def14a
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. ___)
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
o Preliminary Proxy Statement
o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
þ Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Material Pursuant to § 240.14a-12
LIFEVANTAGE CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
þ No fee required.
o Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act
Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was
determined):
(4) Proposed maximum aggregate value of transaction:
o Fee paid previously with preliminary materials.
o Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the Form or Schedule and the
date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
TABLE OF CONTENTS
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS |
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PROXY STATEMENT |
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QUESTIONS AND ANSWERS ABOUT THIS PROXY MATERIAL AND VOTING |
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Why am I receiving these materials? |
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Where and when is the annual meeting? |
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What am I voting on? |
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Who can vote at the annual meeting? |
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How do I vote? |
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How many votes do I have? |
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How are votes counted? |
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What are broker non-votes? |
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How many votes are needed to approve each proposal? |
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What does it mean if I receive more than one proxy card? |
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Can I change my vote after submitting my proxy? |
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What if I return a proxy card but do not make specific choices? |
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What is the quorum requirement? |
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Who is paying for this proxy solicitation? |
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When are shareholder proposals due for next years annual meeting? |
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How can I find out the results of the voting at the annual meeting? |
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PROPOSAL 1 ELECTION OF DIRECTORS |
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PROPOSAL 2 RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
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PROPOSAL 3 ADOPTION OF THE 2010 LONG-TERM INCENTIVE PLAN |
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CORPORATE GOVERNANCE |
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EXECUTIVE OFFICERS |
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COMPENSATION MATTERS |
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AUDIT RELATED MATTERS |
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT |
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS |
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CODE OF ETHICS |
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(i)
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE |
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HOUSEHOLDING OF PROXY MATERIALS |
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ANNUAL REPORT ON FORM 10-K |
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OTHER MATTERS |
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ANNEX A 2010 LONG TERM INCENTIVE PLAN |
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(ii)
LifeVantage Corporation
11545 W. Bernardo Court, Suite 301
San Diego, California 92127
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
NOVEMBER 19, 2010
Dear Shareholder:
You are cordially invited to attend the 2010 Annual Meeting of Shareholders of LifeVantage
Corporation, a Colorado corporation. The meeting will be held at our offices located at 10813 S.
River Front Parkway, Suite 500, South Jordan, Utah 84095 on November 19, 2010 at 9:00 a.m. local
time for the following purposes:
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To elect eight (8) directors to hold office for a one-year term expiring at our
2011 Annual Meeting of Shareholders and until their respective successors are elected
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To ratify the appointment of Ehrhardt Keefe Steiner & Hottman PC as our
independent registered public accounting firm for our fiscal year ending June 30, 2011. |
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To adopt our 2010 Long-Term Incentive Plan. |
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To conduct any other business properly brought before the meeting. |
These items of business are more fully described in the Proxy Statement accompanying this
Notice.
Our board of directors has fixed September 21, 2010 as the record date for determining the
shareholders entitled to receive notice of and to vote at the annual meeting. Only shareholders of
record at the close of business on that date may vote at the meeting or any adjournment or
postponement thereof.
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By Order of the Board of Directors |
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San Diego, California October 1, 2010
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/s/ Carrie E. Carlander
Carrie E. Carlander
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Chief Financial Officer, Secretary and Treasurer |
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You are cordially invited to attend the meeting in person. Whether or not you expect to attend
the meeting, please complete, date, sign and return the enclosed proxy as promptly as possible in
order to ensure your representation at the meeting. A return envelope (which is postage prepaid if
mailed in the United States) is enclosed for your convenience. Even if you have voted by proxy, you
may still vote in person if you attend the meeting. Please note, however, that if your shares are
held of record by a broker, bank or other nominee and you wish to vote at the meeting, you must
obtain a proxy issued in your name from that record holder.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SHAREHOLDER MEETING TO
BE HELD ON NOVEMBER 19, 2010: This notice, the accompanying proxy statement, and annual report to
stockholders are available at http://www.lifevantage.com/investor-sec.aspx
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LifeVantage Corporation
11545 W. Bernardo Court, Suite 301
San Diego, California 92127
2010 ANNUAL MEETING OF SHAREHOLDERS
NOVEMBER 19, 2010
QUESTIONS AND ANSWERS ABOUT THIS PROXY MATERIAL AND VOTING
Why am I receiving these materials?
We sent you this proxy statement and the enclosed proxy card because the board of directors of
LifeVantage Corporation (sometimes referred to as we, us, our, the Company or
LifeVantage) is soliciting your proxy to vote on the proposals described in this proxy statement
at the 2010 Annual Meeting of Shareholders. You are invited to attend the annual meeting to vote on
the proposals described in this proxy statement. However, you do not need to attend the meeting to
vote your shares. Instead, you may simply complete, sign and return the enclosed proxy card.
We intend to mail this proxy statement and accompanying proxy card on or about October 4, 2010
to all our shareholders of record as of the record date entitled to vote at the annual meeting.
Where and when is the annual meeting?
The annual meeting will take place on November 19, 2010 at 9:00 a.m. local time at our offices
located at 10813 S. River Front Parkway, Suite 500, South Jordan, Utah 84095.
What am I voting on?
There are three matters scheduled to be voted on by shareholders at the annual meeting:
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the election of eight (8) directors to our board of directors; |
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the ratification of the selection of the appointment of Ehrhardt Keefe Steiner &
Hottman PC as our independent registered accounting firm for fiscal year ending June
30, 2011; and |
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the adoption of our 2010 Long-Term Incentive Plan. |
Who can vote at the annual meeting?
Only shareholders of record at the close of business on September 21, 2010, which date we
refer to as the record date, will be entitled to vote at the annual meeting. As of the record
date we had 69,065,723 shares of common stock outstanding and entitled to vote.
Shareholders of Record: Shares Registered in Your Name
If on the record date your shares were registered directly in your name with our transfer
agent, Computershare Trust Co., Inc., then you are a shareholder of record. As a shareholder of
record, you may vote by proxy or vote in person at the meeting. Whether or not you plan to attend
the meeting, we urge you to fill out and return the enclosed proxy card to ensure your vote is
counted.
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Beneficial Owner: Shares Registered in the Name of a Broker or Bank
If on the record date your shares were not held in your name, but rather in an account at a
brokerage firm, bank, dealer, or other similar organization, then you are the beneficial owner of
shares held in street name and these proxy materials are being forwarded to you by that
organization. The organization holding your account is considered to be the shareholder of record
for purposes of voting at the annual meeting. As a beneficial owner, you have the right to direct
your broker or other agent on how to vote the shares in your account. You are also invited to
attend the annual meeting provided that you bring with you proof of your beneficial ownership of
shares, such as a brokerage account statement. However, if you are not the shareholder of record,
you may not vote your shares in person at the meeting unless you request and obtain a valid proxy
from your broker or other agent.
How do I vote?
With respect to the election of directors, you may either vote FOR all the nominees to our
board of directors or you may WITHHOLD your vote for all of the nominees or any nominee you
specify. With respect to the other matters to be voted on, you may vote FOR or AGAINST or you
may ABSTAIN from voting.
Shareholder of Record: Shares Registered in Your Name
If you are a shareholder of record, you may vote by proxy using the enclosed proxy card or in
person at the annual meeting.
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Voting Your Proxy By Mail. To vote using the proxy card, simply complete, sign and
date the enclosed proxy card and return it promptly in the envelope provided. |
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Vote in Person. To vote in person, come to the annual meeting and we will give you a
ballot when you arrive. |
Whether or not you plan to attend the meeting, we urge you to vote by proxy to ensure your
vote is counted. You may still attend the meeting and vote in person if you have already voted by
proxy. See Can I change my vote after submitting my proxy? below.
Beneficial Owner: Shares Registered in the Name of Broker or Bank
If you are a beneficial owner of shares registered in the name of your broker, bank, or other
agent, you should have received a proxy card and voting instructions with these proxy materials
from that organization rather than from us. Simply complete and mail the proxy card to ensure that
your vote is counted. You may not vote your shares in person at the meeting unless you request and
obtain a valid proxy from your broker or other agent.
How many votes do I have?
On each matter to be voted upon, you have one vote for each share of common stock you own as
of the record date.
How are votes counted?
Votes will be counted by the inspector of election appointed for the meeting. Each proposal
(other than the election of directors) will be approved if the votes cast FOR the proposal exceed
the votes cast AGAINST the proposal. Because neither abstentions nor broker non-votes are
considered cast with respect to a proposal, abstentions and broker non-votes have no effect and
will not be counted towards the vote total for any proposal.
What are broker non-votes?
When a broker indicates on its proxy that it does not have authority to vote certain shares
held in street name on particular proposals, the shares not voted are called broker non-votes.
Broker non-votes occur when
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brokers do not have discretionary voting authority on certain non-routine proposals under
the rules of the New York Stock Exchange (NYSE) and the beneficial owner has not instructed the
broker how to vote on these proposals. The ratification of the selection of our independent
registered public accounting firm is the only proposal at the annual meeting that is considered a
routine matter under the rules and interpretations of the NYSE.
How many votes are needed to approve each proposal?
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Directors are elected by a plurality of the votes properly cast in person or by
proxy. Cumulative voting is not permitted. The eight (8) nominees receiving the highest
number of FOR votes will be elected. A properly executed proxy marked ABSTAIN with
respect to this proposal will not be voted and accordingly will have no effect on the
outcome of this proposal. Broker non-votes are not considered to be represented in
person or by proxy as to this proposal and therefore will have no effect on the outcome
of this proposal. |
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The 2010 Long-Term Incentive Plan will be adopted by our shareholders if the votes
cast FOR the proposal exceed the votes cast AGAINST the proposal. A properly executed
proxy marked ABSTAIN with respect to this proposal will not be voted and accordingly
will have no effect on the outcome of this proposal. Broker non-votes are not
considered to be represented in person or by proxy as to this proposal and therefore
will have no effect on the outcome of this proposal. |
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The ratification of the selection of Ehrhardt Keefe Steiner & Hottman PC as our
independent auditor for the fiscal year ended June 30, 2011 will be approved by our
shareholders if the votes cast FOR the proposal exceed the votes cast AGAINST the
proposal. A properly executed proxy marked ABSTAIN with respect to this proposal will
not be voted and accordingly will have no effect on the outcome of this proposal. A
broker or other nominee will generally have discretionary authority to vote on this
proposal because it is considered a routine matter, and therefore we do not expect
broker non-votes with respect to this proposal. |
What does it mean if I receive more than one proxy card?
If you receive more than one proxy card, your shares are registered in more than one name or
are registered in different accounts. Please complete, sign and return each proxy card to ensure
that all of your shares are voted.
Can I change my vote after submitting my proxy?
Yes. You can revoke your proxy at any time before it is voted. If you are the record holder of
your shares, you may revoke your proxy in any one of three ways:
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You may submit another properly completed proxy card with a later date; |
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You may send a written notice that you are revoking your proxy to our Corporate
Secretary at LifeVantage Corporation, Attn: Corporate Secretary, 11545 W. Bernardo
Court, Suite 301, San Diego, California 92127; or |
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You may attend the annual meeting and vote in person. Simply attending the meeting
will not, by itself, revoke your proxy. |
If your shares are held by your broker or bank as a nominee or agent, you should follow the
instructions provided by your broker or bank to revoke your proxy.
What if I return a proxy card but do not make specific choices?
If you return a signed and dated proxy card without marking any voting selections or without
marking your voting selection as to a particular proposal, your shares will be voted FOR the
election of all eight (8) nominees for director, FOR the adoption of the approval of the 2010
Long-Term Incentive Plan and FOR the selection of
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Ehrhardt Keefe Steiner & Hottman PC as our independent auditor for our fiscal year ending June
30, 2011, in each case, to the extent your proxy card does not indicate otherwise. If any other
matter is properly presented at the meeting, your proxy (one of the individuals named on your proxy
card) will vote your shares using his or her best judgment.
What is the quorum requirement?
A quorum of shareholders is necessary to hold a valid meeting. A quorum will be present if at
least a majority of the shares outstanding as of the record date are represented by
shareholders present at the meeting or by proxy. As of the record date we had 69,065,723 shares of
common stock outstanding and entitled to vote. Thus, 34,532,862 shares of common stock must be
represented by shareholders present at the meeting in person or by proxy to constitute a quorum.
Persons returning executed proxy cards will be counted as present for purposes of establishing
a quorum even if they abstain from voting on any or all proposals. Shares held by brokers who vote
such shares on any proposal will be counted as present for purposes of establishing a quorum, and
broker non-votes on other proposals will not affect the presence of a quorum.
Who is paying for this proxy solicitation?
We will pay for the entire cost of soliciting proxies. In addition to these mailed proxy
materials, our directors and employees may also solicit proxies in person, by telephone, or by
other means of communication. Directors and employees will not be paid any additional compensation
for soliciting proxies. We will also reimburse brokerage firms, banks and other agents for the cost
of forwarding proxy materials to beneficial owners.
When are shareholder proposals due for next years annual meeting?
Shareholder Proposals for Inclusion in Next Years Proxy Statement.
Shareholders may submit proposals on matters appropriate for shareholder action at meetings of
our shareholders in accordance with Rule 14a-8 promulgated under the Securities Exchange Act of
1934 (the Exchange Act). To be eligible for inclusion in the proxy statement relating to our 2011
annual meeting of shareholders, shareholder proposals must be submitted in writing to LifeVantage
Corporation, Attention: Corporate Secretary at 11545 W. Bernardo Court, Suite 301, San Diego,
California 92127 and must be received by us no later than June 6, 2011 and must otherwise satisfy
the conditions established by the Securities and Exchange Commission (SEC) for shareholder
proposals to be included in the proxy statement for that meeting. In addition, our bylaws include
other requirements for the submission of proposals and the nomination of candidates for director.
Shareholder Proposals for Presentation at Next Years Annual Meeting.
If a shareholder wishes to present a proposal, including a director nomination, at our 2011 annual
meeting of shareholders and the proposal is not intended to be included in our proxy statement
relating to that meeting, the shareholder must give advance notice in writing to LifeVantage
Corporation, Attention: Corporate Secretary at 11545 W. Bernardo Court, Suite 301, San Diego,
California 92127 not less than 90 days, or July 6, 2011, nor more than 120 days, or June 6, 2011,
prior to the first anniversary of the date on which we first mailed our proxy materials for the
2010 annual meeting; provided, however, that in the event that 2011 annual meeting date is
changed by more than 30 days from the anniversary date of the 2010 annual meeting, notice by
the shareholder to be timely must be so delivered not earlier than 120 days prior to the 2011
annual meeting date and not later than the close of business on the later of the 90th day prior to
the 2011 annual meeting date or the 10th day following the day on which we first publicly
announce the 2011 annual meeting date. If a shareholder fails to give timely notice of a proposal,
the shareholder will not be permitted to present the proposal to the shareholders for a vote at our
2011 annual meeting. In addition, our bylaws include other requirements for the submission of
proposals and the nomination of candidates for director.
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How can I find out the results of the voting at the annual meeting?
Preliminary voting results will be announced at the annual meeting. We expect to report final
voting results in a current report on Form 8-K that we will file with the SEC within four business
days after the annual meeting. You can obtain a copy of the Form 8-K, once it is filed, on our
website at www.lifevantage.com, by calling the SEC at (800) SEC-0330 for the location of
the nearest public reference room, or through the EDGAR system at www.sec.gov. Our website
does not constitute part of this proxy statement.
IT IS THE INTENTION OF THE AGENTS DESIGNATED IN THE ENCLOSED PROXY CARD TO VOTE FOR THE ELECTION
OF EACH NOMINEE FOR DIRECTOR IDENTIFIED BELOW (UNLESS AUTHORITY IS WITHHELD BY THE SHAREHOLDER
GRANTING THE PROXY) AND FOR EACH OTHER PROPOSAL DISCUSSED IN THIS PROXY STATEMENT. IF ANY NOMINEE
BECOMES UNAVAILABLE TO SERVE FOR ANY REASON, THE PROXY WILL BE VOTED FOR A SUBSTITUTE NOMINEE OR
NOMINEES TO BE SELECTED BY THE COMPANYS BOARD OF DIRECTORS, UNLESS THE SHAREHOLDER WITHHOLDS
AUTHORITY TO VOTE FOR THE ELECTION OF DIRECTORS.
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PROPOSAL 1 ELECTION OF DIRECTORS
Our board of directors currently consists of the following eight (8) individuals: Mr. David W.
Brown, Dr. James D. Crapo, Dr. Joe M. McCord, Mr. Richard Doutre Jones, Mr. Garry Mauro, Mr.
Douglas Robinson, Mr. Mike Lu & Ms. Kay Stout Manovich. Our board of directors proposes that each
of the foregoing individuals be elected to continue to serve on our board of directors at the
annual meeting. Each director elected will hold office until the next annual meeting of
shareholders and until their successor is elected and qualified, or, if sooner, until the
directors death, resignation or removal. We encourage nominees for directors to attend the annual
meeting. All of the nominees for election as a director at last years annual meeting of
shareholders attended last years annual meeting of shareholders.
If any nominee becomes unavailable for election as a result of an unexpected occurrence,
shares represented by a duly executed proxy will be voted to fill any vacancy so arising in
accordance with the discretionary authority of the persons named in the proxy, unless contrary
instructions are given. Each person nominated for election has agreed to serve if elected. Our
management has no reason to believe that any nominee will be unable to serve.
The following information is furnished with respect to each of the director nominees for
election at the annual meeting:
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Mr. David W. Brown |
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Director, President and CEO |
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2008 |
Dr. James D. Crapo |
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67 |
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Independent Director |
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2005 |
Mr. Richard Doutre Jones |
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57 |
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Independent Director |
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2008 |
Mr. Mike Lu |
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41 |
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Independent Director |
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2010 |
Ms. Kay Stout Manovich |
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Independent Director |
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2010 |
Mr. Garry Mauro |
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Chairman, Independent Director |
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2008 |
Dr. Joe M. McCord |
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Director |
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2006 |
Mr. Douglas Robinson |
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Independent Director |
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2010 |
MR. DAVID W. BROWN Mr. Brown was appointed as our President and CEO in January 2008. Prior to
joining us he most recently was the Managing Director and Co-Founder of Nutrition Business
Advisors, a firm founded in 2003 to provide strategic consulting services, capital raising and
full-service business development focused on the Global Nutrition Industry. From 2000 to 2003, Mr.
Brown served as President and CEO of Metabolife International. From 1994 to 2000, Mr. Brown served
as the President of Natural Balance, Inc., a Colorado-based dietary supplement company. Mr. Brown
began his career as a corporate attorney. He was with the law firm of Ballard, Spahr, Andrews &
Ingersoll in 1994 and he was with Kindel & Anderson from 1991 to 1994. Mr. Brown received his Juris
Doctorate from Cornell University and Bachelors of Arts from Brigham Young University. Mr. Browns
strong leadership and business acumen brings to our board of directors expertise in business
operations and management.
DR. JAMES D. CRAPO Dr. Crapo has been a member of our board of directors since April 2005.
Dr. Crapo has nearly 30 years of experience in the health and science field. He has been a
Professor at National Jewish Medical and Research Center since June 1996 and served as Executive
Vice President of Academic Affairs and Chairman of Medicine from June 1996 to 2004. National Jewish
Health is a private institution specializing in immunology and allergic diseases. Dr. Crapo served as Chief
Executive Officer of Aeolus Pharmaceuticals, Inc. from July 2004 until December 2004. He was the
first scientist to extend Dr. Fridovichs and Dr. Joe McCords original discovery of superoxide
dismutase, a natural antioxidant referred to as SOD, to mammalian models of disease. Prior to
joining National Jewish, Dr. Crapo spent over 15 years as the Chief of the Pulmonary and Critical
Care Medicine Division at Duke University Medical Center. He is involved in a number of
professional societies, including service on the NHLBI Advisory Council and serving as President of
the American Thoracic Society and President of the Fleischner Society. Dr. Crapos scientific
background and financial experience and leadership as Chief of Pulmonary Medicine at Duke
University and as Chairman of Medicine at National Jewish Health, bring to our board of directors a
strong perspective on research and development and financial budgeting and analysis.
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MR. RICHARD DOUTRE JONES Mr. Doutre Jones currently serves as a consultant for various
media and broadcast related businesses. From 2001 through June 2010, he served as the VP/General
Manager of Bay City Television, Inc. (which is XETV/San Diego6 (CW) formerly the FOX affiliate).
Prior to joining Bay City Television, Mr. Doutre Jones held management and executive positions in
the television industry, including serving as the General Sales Manager, Local Sales Manager and
National Sales Manager of KBHKTV-UPN44 in San Francisco, California from June 1981 through October
2001. He is currently on the Executive Board of Directors of the San Diego Ad Club. From 2002 to
2008, he served on the Fox Television Affiliate Board of Directors of Governors, from 1999 to 2005
he served on The UPN Affiliate Board of Directors of Governors and from 2006 to 2008 he served on
the MyNetwork Advisory Board of Directors. Mr. Doutre Jones distinguished career in broadcast
management and background in operations, marketing, Internet, new media, research and sales
provides unique insight to our board of directors. His in-depth understanding of international
business, with a focus on U.S. and Mexico relations, brings to our board of directors a perspective
on international business operations.
MR. MIKE LU Mr. Lu is currently an independent investor in public markets and private equity
and serves as president of the Lu Foundation, which is focused on education and research. He also
serves on the board of advisors for Red Rocks Capital. Mr. Lu managed the Janus Global Technology
Fund from its inception in 1999 to 2006. After joining Janus Capital Corporation as an equity
analyst in 1991, he served in a variety of research roles, with a focus on technology company
analysis. Mr. Lu graduated magna cum laude from Yale University and is a Chartered Financial
Analyst. Mr. Lus in-depth understanding of finance and his perspective as an investor brings to
our board of directors expertise in financial modeling and analysis as well as management and
oversight.
