DEF 14A 1 v340780_def14a.htm DEF 14A

 UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.     )

 

Filed by the Registrant x

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Check the appropriate box:

 

¨  Preliminary Proxy Statement

 

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x  Definitive Proxy Statement

 

¨  Definitive Additional Materials

 

¨  Soliciting Material Pursuant to §240.14a-12

  

Reliv International, Inc.


(Name of Registrant as Specified in its Charter)

  


(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

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RELIV’ INTERNATIONAL, INC.

136 Chesterfield Industrial Boulevard

Chesterfield, Missouri 63005

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO

BE HELD ON MAY 23, 2013

 

To:Stockholders of Reliv’ International, Inc.

 

The Annual Meeting of the Stockholders of Reliv’ International, Inc. will be held at Reliv’ International, Inc., Corporate Headquarters, 136 Chesterfield Industrial Boulevard, Chesterfield, Missouri 63005, on Thursday, May 23, 2013, at 9:00 a.m., Central Daylight Savings Time, for the following purposes:

 

1.To elect 5 directors to hold office during the year following the Annual Meeting or until their successors are elected (Item No. 1 on proxy card);

 

2.To ratify the appointment of Ernst & Young LLP as the independent registered public accounting firm of the Company for 2013 (Item No. 2 on proxy card); and

 

3.To approve, by non-binding vote, named executive compensation (Item No. 3 on proxy card); and

 

4.To recommend, by non-binding vote, the frequency of executive compensation votes (Item No. 4 on proxy card); and

 

5.To transact such other business as may properly come before the meeting.

 

The close of business on March 22, 2013, has been fixed as the record date for determining the stockholders entitled to receive notice of and to vote at the Annual Meeting.

 

BY ORDER OF THE BOARD OF DIRECTORS

 

 

April 8, 2013

 

/s/ Stephen M. Merrick________________

Stephen M. Merrick, Secretary

 

 

YOUR VOTE IS IMPORTANT

 

It is important that as many shares as possible be represented at the Annual Meeting. Please read this Proxy Statement and submit your Proxy via the Internet, or if you received a paper copy of your proxy materials, by using the toll-free telephone number provided or by completing, signing, dating and returning your Proxy in the pre-addressed envelope provided. Your Proxy may be revoked by you at any time before it has been voted.

 

 
 

 

RELIV’ INTERNATIONAL, INC.

136 Chesterfield Industrial Boulevard

Chesterfield, Missouri 63005

 

 

PROXY STATEMENT

 

 

Information Concerning the Solicitation

 

The Board of Directors of Reliv’ International, Inc. (the “Company”) is furnishing this Proxy Statement for the solicitation of proxies from holders of the outstanding common stock of the Company to be used at the 2013 annual stockholders meeting (the “Annual Meeting”) of the Company which will be held on Thursday, May 23, 2013 at 9:00 a.m., Central Daylight Savings Time. The Company has elected to provide access to these proxy materials over the Internet in accordance with rules adopted by the Securities and Exchange Commission. On April 8, 2013 we mailed a Notice of Internet Availability of Proxy Materials to our stockholders of record and beneficial owners. The Notice instructs you on how you may access the proxy materials on the Internet. It also instructs you on how you may vote your proxy. If you received a Notice by mail and would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting printed materials included in the Notice.

 

The cost of preparing, assembling and furnishing the proxy material and of reimbursing brokers, nominees and fiduciaries for the out-of-pocket and clerical expenses of transmitting copies of the proxy material to the beneficial owners of shares held of record by such persons will be borne by the Company. The Company does not intend to solicit proxies otherwise than pursuant to the Notice and, where requested, mailing of proxy materials, but certain officers and regular employees of the Company or its subsidiaries, without additional compensation, may use their personal efforts, by telephone or otherwise, to obtain proxies.

 

Your vote is very important. Whether or not you plan to attend our Annual Meeting, please take the time to vote either by the Internet or, if you requested a paper copy of the proxy materials, by telephone using the instructions on the proxy card or by completing and mailing the proxy card enclosed with the proxy materials as soon as possible. If you elect to vote using the proxy card in the proxy materials you requested be mailed to you, you must sign, date and mail it and indicate how you want to vote. If you do not so indicate, your proxy will be voted as recommended by the Board of Directors.

 

Quorum and Voting

 

Only stockholders of record at the close of business on March 22, 2013 are entitled to vote at the Annual Meeting. On that day, there were 12,619,640 shares of common stock outstanding. Each share has one vote. Stockholders do not have cumulative voting rights in the election of directors. A simple majority of the outstanding shares is required to be present in person or by proxy at the meeting for there to be a quorum for purposes of proceeding with the Annual Meeting. A simple majority of the shares present in person or by proxy at the Annual Meeting, at which a quorum is present, is required to elect directors and approve the appointment of the Company’s independent registered public accounting firm. Abstentions and withheld votes have the effect of votes against these matters. Broker non-votes (shares held of record by a broker for which a proxy is not given) will be counted for purposes of determining shares outstanding for purposes of a quorum, but will not be counted as present for purposes of determining the vote on any matter considered at the meeting.

 

If a stockholder specifies how the proxy is to be voted with respect to any of the proposals for which a choice is provided, the proxy will be voted in accordance with such specifications. If a stockholder fails to so specify with respect to such proposals, the proxy will be voted “FOR” the nominees for directors contained in these proxy materials, “FOR” the appointment of the Company’s independent registered public accounting firm, “FOR” approval of the compensation of the Company’s named executive officers as described in this proxy statement, and “FOR” the proposal providing for an advisory vote to be held every three years to approve the compensation of the Company’s named executive officers. A stockholder submitting a proxy prior to the Annual Meeting has the power to revoke it at any time before the shares subject to it are voted by (i) sending a written statement to that effect to the Secretary of the Company, (ii) submitting a valid proxy having a later date, or (iii) voting in person at the Annual Meeting.

 

 
 

 

Discretionary Voting Power

 

The Board of Directors knows of no other matters to be presented for stockholder action at the Annual Meeting. On matters which may be raised at the Annual Meeting that are not covered by this Proxy Statement, the persons named in the proxy will have full discretionary authority to vote. If any nominee for election as a director becomes unable to accept nomination or election, which we do not anticipate, the persons named in the proxy may vote for the election of another person recommended by the Board of Directors.

 

BENEFICIAL OWNERSHIP OF SHARES BY MANAGEMENT AND

SIGNIFICANT STOCKHOLDERS

 

The following table provides information concerning the beneficial ownership of the Company’s common stock by each director and nominee for director, certain executive officers, all of the Company’s directors and officers as a group, and the beneficial owners known to the Company to hold more than five percent of the Company’s outstanding common stock as of March 22, 2013.

 

The amounts and percentage of common stock beneficially owned are reported on the basis of regulations of the Securities and Exchange Commission (“SEC”) governing the determination of beneficial ownership of securities. Under the rules of the SEC, a person is deemed to be a “beneficial owner” of a security if that person has or shares “voting power,” which includes the power to vote or to direct the voting of such security, or “investment power,” which includes the power to dispose of or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which that person has a right to acquire beneficial ownership within 60 days after March 22, 2013. Under these rules, more than one person may be deemed a beneficial owner of the same securities and a person may be deemed a beneficial owner of securities as to which he has no economic interest. Percentage of class is based on 12,619,640 shares of common stock outstanding as of March 22, 2013.

