UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934
(Amendment
No. )
Filed by
the Registrant x
Filed by
a Party other than the Registrant ¨
Check the
appropriate box:
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Preliminary
Proxy Statement
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Confidential, for Use of the
Commission Only (as permitted by Rule
14a-6(e)(2))
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x
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Definitive
Proxy Statement
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¨
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Definitive
Additional Materials
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¨
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Soliciting
Material Pursuant to §240.14a-12
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Reliv
International, Inc.
(Name
of Registrant as Specified in its Charter)
(Name
of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of filing fee (Check the appropriate box):
¨
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
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1)
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Title
of each class of securities to which transaction
applies:
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2)
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Aggregate
number of securities to which transaction applies:
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3)
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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):
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4)
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Proposed
maximum aggregate value of transaction:
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Fee
paid previously with preliminary
materials.
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¨
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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.
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1)
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Amount
Previously Paid:
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2)
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Form,
Schedule or Registration Statement No.:
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RELIV’
INTERNATIONAL, INC.
136
Chesterfield Industrial Boulevard
Chesterfield,
Missouri 63005
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS TO
BE HELD
ON MAY 28, 2009
To: Stockholders
of Reliv’ International, Inc.
The
Annual Meeting of the Stockholders of Reliv’ International, Inc. will be held at
Reliv’ International, Inc., Corporate Headquarters, 136 Chesterfield Industrial
Boulevard, Chesterfield, Missouri 63005, on Thursday, May 28, 2009, at 9:00
a.m., Central Daylight Savings Time, for the following purposes:
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1.
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To
elect 9 directors to hold office during the year following the Annual
Meeting or until their successors are elected (Item No. 1 on proxy
card);
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2.
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To
approve the adoption of the 2009 Incentive Stock Plan (Item No. 2 on proxy
card);
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3.
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To
ratify the appointment of Ernst & Young LLP as the independent
registered public accounting firm of the Company for 2009 (Item No. 3 on
proxy card); and
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4.
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To
transact such other business as may properly come before the
meeting.
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The close
of business on March 26, 2009, has been fixed as the record date for determining
the stockholders entitled to receive notice of and to vote at the Annual
Meeting.
BY ORDER
OF THE BOARD OF DIRECTORS
April 7,
2009
/s/ Stephen M. Merrick
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Stephen
M. Merrick,
Secretary
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YOUR
VOTE IS IMPORTANT
It
is important that as many shares as possible be represented at the Annual
Meeting. Please read this Proxy Statement and submit your Proxy via
the Internet, or if you received a paper copy of your proxy materials, by using
the toll-free telephone number provided or by completing, signing, dating and
returning your Proxy in the pre-addressed envelope provided. Your
Proxy may be revoked by you at any time before it has been
voted.
RELIV’
INTERNATIONAL, INC.
136
Chesterfield Industrial Boulevard
Chesterfield,
Missouri 63005
PROXY
STATEMENT
Information Concerning the
Solicitation
The Board of Directors of Reliv’
International, Inc. (the “Company”) is furnishing this Proxy Statement for the
solicitation of proxies from holders of the outstanding common stock of the
Company to be used at the 2009 annual stockholders meeting (the “Annual
Meeting”) of the Company which will be held on Thursday, May 28,
2009. The Company has elected to provide access to these proxy
materials over the Internet in accordance with rules adopted by the
Securities and Exchange Commission. On April 7, 2009 we mailed a
Notice of Internet Availability of Proxy Materials to our stockholders of record
and beneficial owners. The Notice instructs you on how you may access
the proxy materials on the Internet. It also instructs you on how you
may vote your proxy. If you received a Notice by mail and would like
to receive a printed copy of our proxy materials, you should follow the
instructions for requesting printed materials included in the
Notice.
The cost
of preparing, assembling and furnishing the proxy material and of reimbursing
brokers, nominees and fiduciaries for the out-of-pocket and clerical expenses of
transmitting copies of the proxy material to the beneficial owners of shares
held of record by such persons will be borne by the Company. The
Company does not intend to solicit proxies otherwise than pursuant to the Notice
and, where requested, mailing of proxy materials, but certain officers and
regular employees of the Company or its subsidiaries, without additional
compensation, may use their personal efforts, by telephone or otherwise, to
obtain proxies.
Your vote
is very important. Whether or not you plan to attend our Annual
Meeting, please take the time to vote either by the Internet or, if you
requested a paper copy of the proxy materials, by telephone using the
instructions on the proxy card or by completing and mailing the proxy card
enclosed with the proxy materials as soon as possible. If you elect
to vote using the proxy card in the proxy materials you requested be mailed to
you, you must sign, date and mail it and indicate how you want to
vote. If you do not so indicate, your proxy will be voted as
recommended by the Board of Directors.
Quorum and
Voting
Only
stockholders of record at the close of business on March 26, 2009 are entitled
to vote at the Annual Meeting. On that day, there were 14,305,585
shares of common stock outstanding. Each share has one
vote. Shareholders do not have cumulative voting rights in the
election of directors. A simple majority of the outstanding shares is
required to be present in person or by proxy at the meeting for there to be a
quorum for purposes of proceeding with the Annual Meeting. A simple
majority of the shares present in person or by proxy at the Annual Meeting, at
which a quorum is present, is required to elect directors and approve the
appointment of the Company’s independent registered public accounting
firm. A majority of the total votes cast with respect to the proposal
is required for approval of the 2009 Incentive Stock
Plan. Abstentions and withheld votes have the effect of votes against
these matters. Broker non-votes (shares held of record by a broker
for which a proxy is not given) will be counted for purposes of determining
shares outstanding for purposes of a quorum, but will not be counted as present
for purposes of determining the vote on any matter considered at the
meeting.
If a
stockholder specifies how the proxy is to be voted with respect to any of the
proposals for which a choice is provided, the proxy will be voted in accordance
with such specifications. If a stockholder fails to so specify with
respect to such proposals, the proxy will be voted “FOR” the nominees for
directors contained in these proxy materials, “FOR” the approval of the adoption
of the 2009 Incentive Stock Plan and “FOR” the appointment of the Company’s
independent registered public accounting firm. A stockholder submitting a proxy
prior to the Annual Meeting has the power to revoke it at any time before the
shares subject to it are voted by (i) sending a written statement to that effect
to the Secretary of the Company, (ii) submitting a valid proxy having a later
date, or (iii) voting in person at the Annual Meeting.
Discretionary Voting
Power
The Board of Directors knows of no
other matters to be presented for shareholder action at the Annual
Meeting. On matters which may be raised at the Annual Meeting that
are not covered by this Proxy Statement, the persons named in the proxy will
have full discretionary authority to vote. If any nominee for
election as a director becomes unable to accept nomination or election, which we
do not anticipate, the persons named in the proxy will vote for the election of
another person recommended by the Board of Directors.
BENEFICIAL OWNERSHIP OF
SHARES BY MANAGEMENT AND
SIGNIFICANT
SHAREHOLDERS
The
following table provides information concerning the beneficial ownership of the
Company’s common stock by each director and nominee for director, certain
executive officers, and by all of the Company’s directors and officers as a
group as of March 26, 2009. In addition, the table provides
information concerning the beneficial owners known to the Company to hold more
than five percent of the Company’s outstanding common stock as of March 26,
2009.
The
amounts and percentage of common stock beneficially owned are reported on the
basis of regulations of the Securities and Exchange Commission (“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 to
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 after March
26, 2009. Under these rules, more than one person may be deemed a
beneficial owner of the same securities and a person may be deemed a beneficial
owner of securities as to which he has no economic
interest. Percentage of class is based on 14,305,585 shares of common
stock outstanding as of March 26, 2009.
Name of beneficial owner(1)
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Amount and nature of
beneficial ownership
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Percent of class
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Robert
L. Montgomery(2)
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3,575,045
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24.71%
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Paul
& Jane Meyer Family Foundation(3)
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2,098,973
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14.60%
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Carl
W. Hastings(4)
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618,028
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4.31%
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Stephen
M. Merrick(5)
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487,336
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3.39%
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Donald
L. McCain(6)
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352,545
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2.45%
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John
B. Akin(7)
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11,326
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*
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Robert
M. Henry(8)
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12,000
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*
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Denis
St. John(9)
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22,500
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*
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Michael
D. Smith
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3,500
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*
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(continued
on following page)
Name of beneficial owner(1)
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Amount and nature of
beneficial ownership
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Percent of class
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Patrick
G. Doherty
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0
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*
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R.
Scott Montgomery(10)
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111,858
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*
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Ryan
A. Montgomery(11)
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31,436
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*
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Steven
D. Albright(12)
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41,283
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*
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All
Directors, nominees and Executive Officers as a Group (18 persons)(13)
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5,387,248
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36.46%
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(1)
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Unless
otherwise indicated below, the person named in the table has sole voting
and investment power with respect to all shares beneficially owned,
subject to community property laws where applicable. Unless
otherwise indicated, the address for each person is c/o Reliv’
International, Inc., 136 Chesterfield Industrial Boulevard, Chesterfield,
Missouri 63005.
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(2)
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Includes
160,000 shares subject to options exercisable within 60 days after March
26, 2009, 1,154,970 shares held through the Montgomery Family Limited
Partnership, 470,114 shares held through Montgomery Enterprises, Ltd., for
which Mr. Montgomery has sole voting and investment power, and 125,920
shares held by Mr. Montgomery’s
spouse.
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(3)
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The
beneficial ownership of the Paul & Jane Meyer Family Foundation as of
March 26, 2009 is based solely upon the information contained in the
Schedule 13D and supporting schedules thereto filed by the Paul & Jane
Meyer Family Foundation with the Securities and Exchange Commission on
January 13, 2009, and subsequent Reports on Form 4 through March 26,
2009. The address for the Paul & Jane Meyer Family
Foundation is 4527 Lake Shore Drive, Waco, Texas
76710.
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(4)
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Includes
20,000 shares subject to options exercisable within 60 days after March
26, 2009.
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(5)
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Includes
50,000 shares subject to options exercisable within 60 days after March
26, 2009. Includes 437,336 shares held in the name of The
Merrick Company LLC.
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(6)
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Includes
50,000 shares subject to options exercisable within 60 days after March
26, 2009.
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(7)
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Includes
10,000 shares subject to options exercisable within 60 days after March
26, 2009.
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(8)
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Includes
10,000 shares subject to options exercisable within 60 days after March
26, 2009.
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(9)
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Includes
10,000 shares subject to options exercisable within 60 days after March
26, 2009 and 2,500 shares held in the name of Mr. St. John’s
spouse.
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(10)
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Includes
50,000 shares subject to options exercisable within 60 days after March
26, 2009.
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(11)
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Includes
25,000 shares subject to options exercisable within 60 days after March
26, 2009.
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(12)
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Includes
20,000 shares subject to options exercisable within 60 days after March
26, 2009.
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(13)
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Includes
470,000 shares subject to options exercisable within 60 days after March
26, 2009.
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PROPOSAL
ONE - ELECTION OF
DIRECTORS
Nine
directors will be elected at the Annual Meeting to serve for terms of one year
expiring on the date of the Annual Meeting in 2010. Each director
elected will continue in office until a successor has been
elected. If a nominee is unable to serve, which the Board of
Directors has no reason to expect, the persons named in the proxy intend to vote
for the balance of those named and, if they deem it advisable, for a substitute
nominee.
THE BOARD OF DIRECTORS RECOMMENDS THE
ELECTION OF ALL OF THE NOMINEES.
Information Concerning
Nominees
The
following is information concerning nominees for election to the Board of
Directors. Each of the following nominees is presently a member of
the Board of Directors.
Robert L. Montgomery, age
67, is the
Chairman of the Board, President and Chief Executive Officer.
Mr. Montgomery became Chairman of the Board of Directors and Chief
Executive Officer on February 15, 1985, and President on July 1, 1985.
Mr. Montgomery has been a director of the Company since 1985.
Mr. Montgomery is also the President and a director of Reliv’, Inc. and
President and a director of Reliv’ World Corporation, both wholly owned
subsidiaries of the Company. Mr. Montgomery received a B.A. degree in
Economics from the University of Missouri in Kansas City, Missouri in 1965.
Mr. Montgomery is the father of R. Scott Montgomery, the Company’s
Executive Vice President and Chief Operating Officer, and Ryan A. Montgomery,
the Company’s Executive Vice President, Worldwide Sales.
Stephen M. Merrick, age
67, has been the
Senior Vice President, Secretary, General Counsel and a member of the Board of
Directors since July 20, 1989. Mr. Merrick is Of Counsel to Vanasco
Genelly & Miller, which has served as counsel to the Company with
respect to certain matters, and has been engaged in the practice of law for over
40 years. Previously, Mr. Merrick was a principal of the law
firm of Merrick & Associates, P.C., which served as counsel to the Company
with respect to certain matters. Mr. Merrick has represented the
Company since the Company’s founding. Mr. Merrick received a Juris Doctor
degree from Northwestern University School of Law in 1966. He is also
an officer and director of CTI Industries Corporation (NASDAQ:
CTIB).
Carl W. Hastings, age 67, was
appointed Vice Chairman and Chief Scientific Officer in April
2007. Prior to his appointment in April 2007, he served as Vice
President of the Company since July 1, 1992. Dr. Hastings has been
employed by the Company since April 1991. Dr. Hastings was re-elected to
the Board of Directors in May 2005 and formerly served as a member of the Board
of Directors from February 1990 until May 2004. Dr. Hastings holds B.S. and
M.S. degrees and a Ph.D. degree in Food Science from the University of Illinois.
For more than the past 30 years, Dr. Hastings has been engaged in a
variety of employment and consulting capacities as a food scientist.
Dr. Hastings is the father of Steven G. Hastings, the Company’s Senior Vice
President, North American Sales and Brett M. Hastings, Vice President -
Legal.
Donald L. McCain, age
65, has been a
member of the Board of Directors since July 20, 1989. Mr. McCain is
the Corporate Secretary and co-owner of The Baughan Group Inc., a supplier and
manufacturer of mining equipment and supplies with offices, plants and
distribution centers in the Midwest and Eastern United States and has been
associated with that company for more than ten years. He is also a part owner of
Baughan PTY, Ltd., a South African-based company which manufactures industrial
chain and rail car axles for worldwide distribution. Mr. McCain is the
father of Ronald McCain, Vice President – Sales Development who is also the
son-in-law of Robert L. Montgomery, the Chairman, President and Chief Executive
Officer.
