def14a
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. ___)
|
|
|
Filed by the Registrant
|
|
þ |
Filed by a Party other than the Registrant
|
|
o |
Check the appropriate box:
|
|
|
o
|
|
Preliminary Proxy Statement |
o
|
|
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
þ
|
|
Definitive Proxy Statement |
o
|
|
Definitive Additional Materials |
o
|
|
Soliciting Material Pursuant to § 240.14a-12 |
LIFEVANTAGE CORPORATION
(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):
|
|
|
þ
|
|
No fee required. |
o
|
|
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
(1) |
|
Title of each class of securities to which transaction applies: |
(2) |
|
Aggregate number of securities to which transaction applies: |
(3) |
|
Per unit price or other underlying value of transaction computed pursuant to Exchange Act
Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was
determined): |
(4) |
|
Proposed maximum aggregate value of transaction: |
|
|
|
o
|
|
Fee paid previously with preliminary materials. |
|
|
|
o
|
|
Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the Form or Schedule and the
date of its filing. |
(1) |
|
Amount Previously Paid: |
(2) |
|
Form, Schedule or Registration Statement No.: |
TABLE OF CONTENTS
|
|
|
|
|
3 |
|
|
4 |
|
|
4 |
|
|
8 |
|
|
30 |
|
|
32 |
|
|
33 |
Shareholders Proposals And Nominations For 2009 Annual Meeting |
|
|
|
|
33 |
Appendix A |
|
|
2
Lifevantage Corporation
11545 W. Bernardo Court, Suite 301
San Diego, California 92127
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be
Held On January 7, 2009
Dear Shareholder:
You
are cordially invited to attend the 2008 Annual Meeting of Shareholders of Lifevantage
Corporation, a Colorado corporation (the Company). The
meeting will be held on January 7, 2009
at 9:00 a.m. local time in Denver, Colorado for the following purposes:
1. |
|
To elect six (6) directors to hold office for a one-year
term expiring at the 2009 Annual Meeting of Shareholders and until their respective successors are elected and qualified. |
2. |
|
To ratify the appointment of Ehrhardt Keefe Steiner & Hottman PC as independent auditors of
the Company for its fiscal year ending June 30, 2009. |
|
3. |
|
To conduct any other business properly brought before the meeting. |
|
|
|
These items of business are more fully described in the Proxy Statement accompanying this
Notice. |
Our Board of Directors has fixed November 20, 2008 as the record date for determining the
shareholders entitled to receive notice of and to vote at the Annual Meeting. Only shareholders of
record at the close of business on that date may vote at the meeting or any adjournment or
postponement thereof.
|
|
|
|
|
|
By Order of the Board of Directors
|
|
|
/s/ Bradford K. Amman
|
|
|
Bradford K. Amman |
|
|
Secretary |
|
|
San Diego, California
October 28, 2008
You are cordially invited to attend the meeting in person. Whether or not you expect to attend
the meeting, please complete, date, sign and return the enclosed proxy as promptly as possible in
order to ensure your representation at the meeting. A return envelope (which is postage prepaid if
mailed in the United States) is enclosed for your convenience. Even if you have voted by proxy, you
may still vote in person if you attend the meeting. Please note, however, that if your shares are
held of record by a broker, bank or other nominee and you wish to vote at the meeting, you must
obtain a proxy issued in your name from that record holder.
3
Lifevantage Corporation
11545 W. Bernardo Court, Suite 301
San Diego, California 92127
PROXY STATEMENT
FOR THE 2008 ANNUAL MEETING OF SHAREHOLDERS
November 20, 2008
QUESTIONS AND ANSWERS ABOUT THIS PROXY MATERIAL AND VOTING
Why am I receiving these materials?
We sent you this proxy statement and the enclosed proxy card because the Board of Directors of
Lifevantage Corporation (sometimes referred to as the Company or LifeVantage) is soliciting
your proxy to vote at the 2008 Annual Meeting of Shareholders. You are invited to attend the annual
meeting to vote on the proposals described in this proxy statement. However, you do not need to
attend the meeting to vote your shares. Instead, you may simply complete, sign and return the
enclosed proxy card.
We intend to mail this proxy statement and accompanying proxy card on or about November 20,
2008 to all our shareholders of record as of the record date entitled to vote at the annual
meeting.
Where and when is the Annual Meeting?
The
annual meeting will take place January 7, 2009 at 9:00 a.m. local
time at Plaza Tower One, First-floor Conference Center, 6400 S.
Fiddlers Green Circle, Greenwood Village, Colorado 80111.
What am I voting on?
There are two matters scheduled to be voted on by shareholders at the annual meeting:
|
|
|
Election of six (6) directors to our Board of Directors; and |
|
|
|
|
Approval of a proposal to ratify the appointment of Ehrhardt Keefe Steiner & Hottman
PC as independent auditors of the Company for its fiscal year ending June 30, 2009. |
Who can vote at the annual meeting?
Only shareholders of record at the close of business on November 20, 2008 will be entitled to
vote at the annual meeting. As of October 27, 2008, there were 24,766,117 shares of common stock
outstanding and entitled to vote.
Shareholders of Record: Shares Registered in Your Name
If on November 20, 2008 your shares were registered directly in your name with our transfer
agent, Computershare Trust Co., Inc., then you are a shareholder of record. As a shareholder of
record, you may vote by proxy or vote in person at the meeting. Whether or not you plan to attend
the meeting, we urge you to fill out and return the enclosed proxy card to ensure your vote is
counted.
Beneficial Owner: Shares Registered in the Name of a Broker or Bank
If on November 20, 2008 your shares were held, not in your name, but rather in an account at a
brokerage firm, bank, dealer, or other similar organization, then you are the beneficial owner of
shares held in street name and these proxy materials are being forwarded to you by that
organization. The organization holding your account is considered to be the shareholder of record
for purposes of voting at the annual meeting. As a beneficial owner, you have the right to direct
your broker or other agent on how to vote the shares in your account. You are also invited to
attend the annual meeting provided that you bring with you proof of your beneficial ownership of
shares, such as a brokerage account statement. However, if you are not the shareholder of record,
you may not vote your shares in person at the meeting unless you request and obtain a valid proxy
from your broker or other agent.
4
How do I vote?
You may either vote For all the nominees to our Board of Directors or you may Withhold
your vote for any nominee you specify. For each of the other matters to be voted on, you may vote
For or Against or abstain from voting. The procedures for voting are fairly simple:
Shareholder of Record: Shares Registered in Your Name
If you are a shareholder of record, you may vote by proxy using the enclosed proxy card or in
person at the annual meeting. Whether or not you plan to attend the meeting, we urge you to vote by
proxy to ensure your vote is counted. You may still attend the meeting and vote in person if you
have already voted by proxy.
|
|
|
Voting Your Proxy By Mail. To vote using the proxy card, simply complete, sign and
date the enclosed proxy card and return it promptly in the envelope provided. If you
return your signed proxy card to us before the annual meeting, we will vote your shares
as you direct. |
|
|
|
|
Vote in Person. To vote in person, come to the annual meeting and we will give you a
ballot when you arrive. |
Beneficial Owner: Shares Registered in the Name of Broker or Bank
If you are a beneficial owner of shares registered in the name of your broker, bank, or other
agent, you should have received a proxy card and voting instructions with these proxy materials
from that organization rather than from LifeVantage. Simply complete and mail the proxy card to
ensure that your vote is counted.
How many votes do I have?
On each matter to be voted upon, you have one vote for each share of common stock you own as
of November 20, 2008.
How are votes counted?
Votes will be counted by the inspector of election appointed for the meeting, who will
separately count For and Withhold and, with respect to proposals other than the election of
directors, Against votes, abstentions and broker non-votes.
Because the approval of each proposal (other than the election of directors) requires the
affirmative vote of a majority of the outstanding shares of common stock, abstentions will be
counted towards the vote total for each proposal and will have the same effect as Against votes.
Broker non-votes have no effect and will not be counted towards the vote total for any proposal.
What are broker non-votes?
When a broker indicates on its proxy that it does not have authority to vote certain shares
held in street name on particular proposals, the shares not voted are called broker non-votes.
Broker non-votes occur when brokers do not have discretionary voting authority on certain
non-routine proposals under the rules of the New York Stock Exchange (NYSE) and the beneficial
owner has not instructed the broker how to vote on these proposals. Both the election of directors
and ratification of the selection of our independent registered public accounting firm are
considered routine matters under the rules and interpretations of the NYSE.
5
How many votes are needed to approve each proposal?
|
|
|
For the election of directors, the six (6) nominees receiving the most For votes
(among votes properly cast in person or by proxy) will be elected. Only votes For or
Withheld will affect the outcome. |
|
|
|
|
The ratification of the selection of Ehrhardt Keefe Steiner & Hottman PC as our
independent auditor for the fiscal year ended June 30, 2009 will be approved if a
majority of the outstanding shares vote For such ratification. If you Abstain from
voting, it will have the same effect as an Against vote. Broker non-votes will have
no effect. |
What does it mean if I receive more than one proxy card?
If you receive more than one proxy card, your shares are registered in more than one name or
are registered in different accounts. Please complete, sign and return each proxy card to ensure
that all of your shares are voted.
Can I change my vote after submitting my proxy?
Yes. You can revoke your proxy at any time before the final vote at the meeting. If you are
the record holder of your shares, you may revoke your proxy in any one of three ways:
|
|
|
You may submit another properly completed proxy card with a later date; |
|
|
|
|
You may send a written notice that you are revoking your proxy to LifeVantages
Secretary at 11545 W. Bernardo Court, Suite 301, San Diego, California 92127; or |
|
|
|
|
You may attend the annual meeting and vote in person. Simply attending the meeting
will not, by itself, revoke your proxy. |
If your shares are held by your broker or bank as a nominee or agent, you should follow the
instructions provided by your broker or bank to change your vote.
What if I return a proxy card but do not make specific choices?
If you return a signed and dated proxy card without marking any voting selections, your shares
will be voted For the election of all six (6) nominees for director and For the selection of
Ehrhardt Keefe Steiner & Hottman PC as our independent auditor for our fiscal year ending June 30,
2009. If any other matter is properly presented at the meeting, your proxy (one of the individuals
named on your proxy card) will vote your shares using his or her best judgment.
What is the quorum requirement?
A quorum of shareholders is necessary to hold a valid meeting. A quorum will be present if at
least a majority of the outstanding shares are represented by shareholders present at the
meeting or by proxy. As of October 27, 2008, there were 24,766,117 shares of common stock
outstanding and entitled to vote. Thus, 12,383,059 shares of common stock must be represented by
shareholders present at the meeting in person or by proxy to constitute a quorum.
Your shares will be counted towards the quorum only if you submit a valid proxy (or one is
submitted on your behalf by your broker, bank or other nominee) or if you vote in person at the
meeting. Abstentions and broker non-votes will be counted towards the quorum requirement. If there
is no quorum, a majority of our shareholders entitled to vote at the meeting, present in person or
by proxy, shall have the power to adjourn the meeting to another date.
Who is paying for this proxy solicitation?
We will pay for the entire cost of soliciting proxies. In addition to these mailed proxy
materials, our directors and employees may also solicit proxies in person, by telephone, or by
other means of communication. Directors and employees will not be paid any additional compensation
for soliciting proxies. We will also reimburse brokerage firms, banks and other agents for the cost
of forwarding proxy materials to beneficial owners.