 

 

Name of beneficial owner(1)

 

Amount and nature of

beneficial ownership

 

 

Percent of class

         
Robert L. Montgomery(2)   3,667,265   28.65%
         
Carl W. Hastings(3)     671,318   5.30%
         
Stephen M. Merrick(4)   499,561   3.94%
         
John B. Akin(5)       11,750   *
         
Denis St. John(6)       34,709   *
         
John M. Klimek(7)            500   *
         
R. Scott Montgomery(8)      140,381   1.11%
         
All Directors, nominees and Executive Officers as a Group (7 persons)(9)  

 

5,025,484

 

 

38.72%

 

(footnotes on following page)

       

 

 

2
 

 

______________________

 

* less than one percent

 

(1)Unless otherwise indicated below, the person named in the table has sole voting and investment power with respect to all shares beneficially owned, subject to community property laws where applicable. Unless otherwise indicated, the address for each person is c/o Reliv’ International, Inc., 136 Chesterfield Industrial Boulevard, Chesterfield, Missouri 63005.

 

(2)Includes 180,000 shares subject to options exercisable within 60 days after March 22, 2013, 2,223,347 shares held through the Montgomery Family Limited Partnership, 483,905 shares held through Montgomery Enterprises, Ltd., for which Mr. Montgomery has sole voting and investment power, and 140,215 shares held by Mr. Montgomery’s spouse.

 

(3)Includes 44,500 shares subject to options exercisable within 60 days after March 22, 2013.

 

(4)Includes 54,000 shares subject to options exercisable within 60 days after March 22, 2013. Includes 443,547 shares held in the name of The Merrick Company LLC.

 

(5)Includes 10,500 shares subject to options exercisable within 60 days after March 22, 2013.

 

(6)Includes 11,200 shares subject to options exercisable within 60 days after March 22, 2013, 6,009 shares held through DMK Limited Partnership and 2,500 shares held in the name of Mr. St. John’s spouse.

 

(7)Includes 500 shares subject to options exercisable within 60 days after March 22, 2013.

 

(8)Includes 58,000 shares subject to options exercisable within 60 days after March 22, 2013.

 

(9)Includes 358,700 shares subject to options exercisable within 60 days after March 22, 2013.

 

 

PROPOSAL ONE - ELECTION OF DIRECTORS

 

Five directors will be elected at the Annual Meeting to serve for terms of one year expiring on the date of the Annual Meeting in 2014. Each director elected will continue in office until a successor has been elected. If a nominee is unable to serve, which the Board of Directors has no reason to expect, the persons named in the proxy intend to vote for the balance of those named and, if they deem it advisable, for a substitute nominee.

 

THE BOARD OF DIRECTORS RECOMMENDS THE ELECTION OF ALL OF THE NOMINEES.

 

Information Concerning Nominees

 

The following is information concerning nominees for election to the Board of Directors. Each of the following nominees is presently a member of the Board of Directors.

 

Robert L. Montgomery, age 71, is the Chairman of the Board and Chief Executive Officer. Mr. Montgomery became Chairman of the Board of Directors and Chief Executive Officer on February 15, 1985. Mr. Montgomery served as President of the Company from July 1985 until July 2012. Mr. Montgomery is the President and a director of Reliv’, Inc. and President and a director of Reliv’ World Corporation, both wholly owned subsidiaries of the Company. Mr. Montgomery has been the principal executive officer of the Company since its founding in 1985. Prior to that time, he held positions for a number of years as an executive officer of several life insurance companies. Mr. Montgomery received a B.A. degree in Economics from the University of Missouri in Kansas City, Missouri in 1965. Mr. Montgomery is the father of R. Scott Montgomery, the Company’s President of Reliv Asia Pacific, and Ryan A. Montgomery, the Company’s President.

 

3
 

 

Carl W. Hastings, age 71, was appointed Vice Chairman and Chief Scientific Officer in April 2007. Prior to his appointment in April 2007, he served as Vice President of the Company since July 1, 1992. Dr. Hastings has been employed by the Company since April 1991. Dr. Hastings has served on the Board of Directors from February 1990 to May 2004 and from May 2005 to the present. Dr. Hastings has been the principal food scientist for the Company for more than 20 years and has been primarily responsible for the development of a majority of the Company’s products. Dr. Hastings holds B.S. and M.S. degrees and a Ph.D. degree in Food Science from the University of Illinois. For more than the past 30 years, Dr. Hastings has been engaged in a variety of employment and consulting capacities as a food scientist. Dr. Hastings is the father of Steven G. Hastings, the Company’s Senior Vice President, North American Sales and Brett M. Hastings, Vice President - Legal.

 

John B. Akin, age 84, has been a member of the Board of Directors since June 1986. Mr. Akin retired as Vice President, A.G. Edwards & Sons and resident manager of the Decatur, Illinois branch office in 1995. Mr. Akin had been associated with A.G. Edwards & Sons as a stock broker, manager and officer since April 1973. Mr. Akin holds a B.A. degree from the University of Northern Iowa, Cedar Falls, Iowa, with a major in Social Science and minor in economics and English literature.

 

Denis St. John, age 69, has been a member of the Board of Directors since May 2004. Mr. St. John is the chairman of Real Estate Development Strategies, LLC. and has held such position since May 2007. Until his retirement on October 31, 2007, Mr. St. John was a principal with Clifton Larson Allen, a regional public accounting firm, in the Health Care Group. For 42 years, Mr. St. John was associated with various accounting firms working primarily in the financing and tax area, serving mid-size, closely held companies. He has served on the boards of several non-profit and closely-held companies in the banking and manufacturing industries. Mr. St. John graduated from the University of Missouri with a Bachelor of Science in Business Administration with a major in Accounting. Mr. St. John is Certified Public Accountant and a member of the Missouri Society of CPAs and the American Institute of CPAs.

 

John M. Klimek, age 54, has been a member of the Board of Directors since May 2010. From August 2004 to the present, Mr. Klimek has been employed by HFR Asset Management, LLC, Chicago, Illinois, a hedge fund management company, and currently serves as Managing Director, Legal and Chief Compliance Officer. From December 1999 to August 2004, Mr. Klimek was a principal in the law firm of Merrick & Klimek, LLP, Chicago, Illinois. Mr. Klimek has been a practicing attorney in Illinois since 1984 specializing in corporate and securities law. He holds a B.S. in Accountancy from the University of Illinois and Juris Doctor Degree from the University of Illinois School Of Law.

  

Executive Officers Other Than Nominees

 

Ryan A. Montgomery, age 39, was appointed President on July 24, 2012. Previously he was Executive Vice President, Worldwide Sales from April 2007 to July 2012 and Vice President, Sales from 2004 to 2007. Mr. Montgomery served as corporate counsel from September 1999 to October 2004. Mr. Montgomery received his B.A. degree in Economics from Vanderbilt University in 1995 and graduated from Saint Louis University Law School in 1999.

 

R. Scott Montgomery, age 43, was appointed President of Reliv Asia Pacific on July 24, 2012. Mr. Montgomery joined the Company in 1993 and previously served as Executive Vice President and Chief Operating Officer from April 2007 to July 2012, Senior Vice President – Worldwide Operations from 2004 to 2007 and Vice President of International Operations from 2001 to 2004. Mr. Montgomery graduated from Southwest Missouri State University with a B.S. degree in Finance and Investments.

 

Stephen M. Merrick, age 71, has been the Senior Vice President, Secretary, and General Counsel since July 20, 1989 and served as a member of the Board of Directors from 1989 to May 2013. Mr. Merrick is Of Counsel to Vanasco, Genelly & Miller, which has served as counsel to the Company with respect to certain matters. Mr. Merrick is a principal of the law firm of Merrick & Associates, P.C., which has served as counsel to the Company with respect to certain matters. Mr. Merrick has been engaged in the practice of law for more than 45 years and has represented the Company since the Company’s founding. Mr. Merrick received a Juris Doctor degree from Northwestern University School of Law in 1966. He is also an officer and director of CTI Industries Corporation (NASDAQ: CTIB).