John B. Akin, age 80, has been a member of
the Board of Directors since June 1986. Mr. Akin retired as Vice President,
A.G. Edwards & Sons and resident manager of the Decatur, Illinois
branch office in 1995. Mr. Akin had been associated with A.G.
Edwards & Sons as a stock broker, manager and officer since April 1973.
Mr. Akin holds a B.A. degree from the University of Northern Iowa, Cedar
Falls, Iowa.
Robert M. Henry, age 62, has been a member of
the Board of Directors since May 2004. Mr. Henry is a private investor and
business consultant. From December 2004 to 2008, Mr. Henry served Chairman
and Chief Executive Officer of Arbonne International, Inc., a personal care
products company. From 2000 to 2003, he served as Chief Executive Officer and
board member for Mannatech, Incorporated, a public multi-level marketing company
that sells dietary supplements, wellness and weight-management products to
independent distributors. From 1998 to 2000, Mr. Henry acted as an
Operating Consultant for Gryphon Investors where he gave advice on the
investment opportunities in the network marketing industry. From 1986 to 1998,
Mr. Henry served in various executive positions in the advertising,
communications, investment and women’s apparel industries. From 1982 to 1986, he
served as Corporate Controller Worldwide for Amway Corporation, a multi-level
marketer of various products. From 1971 to 1982, Mr. Henry served various
management roles for Avon Products Inc., including Regional Controller,
Manufacturing/Sales/Distribution, Chief Financial Officer for Avon Fashions. He
received a B.S. degree in Accounting from Hunter College in New York and a
J.D. from Brooklyn Law School. Mr. Henry has been a member of the
New York State Bar since 1975 and also served on the Direct Selling
Association Board of Directors during 2002.
Denis St. John, age 65, has been a member of
the Board of Directors since May 2004. Mr. St. John is the
chairman of Real Estate Development Strategies, LLC. Until his
retirement on October 31, 2007, Mr. St. John was a principal with Larson Allen,
a regional public accounting firm, in the Health Care Group. For 42 years,
Mr. St. John was associated with various accounting firms working
primarily in the financing and tax area, serving mid-size, closely held
companies. Mr. St. John graduated from the University of Missouri with
a Bachelor of Science in Business Administration with a major in Accounting. He
is a former NASD registered representative, holding Series 6 and 63
securities licenses. Mr. St. John is Certified Public Accountant and a
member of the Missouri Society of CPAs and the American Institute of
CPAs.
Michael D. Smith, age 63, has
been a member of the Board of Directors since August 2006. Mr. Smith
has been Senior Vice President of Major Initiatives of Stampin' Up!, Inc.
since July 2006. Prior to that time, Mr. Smith was employed by NuSkin
Enterprises, Inc. for 17 years in various position including General Counsel and
Director of Legal Affairs, Regional Vice President and Vice President of Global
Industry and Government Relations. Mr. Smith is a retired
Colonel in the U.S. Army (JAG Corps), with 26 years of active and reserve
service, and he holds a Juris Doctorate Degree from the University of Utah
(1973).
Patrick G. Doherty, age 43,
is President of Mariner Equity Management, LLC, a private equity and venture
capital fund. Prior to that time, from 1993 through February 2007, he was
employed by A.G. Edwards & Sons, most recently as Managing Director and
Group Head of the firm’s Consumer and Industrial Investment Banking Group.
He is a member of the Board of Directors of the Association for Corporate Growth
– St. Louis. Mr. Doherty received a B.S.B.A. degree from Georgetown
University and an MBA from the University of Chicago.
Executive Officers Other
Than Nominees
R. Scott Montgomery, age
39, was appointed
Executive Vice President and Chief Operating Officer in April
2007. Mr. Montgomery joined the Company in 1993 and previously
served as Senior Vice President – Worldwide Operations from 2004 to 2007 and
Vice President of International Operations from 2001 to 2004.
Mr. Montgomery graduated from Southwest Missouri State University with a
B.S. degree in Finance and Investments.
Ryan A. Montgomery, age
35, was appointed
Executive Vice President, Worldwide Sales in April 2007. Previously,
he was Vice President, Sales from 2004 to 2007. Mr. Montgomery served as
corporate counsel from September 1999 to October 2004. Mr. Montgomery
received his B.A. degree in Economics from Vanderbilt University in 1995 and
graduated from Saint Louis University Law School in 1999.
Steven D. Albright, age
47, has been the
Vice President, Finance and Chief Financial Officer since March 2005.
Mr. Albright was the Vice President, Finance/Controller from 2002 to 2005
and was the Controller since 1992. Prior to his employment with the Company,
Mr. Albright was employed from 1987 to 1992 as Assistant Controller for
Kangaroos USA, Inc., an athletic shoe importer and distributor. For the period
from 1983 to 1987, he was employed by the public accounting firm of
Ernst & Young LLP. Mr. Albright received a B.S. degree in
Accountancy from the University of Illinois at Urbana-Champaign in May 1983 and
is a CPA.
Steven G. Hastings, age
43, was appointed
Senior Vice President, North American Sales in April 2007. He served
as Vice President, Sales from 2004 to 2007. Mr. Hastings was the Vice
President of International Marketing from 2002 to 2004 and the Director of
International Marketing from 1996 to 2002. Mr. Hastings started with the
Company in January 1993 as Director of Marketing. Mr. Hastings graduated
from the University of Illinois in 1987 with a Marketing degree and obtained his
Masters in Business from Butler University in Indianapolis in 1995.
Kurt C. Wulff, age 44, was
appointed Vice President, Marketing in 2005 and has been employed by the Company
in marketing positions since 1999. Previously, Mr. Wulff had over 10
years of sales and marketing positions in a variety of industries. He
graduated from the University of Missouri-Columbia with a Bachelor Degree of
Journalism in 1986.
Brett M. Hastings, age 35,
was appointed Vice President, Legal in August 2007. He has been
employed by the Company since February 2005 and previously served as Associate
General Counsel. Prior to his employment by the Company, Mr. Hastings
was employed as a senior associate with the law firm of Doster Guin James Ullom
Benson & Mundorf, LLC from 2003 to 2005 and as an associate with Thompson
Coburn, LLP from 1998 to 2005. Mr. Hastings graduated from Ohio Northern
University in 1995 with a B.S.B.A and received a Juris Doctor degree from the
University of Illinois School of Law in 1998.
Ronald W, McCain, age 43, was
named Vice President, Sales Development in August 2007. He has been
employed by the Company in various sales, marketing and customer service
capacities since 1996.
Joseph J. Wojcik, age 45, was
appointed as Vice President, International on September 1,
2008. Prior to his employment with the Company, he was a principal
and founder of Endurance Business Solutions, a professional consulting firm
advising companies on strategic entry into foreign markets, and, for a period of
11 years, was employed in various executive management positions at Herbalife
International.
Barry A. Murov, age 56, Vice
President, Corporate Communications. Mr. Murov has been employed by
the Company since June 2006. Previously, he was Senior Group Director
of Communications for Anheuser-Busch and Senior Vice President of
Fleishman-Hillard, Inc. He earned a B.S. in Journalism with Honors
from the University of Colorado, and an M.A. in Journalism from the University
of Missouri.
Committees of the Board of
Directors
During
2008, the Board of Directors had nine members. The Board met five times during
2008. During 2008, no director attended less than 75% of the combined
Board of Directors and Committee meetings. The Board has determined
that Messrs. Akin, Henry, St. John, Smith and Doherty are independent based on
the application of the rules and standards of the NASDAQ Stock
Market.
The Board
of Directors has standing Executive, Compensation, Nominating, Audit, Management
and Sales and Marketing and International Committees.
The
Executive Committee acts on various matters between meetings of the Board of
Directors. The Executive Committee consists of Messrs. Montgomery,
Merrick, Hastings and McCain. The Executive Committee met two times
during 2008.
The
Management/Sales and Marketing Committee reviews the Company’s operations and
policies on a regular basis. The Management Committee is composed of
four members of the Board of Directors, including Messrs. Montgomery, Hastings,
McCain and Merrick, as well as several other members of
management. The Management/Sales and Marketing Committee met 11 times
during 2008.
During
2008, the Company established an International Committee to review and advise
with respect to the international operations of the Company. The
International Committee consists of Robert M. Henry, Michael Smith and Stephen
M. Merrick and includes several members of management. The
International Committee met two times in 2008.
Audit
Committee
Since
2000, the Company has had a standing Audit Committee, which is presently
composed of Messrs. St. John, Henry, Smith and Doherty. Mr. St. John
has been designated and is the Company’s “Audit Committee Financial Expert”
pursuant to Item 401 of Regulation S-K of the Securities Exchange Act of
1934. The Audit Committee held nine meetings during fiscal year
2008, including quarterly meetings with management, the Company’s Director of
Internal Auditing (now Vice President, Operations), the Internal Audit
Supervisor and the independent registered public accounting firm to discuss the
Company’s financial statements and control systems. Mr. St. John and
each appointed member of the Committee satisfies the definition of “independent”
as that term is defined in the rules governing companies whose stock is traded
on the NASDAQ Stock Market. The Board of Directors has adopted a
written charter for the Audit Committee. A copy of the Audit Committee Charter
has been posted and can be viewed on the Company’s Internet website at
http://www.reliv.com under the section entitled “Investor Relations.” In
addition, the Audit Committee has adopted a complaint monitoring procedure to
enable confidential and anonymous reporting to the Audit Committee of concerns
regarding, among other things, questionable accounting or auditing
matters.
Report of the Audit
Committee
The Audit
Committee oversees the Company’s financial reporting process on behalf of the
Board of Directors. Management has the primary responsibility for the
financial statements and the reporting process including the systems of internal
controls. In fulfilling its oversight responsibilities, the Audit
Committee reviewed the audited financial statements in the Annual Report with
management and the Company’s independent registered public accounting firm,
Ernst & Young LLP, including a discussion of the quality, not just the
acceptability, of the accounting principles, the reasonableness of significant
judgments, the clarity of disclosures in the financial statements and internal
controls.
The Audit
Committee reviewed with the independent registered public accounting firm, which
is responsible for expressing an opinion on the conformity of those audited
financial statements with U.S. generally accepted accounting principles, their
judgments as to the quality, not just the acceptability, of the Company’s
application of accounting principles and such other matters as are required to
be discussed with the Audit Committee under generally accepted auditing
standards, including but not limited to those matters required to be discussed
by SAS 61 (Codification of Statements on Auditing Standards, AU §380, as
amended). In addition, the Audit Committee has discussed with the
independent registered public accounting firm their independence from management
and the Company including the matters in the written disclosures required by the
Independence Standards Board.
The Audit
Committee discussed with the Company’s independent registered public accounting
firm the overall scope and plans for their audit of the Company’s financial
statements and the effectiveness of internal controls over financial
reporting. The Audit Committee meets with the internal auditor and
independent registered public accounting firm, with and without management
present, to discuss the results of their examinations, their evaluations of the
Company’s internal controls and the overall quality of the Company’s financial
reporting.
In
reliance on the reviews and discussions referred to above, the Audit Committee
recommended to the Board of Directors (and the Board has approved) that the
audited financial statements be included in the Annual Report on Form 10-K for
the year ended December 31, 2008 for filing with the Securities and Exchange
Commission. The Audit Committee and the Board of Directors have also
recommended, subject to stockholder approval, the selection of Ernst & Young
LLP as the Company’s independent registered public accounting firm.
Denis St.
John, Audit Committee Chair
Robert M.
Henry, Member
Michael
Smith, Member
Patrick
G. Doherty, Member
Nominating
Committee
In May
2004, the Company established a Nominating Committee. The Nominating
Committee consists of two directors, Messrs. Akin and St. John. The
Nominating Committee does not have a charter. The Board of Directors
has determined that each of the members of the Nominating Committee is
independent as defined in the listing standards for the NASDAQ Stock Market.
The
Nominating Committee has not adopted a formal policy with regard to
consideration of director candidates recommended by security
holders. The Company believes that continuing service of qualified
incumbent members of the Board of Directors promotes stability and continuity at
the Board level, contributes to the Board’s ability to work as a collective body
and provides the benefit of familiarity and insight into the Company’s
affairs. Accordingly, the process of the Nominating Committee for
identifying nominees reflects the Company’s practice of re-nominating incumbent
directors who continue to satisfy the criteria for membership on the
Board. For vacancies which are anticipated on the Board of Directors,
the Nominating Committee intends to seek out and evaluate potential candidates
from a variety of sources that may include recommendations by security holders,
members of management and the Board of Directors, consultants and
others. The minimum qualifications for potential candidates for the
Board of Directors include demonstrated business experience, decision-making
abilities, personal integrity and a good reputation. In light of the
foregoing, and the fact that two new independent directors were elected to the
Board in 2004, one in 2005 and a fourth in 2007, it is believed that a formal
policy and procedure with regard to consideration of director candidates
recommended by security holders is not necessary in order for the Nominating
Committee to perform its duties.
The
Nominating Committee did not meet in 2008. In lieu of a Nominating
Committee meeting, all of the independent directors of the Board of Directors
participated in the nominating process and voted in favor of the nomination of
the persons nominated for election as directors at the Annual Meeting of
Stockholders.
Compensation
Committee
The
Compensation Committee consists of three directors: Messrs. St. John (Chairman),
Smith and Akin. The Board has determined that each of the members of
the Compensation Committee is independent as defined in the listing standards
for the NASDAQ Stock Market. The Compensation Committee reviews and
acts on the Company’s executive compensation and employee benefit and retirement
plans, including their establishment, modification and
administration. It also determines the compensation of the Chief
Executive Officer and certain other executive officers. The
Compensation Committee has a charter which has been posted and can be viewed on
the Company’s Internet website at http://www.reliv.com under the section
entitled “Investor Relations.” The Compensation Committee met six
times in 2008.
EXECUTIVE
COMPENSATION
Compensation
Discussion and Analysis
Overview
of our Compensation Philosophy
Our general compensation philosophy is
to provide compensation and reward programs that will attract, retain and
motivate quality executive talent.
We believe that applying and
implementing this basic philosophy is
fundamental to our
goal of achieving excellent business
performance and increased shareholder value.