6
When are shareholder proposals due for next years annual meeting?
To be considered for inclusion in next years proxy materials, your proposal must be submitted in
writing by July 23, 2009 to LifeVantages Secretary at 11545 W. Bernardo Court, Suite 301, San
Diego, California 92127. If you wish to submit a proposal that is not to be included in next
years proxy materials or nominate a director, you must do so by no earlier than July 23, 2009 and
no later than August 22, 2009. You are also advised to review the Companys Bylaws, which
contain additional requirements about advance notice of shareholder proposals and director
nominations.
How can I find out the results of the voting at the annual meeting?
Preliminary voting results will be announced at the annual meeting. Final voting results will
be published in our quarterly report on Form 10-Q for the second quarter of fiscal year 2009, which
we expect to file on or before February 16, 2009. You can obtain a copy of the Form 10-Q, once it
is filed, on our website at www.lifevantage.com, by calling the Securities and Exchange
Commission at (800) SEC-0330 for the location of the nearest public reference room, or through the
EDGAR system at www.sec.gov. Our website does not constitute part of this proxy statement.
IT IS THE INTENTION OF THE AGENTS DESIGNATED IN THE ENCLOSED PROXY CARD TO VOTE FOR THE ELECTION
OF EACH NOMINEE FOR DIRECTOR IDENTIFIED BELOW (UNLESS AUTHORITY IS WITHHELD BY THE SHAREHOLDER
GRANTING THE PROXY) AND FOR PROPOSAL 2 BELOW. IF ANY NOMINEE BECOMES UNAVAILABLE TO SERVE FOR ANY
REASON, THE PROXY WILL BE VOTED FOR A SUBSTITUTE NOMINEE OR NOMINEES TO BE SELECTED BY THE
COMPANYS BOARD OF DIRECTORS, UNLESS THE SHAREHOLDER WITHHOLDS AUTHORITY TO VOTE FOR THE ELECTION
OF DIRECTORS.
7
PROPOSAL 1 ELECTION OF DIRECTORS
LifeVantages Board of Directors consists of six (6) directors. Our Board of Directors
proposes that Mr. David W. Brown, Dr. James D. Crapo, Mr. Jack R. Thompson, Dr. Joe M. McCord, Mr.
Richard Doutre Jones and Mr. Garry Mauro be elected as directors of the Company. Each director to
be elected will hold office until the next annual meeting of shareholders and until his successor
is elected and qualified, or, if sooner, until the directors death, resignation or removal. We
encourage nominees for directors to attend the annual meeting. All of the nominees for election as
a director at the Companys 2007 Annual Meeting of Shareholders attended the 2007 Annual Meeting of
Shareholders. Each of the nominees listed below, except for Mr. David Brown, Mr. Richard Doutre
Jones and Mr. Garry Mauro, is currently a director of the Company who was previously elected by the
shareholders. Mr. Brown was elected to the Companys Board of Directors on February 21, 2008 and
Messrs. Jones and Mauro were elected to the Companys Board of Directors on March 21, 2008 upon the
unanimous approval of the Board of Directors.
Directors are elected by a plurality of the votes properly cast in person or by proxy.
Cumulative voting is not permitted. The six (6) nominees receiving the highest number of
affirmative votes will be elected. Shares represented by properly executed proxies will be voted,
if authority to do so is not withheld, for the election of the six (6) nominees named below. If any
nominee becomes unavailable for election as a result of an unexpected occurrence, your shares will
be voted to fill any vacancy so arising in accordance with the discretionary authority of the
persons named in the proxy, unless contrary instructions are given. Each person nominated for
election has agreed to serve if elected. Our management has no reason to believe that any nominee
will be unable to serve.
Information Concerning Director Nominees
The following information is furnished with respect to each of the director nominees for
election at the 2008 Annual Meeting of Shareholders:
|
|
|
|
|
|
|
Name |
|
Age |
|
Principal Occupation/Position with Company |
Mr. David W. Brown
|
|
|
45 |
|
|
President and Chief Executive Officer |
Dr. James D. Crapo
|
|
|
65 |
|
|
Professor of Medicine/Independent Director |
Mr. Jack R. Thompson
|
|
|
59 |
|
|
President, Kepner Educational Excellence Program/Chairman of the Board |
Dr. Joe M. McCord
|
|
|
63 |
|
|
Professor of Medicine/Director |
Mr. Richard Doutre Jones
|
|
|
55 |
|
|
Network Television Executive/Independent Director |
Mr. Garry Mauro
|
|
|
60 |
|
|
Independent Director |
MR. DAVID W. BROWN Mr. David Brown was appointed President and CEO of LifeVantage Corporation
in January 2008. Prior to joining LifeVantage he most recently was the Managing Director and
Co-Founder of Nutrition Business Advisors, a firm founded in 2003 to provide strategic consulting
services, capital raising and full-service business development focused on the $130 billion Global
Nutrition Industry. During his tenure at Nutrition Business Advisors, Mr. Brown is credited with
strategically positioning clients for accelerated growth and successful capitalization to fuel
expansion and distribution. Mr. Brown also served as President and CEO of Metabolife International
from 2000-2003, where he strategically transitioned the company from its role as one of the
nations largest direct sales organizations to that of a major force in the retail industry. From
1994 to 2000, Mr. Brown served as the President of Natural Balance, Inc., a Colorado-based dietary
supplement company. Mr. Brown began his career as a corporate attorney, serving at the law firm of
Ballard, Spahr, Andrews & Ingersoll in 1994 and Kindel & Anderson from 1991 1994. Mr. Brown
received his Juris Doctorate from Cornell University and Bachelors of Arts from Brigham Young
University.
DR. JAMES D. CRAPO Dr. Crapo has been a member of our Board of Directors since April 2005.
Dr. Crapo has nearly 30 years of experience in the health and science field. He has been a
Professor at National Jewish Medical and Research Center since June 1996 and served as Executive
Vice President of Academic Affairs and Chairman of Medicine from June 1996-2004. National Jewish is
a private institution in immunology and allergic diseases. Dr. Crapo also served as Chief
Executive Officer of Aeolus Pharmaceuticals, Inc. from July 2004 until December 2004. He was the
first scientist to extend Dr. Fridovichs and Dr. Joe McCords original discovery of superoxide
dismutase, a natural antioxidant (referred to as SOD) to mammalian models of disease. Prior to
joining National Jewish, Dr. Crapo spent over 15 years as the Chief of the Pulmonary and Critical
Care Medicine Division at Duke University Medical Center. He is involved in a number of
professional societies, including service on the NHLBI Advisory Council and serving as President of
the American Thoracic Society and President of the Fleischner Society.
8
MR. JACK R. THOMPSON Jack R. Thompson has been a member of the Board of Directors since
September 2007. Mr. Thompson, who currently serves as an Independent Director and Chairman of the
Audit Committee of Sparx Asia Funds and serves as an Independent Director and Member of the
Investment Committee of Russell Funds, brings 35 years of financial and operational expertise to
the Board of Directors. Mr. Thompson was previously President, CEO and Director of Berger Financial
Group. Prior to this, Mr. Thompson was President and Director of Janus Service Corporation and
Senior Vice President and Trustee of Janus Funds and Executive Vice President and Chief Operating
Officer of Janus Capital Corporation.
DR. JOE M. MCCORD Dr. McCord has been a member of our Board of Directors since February 2006
and was our Director of Science from April 2004 to October 2007. Dr. McCord together with Dr. Irwin
Fridovich discovered SOD in 1969. For this work, Drs. McCord and Fridovich received the Elliot
Cresson Medal of the Franklin Institute. Dr. McCord currently serves as Professor of Medicine,
Biochemistry, and Microbiology at the University of Colorado at Denver and Health Sciences Center
(UCDHSC). Dr. McCord received a lifetime achievement award from the Oxygen Society for outstanding
contributions to the field of free radical biology and medicine in 1997. He is Honorary President
of the International Society of Antioxidants in Nutrition and Health (ISANH). He chaired the Third
International Conference on Superoxide Dismutases: Recent Advances and Clinical Applications, held
at the Institut Pasteur in Paris in 2004, as well as earlier conferences in the series. Dr. McCord
has published articles in a number of scientific journals, including the New England Journal of
Medicine.
MR. RICHARD DOUTRE JONES Richard Doutre Jones has a distinguished career in broadcast
management, with an impressive background in operations, marketing, Internet, new media, research
and sales. In addition, he has in-depth understanding of international business, with a focus on
U.S. and Mexico relations. Currently, he serves as the VP/General Manager of Bay City Television,
Inc. (which is XETV/San Diego6 (CW) formerly the FOX affiliate) of San Diego. In that capacity, he
is responsible for all aspects of the business and is credited with streamlining operations and
achieving profitability. Prior to joining Bay City Television, Mr. Doutre Jones held management
and executive positions in the television industry, including serving as the General Sales Manager,
Local Sales Manager and National Sales Manager of KBHKTV-UPN44 in San Francisco, California. He is
currently on the Executive Board of the San Diego Ad Club, and has served for many years on the Fox
Television Affiliate Board of Governors and various other civic and industry organizations.
MR. GARRY MAURO Garry Mauro has worked for over 30 years at the local, state and national
levels on behalf of both private and public sector entities and is often quoted in the media as an
expert on business and political topics. He served for 16 years as Commissioner of the Texas
General Land Office overseeing the management of more than 20 million acres of state land, 18,000
oil and gas wells, and the States benefit program for Veterans. During his tenure as Commissioner,
he also chaired the Veterans Land Board, the School Land Board, the Parks and Wildlife Board for
Lease, the Texas Department of Corrections Board for Lease, the University Board for Lease, the
Coastal Coordination Council and the Texas Alternative Fuels Council; co-chaired the Sustainable
Energy Development Council; and held numerous other board memberships in Texas. His access to key
policy-makers and his first-hand knowledge of the governmental process has resulted in legislative
initiatives resulting in reductions in air pollution, sales of natural gas, improved recycling
efficiencies, creation of a state-of-the-art oil spill response and prevention program, and other
legislation considered both environmentally and economically sound. He has received numerous honors
and awards for his civic and philanthropic contributions in environmental, political and business
arenas, including the Man of the Year Award from the Texas League of Women Voters and the Rising
Star of Texas Award from Texas Business Magazine. In 1998, he was the Texas Democratic Party
nominee for Governor.
Board Recommendation
Our Board of Directors recommends the shareholders vote FOR each named director nominee.
9
Independence of Board of Directors and Committees
Even though we are not a listed issuer and our shares are not traded on an exchange, in order
to determine whether the members of our Board of Directors are independent, the Securities and
Exchange Commission (SEC) rules require that we use the definition of independence of a
national securities exchange (such as the New York Stock Exchange or the Nasdaq Stock Market) or
national securities association when making this determination. In determining the independence of
the members of our Board of Directors, our Board of Directors elected to use the definition of
independence contained in Nasdaq Stock Market (Nasdaq) listing requirements. As required under
Nasdaq listing standards, a majority of the members of a listed companys Board of Directors must
qualify as independent, as affirmatively determined by the Board of Directors. The Board of
Directors consults with the Companys counsel to ensure that its determinations are consistent with
all relevant securities and other laws and regulations regarding the definition of independent,
including those set forth in pertinent listing standards of the Nasdaq as in effect time to time.