 

4
 

 

Steven D. Albright, age 51, has been Senior Vice President and Chief Financial Officer since March 2005. Mr. Albright was the Vice President, Finance/Controller from 2002 to 2005 and was the Controller since 1992. Prior to his employment with the Company, Mr. Albright was employed from 1987 to 1992 as Assistant Controller for Kangaroos USA, Inc., an athletic shoe importer and distributor. For the period from 1983 to 1987, he was employed by the public accounting firm of Ernst & Young LLP. Mr. Albright received a B.S. degree in Accountancy from the University of Illinois at Urbana-Champaign in May 1983 and is a CPA.

 

Steven G. Hastings, age 47, was appointed Senior Vice President, North American Sales in April 2007. He served as Vice President, Sales from 2004 to 2007. Mr. Hastings was the Vice President of International Marketing from 2002 to 2004 and the Director of International Marketing from 1996 to 2002. Mr. Hastings started with the Company in January 1993 as Director of Marketing. Mr. Hastings graduated from the University of Illinois in 1987 with a Marketing degree and obtained his Masters in Business from Butler University in Indianapolis in 1995.

 

Kurt C. Wulff, age 48, was appointed Vice President, Marketing in 2005 and has been employed by the Company in marketing positions since 1999. Previously, Mr. Wulff had over 10 years of sales and marketing positions in a variety of industries. He graduated in 1986 from the University of Missouri-Columbia with a B.S. degree in Journalism.

 

Brett M. Hastings, age 39, was appointed Vice President, Legal in August 2007. He has been employed by the Company since February 2005 and previously served as Associate General Counsel. Prior to his employment by the Company, Mr. Hastings was employed as a senior associate with the law firm of Doster Ullom, LLC from 2003 to 2005 and as an associate with Thompson Coburn, LLP from 1998 to 2003. Mr. Hastings graduated from Ohio Northern University in 1995 with a B.S.B.A and received a Juris Doctor degree from the University of Illinois School of Law in 1998.

 

Ronald W. McCain, age 47, was named Vice President, Sales Development in August 2007. He has been employed by the Company in various sales, marketing and customer service capacities since 1996.

 

Joseph J. Wojcik, age 49, was appointed as Vice President, International on September 1, 2008. Prior to his employment with the Company, he was a principal and founder of Endurance Business Solutions, a professional consulting firm advising companies on strategic entry into foreign markets, and, for a period of 11 years, was employed in various executive management positions at Herbalife International. Mr. Wojcik graduated from Rutgers University with a Bachelor’s degree in Engineering in 1985 and from California State University, Long Beach, with an MBA degree in 1993.

 

Debra P. Hellweg, age 41, was appointed Vice President, Operations in June 2008.   She has been employed by the Company since 2004 and served as Director of Internal Audit from 2004 to 2008.   Prior to her employment with the Company, Ms. Hellweg was a Manager with Deloitte & Touche LLP and Vice President & Auditor of Southwest Bank of St. Louis.  Ms. Hellweg has a B.S.B.A. degree in Accounting from the University of Missouri and an MBA from Webster University and is a CIA.

 

 

5
 

 

CORPORATE GOVERNANCE AND

THE BOARD OF DIRECTORS

 

General

 

The business and affairs of the Company are managed under the direction of the Board of Directors in accordance with the General Corporation Law of the State of Delaware and the Company’s Articles of Incorporation and Bylaws, as amended. Members of the Board are kept informed of the Company’s business through discussions with the Chairman and Chief Executive Officer and other officers, by reviewing materials provided to them and by participating in meetings of the Board of Directors and its committees.

 

From May 2012 until Michael Smith’s resignation on January 17, 2013, the Board of Directors of the Company had seven members. From January 17, 2013 to the present, the Board had six members. The Board met seven times during 2012. During 2012, no director attended less than 75% of the combined Board of Directors and Committee meetings. The Board has determined that Messrs. Akin, Klimek, Smith and St. John are independent based on the application of the rules and standards of the Nasdaq Stock Market.

 

Board Leadership Structure

 

As is often common practice among public companies of our size in the United States, our Board of Directors has appointed the Company’s Chief Executive Officer to serve as Chairman of the Board. In his position as Chief Executive Officer, Mr. Montgomery is responsible for the direction and leadership of the Company and oversees the development and execution of the Company’s strategic plans. In his role as Chairman of the Board, he presides over the meetings of the Board of Directors and communicates the decisions and directives of the Board to management. The Board of Directors believes that the combination of these two roles provides the most efficient and effective leadership model for the Company by enhancing the Chairman and Chief Executive Officer’s ability to provide perspective and direction with regard to business strategies and plans to both the Board and management, allowing for unified leadership and focus.

 

Notwithstanding the Board’s decision to appoint the Chief Executive Officer as Chairman of the Board of Directors, the Company has no bylaw or policy in place that mandates that the Chief Executive Officer serve as the Chairman of the Board. Our Board of Directors recognizes that depending on the circumstances, other leadership models, such as a separate independent Chairman of the Board, might be appropriate. Accordingly, the Board of Directors periodically evaluates its leadership structure.

 

The Board of Directors has not appointed a lead independent director at this time. The Board has evaluated whether appointing a lead independent director facilitates the ability of the Company’s independent directors to carry out their duties. The independent directors of the Board attend at least one executive session, and may call such further sessions as they deem necessary, at which only independent directors are present and at which the independent directors are free to discuss any aspect of the Company’s business and risk management without the influence of interested directors or management. In addition, all members of the Company’s Audit, Nominating and Compensation committees have been determined by the Board of Directors to be independent based on the application of the rules and standards of the NASDAQ Stock Market.

 

Board Role in Risk Oversight

 

The Board of Directors plays an active role, as a whole and at the committee level, in overseeing management of the Company’s risks. The Board regularly reviews information regarding our credit, liquidity and operations, as well as the risks associated with each. The Audit Committee oversees management of financial risks through regular meetings with the Company’s independent registered public accounting firm and the Company’s Chief Financial Officer and Manager of Internal Audit. The Company’s Compensation Committee evaluates and addresses risks relating to executive compensation, our incentive compensation plans and other compensatory arrangements. The Nominating Committee manages risks associated with the independence of the Board of Directors and potential conflicts of interest. While each committee is responsible for evaluating certain risks and overseeing the management of those risks, the entire Board of Directors is regularly informed through committee reports and management presentations to the full Board about these and other operational risks.

 

6
 

 

Committees of the Board of Directors

 

The Board of Directors has standing Executive, Compensation, Nominating, Audit and International Committees.

 

The Executive Committee acts on various matters between meetings of the Board of Directors. The Executive Committee consists of Messrs. Montgomery, Merrick and Hastings. The Executive Committee did not have any meetings during 2012.

 

The Company has established an International Committee to review and advise with respect to the international operations of the Company. The International Committee consists of Messrs. Klimek and Merrick and includes several members of management. The International Committee met four times in 2012.

 

Audit Committee

 

Since 2000, the Company has had a standing Audit Committee, which is presently composed of Messrs. St. John, Akin and Klimek. Mr. St. John has been designated and is the Company’s “Audit Committee Financial Expert” pursuant to Item 401 of Regulation S-K of the Securities Exchange Act of 1934. The Audit Committee held eight meetings during fiscal year 2012, including quarterly meetings with management, the Company’s Vice President, Operations, the Manager of Internal Audit and the independent registered public accounting firm to discuss the Company’s financial statements and control systems. Mr. St. John and each appointed member of the Committee satisfies the definition of “independent” as that term is defined in the rules governing companies whose stock is traded on the Nasdaq Stock Market. The Board of Directors has adopted a written charter for the Audit Committee. A copy of the Audit Committee Charter has been posted and can be viewed on the Company’s Internet website at http://www.reliv.com under the section entitled “Investor Relations.” In addition, the Audit Committee has adopted a complaint monitoring procedure to enable confidential and anonymous reporting to the Audit Committee of concerns regarding, among other things, questionable accounting or auditing matters.

