(8) | Mr. Drexler did not receive a base salary from the Company in 2015. In February 2016, however, the Company’s Compensation Committee agreed to compensate Mr. Drexler in 2017, calculated in accordance with FASB ASC Topic 718, disregarding the effects of estimated forfeitures, based on the closing price of our common stock of $1.96 on the date of the grant multiplied by the number of shares of restricted stock granted.(3) Reflects the grant date fair value of the restricted stock award granted to Mr. Drexler in 2016, calculated in accordance with FASB ASC Topic 718, disregarding the effects of estimated forfeitures, based on the closing price of our common stock of $2.27 on the date of the grant multiplied by the number of shares of restricted stock granted. (4) Reflects the grant date fair value of the option awards granted to Mr. Drexler in 2016, calculated in accordance with FASB ASC Topic 718, disregarding the effects of estimated forfeitures. The grant date fair value of $1.72 per share was determined using the Black-Sholes option-pricing model, with the following assumptions: | For the Year Ended December 31, 2016 | | Expected term of options | 6.5 years | | Expected stock price volatility | 131.0% | | Expected dividend yield | 0% | | Risk-free interest rate | 1.71% | |
(5) Reflects the grant date fair value of the restricted stock award granted to Mr. Casutto in 2016, calculated in accordance with FASB ASC Topic 718, disregarding the effects of estimated forfeitures, based on the closing price of our common stock of $1.89 on the date of the grant multiplied by the number of shares of restricted stock granted. (6) Mr. Baker’s employment with the Company terminated on March 23, 2017. (7) Amounts under All Other Compensation for 2017 include Company 401(k) matching contributions, insurance premiums paid by the Company on behalf of our named executive officers, perquisites and severance payments, as follows: | | | | Company 401(k) Matching Contributions | $— | $— | $5,575 | Severance (a) | — | — | 350,000 | Miscellaneous (b) | 16,204 | 19,292 | 900 | Automobile Expenses (c) | — | 20,967 | 3,250 | Housing Costs(d) | 15,637 | 46,215 | — | Insurance Premiums(e) | — | 7,167 | 1,453 | TOTAL | $31,841 | $93,641 | $361,178 |
| (a) | Represents the amount of $250,000 for his serviceseverance paid or accrued in 2017 relating to the Company as Executive Chairman from August 2015. In February 2016, the Company also entered into an employment agreement with Mr. Drexler pursuantBaker’s termination of employment. For details relating to which he will receive an annual base salary of $550,000.these payments, see “Narrative Disclosure to Summary Compensation Table” below. |
(9) | Reflects the full grant date fair value of restricted stock awards granted in 2015 calculated in accordance with FASB ASC Topic 718, disregarding the effects of estimated forfeitures, based on the closing price of the common stock of $4.29 on the date of the grant. |
(10) | Reflects the full grant date fair value of restricted stock award granted in 2014 calculated in accordance with FASB ASC Topic 718, disregarding the effects of estimated forfeitures, based on the closing price of the common stock of $13.00 on the date of the grant. |
(11) | Reflects the full grant date fair value of restricted stock award granted in 2013 calculated in accordance with FASB ASC Topic 718, disregarding the effects of estimated forfeitures, based on the closing price of the common stock of $11.01 on the date of the grant. |
(12) | Amounts under “All Other Compensation” for 2015 include the following Company 401(k) matching contributions, life insurance premiums paid by the Company on behalf of the executive officers, perquisites and severance payments: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Drexler ($) | | | Price ($) | | | Pyatt ($) | | | Estalella ($) | | | Greenwell ($) | | | Gregory ($) | | | Prosser ($) | | Company 401(k) Matching Contributions | | | — | | | $ | — | | | $ | 10,600 | | | $ | 10,600 | | | $ | 7,918 | | | $ | 9,119 | | | $ | 3,616 | | Miscellaneous (a) | | $ | 32 | | | $ | 3,875 | | | $ | 20,534 | | | $ | 19,137 | | | $ | 157,308 | | | $ | 8,331 | | | $ | 1,458 | | Automobile Expenses (b) | | $ | 5,947 | | | $ | 7,650 | | | $ | 20,864 | | | $ | 9,000 | | | $ | 14,000 | | | $ | 7,700 | | | $ | 1,750 | | Club Fees, Expenses and Golf Tournaments (c) | | | — | | | | — | | | $ | 29,602 | | | | — | | | | — | | | | — | | | | — | | Attorney Fees (d) | | $ | 71,897 | | | | — | | | $ | 3,245 | | | | — | | | | — | | | | — | | | | — | | Sports Donations (e) | | $ | 20,186 | | | | | | | | | | | | | | | | | | | | | | | | | | Sports Tickets (f) | | | — | | | | — | | | $ | 14,467 | | | | — | | | | — | | | | — | | | | — | | Travel (g) | | | — | | | | — | | | $ | 12,872 | | | $ | 4,025 | | | $ | 4,025 | | | | — | | | | — | | Life Insurance Premiums | | | — | | | | — | | | $ | 908 | | | $ | 5,103 | | | | 1,282 | | | $ | 1,229 | | | $ | 371 | | TOTAL | | $ | 77,876 | | | $ | 11,525 | | | $ | 133,278 | | | $ | 47,865 | | | $ | 184,533 | | | $ | 26,379 | | | $ | 7,195 | |
(a)(b) | These amounts include an allowanceamounts paid by the Company for miscellaneous expenses, Company provided matchincluding Company-provided matching contributions to health savings accounts for our named executive officer and amounts paid for expenses incurred by our executivesnamed executive officers that have been inadequately documented to supportwere not adequately substantiated or did not qualify as a reimbursable business purposes or personal in nature. For Mr. Pyatt, amounts also include Company paid vacation housing and additional apparel not covered by the allowance. For Mr. Greenwell, amounts also include his 2015 bonus paid in conjunction with his severance (paid in 2016.)expense under our expense reimbursement policy. |