MS. KAY STOUT MANOVICH Ms. Stout Manovich is an expert on branding
strategy, graphic and environmental design with more than 30 years of
experience. She founded her own company in 2000, Kay Strategic Branding,
where she provides strategic design solutions both globally, as well as
locally. Ms. Stout Manovich was with Landor Associates from 1976 to 2000,
last serving as Chief Brand Strategist, Worldwide. While with Landor she
was responsible for the final creative product across the U.S. and then
Europe and she also managed Landors San Francisco and European
headquarters. Ms. Stout Manovich was a strategic and creative leader for
the graphic look of three Olympic Games: the 1996 Atlanta Summer Games,
the 1998 Nagano Winter Olympic Games and the 2002 Salt Lake Winter Olympic
Games. A recipient of 16 CLIO Awards, she has been the primary driving
force for the brand identities of such consumer brands as Coca-Cola, Del
Monte, Dole, Pizza Hut, KFC, RadioShack, Oral B, Colgate, Healthline,
Frito-Lay and Wacoal, just to name a few. Ms. Stout Manovichs in-depth
experience in global branding brings to our board of directors a strong
set of branding principles in business development, strategy and design.
MR. GARRY MAURO Mr. Mauro has worked for over 30 years at the local, state and national
levels on behalf of both private and public sector entities. From 1983 to 1999, he served as
Commissioner of the Texas General Land Office overseeing the management of more than 20 million
acres of state land, 18,000 oil and gas wells, and the states benefit program for Veterans. During
his tenure as Commissioner, he also chaired the Veterans Land board of directors, the School Land
board of directors, the Parks and Wildlife board of directors for Lease, the Texas Department of
Corrections board of directors for Lease, the University board of directors for Lease, the Coastal
Coordination Council and the Texas Alternative Fuels Council and co-chaired the Sustainable Energy
Development Council. He has received numerous honors and awards for his civic and philanthropic
contributions in environmental, political and business arenas, including the Man of the Year
Award from the Texas League of Women Voters and the Rising Star of Texas Award from Texas
Business Magazine. In 1998, he was the Texas Democratic Party nominee for Governor. Mr. Mauros
broad range of expertise brings to our board of directors experience in management and operations
as well as strong leadership and oversight.
DR. JOE M. MCCORD Dr. McCord has been a member of our board of directors since February 2006
and was our Director of Science from April 2004 to October 2007. Dr. McCord together with Dr. Irwin
Fridovich discovered superoxide dismutase, a natural antioxidant referred to as SOD, in 1969. For
this work, Drs. McCord and Fridovich received the Elliot Cresson Medal of the Franklin Institute.
Dr. McCord currently serves as Professor of Medicine, Biochemistry, and Microbiology at the
University of Colorado at Denver and Health Sciences Center (UCDHSC). Dr. McCord received a
lifetime achievement award from the Oxygen Society for outstanding contributions to the field of
free radical biology and medicine in 1997. He is Honorary President of the International Society of
Antioxidants in Nutrition and Health (ISANH). He chaired the Third International Conference on
Superoxide Dismutases: Recent Advances and Clinical Applications, held at the Institut Pasteur in
Paris in 2004, as well as earlier conferences in the series. Dr. McCord has published articles in a
number of scientific journals,
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including the New England Journal of Medicine. Dr. McCords scientific background brings to
our board of directors an experienced perspective and leadership with regard to our research and
development efforts and plans.
MR. DOUGLAS ROBINSON Mr. Robinson currently serves as Chief Executive Officer of WorkWell
Systems, a physical medicine and workers compensation solutions company. He has served in that
role since 2007. Prior to joining WorkWell Systems, from 2005 to 2007, Mr. Robinson served as SVP
Healthcare Transformation for UnitedHealth Group. Prior to United, from 2002 to 2005 he led
Deloitte Consultings newly formed consumer-driven healthcare practice. From 2001 to 2002, Mr.
Robinson served as SVP, National Practice Leader for SynHrgy, an outsourced provider of integrated
human resource services including Health and Welfare, Integrated Absence Management, Integrated
Pension Administration, Workforce Administration and Compensation & Performance Management. From
1998 to 2001, as Director, Healthcare Consulting for PriceWaterhouseCoopers, Mr. Robinson sold and
managed the first full-replace consumer-driven healthcare engagement from inception through
installation, until his division was sold to Mellon Financial. Mr. Robinson began his career as a
Senior Account Executive for Blue Cross of Washington and Alaska. Mr. Robinson holds a B.A. degree
in Marketing/Public Relations and Speech Communications from Gonzaga University, Spokane,
Washington where he also continues to guest lecture on healthcare economics to the undergraduate
and graduate schools. Mr. Robinsons experience in corporate governance, oversight, operations and
financial experience and leadership brings to our board of directors a broad range of expertise and
oversight.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE
ELECTION OF DIRECTOR NOMINEES ABOVE.
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PROPOSAL 2 RATIFICATION OF SELECTION OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The audit committee of our board of directors has selected Ehrhardt Keefe Steiner & Hottman PC
as our independent registered public accounting firm for the fiscal
year ending June 30, 2011 and
has further directed that the selection of such firm be submitted to our shareholders for
ratification.
Shareholder ratification of the selection of our independent registered public accounting firm
is not required. However, the audit committee is submitting this proposal to our shareholders as a
matter of good corporate governance. If our shareholders do not vote on an advisory basis in favor
of the ratification of the selection of Ehrhardt Keefe Steiner & Hottman PC as our companys
independent registered public accounting firm for the fiscal year ending June 30, 2010, the audit
committee will review its future selection of an independent registered public accounting firm.
Regardless of whether the selection is ratified, the audit committee in its discretion may, without
resubmitting the matter for shareholders to approve or ratify, appoint a different independent
registered public accounting firm at any time during the year if it determines that such a change
would be in the best interests of our company and our shareholders.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR
RATIFICATION OF THE SELECTION OF EHRHARDT, KEEFE, STEINER & HOTTMAN PC AS OUR
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.
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PROPOSAL 3 ADOPTION OF THE 2010 LONG-TERM INCENTIVE PLAN
Summary
We currently maintain the 2007 Long-Term Incentive Plan (2007 Plan) under which we could
award stock based incentive awards to employees and other service providers. However, the 2007
Plan only has 152,270 shares available for future issuance to grant equity compensation awards to
our employees and other service providers.
Therefore, at the annual meeting, shareholders will be asked to approve the LifeVantage
Corporation 2010 Long-Term Incentive Plan (the 2010 Plan) and to authorize up to 3,500,000 shares
for issuance under the 2010 Plan. The 2010 Plan was adopted, subject to shareholder approval, by
our board of directors on September 27, 2010.
We believe that incentives and stock-based awards focus employees, consultants and directors
on the objective of creating shareholder value and promoting the success of our company, and that
incentive compensation plans like the proposed 2010 Plan are an important attraction, retention and
motivation tool for participants.
Our board of directors approved the 2010 Plan based, in part, on a belief that it helps
attract and retain experienced employees, consultants and directors required for our business to
grow. Our success will depend significantly upon hiring and retaining such experienced,
knowledgeable professionals. There is significant competition for employees with the skills
required to develop and sell the products we offer, and for consultants and directors with the
experience and qualifications we believe are necessary to successfully grow our business. If we
cannot attract, motivate and retain qualified professionals, our business, financial condition and
results of operations will suffer.
Similar to the 2007 Plan, the 2010 Plan will permit the discretionary award of incentive stock
options, nonstatutory stock options, restricted stock, stock units, stock appreciation rights and
cash awards to participants in the 2010 Plan. Such awards may be granted commencing on the date of
board approval of the 2010 Plan and continuing through September 26, 2020 or the earlier
termination of the 2010 Plan, subject to obtaining shareholder approval.
As of September 21, 2010, the fair market value of a share of our common stock (as determined
by the closing price quoted on the OTCBB on such date) was $0.50.
Shareholder approval of the 2010 Plan will allow us to continue to provide long-term
incentives to those who are responsible for our success and growth. Increased stock ownership by
participants in the 2010 Plan will further align their interests with the interests of our
shareholders and will assist us in attracting and retaining talented employees, consultants and
directors. Shareholder approval of the 2010 Plan will also enable (i) awards granted to employees
covered by Internal Revenue Code (Code) Section 162(m) to be eligible to qualify as tax
deductible performance-based compensation and (ii) Code Section 422 ISO grants to employees to
qualify for favorable federal income tax treatment. If shareholders do not approve the 2010 Plan
within one year of the date the 2010 Plan was approved by our board of directors, the 2010 Plan
will terminate and any then-outstanding awards granted thereunder shall be forfeited without
consideration.
Our board of directors encourages shareholders to consider the following in voting to approve
the 2010 Plan. The following points summarize why our board of directors strongly believes the
2010 Plan is essential for our future success:
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Achieving superior long-term results always has been a primary objective for our
company and therefore it is essential that employees think and act like owners. Stock
ownership helps enhance the alignment of the long-term economic interests of
shareholders and employees. Accordingly, historically, we have issued equity awards as
a long term incentive to attract, motivate and retain employees, consultants and
directors. If the 2010 Plan is not approved by shareholders, we will
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essentially have no ability to grant equity compensation awards to valued employees,
consultants and directors in the future. |
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Our employees are our most valuable asset. Our ability to grant equity
compensation awards is vital (i) to attract and keep intact a talented management team
and (ii) to attract and retain other talented and experienced individuals as we compete
for qualified and talented employees. If the 2010 Plan is not approved by
shareholders, we would be at a competitive disadvantage in each of these areas and
would need to resort to providing short term incentive or direct immediate compensation
to prevent a loss of management and other employees and to continue to attract high
caliber executives and employees for our future needs. |
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A balanced approach to executive compensation, using a mix of salaries,
performance-based bonus incentives and long term equity incentives, helps facilitate
management decisions that favor longer term stability, profitability and strength over
transitory short-term results. |
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The 3,500,000 shares of common stock that would become available for grant under the
2010 Plan represent approximately 5% of the number of shares of common stock that
are currently outstanding. |
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The complete text of the 2010 Plan is attached as Annex A to this proxy statement.
Shareholders are urged to review it together with the following information, which is
qualified in its entirety by reference to the complete text of the 2010 Plan. If there
is any inconsistency between the description of the 2010 Plan included in this proxy
statement and the terms of the 2010 Plan, or if the description of the 2010 Plan
included in this proxy statement is inaccurate in any respect, the terms of the 2010
Plan shall govern. |
Key Features of the 2010 Plan
Certain features of the 2010 Plan are summarized as follows:
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A maximum of 3,500,000 shares of common stock may be issued under the 2010 Plan. |
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Various types of equity-based awards and cash-based performance awards may be issued
under the 2010 Plan. |
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If not terminated earlier, the 2010 Plan will terminate on September 26, 2020. |
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The 2010 Plan is generally administered by a committee comprised solely of members
of our board of directors. Our board of directors has determined that the 2010 Plan
will be administered by the compensation committee of our board of directors (2010
Plan Committee). |
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Employees, directors and consultants are eligible to receive awards provided that
the 2010 Plan Committee has the discretion to determine (i) who shall receive any
awards and (ii) the terms and conditions of such awards. |
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Stock options and stock appreciation rights may not be granted at per share exercise
price below the fair market value of our company common stock on the date of grant. |
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Stock options and stock appreciation rights may not be repriced without shareholder
approval. |
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Awards can qualify as tax deductible qualified performance-base compensation
within the meaning of Code Section 162(m). |
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Description of the 2010 Plan
Background and Purpose of the 2010 Plan. The purpose of the 2010 Plan is to help promote the
long-term success of our company and the creation of shareholder value by:
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attracting and retaining the services of employees and certain key service
providers, |
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motivating such employees, through the award of equity and performance-based
compensation grants, to achieve long-term performance goals, |
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providing equity compensation awards that are competitive with similar companies,
and |
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further aligning participants interests with shareholders through compensation that
is based upon the performance of our common stock which can thereby promote the
long-term financial interest of our company and enhance of long-term shareholder
return. |
The 2010 Plan permits the grant of the following types of equity-based incentive awards: (i)
stock options (which can be either incentive stock options or nonstatutory stock options), (ii)
stock appreciation rights, (iii) restricted stock, and (iv) stock units. In addition, cash-based
performance awards can also be granted under the 2010 Plan.
Eligibility to Receive Awards. Our employees, directors and consultants are eligible to
receive awards under the 2010 Plan. The 2010 Plan Committee determines, in its discretion, the
persons who will be granted awards under the 2010 Plan. As of September 15, 2010, approximately 35
full-time and seven part-time employees (including three officers and one employee director) and
seven non-employee directors would be eligible to participate in the 2010 Plan. Our total number
of employees as of September 15, 2010 is approximately 42.
Shares Subject to the 2010 Plan. The maximum number of shares of common stock that can be
issued under the 2010 Plan is 3,500,000. The shares underlying forfeited or terminated awards will
become available again for issuance under the 2010 Plan and shares that are utilized to pay an
awards exercise price or tax withholding obligations will not count against the maximum numbers of
shares that may be issued.
Administration of the 2010 Plan. Our board of directors has determined that its compensation
committee will administer the 2010 Plan in its capacity as
the 2010 Plan Committee. Subject to the terms of the 2010
Plan, the 2010 Plan Committee has the sole discretion, among other things, to:
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select the individuals who will receive awards, |
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determine the terms and conditions of awards (for example, performance conditions,
if any, and vesting schedule), |
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correct any defect, supply any omission, or reconcile any inconsistency in the 2010
Plan or any award agreement, |
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accelerate the vesting, extend the post-termination exercise term or waive
restrictions of any awards at any time and under such terms and conditions as it deems
appropriate, and |
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interpret the provisions of the 2010 Plan and outstanding awards. |
The 2010 Plan Committee may also use the 2010 Plan to issue shares under other plans or
subplans as may be deemed necessary or appropriate, such as to provide for participation by
non-U.S. employees and those of any of our subsidiaries and affiliates. In addition, awards may be
subject to any policy that we may implement on the
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recoupment of compensation (referred to as a clawback policy). We will indemnify the members
of our board of directors, the 2010 Plan Committee and their delegates to the maximum extent
permitted by applicable law for actions taken or not taken regarding the 2010 Plan.
Types of Awards
Awards issued under the 2010 Plan will be evidenced by a written agreement entered into
between our company and the participant. Such agreements will recite the specific terms and
conditions of the award.
Stock Options. A stock option is the right to acquire shares at a fixed exercise price over a
fixed period of time. The 2010 Plan Committee will determine the number of shares covered by each
stock option and the exercise price of the shares subject to each stock option, but such per share
exercise price cannot be less than the fair market value of our common stock on the date of grant
of the stock option.
Stock options granted under the 2010 Plan may be either incentive stock options, or ISOs, or
nonstatutory stock options, or NSOs. As required by the Code and applicable regulations, ISOs
are subject to various limitations. For example, the exercise price for any ISO granted to any
employee owning more than 10% of common stock may not be less than 110% of the fair market value of
the common stock on the date of grant and the ISO must expire not later than five years after the
grant date. The aggregate fair market value (determined at the date of grant) of common stock
subject to all ISOs held by a participant that are first exercisable in any single calendar year
cannot exceed $100,000. ISOs may not be transferred other than upon death, or to a revocable trust
where the participant is considered the sole beneficiary of the stock option while it is held in
trust. The 2010 Plan provides that no more than 3,500,000 shares may be issued pursuant to the
exercise of ISOs.
A stock option granted under the 2010 Plan generally cannot be exercised until it becomes
vested. The 2010 Plan Committee establishes the vesting schedule of each stock option at the time
of grant. The maximum term life for stock options granted under the 2010 Plan may not exceed 10
years from the date of grant.
The exercise price of each stock option granted under the 2010 Plan must be paid in full at
the time of exercise, either with cash or through a broker-assisted cashless exercise and sale
program, or through another method approved by the 2010 Plan Committee. The optionee must also
make arrangements to pay any taxes that we are required to withhold at the time of exercise.
Stock Appreciation Rights. A stock appreciation right, or SAR, is the right to receive,
upon exercise, an amount equal to the excess of the fair market value of the shares of common stock
on the date of the SARs exercise over the fair market value of the shares of common stock covered
by the exercised portion of the SAR on the date of grant. The 2010 Plan Committee determines the
terms of SARs including the exercise price (provided that such per share exercise price cannot be
less than the fair market value of our common stock on the date of grant), the vesting and the term
of the SAR. The maximum term life for SARs granted under the 2010 Plan may not exceed 10 years
from the date of grant. The 2010 Plan Committee may determine that a SAR will only be exercisable
if our company satisfies performance goals established by the 2010 Plan Committee. Settlement of a
SAR may be in shares of common stock or in cash, or any combination thereof, as the 2010 Plan
Committee may determine.
Restricted Stock. Awards of restricted stock are shares of common stock that vest in
accordance with the terms and conditions established by the 2010 Plan Committee. The 2010 Plan
Committee also will determine any other terms and conditions of an award of restricted shares. In
determining whether an award of restricted shares should be made, and/or the vesting schedule for
any such award, the 2010 Plan Committee may impose whatever conditions to vesting as it determines
to be appropriate. For example, the 2010 Plan Committee may determine that an award of restricted
shares will vest only if our company satisfies performance goals established by the 2010 Plan
Committee.
Stock Units. Stock units are the right to receive an amount equal to the fair market value of
the shares covered by the stock unit at some future date after the grant. The 2010 Plan Committee
will determine all of the terms and conditions of an award of stock units, including the vesting
period. Upon each vesting date of a stock unit, the holder thereof will be entitled to receive an
amount equal to the then fair market value of the shares on the
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settlement date. The 2010 Plan Committee may determine that an award of stock units will vest
only if our company satisfies performance goals established by the 2010 Plan Committee. Payment
for vested stock units may be in shares of common stock or in cash, or any combination thereof, as
the 2010 Plan Committee may determine. Settlement of stock units will generally occur within 30
days of vesting unless the participant has timely elected to defer such compensation.
Cash Awards. We may also award cash-based performance bonus opportunities to participants
under the 2010 Plan. Such cash awards will be (i) payable only in cash, (ii) paid based on
achievement of performance goal(s) applying the performance criteria specified below and (iii)
intended to qualify as performance-based compensation under Code Section 162(m).
Non-Employee Director Fees. Upon the affirmative determination of our board of directors to
authorize such a provision, a non-employee director may elect to receive from 50% to all of his or
her annual retainer payments in the form of restricted stock or stock units granted under the 2010
Plan. The terms and conditions of such an arrangement will be determined by our board of
directors.
Performance Goals and Annual Grant Limits. The 2010 Plan specifies performance goals that the
2010 Plan Committee may include in awards that are intended to qualify as performance-based
compensation under Code Section 162(m). These performance goal criteria shall be limited to one or
more of the following target objectives:
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return on equity
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earnings per share
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total earnings |
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earnings growth
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return on capital
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return on assets |
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economic value added
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earnings before interest and taxes
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sales or revenue growth |
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return on investment
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fair market value or price of our common stock (including, but not limited to, growth measures and total stockholder return)
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net operating profit |
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operating income before or after taxes
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cash flow (including, but not limited to, operating cash flow and free cash flow)
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cash flow return on investments (which equals net cash flow divided by total capital) |
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internal rate of return
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net present value
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costs or expenses or cost containment or reduction |
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market share
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customer satisfaction
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corporate transactions including without limitation mergers, acquisitions, dispositions and/or joint ventures |
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product development
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capital expenditures
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earnings before or after interest, taxes, depreciation and/or amortization |
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gross revenue |
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If the 2010 Plan is approved by our shareholders, then each of the above performance criteria
would be approved for use, in our discretion, in awards that are intended to qualify as
performance-based compensation under
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Code Section 162(m). Including one or more of the foregoing performance conditions in awards
of restricted stock and stock units or in cash-based awards to Covered Employees (as defined below
in the federal income tax section) can permit these awards to qualify as performance-based
compensation. Certain other awards, such as stock options, may qualify as performance-based
compensation under Code Section 162(m) without the inclusion of any of the above performance
criteria.
Approval of the material terms of the 2010 Plan (which consists of participant eligibility,
the foregoing specified performance condition criteria and the numerical limitations on the
magnitude of grants or on the value of cash-based awards) by shareholders is necessary for grants
to Covered Employees to qualify for the performance-based compensation exception to the income tax
deduction limitations of Code Section 162(m). Qualified performance-based compensation approved by
shareholders is not subject to the Code Section 162(m) deduction limit. By seeking approval of the
2010 Plan, the Board also intends to prevent Code Section 162(m) from limiting the deductibility of
awards granted under the 2010 Plan to Covered Employees. In this regard, the 2010 Plan imposes the
following annual grant limits on awards that are intended to constitute qualified performance-based
compensation under Code Section 162(m).
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The above share grant limit is increased to 2,500,000 shares for equity awards that are
granted in the fiscal year that the Covered Employee commences employment or when a participant
first becomes a Covered Employee.
However, it is impossible to be certain that all awards granted under the 2010 Plan or any
other compensation paid by the Company to Covered Employees will be tax deductible. Further, the
2010 Plan does not preclude the Compensation Committee from making other compensation payments
outside of the 2010 Plan to Covered Employees even if such payments do not qualify for tax
deductibility under Code Section 162(m). See also the discussion under the heading Certain
Federal Income Tax InformationInternal Revenue Code Section 162(m) Limits below for further
information on Code Section 162(m).
Limited Transferability of Awards. Awards granted under the 2010 Plan generally are not
transferrable other than upon death, or pursuant to a court-approved domestic relations order.