Principles
and Objectives
The basic principles and objectives of
our executive compensation program are:
|
·
|
To
provide a total compensation package that is competitive with prevailing
practices for the industries in which we operate, allowing for above
average total compensation when justified by business results and
individual performance.
|
|
·
|
To
provide a reasonable and competitive level of base compensation to our
executives.
|
|
·
|
To
provide incentive compensation based, principally, on the profitability of
the Company to motivate our executives in a manner consistent with the
interests of the shareholders.
|
|
·
|
To
create a mutuality of interests among executive officers and shareholders
by providing long-term equity compensation programs including stock
options and an Employee Stock Ownership Plan, and otherwise encouraging
equity ownership by executives, so that executive officers will share the
risks and rewards of strategic decision making and its effect on
shareholder value.
|
Components
of Compensation
The components of our executive
compensation program are:
|
·
|
Annual Cash Incentive
Compensation. We have adopted and maintain an incentive
compensation program in which executives and a number of managerial
employees participate. Incentive payments are made on a
quarterly basis and are a based on our operating profits if they exceed a
threshold amount.
|
|
·
|
Discretionary Cash
Bonuses. From time to time, we grant discretionary cash
bonuses to executives by reason of extraordinary
performance.
|
|
·
|
Long-Term Equity Incentive
Compensation
|
|
o
|
Stock Option
Plan. We provide stock option awards under our current
2003 Stock Option Plan. Recipients realize a profit based on
stock price appreciation.
|
|
o
|
Employee Stock Ownership
Plan. On September 1, 2006, we adopted an Employee Stock
Ownership Plan (ESOP) under which executives and all other employees are
awarded shares of stock based on contributions to the plan, subject to
eligibility and vesting requirements. For the year ended
December 31, 2008, we contributed $250,000 to the plan, all of which was
invested in our common stock and allocated to participants in the
plan. We view the ESOP as including an element of long-term
compensation for our executives who participate through indirect ownership
of stock of the Company purchased by, or contributed to, the
ESOP.
|
|
·
|
Retirement
Benefits. We provide retirement benefits to executives
and other employees which include:
|
|
o
|
401(k) Retirement
Plan. We maintain a 401(k) retirement plan providing for
employee contributions and matching employer
contributions. Employees may contribute up to 15% of their
eligible gross income to the Plan and we match a percentage of the
employee’s contribution at the rate of
25%.
|
|
o
|
Employee Stock Ownership
Plan. We view the ESOP as providing retirement benefits
for our executives as well as an element of long-term equity
compensation.
|
|
·
|
Welfare Plans and Other
Benefits. We provide medical and other welfare plan
benefits to all employees. We provide additional life insurance
allowances, car allowances and fringe benefits to certain executives, as
well as limited perquisites.
|
Compensation
Committee Processes
The role of our Compensation Committee
is (i) to establish and maintain our executive compensation policies, (ii) to
review, evaluate and recommend to the Board of Directors salary, incentive
compensation, bonuses and other compensation items for the Chief Executive
Officer, the Chief Financial Officer, other senior members of management,
members of the Board of Directors and senior management of our subsidiaries,
(iii) to review, evaluate and make recommendations concerning our compensation,
retirement and welfare plans, and (iv) to approve grants of stock options and
other equity based incentives.
The Chief Executive Officer’s overall
compensation is set by the Board of Directors in consultation with, and on the
recommendation of, the Compensation Committee. The Compensation
Committee recommendation is based on its assessment of the Chief Executive
Officer’s individual performance and the financial and operating performance of
the Company. Compensation of the other Named Executive Officers and
of other senior executive officers is established on the basis of the
recommendation of the Compensation Committee in consultation with the Executive
Committee, Chief Executive Officer, the Executive Vice President and the Chief
Financial Officer. The Compensation Committee considers the
recommendations of the Chief Executive Officer and the Executive Vice President
and considers each executive’s responsibility, experience and overall
performance. Generally, the Compensation Committee reviews and
adjusts recommended compensation levels annually at its first meeting of the
year. The Compensation Committee will have met periodically during
the preceding year to consider compensation programs and to gain relevant
information and context for determining compensation for
executives.
Benchmarking
The Company seeks to ensure that its
total compensation package, as well as components of the compensation package,
are competitive when compared to its competitive market for executive talent so
that it can attract, motivate and retain the executive talent the Company needs
in order to maximize its return to shareholders. The Company defines
its competitive market as the market represented by the companies identified as
being in its Peer Group.
The Peer Group consists of companies
engaged in the nutritional supplements and personal products industries and, to
the extent possible, those of generally similar size who utilize similar
distribution methods. The Compensation Committee considered, as part of its
evaluation and recommendation of base salary, annual cash incentive compensation
and long-term equity incentive compensation, levels of such compensation in the
Peer Group. The Compensation Committee has also considered other
published data concerning executive compensation in its evaluation of the
Company’s executive compensation package.
The Peer Group identified by the
Company to provide an industry-specific market for executive talent in which the
Company competes includes the following companies:
Chattem
Inc.
|
Herbalife
Ltd.
|
Mannatech,
Inc.
|
Medifast,
Inc.
|
Nu
Skin Enterprises, Inc.
|
Nutraceutical
International Corp.
|
Prestige
Brands Holdings, Inc.
|
Schiff
Nutrition International, Inc.
|
Tupperware
Brands Corp.
|
USANA
Health Sciences Inc.
|
The Compensation Committee believes
that this Peer Group is representative of the companies with which the Company
shares similar industry profiles and competes for executive
talent. Several of the companies in the Peer Group are significantly
larger than the Company and the Compensation Committee takes these differences
into account when evaluating and recommending compensation levels for the Named
Executive Officers and other executives. The Compensation Committee
intends to review the Peer Group periodically and make additions or changes it
deems appropriate.
Upon conclusion of its review of the
Peer Group data, the Compensation Committee has determined that the Company’s
current total compensation package is consistent with its philosophy of paying
competitive cash compensation and providing significant weight in compensation
to annual incentive compensation based on profitability. Average
total direct compensation of our Named Executive Officers was in approximately
the 30th
percentile of executive compensation among our Peer Group. The direct
compensation of our Chief Executive Officer was in the 54th
percentile in the Peer Group for compensation of chief executive officers. The
aggregate amount of total direct compensation paid to our Named Executive
Officers, and the comparative level of such compensation to members of our Peer
Group, was reduced in 2008 compared to 2007, reflecting our reduced level of
profitability in 2008 and consistent with our policy that a significant portion
of the compensation of our Named Executives is based on profitability. Based on
the executive compensation review, the Compensation Committee considers the
compensation paid to the Company’s executives to be within a reasonable market
range.
Tax
Considerations
The Compensation Committee takes into
account the estimated accounting and tax impact of all material changes to the
executive compensation program and discusses such matters periodically during
the year. Generally, an accounting expense is accrued over the
relevant service period for the particular pay element and the Company realizes
a tax deduction upon the payment to the executive. In general, the
policy of the Company and the Compensation Committee is to optimize the tax
deductibility of executive compensation so long as deductibility is consistent
with more important objectives of retaining executives and maintaining
competitive, motivational performance-based compensation that is aligned with
shareholder interests.
Mix
of Compensation Elements
Our compensation program for Named
Executive Officers is designed to provide a balance among base and guaranteed
compensation, variable incentive compensation and long-term
compensation. However, the Compensation Committee does not target a
specific mix of compensation elements.
Base
Salaries
Base
salaries are an important element of compensation and provide executives with a
base level of income. In determining base pay, the Compensation
Committee considers base salary levels among the Company’s Peer Group, the
executive’s responsibilities and individual performance. While base
salaries are reviewed annually, changes in base salary compensation generally
are made in relation to changes in position and responsibility.
For 2008, the only adjustment to base
salary of any of the Named Executive Officers was an annual increase of $10,000
(representing an increase of 6.25%) to Ryan A. Montgomery in connection with his
appointment as Executive Vice President, Worldwide Sales. The
following table summarizes adjustments (if any) made to the base salaries for
the Named Executive Officers during 2006 and 2007:
Named Executive Officer
|
|
Base Pay
|
|
|
|
Robert
L. Montgomery
|
|
No
change
|
Carl
W. Hastings
|
|
No
change
|
R.
Scott Montgomery(1)
|
|
Increased
by 15.6% to $195,000
|
Ryan
A. Montgomery(2)
|
|
Increased
by 6.6% to $160,000
|
Steven
D. Albright(3)
|
|
Increased
by 14.3% to $180,000
|
|
(1)
|
Mr.
R. Scott Montgomery’s salary was increased by 15.6% on October 1, 2006 in
recognition of the assignment to him of additional responsibilities as
Chief Operating Officer.
|
|
(2)
|
Mr.
Ryan A. Montgomery’s salary was increased by 6.6% on July 1, 2007 in
recognition of the assignment to him of additional responsibilities as
Senior Vice President, International
Sales.
|
|
(3)
|
Mr.
Albright’s salary was increased by 14.3% on October 1, 2006 in lieu of an
increase in incentive compensation that was received by most executive
officers in the latter part of
2006.
|
Annual
Cash Incentive Compensation
Effective January 1, 2007, the Board of
Directors, on the recommendation of the Compensation Committee, adopted an
Incentive Compensation Plan providing for annual incentive compensation to be
paid to executive and managerial employees of the Company. Under the
Plan, designated Named Executive Officers and a number of other executive
officers and managers receive incentive compensation payments, determined on a
quarterly and annual basis, which are based upon the income from operations of
the Company for the period if the profits exceed a threshold amount of income
from operations in the amount of $500,000. The benefits under the
Plan are divided into two Pools of compensation. Pool I (representing
the largest pool of incentive compensation) covers senior executive officers who
participate in the pool of incentive compensation based upon a percentage
allocation made by the Compensation Committee each year. Pool II
covers other executives and managers who are selected to participate in
proportions determined by management. The Compensation Committee
believes such incentive compensation motivates participants to achieve strong
profitability which is viewed as the most significant element of corporate
performance, provides rewards for strong corporate performance and aligns the
incentive with the interests of the shareholders. Incentive
compensation participation levels are generally determined during the first
quarter of each fiscal year.
With respect to Pool I participants
(other than the Chief Executive Officer whose participation is determined solely
by the Compensation Committee and the Board of Directors), the Compensation
Committee in consultation with the Chief Executive Officer and Chief Operating
Officer, determine the participants and their relative level of participation
during the first quarter of the year. In determining participation
and the level of participation each year, the Compensation Committee considers
the executive’s responsibilities and individual performance during the prior
year.
Long-Term
Equity Incentives
Long-term
incentive awards are granted to executives under the 2003 Stock Option Plan
approved by the shareholders in May 2003. Long-term incentive
expected values are based on a review of current market practices provided to
the Compensation Committee. Stock option grants are determined from
time to time by the Compensation Committee in consultation with
management. The actual grant for each executive is determined taking
into consideration (i) individual performance, (ii) corporate performance and
(iii) prior grants to, or stock ownership of the Company by, the
executive. Generally, stock options are granted with an exercise
price equal to or greater than the closing price of the Company’s common stock
on the NASDAQ Global Select Market on the date of the grant.
We view
participation by our executives in our ESOP as a component of long-term
compensation. Shares purchased by the Plan, or contributed to the
Plan, are allocated among participants based upon relative eligible compensation
levels and subject to the vesting requirements of the Plan.
In 2007,
the Company adopted a policy concerning the grant of stock options pursuant to
which, unless otherwise approved by the Board of Directors, the Compensation
Committee will only approve the grant of stock options during a period of time
that begins 3 business days after the earnings press release after the second
quarter of each fiscal year and ends after the 8th
business day after such second quarter earnings release. In
2007, during such period, the Compensation Committee authorized the following
grants of stock options to the Named Executive Officer.
Robert
L. Montgomery
|
50,000
shares
|
Carl
W. Hastings
|
13,500
shares
|
R.
Scott Montgomery
|
13,500
shares
|
Ryan
A. Montgomery
|
13,500
shares
|
Steven
D. Albright
|
8,000
shares
|
In each case, the option term was for a
period of five years and the option exercise price is $9.74 per share, the
closing share price on the date of grant. The options vest ratably on
each of August 7, 2009, August 7, 2010, August 7, 2011 and May 1, 2012 and
expire on August 7, 2012.
During 2008, a grant of options to
purchase 16,500 shares of common stock at the price of $5.28 per share (the
closing price on the date of the grant) was made to Carl W. Hastings in
consideration of his performance in the development of new and unique products
for the Company. The option term is for a period of five
years. The options vest at the rate of 25% of the option shares on
each of August 28, 2010, August 28, 2011, August 28, 2012 and May 1,
2013.
Retirement
Benefits
The
Company maintains a 401(k) employee savings plan in which all salaried employees
are eligible to participate. The Company also maintains an Employee
Stock Ownership Plan, which was adopted by the Company on September 1,
2006. Both plans are tax qualified retirement plans.
Under the 401(k) Plan, employees may
contribute up to 15% of their eligible compensation to the Plan and the Company
will contribute a matching amount to the Plan each year. The
federal statutory limit for eligible compensation in 2008 was
$225,000. Participating employees may direct the investment of
individual and company contributions into one or more of the investment options
offered by the Plan, provided that, for new contributions, employees may not
invest more than 15% in common stock of the Company. During 2008, the
Company made matching contributions of 50% of the amount contributed by
employees to the Plan, subject to statutory limits and top-heavy plan
rules. The Company’s contributions to the 401(k) plan totaled
approximately $297,000 in 2008, which is allocated to participants subject to
the vesting requirements of the Plan.
Under the ESOP, all employees of the
Company are eligible to participate in the ESOP and interests in the ESOP are
allocated to participants based on relative eligible
compensation. All contributions to the ESOP are made by the Company
in the form of cash or stock and are discretionary. The maximum amount of
contribution which the Company can make is 25% of the annual eligible
compensation of employees after taking into account contributions to the 401(k)
Plan. During 2008, the Company contributed $250,000 to the
ESOP. Shares of stock purchased by, or contributed to the Plan, are
allocated to participants subject to the vesting requirements of the
Plan.
The policy and plan of the Compensation
Committee is to provide a reasonable level of retirement benefits for employees
through these plans, rather than minimum benefit amounts, in order to reward
long-term employees and keep employee turnover low. The Company’s
contributions under the ESOP, and the matching percentage under the 401(k) Plan,
are intended to reflect competitive market conditions for plans of these types
and provide a level of long-term compensation to employees.