(b) | (c) | We provideprovided an automobile allowance for Mr. Price, Mr. Estalella, Mr. Greenwell, Mr. Gregory and Mr. ProsserCasutto, and the use of a Company car forby Mr. Drexler and Mr. Pyatt.Casutto while he was in Colorado. For the Company car provided to Mr. Drexler and Mr. Pyatt,Casutto, during 2017, the Company insuresinsured the car under its insurance programs, payspaid all registration, license, taxes and other fees on the car, payspaid for all repairs and reimbursesreimbursed for all gas and maintenance costs on the car. The amount disclosed in the table above for Mr. Drexler and Mr. Pyatt represent that portionCassuto represents one-half of the total annual cost for 2017 to the Company for the automobile provided to the executive attributable to their personal use.Company car. |
(c) | Represents payments(d) | We paid for golf club membershipstemporary housing for Mr. Pyatt, including monthly dues, guest fees, mealsCasutto and entertainment costs at the golf clubs and other personal expenses incurred by Mr. Pyatt at the golf clubs, including apparel. Amount also includes golf tournament fees and housing at a major golf event. |
(d) | Represents legal fees in relation to the bank guarantee provided by Mr. Drexler withfor periods when they lived in Colorado while they maintained residency outside of the Company’s bank, legal feesstate. Additionally, we provide housing for Mr. Casutto for his apartment in relation toCalifornia as his residency remains out of the convertible note thatState. The amounts disclosed in the Company entered into with Mr. Drexlertable above represents rent and legal fees related to Mr. Pyatt’s employment contract and related chief executive officer’s duties.utility costs billed by the landlord for this temporary housing. |
| (e) | Represents amountInsurance premiums were paid by the Company for football equipmentpursuant to Arvada West High School, for which Mr. Pyatt coaches.our employee health insurance plan. |
(f) | Amount represents the cost of tickets to attend a Denver Broncos game in the Company’s luxury suite, including catered food. Mr. Pyatt donated the tickets to his son’s football team to be utilized for fund raising. |
(g) | Represents amounts paid by the Company for our executive’s utilization of private jet travel for business purposes. Amount represents the difference between the private travel cost and commercial airfare travel cost for the applicable trip. |
Grants of Plan-Based Awards in Fiscal Year 2015
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Estimated possible payouts under non-equity incentive plan awards | | | All Other Stock Awards: Number of Shares of Stock | | | Grant Date Fair Value of Stock and Option Awards | | Name | | Grant date | | | Threshold ($) | | | Target ($) | | | Maximum ($) | | | (#) | | | ($) | | John Price | | | 4/28/2015 | | | $ | 187,500 | | | $ | 250,000 | | | $ | 312,500 | | | | 50,000 | | | | 214,500 | | Brad Pyatt | | | — | | | $ | 318,750 | | | $ | 425,000 | | | $ | 531,250 | | | | — | | | | — | | Richard Estalella 1 | | | — | | | $ | 262,500 | | | $ | 350,000 | | | $ | 437,500 | | | | — | | | | — | | James Greenwell 1 | | | — | | | $ | 225,000 | | | $ | 300,000 | | | $ | 375,000 | | | | — | | | | — | | Cory Gregory 1 | | | — | | | $ | 168,750 | | | $ | 225,000 | | | $ | 281,250 | | | | — | | | | — | | Don Prosser 1 | | | — | | | | NA | | | | NA | | | | NA | | | | — | | | | — | |
1 | As a result of their employment terminations during 2015, none of Messrs. Estalella, Greenwell, Gregory or Prosser was entitled to an annual bonus for 2015. As part of his severance, Mr. Greenwell received a lump sum payment equal to 50% of his 2015 target bonus. |
Narrative disclosureDisclosure to Summary Compensation Table We have entered into employment agreements with each of Mr. Drexler and Grants of Plan-Based Awards TableMr. Casutto that include certain severance and change in control payments and entered into a separation agreement with Mr. Baker that provides for severance benefits, in each case, as described below. As used below, the terms “without cause,” “good reason,” “qualifying sale,” “aggregate purchase price,” “performance bonus,” “cash-based incentives,” and “change in control” are defined in the applicable agreements. Mr. Drexler. Mr. Drexler is party to an employment agreement with the Company, datedwhich was entered into as of February 11, 2016. The2016 and has subsequently been amended and restated, most recently effective as of February 1, 2018. Subject to earlier termination as provided therein, the term of his agreement is for three years, subject to automatic renewalruns through February 1, 2021 and automatically renews for successive one-year periodsterms thereafter, unless either party provides the other withat least three months’ written notice of its or his or its intention not to renew the agreement at least three months prior to the expiration of the initial or renewal term. Mr. Drexler is entitled to a base salary of $550,000, subject to adjustment, and an annual bonus of up to 200% ofreview. Under his base salary. With respect to his