However, the 2010 Plan Committee may in its discretion permit awards other than ISOs to be
transferred. Generally, where transfers are permitted, they will be permitted only by gift to a
member of the participants immediate family or to a trust or other entity for the benefit of the
member(s) of the participants and/or his or her immediate family.
Termination of Employment, Death or Disability. The 2010 Plan Committee will determine the
effect of the termination of employment on awards, which determination may be different depending
on the nature of the termination, such as terminations due to cause, resignation, death, disability
or retirement, and the status of the award as vested or unvested.
Adjustments Upon Changes in Capitalization. In the event of a subdivision of the outstanding
shares, stock dividend, dividend payable in a form other than shares in an amount that has a
material effect on the price of the shares, consolidation, combination or reclassification of the
shares, recapitalization, spin-off, or other similar occurrence, then the number and class of
shares issued under the 2010 Plan and subject to each award, along with any exercise prices, as
well as the number and class of shares available for issuance under the 2010 Plan, shall each be
equitably and proportionately adjusted by the 2010 Plan Committee.
Corporate Transaction. In the event that our company is a party to a merger or other
reorganization, outstanding 2010 Plan awards will be subject to the agreement of merger or
reorganization. Such agreement may provide for (i) the continuation of the outstanding awards if
our company is a surviving corporation, (ii) the assumption of the outstanding awards by the
surviving corporation or its parent, (iii) full exercisability or full vesting, or (iv)
cancellation of outstanding awards with or without consideration, in all cases with or without
consent of the participant. Neither our board of directors nor the 2010 Plan Committee must adopt
the same rules for each award or participant. The 2010 Plan Committee will decide the effect of a
change in control of our company on outstanding awards. The 2010 Plan Committee may, among other
things, provide that awards will fully vest upon a
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change in control, or upon a change in control followed by an involuntary termination of
employment within a certain period of time.
Term of the 2010 Plan. If approved by shareholders, the 2010 Plan will continue in effect
until September 26, 2020 or until earlier terminated by our board of directors.
Governing Law. The 2010 Plan will be governed by the laws of the State of Colorado (which is
the state of our companys incorporation) except for conflict of law provisions.
Amendment and Termination of the 2010 Plan. Our board of directors generally may amend or
terminate the 2010 Plan at any time and for any reason, except that our board of directors must
obtain shareholder approval of material amendments, including any addition of shares, or any
repricing or as may be required by applicable stock exchange rules.
Certain Federal Income Tax Information
The following is a general summary, as of September 1, 2010, of the federal income tax
consequences to the Company and to U.S. participants for awards granted under the 2010 Plan. The
federal tax laws may change and the federal, state and local tax consequences for any participant
will depend upon his or her individual circumstances. Tax consequences for any particular
individual may be different. This summary is not intended to be exhaustive and does not discuss the
tax consequences of a participants death or provisions of income tax laws of any municipality,
state or other country. The Company advises participants to consult with their own tax advisors
regarding the tax implications of their awards under the 2010 Plan.
Incentive Stock Options. For federal income tax purposes, the holder of an ISO has no taxable
income at the time of the grant or exercise of the ISO. If such person retains the common stock
acquired under the ISO for a period of at least two years after the stock option is granted and one
year after the stock option is exercised, any gain upon the subsequent sale of the common stock
will be taxed as a long-term capital gain. A participant who disposes of shares acquired by
exercise of an ISO prior to the expiration of two years after the stock option is granted or before
one year after the stock option is exercised will realize ordinary income as of the date of
exercise equal to the difference between the exercise price and fair market value of the stock. Any
additional gain or loss recognized upon any later disposition of the shares would be short or long
term capital gain or loss depending on whether the shares have been held by the participant for
more than one year. The difference between the option exercise price and the fair market value of
the shares on the exercise date of an ISO is an adjustment in computing the holders alternative
minimum taxable income and may be subject to an alternative minimum tax which is paid if such tax
exceeds the participants regular income tax for the year.
Nonstatutory Stock Options. A participant who receives an NSO generally will not realize
taxable income on the grant of such option, but will realize ordinary income at the time of
exercise of the stock option equal to the difference between the option exercise price and the fair
market value of the stock on the date of exercise. Any additional gain or loss recognized upon any
later disposition of the shares would be short or long term capital gain or loss depending on
whether the shares had been held by the participant for more than one year.
Stock Appreciation Rights. No taxable income is generally reportable when a stock
appreciation right is granted to a participant. Upon exercise, the participant will recognize
ordinary income in an amount equal to the amount of cash received plus the fair market value of any
shares received. Any additional gain or loss recognized upon any later disposition of any shares
received would be short or long term capital gain or loss depending on whether the shares had been
held by the participant for one year or more.
Restricted Stock. A participant will generally not have taxable income upon grant of unvested
restricted shares unless he or she elects to be taxed at that time pursuant to a Code Section 83(b)
election. Instead, he or she will recognize ordinary income at the time(s) of vesting equal to the
fair market value (on each vesting date) of the shares or cash received minus any amount paid for
the shares.
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Stock Units. No taxable income is generally reportable when unvested stock units are granted
to a participant. Upon settlement of the vested stock units, the participant will recognize
ordinary income in an amount equal to the value of the payment received pursuant to the vested
stock units.
Income Tax Effects for the Company. The Company generally will be entitled to a tax deduction
in connection with an award under the 2010 Plan in an amount equal to the ordinary income realized
by a participant at the time the participant recognizes such income (for example, upon the exercise
of an NSO).
Internal Revenue Code Section 162(m) Limits. Section 162(m) of the Code places a limit of
$1,000,000 on the amount of compensation that the Company may deduct in any one fiscal year with
respect to the Companys principal executive officer and each of the other three most highly
compensated officers (other than the principal financial officer) (Covered Employees).
The 2010 Plan is intended to enable certain awards to constitute performance-based
compensation not subject to the annual deduction limitations of section 162(m) of the Code.
However, to maintain flexibility in compensating executive officers in a manner designed to promote
varying corporate goals, the Board has not adopted a policy that all compensation must be tax
deductible.
Internal Revenue Code Section 409A. Section 409A of the Code governs the federal income
taxation of certain types of nonqualified deferred compensation arrangements. A violation of
section 409A of the Code generally results in an acceleration of the recognition of income of
amounts intended to be deferred and the imposition of a federal excise tax of 20% on the employee
over and above the income tax owed plus possible penalties and interest. The types of arrangements
covered by section 409A of the Code are broad and may apply to certain awards available under the
2010 Plan (such as stock units). The intent is for the 2010 Plan, including any awards available
thereunder, to comply with the requirements of section 409A of the Code to the extent applicable.
As required by Code Section 409A, certain nonqualified deferred compensation payments to specified
employees may be delayed to the seventh month after such employees separation from service.
New Plan Benefits
All awards under the 2010 Plan will be granted at the 2010 Plan Committees discretion and
therefore cannot be determined in advance.
Required Vote
At the annual meeting, shareholders will be asked to approve the 2010 Plan. The 2010 Plan
will be approved by our shareholders if the votes cast FOR the proposal exceed the votes cast
AGAINST the proposal. In the event that shareholder approval is not obtained, we may not make
awards under the 2010 Plan.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT YOU VOTE FOR ADOPTION OF THE PLAN.
-17-
CORPORATE GOVERNANCE
Director Independence
Even though we are not a listed issuer and our shares are not traded on an exchange, in order
to determine whether the members of our board of directors are independent, SEC rules require that
we use the definition of independence of a national securities exchange (such as the New York
Stock Exchange or the Nasdaq Stock Market) or national securities association when making this
determination. In determining the independence of the members of our board of directors, our board
of directors elected to use the definition of independence contained in Nasdaq Stock Market
(Nasdaq) listing requirements. As required under Nasdaq listing standards, a majority of the
members of a listed companys board of directors must qualify as independent, as affirmatively
determined by the board of directors. Our board of directors consulted with the Companys legal
counsel to ensure that its determinations are consistent with all relevant securities and other
laws and regulations regarding the definition of independent, including those set forth in
pertinent listing standards of the Nasdaq as in effect from time to time. Consistent with these
considerations, after review of all relevant transactions or relationships between each director,
or any of his or her family members, and our company, our senior management and our companys
independent auditors, our board of directors affirmatively has determined that Dr. Crapo, Mr.
Doutre Jones, Mr. Mauro, Mr. Robinson, Mr. Lu and Ms. Manovich are independent directors within
the meaning of the applicable Nasdaq listing standards. Mr. Brown, our President and
Chief Executive Officer, and Dr. McCord, are not independent directors.
Board Leadership Structure and Role in Risk Oversight
The leadership structure of our board of directors is such that the chair of our board of
directors and chief executive officer positions are separated. Mr. Mauro, an independent director,
has served as chair of our board of directors since April 2010. We believe having an independent
chair of our board of directors with extensive experience in both private and public sector
entities at the local, state and national levels has provided our board of directors with
consistent, experienced and independent leadership that enhances the effectiveness of our board of
directors as a whole. Our corporate governance guidelines do not require our board of directors to
choose an independent chair or to separate the roles of chair and chief executive officer, but our
board of directors believes this leadership structure is the appropriate structure for our company
at this time. Pursuant to our corporate governance guidelines, our board of directors may choose
its chair in any manner that it deems to be in the best interests of our company. If, in the
future, the chair of our board of directors is not an independent director, our board of directors
may designate an independent director to serve as a lead independent director.
Our board of directors is responsible for oversight of risks facing our company, while our
management is responsible for day-to-day management of risk. Our board of directors, as a whole,
directly administers its risk oversight function. In addition, the risk oversight function is also
administered through the standing committees of our board of directors, which oversee risks
inherent in their respective areas of responsibility, reporting to our board of directors regularly
and involving our board of directors as necessary. For example, the audit committee oversees our
financial exposure and financial reporting related risks, and the compensation committee oversees
risks related to our compensation programs and practices. Our board of directors as a whole
directly oversees our strategic and business risk, including product development risk, through
regular interactions with our management and, from time-to-time, input from independent advisors.
We believe our boards leadership structure supports its role in risk oversight, with our chief
executive officer and president, our chief financial officer and our chief operating officer
responsible for assessing and managing risks facing our company on a day-to-day basis and the chair
and other members of our board of directors providing oversight of such risk management.
Meetings of our Board of Directors and Committees
During the last fiscal year, our board of directors held 13 meetings. Other than Dr. Crapo,
each of our incumbent directors attended at least 75% of the aggregate of (1) the total number of
meetings of our board of directors (held during the period for which he has been a director) and
(2) the total number of meetings held by all committees of our board of directors on which he
served (held during the periods that he served).
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Committees of our Board of Directors
Our board of directors has (1) an audit committee, (2) a compensation committee, (3) a
nominating and governance committee (4) a management and finance committee and (5) a strategic
planning committee.
Audit Committee
The audit committee was established by our board of directors in accordance with Section
3(a)(58)(A) of the Exchange Act. The current members of our audit
committee are Dr. James Crapo, Mr. Garry Mauro and
Mr. Doug Robinson, with Dr. Crapo serving as chairman. Our board of directors has determined that
each member of the audit committee qualifies as independent. Our board of directors has also
determined that Mr. Robinson qualifies as an audit committee financial expert, as that term is
defined as defined by SEC rules. Our board of directors made a qualitative assessment of Mr.
Robinsons level of knowledge and experience based on a number of factors, including his formal
education and his experience as an executive officer overseeing the
CFO and financial reporting function in other companies. The audit committee
met four times during our last fiscal year.
The audit committee operates under a written charter adopted by our board of directors that is
available on our website at www.lifevantage.com. Our website does not constitute part of this proxy
statement.
The audit committee was established to
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(a) |
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assist board oversight of (i) the integrity of our financial statements, (ii)
our compliance with legal and regulatory requirements and (iii) the independent
auditors qualifications and independence, (iv) the performance of our internal audit
function and independent auditors; |
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(b) |
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prepare an audit committee report as required by the SEC to be included in our
annual proxy statement; |
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(c) |
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evaluate the performance of and assesses the qualifications and independence of
our independent auditors; |
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(d) |
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determine and approve the engagement of the independent auditors; |
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(e) |
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determine whether to retain or terminate the existing independent auditors or
to appoint and engage new independent auditors; |
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(f) |
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review and approve the retention of the independent auditors to perform any
proposed permissible non-audit services; |
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(g) |
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monitor the rotation of partners of the independent auditors on the audit
engagement team as required by law; |
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(h) |
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confer with management and the independent auditors regarding the effectiveness
of internal controls over financial reporting; |
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(i) |
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review and approve all related-party transactions; |
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(j) |
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establish procedures, as required under applicable law, for the receipt,
retention and treatment of complaints regarding accounting, internal accounting
controls or auditing matters and the confidential and anonymous submission by employees
of concerns regarding questionable accounting or auditing matters; and |
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(k) |
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to review our annual audited financial statements and quarterly financial
statements with management and the independent auditor, including reviewing disclosures
under the section entitled Managements
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Discussion and Analysis of Financial Condition and Results of Operations contained in
our periodic reports. |
Compensation Committee
The current members of the compensation committee are Mr. Doug Robinson, Mr. Mike Lu and Mr.
Richard Doutre Jones, with Mr. Robinson serving as chairman. As long as our common stock remains
publicly traded, each member of the compensation committee shall (1) qualify as an independent
director as defined under applicable NASDAQ rules and (2) qualify as a non-employee director
under Rule 16b-3(b)(3)(i) promulgated under the Exchange Act. The compensation committee met three
times during the last fiscal year.
The compensation committee operates under a written charter adopted by our board of directors
that is available on our website at www.lifevantage.com. Our website does not constitute part of
this proxy statement.
The compensation committee reviews and approves our overall compensation strategy and
policies. The compensation committee has the following authority and responsibilities:
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(a) |
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To assist our board of directors in developing and evaluating potential
candidates for executive positions and to oversee the development of executive
succession plans. |
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(b) |
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To review and approve on an annual basis the corporate goals and objectives
with respect to compensation for our Chief Executive Officer. The compensation
committee evaluates at least once a year the Chief Executive Officers performance in
light of these established goals and objectives and based upon these evaluations sets
the Chief Executive Officers annual compensation, including salary, bonus, incentive
and equity compensation. The Chief Executive Officer is not present during any meeting
of the compensation committee during which it will vote upon or deliberate the
compensation of the Chief Executive Officer. |
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(c) |
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To review, approve and recommend to our board of directors on an annual basis
the evaluation process and compensation structure for our other executive officers.
The compensation committee evaluates the performance of our executive officers and
reviews, approves and recommends to our board of directors the annual compensation,
including salary, bonus, incentive and equity compensation, for such executive
officers, which is based on a proposal for such amounts submitted to the compensation
committee by our Chief Executive Officer. |
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(d) |
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The compensation committee provides oversight of managements decisions
concerning the performance and compensation of our other officers, employees,
consultants and advisors. The compensation committee may delegate its authority on
these matters with regard to non-officer employees and consultants to our officers and
other appropriate supervisory personnel. |
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(e) |
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To review and approve on an annual basis managements recommendations for the
salary range of non-officer employees by pay grade, percent merit increases and bonus
pools. |
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(f) |
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To review our incentive compensation and other stock-based plans and recommend
changes in such plans to our board of directors as needed. The compensation committee
has and exercises all the authority of our board of directors with respect to the
administration of such plans. |
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(g) |
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To select, retain and terminate such compensation consultants, outside counsel
and other advisors as it deems necessary or appropriate in its sole discretion. The
compensation committee may invite such consultants and advisors to attend its meetings
or to meet with any members of the compensation committee. The compensation committee
has sole authority to approve the fees and retention terms relating to such consultants
and advisors. |
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(h) |
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Except with respect to the responsibilities set forth above regarding the
compensation of our Chief Executive Officer, the compensation committee may delegate
its authority granted under its charter to
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a subcommittee of the compensation committee (consisting either of a subset of members
of the compensation committee or, after giving due consideration to whether the
eligibility criteria described above with respect to compensation committee members and
whether such other board of directors members satisfy such criteria, any members of our
board of directors). |
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(i) |
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To review executive officer compensation for compliance with Section 16 of the
Exchange Act and Section 162(m) of the Code, and other applicable laws, rules and
regulations. |
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(j) |
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To review and approve non-routine employment agreements, severance arrangements
and change in control agreements and provisions when, and if, appropriate, as well as
any special supplemental benefits. |
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(k) |
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To review and recommend to our board of directors the compensation of
independent directors, including incentive and equity based compensation. |
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(l) |
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To report regularly to our board of directors with respect to significant
actions and determinations made by the compensation committee. |
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(m) |
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To review its own performance and report on its conclusions in this regard to
our board of directors. |
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(n) |
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To perform any other activities consistent with its charter, our certificate of
incorporation and by-laws, applicable NASDAQ rules and any other applicable law, as the
compensation committee or our board of directors deems appropriate. |
Nominating and Governance Committee
The current members of our nominating and governance committee are Mr. Richard Doutre Jones,
Dr. James Crapo and Ms. Kay Stout Manovich, with Mr. Doutre Jones serving as chairman. As long as
our common stock remains publicly traded, each member of the nominating and governance committee
shall (1) qualify as an independent director as defined under applicable NASDAQ rules and (2)
qualify as a non-employee director under Rule 16b-3(b)(3)(i) promulgated under the Exchange Act.
The nominating and governance committee met once during the last fiscal year.
The nominating and governance committee operates under a written charter adopted by our board
of directors that is available on our website at www.lifevantage.com. Our website does not
constitute part of this proxy statement.
The purpose of the nominating and governance committee is to identify individuals qualified to
serve as members of our board of directors, and recommend nominees for election as directors of the
Company, evaluate the performance of our board of directors, develop and recommend corporate
governance guidelines to our board of directors, and provide oversight with respect to the
evaluation of our board of directors, management, corporate governance and ethical conduct.
The nominating and governance committee is charged by our board of directors with the
responsibility to:
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(a) |
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Identify and evaluate individuals qualified to serve as members of our board of
directors (including individuals nominated by shareholders in proposals made in writing
to the Companys Secretary that are timely received and that contain sufficient
background information concerning the nominee to enable proper judgment to be made as
to the nominees qualifications) and establish a process for recruiting suitable
candidates to our board of directors, including identifying the characteristics and
skills required by our board of directors and those existing on our board of directors. |
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(b) |
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Identify and recommend for our board of directors selection nominees for
election as directors at the meeting of shareholders at which directors are to be
elected. |
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(c) |
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Recommend to our board of directors the appointment of directors to committees
of our board of directors and, as appropriate, recommend rotation or removal of
directors from such committees. |
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(d) |
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Cause to be prepared and recommend to our board of directors the adoption of
corporate governance guidelines, and periodically review and assess the guidelines and
recommend changes for approval by our board of directors. |
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(e) |
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Cause to be prepared and recommend to our board of directors the adoption of a
code of ethics and a code of conduct, and from time to time review and assess the
codes, and recommend changes for approval by our board of directors. |
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(f) |
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Oversee an annual evaluation of the performance of the nominating and
governance committee and our board of directors, including individual members of our
board of directors, and discuss the evaluation with the full board of directors. |
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(g) |
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Provide minutes of meetings of the nominating and governance committee to our
board of directors, and report to our board of directors on any significant matters
arising from the committees work. |
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(h) |
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At least annually, review and reassess the charter of the nominating and
governance committee and, if appropriate, recommend changes to our board of directors. |
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(i) |
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Make recommendations to our board of directors regarding issues of management
succession. |
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(j) |
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Perform such other duties and responsibilities as may be assigned to it by our
board of directors. |
Other Committees
In addition to the committees described above, our board of directors also has formed a
strategic committee and a management and finance committee.
The current members of the strategic committee are Ms. Stout-Manovich, Dr. McCord, Mr. Doutre
Jones and Mr. Brown, with Ms. Stout-Manovich serving as chairman. This committee meets on an ad hoc
basis as our board of directors deems necessary to review and advise our board of directors with
respect to matters assigned by our board of directors to this committee from time to time.
The current members of the management and finance committee are Mr. Brown, Mr. Mauro, Mr. Lu
and Mr. Robinson, with Mr. Mauro serving as chairman. This committee meets on an ad hoc basis as
our board of directors deems necessary to review financial and
management matters.
Director Nominations
Criteria for Board Membership
In selecting candidates for appointment or election to our board of directors, the nominating
and governance committee considers the appropriate balance of experience, skills and
characteristics required of our board of directors, and seeks to insure that at least a majority of
the directors are independent under NASDAQ rules, that members of the audit committee meet the
financial literacy and sophistication requirements under NASDAQ rules and that at least one of
member of the audit committee qualifies as an audit committee financial expert under SEC rules.
Nominees for director are selected on the basis of their depth and breadth of experience, wisdom,
integrity, ability to make independent analytical inquiries, understanding of our companys
business environment, willingness to devote adequate time to board duties, the interplay of the
nominees experience and skills with those of other directors and the extent to which the nominee
would be a desirable addition to our board of directors and any of its committees. Other than the
foregoing, there are no stated minimum criteria for director nominees, although the nominating and
governance committee may also consider such other factors as it may deem are in the best interests
of our company and our shareholders. The nominating and governance committee does not have a
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policy regarding board diversity, but it takes diversity of professional experience and
perspective within the dietary supplement industry into account in identifying and selecting
director nominees.
Stockholder Recommendations
The nominating and governance committee will consider qualified candidates for director
suggested by stockholders by applying the criteria for board membership described above. If a
stockholder submits a director recommendation, the nominating and governance committee will conduct
an initial evaluation of the proposed nominee and, if it determines the proposed nominee may be
qualified, the nominating and governance committee and one or more members of our management team
will interview the proposed nominee to determine whether he or she might be suitable to be a
director. If the nominating and governance committee determines the proposed nominee would be a
valuable addition to our board of directors, based on the criteria for board membership described
above and our board of directors specific needs at the time, it will recommend to our board of
directors such persons nomination.