Consistent with these considerations, after review of all relevant transactions or relationships
between each director, or any of his or her family members, and the Company, its senior management
and its independent auditors, our Board of Directors affirmatively has determined that Dr. Crapo,
Mr. Thompson, Mr. Doutre Jones and Mr. Mauro are independent directors within the meaning of the
applicable Nasdaq listing standards. Mr. Brown, the Companys current President and Chief
Executive Officer, and Dr. McCord, are not independent directors.
Meetings of the Board of Directors and Committees
During the last fiscal year, our Board of Directors held thirteen (13) meetings. Each of our
incumbent directors attended at least 75% of the aggregate of (1) the total number of meetings of
our Board of Directors (held during the period for which he has been a director) and (2) the total
number of meetings held by all committees of our Board of Directors on which he served (held during
the periods that he served).
Compensation of Directors
The following table shows certain information with respect to the compensation of all
non-employee directors of the Company for the fiscal year ended June 30, 2008:
Director Compensation for Fiscal 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option awards |
|
|
|
|
|
Total |
Name |
|
($)(1) |
|
Fees earned or paid in cash |
|
($) |
Dr. James D. Crapo(2) |
|
$ |
19,661 |
|
|
$ |
2,000 |
|
|
$ |
21,661 |
|
Dr. Joe M. McCord(3) |
|
$ |
19,661 |
|
|
$ |
2,000 |
|
|
$ |
21,661 |
|
Mr. Jack R. Thompson(4) |
|
$ |
13,821 |
|
|
$ |
2,000 |
* |
|
$ |
15,821 |
|
Mr. Richard
Doutre Jones (5) |
|
$ |
6,530 |
|
|
$ |
2,000 |
|
|
$ |
8,530 |
|
Mr. Garry Mauro(6) |
|
$ |
6,530 |
|
|
$ |
2,000 |
|
|
$ |
8,530 |
|
|
|
|
* |
|
Accrued not yet paid. |
|
1. |
|
The amounts shown in this column represent the dollar amount recognized for financial
statement reporting purposes with respect to the fiscal year for stock options granted to
the non-employee directors, as determined in accordance with SFAS 123R. Pursuant to SEC
rules, the amounts shown exclude the impact of estimated forfeitures related to
service-based vesting conditions. For additional information on the valuation assumptions
used to calculate these amounts, see Notes 2 and 7 to the Financial Statements included in
the Companys Annual Report on Form 10-KSB for the year ended June 30, 2008. These amounts
reflect the Companys accounting expense for these awards, and do not correspond to the
actual value that will be recognized by the non-employee directors. |
|
2. |
|
Grant date fair value of option to purchase 120,000 shares of common stock granted in
FY2008: $16,585. Total number of shares subject to stock options outstanding at June 30,
2008: 264,000. |
|
3. |
|
Grant date fair value of option to purchase 120,000 shares of common stock granted in
FY2008: $16,585. Total number of shares subject to stock options outstanding at June 30,
2008: 360,000.. |
|
4. |
|
Grant date fair value of option to purchase 160,000 shares of common stock granted in
FY2008: $22,113. Total number of shares subject to stock options outstanding at June 30,
2008: 160,000. |
|
5. |
|
Grant date fair value of option to purchase 100,000 shares of common stock granted in
FY2008: $19,592 Total number of shares subject to stock options outstanding at June 30,
2008: 100,000. |
10
|
|
|
6. |
|
Grant date fair value of option to purchase 100,000 shares of common stock granted in
FY2008: $19,592 Total number of shares subject to stock options outstanding at June 30,
2008: 100,000. |
Cash Compensation. The Company compensates its Board of Directors with cash compensation of
$1,000 per meeting and reimburses our directors for documented business- and travel-related expenses
directly related to Company business.
The director option grants described above were made pursuant to our 2007 Long-Term Incentive
Plan.
Committees of the Board of Directors
Our Board of Directors has (1) an audit committee, (2) a nominating committee, (3) a
compensation committee, (4) a science committee and (5) a finance committee. Below is a
description of each committee of our Board of Directors.
Audit Committee
The audit committee was established by our Board of Directors in accordance with Section
3(a)(58)(A) of the Exchange Act. The current members of our audit committee are Mr. Jack R.
Thompson and Dr. James D. Crapo, with Mr. Thompson serving as chairman. Our Board of Directors has
determined that each member of the audit committee qualifies as independent. Our Board of
Directors has also determined that Mr. Thompson qualifies as an audit committee financial expert,
as that term is defined in applicable SEC regulations. Our Board of Directors made a qualitative
assessment of Mr. Thompsons level of knowledge and experience based on a number of factors,
including his formal education, experience as an executive officer for public reporting companies
and his experience as an audit committee chairman for other publicly traded companies. In addition
to serving on our audit committee, Mr. Thompson also serves as chairman of the audit committee of
Sparx Asia Funds. Our Board of Directors has determined that such simultaneous service does not
impair Mr. Thompsons ability to effectively serve as chairman of our audit committee.
The audit committee oversees (1) the integrity of our financial statements, (2) our compliance
with legal and regulatory requirements; (3) the engagement of our independent auditor and its
qualifications and independence; (4) the performance of our internal auditors and independent
auditor; and (5) compliance with our code of ethics and code of business conduct and ethics for our
personnel. For this purpose, the audit committee performs several functions. The audit committee
evaluates the performance of and assesses the qualifications and independence of the independent
auditors; determines and approves the engagement of the independent auditors; determines whether to
retain or terminate the existing independent auditors or to appoint and engage new independent
auditors; reviews and approves the retention of the independent auditors to perform any proposed
permissible non-audit services; monitors the rotation of partners of the independent auditors on
the audit engagement team as required by law; confers with management and the independent auditors
regarding the effectiveness of internal controls over financial reporting; reviews and approves all
related-party transactions; prepares an audit committee report as required by the SEC to be
included in the annual proxy statement; establishes procedures, as required under applicable law,
for the receipt, retention and treatment of complaints regarding accounting, internal accounting
controls or auditing matters and the confidential and anonymous submission by employees of concerns
regarding questionable accounting or auditing matters; and meets to review our annual audited
financial statements and quarterly financial statements with management and the independent
auditor, including reviewing disclosures under Managements Discussion and Analysis of Financial
Condition and Results of Operations. The audit committee operates under a written charter adopted
by our Board of Directors that is available on the Companys website at www.lifevantage.com.
The audit committee met two (2) times in during our last fiscal year.
Audit Committee Report1
The audit committee is responsible for overseeing (i) the integrity of our financial
statements, (ii) our compliance with legal and regulatory requirements, (iii) our independent
registered public accounting firms qualifications and independence, (iv) the performance of our
independent registered public accounting firm and (v) compliance with our Code of Ethics and Code
of Business Conduct and Ethics. Management is responsible for the financial reporting process,
including the system of internal controls, for the preparation of consolidated financial statements
in accordance with generally accepted accounting principles. Ehrhardt Keefe Steiner & Hottman PC,
our independent registered public accounting firm, is responsible for auditing our financial
statements and expressing an opinion as to their conformity with generally accepted accounting
principles.
|
|
|
1 |
|
The material in this report is not soliciting
material, is not deemed filed with the SEC and is not to be incorporated by
reference into any filing of the Company under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, other than the Companys
Annual Report on Form 10-KSB for the fiscal year ended June 30, 2008, whether
made before or after the date hereof and irrespective of any general
incorporation language in such filing. |
11
The committee has held discussions with management and the independent registered public
accounting firm. Management represented to the committee that the Companys consolidated financial
statements were prepared in accordance with generally accepted accounting principles, and the
committee has reviewed and discussed the consolidated financial statements with management and the
independent registered public accounting firm. The committee received the written disclosures and
letter required by the Independence Standards Board Standard No. 1 (Independence Discussions with
Audit Committees) and discussed the independence of the independent registered public accounting
firm with the firm. In addition, the committee has discussed with the independent registered public
accounting firm the matters required to be discussed by Statement on Auditing Standards No. 61, as
amended (Codification of Statements on Auditing Standards, AU §380).
The committee has also considered whether the provision of non-audit services to us is
compatible with maintaining the independent registered public accounting firms independence. The
committee has concluded that the independent registered public accounting firm is independent from
us and our management. The committee has reviewed with the independent registered public accounting
firm the overall scope and plans for their audit.
Relying on the foregoing reviews and discussions, the committee recommended to the Board of
Directors the inclusion of the audited consolidated financial statements in the Companys Annual
Report on Form 10-KSB for the year ended June 30, 2008, for filing with the SEC.
The Audit Committee
Jack R. Thompson, Chairman
James D. Crapo
12
Compensation Committee
The
current members of our compensation committee are Dr. Crapo,
Mr. Thompson, Mr. Doutre Jones, Mr.
Mauro and Dr. McCord, with Dr. Crapo serving as chairman. Our Board has determined that all members
of the compensation committee except Dr. McCord qualify as independent. The compensation
committee reviews and approves our overall compensation strategy and policies. The compensation
committee (1) reviews and approves corporate performance goals and objectives relevant to the
compensation of our executive officers and other senior management; (2) reviews and approves the
compensation and other terms of employment of our chief executive officer and other executive
officers, including the terms of any employment agreements, severance arrangements and change of
control arrangements; (3) makes recommendations to our Board of Directors regarding new
compensation plans and programs, including equity compensation plans; (4) administers the 2007
Long-Term Incentive Plan and any other similar programs and (5) reviews director compensation and
recommends from time to time to our Board of Directors any proposed changes in such compensation.
Our Board of Directors has not yet adopted a written charter for the compensation committee,
however the compensation committee formulates its compensation recommendations to the Board of
Directors based upon Company performance relative to plan.
The Compensation Committee met nine (9) times during the last fiscal year.
A discussion of the compensation committees processes and procedures for the consideration
and determination of executive officer and director compensation is included in the Compensation
Discussion and Analysis beginning on page 19 of this Proxy Statement.
Compensation Committee Interlocks and Insider Participation
As indicated above, the Companys compensation committee consists of Dr. Crapo, Mr. Thompson,
Mr. Doutre Jones, Mr. Mauro and Dr. McCord. Dr. McCord served as the Director of Science of the Company
until October of 2007. None of the Companys executive officers serve as a member of the board of
directors or the compensation committee of any entity that has one or more executive officers who
serve on the Companys Board of Directors or compensation committee.
Compensation Committee Report2
The compensation committee has reviewed and discussed with management of the Company the
Compensation Discussion and Analysis included in this Proxy Statement. Based upon this review and
discussion, the compensation committee recommended to the Board of Directors the inclusion of the
Compensation Discussion and Analysis in this Proxy Statement and its incorporation in the Companys
Annual Report on Form 10-KSB for the year ended June 30, 2008, for filing with the SEC.