 

Report of the Audit Committee

 

The Audit Committee oversees the Company’s financial reporting process on behalf of the Board of Directors. Management has the primary responsibility for the financial statements and the reporting process including the systems of internal controls. In fulfilling its oversight responsibilities, the Audit Committee reviewed the audited financial statements in the Annual Report with management and the Company’s independent registered public accounting firm, Ernst & Young LLP, including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, the clarity of disclosures in the financial statements and internal controls.

 

The Audit Committee reviewed with the independent registered public accounting firm, which is responsible for expressing an opinion on the conformity of those audited financial statements with U.S. generally accepted accounting principles, their judgments as to the quality, not just the acceptability, of the Company’s application of accounting principles and such other matters as are required to be discussed with the Audit Committee under generally accepted auditing standards, including but not limited to those matters required to be discussed by SAS 61 (Codification of Statements on Auditing Standards, AU §380, as amended). In addition, the Audit Committee has discussed with the independent registered public accounting firm their independence from management and the Company including the matters in the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the Public Company Accounting Oversight Board regarding its communications with the Audit Committee concerning independence.

 

7
 

 

The Audit Committee discussed with the Company’s independent registered public accounting firm the overall scope and plans for their audit of the Company’s financial statements and the effectiveness of internal controls over financial reporting. The Audit Committee meets with the internal auditor and independent registered public accounting firm, with and without management present, to discuss the results of their examinations, their evaluations of the Company’s internal controls and the overall quality of the Company’s financial reporting.

 

In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors (and the Board has approved) that the audited financial statements be included in the Annual Report on Form 10-K for the year ended December 31, 2012 for filing with the Securities and Exchange Commission. The Audit Committee and the Board of Directors have also recommended, subject to stockholder approval, the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm.

 

Denis St. John, Audit Committee Chair

John B. Akin, Member

John M. Klimek, Member

 

Nominating Committee

 

In May 2004, the Company established a Nominating Committee. The Nominating Committee consists of two directors, Messrs. Akin and St. John. The Nominating Committee does not have a charter. The Board of Directors has determined that each of the members of the Nominating Committee is independent as defined in the listing standards for the Nasdaq Stock Market.

 

The Nominating Committee has not adopted a formal policy with regard to consideration of director candidates recommended by security holders. The Company believes that continuing service of qualified incumbent members of the Board of Directors promotes stability and continuity at the Board level, contributes to the Board’s ability to work as a collective body and provides the benefit of familiarity and insight into the Company’s affairs. Accordingly, the process of the Nominating Committee for identifying nominees reflects the Company’s practice of re-nominating incumbent directors who continue to satisfy the criteria for membership on the Board. For vacancies which are anticipated on the Board of Directors, the Nominating Committee intends to seek out and evaluate potential candidates from a variety of sources that may include recommendations by security holders, members of management and the Board of Directors, consultants and others. The minimum qualifications for potential candidates for the Board of Directors include demonstrated business experience, decision-making abilities, personal integrity and a good reputation. While diversity is not a leading factor in the Nominating Committee’s evaluation of potential candidates and there is no formal policy for considering diversity when nominating a potential director, it is a consideration that is evaluated along with other qualifications of potential candidates. In light of the foregoing, it is believed that a formal policy and procedure with regard to consideration of director candidates recommended by security holders is not necessary in order for the Nominating Committee to perform its duties.

 

The Nominating Committee met twice in 2012. All of the independent directors of the Board of Directors participated in the nominating process and, in separate session, voted in favor of recommending to the Board of Directors the nomination of each of the nominees for election as directors.

 

Compensation Committee

 

The Compensation Committee consists of three directors: Messrs. St. John (Chairman), Klimek and Akin. The Board has determined that each of the members of the Compensation Committee is independent as defined in the listing standards for the Nasdaq Stock Market. The Compensation Committee reviews and acts on the Company’s executive compensation and employee benefit and retirement plans, including their establishment, modification and administration. It also determines the compensation of the Chief Executive Officer and certain other executive officers, including incentive compensation programs and stock options. The Compensation Committee has a charter which has been posted and can be viewed on the Company’s Internet website at http://www.reliv.com under the section entitled “Investor Relations.” The Compensation Committee met five times in 2012.

 

8
 

 

EXECUTIVE COMPENSATION

 

The Company is a “smaller reporting company” under Item 10 of Regulation S-K promulgated under the Securities Exchange Act of 1934 and has elected to comply with certain of the requirements applicable to smaller reporting companies in connection with this proxy statement.

 

SUMMARY COMPENSATION TABLE

 

The following table sets forth the annual and long-term compensation for the fiscal years ended December 31, 2012 and 2011, respectively, of the Company’s Principal Executive Officer and each of the two other most highly compensated executive officers. These individuals, including the Chief Executive Officer, are collectively referred to in this proxy statement as the Named Executive Officers.

 

               Non-Equity   All Other     
           Option   Incentive Plan   Compensation     
Name and Principal Position  Year   Salary   Awards (1)   Compensation (2)   (3, 4, 5, 6, 7, 8)   Total 
                         
Robert L. Montgomery   2012   $642,625   $22,985   $11,690   $75,646   $752,946 
Chairman and Chief Executive   2011   $642,625   $42,842   $32,200   $54,822   $772,489 
Officer                              
                               
Carl W. Hastings   2012   $360,000   $14,095   $11,690   $34,572   $420,357 
Vice Chairman, Chief Scientific   2011   $360,000   $18,073   $11,760   $33,101   $422,934 
    Officer                              
                               
R. Scott Montgomery   2012   $202,000   $7,589   $46,760   $18,607   $274,956 
President, Reliv Asia-Pacific   2011   $202,000   $11,567   $38,864   $21,578   $274,009 

______________________

 

(1)Reflects the compensation expense recognized in 2012 and 2011 for stock option awards under FASB ASC Topic 718 as reported in the Company’s audited financial statements. Refer to Note 7 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012 for a discussion of the relevant assumptions used in calculating the compensation expense. Option awards do not include value of performance-based options granted to each of the named officers, as vesting is not probable at this time. The maximum value of the performance-based options for each named officer is as follows: Robert L. Montgomery, $47,830; Carl W. Hastings and R. Scott Montgomery, $19,132 each.
(2)Amounts determined solely under the Company’s Incentive Compensation Plan.
(3)Amounts for 2012 include matching 401(k) contributions as follows: Robert L. Montgomery, $4,913; and Carl W. Hastings, $4,913.
(4)Amounts for 2012 include Company contributions to the Employee Stock Ownership Plan of $3,691 for Robert L. Montgomery and Carl W. Hastings; and $3,407 for R. Scott Montgomery.
(5)Amounts for 2012 include life insurance allowance paid for Robert L. Montgomery of $39,000; Carl W. Hastings of $16,368; and R. Scott Montgomery of $2,000.
(6)Amounts for 2012 include value of automobile provided for Robert L. Montgomery of $10,391 and automobile allowance provided to Carl W. Hastings of $9,600.
(7)Amounts for 2012, include a travel allowance paid to R. Scott Montgomery of $13,200.
(8)All Other Compensation amount for Robert L. Montgomery includes financial planning services of $17,651 paid in 2012.