Separately, our bylaws contain provisions that address the process by which a stockholder may
nominate an individual to stand for election to our board of directors at our annual meeting of
stockholders. Such nominations may be made only if the shareholder has given timely written notice to our
corporate secretary containing the information required by our bylaws, including as to each
person whom the shareholder proposes to nominate for election as a director, all information
relating to such person that is required to be disclosed in solicitations of proxies for election of
directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended, including such persons written consent to being named in
the proxy statement as a nominee and to serving as a director if elected, and as to the shareholder
giving the notice and the beneficial owner, if any, on whose behalf the nomination is made, the
name and address of such shareholder, as they appear on our books, and of such beneficial owner
and the class and number of shares of our company which are owned beneficially and of record
by such shareholder and such beneficial owner. To be timely, the notice given by a shareholder
must be received at our principal executive offices not less than 90 days nor more than 120 days
prior to the first anniversary of the date on which we first mailed proxy materials for the
preceding years annual meeting, except that if the date of the annual meeting is changed by
more than 30 days from the anniversary date of the previous years meeting, such notice must be
delivered not earlier than 120 days prior to such annual meeting and not later than the close of
business on the later of 90th day prior to such annual meeting or the 10th day following the day
on which we first publicly announce the date of such meeting.
Process for Identifying and Evaluating Nominees
Each year before recommending to the board a slate of nominees for director, the nominating
and governance committee will consider each incumbent directors performance on our board of
directors and willingness to continue in service. In the ordinary course, absent special
circumstances or a material change in the criteria for board membership, the nominating and
governance committee will recommend for nomination incumbent directors with skills and experience
that are relevant to our business and who are willing to continue in service. If an incumbent
director is not willing to stand for re-election, or if a vacancy on our board of directors occurs
between annual stockholder meetings and our board of directors determines to fill such vacancy, the
nominating and governance committee will identify the desired skills and experience of a new
nominee based on the criteria for board membership described above and any specific needs of our
board of directors at the time. The nominating and governance committee will then seek suggestions
from other members of our board of directors and our senior management as to individuals meeting
such criteria. Potential nominees will be selected based on input from members of our board of
directors, our senior management and, if the nominating and governance committee deems appropriate,
a third-party search firm. The nominating and governance committee will evaluate each potential
nominees qualifications and check relevant references; in addition, such individuals will be
interviewed by at least one member of the nominating and governance committee. Following this
process, the nominating and governance committee will determine whether to recommend to our board
of directors that a potential nominee be presented as a nominee for election by the stockholders or
be appointed to fill a vacancy on our board of directors, as the case may be. Historically, our
board of directors nominates for election at our annual stockholder meetings the individuals
recommended by the nominating and governance committee.
Shareholder Communications With the Board of Directors
Shareholders interested in communicating with our board of directors, a board committee, the
independent directors or an individual director may do so by sending an email to Carrie E.
Carlander, our Corporate Secretary at CCarlander@Lifevantage.com or writing to our board of
directors, LifeVantage Corporation, 11545 W. Bernardo Court, Suite 301, San Diego, California
92127, Attention: Corporate Secretary. Communications should specify the addressee(s) and the
general topic of the communication. Our Corporate Secretary will review and sort communications
before forwarding them to the addressee(s). If no particular director is named, letters will be
forwarded, depending on the subject matter, to the chairman of our board of directors or the
appropriate committee, as applicable.
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EXECUTIVE OFFICERS
The following table sets forth the names, ages and titles of our executive officers.
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Name |
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Age |
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Position |
David W. Brown
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47 |
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President and Chief Executive Officer |
Carrie. E. Carlander
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40 |
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Chief Financial Officer, Secretary and Treasurer |
Kirby L. Zenger
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56 |
|
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Chief Operating Officer |
Each officer serves at the discretion of our board of directors and holds office until his or
her successor is appointed or until his or her earlier resignation or removal. There are no family
relationships among any of our directors or executive officers.
Set forth below is a description of the background of Ms. Carlander and Mr. Zenger. For a
description of Mr. Browns background, please see PROPOSAL 1 ELECTION OF DIRECTORS, above.
MS. CARRIE E. CARLANDER Ms. Carlander was appointed as our Chief Financial Officer in June
2009, and as our Secretary and Treasurer in July 2009. From July 2007 through June 2008, Ms.
Carlander served as an interim Chief Financial Officer for two privately-held companies: QThink,
an IC engineering services company, and Genelux, a development-stage biotech company. From
November 2004 through November 2006, Ms. Carlander served as Chief Financial Officer, Secretary,
Treasurer and Vice President of ADVENTRX Pharmaceuticals, Inc. (NYSE Amex:ANX), a publicly traded
clinical-stage biotech company. From December 2003 to December 2004, Ms. Carlander served in a
consulting capacity as Chief Financial Officer of Singlefin, Inc., an email/internet security
software company and as Chief Financial Officer of SofLinx, Inc., a wireless sensor network and
software company. From December 2002 to June 2004, Ms. Carlander served as Vice President of
Finance of V-Enable, Inc., a software company specializing in multimodal software for wireless
devices. From December 1996 to May 2000, Ms. Carlander served first as Director of Finance and
Human Resources, and then as Vice President, Finance and Administration, of Websense Inc.
(Nasdaq:WBSN), a publicly traded company that provides software products that analyze, report and
manage computing resource use by employees. Ms. Carlander received her B.A. in Political Science
from University of California, San Diego, her MBA from San Diego State University and a Certified
Management Accountant designation from the IMA.
MR. KIRBY L. ZENGER Mr. Zenger was appointed as our Executive Vice President-General Manager
in February 2009 and was appointed as our Chief Operating Officer in June 2009. Before joining our
company, he was EVP / General Manger for Zrii LLC, an international network marketing company
founded in 2007. He was integral in the architecture and strategic development of the Zrii
business plan. At Zrii, he managed the daily operations of the company. In 2006, he served
as Vice President of Global Sales for Young Living Essential Oils, a network marketing company.
From 2004 to 2006, Mr. Zenger was General Manager of North America for Synergy Worldwide, a
subsidiary of Natures Sunshine, a direct selling company. From 1998 to 2003, he served as a Client
Partner and Director of Technology Sales of Franklin Covey. Mr. Zenger studied advertising and
business management at the University of Utah and LDS Business College with additional
accreditation in leadership development and strategic planning.
-24-
COMPENSATION MATTERS
Compensation Program Objectives
Our executive compensation program is designed to attract, retain and motivate talented
executives capable of providing the leadership, vision and execution necessary to achieve our
business objectives and create long-term shareholder value. We actively seek to foster a
pay-for-performance environment that aligns the interests of our executive officers with the
creation of shareholder value. To this end, our compensation program is strongly linked to the
delivery of long-term returns to our shareholders, the achievement of short- and long-term
strategic business objectives, individual performance, and the demonstration of competencies that
are aligned with our culture and values and that will contribute to our long-term success.
Compensation Program Components and Procedures
The compensation committee of our board of directors is responsible for overseeing our
compensation policies, plans and programs, and reviewing and determining the salary, bonuses,
equity incentives, perquisites, severance arrangements and other related benefits paid to our
directors and executive officers. The compensation committee has not established any formal
policies or guidelines for allocating compensation between cash and non-cash compensation.
Compensation Elements
Historically, our executive compensation program consists of the following components: base
salary, discretionary performance-based bonuses, long-term equity incentives and other factors. In
addition, currently our chief executive officer has severance benefits. The compensation committee
does not have any specific targets for the percentage of compensation represented by each
component. As a general matter, subject only to limited exceptions, we do not provide perquisites
or benefits for our named executive officers on a basis that is different from other eligible
employees.
Base Salary
Base salary is the primary fixed component of our executive compensation program. We use base
salary to compensate executives for services rendered during the fiscal year, and to ensure that we
remain competitive in attracting and retaining executive talent. Base salaries are generally set
within a range of salaries paid to industry peers with comparable qualifications, experience,
responsibilities and performance at similar companies.
For newly hired executives, the compensation committee determines base salary on a
case-by-case basis by evaluating a number of factors, including the executives qualifications and
experience, the competitive recruiting environment for his or her services, the executives
anticipated role and responsibilities with our company, the executives past compensation history,
and comparisons to market data regarding compensation levels for comparable executives of other
nutraceutical companies of similar sizes and stages of development.
For continuing executives, the compensation committee reviews base salaries annually as part
of our companys performance review and appraisal process. Base salary increases, if any, are based
primarily on each executives job performance for the prior year, as well as a review of
competitive market data, the executives compensation relative to other executive officers, the
importance of the executives continued service with us and our companys financial condition.
Bonuses
During fiscal year 2010, our board of directors had the discretion, and based upon the
recommendation of our compensation committee, to award bonuses to our executive officers. In
determining whether to recommend to our board of directors that an executive officer be awarded a
discretionary bonus, our compensation committee conducts a performance appraisal for each executive
officer for the fiscal year, evaluates such executives performance during the fiscal year and
evaluates our corporate performance during the fiscal year. Following such
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appraisal and evaluation, and taking into account our companys financial condition, if the
compensation committee determines that an executive warrants a bonus, it would recommend a bonus
and a specified amount to our board of directors. The board of directors retains the authority, in
its discretion, to award the bonus. During fiscal 2010, we did not award any bonuses to our
executive officers.
Long-Term Equity Incentives
Long-term equity incentives represent the largest at-risk component of our executive and
employee compensation program. Our long-term equity incentives are designed to align the interests
of our executive officers and employees with those of our shareholders by creating an incentive for
our executive officers and employees to maximize long-term shareholder value. Historically, we have
granted stock options to newly-hired executive officers and employees when they commence employment
with us.
The compensation committee approves all equity grants to our executive officers. Grants
approved during scheduled meetings become effective and are priced as of the date of approval or a
predetermined future date (for example, new hire grants are effective as of the later of the date
of approval or the newly-hired executives start date). Grants approved by unanimous written
consent become effective and are priced as of the date the last signature is obtained or as of
predetermined future date. The compensation committee has not granted, nor does it intend to grant,
equity compensation awards to executive officers or employees in anticipation of the release of
material nonpublic information that is likely to result in changes to the price of our common
stock, such as a significant positive or negative clinical trial result. Similarly, the
compensation committee has not timed, nor does it intend in the future to time, the release of
material nonpublic information based on equity award grant dates.
The compensation committee determines the number of stock options to award to a newly-hired
executive officer using the same factors described above that are considered in determining the
base salaries of newly-hired executive officers.
Employment Agreements
On January 10, 2008, we entered into an employment agreement with David W. Brown pursuant to
which Mr. Brown was hired as our President and Chief Executive Officer. On December 15, 2009, we
entered into an amendment agreement to that employment agreement. The term of the employment
agreement, as amended, is through December 31, 2011. Set out below is a summary of the material
terms of the employment agreement, as amended:
Base Salary. From December 1, 2009 through December 31, 2010, Mr. Browns monthly salary is
1.5% of our total net sales for the prior month, subject to any minimum salary amount required by
applicable state law. Under the original terms of his employment agreement, Mr. Browns monthly
salary was to be $20,000 during those months. By no later than December 15, 2010, we and Mr. Brown
will agree on his compensation program for calendar year 2011; provided, however, Mr. Browns
monthly base salary for calendar year 2011 will not be less than $20,000 per month, which was his
monthly base salary prior to the amendment.
Stock Options. Upon hiring, we granted Mr. Brown options to purchase up to an aggregate of
1,800,000 shares of our common stock. Of such 1,800,000 shares: (i) 150,000 shares fully vested
upon grant and have an exercise price of $0.23 per share; (ii) 450,000 shares vested from January
31, 2008 through December 31, 2008 and have an exercise price of $0.23 per share; and (iii) 300,000
shares with an exercise price of $0.30 per share were to vest if warrants to purchase our common
stock were exercised on or before April 18, 2008. Of this latter 300,000 shares, 62,751 shares
vested on April 18, 2008 and 237,249 shares terminated on April 18, 2008.
In addition, 450,000 shares of the original option grant were to vest in monthly installments
of 37,500 shares from January 31, 2009 through December 31, 2009 and have an exercise price of
$0.50 per share. The remaining 450,000 shares were to vest in monthly installments of 37,500 shares
from January 31, 2010 through December 31, 2010 and have an exercise price of $0.75 per share. In
connection with the amendment agreement to his employment agreement, we agreed that all of the
stock options would cease vesting until such time as we have generated positive cash flow from
operations for a period of three consecutive months. Upon achievement of such
-26-
milestone, all of Mr. Browns option awards will resume vesting in accordance with their
original vesting schedules and any portion of such awards which did not vest as a result of the
tolled vesting will become vested and exercisable.
Bonus. Mr. Brown is eligible to receive a discretionary an annual bonus of up to 75% of his
base salary. See Compensation ElementsBonuses, above for a discussion of factors taken into
account in determining whether to award a bonus.
Severance. If Mr. Brown resigns his employment for good reason or is terminated without
substantial cause (as such terms are defined in the employment agreement), Mr. Brown will be
eligible for severance in the amount of his annual base salary (at an assumed rate of $20,000 per
month through December 31, 2010) plus the actual bonus (if any) paid to Mr. Brown for the previous
year. Such severance amount is payable in equal installments over a period of 24 months.
Non-Competition. During the term of his employment and for a period of six months thereafter,
Mr. Brown has agreed not to, directly or indirectly, compete with our company within the United
States and all other countries in which we have, as of the effective date of the termination of Mr.
Browns employment, a registered patent and/or any active business activity in: (i) the antioxidant
segment of the nutraceutical industry; (ii) any other line of business in which our company was
engaged at any time during Mr. Browns employment with us; or (iii) any other line of business into
which our company, during Mr. Browns employment with us, formed an intention to enter into. In
addition, during this time, Mr. Brown has agreed not to solicit our employees or interfere with our
business relationships.
Perquisites
Perquisites and other personal benefits are not factored into our executive compensation
program. We prefer to compensate executive officers using a mix of current, short- and long-term
compensation with an emphasis on performance and do not believe that providing an executive
perquisite program is consistent with our overall compensation philosophy. We typically provide
perquisites and other personal benefits to executive officers on an exception-only basis, and they
are generally limited to executive relocation assistance and temporary commuting and living
expenses.
Other Benefits
We maintain health, dental and vision insurance plans for the benefit of all eligible
employees, including our executive officers. Basic coverage under each of these benefit plans is
paid by the Company and any premium in excess of the basic coverage is paid by the employee or
executive. These benefits are offered on the same basis to all employees including our executive
officers.
-27-
Summary Compensation Table
The following table shows for the fiscal years ended June 30, 2010 and June 30, 2009 the
compensation awarded to, earned by or paid to our Chief Executive Officer, our Chief Financial
Officer, our former Chief Financial Officer and our two other most highly compensated officers
during fiscal year 2010 (collectively, the named executive officers):
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summary Compensation Table for Fiscal Year 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All other |
|
|
|
|
|
|
|
|
Salary |
|
|
Bonus |
|
|
Option awards |
|
|
compensation |
|
|
Total |
|
Name and principal position |
|
Year |
|
($) |
|
|
($) |
|
|
($)(1) |
|
|
($) |
|
|
($) |
|
David W. Brown, |
|
2010 |
|
|
222,341 |
|
|
|
|
|
|
|
194,150 |
|
|
|
|
|
|
|
416,491 |
|
Chief Executive Officer (2) |
|
2009 |
|
|
240,000 |
|
|
|
31,500 |
|
|
|
132,087 |
|
|
|
|
|
|
|
388,587 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrie E. Carlander, |
|
2010 |
|
|
200,000 |
|
|
|
|
|
|
|
197,985 |
|
|
|
|
|
|
|
397,985 |
|
Chief Financial Officer (3) |
|
2009 |
|
|
556 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
556 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kirby L. Zenger, |
|
2010 |
|
|
215,000 |
|
|
|
|
|
|
|
109,159 |
|
|
|
|
|
|
|
324,159 |
|
Chief Operating Officer (4) |
|
2009 |
|
|
78,444 |
|
|
|
|
|
|
|
34,781 |
|
|
|
|
|
|
|
113,225 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bradford K. Amman, |
|
2010 |
|
|
133,845 |
|
|
|
|
|
|
|
76,596 |
|
|
|
|
|
|
|
210,441 |
|
Former Chief Financial Officer (5) |
|
2009 |
|
|
140,208 |
|
|
|
1,500 |
|
|
|
58,053 |
|
|
|
|
|
|
|
199,761 |
|
|
|
|
1. |
|
The amounts shown in this column represent the dollar amount recognized for financial
statement reporting purposes with respect to the fiscal year for stock options granted to
the named executive officers, as determined in accordance with SFAS 123(R). Pursuant to SEC
rules, the amounts shown exclude the impact of estimated forfeitures related to
service-based vesting conditions. For additional information on the valuation assumptions
used to calculate these amounts, see Notes 2 and 7 to the Financial Statements included in
the Companys Annual Report on Form 10-K for the year ended June 30, 2010. These amounts
reflect the Companys accounting expense for these awards, and do not correspond to the
actual value that will be recognized by the named executive officers. |
|
2. |
|
Mr. Brown was hired as President and Chief Executive Officer on January 10, 2008. Mr.
Brown was granted options to purchase up to 1,800,000 shares of common stock at various
prices from $0.23 to $0.75 per share. See Employment Agreements, above, for the terms
of these options. Mr. Brown was awarded a bonus of $31,500 in 2009, $16,500 of which was
paid during fiscal 2009 and $15,000 of which was paid during fiscal 2010. |
|
3. |
|
Ms. Carlander was hired as Chief Financial Officer on June 9, 2009. On July 31, 2009,
Ms. Carlander was granted an option to purchase up to 500,000 shares of common stock
exercisable at $0.54 per share and vesting in full on July 31, 2010. |
|
4. |
|
Mr. Zenger joined the Company on February 2009 and was appointed Chief Operating
Officer on June 9, 2009. On March 27, 2009, Mr. Zenger was granted an option to purchase
up to 150,000 shares of common stock exercisable at $0.70 per share and vesting in full on
March 27, 2010. On July 31, 2009, he was granted an additional option to purchase up to
100,000 shares of common stock exercisable at $0.54 per share and vesting in full on July
31, 2010. |
|
5. |
|
Mr. Amman joined the Company on June 16, 2006 and left the Company on December 31,
2009. Mr. Amman was granted an option to purchase 120,000 shares of common stock on
September 26, 2006 exercisable at $0.76 per share. On January 16, 2007, Mr. Amman was
granted an additional option to purchase 26,571 shares exercisable at $0.49 per share. On
February 21, 2008, Mr. Amman was granted an additional option to purchase 120,000 shares
exercisable at $0.35 per share. On March 27, 2009, Mr. Amman was granted an additional
option to purchase an additional 120,000 shares exercisable at $0.70 per share. |
-28-
Outstanding Equity Awards at Fiscal Year End
The following table sets forth certain information regarding equity awards granted to the
named executive officers that were outstanding as of June 30, 2010:
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|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding Equity Awards at Fiscal Year-End for Fiscal Year 2010 |
|
|
|
Option awards |
|
|
Stock awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
plan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
plan |
|
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|
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|
|
|
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|
|
|
|
|
|
|
|
|
|
awards: |
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
awards: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market |
|
|
Number of |
|
|
|
|
|
|
Number of |
|
|
securities |
|
|
Number of |
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
value of |
|
|
unearned |
|
|
|
|
|
|
securities |
|
|
underlying |
|
|
securities |
|
|
|
|
|
|
|
|
|
|
shares or |
|
|
shares of |
|
|
shares, units |
|
|
Equity Incentive |
|
|
|
underlying |
|
|
unexercised |
|
|
underlying |
|
|
|
|
|
|
|
|
|
|
units of |
|
|
units of |
|
|
or other |
|
|
plan awards: Market or |
|
|
|
unexercised |
|
|
options |
|
|
unexercised |
|
|
Option |
|
|
|
|
|
|
stock that |
|
|
stock that |
|
|
rights that |
|
|
payout value of unearned |
|
|
|
options |
|
|
(#) |
|
|
unearned |
|
|
exercise |
|
|
|
|
|
|
have not |
|
|
have not |
|
|
have not |
|
|
shares, units or others rights |
|
|
|
(#) |
|
|
unexercis- |
|
|
options |
|
|
price |
|
|
Option expiration |
|
|
vested |
|
|
vested |
|
|
vested |
|
|
that have not vested |
|
Name |
|
exercisable |
|
|
able |
|
|
(#) |
|
|
($) |
|
|
date |
|
|
(#) |
|
|
($) |
|
|
(#) |
|
|
($) |
|
David W. Brown |
|
|
600,000 |
|
|
|
|
|
|
|
|
|
|
$ |
0.23 |
|
|
|
01/10/18 |
(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
412,500 |
|
|
|
|
|
|
|
37,500 |
|
|
$ |
0.50 |
|
|
|
01/10/18 |
(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
450,000 |
|
|
$ |
0.75 |
|
|
|
01/10/18 |
(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62,751 |
|
|
|
|
|
|
|
|
|
|
$ |
0.30 |
|
|
|
01/10/18 |
(4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
300,000 |
|
|
$ |
0.70 |
|
|
|
03/27/19 |
(5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrie E. Carlander |
|
|
|
|
|
|
500,000 |
|
|
|
|
|
|
$ |
0.54 |
|
|
|
07/31/2019 |
(6) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kirby L. Zenger |
|
|
150,000 |
|
|
|
|
|
|
|
|
|
|
$ |
0.70 |
|
|
|
3/27/2019 |
(7) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000 |
|
|
|
|
|
|
$ |
0.54 |
|
|
|
07/31/2019 |
(8) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bradford K. Amman |
|
|
120,000 |
|
|
|
|
|
|
|
|
|
|
$ |
0.76 |
|
|
|
09/26/16 |
(9) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,571 |
|
|
|
|
|
|
|
|
|
|
$ |
0.49 |
|
|
|
01/16/17 |
(10) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
73,333 |
|
|
|
|
|
|
|
|
|
|
$ |
0.35 |
|
|
|
02/21/18 |
(11) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
120,000 |
|
|
|
|
|
|
|
|
|
|
$ |
0.70 |
|
|
|
03/27/19 |
(12) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
This option was granted in January 2008. The shares subject to this option vested as follows: 150,000 shares vested upon grant and 37,500 shares vested each month over a 12-month period. This option
fully vested in December 2008. |
|
(2) |
|
This option was granted in January 2008. The original terms of this option provided that the shares subject to this option would vest in equal installments over a 12-month period commencing
in January 2009. In December 2009, at which time 412,500 shares subject to this option were vested, the terms of this option were amended to provide that the shares subject to this option that had not
vested would not vest until such time as our company met certain financial performance targets and at which time the shares subject to this option would vest. |
|
(3) |
|
This option was granted in January 2008. The original terms of this option provided that the shares subject to this option would vest in equal installments over a 12-month period commencing in
January 2010. In December 2009, the terms of this option were amended to provide that the shares subject to this option would cease vesting until such time as our company met certain financial
performance targets and that at the time such targets were met, the shares subject to this option would vest in accordance with the original vesting schedule as if vesting had not ceased. |
|
(4) |
|
This option was granted in January 2008 and all shares subject to this option vested in April 2008. |
|
(5) |
|
This option was granted in March 2009. The original terms of this option provided that all of the shares subject to this option would vest on the one-year anniversary of the date of grant. In
December 2009, the terms of this option were amended to provide that the shares subject to this option would not vest on the one-year anniversary of the date of grant but instead all such shares
would vest at such time as our company met certain financial performance targets. |
|
(6) |
|
This option was granted in July 2009 and all shares subject to this option vested on the one-year anniversary of the date of grant. |
|
(7) |
|
This option was granted in March 2009 and all shares subject to this option vested on the one-year anniversary of the date of grant. |
|
(8) |
|
This option was granted in July 2009 and all shares subject to this option vested on the one-year anniversary of the date of grant. |
|
(9) |
|
This option was granted in September 2006 and the shares subject to this option vested monthly over a 12-month period commencing on the date of grant. |
|
(10) |
|
This option was granted in January 2007 and the shares subject to this option vested monthly over a 12-month period commencing on the date of grant. |
|
(11) |
|
This option was granted in February 2008 and the shares subject to this option vested monthly over a 12-month period commencing on the date of grant through the date of termination of employment. The
shares subject to this option that did not vest as of the date of termination of employment were forfeited. |
|
(12) |
|
This option was granted in March 2009 and all shares subject to this option were to vest on the one-year anniversary of the date of grant. In connection with his termination of employment, the
vesting of all options were accelerated. |
-29-
Director Compensation
We compensate non-employee directors with cash compensation of $1,000 per meeting and
reimburse our non-employee directors for documented business and travel-related expenses directly
related to our companys business. We do not provide any compensation to employee directors for
their service on our board of directors.