services since August 26, 2015, in lieu of any base salary for 2015, Mr. Drexler was paid $250,000 on March 1, 2016. In connection with the execution of the employment agreement, Mr. Drexler was entitled to a stock option grant havingbase salary of $550,00 per year for 2017 and is entitled to a value equalbase salary of $700,000 per year for 2018, which will be increased to $250,000. On February 22, 2016$750,000 per year effective January 1, 2020, in each case, subject to increase by the Boardboard. For 2017, Mr. Drexler was eligible to receive cash-based incentives of Directors (excluding Ryan Drexler) unanimously approved a stock option grantup to $350,000 based on the achievement of 137,362 options with an exercise price of $1.89, two year vesting schedulespecified performance goals and, ten year life. The options were granted under the 2015 Equity Incentive Plan. Mr. Drexlerhis amended and restated agreement, is eligible to receive a 2018 performance bonus equal to 75% of his annual base salary, subject to the Company’s achievement of specified performance conditions unless otherwise determined by the Board. Under his amended and restated employment agreement, Mr. Drexler is also eligible to receive additional cash-based incentives of up to $350,000 based on the achievement of specified performance goals.
Concurrently with entering into the amended and restated employment agreement in February 2018, Mr. Drexler and the Company entered into a transaction bonus ifagreement, which provides that, upon the occurrence of a qualifying sale, and provided that at the time of the qualifying sale Mr. Drexler is an owner of at least 20% of the shares of the Company, occurs on or priorMr. Drexler will be entitled to February 11, 2019 in an amounta transaction bonus equal to 10% of the aggregate purchase price, if such price is in such sale.excess of $50 million. Mr. Drexler is entitled to participatethis transaction bonus regardless of whether the qualifying transaction occurs during his employment or at any time thereafter. If Mr. Drexler’s employment is terminated for any reason, each equity award granted to him will fully vest and he will be entitled to any unpaid performance bonus or cash-based incentives (as described above), to the extent earned as of the date of such termination, in our benefit plansaddition to any amounts required by law or Company policy. In addition, if Mr. Drexler’s employment is terminated by the Company without cause or by Mr. Drexler for good reason prior to (but not in connection with) a qualifying sale, Mr. Drexler will be entitled to receive (i) 12 months’ of base salary continuation, (ii) up to 12 months’ of Company-subsidized COBRA premiums, and (iii) a lump sum payment of the performance bonus for the year his employment terminates. If Mr. Drexler’s employment is terminated by the Company without cause or by Mr. Drexler for good reasonwithin 12 months following (or prior to, but in connection with or anticipation of) a qualifying sale, Mr. Drexler will be entitled to receive, in lieu of the amounts described in the preceding sentence, (i)a lump sum payment equal to 200% of his annual base salary, (ii) up to 18 months’ of Company-subsidized COBRA, and (iii) a lump sum payment equal to 200% of the performance bonus for the year his employment terminates.The severance payable to Mr. Drexler on the same basis as other senior employees, except thata termination of his employment by the Company without cause or by Mr. Drexler for good reason is subject to his execution (and non-revocation) of a release of claims in favor of the Company. Under the employment agreement, Mr. Drexler has agreed to pay 100%certain restrictions on solicitation of employees, which continue for 12 months following the termination of his employment, if his employment is terminated due to disability, by him for good reason or by the Company with or without cause, due to expiration of the costemployment period by notice of any group medical, visionnon-renewal or dental coverage elected by Mr. Drexler and 50%due to termination of his employment upon a notice of termination. The employment agreement also contains restrictions with respect to disclosure of the additional incremental cost for coverage elected by him or his family.Company’s confidential information. Mr. PriceCasutto.Mr. Casutto is party to an employment agreement with the Company, datedwhich was entered into as of April 29, 2015.July 15, 2015 and was amended and restated as of January 1, 2018. The original term of histhe employment agreement endsended on December 31, 2017 unless it is terminated earlier or extended.and has been extended to December 31, 2018. Under his employment agreement, Mr. PriceCasutto is entitled to a base salary of $250,000, and an annual$400,000 per year, which may be increased at the discretion of the Compensation Committee. In addition, Mr. Casutto is eligible to receive cash bonuses based on performance criteria to be adopted by the Compensation Committee, with a potential bonus pool of up to $250,000, subject to annual review. Mr. Price$350,000 per year, which may be adjusted at the discretion of the Compensation Committee. Under his employment agreement, Mr Casutto is entitled to participate in our benefit plans made available to executive officers and is titled to a monthly vehicle allowance of $1,000 and an annuala miscellaneous expense allowance of up to $5,000.Prior$5,000 per year . If Mr. Casutto’s employment is terminated