
voting or disposition of any shares of the company contrary to the
terms of this Agreement;
8.2
grant a proxy
with respect to the voting of the shares of the Company to any
person other than as to matters not contemplated in the proxy set
forth in Section 6.2;
8.3
exercise any
rights granted to the Shareholder pursuant to any of the
Proxies;
8.4
deposit any
shares of the Company in a voting trust or enter into any other
arrangement or agreement with respect to the voting thereof other
than as to matters not contemplated in the proxy set forth in
Section 6.2;
8.5
take any action,
alone or in concert with any other person, advise, finance, assist
or participate in or encourage any person to take any action which
is prohibited to be taken by such party pursuant to this Agreement,
or make any investment in or enter into any arrangement with, any
other person that engages, or offers or proposes to engage in any
of the foregoing;
8.6
pursuant to
the URBCA,
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