The following table shows certain information with respect to the compensation of all
non-employee directors of the Company for the fiscal year ended June 30, 2010:
|
|
|
|
|
|
|
Director Compensation for Fiscal 2010 |
Name |
|
Option awards ($)(1) |
|
Fees earned or paid in cash (4) |
|
Total ($) |
Dr. James D. Crapo(2) |
|
33,078 |
|
5,000 |
|
38,078 |
Dr. Joe M. McCord(3) |
|
47,804 |
|
7,000 |
|
54,804 |
Mr. Richard Doutre Jones (4) |
|
33,078 |
|
7,000 |
|
40,078 |
Mr. Garry Mauro(5) |
|
33,078 |
|
7,000 |
|
40,078 |
Mr. Douglas Robinson(6) |
|
19,689 |
|
3,000 |
|
22,689 |
Mr. Mike Lu(7) |
|
19,689 |
|
3,000 |
|
22,689 |
Ms. Kay Stout Manovich(8) |
|
19,689 |
|
3,000 |
|
22,689 |
Mr. Jack R. Thompson(9) |
|
33,075 |
|
10,000 |
|
43,075 |
|
|
|
1. |
|
The amounts shown in this column represent the dollar amount recognized for financial
statement reporting purposes with respect to the fiscal year for stock options granted to
the non-employee directors, as determined in accordance with SFAS 123R. Each director was
granted an option to purchase 120,000 shares of our common stock during fiscal 2010.
Pursuant to SEC rules, the amounts shown exclude the impact of estimated forfeitures
related to service-based vesting conditions. For additional information on the valuation
assumptions used to calculate these amounts, see Notes 2 and 7 to the Financial Statements
included in the Companys Annual Report on Form 10-K for the year ended June 30, 2010.
These amounts reflect the Companys accounting expense for these awards, and do not
correspond to the actual value that will be recognized by the non-employee directors. The
options granted to our directors were made pursuant to our 2007 Long-Term Incentive Plan. |
|
2. |
|
Total number of shares subject to stock options at June 30, 2010: 480,000. |
|
3. |
|
Total number of shares subject to stock options at June 30, 2010: 620,408. |
|
4. |
|
Total number of shares subject to stock options at June 30, 2010: 340,000. |
|
5. |
|
Total number of shares subject to stock options at June 30, 2010: 340,000. |
|
6. |
|
Total number of shares subject to stock options at June 30, 2010: 120,000. |
|
7. |
|
Total number of shares subject to stock options at June 30, 2010: 120,000. |
|
8. |
|
Total number of shares subject to stock options at June 30, 2010: 120,000. |
|
9. |
|
Total number of shares subject to stock options at
June 30, 2010: 260,000. Mr.
Thompson resigned from our board of directors effective as of September 14, 2010. |
-30-
AUDIT RELATED MATTERS
Audit Committee Report
Management is responsible for the financial reporting process, including the system of
internal controls, for the preparation of consolidated financial statements in accordance with
generally accepted accounting principles. Ehrhardt Keefe Steiner & Hottman PC, our independent
registered public accounting firm, is responsible for auditing our financial statements and
expressing an opinion as to their conformity with generally accepted accounting principles.
The audit committee has held discussions with management and the independent registered public
accounting firm. Management represented to the audit committee that the Companys consolidated
financial statements were prepared in accordance with generally accepted accounting principles, and
the audit committee has reviewed and discussed the consolidated financial statements with
management and the Companys independent registered public accounting firm. The audit committee
received the written disclosures and letter required by the Independence Standards board of
directors Standard No. 1 (Independence Discussions with Audit Committees) and discussed the
independence of the Companys independent registered public accounting firm with the firm. In
addition, the committee has discussed with the Companys independent registered public accounting
firm the matters required to be discussed by Statement on Auditing Standards No. 61, as amended
(Codification of Statements on Auditing Standards, AU §380).
The audit committee has also considered whether the provision of non-audit services to the
Company is compatible with maintaining the independent registered public accounting firms
independence. The audit committee has concluded that the independent registered public accounting
firm is independent the Company and its management. The audit committee has reviewed with the
Companys independent registered public accounting firm the overall scope and plans for its audit.
Relying on the foregoing reviews and discussions, the audit committee recommended to the
board of directors the inclusion of the audited consolidated financial statements in the Companys
Annual Report on Form 10-K for the year ended June 30, 2010, for filing with the SEC.
The Audit Committee
James D. Crapo, Chairman
Garry Mauro
Douglas C. Robinson
The preceding Audit Committee Report shall not be deemed soliciting material or filed with the
SEC, nor shall any information in this report be incorporated by reference into any past or future
filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, except to the extent the Company specifically incorporates it by reference into such
filing.
-31-
Principal Accountant Fees and Services
The following table presents fees for professional audit services rendered by Ehrhardt Keefe
Steiner & Hottman PC during the fiscal years ended June 30, 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended |
|
|
|
2010 |
|
|
2009 |
|
Audit Fees |
|
$ |
65,000 |
|
|
$ |
53,000 |
|
Audit-Related Fees (1) |
|
$ |
43,000 |
|
|
$ |
34,800 |
|
Tax Fees (2) |
|
$ |
9,700 |
|
|
$ |
8,496 |
|
All Other Fees (3) |
|
$ |
9,059 |
|
|
$ |
3,500 |
|
Total Fees |
|
$ |
126,759 |
|
|
$ |
99,796 |
|
|
|
|
(1) |
|
Audit-Related fees for the fiscal year ended June 30, 2009 related
to assurance and other services related to performance of the audit and
review of interim reports. |
|
(2) |
|
Tax Fees are for tax compliance, advice and planning. |
|
(3) |
|
All Other Fees are related to our convertible debt offering, 404(b)
compliance and other professional services. |
Pre-Approval Policies and Procedures
The audit committee has adopted policies and procedures for the pre-approval of audit and
non-audit services rendered by our independent registered public accounting firm. The policies
require pre-approval of all auditing and such non-auditing services as our independent registered
public accounting firm is permitted to provide, subject to de minimus exceptions for services other
than audit, review, or attest services that are approved by the audit committee prior to completion
of the audit. All of the items identified under Audit-Related Fees, Tax Fees and All Other
Fees above were approved by the audit committee. Alternatively, the engagement of our independent
registered public accounting firm may be entered into pursuant to pre-approved policies and
procedures that our audit committee may establish, so long as these policies and procedures are
detailed as to particular services and the audit committee is informed of each service. In making
these determinations, the audit committee will consider whether the services provided are
compatible with maintaining the independence of the independent registered public accounting firm.
We are prohibited by applicable law from obtaining certain non-audit services from our independent
registered public accounting firm and, in that event, we would obtain these non-audit services from
other providers.
Our audit committee has considered whether the provision of non-audit services is compatible
with maintaining the independence of our independent registered public accounting firm and
determined that it is consistent with such independence.
-32-
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership of our common stock
as of September 1, 2010 by: (i) each director and nominee for director; (ii) each of our
named executive officers; (iii) all of our executive officers and directors as a group; and (iv)
each person who is known to us to own beneficially more than five percent of our common stock. The
shares disclosed in this table are based upon information supplied by officers, directors and
principal shareholders and filings made by such parties with the SEC.
Except as otherwise noted, the address for each person listed below is c/o LifeVantage
Corporation, 11545 W. Bernardo Court, Suite 301, San Diego, California 92127.
The percentages of beneficial ownership set forth below are based on 69,065,723 shares of our
common stock issued and outstanding as of September 21, 2010.
|
|
|
|
|
|
|
|
|
Beneficial Owner (1) |
|
Number of Shares |
|
|
Percent of Class |
|
|
Dr. James D. Crapo |
|
|
1,222,375 |
(2) |
|
|
1.75 |
% |
Richard Doutre Jones |
|
|
420,000 |
(3) |
|
|
* |
|
C. Mike Lu |
|
|
4,668,935 |
(4) |
|
|
6.38 |
% |
Kay Stout Manovich |
|
|
435,537 |
(5) |
|
|
* |
|
Garry P. Mauro |
|
|
520,000 |
(6) |
|
|
* |
|
Dr. Joe M. McCord |
|
|
2,669,333 |
(7) |
|
|
3.81 |
% |
Douglas C. Robinson |
|
|
90,000 |
(8) |
|
|
* |
|
David W. Brown |
|
|
1,275,251 |
(9) |
|
|
1.82 |
% |
Carrie E. Carlander |
|
|
500,000 |
(10) |
|
|
* |
|
Kirby Zenger |
|
|
250,000 |
(11) |
|
|
* |
|
All executive officers and directors as a group (10 persons) |
|
|
12,051,431 |
|
|
|
15.52 |
% |
|
|
|
* |
|
Less than one percent. |
|
1 |
|
The shares of our common stock beneficially owned are reported on the basis of regulations of
the SEC governing the determination of beneficial ownership of securities. Under the rules of
the SEC, a person is deemed to be a beneficial owner of a security if that person has or
shares voting power, which includes the power to vote or direct the voting of such security,
or investment power, which includes the power to dispose of or to direct the disposition of
such security. A person is also deemed to be a beneficial owner of any securities of which
that person has a right to acquire beneficial ownership within 60 days. Securities that can be
so acquired are deemed to be outstanding for purposes of computing such persons ownership
percentage, but not for purposes of computing any other persons percentage. Under these
rules, more than one person may be deemed beneficial owner of the same securities and a person
may be deemed to be a beneficial owner of securities as to which such person has no economic
interest. This table is based upon information supplied by officers, directors and principal
shareholders and Schedules 13D and 13G filed with the SEC. Except as otherwise indicated in
these footnotes and subject to community property laws where applicable, each of the
beneficial owners has, to our knowledge, sole voting and investment power with respect to the
indicated shares of common stock. In accordance with the beneficial ownership rules of the
SEC, the table does not reflect an aggregate of 1,307,500 shares of common stock reserved for
issuance upon the exercise of outstanding options not exercisable within 60 days held by
certain of our directors and executive officers. |
|
2 |
|
Includes 125,000 shares owned by Dr. Crapo and his wife as tenants in common, 450,000 shares
held in Dr. Crapos Individual Retirement Account and 50,000 shares owned directly by Dr.
Crapo, 112,500 shares underlying warrants at an exercise price of $0.50 per share. Also
includes shares which Dr. Crapo has the right to acquire or will have the right to acquire
within 60 days of September 1, 2010 pursuant to an option to purchase 120,000 shares at an
exercise price of $0.49 per share and options to purchase 240,000 shares at an exercise price
of $0.21, and, pursuant to a convertible debenture totaling $24,975.00, 124,875 shares with a
conversion price of $0.20 |
-33-
3 |
|
Includes 100,000 shares owned by Mr. Doutre Jones, 100,000 shares underlying warrants at an
exercise price of $0.50 per share and also includes shares Mr. Doutre Jones has the right to
acquire or will have the right to acquire within 60 days of September 1, 2010 pursuant to an
option to purchase 100,000 shares at an exercise price of $0.30 per share and an option to
purchase 120,000 shares at an exercise price of $0.21 per share. |
|
4 |
|
Includes 550,000 shares owned by Mr. Lu, 1,307,000 shares underlying warrants at an exercise
price of $0.50 per share, 224,435 shares underlying warrants at an exercise price of $0.20 per
share and also includes shares Mr. Lu has the right to acquire or will have the right to
acquire within 60 days of September 1, 2010, pursuant to an option to purchase 90,000 shares
at an exercise price of $0.25 per share, and pursuant to a convertible debenture totaling
$499,500.00, 2,497,500 shares with a conversion price of $0.20. |
|
5 |
|
Includes 345,537 shares owned by Ms. Stout Manovich and also includes shares which Ms. Stout
Manovich has the right to acquire or will have the right to acquire within 60 days of
September 1, 2010 pursuant to an option to purchase 90,000 shares at an exercise price of
$0.25 per share. |
|
6 |
|
Includes 150,000 shares owned by Mr. Mauro, 150,000 shares underlying warrants at an exercise
price of $0.50 per share and also includes shares Mr. Mauro has the right to acquire or will
have the right to acquire within 60 days of September 1, 2010 pursuant to an option to
purchase 100,000 shares at an exercise price of $0.30 per share and an option to purchase
120,000 shares at an exercise price of $0.21 per share. |
|
7 |
|
Includes 1,606,800 shares of common stock owned by Dr. McCord, 187,500 shares underlying
warrants at an exercise price of $0.50 per share and also includes shares Dr. McCord has the
right to acquire or will have the right to acquire within 60 days of September 1, 2010
pursuant to an option to purchase 240,000 shares at an exercise price of $0.46 per share, an
option to purchase 120,000 shares at an exercise price of $0.21 per share, an option to
purchase 20,408 shares at an exercise price of $0.49 per share and an option to purchase
120,000 shares at an exercise price of $0.21 per share, and, pursuant to a convertible
debenture totaling $74,925.00, 374,625 shares with a conversion price of $0.20. |
|
8 |
|
Consists of shares Mr. Robinson has the right to acquire or will have the right to acquire
within 60 days of September 1, 2010 pursuant to an option to purchase 90,000 shares at an
exercise price of $0.25 per share. |
|
9 |
|
Includes 100,000 shares owned by Mr. Brown, 100,000 shares underlying warrants at an exercise
price of $0.50 per share and also includes shares Mr. Brown has the right to acquire or will
have the right to acquire within 60 days of September 1, 2010 pursuant to an option to
purchase 62,751 shares at an exercise price of $0.30 per share, an option to purchase 600,000
shares at an exercise price of $0.23 per share and an option to purchase 412,500 shares at an
exercise price of $0.50 per share. |
|
10 |
|
Consists of shares Ms. Carlander has the right to acquire or will have the right to acquire
within 60 days of September 1, 2010 pursuant to an option to purchase 500,000 shares at an
exercise price of $0.54 per share. |
|
11 |
|
Consists of shares Mr. Zenger has the right to acquire or will have the right to acquire
within 60 days of September 1, 2010 pursuant to an option to purchase 150,000 shares at an
exercise price of $0.70 per share and an option to purchase 100,000 shares at an exercise
price of $0.54 per share. |
-34-
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Related-Party Transactions Policies and Procedures
Related-party transactions have the potential to create actual or perceived conflicts of
interest between the Company and its directors and executive officers or their immediate family
members. Under its charter, our audit committee is charged with the responsibility of reviewing and
approving all related-party transactions. To assist in identifying such transactions for our
fiscal year ended June 30, 2010, we distributed questionnaires to our directors and officers.
Although we do not have a formal policy with regard to related-party transactions, our audit
committee may consider the following factors when deciding whether to approve a related-party
transaction: the nature of the related partys interest in the transaction; the material terms of
the transaction, including, without limitation, the amount and type of the transaction; the
importance of the transaction to the related party; whether the transaction would impair the
judgment of a director or executive officer to act in our best interests; and any other matters
deemed appropriate by our audit committee.
Certain Related-Party Transactions
Other than the employment arrangements described elsewhere in this proxy statement and the
transactions described below, since July 1, 2008, there has not been, nor is there currently
proposed, any related-party transaction or series of similar related-party transactions:
Between November 2009 and February 2010, we issued convertible debentures with a face value of
$5,000,000 that bear interest at 8 percent per annum and have a term of two years, along with
warrants to purchase shares of our common stock. We received aggregate net cash proceeds of
$4,035,687 in connection with these private placement transactions. One of our directors, Mr. Mike
Lu, applied a note payable of $500,000 that we owed to him to his subscription amount in the
private placement. Mr. Lu loaned us the $500,000 evidenced by the note payable in September 2009,
before he was appointed to our board of directors.
In September 2009, we received two bridge loans totaling $100,000 each from Messrs. Mauro and
Thompson. Mr. Mauro is currently one of our directors and Mr. Thompson was a director at the time
such loan was extended. The principal accrued interest at a rate of 10% per annum. These loans were
paid off in February 2010.
In February 2009, Zrii, LLC filed a complaint against certain of our employees and
distributors including Mr. Zenger, our Chief Operating Officer. We agreed to pay legal fees on
behalf of Mr. Zenger and other defendants named in the complaint. The lawsuit was settled December
2009. We paid an aggregate of approximately $1,702,302 in legal fees on behalf of all defendants
named in the lawsuit including Mr. Zenger.
In January 2008, we entered into a consulting agreement with one of our current directors, Dr.
McCord, to assist with our research and development efforts, make scientific presentations and be
available for interviews related to our company and our products. We paid Dr. McCord a monthly
retainer of $5,000 from January 2008 through February 2009. Effective as of January 2009, we
entered into a scientific advisory board agreement with Dr. McCord, effective through June 30,
2010, whereby we agreed to pay Dr. McCord a $10,000 monthly retainer for his services as a member
of our companys scientific advisory board, as well as for various research and development
services related to our products. In addition, beginning June 2009 through June 30, 2010, Dr.
McCord received a $0.50 commission per bottle of Protandim® that we sold. Under this agreement,
during our fiscal year ended June 30, 2010, Dr. McCord earned, including the $10,000 monthly
retainer, a total of $224,192, $150,778 of which was paid during fiscal year 2010 and the balance
of which has been paid to date. We are currently negotiating a consulting agreement with Dr.
McCord whereby he would assist with our research and development efforts, make scientific
presentations, be available for interviews related to our company and our products as well as
present at various distributor events as warranted.
-35-
CODE OF ETHICS
We have adopted the LifeVantage Corporation Code of Ethics which applies to our Chief
Executive Officer, Chief Financial Officer, Chief Operating Officer, members of our board of
directors and all employees. The Code of Ethics addresses matters including: (1) honest and ethical
conduct, including the ethical handling of actual or apparent conflicts of interest between
personal and professional relationships; (2) full, fair, accurate, timely, and understandable
disclosure in reports and documents that we file with, or submits to, the SEC and in other public
communications we make; and (3) compliance with laws, rules and regulations applicable to us. A
copy of the Code of Ethics is available on our website at www.lifevantage.com. Any amendments to,
or waivers from, a provision of our Code of Ethics shall be disclosed by posting such information
on our website at www.lifevantage.com. Our website does not constitute part of this proxy
statement.