 

9
 

 

Narrative Disclosure For Summary Compensation Table

 

Employment Agreements with Our Named Executive Officers

 

In June 2007, the Company entered into an Employment Agreement with Robert L. Montgomery replacing a prior agreement. The agreement, as amended, is for a term of employment commencing on January 1, 2007 and expiring on December 31, 2009 with a provision for automatic one-year renewal terms, and provides for Mr. Montgomery to receive base annual compensation during the term of not less than $600,000. Mr. Montgomery is also to participate in the Company’s annual incentive compensation and the Company’s long-term equity incentive compensation plans and such other compensation plans as the Company may from time to time have for executives. In the event of Mr. Montgomery’s death during the term of the agreement, payments equal to the total compensation that would have been paid to Mr. Montgomery under the agreement, but for his death, will be made to his heirs for a period of six months. The agreement also allows Mr. Montgomery the option to reduce his level of service to the Company by approximately one-half with a corresponding decrease in base annual compensation and a reduction of 25% of his incentive compensation, after a requisite waiting period. Mr. Montgomery also has the option to terminate his active service and continue in a consulting capacity. The term of the consulting period will be 15 years and Mr. Montgomery will receive approximately 30% of his prior average annual cash compensation over the five years immediately preceding the earlier of (1) his election to terminate his employment and continue to serve the Company as a consultant or (2) his election to continue his employment at a reduced rate of service and compensation. The agreement includes the obligation of Mr. Montgomery to maintain the confidentiality of the Company’s confidential information and contains a covenant of Mr. Montgomery not to compete with the Company. In addition, for a period of at least 20 years following the termination of the agreement, the Company has the right to continue its use of Mr. Montgomery’s name and likeness in consideration of a $10,000 annual fee paid to Mr. Montgomery or his heirs.

 

In December 2011, the Company entered into an Employment Agreement with Dr. Hastings replacing a prior agreement. The term of employment under the agreement, as amended, was for a period commencing on July 1, 2006 and expiring on December 31, 2012; provided, however, the parties have agreed to extend the agreement on a month-to-month basis. During the term of employment, the Company is obligated to pay Dr. Hastings a basic salary at the rate of $30,000 per month. Dr. Hastings is also to participate in the Company’s annual incentive compensation and the Company’s long-term equity incentive compensation plans and such other compensation plans as the Company may from time to time have for executives. Upon expiration of the term of employment and a requisite waiting period, Dr. Hastings will be retained to provide consulting services to the Company for a term expiring on June 30, 2021. During the consulting term, the Company will pay Dr. Hastings the sum of $12,000 per month, such amount to be adjusted periodically based upon changes in the National Consumer Price Index. In the event of Dr. Hastings’ death during the term of the agreement, payments equal to the cash compensation that would have been paid to Dr. Hastings under the agreement, but for his death, will be made to his heirs for a period of six months. During the term of the agreement, and thereafter for a period of 20 years in consideration of the payment of $10,000 annually, the Company will be entitled to use the name and likeness of Dr. Hastings in connection with the Company’s promotional materials and activities. The agreement also includes the obligation of Dr. Hastings to maintain the confidentiality of the Company’s confidential information and to hold any and all inventions made or conceived by him during the term of the agreement as the Company’s fiduciary and a covenant of Dr. Hastings not to compete with the Company. Since December 31, 2012, the terms of the agreement have remained in effect on a month-to-month basis while Dr. Hastings and the Company negotiate a new employment agreement.

 

In January 2008, the Company entered into an Employment Agreement with R. Scott Montgomery under which Mr. Montgomery was employed as an executive of the Company. The agreement is for a term of one year with a provision for automatic one-year renewal terms, and provides for base annual compensation of $202,000. Mr. Montgomery is also to participate in the Company’s annual incentive compensation plan and such other compensation plans as the Company may from time to time have for executives. The agreement provides that, in the event of termination (other than termination for default or permanent mental or physical disability), Mr. Montgomery will receive a severance payment equal to $101,000, payable over a 12-month period. The agreement includes the obligations of Mr. Montgomery to maintain the confidentiality of the Company’s confidential information and hold certain inventions for the Company in his fiduciary capacity, and contain a covenant not to solicit the Company’s distributors for a period of two years after the date of termination of the agreement.

 

10
 

 

Base Salaries

 

For 2012, there was no adjustment to the base salaries of Messrs. Robert L. Montgomery, Carl Hastings and R. Scott Montgomery.

 

Information Relating to Cash Incentives and Stock and Option Awards

 

Effective January 1, 2007, the Board of Directors, on the recommendation of the Compensation Committee, adopted an Incentive Compensation Plan providing for annual incentive compensation to be paid to executive and managerial employees of the Company. Under the Plan, designated Named Executive Officers and a number of other executive officers and managers receive incentive compensation payments, determined on a quarterly and annual basis, which are based upon the income from operations of the Company for the period if the profits exceed a threshold amount of quarterly income from operations in the amount of $500,000. The benefits under the Plan are divided into two Pools of compensation. Pool I (representing the largest pool of incentive compensation) covers senior executive officers who participate in the pool of incentive compensation based upon a percentage allocation made by the Compensation Committee each year. Pool II covers other executives and managers who are selected to participate in proportions determined by management. The Compensation Committee believes such incentive compensation motivates participants to achieve strong profitability which is viewed as the most significant element of corporate performance, provides rewards for strong corporate performance and aligns the incentive with the interests of the stockholders. Incentive compensation participation levels are generally determined during the first quarter of each fiscal year.

 

With respect to Pool I participants (other than the Chief Executive Officer whose participation is determined solely by the Compensation Committee and the Board of Directors), the Compensation Committee, in consultation with the Chief Executive Officer, determines the participants and their relative level of participation during the first quarter of the year. In determining participation and the level of participation each year, the Compensation Committee considers the executive’s responsibilities and individual performance during the prior year.

 

Long-Term Equity Incentives

 

Prior to May 2009, long-term incentive awards were granted to executives under the 2003 Stock Option Plan approved by the stockholders in May 2003. At the Company’s Annual Meeting of Stockholders held in May 2009, the Company’s 2009 Incentive Stock Plan was approved by the stockholders. Upon approval by the stockholders of the 2009 Incentive Stock Plan, the Board provided that no further grants of option awards shall be made under the 2003 Stock Option Plan. As of December 31, 2012, 775,000 shares subject to option awards have been granted to certain executive officers and senior management of the Company under the 2009 Incentive Stock Plan.

 

Stock option grants are determined from time to time by the Compensation Committee in consultation with management. The actual grant for each executive is determined taking into consideration (i) individual performance, (ii) corporate performance and (iii) prior grants to, or stock ownership of the Company by, the executive. Generally, stock options are granted with an exercise price equal to or greater than the closing price of the Company’s common stock on the NASDAQ Global Select Market on the date of the grant.

 

In 2007, the Company adopted a policy concerning the grant of stock options pursuant to which, unless otherwise approved by the Board of Directors, the Compensation Committee will only approve the grant of stock options during a period of time that begins 3 business days after the earnings press release after the second quarter of each fiscal year and ends at the 8th business day after such second quarter earnings release.

 

11
 

 

In 2012, the Board of Directors authorized the following grants of stock options to the Named Executive Officer.

 

Robert L. Montgomery  200,000 shares 
Carl W. Hastings  80,000 shares 
R. Scott Montgomery  80,000 shares 

 

Robert L. Montgomery was awarded three stock options totaling 200,000 shares in 2012. The first option grant was a non-qualified stock option for 64,250 shares with a term of five years and a price of $1.20, the closing price of the Company’s stock on the NASDAQ exchange on the day before grant. The options become fully vested when the Company’s consolidated trailing twelve-month Income from Operations exceeds $4.3 million, as reported in the Company’s financial statements filed with the SEC, excluding the expense recognition of all performance-based stock options under ASC 718, and expire on January 10, 2017. The second option grant was an incentive stock option for 35,750 shares with a term of five years and a price of $1.32, 110% of the closing price of the Company’s stock on the NASDAQ exchange on the day before grant. The options become fully vested when the Company’s consolidated trailing twelve-month Income from Operations exceeds $4.3 million, as reported in the Company’s financial statements filed with the SEC, excluding the expense recognition of all performance-based stock options under ASC 718, and expire on January 10, 2017. The third option grant was an incentive stock option for 100,000 shares with a term of five years and a price of $1.32, 110% of the closing price of the Company’s stock on the NASDAQ exchange on the day before grant. The options vest ratably on each of January 11, 2013, January 11, 2014, January 11, 2015, January 11, 2016 and November 1, 2016 and expire on January 10, 2017.