without cause or he resigns for good reason, he will be entitled to receive (i) base salary continuation for the lesser of 12 months and the remainder of the term of the employment agreement, (ii) a bonus equal to the greater of 25% of his target bonus for the year (or 50%, if the termination of employment occurs between July 1 and December 31 of the year) and the bonus for the year of termination of employment, as determined by the Compensation Committee at its discretion, and (iii) reimbursement of COBRA premiums for up to 12 months. In addition, unless otherwise provided in March 2016,an equity award agreement, all equity awards held by Mr. Pyatt had beenCasutto will vest in full. If Mr. Casutto’s employment is terminated without cause or he resigns for good reason within six months prior to (under certain circumstances) or within two years following a change in control (or the end of the term of the employment agreement, if earlier), then Mr. Casutto will be entitled to receive, in lieu of the amounts described above, (i) base salary continuation for 12 months,(ii) a bonus equal to the greater of 100% of his target bonus and the bonus for the year of termination of employment as determined by the Compensation Committee, (iii) a lump sum cash payment of $500,000, (iv) reimbursement of COBRA premiums for up to 12 months and (v) all equity and other incentive awards held by Mr. Casutto will fully vest. If Mr. Casutto’s employment is terminated due to his death or disability, he will be entitled to receive (i) the greater of 100% of his target bonus for the year of termination or the bonus for such year as determined by the Compensation Committee, (ii) reimbursement of COBRA premiums for up to 12 months, and (iii) if such termination is due to his disability, base salary continuation for 6 months. All severance payable to Mr. Casutto under his employment agreement is subject to his execution (and non-revocation) of a release of claims in favor of the Company.
Under the employment agreement, Mr. Casutto has agreed to certain restrictions on competition and solicitation, which continue for 12 months following the termination of his employment. The employment agreement also contains restrictions with respect to disclosure of the Company’s confidential information. Mr. Baker.Mr. Baker was party to an employment agreement with the Company, datedwhich was entered into as of June 24, 2015, which agreement supersededJanuary 1, 2016. Under his prior employment agreement, with the Company. The term of his agreement was for five years, subject to automatic renewal for successive one-year periods unless either party provides the other with his or its intention not to renew the agreement at least three months prior to the expiration of the initial or renewal term. Mr. PyattBaker was entitled to a base salary of $425,000$350,000 for 2015 and an annual2017, subject to increase at the discretion of the Compensation Committee. In addition, Mr. Baker was eligible to receive cash bonuses based on performance criteria to be adopted by the Compensation Committee, with a potential bonus in an amountpool of up to 125%$400,000 per year, payable quarterly. Under the employment agreement, Mr. Baker agreed to certain restrictions on competition and solicitation, which continue for 12 months following the termination of his base salary. Each year during theemployment. The employment period, Mr. Pyatt wasagreement also contained restrictions with respect to receive an equity award or equity awards having a pre-established fixed value ($817,000 for 2015). Mr. Pyatt was entitled to participate in our benefit plans on the same basis as other senior employees, except that the Company had agreed to pay 100%disclosure of the cost of any group medical, vision or dental coverage elected by Company’s confidential information. Mr. Pyatt and 50% of the additional incremental cost for coverage elected by him or his family.Prior toBaker’s employment terminated on March 23, 2017. In connection with his termination of employment, on December 30, 2015, Mr. Estalella had been partysubject to an employment agreement withhis execution (and non-revocation) of a release of claims in favor of the Company, dated as of June 24, 2015. This agreement had substantially the same terms as the agreement with Mr. Pyatt, described above, except that his annual base salary for 2015 was $375,000 and his equity award value for 2015 was $695,000.
Each of our named executive officers, Messrs. Greenwell, Gregory and Estalella, was party to an employment agreement during fiscal year 2015 until the date of termination of their employment that entitled them to an annual base salary and the ability to earn an incentive bonus as well as to participate in our benefit plans made available to executive officers. As a result of their employment terminations during 2015, none of Messrs. Estalella, Greenwell, Gregory or Prosser wasBaker became entitled to an annual bonus for 2015. As partreceive (i) severance in the amount of his severance, Mr. Greenwell received$350,000, payable over a 12-month period, a lump sum payment equalof $39,378, representing Mr. Baker’s accrued and unused vacation time, and a first quarter bonus of $80,311, and 10,000 shares of unvested restricted stock held by Mr. Baker became fully vested. In addition, the restrictions on competition contained in his employment agreement were reduced to 50%6 months following his termination of his 2015 target bonus.