We have also adopted the LifeVantage Corporation Code of Business Conduct and Ethics that
applies to all officers, directors and employees. Among other matters, this code addresses:
compliance with laws, rules, and regulations; conflicts of interest; corporate opportunities;
competition and fair dealing; discrimination; health and safety; confidentiality; protection of our
assets; and payments to governmental personnel.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors,
executive officers, and persons who own more than 10% of our common stock to report their
ownership of our common stock and any changes in that ownership to the SEC. The SEC has established
specific due dates for these reports, and we are required to report in this proxy statement any
failure to file by the specific due dates. To our knowledge, based solely on a review of the copies
of such reports furnished to us and written representations that no other reports were required,
during the fiscal year ended June 30, 2010, we believe that all such reports were filed on a timely
basis.
HOUSEHOLDING OF PROXY MATERIALS
The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy
the delivery requirements for proxy statements and annual reports with respect to two or more
shareholders sharing the same address by delivering a single proxy statement addressed to those
shareholders. This process, which is commonly referred to as householding, potentially means
extra convenience for shareholders and cost savings for companies.
This year, a number of brokers with account holders who are LifeVantage Corporation
shareholders will be householding our proxy materials. A single proxy statement will be delivered
to multiple shareholders sharing an address unless contrary instructions have been received from
the affected shareholders. Once you have received notice from your broker that they will be
householding communications to your address, householding will continue until you are notified
otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in
householding and would prefer to receive a separate proxy statement and annual report, please
notify your broker, direct your written request to LifeVantage Corporation, Carrie E. Carlander,
Secretary, (858) 312-8000, 11545 W. Bernardo Court, Suite 301, San Diego, California 92127.
Shareholders who currently receive multiple copies of the proxy statement at their address and
would like to request householding of their communications should contact their broker.
ANNUAL REPORT ON FORM 10-K
Our Annual Report on Form 10-k, which has been filed with the SEC for our fiscal year ended
June 30, 2010, will be made available to shareholders without charge upon written request to
LifeVantage Corporation, Attn: Carrie E. Carlander, Corporate Secretary, 11545 W. Bernardo Court,
Suite 301, San Diego, California 92127
-36-
OTHER MATTERS
Our board of directors knows of no other matters that will be presented for consideration at
the Annual Meeting. If any other matters are properly brought before the meeting, it is the
intention of the persons named in the accompanying proxy to vote on such matters in accordance with
their best judgment.
|
|
|
|
|
|
By Order of the Board of Directors
|
|
October 1, 2010 |
/s/ Carrie E. Carlander
|
|
|
Carrie E. Carlander |
|
|
Chief Financial Officer, Secretary and Treasurer |
|
-37-
ANNEX
A
LIFEVANTAGE CORPORATION
2010 LONG-TERM INCENTIVE PLAN
(Effective
as of September 27, 2010)
A-1
LIFEVANTAGE CORPORATION
2010 LONG-TERM INCENTIVE PLAN
(Effective as of September 27, 2010)
SECTION 1. INTRODUCTION.
The Board adopted the Lifevantage Corporation 2010 Long-Term Incentive Plan on the Adoption
Date conditioned on and subject to obtaining Company shareholder approval.
The purposes of the Plan are to (i) attract and retain the services of persons eligible to
participate in the Plan; (ii) motivate Selected Employees, by means of appropriate equity and
performance based incentives, to achieve long-term performance goals; (iii) provide equity and
performance based incentive compensation opportunities that are competitive with those of other
similar companies; and (iv) further align Participants interests with those of the Companys other
shareholders and thereby promote the financial interests of the Company and its affiliates and
enhancement of shareholder return.
The Plan seeks to achieve this purpose by providing for Awards in the form of Options (which
may constitute Incentive Stock Options or Nonstatutory Stock Options), Stock Appreciation Rights,
Restricted Stock Grants, Stock Units and/or Cash Awards.
Capitalized terms shall have the meaning provided in Section 2 unless otherwise provided in
this Plan or any related Stock Option Agreement, SAR Agreement, Restricted Stock Grant Agreement or
Stock Unit Agreement.
SECTION 2. DEFINITIONS.
(a) Adoption Date means September 27, 2010.
(b) Affiliate means any entity other than a Subsidiary, if the Company and/or one or more
Subsidiaries own not less than 50% of such entity. For purposes of determining an individuals
Service, this definition shall include any entity other than a Subsidiary, if the Company, a
Parent and/or one or more Subsidiaries own not less than 50% of such entity.
(c) Award means any award, under this Plan, to a Selected Employee of an Option, SAR,
Restricted Stock Grant, Stock Unit or to a Covered Employment of any Cash Award.
(d) Board means the Board of Directors of the Company, as constituted from time to time.
A-2
(e) Cash Award means an award of a bonus opportunity, under this Plan, to a Covered Employee
that is (i) payable only in cash, (ii) not an Option, SAR, Restricted Stock Grant or Stock Unit,
(iii) paid based on achievement of Performance Goal(s) and (iv) intended to qualify as
performance-based compensation under Code Section 162(m).
(f) Cashless Exercise means, to the extent that a Stock Option Agreement so provides and as
permitted by applicable law and in accordance with any procedures established by the Committee, an
arrangement whereby payment of some or all of the aggregate Exercise Price may be made all or in
part by delivery of an irrevocable direction to a securities broker to sell Shares and to deliver
all or part of the sale proceeds to the Company. Cashless Exercise may also be utilized to satisfy
an Options tax withholding obligations as provided in Section 14(b).
(g) Cause means, except as may otherwise be provided in a Participant employment agreement
or applicable Award agreement (and in such case the employment agreement or Award agreement shall
govern as to the definition of Cause), (i) dishonesty or fraud, (ii) serious willful misconduct,
(iii) unauthorized use or disclosure of confidential information or trade secrets, (iv) conviction
or confession of a felony, or (v) any other act or omission by a Participant that, in the opinion
of the Company, could reasonably be expected to adversely affect the Companys or a Subsidiarys or
an Affiliates business, financial condition, prospects and/or reputation. In each of the
foregoing subclauses (i) through (v), whether or not a Cause event has occurred will be
determined by the Companys chief human resources officer or other person performing that function
or, in the case of Participants who are Directors or Officers or Section 16 Persons, the Board,
each of whose determination shall be final, conclusive and binding. A Participants Service shall
be deemed to have terminated for Cause if, after the Participants Service has terminated, facts
and circumstances are discovered that would have justified a termination for Cause, including,
without limitation, violation of material Company policies or breach of confidentiality or other
restrictive covenants that may apply to the Participant.
(h) Change in Control except as may otherwise be provided in a Participant employment
agreement or applicable Award agreement (and in such case the employment agreement or Award
agreement shall govern as to the definition of Change in Control), means the occurrence of any one
or more of the following: (i) any merger, consolidation or business combination in which the
shareholders of the Company immediately prior to the merger, consolidation or business combination
do not own at least a majority of the outstanding equity interests of the surviving parent entity,
(ii) the sale of all or substantially all of the Companys assets, (iii) the acquisition of
beneficial ownership or control of (including, without limitation, power to vote) a majority of the
outstanding Shares by any person or entity (including a group as defined by or under Section
13(d)(3) of the Exchange Act), (iv) the dissolution or liquidation of the Company, (v) a contested
election of directors, as a result of which or in connection with which the persons who were
directors of the Company before such election or their nominees cease to constitute a majority of
the Board, or (vi) any other event specified by the Board or the Committee.
A-3
A transaction shall not constitute a Change in Control if its sole purpose is to change the
state of the Companys incorporation or to create a holding company that will be owned in
substantially the same proportions by the persons who held the Companys securities immediately
before such transactions.
(i) Code means the Internal Revenue Code of 1986, as amended, and the regulations and
interpretations promulgated thereunder.
(j) Committee means a committee described in Section 3.
(k) Common Stock means the Companys common stock, $0.001 par value per Share, and any other
securities into which such shares are changed, for which such shares are exchanged or which may be
issued in respect thereof.
(l) Company means Lifevantage Corporation, a Colorado corporation.
(m) Consultant means an individual (or entity) which performs bona fide services to the
Company, a Parent, a Subsidiary or an Affiliate, other than as an Employee or Director or
Non-Employee Director.
(n) Covered Employees means those individuals whose compensation is subject to the deduction
limitations of Code Section 162(m).
(o) Director means a member of the Board who is also an Employee.
(p) Disability means, except as may otherwise be provided in a Participant employment
agreement or applicable Award agreement (and in such case the employment agreement or Award
agreement shall govern as to the definition of Disability), that the Participant is classified as
disabled under a long-term disability policy of the Company or, if no such policy applies, the
Participant is unable to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in death or which has
lasted or can be expected to last for a continuous period of not less than 12 months.
(q) Employee means any individual who is a common-law employee of the Company, or of a
Parent, or of a Subsidiary or of an Affiliate.
(r) Equity Award means any Award other than a Cash Award.
(s) Exchange Act means the Securities Exchange Act of 1934, as amended.
(t) Exercise Price means, in the case of an Option, the amount for which a Share may be
purchased upon exercise of such Option, as specified in the applicable Stock Option Agreement.
Exercise Price, in the case of a SAR, means an amount, as specified in the applicable SAR
Agreement, which is subtracted from the Fair Market Value in determining the amount payable to a
Participant upon exercise of such SAR.
A-4
(u) Fair Market Value means the market price of a Share, determined by the Committee as
follows:
(i) If the Shares were traded on a stock exchange (such as the New York Stock
Exchange, NYSE Amex, the NASDAQ Global Market or NASDAQ Capital Market) at the time of
determination, then the Fair Market Value shall be equal to the regular session closing
price for such stock as reported by such exchange (or the exchange or market with the
greatest volume of trading in the Shares) on the date of determination, or if there were no
sales on such date, on the last date preceding such date on which a closing price was
reported;
(ii) If the Shares were traded on the OTC Bulletin Board at the time of determination,
then the Fair Market Value shall be equal to the last-sale price reported by the OTC
Bulletin Board for such date, or if there were no sales on such date, on the last date
preceding such date on which a sale was reported; and
(iii) If neither of the foregoing provisions is applicable, then the Fair Market Value
shall be determined by the Committee in good faith using a reasonable application of a
reasonable valuation method as the Committee deems appropriate.
Whenever possible, the determination of Fair Market Value by the Committee shall be based on
the prices reported by the applicable exchange or the OTC Bulletin Board, as applicable, or a
nationally recognized publisher of stock prices or quotations (including an electronic on-line
publication). Such determination shall be conclusive and binding on all persons.
(v) Fiscal Year means the Companys fiscal year.
(w) Incentive Stock Option or ISO means an incentive stock option described in Code
Section 422.
(x) Net Exercise means, to the extent that a Stock Option Agreement so provides and as
permitted by applicable law, an arrangement pursuant to which the number of Shares issued to the
Optionee in connection with the Optionees exercise of the Option will be reduced by the Companys
retention of a portion of such Shares. Upon such a net exercise of an Option, the Optionee will
receive a net number of Shares that is equal to (i) the number of Shares as to which the Option is
being exercised minus (ii) the quotient (rounded down to the nearest whole number) of the aggregate
Exercise Price of the Shares being exercised divided by the Fair Market Value of a Share on the
Option exercise date. The number of Shares covered by clause (ii) will be retained by the Company
and not delivered to the Optionee. No fractional Shares will be created as a result of a Net
Exercise and the Optionee must contemporaneously pay for any portion of the aggregate Exercise
Price that is not covered by the Shares retained by the Company under clause (ii). The number of
Shares delivered to the Optionee may be further reduced if Net Exercise is utilized under Section
14(b) to satisfy applicable tax withholding obligations.
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(y) Non-Employee Director means a member of the Board who is not an Employee.
(z) Nonstatutory Stock Option or NSO means a stock option that is not an ISO.
(aa) Officer means an individual who is an officer of the Company within the meaning of Rule
16a-1(f) of the Exchange Act.
(bb) Option means an ISO or NSO granted under the Plan entitling the Optionee to purchase a
specified number of Shares, at such times and applying a specified Exercise Price, as provided in
the applicable Stock Option Agreement.
(cc) Optionee means an individual, estate or other entity that holds an Option.
(dd) Parent means any corporation (other than the Company) in an unbroken chain of
corporations ending with the Company, if each of the corporations other than the Company owns stock
possessing 50% or more of the total combined voting power of all classes of stock in one of the
other corporations in such chain. A corporation that attains the status of a Parent on a date
after the Adoption Date shall be considered a Parent commencing as of such date.
(ee) Participant means an individual or estate or other entity that holds an Award.
(ff) Performance Goals means one or more objective performance targets established for a
Participant which may be described in terms of Company-wide objectives and/or objectives that are
related to the performance of the individual Participant or a Parent, Subsidiary, Affiliate,
division, department or function within the Company or entity in which the Participant is employed,
and such targets may be applied either individually, alternatively or in any combination, and
measured either annually or cumulatively over a period of years, on an absolute basis or relative
to a pre-established target, to previous years results or to a designated comparison group, in
each case as specified by the Committee. Any Performance Goals that are included in an Award in
order to make such Award qualify as performance-based compensation under Code Section 162(m) shall
be limited to one or more of the following target objectives: (i) operating income; (ii) earnings
before interest, taxes, depreciation and amortization, or EBITDA; (iii) earnings; (iv) cash flow;
(v) market share; (vi) sales or revenue; (vii) expenses; (viii) cost of goods sold; (ix)
profit/loss or profit margin; (x) working capital; (xi) return on equity or assets or investment;
(xii) earnings per share; (xiii) economic value added, or EVA; (xiv) stock price including without
limitation total shareholder return; (xv) price/earnings ratio; (xvi) debt or debt-to-equity;
(xvii) accounts receivable; (xviii) writeoffs; (xix) cash; (xx) assets; (xxi) liquidity; (xxii)
operations; (xxiii) research or related milestones; (xxiv) business development; (xxv) intellectual
property (e.g., patents); (xxvi) product development; (xxvii) regulatory activity; (xxviii)
information technology; (xxix) financings; (xxx) product quality control; (xxxi) management;
(xxxii)
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human resources; (xxxiii) corporate governance; (xxxiv) compliance program; (xxxv) legal
matters; (xxxvi) internal controls; (xxxvii) policies and procedures; (xxxviii) accounting and
reporting; (xxxix) strategic alliances, licensing and partnering; (xl) site, plant or building
development; (xli) corporate transactions including without limitation mergers, acquisitions,
divestitures and/or joint ventures; (xlii) customer satisfaction; (xliii) capital expenditures
and/or (xliv) Company advancement milestones. Awards issued to individuals who are not Covered
Employees (or which are not intended to qualify as performance-based compensation under Code
Section 162(m)) may take into account other (or no) factors.
(gg) Performance Period means any period of time as determined by the Committee, in its sole
discretion. The Committee may establish different Performance Periods for different Participants,
and the Committee may establish concurrent or overlapping Performance Periods.
(hh) Plan means this Lifevantage Corporation 2010 Long-Term Incentive Plan as it may be
amended from time to time.
(ii) Prior Equity Compensation Plans means the Companys 2007 Long-Term Incentive Plan (as
assumed from Lifeline Therapeutics, Inc., a Colorado corporation) and its predecessor plans and any
other Company equity compensation plans.
(jj) Re-Price means that the Company has lowered or reduced the Exercise Price of
outstanding Options and/or outstanding SARs for any Participant(s) in a manner described by SEC
Regulation S-K Item 402(d)(2)(viii) (or as described in any successor provision(s) or
definition(s)).
(kk) Restricted Stock Grant means Shares awarded under the Plan as provided in Section 9.
(ll) Restricted Stock Grant Agreement means the agreement described in Section 9 evidencing
each Award of a Restricted Stock Grant.
(mm) SAR Agreement means the agreement described in Section 8 evidencing each Award of a
Stock Appreciation Right.
(nn) SEC means the Securities and Exchange Commission.
(oo) Section 16 Persons means those officers, directors or other persons who are subject to
Section 16 of the Exchange Act.
(pp) Securities Act means the Securities Act of 1933, as amended.
(qq) Selected Employee means an Employee, Consultant, Director, or Non-Employee Director who
has been selected by the Committee to receive an Award under the Plan.
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(rr) Separation From Service means a Participants separation from service with the Company
within the meaning provided to such term under Code Section 409A.
(ss) Service means service as an Employee, Director, Non-Employee Director or Consultant.
Service will be deemed terminated as soon as the entity to which Service is being provided is no
longer either (i) the Company, (ii) a Parent, (iii) a Subsidiary or (iv) an Affiliate. A
Participants Service does not terminate if he or she is a common-law employee and goes on a bona
fide leave of absence that was approved by the Company in writing and the terms of the leave
provide for continued service crediting, or when continued service crediting is required by
applicable law. However, for purposes of determining whether an Option is entitled to continuing
ISO status, a common-law employees Service will be treated as terminating ninety (90) days after
such Employee went on leave, unless such Employees right to return to active work is guaranteed by
law or by a contract. Service terminates in any event when the approved leave ends, unless such
Employee immediately returns to active work. The Committee determines which leaves count toward
Service, and when Service commences and terminates for all purposes under the Plan. For avoidance
of doubt, a Participants Service shall not be deemed terminated if the Committee determines that
(i) a transition of employment to service with a partnership, joint venture or corporation not
meeting the requirements of a Subsidiary in which the Company or a Subsidiary is a party is not
considered a termination of Service, (ii) the Participant transfers between service as an Employee
and service as a Consultant or other personal service provider (or vice versa), or (iii) the
Participant transfers between service as an Employee and that of a Non-Employee Director (or vice
versa). The Committee may determine whether any company transaction, such as a sale or spin-off of
a division or subsidiary that employs a Participant, shall be deemed to result in termination of
Service for purposes of any affected Awards, and the Committees decision shall be final and
binding.
(tt) Share means one share of Common Stock.
(uu) Shareholder Approval Date means the date that the Companys shareholders approve this
Plan provided that such approval must occur on or before the first anniversary of the Adoption
Date.
(vv) Specified Employee means a Participant who is considered a specified employee within
the meaning provided to such term under Code Section 409A.
(ww) Stock Appreciation Right or SAR means a stock appreciation right awarded under the
Plan which provides the holder with a right to potentially receive, in cash and/or Shares, value
with respect to a specific number of Shares, as provided in Section 8.
(xx) Stock Option Agreement means the agreement described in Section 6 evidencing each Award
of an Option.
(yy) Stock Unit means a bookkeeping entry representing the equivalent of one Share, as
awarded under the Plan and as provided in Section 10.
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(zz) Stock Unit Agreement means the agreement described in Section 10 evidencing each Award
of Stock Units.
(aaa) Subsidiary means any corporation (other than the Company) in an unbroken chain of
corporations beginning with the Company, if each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain. A corporation that
attains the status of a Subsidiary on a date after the Adoption Date shall be considered a
Subsidiary commencing as of such date.
(bbb) Termination Date means the date on which a Participants Service terminates as
determined by the Committee.
(ccc) 10-Percent Shareholder means an individual who owns more than 10% of the total
combined voting power of all classes of outstanding stock of the Company, its Parent or any of its
Subsidiaries. In determining stock ownership, the attribution rules of Section 424(d) of the Code
shall be applied.
SECTION 3. ADMINISTRATION.
(a) Committee Composition. A Committee appointed by the Board shall administer the
Plan. Unless the Board provides otherwise, the Boards Compensation Committee (or a comparable
committee of the Board) shall be the Committee. The Board may also at any time terminate the
functions of the Committee and reassume all powers and authority previously delegated to the
Committee.
To the extent required, the Committee shall have membership composition which enables (i)
Awards to Section 16 Persons to qualify as exempt from liability under Section 16(b) of the
Exchange Act and (ii) Awards to Covered Employees to be able to qualify as performance-based
compensation as provided under Code Section 162(m) (to the extent such Awards are intended to
qualify as performance-based compensation).
The Board may also appoint one or more separate committees of the Board, each composed of
directors of the Company who need not qualify under Rule 16b-3 of the Exchange Act or Code Section
162(m), that may administer the Plan with respect to Selected Employees who are not Section 16
Persons or Covered Employees, respectively, may grant Awards under the Plan to such Selected
Employees and may determine all terms of such Awards. To the extent permitted by applicable law,
the Board may also appoint a committee, composed of one or more Officers, that may authorize Awards
to Employees (who are not Section 16 Persons or Covered Employees) within parameters specified by
the Board and consistent with any limitations imposed by applicable law.
Notwithstanding the foregoing, the Board shall constitute the Committee and shall administer
the Plan with respect to all Awards granted to Non-Employee Directors.
(b) Authority of the Committee. Subject to the provisions of the Plan, the Committee
shall have full authority and discretion to take any actions it deems necessary
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or advisable for the administration of the Plan. Such actions shall include without
limitation:
(i) determining Selected Employees who are to receive Awards under the Plan;
(ii) determining the type, number, vesting requirements, Performance Goals (if
any) and their degree of satisfaction, and other features and conditions of
such Awards and amending such Awards;
(iii) correcting any defect, supplying any omission, or reconciling or
clarifying any inconsistency in the Plan or any Award agreement;
(iv) accelerating the vesting, or extending the post-termination exercise
term, or waiving restrictions, of Awards at any time and under such terms and
conditions as it deems appropriate;
(v) interpreting the Plan and any Award agreements;
(vi) making all other decisions relating to the operation of the Plan; and
(vii) adopting such plans or subplans as may be deemed necessary or
appropriate to provide for the participation by non-U.S. employees of the
Company and its Subsidiaries and Affiliates, which plans and/or subplans shall
be attached hereto as appendices.
The Committee may adopt such rules or guidelines, as it deems appropriate to implement the
Plan. The Committees determinations under the Plan shall be final, conclusive and binding on all
persons. The Committees decisions and determinations need not be uniform and may be made
selectively among Participants in the Committees sole discretion. The Committees decisions and
determinations will be afforded the maximum deference provided by applicable law.