The Compensation Committee
James D. Crapo, Chairman
Jack R. Thompson
Richard Doutre Jones
Garry Mauro
Joe M. McCord
|
|
|
2 |
|
The material in this report is not soliciting
material, is not deemed filed with the SEC and is not to be incorporated by
reference into any filing of the Company under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, other than the Companys
Annual Report on Form 10-KSB for the fiscal year ended June 30, 2008, whether
made before or after the date hereof and irrespective of any general
incorporation language in such filing. |
13
Nominating Committee
The current members of our Board of Directors nominating committee are Dr. McCord, Dr. Crapo,
Mr. Jack Thompson, Mr. David Brown, Mr. Richard Doutre Jones and Mr. Gary Mauro, with Dr. McCord
serving as Chairman. Our Board has determined that all members of the nominating committee except
Mr. Brown and Dr. McCord qualify as independent. The nominating committee of our Board of
Directors is responsible for (1) identifying, reviewing and evaluating candidates to serve as
directors of the Company (consistent with criteria set forth below under the section titled
Director Nomination Procedures, approved by our Board of Directors), (2) reviewing and evaluating
incumbent directors, (3) recommending to our Board of Directors candidates for election to the
Board of Directors, (4) considering questions of independence of members of the Board of Directors,
and (5) assessing the performance of our Board of Directors. Our Board of Directors has
not yet adopted a written charter for the nominating committee.
Director Nomination Procedures
Our Board of Directors has established a nominating committee and assigned certain
responsibilities to the committee, but we have not yet adopted a written nominating committee
charter. Although we are not a listed issuer and we are not currently required to have a nominating
committee charter, our Board of Directors is nonetheless considering the proposed scope of the
nominating committees responsibilities to be reflected in a written charter. Currently, the
nominating committee evaluates and reviews director nominee candidates and our Board of Directors
is responsible for proposing a slate of nominees to the shareholders for election to the board,
using information provided by the committee. Each of Mr. Thompson, Dr. Crapo, Dr. McCord, Mr.
Brown, Mr. Doutre Jones and Mr. Mauro were recommended by our Board of Directors for election at
the 2008 Annual Meeting of Shareholders.
Our members of the nominating committee, and other members of our Board of Directors are the
primary sources for the identification of prospective nominees. The nominating committee may also
retain third-party search firms to identify director candidates, and the committee may consider
proposed nominees that are identified by shareholders in the manner prescribed by our bylaws. In
order for a shareholder to recommend a prospective nominee for election to our Board of Directors
at a shareholder meeting, our bylaws require that the shareholder (i) be entitled to vote at the
meeting, (ii) provide written advance notice regarding such nomination to our corporate Secretary
in accordance with the procedures set forth in our bylaws and (iii) be a shareholder of record at
the time of giving the notice.
While the nominating committee currently has no formal written process for evaluating proposed
nominees, the members of the committee generally will review the resume of a proposed nominee and
consult the proposed nominees personal references. The nominating committee conducts any other
appropriate and necessary background checks of possible candidates. The committee may also
personally interview (and suggest that other members of our Board of Directors interview) the
proposed nominee, if the committee considers the proposed nominee sufficiently suitable.
The nominating committee evaluates the prospective nominee in order to determine whether the
nominee has experience and expertise in our industry, the ability to offer sound advice and
guidance to management, sufficient time to devote to the affairs of the Company, and has
demonstrated excellence in his or her field and the ability to exercise sound business judgment.
Candidates for director nominees are reviewed in the context of the current composition of our
Board of Directors, the operating requirements of the Company and its long-term best interests. In
conducting this assessment, the nominating committee considers diversity, age, skills, and such
other factors as it deems appropriate given the current needs of our Board of Directors and the
Company, to maintain a balance of knowledge, experience and capability. In the case of incumbent
directors whose terms of office are set to expire, the nominating committee reviews such directors
overall service to the Company during their term, including the number of meetings attended, level
of participation, quality of performance, and any other relationships and transactions that might
impair such directors independence. The nominating committee may modify these qualifications from
time to time and is currently considering whether to establish a set of corporate governance
practices and policies with additional standards and qualifications.
After its evaluation of a candidates qualifications, the nominating committee then selects a
nominee for recommendation to our Board of Directors by majority vote. The board determines the
nominees after considering the recommendation and report of the nominating committee.
To date, the nominating committee has not paid a fee to any third party to assist in the
process of identifying or evaluating director candidates and the nominating committee has not
rejected a timely director nominee from a shareholder or shareholders holding more
14
than 5% of our voting stock. The members of the nominating committee recommended Mr. David
Brown, Mr. Richard Doutre Jones and Mr. Gary Mauro as a nominee for the Board of Directors.
Other Committees
In addition to the audit committee, compensation committee and nominating committee, our Board
of Directors also has formed a science committee and a finance committee.
The current members of the science committee are Dr. Crapo and Dr. McCord, with Dr. McCord
serving as chairman. This committee meets on an ad hoc basis as our Board of Directors deems
necessary to review and advise the Board of Directors with respect to matters assigned by the board
from time to time. The science committee has a written mission statement.
The
current members of the finance committee are Mr. Thompson, Mr.
Doutre Jones, Mr. Mauro and Mr.
Brown, with Mr. Thompson serving as chairman. This committee meets on an ad hoc basis as our Board
of Directors deems necessary to review financial and fundraising matters.
Shareholder Communications With the Board of Directors
Shareholders interested in communicating with our Board of Directors, a board committee, the
independent directors or an individual director may do so by sending an email to Brad Amman, our
Secretary at BradA@Protandim.com or writing to Board of Directors, Lifevantage Corporation, 11545
W. Bernardo Court, Suite 301, San Diego, California 92127, Attention: Secretary. Communications
should specify the addressee(s) and the general topic of the communication. Our Secretary will
review and sort communications before forwarding them to the addressee(s). If no particular
director is named, letters will be forwarded, depending on the subject matter, to the chairman of
the appropriate committee.
15
Information Concerning Our Executive Officers
The following table sets forth the names, ages and titles of our executive officers.
|
|
|
|
|
|
|
Name |
|
Age |
|
Position |
David W. Brown |
|
|
45 |
|
|
President and Chief Executive Officer |
Bradford K. Amman |
|
|
46 |
|
|
Chief Financial Officer, Secretary and Treasurer |
Each officer serves at the discretion of our Board of Directors and holds office until his or
her successor is appointed or until his or her earlier resignation or removal. There are no family
relationships among any of our directors or executive officers.
Set forth below is a description of the background of the persons named above.
See Proposal 1 Election of Directors for Mr. Browns biography.
BRADFORD K. AMMAN Mr. Amman joined the Company in June 2006 as the Companys Director of
Finance and was subsequently appointed as the Companys Secretary, Treasurer and Chief Financial
Officer. Prior to joining the Company, he provided financial consulting services to a unique client
base, including Lifevantage Corporation. Mr. Amman was the Treasurer and Vice President of Finance
and Administration for SKYDEX Technologies, Inc. and has served in various senior level financial
and accounting roles within the manufacturing and telecom industries. Mr. Amman received his B.S.
in Accounting from the University of Denver and his M.B.A. from the University of Notre Dame.
16
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the ownership of the Companys
common stock as of September 30, 2008 by: (i) each director and nominee for director; (ii)
each of the executive officers named in the Summary Compensation Table; (iii) all executive
officers and directors of the Company as a group; and (iv) each person who is known to us to own
beneficially more than five percent of our common stock. The shares disclosed in this table are
based upon information supplied by officers, directors and principal shareholders and filings made
by shareholders with the Securities and Exchange Commission.
Except as otherwise noted, the address for each person listed below is c/o Lifevantage
Corporation, 11545 W. Bernardo Court, Suite 301, San Diego, California 92127.
The percentages of beneficial ownership set forth below are based on 24,766,117 shares of our
common stock issued and outstanding as of September 30, 2008.
|
|
|
|
|
|
|
|
|
Beneficial Owner (1) |
|
Number of Shares |
|
Percent of Class |
David W. Brown |
|
|
625,251 |
(7) |
|
|
2.5 |
% |
Bradford K. Amman |
|
|
173,852 |
(5) |
|
|
|
* |
Dr. James D. Crapo |
|
|
829,000 |
(4) |
|
|
3.3 |
% |
Dr. Joe M. McCord |
|
|
1,863,466 |
(2) |
|
|
7.5 |
% |
Jack R. Thompson |
|
|
719,477 |
(3) |
|
|
2.9 |
% |
Richard Doutre Jones |
|
|
90,000 |
(8) |
|
|
|
* |
Garry Mauro |
|
|
90,000 |
(9) |
|
|
|
* |
Paul R. Myhill
3466 Willowrun Court
Castle Rock CO 80109 |
|
|
1,908,711 |
(6) |
|
|
7.7 |
% |
|
|
All named executive
officers and
directors as a group
(seven persons) |
|
|
4,391,046 |
(10) |
|
|
17.7 |
% |
|
|
|
* |
|
Less than one percent. |
|
1 |
|
The shares of our common stock beneficially owned are reported on the basis of regulations of
the SEC governing the determination of beneficial ownership of securities. Under the rules of
the SEC, a person is deemed to be a beneficial owner of a security if that person has or
shares voting power, which includes the power to vote or direct the voting of such security,
or investment power, which includes the power to dispose of or to direct the disposition of
such security. A person is also deemed to be a beneficial owner of any securities of which
that person has a right to acquire beneficial ownership within 60 days. Securities that can be
so acquired are deemed to be outstanding for purposes of computing such persons ownership
percentage, but not for purposes of computing any other persons percentage. Under these
rules, more than one person may be deemed beneficial owner of the same securities and a person
may be deemed to be a beneficial owner of securities as to which such person has no economic
interest. This table is based upon information supplied by officers, directors and principal
stockholders and Schedules 13D and 13G filed with the SEC. Except as otherwise indicated in
these footnotes and subject to community property laws where applicable, each of the
beneficial owners has, to our knowledge, sole voting and investment power with respect to the
indicated shares of common stock. In accordance with the beneficial ownership rules of the
SEC, the table does not reflect an aggregate of 1,204,167 shares of common stock reserved for
issuance upon the exercise of outstanding options not exercisable within 60 days held by
certain of our directors and executive officers. |
|
2 |
|
Includes 1,606,800 shares of common stock and 146,666 shares which Dr. McCord has the right
to acquire or will have the right to acquire within 60 days of September 30, 2008 pursuant to
an option to purchase shares of our common stock at $0.49 per share and includes 110,000
shares which Dr. McCord has the right to acquire or will have the right to acquire within 60
days of September 30, 2008 pursuant to an option to purchase shares of our common stock at
$0.21 per share. |
|
3. |
|
Includes 359,477 shares held of record by Mr. Thompson, and 60,000 shares which Mr. Thompson
has the right to acquire or will have the right to acquire within 60 days of September 30,
2008 pursuant to an option to purchase shares of our common stock at $0.21 per share. Also
includes 150,000 as converted common shares for which Mr. Thompson has the right to acquire
pursuant |
17
|
|
|
|
|
to a convertible note received in the 2007 private placement
and 150,000 shares for which Mr. Thompson
has the right to acquire pursuant to warrants issued in the 2007 private placement. |
|
4 |
|
Includes 125,000 shares owned by Dr. Crapo and his wife as tenants in common and 450,000
shares held in Dr. Crapos Individual Retirement Account. Also includes shares which Dr. Crapo
has the right to acquire or will have the right to acquire pursuant to an option to purchase
24,000 shares of our common stock at $3.37 per share, 120,000 shares at $0.49 per share and
110,000 shares for which he has a right to acquire within 60 days of September 30, 2008 at an
exercise price of $0.21. |
|
5 |
|
Includes 28,614 shares owned by Mr. Amman. Also, includes shares which Mr. Amman has the
right to acquire or will have the right to acquire within 60 days of September 30, 2008
pursuant to options to purchase 86,667 shares at $0.76 per share and 28,571 shares at $0.49
per share and 30,000 shares at $0.35 per share. |
|
6 |
|
Includes 1,033,766 shares held by Mr. Myhill and 874,945 shares held by Mr. Myhills wife.