The severance arrangements with our named executive officers and the effect of a change in control on their outstanding options are described below under “Potential payments upon termination or change of control”.
employment. Outstanding Equity Awards at Year End The following table provides information concerning restricted stock awardsand options to purchase shares of our common stock held by our named executive officers as of December 31, 2015. This table includes unvested restricted stock awards with vesting conditionsthat were not satisfied as of December 31, 2015. Each equity grant is shown separately for each named executive officer. The vesting schedule for each outstanding equity award is shown in the footnotes following this table.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Outstanding Equity Awards at Year End | | | | | | | Option Awards | | | Stock Awards | | Name | | Grant Date | | | Number of Securities Underlying Unexercised Options (#) Exercisable | | | Number of Securities Underlying Unexercised Options (#) Unexercisable | | | Option Exercise Price ($) | | | Option Expiration Date | | | Number of Shares of Stock that Have Not Vested (1) (#) | | | Market Value of Shares or Units of Stock that Have Not Vested (2) ($) | | John Price | | | 10/1/2014 | | | | — | | | | — | | | | — | | | | — | | | | 50,000 | | | | 114,000 | | | | | 4/28/2015 | | | | — | | | | — | | | | — | | | | — | | | | 50,000 | | | | 114,000 | | Bradley Pyatt | | | 10/1/2014 | | | | — | | | | — | | | | — | | | | — | | | | 500,000 | | | | 1,140,000 | | Richard Estalella | | | 10/1/2014 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | Cory Gregory (3) | | | 10/1/2014 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | James Greenwell (3) | | | 10/1/2014 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | Donald Prosser (3) | | | 10/1/2014 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
2017.Outstanding Equity Awards at Year End | | | | | | | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | | Number of Shares of Stock that Have Not Vested (1) (#) | Market Value of Shares or Units of Stock that Have Not Vested (2) | Ryan Drexler(3) | 1/1/2017 | | | | | $350,000 | 227,500 | | 2/22/2016 | 120,191 | $17,171 | 1.89 | | | | | | | | | | | Brian Casutto | 10/1/2014 | — | — | — | — | 30,000 | 19,500 | | 2/23/2016 | — | — | — | — | 20,000 | 13,000 |
(1) | The table below shows the vesting dates for the respective unvested shares of restricted stock awards listed in the above Outstanding Equity Awards at Year-End for 2015 Table.2017 Table, generally subject to the named executive officer’s continued employment through such date. The restricted stock granted to Mr. Drexler would vest in full upon a termination of his employment or a change in control. The restricted stock granted to Mr. Casutto would vest in connection with a termination of Mr. Casutto’s employment under certain circumstances, as described under “Narrative Disclosure to Summary Compensation Table” above. |
Vesting Date | | | 1/1/2018 | 350,000 | — | 5/23/2018 | — | 10,000 | 12/31/2018 | — | 30,000 | 5/23/2019 | — | 10,000 |
(2) | MarketThe market value of the restricted stock award represents the product of the closing price of a share of our common stock as of December 31, 201529, 2017 (the last trading day of the year), which was $2.28,$0.65, and the number of shares underlying each such award.of restricted stock held by the named executive officer on December 31, 2017. |
(3) | As a result of their employment terminations during 2015,The stock options granted to Mr. Drexler vest in equal quarterly installments over the unvested portion of all outstanding restricted stock awards vested immediately based upon the terms of the stock grant. |
| | | | | | | | | Vesting Date | | Price | | | Pyatt | | 12/31/2016 | | | 60,000 | | | | 300,000 | | 12/31/2017 | | | 20,000 | | | | 100,000 | | 12/31/2018 | | | 20,000 | | | | 100,000 | | Total | | | 100,000 | | | | 500,000 | |
Options Exercised and Stock Vested
The following table provides information regarding the vesting of restricted stock awards with respect to our named executive officers during 2015. No stock options were exercised by our named executive officers during 2015.
| | | | | | | | | | | | | | | | | | | Option Awards | | | Stock Awards | | Name | | Number of Shares Acquired on Exercise | | | Value Realized on Exercise | | | Number of Shares Acquired on Vesting | | | Value Realized on Vesting (1) | | John Price | | | — | | | | — | | | | 0 | | | $ | 0 | | Brad Pyatt | | | — | | | | — | | | | 290,500 | | | $ | 662,340 | | Richard Estalella | | | — | | | | — | | | | 0 | | | $ | 0 | | Cory Gregory (2) | | | — | | | | — | | | | 224,500 | | | $ | 886,775 | | James Greenwell (2) | | | — | | | | — | | | | 126,521 | | | $ | 638,931 | | Donald Prosser (2) | | | — | | | | — | | | | 128,219 | | | $ | 534,673 | |
(1) | Value realizedtwo-year period commencing on vesting is computed by multiplying the number of shares that vested by the per-share closing price of our common stock on the vesting date. |
(2) | As a result of their employment terminations during 2015, the unvested portion of all outstanding restricted stock awards vested immediately based upon the terms of the stock grant. |
Nonqualified Deferred Compensation and Pension Benefits
We maintain a 401(k) plan as previously discussed in the Compensation Discussion and Analysis. We do not maintain any defined benefit or nonqualified deferred compensation plans.