Welfare
Plans and Other Benefits
The Company believes that its employee
benefits, including health and disability insurance plans and perquisites are of
the type commonly offered by other employers. These benefits form
part of our compensation philosophy because the Company believes they are
necessary in order to attract, motivate and retain talented
executives.
Employment and Change of
Control Agreements
The Company has employment or services
agreements with Robert L. Montgomery, the Chief Executive Officer and each of
other Named Executives, including Carl W. Hastings, R. Scott Montgomery, Ryan A.
Montgomery and Steven D. Albright. For a description of these
agreements, see the narrative disclosure following the Summary Compensation
Table. We do not maintain any change of control agreements with any
executives.
Compensation Committee
Report
The Compensation Committee has reviewed
and discussed the Compensation Discussion and Analysis section appearing above
with the Company’s management. Based on this review and these
discussions, the Compensation Committee recommended to the Company’s Board of
Directors that the Compensation Committee Analysis be included in the Company’s
Annual Report on Form 10-K for the fiscal year ended December 31, 2008 and in
this Proxy Statement.
Denis
St. John, Chairman
|
Michael
Smith, Member
|
John
Akin, Member
|
SUMMARY COMPENSATION
TABLE
The
following table sets forth the annual and long-term compensation for the fiscal
years ended December 31, 2008, 2007 and 2006, respectively, of the Company’s
Chief Executive Officer and Chief Financial Officer and each of the three other
most highly compensated executive officers. These individuals,
including the Chief Executive Officer and Chief Financial Officer are
collectively referred to in this proxy statement as the Named Executive
Officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option
|
|
|
Incentive Plan
|
|
|
Compensation
|
|
|
|
|
Name and Principal Position
|
|
Year
|
|
Salary
|
|
|
Bonus
|
|
|
Awards(1)
|
|
|
Compensation (2)
|
|
|
|
(3, 4, 5, 6, 7, 8)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
L. Montgomery
|
|
2008
|
|
$ |
642,625 |
|
|
$ |
- |
|
|
$ |
42,842 |
|
|
$ |
224,700 |
|
|
$ |
85,347 |
|
|
$ |
995,514 |
|
Chairman,
Chief Executive
|
|
2007
|
|
$ |
642,625 |
|
|
$ |
- |
|
|
$ |
17,851 |
|
|
$ |
286,650 |
|
|
$ |
85,451 |
|
|
$ |
1,032,577 |
|
Officer
and President
|
|
2006
|
|
$ |
642,625 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
551,327 |
|
|
$ |
80,947 |
|
|
$ |
1,274,899 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carl
W. Hastings
|
|
2008
|
|
$ |
360,000 |
|
|
$ |
- |
|
|
$ |
13,736 |
|
|
$ |
64,200 |
|
|
$ |
9,600 |
|
|
$ |
447,536 |
|
Vice
Chairman, Chief Scientific
|
|
2007
|
|
$ |
360,000 |
|
|
$ |
- |
|
|
$ |
4,820 |
|
|
$ |
81,900 |
|
|
$ |
38,905 |
|
|
$ |
485,625 |
|
Officer
|
|
2006
|
|
$ |
360,000 |
|
|
$ |
70,000 |
|
|
$ |
- |
|
|
$ |
133,782 |
|
|
$ |
30,479 |
|
|
$ |
594,261 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R.
Scott Montgomery
|
|
2008
|
|
$ |
195,000 |
|
|
$ |
- |
|
|
$ |
11,567 |
|
|
$ |
107,000 |
|
|
$ |
16,237 |
|
|
$ |
329,804 |
|
Executive
Vice President,
|
|
2007
|
|
$ |
195,000 |
|
|
$ |
- |
|
|
$ |
4,820 |
|
|
$ |
136,500 |
|
|
$ |
34,030 |
|
|
$ |
370,350 |
|
Chief
Operating Officer
|
|
2006
|
|
$ |
168,750 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
199,230 |
|
|
$ |
13,020 |
|
|
$ |
381,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ryan
A. Montgomery
|
|
2008
|
|
$ |
170,000 |
|
|
$ |
- |
|
|
$ |
11,567 |
|
|
$ |
96,300 |
|
|
$ |
15,987 |
|
|
$ |
293,854 |
|
Executive
Vice President,
|
|
2007
|
|
$ |
160,000 |
|
|
$ |
- |
|
|
$ |
4,820 |
|
|
$ |
122,850 |
|
|
$ |
27,768 |
|
|
$ |
315,438 |
|
Worldwide
Sales
|
|
2006
|
|
$ |
150,000 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
176,933 |
|
|
$ |
14,503 |
|
|
$ |
341,436 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven
D. Albright
|
|
2008
|
|
$ |
180,000 |
|
|
$ |
- |
|
|
$ |
6,855 |
|
|
$ |
67,260 |
|
|
$ |
16,237 |
|
|
$ |
270,351 |
|
Senior
Vice President, Finance
|
|
2007
|
|
$ |
180,000 |
|
|
$ |
- |
|
|
$ |
2,856 |
|
|
$ |
95,550 |
|
|
$ |
29,988 |
|
|
$ |
308,394 |
|
Chief
Financial Officer
|
|
2006
|
|
$ |
157,500 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
162,579 |
|
|
$ |
14,693 |
|
|
$ |
334,772 |
|
|
(1)
|
Reflects
the compensation expense recognized in 2008 and 2007 for stock option
awards under SFAS 123R as reported in the Company’s audited financial
statements. Refer to Note 7 to the Consolidated Financial
Statements included in the Company’s Annual Report on Form 10-K for the
year ended December 31, 2008 for a discussion of the relevant assumptions
used in calculating the compensation
expense.
|
|
(2)
|
Amounts
determined under the Company’s incentive compensation program discussed
under “Compensation Discussion and
Analysis.”
|
|
(3)
|
Amounts
for 2008 include matching 401(k) contributions as
follows: Robert L. Montgomery, $10,250, Carl W. Hastings,
$10,250, R. Scott Montgomery, $7,750, Ryan A. Montgomery, $7,500, and
Steven D. Albright, $7,750.
|
|
(4)
|
Amounts
for 2008 include Company contributions to the Employee Stock Ownership
Plan of $6,487 for each Named Executive
Officer.
|
|
(5)
|
Amounts
for 2008 include life insurance allowance paid for Robert L. Montgomery of
$30,000 and $2,000 for each of R. Scott Montgomery, Ryan A. Montgomery and
Steven D. Albright.
|
|
(6)
|
Amounts
for 2008 include value of life insurance provided to Carl W. Hastings for
$12,589.
|
|
(7)
|
Amounts
for 2008 include value of automobile provided for Robert L. Montgomery of
$15,760 and automobile allowance provided to Carl W. Hastings of
$9,600.
|
|
(8)
|
All
Other Compensation amount for Robert L. Montgomery includes country club
dues of $8,912 and financial planning services of $13,938 paid in
2008.
|
GRANTS OF PLAN-BASED AWARDS
DURING FISCAL YEAR 2008
The
following table sets forth information regarding grants of plan-based awards
made to the Named Executive Officers during the fiscal year ended
December 31, 2008.
Name
|
|
Grant
Date
|
|
All other Option
Awards: Number
of Securities
Underlying
Options (#)(1)
|
|
|
Exercise
or Base Price
of Option
Awards
($/sh)(2)
|
|
|
Grant Date
Fair Value of
Option
Awards(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carl
W. Hastings
|
|
8/28/2008
|
|
|
16,500 |
|
|
$ |
5.28 |
|
|
$ |
30,360 |
|
|
(1)
|
Stock
option granted to the named executive officer vests in one-quarter
increments on each of August 28, 2010, August 28, 2011, August 28, 2012
and May 1, 2013. See Compensation Discussion and Analysis for
further discussion of stock option
awards.
|
|
(2)
|
The
exercise price of the options granted to the individual shown above was
the fair market value of the Company’s common stock (the closing price of
the stock on the NASDAQ Stock Market) on the date of
grant.
|
|
(3)
|
Represents
the full grant date fair value of each equity-based award, computed in
accordance with SFAS 123R. Refer to Note 7 to the Consolidated
Financial Statements included in the Company’s Annual Report on Form 10-K
for the year ended December 31, 2008 for a discussion of the relevant
assumptions used in calculating the compensation
expense.
|
Narrative Disclosure For
Summary Compensation Table and Grants of Plan-Based Awards
Table
Employment
Agreements with Our Named Executive Officers
In June 2007, the Company entered into
an Employment Agreement with Robert L. Montgomery replacing a prior
agreement. The agreement, as amended, is for a term of employment
commencing on January 1, 2007 and expiring on December 31, 2009 with a provision
for automatic one-year renewal terms, and provides for Mr. Montgomery to receive
base annual compensation during the term of not less than
$600,000. Mr. Montgomery is also to participate in the Company’s
annual incentive compensation and the Company’s long-term incentive compensation
plans, the Company’s stock option plan and such other compensation plans as the
Company may from time to time have for executives. In the event of
Mr. Montgomery’s death during the term of the agreement, payments equal to his
compensation under the agreement will be made to his heirs for a period of six
months. The agreement also allows Mr. Montgomery the option to reduce
his level of service to the Company by approximately one-half with a
corresponding decrease in base annual compensation and a reduction of 25% of his
incentive compensation. Mr. Montgomery also has the option to
terminate his active service and continue in a consulting
capacity. The term of the consulting period will be 180 months and
Mr. Montgomery will receive approximately 30% of his prior average annual
compensation over the previous five years as a consulting fee. The
agreement includes the obligation of Mr. Montgomery to maintain the
confidentiality of the Company’s confidential information and contains a
covenant of Mr. Montgomery not to compete with the Company. In
addition, for a period of at least 20 years following the termination of the
agreement, the Company has the right to continue its use of Mr. Montgomery’s
name and likeness in consideration of a $10,000 annual fee paid to Mr.
Montgomery or his heirs.
In July 2007, the Company entered into
an Employment Agreement with Dr. Hastings replacing a prior
agreement. The term of employment under the agreement, as amended, is
for a period commencing on July 1, 2006 and expiring on June 30, 2012, provided
that, for the period from July 1, 2009 through June 30, 2012, Dr. Hastings shall
be obligated to devote approximately one-half of his productive time
(approximately 85 hours per month) to his duties for the
Company. During the period from July 1, 2006 to June 30, 2009, the
Company is obligated to pay Dr. Hastings a basic salary at the rate of $30,000
per month and, for the period from July 1, 2009 to June 30, 2012, at the rate of
$22,500 per month. Dr. Hastings is also to participate in the
Company’s annual incentive compensation and the Company’s long-term incentive
compensation plans, the Company’s stock option plan and such other compensation
plans as the Company may from time to time have for executives. Upon
expiration of the term of employment, Dr. Hastings will be retained to provide
consulting services to the Company for a term expiring on June 30,
2021. During the consulting term, the Company will pay Dr. Hastings
the sum of $12,000 per month, such amount to be adjusted periodically based upon
changes in the National Consumer Price Index. In the event of Dr.
Hastings’ death during the term of the agreement, payments equal to his total
compensation under the agreement will be made to his heirs for a period of six
months. During the term of the agreement, and thereafter for a period
of 20 years in consideration of the payment of $10,000 annually, the Company
will be entitled to use the name and likeness of Dr. Hastings in connection with
the Company’s promotional materials and activities. The agreement
also includes the obligation of Dr. Hastings to maintain the confidentiality of
the Company’s confidential information and to hold any and all inventions made
or conceived by him during the term of the agreement as the Company’s fiduciary
and a covenant of Dr. Hastings not to compete with the Company.
In January 2008, the Company entered
into Employment Agreements with each of R. Scott Montgomery, Steven D. Albright
and Ryan A. Montgomery under which each of them was employed as an executive of
the Company. The agreements are for a term of one year with a
provision for automatic one-year renewal terms, and provide for base annual
compensation to R. Scott Montgomery of $195,000, to Steven D. Albright at the
rate of $180,000, and to Ryan A. Montgomery at the rate of
$170,000. Each of these executives is also to participate in the
Company’s annual incentive compensation plan and such other compensation plans
as the Company may from time to time have for executives. Each of the
agreements provides that, in the event of termination (other than termination
for default or permanent mental or physical disability), the executive will
receive a severance payment equal to six months salary. The
agreements include the obligations of each of the executives to maintain the
confidentiality of the Company’s confidential information and hold certain
inventions for the Company in his fiduciary capacity, and contain a covenant not
to solicit the Company’s distributors for a period of 24 months after the date
of termination of the agreement.
Information
Relating to Cash Incentives and Stock and Option Awards
Each of the Named Executives
participated in the incentive compensation program of the Company during 2006
through 2008. The incentive compensation program is described in the
Compensation Discussion and Analysis. The amount shown as Non-Equity Incentive
Compensation represents amounts earned by each of the Named Executives under
that program during those years and paid in the year earned or within three
months after the end of such year.
Stock options awarded to the Named
Executive Officers in 2007 and 2008 are described in the Compensation Discussion
and Analysis.
Salary
and Bonus Proportion of Compensation
During 2008, salary and bonus paid to
the Named Executive Officers represented 66.2% of the total compensation paid to
them and incentive compensation payments represented 23.9% of their total
compensation. Long-term compensation consisting of option awards (and
also including matching 401(k) contributions and ESOP contributions) represented
7% of total compensation.
OUTSTANDING EQUITY AWARDS AT
DECEMBER 31, 2008
The following chart sets forth all
outstanding equity awards to Named Executive Officers as of December 31,
2008. All awards are in the common stock of the Company.
|
|
Option Awards
|
|
|
|
|
Number of Securities Underlying
|
|
|
Option
|
|
Option
|
|
|
|
|
Unexercised Options (#)
|
|
|
Exercise
|
|
Expiration
|
|
|
Name
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Price ($)
|
|
Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
L. Montgomery
|
|
|
160,000 |
|
|
|
- |
|
|
$ |
7.92 |
|
1/5/2015
|
(1) |
|
|
|
|
- |
|
|
|
50,000 |
|
|
|
9.74 |
|
8/7/2012
|
(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carl
W. Hastings
|
|
|
20,000 |
|
|
|
- |
|
|
|
7.92 |
|
1/5/2015
|
(1) |
|
|
|
|
- |
|
|
|
13,500 |
|
|
|
9.74 |
|
8/7/2012
|
(2) |
|
|
|
|
- |
|
|
|
16,500 |
|
|
|
5.28 |
|
8/28/2013
|
(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R.