Pursuant to a voting agreement and irrevocable proxy with us dated February 9, 2006, Mr.
Myhill and his wife agreed, among other things, to vote their shares of common stock as
directed by our Board of Directors until February 7, 2016. |
|
7 |
|
Includes shares which Mr. Brown has the right to acquire or will have the right to acquire
within 60 days of September 30, 2008 pursuant to an option to purchase 562,500 shares at $0.23
per share and 62,751 shares at $0.30 per share . |
|
8. |
|
Includes shares which Mr. Richard Doutre Jones has the right to acquire or will have the
right to acquire within 60 days of September 30, 2008 pursuant to an option to purchase 90,000
shares at $0.30 per share. |
|
9. |
|
Includes shares which Mr. Mauro has the right to acquire or will have the right to acquire
within 60 days of September 30, 2008 pursuant to an option to purchase 90,000 shares at $0.30
per share. |
|
10. |
|
See notes (2) through (5) and (7) through (9) above. |
18
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
This compensation discussion and analysis provides information regarding the compensation
that may be awarded to, earned by or paid to the named executed officers. It includes information regarding the
objectives of our compensation program, our compensation processes and procedures, each element of
compensation that we provide, why we choose these elements, and how we determine the amount of each
component to pay. This compensation discussion and analysis should be read in conjunction with the
tables and related discussion beginning on page 22 of this Proxy Statement.
Compensation Program Objectives
Our executive compensation program is designed to attract, retain and motivate talented
executives capable of providing the leadership, vision and execution necessary to achieve our
business objectives and create long-term shareholder value. We actively seek to foster a
pay-for-performance environment that aligns the interests of our executive officers with the
creation of shareholder value. To this end, our compensation program is strongly linked to the
delivery of long-term returns to our shareholders, the achievement of short- and long-term
strategic business objectives, individual performance, and the demonstration of competencies that
are aligned with our culture and values and that will contribute to our long-term success.
Compensation Program Components and Procedures
Our compensation committee is responsible for overseeing our compensation policies, plans and
programs, and reviewing and determining the salary, bonuses, equity incentives, perquisites,
severance arrangements and other related benefits paid to our directors and executive officers. Our
compensation committee has implemented a performance based compensation program, which ties a
substantial portion of our executives overall compensation to the achievement of measurable
corporate and individual performance objectives and the creation of shareholder value. As described
in more detail below, our executive compensation program consists of
one or more of the following key components:
base salary, performance-based bonuses, long-term equity incentives and severance and
change-in-control benefits. The compensation committee has not established any formal policies or
guidelines for allocating compensation between cash and non-cash
compensation except that due to cash constraints of the Company,
performance based compensation in fiscal 2008 has been in the form of non-cash
equity compensation. However,
commensurate with the Companys philosophy of establishing a link between compensation and
corporate performance, the compensation committee believes that a significant portion of each
executives total compensation should be performance-based, reflecting both upside potential and
down-side risk.
The compensation committees executive compensation procedure comprises two related elements:
the establishment of performance objectives and the determination of executive compensation levels.
At the beginning of each fiscal year, the compensation committee approves annual performance
objectives for the corporation as a whole and for each individual executive officer. The corporate
objectives generally target the achievement of specific product development, corporate development,
financial and operational milestones. The individual objectives focus on contributions that are
consistent with and support the corporate objectives or are otherwise intended to contribute to the
success of the Company. The annual corporate and individual performance objectives are proposed by
management and reviewed and approved by the compensation committee. The corporate objectives are
also subject to review and approval by the full Board.
At the conclusion of each fiscal year, the Chief Executive Officer conducts a performance
appraisal for each executive officer (other than himself) for the year. The Chief Executive Officer also evaluates
the degree of achievement of the annual corporate and individual performance objectives and submits
his recommendations to the compensation committee for any base salary increases, bonuses
and/or stock option awards for each executive officer (other than himself). The Chief Executive
Officers recommendations and compensation committees determinations are generally based upon a
number of factors, including: the executives individual performance for the year, the degree of
achievement of annual corporate and individual performance objectives, comparisons with market data
for compensation paid to comparable executives of other nutraceutical companies, with a particular
focus on companies of comparable sizes and stages of development, the executives compensation
relative to other executive officers at the Company, and the importance of the executives
continued service with the Company.
In the case of the Chief Executive Officer, his individual performance appraisal is conducted
by the compensation committee, which determines his compensation adjustments and awards, if any,
based on these same factors. The Chief Executive Officer may not
19
participate in or be present during any deliberations or determinations of the compensation
committee regarding his compensation. To the extent approved, any base salary increases,
bonuses and/or stock option awards for the executives, including the Chief Executive Officer, are
implemented during the first fiscal quarter of the year when possible.
Compensation Elements
Our executive compensation program consists of the following key components: base salary,
performance-based bonuses, long-term equity incentives and severance and change in control
benefits.
Our compensation committee believes that these four components are the most effective
combination in motivating and retaining talented executive officers at this stage in our
development. The compensation committee does not have any specific targets for the percentage of
compensation represented by each component, although a significant percentage of total compensation
is allocated to long-term equity incentives as a result of the compensation philosophy discussed
above. As a general matter, subject only to limited exceptions relating to the relocation of
executive officers, we do not provide perquisites or benefits for our named executive officers on a
basis that is different from other eligible employees.
Base Salary
Base salary is the primary fixed component of our executive compensation program. We use base
salary to compensate executives for services rendered during the fiscal year, and to ensure that we
remain competitive in attracting and retaining executive talent. Base salaries are generally set
within a range of salaries paid to industry peers with comparable qualifications, experience,
responsibilities and performance at similar companies.
For newly hired executives, the compensation committee determines base salary on a
case-by-case basis by evaluating a number of factors, including the executives qualifications and
experience, the competitive recruiting environment for his or her services, the executives
anticipated role and responsibilities with the Company, the executives past compensation history,
and comparisons to market data regarding compensation levels for comparable executives of other
nutraceutical companies of similar sizes and stages of development.
For continuing executives, the compensation committee reviews base salaries annually as part
of the Companys performance review and appraisal process. Base salary increases, if any, are based
primarily on each executives job performance for the prior year, as well as a review of
competitive market data, the executives compensation relative to other executive officers, and the
importance of the executives continued service with the Company.
Performance-Based Bonuses
Our
performance-based bonuses are designed to promote the interests of the Company
and its shareholders by providing executive officers with the opportunity to earn bonuses based
upon the achievement of pre-specified corporate and individual performance objectives, and to
assist the Company in attracting and retaining executive talent.
During
fiscal 2008, the Company has granted bonuses in the form of stock
grants under the 2007 Long-Term Incentive Plan as a method of
rewarding employees and executive officers for meeting certain
performance objectives.
At the conclusion of each year, the Chief Executive Officer evaluates the degree of
achievement of the annual corporate and individual performance objectives, and submits his bonus
recommendations to the compensation committee, which determines the final bonus amount, if any, for
each executive officer. The compensation committee may determine to grant a bonus even though
certain corporate or individual performance objectives are not met. If the compensation committee
determines that corporate or individual performance for the year exceeded objectives or was
excellent in view of prevailing conditions, the compensation committee may approve corporate or
individual performance multipliers. The compensation committee also retains the authority, in its
20
discretion, to identify any unplanned achievements that have been accomplished and to approve
adjustments to an executive officers bonus award. Bonuses, if any, are generally paid in January
of each year for services rendered during the prior fiscal year.
Long-Term Equity Incentives
Long-term equity incentives represent the largest at-risk component of our executive and
employee compensation program. Our long-term equity incentives are designed to align the interests
of our executive officers and employees with those of our shareholders by creating an incentive for
our executive officers and employees to maximize long-term shareholder value. The equity
compensation program is also designed to encourage our executive officers and employees to remain
employed with us.
Historically,
we have granted stock options to newly-hired executive officers and
employees when they commence employment with us. We have also granted stock options to continuing executive
officers once a year as part of our annual performance review and appraisal process. The annual
stock options are granted as a reward for past individual and corporate performance and as an
incentive for future performance. All stock options are granted with a 10-year term and an exercise
price equal to or greater than 100% of the fair market value of our common stock on the date of grant. The stock
options generally vest over a three-year period, with one sixth of the options vesting three months
after the date of grant, and the remaining five sixths of the options vesting in equal monthly
installments thereafter over the remaining term, subject to the executives or employees continued
employment with us through such vesting dates.
The compensation committee approves all equity grants to our executive officers. Grants
approved during scheduled meetings become effective and are priced as of the date of approval or a
predetermined future date (for example, new hire grants are effective as of the later of the date
of approval or the newly-hired executives start date). Grants approved by unanimous written
consent become effective and are priced as of the date the last signature is obtained or as of
predetermined future date. The compensation committee has not granted, nor does it intend to grant,
equity compensation awards to executive officers or employees in anticipation of the release of
material nonpublic information that is likely to result in changes to the price of our common
stock, such as a significant positive or negative clinical trial result. Similarly, the
compensation committee has not timed, nor does it intend in the future to time, the release of
material nonpublic information based on equity award grant dates. Also, because equity compensation
awards typically vest over a three-year period (with a 3 month cliff followed by monthly vesting
thereafter), the value to recipients of any immediate increase in the price of our common stock
following a grant will be attenuated. Our Chief Executive
Officers
stock options are subject to vesting procedures different from those
described above and are described in further detail beginning on page
26 of this Proxy Statement under the heading Employment
Agreement with David W. Brown.
The compensation committee determines the number of stock options to award to a newly-hired
executive officer using the same factors described above that are considered in determining the
base salaries of newly-hired executive officers. The compensation committee determines the number
of stock options to be awarded to continuing executives based on a variety of factors, including
its review of competitive market data, its assessment of each executive officers individual
performance and expected future contribution, a review of each executives existing equity
incentive awards, and the importance of the executives continued service with the Company.
Severance and Change-in-Control Benefits
We enter into employment agreements with our executives in select cases, generally when it is
necessary to secure the services of a newly hired executive. We have entered into an employment
agreement with Mr. Brown in connection with his commencement of employment with the Company. The
terms of such employment agreement, including the severance compensation payable thereunder, are
described in more detail beginning on page 26 of this Proxy Statement under the heading
Certain Related-Party Transactions.
Perquisites
Perquisites and other personal benefits are not factored into our executive compensation
program. We prefer to compensate executive officers using a mix of current, short- and long-term
compensation with an emphasis on performance and do not believe that providing an executive
perquisite program is consistent with our overall compensation philosophy. We typically provide
perquisites and other personal benefits to executive officers on an exception-only basis, and they
are generally limited to executive relocation assistance and temporary commuting and living
expenses.