 

Each of Dr. Carl Hastings and R. Scott Montgomery was awarded two stock options totaling 80,000 shares in 2012. The first option grant was an incentive stock option for 40,000 shares with a term of five years and a price of $1.20, the closing price of the Company’s stock on the NASDAQ exchange on the day before grant. The options become fully vested when the Company’s consolidated trailing twelve-month Income from Operations exceeds $4.3 million, as reported in the Company’s financial statements filed with the SEC, excluding the expense recognition of all performance-based stock options under ASC 718, and expire on January 10, 2017. The second option grant was an incentive stock option for 40,000 shares with a term of five years and a price of $1.20, the closing price of the Company’s stock on the NASDAQ exchange on the day before grant. The options vest ratably on each of January 11, 2013, January 11, 2014, January 11, 2015, January 11, 2016 and November 1, 2016 and expire on January 10, 2017.

 

In each case, the option term was for a period of five years and the option exercise price is $9.74 per share, the closing share price on the date of grant. The options vest ratably on each of August 7, 2009, August 7, 2010, August 7, 2011 and May 1, 2012 and expire on August 7, 2012.

 

We view participation by our executives in our Employee Stock Ownership Plan as a component of long-term compensation. Shares purchased by the Plan, or contributed to the Plan, are allocated among participants based upon relative eligible compensation levels and subject to the vesting requirements of the Plan.

 

Retirement Benefits

 

The Company maintains a 401(k) employee savings plan in which all salaried employees that have met the plan’s service requirements are eligible to participate. The Company also maintains an Employee Stock Ownership Plan, which was adopted by the Company on September 1, 2006. Both plans are tax qualified retirement plans.

 

Under the 401(k) Plan, employees may contribute up to 15% of their eligible compensation to the Plan and the Company will contribute a matching amount to the Plan each year. The federal statutory limit for eligible compensation in 2012 was $255,000. Participating employees may direct the investment of individual and company contributions into one or more of the investment options offered by the Plan, provided that, for new contributions, employees may not invest more than 15% in common stock of the Company. During 2012, the Company made matching contributions of 25% of the amount contributed by employees to the Plan, subject to statutory limits and top-heavy plan rules. The Company’s contributions to the 401(k) plan totaled approximately $145,000 in 2012, which is subject to the vesting requirements of the Plan.

 

12
 

 

Under the ESOP, all employees of the Company are eligible to participate in the ESOP and interests in the ESOP are allocated to participants based on relative eligible compensation. All contributions to the ESOP are made by the Company in the form of cash or stock and are discretionary. The maximum amount of contribution which the Company can make is 25% of the annual eligible compensation of employees after taking into account contributions to the 401(k) Plan. During 2012, the Company contributed $125,000 to the ESOP. Shares of stock purchased by, or contributed to the Plan, are allocated to participants subject to the vesting requirements of the Plan.

 

Other Benefits

 

The Company provides certain general employee benefits and health insurance plans of the type commonly offered by other employers. These benefits form part of our compensation philosophy because the Company believes they are necessary in order to attract, motivate and retain talented executives.

 

Supplemental Executive Retirement Plan

 

The Company sponsored a Supplemental Executive Retirement Plan (SERP) that previously allowed certain executives to defer a portion of their annual salary and bonus into a grantor trust. A grantor trust was established to hold the assets of the SERP. The Company funded the grantor trust by paying the amount deferred by the participant into the trust at the time of deferral. Investment earnings and losses accrue to the benefit or detriment of the participants. The SERP also provided for a discretionary matching contribution by the Company not to exceed 100% of the participant’s annual contribution. The participants fully vested in the deferred compensation three years from the date they entered the SERP. The participants are not eligible to receive distributions under the SERP until retirement, death, or disability of the participant.

 

In 2006, the SERP was amended to provide, among other things, that no new participants may be designated and no new or additional salary deferrals may be made. Accordingly, none of the named executive officers made a contribution to the SERP in 2012 and no Company additions or matches were provided. Carl W. Hastings is the only current executive officer of the Company who is a participant in the SERP.

 

13
 

 

OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2012

 

The following table sets forth all outstanding equity awards to Named Executive Officers as of December 31, 2012. All awards are in the common stock of the Company.

 

   Option Awards   
           Equity incentive           
   Number of Securities   plan awards:           
   Underlying   Number of Securities   Option   Option   
   Unexercised Options (#)   Underlying Unexercised   Exercise   Expiration   
Name  Exercisable   Unexercisable   Unearned Options (#)   Price ($)   Date   
                       
Robert L. Montgomery   160,000    -    -   $7.92    1/5/2015  (1)
    -    100,000    -    1.32    1/10/2017  (2)
    -    -    35,750    1.32    1/10/2017  (3)
    -    -    64,250    1.20    1/10/2017  (3)
                             
Carl W. Hastings   20,000    -    -    7.92    1/5/2015  (1)
    16,500    -    -    5.28    8/28/2013  (4)
    -    40,000    -    1.20    1/10/2017  (2)
    -    -    40,000    1.20    1/10/2017  (3)
                             
R. Scott Montgomery   50,000    -    -    7.92    1/5/2015  (1)
    -    40,000    -    1.20    1/10/2017  (2)
    -    -    40,000    1.20    1/10/2017  (3)

______________________

 

(1)Each of the stock options granted to the named executive officers was fully vested as of December 31, 2012.
(2)Stock options granted to the named executive officer vests in 20% increments on each of January 11, 2013 through 2016, with the final 20% vesting on November 1, 2016.
(3)Stock options granted to the named executive officer become fully vested when the Company’s consolidated trailing twelve-month Income from Operations exceeds $4.3 million, as reported in the Company’s financial statements filed with the SEC, excluding the expense recognition of all performance-based stock options under ASC 718.
(4)Stock option granted to the named executive officer vests in one-quarter increments on each of August 28, 2010, August 28, 2011, August 28, 2012 and May 1, 2013.

 

The Company has not issued any stock awards.

 

14
 

 

EQUITY COMPENSATION PLAN INFORMATION

 

The following table sets forth the common stock of the Company authorized for issuance under the Company’s equity compensation plans as of December 31, 2012.

 

 

 

 

 

Plan Category

  Number of securities to be issued upon exercise of outstanding options, warrants and rights  

 

Weighted-average exercise price of outstanding options, warrants and rights

   Number of securities remaining available for future issuance under equity compensation plans 
             
Equity compensation plans approved by security holders   1,313,500   $3.94    225,000(1)
                
Equity compensation plans not approved by security holders   -    -    - 
                
Total   1,313,500   $3.94    225,000 

______________________

 

(1)Includes 225,000 shares of common stock available for issuance under the Company’s 2009 Incentive Stock Plan.

 

Payments upon Termination or Change of Control

 

The Company has no agreements with Named Executives or other executives of the Company under which payments are to be made in the event of change of control of the Company.

 

Under the Employment Agreement between the Company and Robert L. Montgomery, Mr. Montgomery has the right, to reduce his level of service to the Company by approximately one-half with a corresponding decrease in position and base annual compensation and a 25% decrease in incentive compensation. Mr. Montgomery also has the option to terminate his active service and continue in a consulting capacity. The term of the consulting period will be 15 years and Mr. Montgomery will receive approximately 30% of his prior average annual compensation over the previous five years or last five years of his full-time employment as a consulting fee. In the event of Mr. Montgomery’s death during the term of the agreement, payments equal to his total compensation under the agreement will be made to his heirs for a period of six months. In addition, for a period of 20 years following termination of the agreement, the Company has the right to continue its use of Mr. Montgomery’s name and likeness in consideration of a $10,000 annual fee payable to Mr. Montgomery or his heirs.