Scott Montgomery
|
|
|
50,000 |
|
|
|
- |
|
|
|
7.92 |
|
1/5/2015
|
(1) |
|
|
|
|
- |
|
|
|
13,500 |
|
|
|
9.74 |
|
8/7/2012
|
(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ryan
A. Montgomery
|
|
|
25,000 |
|
|
|
- |
|
|
|
7.92 |
|
1/5/2015
|
(1) |
|
|
|
|
- |
|
|
|
13,500 |
|
|
|
9.74 |
|
8/7/2012
|
(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven
D. Albright
|
|
|
20,000 |
|
|
|
- |
|
|
|
7.92 |
|
1/5/2015
|
(1) |
|
|
|
|
- |
|
|
|
8,000 |
|
|
|
9.74 |
|
8/7/2012
|
(2) |
|
|
(1)
|
Each
of the stock options granted to the named executive officers was
fully vested on the date of
grant.
|
|
(2)
|
Each
of the stock options granted to the named executive
officers vests in one-quarter increments on each of August 7,
2009, August 7, 2010, August 7, 2011 and May 1,
2012.
|
|
(3)
|
Stock
option granted to the named executive officer vests in one-quarter
increments on each of August 28, 2010, August 28, 2011, August 28, 2012
and May 1, 2013. See Compensation Discussion and Analysis for
further discussion of stock option
awards.
|
The
Company has not issued stock awards.
OPTION EXERCISES AND STOCK
VESTED
During the fiscal year ended December
31, 2008, none of the Named Executive Officers exercised any stock
options. The Company has not issued any stock
awards.
NON-QUALIFIED DEFERRED
COMPENSATION
The following table set forth all
non-qualified deferred compensation of the Named Executive Officers, as
applicable, for the fiscal year ended December 31, 2008.
|
|
Aggregate
|
|
|
Aggregate
|
|
|
|
Earnings(Loss)
|
|
|
Balance at
|
|
Name
|
|
in Last FY ($)
|
|
|
Last FYE ($)
|
|
|
|
|
|
|
|
|
Carl
W. Hastings
|
|
|
(188,033 |
) |
|
|
169,990 |
|
Narrative Description of
Non-Qualified Deferred Compensation
Supplemental
Executive Retirement Plan
The Company sponsored a Supplemental
Executive Retirement Plan (SERP) that previously allowed certain executives to
defer a portion of their annual salary and bonus into a grantor
trust. A grantor trust was established to hold the assets of the
SERP. The Company funded the grantor trust by paying the amount
deferred by the participant into the trust at the time of
deferral. Investment earnings and losses accrue to the benefit or
detriment of the participants. The SERP also provided for a
discretionary matching contribution by the Company not to exceed 100% of the
participant’s annual contribution. The participants fully vested in
the deferred compensation three years from the date they entered the
SERP. The participants are not eligible to receive distributions
under the SERP until retirement, death, or disability of the
participant.
In 2006, the SERP was amended to
provide, among other things, that no new participants may be designated and no
new or additional salary deferrals may be made. Accordingly, none of
the named executive officers made a contribution to the SERP in 2008 and no
Company additions or matches were provided. Carl W. Hastings is the
only current executive officer of the Company that is a participant in the
SERP.
Payments
upon Termination or Change of Control
The Company has no agreements with
Named Executives or other executives of the Company under which payments are to
be made in the event of change of control of the Company.
Under the Employment Agreement between
the Company and Robert L. Montgomery, Mr. Montgomery has the right, to reduce
his level of service to the Company by approximately one-half with a
corresponding decrease in position and base annual compensation and a 25%
decrease in incentive compensation. Mr. Montgomery also has the
option to terminate his active service and continue in a consulting
capacity. The term of the consulting period will be 15 years and Mr.
Montgomery will receive approximately 30% of his prior average annual
compensation over the previous five years as a consulting fee. In
addition, for a period of 20 years following termination of the agreement, the
Company has the right to continue its use of Mr. Montgomery’s name and likeness
in consideration of a $10,000 annual fee payable to Mr. Montgomery or his
heirs.
Under the Employment Agreement between
the Company and Carl W. Hastings, upon expiration of the term of employment, Dr.
Hastings will be retained to provide consulting services to the Company for the
remainder of the term of the services agreement. During the
consulting term, the Company will pay Dr. Hastings the sum of $12,000 per
month. In the event of Dr. Hastings’ death during the term of the
agreement, payments equal to his total compensation under the agreement will be
made to his heirs for a period of six months. In addition, for a
period of 20 years following termination of the agreement, the Company has the
right to continue its use of Dr. Hastings’ name and likeness in consideration of
a $10,000 annual fee payable to Dr. Hastings or his heirs.
Under the Employment Agreements of each
of R. Scott Montgomery, Steven D. Albright and Ryan A. Montgomery, in the event
of the executive’s termination for reasons other than an event of default or
permanent mental or physical disability, the executive will receive a severance
payment equal to six months salary. The agreement includes the
obligations of the executive to maintain the confidentiality of the Company’s
confidential information and hold certain inventions for the Company in his
fiduciary capacity, and contains a covenant not to solicit the Company’s
distributors for a period of 24 months after the date of termination of the
agreement.
DIRECTOR
COMPENSATION
Name
|
|
Fees Earned or
Paid in Cash ($)
|
|
|
Option Awards(1)(2)
|
|
|
All Other
Compensation ($)
|
|
|
Total ($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Donald L.
McCain
|
|
$ |
97,500 |
|
|
$ |
6,855 |
|
|
$ |
- |
|
|
$ |
104,355 |
|
Denis
St. John
|
|
|
72,000 |
|
|
|
6,855 |
|
|
|
- |
|
|
|
78,855 |
|
Robert
M. Henry
|
|
|
55,500 |
|
|
|
4,284 |
|
|
|
- |
|
|
|
59,784 |
|
John
B. Akin
|
|
|
46,500 |
|
|
|
4,284 |
|
|
|
- |
|
|
|
50,784 |
|
Michael
Smith
|
|
|
64,500 |
|
|
|
4,284 |
|
|
|
- |
|
|
|
68,784 |
|
Patrick
G. Doherty
|
|
|
45,000 |
|
|
|
4,284 |
|
|
|
- |
|
|
|
49,284 |
|
|
(1)
|
Represents
the full grant date fair value of each equity-based award, computed in
accordance with SFAS 123R. Refer to Note 7 to the
Consolidated Financial Statements included in the Company’s Annual Report
on Form 10-K for the year ended December 31, 2008 for a discussion of the
relevant assumptions used in calculating the compensation
expense.
|
|
(2)
|
As
of December 31, 2008, the above-named directors had the following stock
options outstanding: Mr. McCain (58,000), Mr. St. John
(18,000), Mr. Henry (15,000), Mr. Akin (15,000), Mr. Smith (5,000) and Mr.
Doherty (5,000).
|
Narrative Description of
Director Compensation
Members of the Board of Directors who
are not employees receive a monthly fee of $2,500 and $1,500 per attendance at
meetings of the Board of Directors or any committees of the Board of
Directors.
Messrs. St.
John, Smith and Akin currently serve on the Compensation Committee. None of
these committee members is employed by the Company.
The Chief Executive Officer, President
and Chairman of the Board, Robert L. Montgomery, is the father of R. Scott
Montgomery and Ryan A. Montgomery. Ronald McCain is the son of Donald
L. McCain, a director, and Ronald McCain is the son-in-law of the Chief
Executive Officer, President and Chairman of the Board, Robert L.
Montgomery. Ronald McCain is Vice President – Sales Development and
as a result of serving in such capacity, the Company paid him cash compensation
of $191,175 in 2008.
Vice Chairman, Chief Scientific Officer
and director, Dr. Carl W. Hastings, is the father of Steven G. Hastings and
Brett M. Hastings. Steven G. Hastings is Senior Vice President, North
American Sales and as a result of serving in such capacity, the Company paid him
cash compensation of $256,300 for 2008. Brett M. Hastings is Vice
President-Legal and as a result of serving in such capacity, the Company paid
him cash compensation of $199,425 for 2008.
Dr. Hastings holds a minority ownership
position in Proviant Technologies, Inc., a vendor that supplies encapsulated
finished goods to the Company. Under this relationship, the Company
provides Proviant Technologies, Inc. a significant portion of the raw materials
for conversion to finished goods. Proviant Technologies, Inc.
reimburses the Company for Company-supplied raw materials and charges the
Company a fee for the conversion. During the year ended December 31,
2008, the Company’s net purchases from Proviant Technologies, Inc. were
$79,000.
During 2008, the Company purchased an
aggregate of 1,186,500 shares of its common stock from The Paul & Jane Meyer
Family Foundation, holder of in excess of 5% of the outstanding shares of the
Company, at an average price of $5.83 per share for the aggregate purchase price
of $6,922,875.
Approval of Related Party
Transactions
The Company has a practice that any
related party transaction, other than employment compensation of executive
officers, is submitted to the Audit Committee. The Audit Committee is
responsible for reviewing and approving all transactions between the Company and
certain related persons, such as its executive officers, directors and owners of
more than 5% of the Company’s voting securities. In reviewing a
transaction, the Committee considers the relevant facts and circumstances,
including the benefits to the Company, and whether the transaction is fair
to the Company and consistent with a transaction available on an arms-length
basis. Only those related person transactions that are determined to be in
(or not inconsistent with) the best interests of the Company and shareholders
are approved.
Section 16(a) Beneficial
Ownership Reporting Compliance
Section 16(a) of the Securities
Exchange Act of 1934 requires the Company’s officers and directors, and persons
who own more than ten percent of a registered class of the Company’s equity
securities, to file reports of ownership and changes in ownership with the
Securities and Exchange Commission and with the NASDAQ Stock
Market. Officers, directors and greater than ten percent stockholders
are required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on a review of the copies
of such forms furnished to the Company, or written representations that no Form
5’s were required, the Company believes that during calendar year 2008, all of
the officers, directors and ten percent beneficial owners of the Company
complied with all applicable Section 16(a) filing requirements.
Code of
Ethics
The Company has adopted a code of
ethics that applies to directors and senior executive and financial
officers. The Company’s Code of Ethics seeks to promote (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 of information to the
Commission, (3) compliance with applicable governmental laws, rules and
regulations, (4) prompt internal reporting of violations of the Code of Ethics
to predesignated persons, and (5) accountability for adherence to the Code of
Ethics. A copy of the Company’s Code of Ethics has been attached to
and can be viewed on the Company’s Internet website at http://www.reliv.com
under the section entitled “Investor Relations.”
PROPOSAL
TWO – APPROVAL OF 2009
INCENTIVE STOCK PLAN
On April
2, 2009, the Board of Directors approved a 2009 Incentive Stock Plan (the
“Plan”) and authorized the Plan to be submitted to the shareholders of the
Company for approval. The Plan authorizes the issuance of awards for
up to 1,000,000 shares of our common stock in the form of incentive stock
options, non-statutory stock options, restricted stock awards and unrestricted
stock awards. To date, no awards have been made under the Plan and no
awards will be made unless and until the Plan is approved by the
shareholders. The purposes of the Plan is to further align the
interests of our current and future directors, executive officers and other
employees with the interests of our stockholders by giving them an opportunity
to acquire an ownership interest (or increase an existing ownership interest) in
the Company through the acquisition of common stock. The Board of
Directors believes that establishing the Plan and making available awards as
provided in the Plan will assist the Company in attracting and retaining key
employees by enabling us to offer competitive compensation.
If the
Plan is approved by the shareholders, we plan to file, as soon as practicable, a
registration statement covering the 1,000,000 shares issuable under the
Plan. Except in the case of shares issued to our affiliates, as
defined in the Securities Act of 1933 and regulations thereunder, the shares of
common stock issued under the Plan will be freely tradable in the public market
if they are issued while a registration statement is effective.
There is
currently in effect the 2003 Stock Option Plan under which 232,000 shares remain
available for stock option issuance. In its resolution authorizing
the Plan, the Board of Directors provided that, if the Plan shall receive
approval of the shareholders, no further options shall be issued under the 2003
Stock Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT
YOU VOTE “FOR” PROPOSAL TWO TO APPROVE THE 2009 INCENTIVE STOCK
PLAN
Description of the
Plan
The Plan
authorizes the issuance of awards for up to 1,000,000 shares of common stock of
the Company in the form of incentive stock options, non-statutory stock options,
restricted stock awards and unrestricted stock awards to officers, directors and
employees of, and consultants and advisors to, the Company or its
affiliates. A copy of the Plan is included with these Proxy Materials
as Schedule A.
Administration of
the Plan. The Plan will be administered by the Compensation
Committee of the Company who is authorized to select the persons who will
receive awards, determine the number of shares to be covered by any award and to
determine and modify the terms and conditions and restrictions of the award
consistent with the Plan.
Awards Issuable
under the Plan. The Plan authorizes the issuance of awards of,
or permitting the purchase of, up to 1,000,000 shares of common stock of the
Company, in the aggregate. In the event that there is a stock
dividend, stock split or other similar change in capitalization after the Plan
is approved, the Compensation Committee may make appropriate adjustments in the
awards or stock to be issued with respect to them. The awards may be in the form
of incentive stock options, non-statutory stock options, restricted stock awards
or unrestricted stock awards. Incentive stock options may be granted
only to persons who are officers or employees of the Company on the date of the
grant. The exercise price per share for stock options granted under
the Plan shall not be less than 100% of the fair market value (the closing price
per share on the market) of the common stock on the date of the grant; provided
that, if any recipient of an award owns more than 10% of the common stock of the
Company, the options price shall not be less than 110% of the fair market value
on the date of the grant. The term of options shall be as provided by
the Compensation Committee but in no event more than 10 years from the date of
the grant (5 years with respect to holders of more than 10% of the common
stock). Stock options will become vested and exercisable at such
times, and on such terms, as the Compensation Committee shall provide in each
case. Generally, stock options will not be transferable except by
will or laws of descent.