Other Benefits
We maintain health, dental and vision insurance plans for the benefit of all eligible
employees, including our executive officers. Basic coverage under each of these benefit plans is
paid by the Company and any premium in excess of the basic coverage is paid by the employee or
executive. These benefits are offered on the same basis to all employees including our executive
officers. We also
21
maintain a 401(k) retirement savings plan that is available to all eligible
employees. Currently, the 401(k) retirement plan is not matched by the
Company. Executives are eligible to participate in the 401(k) plan up to ERISA limits. No
supplementary participation is available to executives or employees. Life, accidental death and
dismemberment, short- and long-term disability insurance coverage, and wellness programs are also
offered to all eligible employees and basic premiums are paid in full by the Company. Other
voluntary benefits, such as supplemental long-term disability insurance
coverage, are also made available and paid for by the employees. The above benefits are available
to our executive officers on the same basis as all other eligible employees.
Summary Compensation Table
The following table shows for the fiscal years ended June 30, 2007 and June 30, 2008,
compensation awarded or paid to, or earned by, our Chief Executive Officer, any other person
serving as our Chief Executive Officer during the last fiscal year, our Chief Financial Officer,
any other person serving as our Chief Financial Officer during the last fiscal year, and our two
other most highly compensated officers required by the rules of the SEC to be included therein
(collectively, the named executive officers):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option |
|
All other |
|
|
|
|
|
|
|
|
Salary |
|
Bonus |
|
awards |
|
compensation |
|
Total |
Name and principal position |
|
Year |
|
($) |
|
($) |
|
($)(1) |
|
($) |
|
($) |
David W. Brown, |
|
|
2008 |
|
|
|
111,846 |
|
|
|
|
|
|
|
67,432 |
|
|
|
|
|
|
|
179,278 |
|
Chief Executive Officer (2) |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bradford K. Amman, |
|
|
2008 |
|
|
|
130,160 |
|
|
|
|
|
|
|
33,995 |
|
|
|
8,013 |
|
|
|
172,168 |
|
Chief Financial Officer (3) |
|
|
2007 |
|
|
|
133,583 |
|
|
|
4,000 |
|
|
|
20,588 |
|
|
|
|
|
|
|
158,171 |
|
James J. Krejci, |
|
|
2008 |
|
|
|
37,947 |
|
|
|
|
|
|
|
17,360 |
|
|
|
|
|
|
|
55,307 |
|
Former Chief Executive Officer (4) |
|
|
2007 |
|
|
|
97,481 |
|
|
|
|
|
|
|
159,322 |
|
|
|
|
|
|
|
256,803 |
|
Stephen K. Onody, |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Former Chief Executive Officer (5) |
|
|
2007 |
|
|
|
224,717 |
|
|
|
42,000 |
|
|
|
464,948 |
|
|
|
6,746 |
(6) |
|
|
738,411 |
|
Gerald J. Houston, |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Former Chief Financial Officer (7) |
|
|
2007 |
|
|
|
212,043 |
|
|
|
28,500 |
|
|
|
78,960 |
|
|
|
|
|
|
|
319,503 |
|
|
|
|
1. |
|
The amounts shown in this column represent the dollar amount recognized for financial
statement reporting purposes with respect to the fiscal year for stock options granted to
the named executive officers, as determined in accordance with SFAS 123(R). Pursuant to SEC
rules, the amounts shown exclude the impact of estimated forfeitures related to
service-based vesting conditions. For additional information on the valuation assumptions
used to calculate these amounts, see Notes 2 and 7 to the Financial Statements included in
the Companys Annual Report on Form 10-KSB for the year ended June 30, 2008. These amounts
reflect the Companys accounting expense for these awards, and do not correspond to the
actual value that will be recognized by the named executive officers. |
|
2. |
|
Mr. Brown was hired as President and Chief Executive Officer on January 10, 2008 and on
January 10, 2008, Mr. Brown was granted options to purchase up to 1,800,000 shares of the
Companys common stock at various prices from $0.23 to $0.75 per share. The option award
was calculated using the Black Scholes method pursuant to SFAS 123(R). |
|
3. |
|
Mr. Amman was granted an option to purchase 120,000 shares of the Companys common
stock on September 26, 2006 at an exercise price of $0.76. On January 16, 2007, Mr. Amman
was granted an option to purchase 26,571 shares at $0.49 per shares and on February 21,
2008 Mr. Amman was granted an option to purchase an additional 120,000 shares at $0.35 per
share. The option award was calculated using the Black-Scholes method pursuant to SFAS
123(R). |
|
|
|
Other compensation of $8,013 was the fair value of a grant of stock as of the date granted. |
|
4. |
|
Mr. Krejci who became the Companys Chief Executive Officer beginning on December 21,
2006, left the Company on August 31, 2007, and as a consequence the stock option granted to
Mr. Krejci terminated. |
|
5. |
|
Mr. Onody joined the Company as Chief Executive Officer on November 28, 2005 and
resigned from the Company on November 30, 2006 and as a consequence the stock option
granted to Mr. Onody terminated. |
22
|
|
|
6. |
|
For fiscal year end of June 30, 2007, other compensation consists of $1,325 for an
annual life insurance premium and $5,421 for disability insurance premiums paid by the
Company on behalf of Mr. Onody. |
|
7. |
|
Mr. Houston joined the Company as Chief Financial Officer on January 4, 2006 and
resigned from the Company on February 16, 2007, and as a consequence the option granted to
Mr. Houston terminated. |
Grants of Plan-Based Awards
The following table sets forth certain information regarding grants of plan-based awards to
the named executive officers during the fiscal year ended June 30, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other |
|
Option |
|
|
|
|
|
Grant |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards: |
|
Awards: |
|
Exercise |
|
Date Fair |
|
|
|
|
|
|
Estimated Possible Payouts |
|
Number |
|
Number of |
|
or Base |
|
Value of |
|
|
|
|
|
|
Under Non-Equity Incentive |
|
of Shares |
|
Securities |
|
Price of |
|
Stock and |
|
|
|
|
|
|
Plan Awards(1) |
|
of Stock |
|
Underlying |
|
Option |
|
Option |
|
|
|
|
|
|
Threshold |
|
Target |
|
Maximum |
|
or Units |
|
Options |
|
Awards |
|
Awards |
Name |
|
Grant Date |
|
($) |
|
($) |
|
($) |
|
(#) |
|
(#)(2) |
|
($/Sh)(3) |
|
($)(4) |
David W. Brown |
|
|
1/10/08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
450,000 |
|
|
$ |
0.23 |
|
|
|
93,364 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
450,000 |
|
|
|
0.50 |
|
|
|
55,027 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
450,000 |
|
|
|
0.75 |
|
|
|
46,743 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
300,000 |
|
|
|
0.30 |
|
|
|
43,409 |
|
Bradford K. Amman |
|
|
2/21/08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
120,000 |
|
|
|
0.35 |
|
|
|
28,355 |
|
|
|
|
1. |
|
These columns show the possible threshold, target and maximum cash bonus payments to
the named executive officers for the year ended June 30, 2008 under the Companys
performance-based cash bonus program, which is described in more detail in the Compensation
Discussion and Analysis beginning on page 19 of this Proxy Statement. The actual cash bonus
awards earned by the named executive officers for the year ended June 30, 2008 are set
forth in the Summary Compensation Table above under the column entitled Non-Equity
Incentive Plan Compensation, and the amounts set forth in these columns do not represent
additional compensation paid to or earned by the named executive officers for the year
ended June 30, 2008. |
|
2. |
|
This column shows the number of shares of common stock underlying stock options granted
to the named executive officers during the year ended June 30, 2008. For Mr. Amman, stock
options have a 10-year term and vest over a three-year period, with one sixth of the
options vesting on the first anniversary of the date of grant and the remaining five sixths
of the options vesting in equal monthly installments thereafter over the next three years,
subject to the recipients continued employment with the Company through such vesting
dates. |
|
|
|
For Mr. Brown, stock options have a 10-year term and vest as follows: |
|
|
|
Option to purchase 150,000 shares vested immediately at $0.23 per share |
|
|
|
|
Option to purchase 450,000 shares vest monthly during calendar year 2008 at
$0.23 per share. |
|
|
|
|
Option to purchase 450,000 shares vest monthly during calendar year 2009 at
$0.50 per share. |
|
|
|
|
Option to purchase 450,000 shares vest monthly during calendar year 2010 at
$0.75per share. |
|
|
|
|
Option to purchase 62,751 out of 300,000 shares vested on April 18, 2008 at
$0.30 per share based on the exercise of 2005 private placement warrants. |
|
|
|
3. |
|
This column shows the exercise price for the stock options granted to the named
executive officers during the year ended June 30, 2008, which equals the fair market value
of the Companys common stock on the date of grant. |
|
4. |
|
This column shows the full grant date fair value of the restricted stock awards and
stock options granted to the named executive officers during the year ended June 30, 2008,
as determined in accordance with SFAS 123(R). The full grant date fair value is the amount
that the Company recognizes as stock-based compensation expense in its financial statements
over the required service period of the award. For additional information, see Notes 2 and
7 to the Financial Statements included in the Companys Annual Report on Form 10-KSB for
the year ended June 30, 2008. |
23
Outstanding Equity Awards at Fiscal Year End
The following table sets forth certain information regarding equity awards granted to the named
executive officers that were outstanding as of June 30, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option awards |
|
Stock awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
incentive |
|
|
|
|
|
|
|
|
|
|
|
|
incentive |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
plan |
|
|
|
|
|
|
|
|
|
|
|
|
plan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
awards: |
|
|
|
|
|
|
|
|
|
|
awards: |
|
|
|
|
|
|
|
|
|
Number |
|
Market |
|
Number of |
|
|
|
|
Number of |
|
Number of |
|
Number of |
|
|
|
|
|
|
|
|
|
of shares |
|
value of |
|
unearned |
|
|
|
|
securities |
|
securities |
|
securities |
|
|
|
|
|
|
|
|
|
or units |
|
shares of |
|
shares, |
|
Equity Incentive |
|
|
underlying |
|
underlying |
|
underlying |
|
|
|
|
|
|
|
|
|
of stock |
|
units of |
|
units or |
|
plan awards: Market or payout |
|
|
unexercised |
|
unexercised |
|
unexercised |
|
Option |
|
|
|
|
|
that have |
|
stock that |
|
other rights |
|
value of unearned shares, units |
|
|
options |
|
options |
|
unearned |
|
exercise |
|
|
|
|
|
not |
|
have not |
|
that have |
|
or others rights that have not |
|
|
(#) |
|
(#) |
|
options |
|
price |
|
Option expiration |
|
vested |
|
vested |
|
not vested |
|
vested |
Name |
|
exercisable |
|
unexercisable |
|
(#) |
|
($) |
|
date |
|
(#) |
|
($) |
|
(#) |
|
($) |
David W. Brown |
|
|
375,000 |
|
|
|
|
|
|
|
225,000 |
|
|
$ |
0.23 |
|
|
|
01/10/18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
450,000 |
|
|
$ |
0.50 |
|
|
|
01/10/18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
450,000 |
|
|
$ |
0.75 |
|
|
|
01/10/18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62,751 |
|
|
|
237,249 |
|
|
|
|
|
|
$ |
0.30 |
|
|
|
01/10/18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bradford K. Amman |
|
|
70,000 |
|
|
|
|
|
|
|
50,000 |
|
|
$ |
0.76 |
|
|
|
09/26/16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,571 |
|
|
|
|
|
|
|
|
|
|
$ |
0.49 |
|
|
|
01/16/17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,333 |
|
|
|
|
|
|
|
106,667 |
|
|
$ |
0 .35 |
|
|
|
02/21/18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Exercises And Stock Vested
The following table sets forth certain information regarding option exercises and shares of
restricted stock that vested during the year ended June 30, 2008 with respect to the named
executive officers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards |
|
Stock Awards |
|
|
Number of Shares |
|
Value Realized |
|
Number of Shares |
|
Value Realized |
|
|
Acquired on Exercise |
|
on Exercise |
|
Acquired on Vesting |
|
on Vesting |
Name |
|
(#) |
|
($) |
|
(#) |
|
($)(1) |
David W. Brown |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bradford K. Amman |
|
|
|
|
|
|
|
|
|
|
28,614 |
|
|
|
8,013 |
|
|
|
|
1. |
|
The value realized on vesting of shares of restricted stock equals the market value of
the Companys common stock on the vesting date, multiplied by the number of shares that
vested. |
Pension Benefits
None of the named executive officers participate in or have account balances in qualified or
non-qualified deferred benefit plans sponsored by the Company.