 

Under the Employment Agreement between the Company and Carl W. Hastings, upon expiration of the term of employment, Dr. Hastings will be retained to provide consulting services to the Company through June 30, 2021. During the consulting term, the Company will pay Dr. Hastings the sum of $12,000 per month, such amount to be adjusted periodically based upon changes in the National Consumer Price Index. In the event of Dr. Hastings’ death during the term of the agreement, payments equal to his cash compensation under the agreement will be made to his heirs for a period of six months. In addition, for a period of 20 years following termination of the agreement, the Company has the right to continue its use of Dr. Hastings’ name and likeness in consideration of a $10,000 annual fee payable to Dr. Hastings or his heirs.

 

Under the Employment Agreement of R. Scott Montgomery in the event of his termination for reasons other than an event of default or permanent mental or physical disability, he will receive severance of $101,000, payable in equal installments over a 12-month period. The agreement includes the obligations of Mr. Montgomery to maintain the confidentiality of the Company’s confidential information and hold certain inventions for the Company in his fiduciary capacity, and contains a covenant not to solicit the Company’s distributors for a period of two years after the date of termination of the agreement.

 

15
 

 

 

DIRECTOR COMPENSATION

 

 

Name  Fees Earned or Paid in Cash ($)   Option Awards(1)   All Other
Compensation ($)
   Total ($) 
                 
Stephen M. Merrick(2)  $-   $5,008   $247,417   $252,425 
Denis St. John   58,500    2,845    -    61,345 
John B. Akin   48,000    1,661    -    49,661 
Michael Smith   60,000    1,428    -    61,428 
John M. Klimek   57,000    233    -    57,233 

 

(footnotes on following page)

______________________

 

(1)Represents the full grant date fair value of each equity-based award, computed in accordance with FASB ASC Topic 718. At December 31, 2012, the aggregate number of outstanding options held by each director was as follows:

 

Name   Option
Stephen M. Merrick   90,000
Denis St. John   22,000
John B. Akin   15,000
John M. Klimek   5,000

 

(2)Mr. Merrick serves as Senior Vice President, General Counsel and Secretary to the Company and received compensation totaling $252,425, including a Company contribution to the Employee Stock Ownership Plan of $1,417.

 

Narrative Description of Director Compensation

 

Members of the Board of Directors who are not employees receive a monthly fee of $2,500 and $1,500 per attendance at meetings of the Board of Directors or any committees of the Board of Directors, up to a maximum of $3,000 per day. See footnote 2 to the Director Compensation Table for an explanation of Mr. Merrick’s compensation.

 

Certain Relationships and Related Transactions

 

Robert L. Montgomery, the Chief Executive Officer and Chairman of the Board, is the father of R. Scott Montgomery and Ryan A. Montgomery. Ryan A. Montgomery is President and as a result of serving in such capacity, the Company paid him cash compensation of $241,160 in 2012 and $229,020 in 2011. Ronald McCain is the son-in-law of the Chief Executive Officer and Chairman of the Board, Robert L. Montgomery. Ronald McCain is Vice President – Sales Development and as a result of serving in such capacity, the Company paid him cash compensation of $177,119 in 2012 and $176,739 in 2011.

 

Dr. Carl W. Hastings, Vice Chairman, Chief Scientific Officer and director, is the father of Steven G. Hastings and Brett M. Hastings. Steven G. Hastings is Senior Vice President, North American Sales and as a result of serving in such capacity, the Company paid him cash compensation of $215,270 for 2012 and $213,436 for 2011. Brett M. Hastings is Vice President-Legal and as a result of serving in such capacity, the Company paid him cash compensation of $199,535 for 2012 and $195,041 for 2011.

 

16
 

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s officers and directors, and persons who own more than ten percent of a registered class of the Company’s equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission and with the Nasdaq Stock Market. Officers, directors and greater than ten percent stockholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file.

 

Based solely on a review of the copies of such forms furnished to the Company, or written representations that no Form 5’s were required, the Company believes that during calendar year 2012, all of the officers, directors and ten percent beneficial owners of the Company complied with all applicable Section 16(a) filing requirements, except that on one occasion each of Mr. Robert L. Montgomery, Michael D. Smith and Joseph J. Wojcik filed a nominally late Form 4 for a transaction.

 

 

Code of Ethics

 

The Company has adopted a code of ethics that applies to senior executive and financial officers. The Company’s Code of Ethics seeks to promote (1) honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships, (2) full, fair, accurate, timely and understandable disclosure of information to the Commission, (3) compliance with applicable governmental laws, rules and regulations, (4) prompt internal reporting of violations of the Code of Ethics to predesignated persons, and (5) accountability for adherence to the Code of Ethics. A copy of the Company’s Code of Ethics has been posted to and can be viewed on the Company’s Internet website at http://www.reliv.com under the section entitled “Investor Relations.”

 

17
 

 

PROPOSAL TWO - SELECTION OF AUDITORS

 

Ratification of Appointment of Independent Registered Public Accounting Firm

 

The Board of Directors has selected and approved Ernst & Young LLP as the independent registered public accounting firm to audit the Company’s financial statements for 2013, subject to ratification by the stockholders. It is expected that a representative of the firm of Ernst & Young LLP will be present at the Annual Meeting and will have an opportunity to make a statement if he or she so desires and will be available to respond to appropriate questions.

 

Fees Billed By Independent Registered Public Accounting Firm

 

The following table sets forth the amount of fees billed by Ernst & Young LLP for services rendered for the years ended December 31, 2012 and 2011:

 

   2012   2011 
         
Audit Fees (1)  $400,165   $424,841 
Audit-Related Fees    -0-    -0- 

Tax Fees (2)

   174,824    254,544 
Total Fees   $574,989   $679,385 

 

______________________

 

(1)Includes the annual consolidated financial statement audit, limited quarterly reviews, reviews of registration statements and comfort letters, statutory audits required internationally and the audit of internal controls.
(2)Primarily represents the preparation of tax returns and other tax compliance and consulting services.

 

All audit, tax, and other services to be performed by Ernst & Young LLP for the Company must be pre-approved by the Audit Committee. The Audit Committee reviews the description of the services and an estimate of the anticipated costs of performing those services. Services not previously approved cannot commence until such approval has been granted. Pre-approval is granted usually at regularly scheduled meetings. If unanticipated items arise between meetings of the Audit Committee, the Audit Committee has delegated approval authority to the chairman of the Audit Committee, in which case the chairman communicates such pre-approvals to the full committee at its next meeting. During 2012, all services performed by Ernst & Young LLP were pre-approved by the Audit Committee in accordance with this policy.

 

The Audit Committee reviews all relationships with Ernst & Young LLP, including the provision of non-audit services, which may relate to the independent registered public accounting firm’s independence. The Audit Committee considered the effect of Ernst & Young LLP’s non-audit services in assessing the independence of the independent registered public accounting firm and concluded that the provision of such services by Ernst & Young LLP was compatible with the maintenance of that firm’s independence in the conduct of its auditing functions.

 

THE BOARD OF DIRECTORS RECOMMENDS STOCKHOLDERS VOTE “FOR” SUCH RATIFICATION.

 

 

18
 

 

PROPOSAL THREE – ADVISORY VOTE TO APPROVE NAMED EXECUTIVE COMPENSATION

 

We are requesting our stockholders to provide advisory approval of the compensation of our Named Executive Officers as disclosed in the Executive Compensation section of this Proxy Statement, including the compensation tables and narrative discussion set forth on pages 9 to 15 of this Proxy Statement. This non-binding advisory vote is commonly referred to as a “say-on-pay” vote.