The
Compensation Committee may also issue restricted stock awards under the Plan
which entitle the recipient to acquire, for such purchase price, if any, shares
of common stock of the Company subject to such restrictions and conditions as
the Compensation Committee shall determine at the time of the grant, including
continued employment or achievement of specified performance goals or
objectives. The recipient of a restricted stock award becomes a
shareholder at the time he or she has accepted the award, signing and delivering
to the Company an agreement respecting the award, and makes payment to the
Company of any amount to be paid with respect to the award. Shares
issued under a restricted stock award by not be sold or transferred until they
have vested under the terms of the award. If employment of the
recipient is terminated prior to the vesting of restricted shares, the Company
shall have the right to repurchase such shares or to require forfeiture of them,
as provide in the grant. The Compensation Committee may also issue
unrestricted shares of common stock under the Plan.
In the
event of the death of a recipient of a stock option, the legal representative of
the recipient shall be entitled to exercise the option for a period of 180 days
from the date of the recipient’s death. In the event of the
retirement or disability of a recipient, the option shall be exercisable for a
period of 90 days from such date. If a recipient is terminated for
cause, the option shall immediately terminate and, in the case of other
termination of employment, the recipient shall have 30 days to exercise
outstanding options.
Change
of Control.
In the
event of a change of control of the Company:
1. Subject
to paragraph 3, the holders of stock options or stock awards under the Plan
shall be entitled to receive, upon exercise of the award, to receive, in lieu of
shares of common stock of the Company, shares of stock, or other securities,
cash or property, as the holders of shares of common stock received in
connection with the change of control;
2. The
Compensation Committee may accelerate, or waive any conditions or restrictions
on, outstanding stock options or restricted stock awards; or
3. The
Compensation Committee may cancel outstanding stock options and restricted stock
awards as of the date of the change of control, provided that all holders of
options and awards shall have been given notice and the opportunity to exercise
the award, if exercisable.
Change of
control will mean and include:
1. Any
person becomes a beneficial owner of securities representing 50% of the combined
voting power of the Company’s then outstanding securities;
2. The
stockholders approve a merger or consolidation under circumstances in which the
stockholders of the Company immediately prior to such merger or consolidation do
not own after such merger or consolidation share representing at least 50% of
the voting power of the Company or the surviving or resulting corporation;
or
3. The
stockholders approve a complete liquidation of the Company or an agreement to
sell or otherwise dispose of all or substantially all of its
assets.
Future
Amendments to the Plan.
Our
Board of Directors may, in its discretion, terminate or amend the Plan at any
time, except that no such termination may affect options previously granted, nor
may any amendment make a change in an award previously granted which would
adversely affect the rights of an award holder under the Plan.
The
foregoing discussion is only a summary of some of the provisions of the Plan and
is qualified in its entirety by the specific language of the Plan, a full copy
of which is attached as Schedule A to this proxy statement.
Federal Income Tax
Information With Respect to the Plan
The
following is a summary of the material United States federal income tax
consequences of the Plan generally applicable to participants and to the
Company. Individual participants should contact their own tax advisors with
respect to the federal, state and local tax consequences applicable to them
based upon their particular circumstances.
Incentive Stock
Options
The
grantee of an incentive stock option recognizes no income for federal income tax
purposes on the grant thereof. Except as provided below with respect to the
alternative minimum tax, there is also no tax upon exercise of an incentive
option. If the shares acquired upon exercise of an incentive option are not
disposed of by the option holder within two years from the date of the grant of
the incentive option or within one year after exercise of the incentive option,
any gain realized by the option holder on the subsequent sale of such shares is
treated as long-term capital gain for federal income tax purposes. If the shares
are sold prior to the expiration of such two-year and one-year periods, which is
known as a “disqualifying disposition,” the difference between the lesser of the
value of the shares at the date of exercise or at the date of sale and the
exercise price of the incentive option is treated as compensation to the option
holder taxable as ordinary income and the excess gain, if any, is treated as
capital gain (which will be long-term capital gain if the shares are held for
more than one year). The excess of the fair market value of the underlying
shares over the option price at the time of exercise of an incentive option will
constitute an item of tax preference for purposes of the alternative minimum
tax. Taxpayers who incur the alternative minimum tax are allowed a credit which
may be carried forward indefinitely to be used as a credit against the
taxpayer’s regular tax liability in a later year; however, the alternative
minimum tax credit cannot reduce the regular tax below the alternative minimum
tax for that carryover year.
Non-Statutory Stock
Options
The
grantee of a non-statutory stock option recognizes no income for federal income
tax purposes on the grant thereof. On the exercise of a non-statutory option,
the difference between the fair market value of the underlying shares of common
stock on the exercise date and the option exercise price is treated as
compensation to the holder of the option taxable as ordinary income in the year
of exercise, and such fair market value becomes the basis for the underlying
shares which will be used in computing any capital gain or loss upon disposition
of such shares.
The
grantee of a restricted stock award recognizes no income for federal income tax
purposes on the grant thereof. Furthermore, a grantee of a restricted stock
award recognizes no income for federal income tax purposes upon the receipt of
common stock pursuant to that award, unless, as described below, he or she
otherwise elects. Instead, the grantee will recognize ordinary income in an
amount equal to the fair market value of the common stock acquired pursuant to
the restricted stock award on the date that it is no longer subject to a
substantial risk of forfeiture less the amount, if any, the grantee paid for the
stock. Such fair market value becomes the basis for the underlying shares and
will be used in computing any capital gain or loss upon the disposition of the
shares. The capital gain will be long-term capital gain if the grantee held the
common stock acquired pursuant to the restricted stock award for more than one
year after the date on which the shares are no longer subject to a substantial
risk of forfeiture, and short-term capital gain if the recipient held the common
stock acquired pursuant to the restricted stock award for one year or less after
the date on which the shares are no longer subject to a substantial risk of
forfeiture.
Alternatively,
the grantee of a restricted stock award may elect, pursuant to
Section 83(b) of the Internal Revenue Code, within 30 days of the
acquisition of common stock pursuant to the restricted stock award, to include
in gross income as ordinary income for the year in which the common stock is
received, the fair market value of the common stock on the date it is received
less the amount, if any, the grantee paid for such stock, determined without
regard to any restriction other than a restriction which by its terms will never
lapse.
Such fair
market value will become the basis for the shares and will be used in
determining any capital gain or loss upon the disposition of such shares. The
proceeds of a disposition of common stock acquired pursuant to a restricted
stock award will be taxable as capital gain to the extent that the proceeds
exceed the grantee’s basis in such shares. This capital gain will be long-term
capital gain if the disposition is more than one year after the date the common
stock is received, and short-term capital gain if the disposition is one year or
less after the date of receipt. In the event that the common stock acquired
pursuant to a restricted stock award is forfeited after the grantee has made an
election pursuant to Section 83(b), the grantee will not be entitled to a
deduction. Grantees of restricted stock awards who wish to make an election
pursuant to Section 83(b) of the Internal Revenue Code are advised to
consult their own tax advisors.
Unrestricted Stock
Awards
The
grantee of an unrestricted stock award will recognize as ordinary income the
difference between the fair market value of the common stock granted pursuant to
an unrestricted stock award less the amount, if any, the grantee paid for such
stock in the taxable year the grantee receives the common stock. The grantee’s
basis in any common stock received pursuant to the grant of an unrestricted
stock award will be equal to the fair market value of the common stock on the
date of receipt of the common stock. Any gain realized by the grantee of an
unrestricted stock award upon a subsequent disposition of such common stock will
be treated as long-term capital gain if the recipient held the shares for more
than one year, and short-term capital gain if the recipient held the shares for
one year or less.
Generally,
subject to certain limitations, the Company may deduct on its corporate income
tax return, in the year in which a Plan participant recognizes ordinary income
upon the occurrence of any of the following events, an amount equal to the
amount recognized by the grantee as ordinary income upon the occurrence of these
events: (i) the exercise of a non-statutory stock option, (ii) a
disqualifying disposition of an incentive option, (iii) a lapse of a
substantial risk of forfeiture of a restricted stock award or performance share
award, (iv) a grantee’s election to include in income the fair market value
of common stock received in connection with a restricted stock award or a
performance share award, and (v) the grant of an unrestricted stock
award.
The Plan
is not subject to the provisions of the Employee Retirement Income Security Act
of 1974, nor is the Plan qualified under Section 401(a) of the Internal
Revenue Code.
PROPOSAL
THREE - SELECTION OF
AUDITORS
Ratification of Appointment
of Independent Registered Public Accounting Firm
The Board of Directors has selected and
approved Ernst & Young LLP as the independent registered public accounting
firm to audit the Company’s financial statements for 2009, subject to
ratification by the stockholders. It is expected that a
representative of the firm of Ernst & Young LLP will be present at the
Annual Meeting and will have an opportunity to make a statement if he or she so
desires and will be available to respond to appropriate
questions.
Fees Billed By Independent
Registered Public Accounting Firm
The following table sets forth the
amount of fees billed by Ernst & Young LLP for services rendered for the
years ended December 31, 2008 and 2007:
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Audit
Fees (1)
|
|
$ |
514,300 |
|
|
$ |
538,300 |
|
Audit-Related
Fees (2)
|
|
|
35,000 |
|
|
|
32,500 |
|
Tax
Fees (3)
|
|
|
150,000 |
|
|
|
188,400 |
|
|
|
|
|
|
|
|
|
|
Total
Fees
|
|
$ |
699,300 |
|
|
$ |
759,200 |
|
|
(1)
|
Includes
the annual consolidated financial statement audit, limited quarterly
reviews, reviews of registration statements and comfort letters, statutory
audits required internationally and the audit of internal
controls.
|
|
(2)
|
Represents
fees paid for the annual audit of the Company’s 401(k) Plan and Employee
Stock Ownership Plan.
|
|
(3)
|
Primarily
represents the preparation of tax returns and other tax compliance and
consulting services.
|
All audit, tax, and other services to
be performed by Ernst & Young LLP for the Company must be pre-approved by
the Audit Committee. The Audit Committee reviews the description of the services
and an estimate of the anticipated costs of performing those services. Services
not previously approved cannot commence until such approval has been granted.
Pre-approval is granted usually at regularly scheduled meetings. If
unanticipated items arise between meetings of the Audit Committee, the Audit
Committee has delegated approval authority to the chairman of the Audit
Committee, in which case the chairman communicates such pre-approvals to the
full committee at its next meeting. During 2008, all services
performed by Ernst & Young LLP were pre-approved by the Audit Committee in
accordance with this policy.
The Audit Committee reviews all
relationships with Ernst & Young LLP, including the provision of non-audit
services, which may relate to the independent registered public accounting
firm’s independence. The Audit Committee considered the effect of Ernst &
Young LLP’s non-audit services in assessing the independence of the independent
registered public accounting firm and concluded that the provision of such
services by Ernst & Young LLP was compatible with the maintenance of that
firm’s independence in the conduct of its auditing functions.
THE
BOARD OF DIRECTORS RECOMMENDS STOCKHOLDERS VOTE “FOR” SUCH
RATIFICATION.
Stockholder Proposals for
2010 Proxy Statement
Proposals by stockholders for inclusion
in the Company’s Proxy Statement and form of Proxy relating to the 2010 Annual
Meeting of Stockholders, which is scheduled to be held on May 27, 2010, should
be addressed to the Secretary, Reliv’ International, Inc., P.O. Box 405,
Chesterfield, Missouri 63006, and must be received at such address no later than
December 31, 2009. Upon receipt of any such proposal, the Company
will determine whether or not to include such proposal in the Proxy Statement
and Proxy in accordance with applicable law. It is suggested that
such proposal be forwarded by certified mail, return receipt
requested.
Proxy
Statement and Annual Report Delivery
The SEC
has adopted rules that permit companies and intermediaries such as brokers to
satisfy delivery requirements for annual reports, proxy statements and Notice of
Internet Availability of Proxy Materials with respect to two or more
shareholders sharing the same address by delivering a single copy of the
documents addressed to those shareholders. This process, which is commonly
referred to as “householding,” potentially provides extra convenience for
shareholders and cost savings for companies. The Company and some brokers
household annual reports, proxy materials and Notice of Internet
Availability of Proxy Materials, delivering a single copy of the documents to
multiple shareholders sharing an address unless contrary instructions have been
received from the affected shareholders.
Once you
have received notice from your broker or the Company that your broker or the
Company will be householding materials 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 copy of the documents in the future, please notify your
broker if your shares are held in a brokerage account or the Company if you hold
registered shares. If, at any time, you and another shareholder sharing
the same address wish to participate in householding and prefer to receive a
single copy of the Company’s annual report, proxy statement or Notice of
Internet Availability of Proxy Materials, please notify your broker if your
shares are held in a brokerage account or the Company if you hold registered
shares.
You may
request to receive at any time a separate copy of our annual report, proxy
statement or Notice of Internet Availability of Proxy Materials, or notify the
Company that you do or do not wish to participate in householding by sending a
written request to the Corporate Secretary at P.O. Box 405, Chesterfield,
Missouri 63006 or by telephoning (636) 537-9715.
Stockholder Communications
with the Board of Directors
Stockholders of the Company may
communicate with the Board of Directors in writing addressed to:
|
Board
of Directors
|
|
|
c/o
Corporate Secretary
|
|
|
Reliv’
International, Inc.
|
|
|
P.O.
Box 405
|
|
|
Chesterfield,
Missouri 63006
|
|
The Secretary will review each
communication from a stockholder. The Secretary will forward to the
members of the Board of Directors each communication that (1) concerns the
Company’s business or governance, (2) is not offensive and is legible in form
and reasonably understandable in content, and (3) does not relate to a personal
grievance against the Company or a team member or further a personal interest
not shared by the other stockholders generally.
The Company strongly encourages each of
its directors to attend each Annual Meeting of the Company’s stockholders where
attendance does not unreasonably conflict with the director’s other business and
personal commitments. All of the members of the Board of Directors
attended the 2008 Annual Meeting of Stockholders.
|
BY
ORDER OF THE |
|
BOARD
OF DIRECTORS |
|
|
Dated: April
7, 2009 |
|
|
|
|
|
|
|
Appendix
A
RELIV
INTERNATIONAL, INC.
2009
INCENTIVE STOCK PLAN
SECTION
1
General
Purpose of the Plan; Definitions
The name
of the plan is the Reliv International, Inc. 2009 Incentive Stock Plan (the
“Plan”). The purpose of the Plan is to encourage and enable officers and
employees of, and other persons providing services to, Reliv International, Inc.
(the “Company”) and its Affiliates to acquire a proprietary interest in the
Company. It is anticipated that providing such persons with a direct stake in
the Company’s welfare will assure a closer identification of their interests
with those of the Company and its shareholders, thereby stimulating their
efforts on the Company’s behalf and strengthening their desire to remain with
the Company.