24
Nonqualified Deferred Compensation
None of the named executive officers participate in or have account balances in non-qualified
defined contribution plans or other deferred compensation plans maintained by the Company. In the
future, the compensation committee may elect to provide the named executive officers and other
employees with non-qualified defined contribution or deferred compensation benefits if the
compensation committee determines that doing so is in the Companys best interests.
25
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Related-Party Transactions Policies and Procedures
Related-party transactions have the potential to create actual or perceived conflicts of
interest between the Company and its directors and executive officers or their immediate family
members. Under its charter, our audit committee is charged with the responsibility of reviewing and
approving all related-party transactions. To assist in identifying such transactions for our
fiscal year ended June 30, 2008, the Company distributed questionnaires to directors, officers and
beneficial owners of more than 5% of any class of the Companys common stock.
Current SEC rules define a related-party transaction to include any transaction, arrangement
or relationship in which the Company is a participant and in which any of the following persons has
or will have a direct or indirect interest:
|
|
|
any executive officer, director or director nominee of the Company; |
|
|
|
|
any person who is an immediate family member (as defined under Item 404 of
Regulation S-K) of an executive officer, director or director nominee or beneficial
owner of more than 5% of the Companys common stock; |
|
|
|
|
any person who is known to be the beneficial owner of more than 5% of the
Companys common stock; or |
|
|
|
|
any firm, corporation or other entity in which any of the foregoing persons is
employed or is a partner or principal or in a similar position or in which such
person, together with any of the foregoing persons, has a 5% or greater beneficial
ownership interest. |
Although the Company does not have a formal policy with regard to related-party transactions,
our audit committee may consider the following factors when deciding whether to approve a
related-party transaction: the nature of the related partys interest in the transaction; the
material terms of the transaction, including, without limitation, the amount and type of the
transaction; the importance of the transaction to the related party; whether the transaction would
impair the judgment of a director or executive officer to act in the best interests of the Company;
and any other matters deemed appropriate by our audit committee.
Certain Related-Party Transactions
Employment Agreement with David W. Brown
On January 10, 2008, the Company entered into an Employment Agreement with David W. Brown
pursuant to which Mr. Brown was hired as President and Chief Executive Officer of the Company.
Unless sooner terminated pursuant to the terms of the Employment Agreement, the term of Mr. Browns
employment as President and Chief Executive Officer of the Company will be from January 10, 2008 to
December 31, 2010. Mr. Brown will be entitled to an annual base salary of $240,000 and will be
eligible to receive an annual bonus of up to 75% of his base salary based upon meeting certain
operating and financial benchmarks to be established by the Companys Board of Directors and
compensation committee. Mr. Brown will also be eligible to participate in the Companys standard
benefit plans. Until no later than June 1, 2008, the Company will provide Mr. Brown with temporary
living benefits pending his relocation to the Denver area.
In addition, Mr. Brown was granted options to purchase up to an aggregate of 1,800,000 shares
of the Companys common stock. The stock options shall vest and become exercisable in the amounts
and based upon the exercise prices as follows: 150,000 shares were fully vested upon grant and have
an exercise price of $0.23 per share; 450,000 shares vest in monthly installments of 37,500 shares
from January 31, 2008 through December 31, 2008 and have an exercise price of $0.23 per share;
450,000 shares vest in monthly installments of 37,500 shares from January 31, 2009 through December
31, 2009 and have an exercise price of $0.50 per share; 450,000 shares vest in monthly installments
of 37,500 shares from January 31, 2010 through December 31, 2010 and have an exercise price of
$0.75 per share; and 300,000 shares that vested based upon warrants to purchase the Companys
common stock being exercised on or before April 18, 2008 and have an exercise price of $0.30 per
share (of which 62,751 shares vested on April 18, 2008 and of which 237,249 shares terminated on
April 18, 2008).
26
During the term of his employment and for a period of six months thereafter, Mr. Brown has
agreed not to, directly or indirectly, as an officer, director, employee, consultant, owner,
shareholder, adviser, joint venturer, or otherwise, compete with Company within the United States
and all other countries in which the Company has, as of the effective date of the termination of
Mr. Browns employment, a registered patent and/or any active business activity in: (i) the
antioxidant segment of the nutraceutical industry; or (ii) any other line of business in which
Company was engaged at any time during Mr. Browns employment with Company; or (iii) any other line
of business into which Company, during Mr. Browns employment with Company, formed an intention to
enter into. This covenant will not prohibit Mr. Brown from owning less than two percent of the
securities of any competitor of the Company, if such securities are publicly traded on a nationally
recognized stock exchange or over-the-counter market. In addition, during this time, Mr. Brown has
agreed not to solicit employees of the Company or interfere with the Companys business
relationships.
If Mr. Brown is terminated without Substantial Cause or resigns for Good Reason (each as
defined in the Employment Agreement), then the Company will pay to Mr. Brown severance in the
amount of (i) all compensation accrued and unpaid as of the date of termination or resignation,
(ii) (a) if the termination or resignation occurs prior to the first anniversary of the date of the
Employment Agreement, a cash payment equal to one year of his annual base salary as of the date of
termination or resignation paid over a period of twenty-four months or (b) if the termination or
resignation occurs on or after the first anniversary of the date of the Employment Agreement, a
cash payment equal to one year of his annual base salary as of the date of termination or
resignation paid over a period of twenty-four months and the actual annual bonus paid to Mr. Brown
for the year before the year of termination or resignation, and (iii) the acceleration of the
vesting of all unvested stock-based long term incentive compensation granted to Mr. Brown pursuant
to the Employment Agreement.
If the Company notifies Mr. Brown that it will not renew the Employment Agreement following
December 31, 2010 or any subsequent renewal term, and Mr. Brown resigns from the Company on or
before the date that the Employment Agreement expires, then the Company will pay to Mr. Brown
severance in the amount of (i) all compensation accrued and unpaid as of the date of resignation
and (ii) a cash payment equal to six months of Mr. Browns annual base salary as of the date of
resignation paid over a period of twelve months from the date of resignation.
If Mr. Brown is terminated with Substantial Cause or resigns without Good Reason, then he
shall be entitled to all compensation accrued and unpaid as of the date of termination or
resignation, but he shall not be entitled to any additional severance payments or acceleration of
vesting upon such termination or resignation.
Bolder Venture Partners
On September 28, 2007, the Company entered into a consulting arrangement with Bolder Venture
Partners (BVP) under a signed letter of intent, pursuant to which Gene Copeland served as the
Companys interim Chief Operating Officer. The Company paid a monthly, non-refundable retainer of
$15,000 per month to BVP, which was reduced to $7,500 per month after the hiring of a CEO. The
Company also paid to BVP a monthly incentive fee equal to 10% of the amount of monthly revenue
increase above its current monthly revenue. The Company was also required to reimburse BVP for
costs and expenses incurred by BVP pursuant to the arrangement, including lodging expenses for Mr.
Copeland, who is not a resident of the Denver metro area.
The Company granted to BVP a warrant to purchase up to 1,200,000 shares of our common stock at
$.30 per share for five years. BVP was granted the same registration rights as those granted to
participants in our September 2007 private placement offering. The warrant vests on the occurrence
of performance milestones by BVP. The consulting arrangement with BVP terminated on September 28,
2008. The incentive fee, however, continues through October 31, 2008.
27
CODE OF ETHICS
We have adopted the Lifevantage Corporation Code of Ethics which applies to our Chief
Executive Officer, Chief Financial Officer, principal accounting officer, and controller. The Code
of Ethics is available on our website at www.lifevantage.com. The Code of Ethics addresses
matters including: (1) honest and ethical conduct, including the ethical handling of actual or
apparent conflicts of interest between personal and professional relationships; (2) full, fair,
accurate, timely, and understandable disclosure in reports and documents that we file with, or
submits to, the SEC and in other public communications we make; and (3) compliance with laws, rules
and regulations applicable to us. The Board of Directors may grant waivers of provisions of the
Code of Ethics. Any amendments to, or waivers from, a provision of our Code of Ethics that shall be
disclosed by posting such information on our website at www.lifevantage.com. We have also
adopted the Lifevantage Corporation Code of Business Conduct and Ethics that applies to all
officers, directors and employees. Among other matters, the Code of Business Conduct addresses:
compliance with laws, rules, and regulations; conflicts of interest; corporate opportunities;
competition and fair dealing; discrimination; health and safety; confidentiality; protection of our
assets; and payments to governmental personnel.
28
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors,
executive officers, and persons who own more than ten percent of our common stock to report their
ownership of the common stock and any changes in that ownership to the Securities and Exchange
Commission. The Securities and Exchange Commission has established specific due dates for these
reports, and we are required to report in this proxy statement any failure to file by these dates.
To our knowledge, based solely on a review of the copies of such reports furnished to us and
written representations that no other reports were required, during the fiscal year ended June 30,
2008, we believe that all such reports were filed on a timely basis except that an initial report
of ownership on Form 3 for Mr. Mauro was filed late.
29
PROPOSAL 2 RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
Gordon, Hughes & Banks, LLP audited the Companys consolidated financial statements from
December 22, 2004 until January 30, 2008. On January 30, 2008, after careful consideration, the
audit committee dismissed Gordon, Hughes & Banks, LLP as the Companys independent registered
public accounting firm. On the same date, the audit committee unanimously approved the engagement
of Ehrhardt Keefe Steiner & Hottman PC as the independent registered public accounting firm of the
Company for the remainder of the fiscal year ended June 30, 2008.
The audit committee of our Board of Directors has selected Ehrhardt Keefe Steiner & Hottman PC
as the Companys independent auditors for the fiscal year ending June 30, 2009 and has further
directed that management submit the selection of independent auditors for ratification by the
shareholders at the Annual Meeting. Representatives of Ehrhardt Keefe Steiner & Hottman PC are
expected to be present at the annual meeting. They will have an opportunity to make a statement if
they so desire and will be available to respond to appropriate questions.
Neither the Companys Bylaws nor other governing documents or law require shareholder
ratification of the selection of Ehrhardt Keefe Steiner & Hottman PC as our independent auditors.