(c) Indemnification. To the maximum extent permitted by applicable law, each member
of the Committee, or of the Board, or any persons (including without limitation Employees and
Officers) who are delegated by the Board or Committee to perform administrative functions in
connection with the Plan, shall be indemnified and held harmless by the Company against and from
(i) any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or
her in connection with or resulting from any claim, action, suit, or proceeding to which he or she
may be a party or in which he or she may be involved by reason of any action taken or failure to
act under the Plan or any Award Agreement, and (ii) from any and all amounts paid by him or her in
settlement thereof, with the Companys approval, or paid by him or her in satisfaction of any
judgment in any such claim, action, suit, or proceeding against him or her, provided he or she
shall give the Company an opportunity, at its own expense, to handle and defend the same before he
or she undertakes to handle and defend it on his or her own behalf. The foregoing right of
indemnification shall not be exclusive of any other
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rights of indemnification to which such persons may be entitled under the Companys Articles
of Incorporation or Bylaws, by contract, as a matter of law, or otherwise, or under any power that
the Company may have to indemnify them or hold them harmless.
SECTION 4. GENERAL.
(a) General Eligibility. Only Employees, Consultants, Directors and Non-Employee
Directors shall be eligible for designation as Selected Employees by the Committee.
(b) Incentive Stock Options. Only Selected Employees who are common-law employees of
the Company, a Parent or a Subsidiary shall be eligible for the grant of ISOs. In addition, a
Selected Employee who is a 10-Percent Shareholder shall not be eligible for the grant of an ISO
unless the requirements set forth in Section 422(c)(5) of the Code are satisfied. If and to the
extent that any Shares are issued under a portion of any Option that exceeds the $100,000
limitation of Section 422 of the Code, such Shares shall not be treated as issued under an ISO
notwithstanding any designation otherwise. Certain decisions, amendments, interpretations and
actions by the Committee and certain actions by a Participant may cause an Option to cease to
qualify as an ISO pursuant to the Code and by accepting an Option the Participant agrees in advance
to such disqualifying action.
(c) Buyout of Awards. Subject to approval of Company shareholders, the Committee may
at any time (i) offer to buy out for a payment in cash or cash equivalents (including without
limitation Shares valued at Fair Market Value that may or may not be issued from this Plan) an
Award previously granted or (ii) authorize a Participant to elect to cash out an Award previously
granted, in either case at such time and based upon such terms and conditions as the Committee
shall establish.
(d) Restrictions on Shares. Any Shares issued pursuant to an Award shall be subject
to such Company policies, rights of repurchase, rights of first refusal and other transfer
restrictions as the Committee may determine. Such restrictions shall apply in addition to any
restrictions that may apply to holders of Shares generally and shall also comply to the extent
necessary with applicable law. In no event shall the Company be required to issue fractional
Shares under this Plan.
(e) Beneficiaries. A Participant may designate one or more beneficiaries with respect
to an Award by timely filing the prescribed form with the Company. A beneficiary designation may
be changed by filing the prescribed form with the Company at any time before the Participants
death. If no beneficiary was designated or if no designated beneficiary survives the Participant,
then after a Participants death any vested Award(s) shall be transferred or distributed to the
Participants estate.
(f) Performance Goals. The Committee may, in its discretion, include Performance
Goals or other performance objectives in any Award. If Performance Goals are included in Awards to
Covered Employees in order to enable such Awards to qualify as performance-based compensation under
Code Section 162(m), then such Awards will
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be subject to the achievement of such Performance Goals that will be established and
administered pursuant to the requirements of Code Section 162(m) and as described in this Section
4(f). If an Award is intended to qualify as performance-based compensation under Code Section
162(m) and to the extent required by Code Section 162(m), the Committee shall certify in writing
the degree to which the Performance Goals have been satisfied before any Shares underlying an Award
or any Award payments are released to a Covered Employee with respect to a Performance Period.
Without limitation, the approved minutes of a Committee meeting shall constitute such written
certification. With respect to Awards that are intended to qualify as performance-based
compensation under Code Section 162(m), the Committee may adjust the evaluation of performance
under a Performance Goal (to the extent permitted by Code Section 162(m)) to remove the effects of
certain events including without limitation the following:
(i) asset write-downs or discontinued operations,
(ii) litigation or claim judgments or settlements,
(iii) material changes in or provisions under tax law, accounting principles or other
such laws or provisions affecting reported results,
(iv) reorganizations or restructuring programs or divestitures or acquisitions, and/or
(v) extraordinary non-recurring items as described in applicable accounting principles
and/or items of gain, loss or expense determined to be extraordinary or unusual in nature
or infrequent in occurrence.
Notwithstanding satisfaction of any completion of any Performance Goal, to the extent
specified at the time of grant of an Award, the number of Shares, Options, SARs, Stock Units or
other benefits granted, issued, retainable and/or vested under an Award on account of satisfaction
of such Performance Goals may be reduced by the Committee on the basis of such further
considerations as the Committee in its sole discretion shall determine. Awards with Performance
Goals or performance objectives (if any) that are granted to Selected Employees who are not Covered
Employees or any Awards to Covered Employees which are not intended to qualify as performance-based
compensation under Code Section 162(m) need not comply with the requirements of Code Section
162(m).
(g) No Rights as a Shareholder. A Participant, or a transferee of a Participant,
shall have no rights as a shareholder (including without limitation voting rights or dividend or
distribution rights) with respect to any Common Stock covered by an Award until such person becomes
entitled to receive such Common Stock, has satisfied any applicable withholding or tax obligations
relating to the Award and the Common Stock has been issued to the Participant. No adjustment shall
be made for cash or stock dividends or other rights for which the record date is prior to the date
when such Common Stock is issued, except as expressly provided in Section 11.
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(h) Termination of Service. Unless the applicable Award agreement or employment
agreement provides otherwise (and in such case, the Award or employment agreement shall govern as
to the consequences of a termination of Service for such Awards), the following rules shall govern
the vesting, exercisability and term of outstanding Awards held by a Participant in the event of
termination of such Participants Service (in all cases subject to the term of the Option or SAR as
applicable):
(i) if the Service of a Participant is terminated for Cause, then all of
Participants Options, SARs, unvested portions of Stock Units and unvested
portions of Restricted Stock Grants shall terminate and be forfeited
immediately without consideration as of the Termination Date (except for
repayment of any amounts the Participant had previously paid to the Company to
acquire Shares underlying the forfeited Awards);
(ii) if the Service of Participant is terminated for any reason other than for
Cause and other due to Participants death or Disability), then the vested
portion of Participants then-outstanding Options/SARs may be exercised by
such Participant or his or her personal representative within three months
after the Termination Date and all unvested portions of Participants
outstanding Awards shall be forfeited without consideration as of the
Termination Date (except for repayment of any amounts the Participant had
previously paid to the Company to acquire Shares underlying the forfeited
Awards); or
(iii) if the Service of a Participant is terminated due to Participants death
or Disability, the vested portion of Participants then outstanding
Options/SARs may be exercised within twelve months after the Termination Date
and all unvested portions of any outstanding Awards shall be forfeited without
consideration as of the Termination Date (except for repayment of any amounts
the Participant had previously paid to the Company to acquire Shares
underlying the forfeited Awards).
(i) Code Section 409A. Notwithstanding anything in the Plan to the contrary, the Plan
and Awards granted hereunder are intended to comply with the requirements of Code Section 409A and
shall be interpreted in a manner consistent with such intention. In the event that any provision
of the Plan or an Award Agreement is determined by the Committee to not comply with the applicable
requirements of Code Section 409A and the Treasury Regulations and other guidance issued
thereunder, the Committee shall have the authority to take such actions and to make such changes to
the Plan or an Award Agreement as the Committee deems necessary to comply with such requirements,
provided that no such action shall adversely affect any outstanding Award without the consent of
the affected Participant. Each payment to a Participant made pursuant to this Plan shall be
considered a separate payment and not one of a series of payments for purposes of Code Section
409A. Notwithstanding the foregoing or anything elsewhere in the Plan or an Award Agreement to the
contrary, if upon a Participants Separation From
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Service he/she is then a Specified Employee, then solely to the extent necessary to comply
with Code Section 409A and avoid the imposition of taxes under Code Section 409A, the Company shall
defer payment of nonqualified deferred compensation subject to Code Section 409A payable as a
result of and within six (6) months following such Separation From Service under this Plan until
the earlier of (i) the first business day of the seventh month following the Participants
Separation From Service, or (ii) ten (10) days after the Company receives written confirmation of
the Participants death. Any such delayed payments shall be made without interest. In no event
whatsoever shall the Company be liable for any additional tax, interest or penalties that may be
imposed on a Participant by Code Section 409A or for any damages for failing to comply with Code
Section 409A.
(j) Suspension or Termination of Awards. If at any time (including after a notice of
exercise has been delivered) the Committee (or the Board), reasonably believes that a Participant
has committed an act of Cause (which includes a failure to act), the Committee (or Board) may
suspend the Participants right to exercise any Option or SAR (or payment of a Cash Award or
vesting of Restricted Stock Grants or Stock Units) pending a determination of whether there was in
fact an act of Cause. If the Committee (or the Board) determines a Participant has committed an
act of Cause, neither the Participant nor his or her estate shall be entitled to exercise any
outstanding Option or SAR whatsoever and all of Participants outstanding Awards shall then
terminate without consideration. Any determination by the Committee (or the Board) with respect to
the foregoing shall be final, conclusive and binding on all interested parties.
(k) Electronic Communications. Subject to compliance with applicable law and/or
regulations, an Award agreement or other documentation or notices relating to the Plan and/or
Awards may be communicated to Participants by electronic media.
(l) Unfunded Plan. Insofar as it provides for Awards, the Plan shall be unfunded.
Although bookkeeping accounts may be established with respect to Participants who are granted
Awards under this Plan, any such accounts will be used merely as a bookkeeping convenience. The
Company shall not be required to segregate any assets which may at any time be represented by
Awards, nor shall this Plan be construed as providing for such segregation, nor shall the Company
or the Committee be deemed to be a trustee of stock or cash to be awarded under the Plan.
(m) Liability of Company. The Company (or members of the Board or Committee) shall
not be liable to a Participant or other persons as to: (a) the non-issuance or sale of Shares as to
which the Company has been unable to obtain from any regulatory body having jurisdiction the
authority deemed by the Companys counsel to be necessary to the lawful issuance and sale of any
Shares hereunder; and (b) any unexpected or adverse tax consequence or any tax consequence
expected, but not realized, by any Participant or other person due to the grant, receipt, exercise
or settlement of any Award granted hereunder.
(n) Reformation. In the event any provision of this Plan shall be held illegal or
invalid for any reason, such provisions will be reformed by the Board if possible and
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to the extent needed in order to be held legal and valid. If it is not possible to reform the
illegal or invalid provisions then the illegality or invalidity shall not affect the remaining
parts of this Plan, and this Plan shall be construed and enforced as if the illegal or invalid
provision had not been included.
(o) Director Fees. If the Board affirmatively determines to implement this Section
4(o), then each Non-Employee Director may be awarded either a Restricted Stock Grant or Stock Units
in accordance with the terms and conditions contained in this Section 4(o).
(i) Participation Elections. Each Non-Employee Director may elect
to receive a Restricted Stock Grant (or Stock Units) under the Plan in lieu of
payment of a portion of his or her annual cash retainer. Such an election may
be for any dollar or percentage amount equal to at least 50% of the
Non-Employee Directors annual cash retainer (up to a limit of 100% of the
annual cash retainer of Non-Employee Directors). The election must be made
prior to the beginning of the annual board of directors cycle which shall be
any twelve month continuous period designated by the Board (the Board Cycle)
and such election may need to be made earlier as necessary to comply with Code
Section 409A. Any amount of the annual retainer not elected to be received as
a Restricted Stock Grant or Stock Units shall be payable in cash in accordance
with the Companys standard payment procedures.
(ii) Awards of Stock. As soon as reasonably practicable following
the commencement of each Board Cycle, each Non-Employee Director who has
timely made the election described in Section 4(o)(i) with respect to that
Board Cycle shall be granted a number of Shares pursuant to a Restricted Stock
Grant (or Stock Units) having a fair market value equivalent to the amount of
the annual cash retainer elected to be received as a Restricted Stock Grant
(or Stock Units) under Section 4(o)(i) for such Board Cycle, rounded down to
the nearest full Share. Such Restricted Stock Grant (or Stock Units) will be
evidenced by an executed Restricted Stock Grant Agreement (or Stock Unit
Agreement) between the Company and the electing Non-Employee Director. Such
Restricted Stock Grant (or Stock Units) may be subject to vesting conditions
at grant.
(iii) Other Terms. Shares (or Stock Units) granted under this
Section 4(o) shall otherwise be subject to the terms of the Plan applicable to
Non-Employee Directors or to Participants generally (other than provisions
specifically applying only to Employees).
(p) Re Pricing of Options or SARs. Notwithstanding anything to the contrary,
outstanding Options or SARs may not be Re-Priced without the approval of Company shareholders.
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(q) Successor Provision. Any reference to a statute, rule or regulation, or to a
section of a statute, rule or regulation, is a reference to that statute, rule, regulation, or
section as amended from time to time, both before and after the Adoption Date and including any
successor provisions.
(r) Governing Law. This Plan and all Awards shall be construed in accordance with and
governed by the laws of the State of Colorado but without regard to its conflict of law provisions.
The Committee may provide that any dispute as to any Award shall be presented and determined in
such forum as the Committee may specify, including through binding arbitration. Unless otherwise
provided in the Award Agreement, recipients of an Award under the Plan are deemed to submit to the
exclusive jurisdiction and venue of the federal or state courts of Colorado to resolve any and all
issues that may arise out of or relate to the Plan or any related Award Agreement.
SECTION 5. SHARES SUBJECT TO PLAN AND SHARE LIMITS.
(a) Basic Limitations. The Common Stock issuable under the Plan shall be authorized
but unissued Shares or treasury Shares. Subject to adjustment as provided in Section 11, the
maximum aggregate number of Shares that may be issued under the Plan shall not exceed 3,500,000
Shares. The maximum aggregate number of Shares that may be issued in connection with any single
type of Equity Award (NSOs, ISOs, SARs, Restricted Stock Grants or Stock Units) under the Plan
shall be 3,500,000 Shares.
(b) Share Re-Use. If Equity Awards are forfeited or are terminated for any reason
other than being exercised, then the Shares underlying such Equity Awards shall again become
available for Equity Awards under the Plan. If SARs are exercised or Stock Units are settled in
Shares, then only the number of Shares (if any) actually issued in settlement of such SARs or Stock
Units shall reduce the number of Shares available under the Share limits stated in Section 5(a) and
the balance shall again become available for Equity Awards under the Plan. If a Participant pays
the Exercise Price by Net Exercise or by surrendering previously owned Shares (or by stock
attestation) and/or, as permitted by the Committee, pays any withholding tax obligation with
respect to an Equity Award by electing to have Shares withheld or surrendering previously owned
Shares (or by stock attestation), the surrendered Shares and the Shares withheld to pay taxes shall
be available for issuance under the Plan and shall not count toward the Share limits set forth in
Section 5(a). Any Shares that are delivered and any Equity Awards that are granted by, or become
obligations of, the Company, as a result of the assumption by the Company of, or in substitution
for, outstanding awards previously granted by another entity (as provided in Sections 6(e), 8(f),
9(e) or 10(e)) shall not be counted against the Share limits specified in Sections 5(a) and 5(d).
(c) Dividend Equivalents. Any dividend equivalents distributed under the Plan shall
not be applied against the number of Shares available for Equity Awards.
(d) Code Section 162(m) Limits. For so long as: (x) the Company is a publicly held
corporation within the meaning of Code Section 162(m) and (y) the deduction limitations of Code
Section 162(m) are applicable to Awards granted to the
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Companys Covered Employees under this Plan, then the limits specified below in this Section
5(d) shall be applicable to Awards issued under the Plan that are intended to qualify as
performance-based compensation under Code Section 162(m).
(i) Limits on Options. No Selected Employee shall receive Options to purchase
Shares during any Fiscal Year that in the aggregate cover in excess of 1,250,000 Shares.
(ii) Limits on SARs. No Selected Employee shall receive Awards of SARs during
any Fiscal Year that in the aggregate cover in excess of 1,250,000 Shares.
(iii) Limits on Restricted Stock Grants. No Selected Employee shall receive
Restricted Stock Grants during any Fiscal Year that in the aggregate cover in excess of
1,250,000 Shares.
(iv) Limits on Stock Units. No Selected Employee shall receive Stock Units
during any Fiscal Year that in the aggregate cover in excess of 1,250,000 Shares.
(v) Limit on Total Amount of All Equity Awards. No Selected Employee shall
receive Equity Awards during any Fiscal Year in excess of the aggregate amount of 1,250,000
Shares, whether such Equity Awards are in the form of Options, SARs, Restricted Stock
Grants and/or Stock Units.
(vi) Increased Limits for First Year of Employment. The numerical limits
expressed in the foregoing subparts (i) through (v) shall in each case be increased to
2,500,000 Shares with respect to Equity Awards granted to a Selected Employee during the
Fiscal Year of the Selected Employees commencement of employment with the Company or
during the first Fiscal Year that the Selected Employee becomes a Covered Employee.
(vii) Dollar Limit for Cash Awards. The maximum aggregate value of Cash
Awards that may be received by any one Selected Employee with respect to any individual
Fiscal Year is $1,000,000.
SECTION 6. TERMS AND CONDITIONS OF OPTIONS.
(a) Stock Option Agreement. Each Award of an Option under the Plan shall be evidenced
by a Stock Option Agreement between the Optionee and the Company. Such Option shall be subject to
all applicable terms and conditions of the Plan and may be subject to any other terms and
conditions that are not inconsistent with the Plan (including without limitation any Performance
Goals). The provisions of the various Stock Option Agreements entered into under the Plan need not
be identical. The Stock Option Agreement shall also specify whether the Option is an ISO and if
not specified then the Option shall be an NSO.
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(b) Number of Shares. Each Stock Option Agreement shall specify the number of Shares
that are subject to the Option and shall provide for adjustment of such number in accordance with
Section 11.
(c) Exercise Price. An Options Exercise Price shall be established by the Committee
and set forth in a Stock Option Agreement. Except with respect to outstanding stock options being
assumed or Options being granted in exchange for cancellation of outstanding options granted by
another issuer as provided under Section 6(e), the Exercise Price of an Option shall not be less
than 100% of the Fair Market Value (110% for ISO Awards to 10-Percent Shareholders) on the date of
Award.
(d) Exercisability and Term. Each Stock Option Agreement shall specify the date when
all or any installment of the Option is to become vested and/or exercisable. The Stock Option
Agreement shall also specify the term of the Option; provided that the term of an Option shall in
no event exceed ten years from the date of Award (and may be for a shorter period of time than ten
years). No Option can be exercised after the expiration date specified in the applicable Stock
Option Agreement. A Stock Option Agreement may provide for accelerated vesting in the event of the
Participants death, or Disability or other events. Notwithstanding the previous sentence, an ISO
that is granted to a 10-Percent Shareholder shall have a maximum term of five years.
Notwithstanding any other provision of the Plan, no Option can be exercised after the expiration
date provided in the applicable Stock Option Agreement. A Stock Option Agreement may permit an
Optionee to exercise an Option before it is vested (an early exercise), subject to the Companys
right of repurchase at the original Exercise Price of any Shares acquired under the unvested
portion of the Option which right of repurchase shall lapse at the same rate the Option would have
vested had there been no early exercise. In no event shall the Company be required to issue
fractional Shares upon the exercise of an Option and the Committee may specify a minimum number of
Shares that must be purchased in any one Option exercise.
(e) Modifications or Assumption of Options. Within the limitations of the Plan, the
Committee may modify, extend or assume outstanding Options or may accept the cancellation of
outstanding stock options (whether granted by the Company or by another issuer) in return for the
grant of new Options for the same or a different number of Shares and at the same or a different
Exercise Price. For avoidance of doubt, the Committee may not Re-Price outstanding Options without
approval from the Companys shareholders. No modification of an Option shall, without the consent
of the Optionee, impair his or her rights or increase his or her obligations under such Option.
(f) Assignment or Transfer of Options. Except as otherwise provided in the applicable
Stock Option Agreement and then only to the extent permitted by applicable law, no Option shall be
transferable by the Optionee other than by will or by the laws of descent and distribution. Except
as otherwise provided in the applicable Stock Option Agreement, an Option may be exercised during
the lifetime of the Optionee only by Optionee or by the guardian or legal representative of the
Optionee. No Option or interest therein may be assigned, pledged or hypothecated by the Optionee
during his or
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her lifetime, whether by operation of law or otherwise, or be made subject to execution,
attachment or similar process.
SECTION 7. PAYMENT FOR OPTION SHARES.
(a) General Rule. The entire Exercise Price of Shares issued upon exercise of Options
shall be payable in cash at the time when such Shares are purchased by the Optionee, except as
follows and if so provided for in an applicable Stock Option Agreement:
(i) In the case of an ISO granted under the Plan, payment shall be made only pursuant
to the express provisions of the applicable Stock Option Agreement. The Stock Option
Agreement may specify that payment may be made in any form(s) described in this Section 7.
(ii) In the case of an NSO granted under the Plan, the Committee may, in its
discretion at any time, accept payment in any form(s) described in this Section 7.
(b) Surrender of Stock. To the extent that the Committee makes this Section 7(b)
applicable to an Option in a Stock Option Agreement, payment for all or a part of the Exercise
Price may be made with Shares which have already been owned by the Optionee for such duration as
shall be specified by the Committee. Such Shares shall be valued at their Fair Market Value on the
date when the new Shares are purchased under the Plan.