The
following terms shall be defined as set forth below:
“Affiliate” means a parent
corporation, if any, and each subsidiary corporation of the Company, as those
terms are defined in Section 424 of the Code.
“Award” or “Awards”, except where
referring to a particular category of grant under the Plan, shall include
Incentive Stock Options, Non-Statutory Stock Options, Restricted Stock Awards,
and Unrestricted Stock Awards. Awards shall be evidenced by a written agreement
(which may be in electronic form and may be electronically acknowledged and
accepted by the recipient) containing such terms and conditions not inconsistent
with the provisions of this Plan as the Committee shall determine.
“Board” means the Board of
Directors of the Company.
“Cause” shall mean, with
respect to any Award holder, a determination by the Company (including the
Board) or any Affiliate that the Holder’s employment or other relationship with
the Company or any such Affiliate should be terminated as a result of (i) a
material breach by the Award holder of any agreement to which the Award holder
and the Company (or any such Affiliate) are parties, (ii) any act (other
than retirement) or omission to act by the Award holder that may have a material
and adverse effect on the business of the Company, such Affiliate or any other
Affiliate or on the Award holder’s ability to perform services for the Company
or any such Affiliate, including, without limitation, the proven or admitted
commission of any crime (other than an ordinary traffic violation), or
(iii) any material misconduct or material neglect of duties by the Award
holder in connection with the business or affairs of the Company or any such
Affiliate.
“Change of Control” shall have
the meaning set forth in Section 13.
“Code” means the Internal
Revenue Code of 1986, as amended, and any successor Code, and related rules,
regulations and interpretations.
“Committee” shall have the
meaning set forth in Section 2.
“Disability” means disability
as set forth in Section 22(e)(3) of the Code.
“Effective Date” means the
date on which the Plan is approved by the Board of Directors as set forth in
Section 15.
“Eligible Person” shall have
the meaning set forth in Section 4.
“Exchange Act” shall mean the
Securities Exchange Act of 1934, as amended.
“Fair Market Value” on any
given date means the closing price per share of the Stock on such date as
reported by such registered national securities exchange on which the Stock is
listed, or, if the Stock is not listed on such an exchange, as quoted on NASDAQ;
provided, that, if there is no trading on such date, Fair Market Value shall be
deemed to be the closing price per share on the last preceding date on which the
Stock was traded. If the Stock is not listed on any registered national
securities exchange or quoted on NASDAQ, the Fair Market Value of the Stock
shall be determined in good faith by the Committee.
“Incentive Stock Option” means
any Stock Option designated and qualified as an “incentive stock option” as
defined in Section 422 of the Code.
“Independent Director” means
any director who meets the independence requirement of NASDAQ Marketplace
Rule 4200(a)(15).
“Non-Employee Director” means
any director who: (i) is not currently an officer of the Company or an
Affiliate, or otherwise currently employed by the Company or an Affiliate,
(ii) does not receive compensation, either directly or indirectly, from the
Company or an Affiliate, for services rendered as a consultant or in any
capacity other than as a director, except for an amount that does not exceed the
dollar amount for which disclosure would be required pursuant to
Rule 404(a) of Regulation S-K promulgated by the SEC, (iii) does
not possess an interest in any other transaction for which disclosure would be
required pursuant to Rule 404(a) of Regulation S-K, and (iv) is
not engaged in a business relationship for which disclosure would be required
pursuant to Rule 404(b) of Regulation S-K.
“Non-Statutory Stock Option”
means any Stock Option that is not an Incentive Stock Option.
“Normal Retirement” means
retirement in good standing from active employment with the Company and its
Affiliates in accordance with the retirement policies of the Company and its
Affiliates then in effect.
“Option” or “Stock Option” means any
option to purchase shares of Stock granted pursuant to
Section 5.
“Outside Director” means any
director who (i) is not an employee of the Company or of any “affiliated
group,” as such term is defined in Section 1504(a) of the Code, which
includes the Company (an “Affiliated Group Member”), (ii) is not a former
employee of the Company or any Affiliated Group Member who is receiving
compensation for prior services (other than benefits under a tax-qualified
retirement plan) during the Company’s or any Affiliated Group Member’s taxable
year, (iii) has not been an officer of the Company or any Affiliated Group
Member and (iv) does not receive remuneration from the Company or any
Affiliated Group Member, either directly or indirectly, in any capacity other
than as a director. “Outside Director” shall be determined in accordance with
Section 162(m) of the Code and the Treasury regulations issued
thereunder.
“Restricted Stock Award” means
an Award granted pursuant to Section 6.
“SEC” means the Securities and
Exchange Commission or any successor authority.
“Stock” means the common
stock, no par value per share, of the Company.
“Unrestricted Stock Award”
means Awards granted pursuant to Section 7.
SECTION
2
Administration
of Plan; Committee Authority to
Select
Participants and Determine Awards
(a) Committee. The
Plan shall be administered by the Compensation Committee of the Board (the
“Committee”) consisting of not less than two (2) persons each of whom
qualifies as an Independent Director but the authority and validity of any act
taken or not taken by the Committee shall not be affected if any person
administering or taking action with respect to the Plan is not an Independent
Director, an Outside Director or a Non-Employee Director. Except as the Board of
Directors shall by resolution provide otherwise, the Committee shall have full
and final authority to operate, manage and administer the Plan on behalf of the
Company.
(b) Powers of
Committee. The Committee shall have the power and authority to
grant and modify Awards consistent with the terms of the Plan, including the
power and authority:
(i) to
select the persons to whom Awards may from time to time be granted;
(ii) to
determine the time or times of grant, and the extent, if any, of Incentive Stock
Options, Non-Statutory Stock Options, Restricted Stock, and Unrestricted Stock,
or any combination of the foregoing, granted to any one or more
participants;
(iii) to
determine the number of shares to be covered by any Award;
(iv) to
determine and modify the terms and conditions, including restrictions not
inconsistent with the terms of the Plan, of any Award, which terms and
conditions may differ among individual Awards and participants, and to approve
the form of written instruments evidencing the Awards; provided, however, that
no such action shall adversely affect rights under any outstanding Award without
the participant’s consent;
(v) to
accelerate the exercisability or vesting of all or any portion of any
Award;
(vi) to
extend the period in which any outstanding Stock Option (other than a
Non-Statutory Stock Option) may be exercised; and
(vii) to
adopt, alter and repeal such rules, guidelines and practices for administration
of the Plan and for its own acts and proceedings as it shall deem advisable; to
interpret the terms and provisions of the Plan and any Award (including related
written instruments); to make all determinations it deems advisable for the
administration of the Plan; to decide all disputes arising in connection with
the Plan; and to otherwise supervise the administration of the
Plan.
(c) Minutes. The
Compensation Committee shall keep minutes of all meetings at which Awards are
made specifying the type of Award, number of shares, date and
terms. Copies of such minutes shall be maintained with the minutes of
the Board of Directors.
All
decisions and interpretations of the Committee shall be binding on all persons,
including the Company and Plan participants. No member or former member of the
Committee or the Board shall be liable for any action or determination made in
good faith with respect to this Plan.
SECTION
3
Shares
Issuable under the Plan;
Mergers;
Substitution
(a) Shares Issuable. The
maximum number of shares of Stock which may be issued in respect of Awards
granted under the Plan, subject to adjustment upon changes in capitalization of
the Company as provided in this Section 3, shall be 1,000,000 shares.
For purposes of this limitation, the shares of Stock underlying any Awards which
are forfeited, cancelled, reacquired by the Company or otherwise terminated
(other than by exercise) shares that are tendered in payment of the exercise
price of any Award and shares that are tendered or withheld for tax withholding
obligations shall be added back to the shares of Stock with respect to which
Awards may be granted under the Plan. Shares issued under the Plan may be
authorized but unissued shares or shares reacquired by the Company.
(b) Stock Dividends, Mergers,
etc. In the event that, after approval of the Plan by the
stockholders of the Company in accordance with Section 15, the Company
effects a stock dividend, stock split or similar change in capitalization
affecting the Stock, the Committee shall make appropriate adjustments in
(i) the number and kind of shares of stock or securities with respect to
which Awards may thereafter be granted (including without limitation the
limitations set forth in Sections 3(a) and (b) above), (ii) the
number and kind of shares remaining subject to outstanding Awards, and
(iii) the option or purchase price in respect of such shares. In the event
of any merger, consolidation, dissolution or liquidation of the Company, the
Committee in its sole discretion may, as to any outstanding Awards, make such
substitution or adjustment in the aggregate number of shares reserved for
issuance under the Plan and in the number and purchase price (if any) of shares
subject to such Awards as it may determine and as may be permitted by the terms
of such transaction, or accelerate, amend or terminate such Awards upon such
terms and conditions as it shall provide (which, in the case of the termination
of the vested portion of any Award, shall require payment or other consideration
which the Committee deems equitable in the circumstances), subject, however, to
the provisions of Section 13.
(c) Substitute
Awards. The Committee may grant Awards under the Plan in
substitution for stock and stock based awards held by employees of another
corporation who concurrently become employees of the Company or an Affiliate as
the result of a merger or consolidation of the employing corporation with the
Company or an Affiliate or the acquisition by the Company or an Affiliate of
property or stock of the employing corporation. The Committee may direct that
the substitute awards be granted on such terms and conditions as the Committee
considers appropriate in the circumstances.
SECTION
4
Eligibility
Awards
may be granted to officers, directors and employees of, and consultants and
advisers to, the Company or its Affiliates (“Eligible Persons”).
SECTION
5
Stock
Options
The
Committee may grant to Eligible Persons options to purchase stock.
Any Stock
Option granted under the Plan shall be in such form and containing such terms as
the Committee may from time to time approve, not inconsistent with the
provisions of this Plan, and, at a minimum, setting forth the exact number of
shares subject to the Stock Option and the exercise or grant price, which must
be no less than Fair Market Value.
Stock
Options granted under the Plan may be either Incentive Stock Options (subject to
compliance with applicable law) or Non-Statutory Stock Options. Unless otherwise
so designated, an Option shall be a Non-Statutory Stock Option. To the extent
that any option does not qualify as an Incentive Stock Option, it shall
constitute a Non-Statutory Stock Option.
No
Incentive Stock Option shall be granted under the Plan after the tenth
anniversary of the date of adoption of the Plan by the Board.
The
Committee may also grant additional Non-Statutory Stock Options to purchase a
number of shares to be determined by the Committee in recognition of services
provided by a Non-Employee Director in his or her capacity as a director,
provided that such grants are in compliance with the requirements of
Rule 16b-3, as promulgated under the Securities Exchange Act of 1934, as
amended from time to time (“Rule 16b-3”).
The
Committee in its discretion may determine the effective date of Stock Options,
provided, however, that grants of Incentive Stock Options shall be made only to
persons who are, on the effective date of the grant, officers or employees of
the Company or an Affiliate. Stock Options granted pursuant to this
Section 5 shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem
desirable.
(a) Exercise
Price. The exercise price per share for the Stock covered by a
Stock Option granted pursuant to this Section 5 shall be determined by the
Committee at the time of grant but shall be not less than one hundred percent
(100%) of Fair Market Value on the date of grant. If an employee owns or is
deemed to own (by reason of the attribution rules applicable under
Section 424(d) of the Code) more than ten percent (10%) of the combined
voting power of all classes of stock of the Company or any subsidiary or parent
corporation and an Incentive Stock Option is granted to such employee, the
option price shall be not less than one hundred ten percent (110%) of Fair
Market Value on the date of grant.
(b) Option Term. The
term of each Stock Option shall be fixed by the Committee, but no Incentive
Stock Option shall be exercisable more than ten (10) years after the date
the option is granted. If an employee owns or is deemed to own (by reason of the
attribution rules of Section 424(d) of the Code) more than ten percent
(10%) of the combined voting power of all classes of stock of the Company or any
subsidiary or parent corporation and an Incentive Stock Option is granted to
such employee, the term of such option shall be no more than five (5) years
from the date of grant.
(c) Exercisability; Rights of a
Shareholder. Stock Options shall become vested and exercisable
at such time or times, whether or not in installments, as shall be determined by
the Committee. The Committee, in its discretion, may accelerate the
exercisability of all or any portion of any Stock Option only in circumstances
involving (i) a Change of Control of the Company, (ii) undue hardship,
including, but not limited to, death or disability of the option holder, and
(iii) a severance arrangement with a departing option holder. An optionee
shall have the rights of a shareholder only as to shares acquired upon the
exercise of a Stock Option and not as to unexercised Stock Options.
(d) Method of
Exercise. Stock Options may be exercised in whole or in part,
by delivering written notice of exercise to the Company, specifying the number
of shares to be purchased. Payment of the purchase price may be made by delivery
of cash or bank check or other instrument acceptable to the Committee in an
amount equal to the exercise price of such Options, or, to the extent provided
in the applicable Option Agreement, by one or more of the following
methods:
(i) by
delivery to the Company of shares of Common Stock of the Company that either
have been purchased by the optionee on the open market, or have been
beneficially owned by the optionee for a period of at least six months and are
not then subject to restriction under any Company plan (“mature shares”); such
surrendered shares shall have a fair market value equal in amount to the
exercise price of the Options being exercised; or
(ii) if
the class of Common Stock is registered under the Securities Exchange Act of
1934 at such time, by delivery to the Company of a properly executed exercise
notice along with irrevocable instructions to a broker to deliver promptly to
the Company cash or a check payable and acceptable to the Company for the
purchase price; provided that in the event that the optionee chooses to pay the
purchase price as so provided, the optionee and the broker shall comply with
such procedures and enter into such agreements of indemnity and other agreements
as the Committee shall prescribe as a condition of such payment procedure
(including, in the case of an optionee who is an executive officer of the
Company, such procedures and agreements as the Committee deems appropriate in
order to avoid any extension of credit in the form of a personal loan to such
officer). The Company need not act upon such exercise notice until the Company
receives full payment of the exercise price; or
(iii) by
reducing the number of Option shares otherwise issuable to the optionee upon
exercise of the Option by a number of shares of Common Stock having a fair
market value equal to such aggregate exercise price; provided, however, that the
optionee otherwise holds an equal number of mature shares; or
(iv) by
any combination of such methods of payment.