However, the audit committee is submitting the selection of Ehrhardt Keefe Steiner & Hottman PC to
the shareholders for ratification as a matter of good corporate governance. If the shareholders
fail to ratify the selection, the audit committee will review its future selection of independent
auditors. Even if the selection is ratified, the audit committee in its discretion may direct the
appointment of different independent auditors at any time during the year if they determine that
such a change would be in the best interests of the Company and our shareholders.
The affirmative vote of the holders of a majority of the outstanding shares of common stock
will be required to ratify the selection of Ehrhardt Keefe Steiner & Hottman PC. Abstentions will
be counted toward the tabulation of votes cast on proposals presented to the shareholders and will
have the same effect as negative votes. Broker non-votes are counted towards a quorum, but are not
counted for any purpose in determining whether this matter has been approved.
Principal Accountant Fees and Services
The following table presents (1) fees for professional audit services rendered by Gordon,
Hughes & Banks, LLP, the Companys principal accountant through January 30, 2008, for the audit of
our annual financial statements for the fiscal year ended June 30, 2007, and fees billed for other
services rendered by Gordon, Hughes & Banks, LLP during that period, and (2) fees for professional
audit services rendered by Ehrhardt Keefe Steiner & Hottman PC, the Companys principal accountant
beginning January 30, 2008, for the audit of our annual financial statements for the fiscal year
ended June 30, 2008, and fees billed for other services rendered by Ehrhardt Keefe Steiner &
Hottman PC during that period:
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended |
|
|
2008 |
|
2007 |
Audit Fees |
|
$ |
45,500 |
|
|
$ |
35,000 |
|
Audit-related Fees (1) |
|
|
26,000 |
|
|
|
47,302 |
|
Tax Fees (2) |
|
|
8,164 |
|
|
|
6,000 |
|
All Other Fees |
|
|
|
|
|
|
|
|
|
|
|
Total Fees |
|
$ |
79,664 |
|
|
$ |
88,302 |
|
|
|
|
1 |
|
Audit-related fees of $26,000 and $47,302 in fiscal years ended June 30, 2008 and 2007 related to
assurance and other services related to performance of the audit and review of interim
reports. |
|
2 |
|
Tax fees of $8,164 and $6,000 in fiscal years ended June 30, 2008 and 2007 are for tax
compliance, advice and planning. |
Pre-Approval Policies and Procedures
The audit committee has adopted policies and procedures for the pre-approval of audit and
non-audit services rendered by our independent auditor, Ehrhardt Keefe Steiner & Hottman PC. The
policies require pre-approval of all auditing and such non-auditing services as our independent
auditor is permitted to provide, subject to de minimus exceptions for services other than audit,
review, or
30
attest services that are approved by the audit committee prior to completion of the audit. All
of the items identified under Audit-Related Fees, Tax Fees and All Other Fees above were
approved by the audit committee. Alternatively, the engagement of our independent auditor may be
entered into pursuant to pre-approved policies and procedures that our audit committee may
establish, so long as these policies and procedures are detailed as to particular services and the
audit committee is informed of each service. In making these determinations, the audit committee
will consider whether the services provided are compatible with maintaining our auditors
independence. We are prohibited by applicable law from obtaining certain non-audit services from
our independent auditor and, in that event, we would obtain these non-audit services from other
providers.
The audit committee has determined that the rendering of the services other than audit
services by Ehrhardt Keefe Steiner & Hottman PC is compatible with maintaining the principal
accountants independence.
On January 30, 2008, the Company dismissed Gordon, Hughes & Banks, LLP as the Companys
independent registered public accounting firm. The Company appointed Ehrhardt, Keefe, Steiner &
Hottman PC on January 30, 2008 as its independent registered public accounting firm beginning for
the three months ended December 31, 2007. The decision to change accountants was recommended and
approved by the Companys Board of Directors and its Audit Committee on January 30, 2008.
Neither Gordon, Hughes & Banks, LLPs audit report dated October 10, 2007 on the Companys
consolidated financial statements as of and for the year ended June 30, 2007, included in its Form
10-KSB filed October 12, 2007, nor Gordon, Hughes & Banks, LLPs audit report dated August 15, 2006
and updated on November 28, 2006 on the Companys consolidated financial statements as of and for
the year ended June 30, 2006, included in its Form 10-KSB and amended Form 10-KSB/A filed September
28, 2006 and November 30, 2006 respectively, contained an adverse opinion or a disclaimer of
opinion or was qualified or modified as to uncertainty, audit scope, or accounting principles.
In connection with the audits of the Companys financial statements for the fiscal years ended
June 30, 2007 and 2006 and in the subsequent interim period through January 30, 2008, the date of
the dismissal of the former accountant, there were no disagreements with Gordon, Hughes & Banks,
LLP on any matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure which, if not resolved to the satisfaction of Gordon, Hughes & Banks,
LLP, would have caused Gordon, Hughes & Banks, LLP to make reference to the subject matter of the
disagreement in connection with its report. During the years ended June 30, 2007 and 2006, and the
subsequent interim period through January 30, 2008, Gordon, Hughes & Banks, LLP did not advise the
Company of any reportable events as described in Item 304(a)(1)(iv)(B) of Regulation S-K. Gordon,
Hughes & Banks, LLPs letter to the SEC stating its agreement with the statements in this paragraph
is filed as an exhibit to the Companys Current Report on Form 8-K dated February 8, 2008.
The Company engaged Ehrhardt, Keefe, Steiner & Hottman PC as its independent registered public
accounting firm for the fiscal year ending June 30, 2008. The Company has not consulted with
Ehrhardt, Keefe, Steiner & Hottman PC during its two most recent fiscal years or during any
subsequent interim period prior to the appointment of Ehrhardt, Keefe, Steiner & Hottman PC as the
Companys independent registered public accounting firm regarding any matters described in Item
304(a)(2)(i) or Item 304(a)(2)(ii) of Regulation S-K.
Board Recommendation
Our Board of Directors recommends the shareholders vote FOR ratification of Ehrhardt, Keefe,
Steiner & Hottman PC as our independent auditors for the fiscal year ending June 30, 2009.
31
HOUSEHOLDING OF PROXY MATERIALS
The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy
the delivery requirements for proxy statements and annual reports with respect to two or more
shareholders sharing the same address by delivering a single proxy statement addressed to those
shareholders. This process, which is commonly referred to as householding, potentially means
extra convenience for shareholders and cost savings for companies.
This year, a number of brokers with account holders who are Lifevantage Corporation
shareholders will be householding our proxy materials. A single proxy statement will be delivered
to multiple shareholders sharing an address unless contrary instructions have been received from
the affected shareholders. Once you have received notice from your broker that they will be
householding communications to your address, householding will continue until you are notified
otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in
householding and would prefer to receive a separate proxy statement and annual report, please
notify your broker, direct your written request to Lifevantage Corporation., Bradford K. Amman,
Secretary, 11545 W. Bernardo Court, Suite 301, San Diego, California 92127. Shareholders who
currently receive multiple copies of the proxy statement at their address and would like to request
householding of their communications should contact their broker.
32
OTHER MATTERS
Our Board of Directors knows of no other matters that will be presented for consideration at
the Annual Meeting. If any other matters are properly brought before the meeting, it is the
intention of the persons named in the accompanying proxy to vote on such matters in accordance with
their best judgment.
INCORPORATION BY REFERENCE
This proxy statement includes references to our website address. Our website address is
intended to provide inactive, textual references only. The information on our website is not part
of this proxy statement.
|
|
|
|
|
|
By Order of the Board of Directors
|
|
|
/s/ Bradford K. Amman
|
|
|
Bradford K. Amman |
|
|
Secretary |
|
|
October 28, 2008
33
|
|
|
|
|
|
|
|
|
|
|
(BAR CODE)
|
|
|
Lifevantage Corporation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(BAR CODE) |
|
MR |
|
A |
|
SAMPLE |
|
|
DESIGNATION |
|
(IF |
|
ANY) |
|
|
ADD |
|
|
|
|
|
1 |
|
|
ADD |
|
|
|
|
|
2 |
|
|
ADD |
|
|
|
|
|
3 |
|
|
ADD |
|
|
|
|
|
4 |
|
|
ADD |
|
|
|
|
|
5 |
|
|
ADD |
|
|
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
(SCALE) |
|
|
|
|
|
|
|
|
|
|
|
000000000.000 ext |
|
|
000000000.000 ext |
000004 |
|
000000000.000 ext |
|
|
000000000.000 ext |
|
|
000000000.000 ext |
Least Address Line |
|
000000000.000 ext |
|
|
000000000.000 ext |
|
|
|
|
|
C 1234567890 J N T |
|
|
(BAR CODE) |
|
o |
|
Mark this box with an X if you have made changes to your name or address details above. |
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Meeting Proxy Card |
|
|
(123456 |
) |
|
|
C0123456789 |
|
|
|
12345 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A Election of Directors
1. |
|
To elect six (6) directors to hold office for a one-year term expiring
at the 2009 Annual Meeting of Shareholders and until their respective successors
are elected and qualified. |
|
|
|
|
|
Nominees: |
|
For |
|
Withhold |
01 Dr. James D. Crapo
|
|
o
|
|
o |
02 Mr. Jack R. Thompson
|
|
o
|
|
o |
03 Dr. Joe M. McCord
|
|
o
|
|
o |
04 Mr. David W. Brown
|
|
o
|
|
o |
05 Mr. Richard Doutre Jones
|
|
o
|
|
o |
06 Mr. Garry Mauro
|
|
o
|
|
o |
|
|
|
|
|
|
|
|
|
|
|
For
|
|
Against
|
|
Abstain
|
|
|
|
|
|
|
|
|
|
|
|
2. To ratify the appointment of
Ehrhardt Keefe Steiner &
Hottman PC as independent
auditors of the Company for its
fiscal year ending June 30,
2009
|
|
o
|
|
o
|
|
o |
|
|
E Authorized Signatures Sign Here This section must be completed for your instructions to be
executed.
NOTE: Please sign exactly as name appears on this proxy. If joint owners EACH should sign this
proxy. When signing as attorney, executor, administrator, trustee, guardian or corporate officer,
please give your FULL title as such.
|
|
|
|
|
Signature 1 - Please keep signature within the box |
|
Signature 2 - Please keep signature within the box
|
|
Date (mm/dd/yyyy) |
|
|
|
|
|
/ /
|
§
Proxy LIFEVANTAGE CORPORATION
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON JANUARY 7, 2009 THIS PROXY IS SOLICITED ON
BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of LifeVantage Corporation (the Company) hereby appoints Bradford K.
Amman and David W. Brown and each of them, the proxies of the undersigned, with power to act
without the other and with full power of substitution, to attend and represent the undersigned at
the Annual Meeting of Shareholders of the Company to be held on Wednesday, January 7, 2009 and at
any adjournment or postponement thereof, and to vote all of such shares that the undersigned is
entitled to vote at such Annual Meeting or at any adjournment or postponement thereof, as stated on
the reverse side.
THIS PROXY WILL BE VOTED BY THE PROXIES AS DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL BE VOTED
FOR EACH OF THE DIRECTOR NOMINEES IN ACCORDANCE WITH THEIR BEST JUDGMENT UPON SUCH OTHER BUSINESS
AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
Your are urged to mark, sign, date and return your proxy without delay in the return envelope provided for
that purpose, which requires no postage if mailed in the United States.
THANK YOU FOR VOTING
2