Potential Payments Upon Termination or Change-in-Control
Messrs. Drexler, Pyatt and Price
Pursuant to the terms of their employment agreements, each of Messrs. Drexler, Pyatt and Price is entitled to certain payments and benefits upon a termination of employment with the Company due to the executive’s death or disability, upon a termination by the Company without cause (as such term is defined in the respective agreement) or a resignation by the executive for good reason (as such term is defined in the respective agreement) and, in certain circumstances, in connection with a change of control of the Company.
Mr. Pyatt’s employment with the Company terminated on March 15, 2016. Pursuant to Mr. Pyatt’s separation agreement with the Company, in exchange for a release of claims, the Company agreed to pay him severance in the amount of $1,062,000, payable over a 12-month period and a lump sum payment of $250,000 and to reimburse COBRA premiums for him and his eligible dependents for 12 months. In addition, all stock awards held by Mr. Pyatt vested in full on his termination. As a result of his acceptance of the terms of the separation agreement, the benefits detailed below were foregone, including past and future contractual equity awards.
Death or Disability
The employment agreements with Messrs. Drexler and Pyatt provide that the following benefits will be paid or provided upon a termination of employment due to death or disability:
(i) | earned but unpaid base salary through the date of termination; |
(ii) | reasonable business expenses paid or incurred by the executive but not reimbursed as of the date of termination; |
(iii) | any accrued but unused vacation time in accordance with Company policy ((i)-(iii), the “Accrued Obligations”); |
(iv) | any annual bonuses earned through the date of termination; |
(v) | regarding Mr. Pyatt, all long-term incentives earned prior to date of termination, a cash amount equal to three hundred percent (300%) of his base salary, annual bonus and long-term incentive amount earned during the year immediately preceding the date of termination (the “Separation Payment”) and reimbursement of COBRA premiums for 18 months following termination; and |
(vi) | regarding Mr. Drexler, any transaction bonus earned through the date of termination and full vesting of all equity awards. |
Mr. Drexler remains eligible to receive a transaction bonus under his employment agreement equal to 10% of the purchase price if a qualifying sale of the Company occurs before February 10, 2021.
The employment agreement for Mr. Price provides that that the following benefits will be paid or provided upon a termination of employment due to death or his inability to perform his duties as a result of disability:
(i) | the Accrued Obligations; |
(ii) | the greater of (a) one hundred percent (100%) of his target bonus for the year in which the date of termination occurs or (b) a bonus for such year as may be determined by the Committee in its sole discretion; |
(iii) | in the case of inability to perform due to disability, six months of base salary, payable in monthly installments; and |
(iv) | reimbursement of COBRA premiums for 12 months. |
Termination by the Company for Cause or Resignation without Good Reason
Upon termination for cause or resignation without good reason, each of Messrs. Drexler, Pyatt and Price is generally entitled to receive the Accrued Obligations. In addition, all equity awards held by Mr. Drexler will vest in full.
By the Company without Cause or by the Executive for Good Reason
The employment agreements provide that Messrs. Drexler and Pyatt are entitled to receive the following upon a termination of employment by the Company without cause or the executive for good reason:
(i) | the Accrued Obligations; |
(ii) | any annual bonuses earned through the date of termination; |
(iii) | regarding Mr. Pyatt, all long-term incentives earned prior to date of termination, the Separation Payment and reimbursement of COBRA premiums for 18 months following termination; and |
(iv) | regarding Mr. Drexler, any transaction bonus earned through the date of termination and full vesting of all equity awards. |
Mr. Drexler remains eligible to receive a transaction bonus under his employment agreement equal to 10% of the purchase price if a qualifying sale of the Company occurs before February 10, 2021.
Mr. Pyatt could have terminated his employment in connection with a change in control and received these same benefits.
The employment agreement for Mr. Price provides that he is entitled to receive the following upon a termination by the Company without cause or by him for good reason outside of a change in control:
(i) | the Accrued Obligations |
(ii) | the lesser of (a) nine months of Mr. Price’s base salary at the time of termination, payable in installments over a three-month period, or (b) the base salary remaining under the employment agreement; |
(iii) | any annual bonuses earned through the date of termination plus either (a) twenty-five percent (25%) of Mr. Price’s target bonus if the termination date is between January 1 and June 30 or (b) fifty percent (50%) of Mr. Price’s target bonus if the termination date is between July 1 and December 31; |
(iv) | reimbursement of COBRA premiums for 12 months following termination; and |
(v) | full vesting of equity awards. |
If Mr. Price’s employment is terminated by the Company without cause or by him for good reason during the “Protection Period”, in lieu of the benefits described above, he will be entitled to receive:
(i) | the Accrued Obligations; |
(ii) | one year of base salary, payable over a 12-month period; |
(iii) | the greater of (a) 100% of his target bonus for the year of termination or (b) a bonus for such year as determined by the Compensation Committee in its sole discretion; |
(iv) | a one-time cash payment equal to $500,000, payable in a lump sum; |
(v) | reimbursement of COBRA premiums for 12 months following termination; and |
(vi) | full vesting of equity awards. |
“Protection Period” means the period commencing on the date of a change in control and continuing until the earlier of the second anniversary of such change in control and the term of the agreement; and the six-month period prior to such change in control if Mr. Price’s employment is terminated without cause or for good reason and in either case the termination was requested by the party that effectuates the change in control or occurs in connection with or in anticipation of the change in control.