The
delivery of certificates representing shares of Stock to be purchased pursuant
to the exercise of a Stock Option will be contingent upon receipt from the
Optionee (or a purchaser acting in his stead in accordance with the provisions
of the Stock Option) by the Company of the full purchase price for such shares
and the fulfillment of any other requirements contained in the Stock Option or
imposed by applicable law.
(e) Non-transferability of
Options. Except as the Committee may provide with respect to a
Non-Statutory Stock Option, no Stock Option shall be transferable other than by
will or by the laws of descent and distribution and all Stock Options shall be
exercisable, during the optionee’s lifetime, only by the optionee.
(f) Annual Limit on Incentive Stock
Options. To the extent required for “incentive stock option”
treatment under Section 422 of the Code, the aggregate Fair Market Value
(determined as of the time of grant) of the Stock with respect to which
Incentive Stock Options granted under this Plan and any other plan of the
Company or its Affiliates become exercisable for the first time by an optionee
during any calendar year shall not exceed $100,000.
(g) Lockup
Agreement. Each Option shall provide that the optionee shall
agree for a period of time (not to exceed 180 days) from the effective date
of any registration of securities of the Company (upon request of the Company or
the underwriters managing any underwritten offering of the Company’s securities)
not to sell, make any short sale of, loan, grant any option for the purchase of,
or otherwise dispose of, any shares issued pursuant to the exercise of such
Option, without the prior written consent of the Company or such underwriters,
as the case may be.
SECTION
6
Restricted
Stock Awards
(a) Nature of Restricted Stock
Award. The Committee in its discretion may grant Restricted
Stock Awards to any Eligible Person, entitling the recipient to acquire, for
such purchase price, if any, as may be determined by the Committee, shares of
Stock subject to such restrictions and conditions as the Committee may determine
at the time of grant (“Restricted Stock”), including continued employment and/or
achievement of pre-established performance goals and objectives.
(b) Acceptance of
Award. A participant who is granted a Restricted Stock Award
shall have no rights with respect to such Award unless the participant shall
have accepted the Award within sixty (60) days (or such shorter date as the
Committee may specify) following the award date by making payment to the Company
of the specified purchase price, if any, of the shares covered by the Award and
by executing and delivering to the Company a written instrument that sets forth
the terms and conditions applicable to the Restricted Stock in such form as the
Committee shall determine.
(c) Rights as a
Shareholder. Upon complying with Section 6(b) above, a
participant shall have all the rights of a shareholder with respect to the
Restricted Stock, including voting and dividend rights, subject to
non-transferability restrictions and Company repurchase or forfeiture rights
described in this Section 6 and subject to such other conditions contained
in the written instrument evidencing the Restricted Award. Unless the Committee
shall otherwise determine, certificates evidencing shares of Restricted Stock
shall remain in the possession of the Company until such shares are vested as
provided in Section 6(e) below.
(d) Restrictions. Shares
of Restricted Stock may not be sold, assigned, transferred, pledged or otherwise
encumbered or disposed of except as specifically provided herein. In the event
of termination of employment by the Company and its Affiliates for any reason
(including death, Disability, Normal Retirement and for Cause), the Company
shall have the right, at the discretion of the Committee, to repurchase shares
of Restricted Stock which have not then vested at their purchase price, or to
require forfeiture of such shares to the Company if acquired at no cost, from
the participant or the participant’s legal representative. The Company must
exercise such right of repurchase or forfeiture within ninety (90) days
following such termination of employment (unless otherwise specified in the
written instrument evidencing the Restricted Stock Award).
(e) Vesting of Restricted
Stock. The Committee at the time of grant shall specify the
date or dates and/or the attainment of pre-established performance goals,
objectives and other conditions on which the non-transferability of the
Restricted Stock and the Company’s right of repurchase or forfeiture shall
lapse. Subsequent to such date or dates and/or the attainment of such
pre-established performance goals, objectives and other conditions, the shares
on which all restrictions have lapsed shall no longer be Restricted Stock and
shall be deemed “vested.” Subject to Section 11, the Committee, in its
discretion, may accelerate the exercisability of all or any portion of any
Restricted Stock Award only in circumstances involving (i) a Change of
Control of the Company, (ii) undue hardship, including, but not limited to,
death or disability of the Restricted Stock Award holder, and (iii) a
severance arrangement with a departing Restricted Stock Award
holder.
(f) Waiver, Deferral and Reinvestment of
Dividends. The written instrument evidencing the Restricted
Stock Award may require or permit the immediate payment, waiver, deferral or
investment of dividends paid on the Restricted Stock.
SECTION
7
Unrestricted
Stock Awards
(a) Grant or Sale of Unrestricted
Stock. The Committee in its discretion may grant or sell to
any Eligible Person shares of Stock free of any restrictions under the Plan
(“Unrestricted Stock”) at a purchase price determined by the Committee. Shares
of Unrestricted Stock may be granted or sold as described in the preceding
sentence in respect of past services or other valid consideration.
(b) Restrictions on
Transfers. The right to receive unrestricted Stock may not be
sold, assigned, transferred, pledged or otherwise encumbered, other than by will
or the laws of descent and distribution.
SECTION
8
Termination
of Stock Options
(a) Incentive Stock
Options:
(i) Termination by
Death. If any participant’s employment by the Company and its
Affiliates terminates by reason of death, any Incentive Stock Option owned by
such participant may thereafter be exercised to the extent exercisable at the
date of death, by the legal representative or legatee of the participant, for a
period of one hundred eighty (180) days (or such longer period as the
Committee shall specify at any time) from the date of death, or until the
expiration of the stated term of the Incentive Stock Option, if
earlier.
(ii) Termination by Reason of Disability
or Normal Retirement.
(A) Any
Incentive Stock Option held by a participant whose employment by the Company and
its Affiliates has terminated by reason of Disability may thereafter be
exercised, to the extent it was exercisable at the time of such termination, for
a period of ninety (90) days (or such longer period as the Committee shall
specify at any time) from the date of such termination of employment, or until
the expiration of the stated term of the Option, if earlier.
(B) Any
Incentive Stock Option held by a participant whose employment by the Company and
its Affiliates has terminated by reason of Normal Retirement may thereafter be
exercised, to the extent it was exercisable at the time of such termination, for
a period of ninety (90) days (or such longer period as the Committee shall
specify at any time) from the date of such termination of employment, or until
the expiration of the stated term of the Option, if earlier.
(C) The
Committee shall have sole authority and discretion to determine whether a
participant’s employment has been terminated by reason of Disability or Normal
Retirement.
(iii) Termination for
Cause. If any participant’s employment by the Company and its
Affiliates has been terminated for Cause, any Incentive Stock Option held by
such participant shall immediately terminate and be of no further force and
effect; provided, however, that the Committee may, in its sole discretion,
provide that such Option can be exercised for a period of up to thirty
(30) days from the date of termination of employment or until the
expiration of the stated term of the Option, if earlier.
(iv) Other
Termination. Unless otherwise determined by the Committee, if
a participant’s employment by the Company and its Affiliates terminates for any
reason other than death, Disability, Normal Retirement or for Cause, any
Incentive Stock Option held by such participant may thereafter be exercised, to
the extent it was exercisable on the date of termination of employment, for
thirty (30) days (or such other period as the Committee shall specify) from
the date of termination of employment or until the expiration of the stated term
of the Option, if earlier.
(b) Non-Statutory Stock
Options. Any Non-Statutory Stock Option granted under the Plan
shall contain such terms and conditions with respect to its termination as the
Committee, in its discretion, may from time to time determine.
SECTION
9
Tax
Withholding
(a) Payment by
Participant. Each participant shall, no later than the date as
of which the value of an Award or of any Stock or other amounts received
thereunder first becomes includable in the gross income of the participant for
Federal income tax purposes, pay to the Company, or make arrangements
satisfactory to the Committee regarding payment of any Federal, state, local
and/or payroll taxes of any kind required by law to be withheld with respect to
such income. The Company and its Affiliates shall, to the extent permitted by
law, have the right to deduct any such taxes from any payment of any kind
otherwise due to the participant.
(b) Payment in
Shares. A Participant may elect, with the consent of the
Committee, to have such tax withholding obligation satisfied, in whole or in
part, by (i) authorizing the Company to withhold from shares of Stock to be
issued pursuant to an Award a number of shares with an aggregate Fair Market
Value (as of the date the withholding is effected) that would satisfy the
minimum withholding amount due with respect to such Award, or
(ii) delivering to the Company a number of mature shares of Stock with an
aggregate Fair Market Value (as of the date the withholding is effected) that
would satisfy the minimum withholding amount due.
(c) Notice of Disqualifying
Disposition. Each holder of an Incentive Option shall agree to
notify the Company in writing immediately after making a disqualifying
disposition (as defined in Section 421(b) of the Code) of any Stock
purchased upon exercise of an Incentive Stock Option.
SECTION
10
Transfer
and Leave of Absence
For
purposes of the Plan, the following events shall not be deemed a termination of
employment:
(a) a
transfer to the employment of the Company from an Affiliate or from the Company
to an Affiliate, or from one Affiliate to another;
(b) an
approved leave of absence for military service or sickness, or for any other
purpose approved by the Company, if the employee’s right to re-employment is
guaranteed either by a statute or by contract or under the policy pursuant to
which the leave of absence was granted or if the Committee otherwise so provides
in writing.
SECTION
11
Amendments
and Termination
The Board
may at any time amend or discontinue the Plan and the Committee may at any time
amend or cancel any outstanding Award (or provide substitute Awards at the same
or reduced exercise or purchase price or with no exercise or purchase price, but
such price, if any, must satisfy the requirements which would apply to the
substitute or amended Award if it were then initially granted under this Plan)
for the purpose of satisfying changes in law or for any other lawful purpose,
but no such action shall adversely affect rights under any outstanding Award
without the holder’s consent.
This Plan
shall terminate as of the tenth anniversary of its effective date. The Board may
terminate this Plan at any earlier time for any reason. No Award may be granted
after the Plan has been terminated. No Award granted while this Plan is in
effect shall be altered or impaired by termination of this Plan, except upon the
consent of the holder of such Award. The power of the Committee to construe and
interpret this Plan and the Awards granted prior to the termination of this Plan
shall continue after such termination.
SECTION
12
Status
of Plan
With
respect to the portion of any Award which has not been exercised and any
payments in cash, Stock or other consideration not received by a participant, a
participant shall have no rights greater than those of a general creditor of the
Company unless the Committee shall otherwise expressly determine in connection
with any Award or Awards. In its sole discretion, the Committee may authorize
the creation of trusts or other arrangements to meet the Company’s obligations
to deliver Stock or make payments with respect to Awards hereunder, provided
that the existence of such trusts or other arrangements is consistent with the
provision of the foregoing sentence.
SECTION
13
Change
of Control Provisions
(a) Upon
the occurrence of a Change of Control as defined in this
Section 13:
(i) subject
to the provisions of clause (iii) below, after the effective date of such
Change of Control, each holder of an outstanding Stock Option, or Restricted
Stock Award shall be entitled, upon exercise of such Award, to receive, in lieu
of shares of Stock (or consideration based upon the Fair Market Value of Stock),
shares of such stock or other securities, cash or property (or consideration
based upon shares of such stock or other securities, cash or property) as the
holders of shares of Stock received in connection with the Change of
Control;
(ii) the
Committee may accelerate, fully or in part, the time for exercise of, and waive
any or all conditions and restrictions on, each unexercised and unexpired Stock
Option, and Restricted Stock Award, effective upon a date prior or subsequent to
the effective date of such Change of Control, as specified by the
Committee; or
(iii) each
outstanding Stock Option and Restricted Stock Award, may be cancelled by the
Committee as of the effective date of any such Change of Control provided that
(x) prior written notice of such cancellation shall be given to each holder
of such an Award and (y) each holder of such an Award shall have the right
to exercise such Award to the extent that the same is then exercisable or, in
full, if the Committee shall have accelerated the time for exercise of all such
unexercised and unexpired Awards, during the thirty (30) day period
preceding the effective date of such Change of Control.
(b) “Change
of Control” shall mean the occurrence of any one of the following
events:
(i) any
“person” (as such term is used in Sections 11(d) and 12(d)(2) of the
Exchange Act) becomes, after the Effective Date of this Plan, a “beneficial
owner” (as such term is defined in Rule 13d-3 promulgated under the
Exchange Act) (other than the Company, any trustee or other fiduciary holding
securities under an employee benefit plan of the Company, or any corporation
owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company),
directly or indirectly, of securities of the Company representing fifty percent
(50%) or more of the combined voting power of the Company’s then outstanding
securities; or
(ii) the
stockholders of the Company approve a merger or consolidation of the Company
with any other corporation or other entity, other than a merger or consolidation
which would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) more than fifty percent (50%) of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation; or
(iii) the
stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of all or
substantially all of the Company’s assets.
SECTION
14
General
Provisions
(a) No Distribution; Compliance with
Legal Requirements. The Committee may require each person
acquiring shares pursuant to an Award to represent to and agree with the Company
in writing that such person is acquiring the shares without a view to
distribution thereof.
No shares
of Stock shall be issued pursuant to an Award until all applicable securities
laws and other legal and stock exchange requirements have been satisfied. The
Committee may require the placing of such stop orders and restrictive legends on
certificates for Stock and Awards as it deems appropriate.
(b) Delivery of Stock
Certificates. Delivery of stock certificates to participants
under this Plan shall be deemed effected for all purposes when the Company or a
stock transfer agent of the Company shall have delivered such certificates in
the United States mail, addressed to the participant, at the participant’s last
known address on file with the Company.
(c) Other Compensation Arrangements; No
Employment Rights. Nothing contained in this Plan shall
prevent the Board from adopting other or additional compensation arrangements,
including trusts, subject to stockholder approval if such approval is required;
and such arrangements may be either generally applicable or applicable only in
specific cases. The adoption of the Plan or any Award under the Plan does not
confer upon any employee any right to continued employment with the Company or
any Affiliate.
SECTION
15
Effective
Date of Plan
This Plan
shall become effective upon its adoption by the Company’s Board of Directors. If
the Plan shall not be approved by the shareholders of the Company within twelve
months following its adoption, this Plan shall terminate and be of no further
force or effect.
SECTION
16
Governing
Law
This Plan
shall be governed by, and construed and enforced in accordance with, the
substantive laws of the State of Missouri without regard to its principles of
conflicts of laws.
Approved by the Board of Directors
____________________.
Approved by the Shareholders
____________________________.