(c) Cashless Exercise. To the extent that the Committee makes this Section 7(c)
applicable to an Option in a Stock Option Agreement, payment for all or a part of the Exercise
Price may be made through Cashless Exercise.
(d) Net Exercise. To the extent that the Committee makes this Section 7(d) applicable
to an Option in a Stock Option Agreement, payment for all or a part of the Exercise Price may be
made through Net Exercise.
(e) Other Forms of Payment. To the extent that the Committee makes this Section 7(e)
applicable to an Option in a Stock Option Agreement, payment may be made in any other form that is
consistent with applicable laws, regulations and rules and approved by the Committee.
SECTION 8. TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS.
(a) SAR Agreement. Each Award of a SAR under the Plan shall be evidenced by a SAR
Agreement between the Participant and the Company. Such SAR shall be subject to all applicable
terms of the Plan and may be subject to any other terms that are not inconsistent with the Plan
(including without limitation any Performance Goals). A SAR Agreement may provide for a maximum
limit on the amount of any payout notwithstanding the Fair Market Value on the date of exercise of
the SAR. The provisions of the various SAR Agreements entered into under the Plan need not be
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identical. SARs may be granted in consideration of a reduction in the Participants other
compensation.
(b) Number of Shares. Each SAR Agreement shall specify the number of Shares to which
the SAR pertains and is subject to adjustment of such number in accordance with Section 11.
(c) Exercise Price. Each SAR Agreement shall specify the Exercise Price. Except with
respect to outstanding stock appreciation rights being assumed or SARs being granted in exchange
for cancellation of outstanding stock appreciation rights granted by another issuer as provided
under Section 8(f), the Exercise Price of a SAR shall not be less than 100% of the Fair Market
Value on the date of Award.
(d) Exercisability and Term. Each SAR Agreement shall specify the date when all or
any installment of the SAR is to become exercisable. The SAR Agreement shall also specify the term
of the SAR which shall not exceed ten years from the date of Award. No SAR can be exercised after
the expiration date specified in the applicable SAR Agreement. A SAR Agreement may provide for
accelerated exercisability in the event of the Participants death, or Disability or other events
and may provide for expiration prior to the end of its term in the event of the termination of the
Participants Service. A SAR may be included in an ISO only at the time of Award but may be
included in an NSO at the time of Award or at any subsequent time, but not later than six months
before the expiration of such NSO. A SAR granted under the Plan may provide that it will be
exercisable only in the event of a Change in Control.
(e) Exercise of SARs. If, on the date when a SAR expires, the Exercise Price under
such SAR is less than the Fair Market Value on such date but any portion of such SAR has not been
exercised or surrendered, then such SAR may automatically be deemed to be exercised as of such date
with respect to such portion to the extent so provided in the applicable SAR agreement. Upon
exercise of a SAR, the Participant (or any person having the right to exercise the SAR after
Participants death) shall receive from the Company (i) Shares, (ii) cash or (iii) any combination
of Shares and cash, as the Committee shall determine. The amount of cash and/or the Fair Market
Value of Shares received upon exercise of SARs shall, in the aggregate, be equal to the amount by
which the Fair Market Value (on the date of surrender) of the Shares subject to the SARs exceeds
the Exercise Price of the Shares.
(f) Modification or Assumption of SARs. Within the limitations of the Plan, the
Committee may modify, extend or assume outstanding SARs or may accept the cancellation of
outstanding SARs (including stock appreciation rights granted by another issuer) in return for the
grant of new SARs for the same or a different number of Shares and at the same or a different
Exercise Price. For avoidance of doubt, the Committee may not Re-Price outstanding SARs without
approval from the Companys shareholders. No modification of a SAR shall, without the consent of
the Participant, impair his or her rights or increase his or her obligations under such SAR.
A-20
(g) Assignment or Transfer of SARs. Except as otherwise provided in the applicable
SAR Agreement and then only to the extent permitted by applicable law, no SAR shall be transferable
by the Participant other than by will or by the laws of descent and distribution. Except as
otherwise provided in the applicable SAR Agreement, a SAR may be exercised during the lifetime of
the Participant only by the Participant or by the guardian or legal representative of the
Participant. No SAR or interest therein may be assigned, pledged or hypothecated by the
Participant during his or her lifetime, whether by operation of law or otherwise, or be made
subject to execution, attachment or similar process.
SECTION 9. TERMS AND CONDITIONS FOR RESTRICTED STOCK GRANTS.
(a) Restricted Stock Grant Agreement. Each Restricted Stock Grant awarded under the
Plan shall be evidenced by a Restricted Stock Grant Agreement between the Participant and the
Company. Each Restricted Stock Grant shall be subject to all applicable terms and conditions of
the Plan and may be subject to any other terms and conditions that are not inconsistent with the
Plan (including without limitation any Performance Goals). The provisions of the Restricted Stock
Grant Agreements entered into under the Plan need not be identical.
(b) Number of Shares and Payment. Each Restricted Stock Grant Agreement shall specify
the number of Shares to which the Restricted Stock Grant pertains and is subject to adjustment of
such number in accordance with Section 11. Restricted Stock Grants may be issued with or without
cash consideration under the Plan.
(c) Vesting Conditions. Each Restricted Stock Grant may or may not be subject to
vesting. Vesting shall occur, in full or in installments, upon satisfaction of the conditions
specified in the Restricted Stock Grant Agreement. A Restricted Stock Grant Agreement may provide
for accelerated vesting in the event of the Participants death, or Disability or other events.
(d) Voting and Dividend Rights. The holder of a Restricted Stock Grant (irrespective
of whether the Shares subject to the Restricted Stock Grant are vested or unvested) awarded under
the Plan shall have the same voting, dividend and other rights as the Companys other shareholders.
However, any dividends received on Shares that are unvested (whether such dividends are in the
form of cash or Shares) may be subject to the same vesting conditions and restrictions as the
Restricted Stock Grant with respect to which the dividends were paid. Such additional Shares
issued as dividends that are subject to the Restricted Stock Grant shall not reduce the number of
Shares available for issuance under Section 5.
(e) Modification or Assumption of Restricted Stock Grants. Within the limitations of
the Plan, the Committee may modify or assume outstanding Restricted Stock Grants or may accept the
cancellation of outstanding Restricted Stock Grants (including stock granted by another issuer) in
return for the grant of new Restricted Stock Grants for the same or a different number of Shares.
No modification of a Restricted
A-21
Stock Grant shall, without the consent of the Participant, impair his or her rights or
increase his or her obligations under such Restricted Stock Grant.
(f) Assignment or Transfer of Restricted Stock Grants. Except as provided in Section
14, or in a Restricted Stock Grant Agreement, or as required by applicable law, a Restricted Stock
Grant awarded under the Plan shall not be anticipated, assigned, attached, garnished, optioned,
transferred or made subject to any creditors process, whether voluntarily, involuntarily or by
operation of law. Any act in violation of this Section 9(f) shall be void. However, this Section
9(f) shall not preclude a Participant from designating a beneficiary pursuant to Section 4(e) nor
shall it preclude a transfer of Restricted Stock Grant Awards by will or pursuant to Section 4(e).
SECTION 10. TERMS AND CONDITIONS OF STOCK UNITS.
(a) Stock Unit Agreement. Each Award of Stock Units under the Plan shall be evidenced
by a Stock Unit Agreement between the Participant and the Company. Such Stock Units shall be
subject to all applicable terms of the Plan and may be subject to any other terms that are not
inconsistent with the Plan (including without limitation any Performance Goals). The provisions of
the various Stock Unit Agreements entered into under the Plan need not be identical. Stock Units
may be granted in consideration of a reduction in the Participants other compensation.
(b) Number of Shares and Payment. Each Stock Unit Agreement shall specify the number
of Shares to which the Stock Unit Grant pertains and is subject to adjustment of such number in
accordance with Section 11. To the extent that an Award is granted in the form of Stock Units, no
cash consideration shall be required of the Award recipients.
(c) Vesting Conditions. Each Award of Stock Units may or may not be subject to
vesting. Vesting shall occur, in full or in installments, upon satisfaction of the conditions
specified in the Stock Unit Agreement. A Stock Unit Agreement may provide for accelerated vesting
in the event of the Participants death, or Disability or other events.
(d) Voting and Dividend Rights. The holders of Stock Units shall have no voting
rights. Prior to settlement or forfeiture, any Stock Unit awarded under the Plan may, at the
Committees discretion, carry with it a right to dividend equivalents. Such right entitles the
holder to be credited with an amount equal to all cash or Common Stock dividends paid on one Share
while the Stock Unit is outstanding. Dividend equivalents may be converted into additional Stock
Units. Settlement of dividend equivalents may be made in the form of cash, in the form of Shares,
or in a combination of both. Prior to vesting of the Stock Units, any dividend equivalents accrued
on such unvested Stock Units may be subject to the same vesting conditions and restrictions as the
Stock Units to which they attach.
(e) Modification or Assumption of Stock Units. Within the limitations of the Plan,
the Committee may modify or assume outstanding Stock Units or may accept the cancellation of
outstanding Stock Units (including stock units granted by another issuer)
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in return for the grant of new Stock Units for the same or a different number of Shares. No
modification of a Stock Unit shall, without the consent of the Participant, impair his or her
rights or increase his or her obligations under such Stock Unit.
(f) Assignment or Transfer of Stock Units. Except as provided in Section 14, or in a
Stock Unit Agreement, or as required by applicable law, Stock Units shall not be anticipated,
assigned, attached, garnished, optioned, transferred or made subject to any creditors process,
whether voluntarily, involuntarily or by operation of law. Any act in violation of this Section
10(f) shall be void. However, this Section 10(f) shall not preclude a Participant from designating
a beneficiary pursuant to Section 4(e) nor shall it preclude a transfer of Stock Units pursuant to
Section 4(e).
(g) Form and Time of Settlement of Stock Units. Settlement of vested Stock Units may
be made in the form of (a) cash, (b) Shares or (c) any combination of both, as determined by the
Committee. The actual number of Stock Units eligible for settlement may be larger or smaller than
the number included in the original Award. Methods of converting Stock Units into cash may include
(without limitation) a method based on the average Fair Market Value of Shares over a series of
trading days. Except as otherwise provided in a Stock Unit Agreement or a timely completed
deferral election, vested Stock Units shall be settled within thirty days after vesting. The
distribution may occur or commence when all vesting conditions applicable to the Stock Units have
been satisfied or have lapsed, or it may be deferred, in accordance with applicable law, to a later
specified date. The amount of a deferred distribution may be increased by an interest factor or by
dividend equivalents. Until an Award of Stock Units is settled, the number of such Stock Units
shall be subject to adjustment pursuant to Section 11.
(h) Creditors Rights. A holder of Stock Units shall have no rights other than those
of a general creditor of the Company. Stock Units represent an unfunded and unsecured obligation
of the Company, subject to the terms and conditions of the applicable Stock Unit Agreement.
SECTION 11. ADJUSTMENTS.
(a) Adjustments. In the event of a subdivision of the outstanding Shares, a
declaration of a dividend payable in Shares, a declaration of a dividend payable in a form other
than Shares in an amount that has a material effect on the price of Shares, a combination or
consolidation of the outstanding Shares (by reclassification or otherwise) into a lesser number of
Shares, a stock split, a reverse stock split, a reclassification or other distribution of the
Shares without the receipt of consideration by the Company, of or on the Common Stock, a
recapitalization, a combination, a spin-off or a similar occurrence, the Committee shall make
equitable and proportionate adjustments to:
(i) the Share limits on Equity Awards specified in Section 5(a);
(ii) the number and kind of securities available for Equity Awards (and which can be
issued as ISOs) under Section 5;
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(iii) the Share limits on Equity Awards issued under the Plan that are intended to
qualify as performance-based compensation under Code Section 162(m) under Section 5(d);
(iv) the number and kind of securities covered by each outstanding Equity Award;
(v) the Exercise Price under each outstanding SAR and Option; and
(vi) the number and kind of outstanding securities issued under the Plan.
(b) Participant Rights. Except as provided in this Section 11, a Participant shall
have no rights by reason of any issue by the Company of stock of any class or securities
convertible into stock of any class, any subdivision or consolidation of shares of stock of any
class, the payment of any stock dividend or any other increase or decrease in the number of shares
of stock of any class. If by reason of an adjustment pursuant to this Section 11, a Participants
Equity Award covers additional or different shares of stock or securities, then such additional or
different shares and the Equity Award in respect thereof shall be subject to all of the terms,
conditions and restrictions which were applicable to the Equity Award and the Shares subject to the
Equity Award prior to such adjustment.
(c) Fractional Shares. Any adjustment of Shares pursuant to this Section 11 shall be
rounded down to the nearest whole number of Shares. Under no circumstances shall the Company be
required to authorize or issue fractional shares. To the extent permitted by applicable law, no
consideration shall be provided as a result of any fractional shares not being issued or
authorized.
SECTION 12. EFFECT OF A CHANGE IN CONTROL.
(a) Merger or Reorganization. In the event that the Company is a party to a merger or
other reorganization, outstanding Awards shall be subject to the agreement of merger or
reorganization. Such agreement may provide, without limitation, that subject to the consummation
of the merger or other reorganization, for the assumption (or substitution) of outstanding Awards
by the surviving corporation or its parent, for their continuation by the Company (if the Company
is a surviving corporation), for accelerated vesting or for their cancellation with or without
consideration, in all cases without the consent of the Participant.
(b) Acceleration. Except as otherwise provided in the applicable Award Agreement (and
in such case the applicable Award agreement shall govern), in the event that a Change in Control
occurs and there is no assumption, substitution or continuation of Awards pursuant to Section
12(a), the Committee may in its discretion provide that all Awards shall vest and become
exercisable as of immediately before such Change in Control. For avoidance of doubt,
substitution includes, without limitation, an Award being replaced by a cash award that provides
an equivalent intrinsic value (wherein for
A-24
Equity Awards intrinsic value equals the difference between the market value of a Share and
any per Share exercise price).
SECTION 13. LIMITATIONS ON RIGHTS.
(a) Retention Rights. Neither the Plan nor any Award granted under the Plan shall be
deemed to give any individual a right to remain in Service as an Employee, Consultant, Director or
Non-Employee Director or to receive any other Awards under the Plan. The Company and its Parents
and Subsidiaries and Affiliates reserve the right to terminate the Service of any person at any
time, and for any reason, subject to applicable laws, the Companys Articles of Incorporation and
Bylaws and a written employment agreement (if any).
(b) Regulatory Requirements. Any other provision of the Plan notwithstanding, the
obligation of the Company to issue Shares or other securities under the Plan shall be subject to
all applicable laws, rules and regulations and such approval by any regulatory body as may be
required. The Company reserves the right to restrict, in whole or in part, the delivery of Shares
or other securities pursuant to any Equity Award prior to the satisfaction of all legal
requirements relating to the issuance of such Shares or other securities, to their registration,
qualification or listing or to an exemption from registration, qualification or listing.
(c) Dissolution. To the extent not previously exercised or settled, Options, SARs,
unvested Stock Units and unvested Restricted Stock Grants shall terminate immediately prior to the
dissolution or liquidation of the Company and shall be forfeited to the Company.
(d) Clawback Policy. The Company may (i) cause the cancellation of any Award, (ii)
require reimbursement of any Award by a Participant and (iii) effect any other right of recoupment
of equity or other compensation provided under this Plan or otherwise in accordance with Company
policies and/or applicable law (each, a Clawback Policy). In addition, a Participant may be
required to repay to the Company certain previously paid compensation, whether provided under this
Plan or an Award Agreement or otherwise, in accordance with the Clawback Policy.
SECTION 14. TAXES.
(a) General. A Participant shall make arrangements satisfactory to the Company for
the satisfaction of any withholding tax obligations that arise in connection with his or her Award.
The Company shall not be required to issue any Shares or make any cash payment under the Plan
until such obligations are satisfied.
(b) Share Withholding. The Committee in its discretion may permit or require a
Participant to satisfy all or part of his or her withholding or income tax obligations by having
the Company withhold all or a portion of any Shares that otherwise would be issued to him or her or
by surrendering all or a portion of any Shares that he or she previously acquired (or by stock
attestation). Such Shares shall be valued based on the value of the actual trade or, if there is
none, the Fair Market Value as of the previous day.
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Any payment of taxes by assigning Shares to the Company may be subject to restrictions,
including, but not limited to, any restrictions required by rules of the SEC. The Committee may
also, in its discretion, permit or require a Participant to satisfy withholding or income tax
obligations (up to the maximum amount permitted by applicable law) related to an Equity Award
through a sale of Shares underlying the Equity Award or, in the case of Options, through Net
Exercise or Cashless Exercise.
SECTION 15. DURATION AND AMENDMENTS.
(a) Term of the Plan. The Plan, as set forth herein, is effective on the Adoption
Date but is conditioned upon and subject to the approval of the Companys shareholders. No
settlement of Awards or exercise of Options or SARs may occur before the Shareholder Approval Date.
If the Companys shareholders do not approve the Plan on or before the first anniversary of the
Adoption Date, then the Plan shall terminate and be null and void and any Awards granted under the
Plan shall be then forfeited without consideration (except for repayment of any amounts that
Participants had previously paid to the Company to acquire Shares underlying the forfeited Awards).
In any event, the Plan shall terminate no later than on the day before the tenth anniversary of
the Adoption Date. The Plan may be terminated by the Board on any earlier date pursuant to Section
15(b). This Plan will not in any way affect outstanding awards that were issued under the Prior
Equity Compensation Plans or other Company equity compensation plans.
(b) Right to Amend or Terminate the Plan. The Board may amend or terminate the Plan
at any time and for any reason. No Awards shall be granted under the Plan after the Plans
termination. An amendment of the Plan shall be subject to the approval of the Companys
shareholders only to the extent required by applicable laws, regulations or rules. In addition, no
such amendment or termination shall be made which would impair the rights of any Participant,
without such Participants written consent, under any then-outstanding Award, provided that no such
Participant consent shall be required with respect to any amendment or alteration if the Committee
determines in its sole discretion that such amendment or alteration either (i) is required or
advisable in order for the Company, the Plan or the Award to satisfy or conform to any law or
regulation or to meet the requirements of any accounting standard, or (ii) is not reasonably likely
to significantly diminish the benefits provided under such Award, or that any such diminishment has
been adequately compensated. In the event of any conflict in terms between the Plan and any Award
agreement, the terms of the Plan shall prevail and govern.
A-26
SECTION 16. EXECUTION.
To record the adoption of this Plan by the Board, the Company has caused its duly authorized
Officer to execute this Plan on behalf of the Company.
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LIFEVANTAGE CORPORATION
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Annual Meeting Proxy Card
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▼ PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
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Proposals The Board of Directors recommends a vote FOR
all the nominees listed and FOR Proposals 2, 3 and 4.
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1.
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To elect the following (8) persons (except as marked to the contrary) as directors of the Company for a one-year term, or until their successors are duly elected and qualified:
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01 - Mr. David W. Brown
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02 - Dr. James D. Crapo
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03 - Dr. Joe M. McCord
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04 - Mr. Richard Doutre Jones
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05 - Mr. Garry Mauro
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06 - Mr. Douglas C. Robinson
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07 - Mr. C. Mike Lu
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08 - Ms. Kay Stout Manovich
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Mark here to vote FOR all nominees |
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Mark here to WITHHOLD vote from all nominees |
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For All
EXCEPT - To withhold a vote for one or more nominees, mark
the box to the left and the corresponding numbered box(es) to the right.
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For |
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Abstain |
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For |
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To ratify the appointment of Ehrhardt Keefe Steiner &
Hottman PC as independent auditors of the Company for its
fiscal year ending June 30, 2011.
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To ratify the approval of the Companys 2010 Long-Term
Incentive Plan.
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To conduct any other business properly brought before
the meeting. |
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Non-Voting
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Change of Address Please print new address below
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Authorized
Signatures
This section must be completed for your vote to be counted.
Date and Sign Below
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IMPORTANT: Please sign below exactly as the shares are issued. When shares are held by joint tenants, both should sign. When signing as an attorney, executor, administrator, trustee or guardian, please
give the full title as such. If a corporation, please sign in full corporate name by the president or other authorized officer. If a partnership, please sign in the partnership name by an authorized person.
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Date (mm/dd/yyyy) Please print date below.
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Signature 1 Please keep signature within the box.
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Signature 2 Please keep signature within the box. |
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Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be
Held on November 19, 2010: The Proxy Statement and Annual Report to Stockholders are available at
http://www.lifevantage.com/investor-sec.aspx
▼ PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. ▼
Proxy LIFEVANTAGE CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 19, 2010.
The stockholder(s) whose signature(s) appear(s) on the reverse side of this proxy form hereby
appoint(s) Carrie E. Carlander and David W. Brown or either of them as proxies, with full power of
substitution, and hereby authorize(s) them to represent and vote all shares of common stock of
LifeVantage Corporation (the Company) that the stockholder(s) would be entitled to vote on all
matters that may come before the Annual Meeting of Stockholders to be held on November 19, 2010, or
at any adjournment thereof. The proxies shall vote subject to the directions indicated on the
reverse side of this card and the proxies are authorized to vote in their discretion upon such
other business as may properly come before the meeting and any adjournments or postponements
thereof. The proxies will vote as the board of directors recommends where a choice is not
specified.
Please complete, sign, date and mail the enclosed proxy card in the accompanying envelope even if
you intend to be present at the Annual Meeting. Returning the proxy will not limit your right to
vote in person or to attend the Annual Meeting, but will ensure your representation if you cannot
attend. If you hold shares in more than one name or if your stock is registered in more than one
way, you may receive more than one copy of the proxy materials. If so, please sign and return each
of the proxies that you receive so that all of your shares may be voted. The proxy is revocable at
any time before it is voted.
THANK YOU FOR VOTING.