Mr. Drexler has agreed not to disclose our confidential information and to not compete with us or solicit our employees, independent contractors or customers generally for a period of 12 months following termination (the post-termination restrictions will not apply on a termination due to cause or a voluntary termination). Mr. Price has agreed to not disclose our confidential information, to not compete with us for six months following termination and to not solicit our employees (or anyone who was an employee within the 90-day period before such solicitation) for 12 months following termination.
Messrs. Greenwell and Gregory
Mr. Greenwell’s employment with the Company terminated on August 25, 2015. Pursuant to Mr. Greenwell’s separation agreement with the Company, in exchange for a release of claims, the Company agreed to pay him nine months of base salary, paid as salary continuation over a three-month period, and a lump sum payment of $150,000, which represented 50% of his 2015 target bonus, and to reimburse COBRA premiums for him and his eligible dependents for 12 months and to pay key man insurance policy premiums on behalf of Mr. Greenwell until December 31, 2015. In addition, all stock awards held by Mr. Greenwell vested in full on his termination. Mr. Greenwell agreed to provide consulting services to the Company upon its request until December 31, 2016 for an hourly fee of $150. Mr. Greenwell agreed not to compete with us or to solicit our employees until December 31, 2016.
Mr. Gregory’s employment with the Company terminated on November 5, 2015. Pursuant to Mr. Gregory’s separation agreement with the Company, in exchange for a release of claims, the Company agreed to pay him six months of base salary, paid as salary continuation over a nine-month period, and to reimburse COBRA premiums for him and his eligible dependents for 12 months and to pay key man insurance policy premiums on behalf of Mr. Gregory until December 31, 2015. In addition, all stock awards held by Mr. Gregory vested in full on his termination. Mr. Gregory agreed not to compete with us or to solicit our employees for six months following termination.
Mr. Prosser
Mr. Prosser resigned from the Company effective April 15, 2015. In connection with his resignation, Mr. Prosser was entitled to accrued but unpaid compensation and benefits through the date of termination. In connection with his termination of employment, all stock awards held by Mr. Prosser vested in full on his termination.
Mr. Estalella
Mr. Estalella’s employment with the Company terminated on December 30, 2015. Mr. Estalella did not receive severance upon his termination of employment and is currently in a dispute with the Company regarding such severance payments.
The following tables describe (i) the potential payments and benefits to which Messrs. Pyatt and Price would be entitled upon a termination of their employment under their employment agreements assuming a termination of employment and a change in control had each occurred on December 31, 2015 (the last business day of our last completed fiscal year) and (ii) the actual payments and benefits that Messrs. Gregory, Greenwell and Prosser
received upon their terminations of employment during 2015. Mr. Drexler would not have been entitled to any payments or benefits had his employment been terminated on December 31, 2015 since he was not an employee as of December 31, 2015 and his employment agreement with the Company was entered into following the end of the last fiscal year. Amounts in respect of equity acceleration for each of Messrs. Pyatt and Price were determined using the closing price of a share of our common stock on December 31, 2015 ($2.28). Amounts in respect to equity acceleration for each of Messrs. Gregory, Greenwall and Prosser were determined using the closing price of a share of common stock on the date of termination ($3.95, $5.05, $4.17, respectively.)