 

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR”APPROVAL

OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS

AS DISCLOSED IN THIS PROXY STATEMENT

 

Background on Proposal

 

In accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) and related SEC rules, stockholders are being given the opportunity to vote at the Annual Meeting on an advisory resolution regarding the compensation of our Named Executive Officers (commonly referred to as “say-on-pay”). The advisory resolution which will be presented and voted upon at the Annual Meeting is as follows:

 

RESOLVED, that the stockholders of Reliv International, Inc. hereby approve, on an advisory basis, the compensation of the Company’s Named Executive Officers, as disclosed in the Executive Compensation section of this Proxy Statement, including the compensation tables and narrative discussion set forth on pages 9 to 15 of the Proxy Statement.

 

Effects of the Advisory Vote

 

Because the vote on this proposal is advisory in nature, it will not affect any compensation already paid or awarded to our Named Executive Officers and will not be binding on the Board of Directors or the Compensation Committee. However, the Compensation Committee and the Board of Directors will consider the outcome of the vote when making future executive compensation decisions.

 

Vote Required

 

The resolution approving, on an advisory basis, the compensation of our Named Executive Officers will be approved if a majority of the votes cast at the Annual Meeting are voted in favor of the proposal, assuming a quorum is present. A properly executed proxy marked “ABSTAIN” with respect to the proposal will not be voted or treated as a vote cast, although it will be counted for purposes of determining whether a quorum is present. Accordingly, an abstention will not affect the outcome of the proposal. Brokers are not entitled to use their discretion to vote uninstructed proxies with respect to the proposal, any such “broker non-votes” will not be deemed a vote cast.

 

Discussion

 

Our Compensation Committee and our Board of Directors, who are responsible for designing and administering our executive compensation program, have designed our executive compensation program to provide a competitive and internally equitable compensation program and benefits package that reflects company performance, job complexity and the value provided, while also promoting long-term retention, motivation and alignment with the long-term interests of the Company’s stockholders.

 

We encourage you to carefully review the Executive Compensation section of this Proxy Statement including the compensation tables and narrative discussion set forth on pages 9 to 15 of this Proxy Statement. We are asking you to indicate your support for the compensation of our Named Executive Officers as described in this Proxy Statement. This vote is not intended to address any specific item of compensation but rather the overall compensation of our Named Executive Officers. Accordingly, we are asking you to vote, on an advisory basis, “FOR” the foregoing resolution at the Annual Meeting.

 

19
 

 

PROPOSAL FOUR – ADVISORY VOTE ON FREQUENCY OF FUTURE

“SAY-ON-PAY”ADVISORY VOTES

 

At the Annual Meeting, stockholders will be given the opportunity to vote on whether they prefer to have future “say-on-pay” votes occur (i) every year, (ii) every two years or (iii) every three years.

 

THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS

VOTE IN FAVOR OF HOLDING FUTURE “SAY-ON-PAY”

ADVISORY VOTES EVERY THREE YEARS

 

Background on Proposal

 

In accordance with the Dodd-Frank Act and related SEC rules, stockholders are being given the opportunity to vote at the Annual Meeting on an advisory resolution regarding the compensation of our Named Executive Officers. See Proposal Three above in this Proxy Statement. The Dodd-Frank Act and applicable SEC rules also require that, at least once every six years, stockholders be given the opportunity to vote on an advisory resolution regarding the frequency of future “say-on-pay” votes.

 

Stockholders may vote to recommend that future “say-on pay” votes be held every year, every two years or every three years. The Board of Directors presently believes that future “say-on-pay” votes should occur every three years. The Board of Directors believes that holding a “say-on-pay” vote every three years is most consistent with the Company’s approach to executive compensation in which the Company seeks to enhance the long-term growth of the Company and to attract, retain and motivate our executive officers over the long term. The Board of Directors believes a three-year cycle for the advisory vote on executive compensation will provide investors the most meaningful timing alternative by which to evaluate the effectiveness of our executive compensation strategies and their alignment with the Company’s business and results of operation. It will also minimize the administrative, compliance and other corporate expenses associated with holding “say-on-pay” votes more frequently (e.g., every year or every two years).

 

Effects of Advisory Vote

 

Because the vote on this matter is advisory in nature, it will not be binding on the Board of Directors. However, the Board of Directors will consider the outcome of the vote, along with other factors, when making its decision about the frequency of future “say-on-pay” votes.

 

Vote Required

 

This proposal is being submitted to enable stockholders to express a preference as to whether future “say-on-pay” votes should be held every year, every two years or every three years. The selection that receives a plurality of affirmative votes will be considered the preference of the stockholders. Brokers are not entitled to use their discretion to vote uninstructed proxies with respect to the proposal and any such “broker non-votes” will not be deemed a vote cast. 

 

Stockholder Proposals for 2014 Proxy Statement

 

Proposals by stockholders for inclusion in the Company’s Proxy Statement and form of Proxy relating to the 2014 Annual Meeting of Stockholders, which is scheduled to be held on May 22, 2014, should be addressed to the Secretary, Reliv’ International, Inc., P.O. Box 405, Chesterfield, Missouri 63006, and must be received at such address no later than 120 days prior to April 30, 2014. Upon receipt of any such proposal, the Company will determine whether or not to include such proposal in the Proxy Statement and Proxy in accordance with applicable law. It is suggested that such proposal be forwarded by certified mail, return receipt requested.

 

 

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Proxy Statement and Annual Report Delivery

 

 

The SEC has adopted rules that permit companies and intermediaries such as brokers to satisfy delivery requirements for annual reports and proxy statements with respect to two or more stockholders sharing the same address by delivering a single annual report and/or proxy statement addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially provides extra convenience for stockholders and cost savings for companies. The Company and some brokers household annual reports and proxy materials, delivering a single annual report and/or proxy statement to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders.

 

Once you have received notice from your broker or the Company that your broker or the Company will be householding materials to your address, householding will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate annual report and/or proxy statement in the future, please notify your broker if your shares are held in a brokerage account or the Company if you hold registered shares. If, at any time, you and another stockholder sharing the same address wish to participate in householding and prefer to receive a single copy of the Company’s annual report and/or proxy statement, please notify your broker if your shares are held in a brokerage account or the Company if you hold registered shares.

 

You may request to receive at any time a separate copy of our annual report or proxy statement, or notify the Company that you do or do not wish to participate in householding by sending a written request to the Corporate Secretary at P.O. Box 405, Chesterfield, Missouri 63006 or by telephoning (636) 537-9715.

 

Stockholder Communications with the Board of Directors

 

Stockholders of the Company may communicate with the Board of Directors in writing addressed to:

 

Board of Directors

c/o Corporate Secretary

Reliv’ International, Inc.

P.O. Box 405

Chesterfield, Missouri 63006

 

The Secretary will review each communication from a stockholder. The Secretary will forward to the members of the Board of Directors each communication that (1) concerns the Company’s business or governance, (2) is not offensive and is legible in form and reasonably understandable in content, and (3) does not relate to a personal grievance against the Company or a Board member or further a personal interest not shared by the other stockholders generally.

 

The Company strongly encourages each of its directors to attend each Annual Meeting of the Company’s stockholders where attendance does not unreasonably conflict with the director’s other business and personal commitments. All of the members of the Board of Directors attended the 2012 Annual Meeting of Stockholders.

 

 

BY ORDER OF THE

BOARD OF DIRECTORS

Dated: April 8, 2013

 

/s/ Stephen M. Merrick                                   

   Stephen M. Merrick, Secretary

 

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