| | | | | | | | | | | | | | | Involuntary Termination Without Cause/ For Good Reason ($) | | | Death/ Disability ($) | | | Involuntary Termination Without Cause/For Good Reason Following Change in Control ($) | | Bradley J. Pyatt (1) | | | | | | | | | | | | | Cash severance | | $ | 5,319,750 | | | $ | 5,319,750 | | | $ | 5,319,750 | | Health and welfare continuation | | $ | 23,400 | | | $ | 23,400 | | | $ | 23,400 | | Equity acceleration | | $ | 1,140,000 | | | $ | 1,140,000 | | | $ | 1,140,000 | | | | | | | | | | | | | | | Total | | $ | 6,483,150 | | | $ | 6,483,150 | | | $ | 6,483,150 | | | | | | | | | | | | | | | John Price | | | | | | | | | | | | | Cash severance | | $ | 153,000 | | | $ | 375,000 | | | $ | 1,000,000 | | Health and welfare continuation | | $ | 24,000 | | | $ | 24,000 | | | $ | 24,000 | | Equity acceleration | | $ | 228,000 | | | $ | 228,000 | | | $ | 228,000 | | | | | | | | | | | | | | | Total | | $ | 405,000 | | | $ | 627,000 | | | $ | 1,252,000 | | | | | | | | | | | | | | | Cory Gregory | | | | | | | | | | | | | Cash severance | | $ | 110,573 | | | | — | | | | — | | Health and welfare continuation | | $ | 5,400 | | | | — | | | | — | | Equity acceleration | | $ | 886,775 | | | | — | | | | — | | | | | | | | | | | | | | | Total | | $ | 1,002,748 | | | | — | | | | — | | | | | | | | | | | | | | | James Greenwell | | | | | | | | | | | | | Cash severance | | $ | 375,000 | | | | — | | | | — | | Health and welfare continuation | | $ | 15,600 | | | | — | | | | — | | Equity acceleration | | $ | 638,931 | | | | — | | | | — | | | | | | | | | | | | | | | Total | | $ | 1,029,531 | | | | — | | | | — | | | | | | | | | | | | | | | Donald Prosser | | | | | | | | | | | | | Cash severance | | | — | | | | — | | | | — | | Health and welfare continuation | | | — | | | | — | | | | — | | Equity acceleration | | $ | 534,673 | | | | — | | | | — | | | | | | | | | | | | | | | Total | | $ | 534,673 | | | | — | | | | — | | | | | | | | | | | | | | |
(1) | Mr. Pyatt’s employment with the Company terminated on March 15, 2016. Pursuantgrant, generally subject to Mr. Pyatt’s separation agreement with the Company, in exchange for a release of claims, the Company agreedDrexler’s continued employment. The stock options granted to pay him severance in the amount of $1,062,000, payable over a 12-month period and a lump sum payment of $250,000 and to reimburse COBRA premiums for him and his eligible dependents for 12 months. In addition, all stock awards held by Mr. PyattDrexler vested in full on his termination. Mr. Pyatt forewent his contractual termination benefits detailed here and all contractual past and future equity awards.February 22, 2018. |
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
All compensation and related matters are reviewed by our Compensation Committee. Our Compensation Committee consists of Michael Doron, Noel Thompson and William Bush. None of the members of our Compensation Committee is or has at any time during the past year been an officer or employee of ours. None of our executive officers currently serves or in the past year has served as a member of the Board of Directors or Compensation Committee of any entity that has one or more executive officers serving on our Board of Directors or Compensation Committee.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth information with respect to the beneficial ownership of shares of our common stock by (i) each current director, (ii) each named executive officer, and (iii) each person who we know beneficially owns more than 5% of our common stock as of April 18, 2016.October 22, 2018. We have determined beneficial ownership in accordance with the rules of the SEC. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons and entities named in the table below have sole voting and investment power with respect to all shares of common stock that they beneficially own, subject to applicable community property laws. | | | | | | | | | | | Shares Beneficially Owned | | | | Common Stock (1) | | Name of Beneficial Owner | | Shares | | | % (2) | | Named Executive Officers: | | | | | | | | | Ryan Drexler (3) | | | 4,140,028 | | | | 26 | % | John Price | | | 100,000 | | | | 1 | % | Non-Employee Directors: | | | | | | | | | Michael Doron | | | 79,197 | | | | 1 | % | William Bush | | | 19,412 | | | | 0 | % | Stacey Jenkins | | | 19,412 | | | | 0 | % | Noel Thompson | | | 19,412 | | | | 0 | % | Richard Estalella | | | 46,049 | | | | 0 | % | | | | | | | | | | Officers and Directors as a Group (seven persons): | | | 4,423,510 | | | | 27 | % | | | | | | | | | |
| Shares Beneficially Owned | | | Name of Beneficial Owner | | | Named Executive Officers: | | | Ryan Drexler | 18,516,023 | 58.7% | Brian Casutto | 125,000 | * | Non-Employee Directors: | | | William Bush | 254,086 | * | John J. Desmond | 230,214 | * | Officers and Directors as a Group (four persons): | 18,794,210 | 60.7% |
* | Represents less than one percent. |
(1) | This column lists beneficial ownership of voting securities as calculated under SEC rules. Otherwise, except to the extent noted below, each director, named executive officer or entity has sole voting and investment power over the shares reported. Standard brokerage accounts may include nonnegotiable provisions regarding set-offs or similar rights. |
(2) | Percent of total voting power represents voting power with respect to 13,600,78515,314,667 shares of common stock outstanding as of April 18, 2016,October 22, 2018, plus 2,608,69616,216,216 shares of common stock as if the conversion option of the outstanding convertible debt was exercised (16,209,481and options to purchase common shares 137,262 shares (31,996,734 common shares). were also exercised. |
(3) | Ryan Drexler, the Company’s interim chief executive officer, interim president and chairman of the board of directors is the sole member of Consac, LLC, and as such has voting and investment power over the securities owned by the stockholder. These shares are also included in the beneficial owners of more than five percent table below. |
Beneficial Owners of More than Five Percent The following table shows the number of shares of our common stock, as of April 18, 2016,October 22, 2018, held by persons known to us to beneficially own more than five percent of our outstanding common stock. | | | | | | | | | | | Shares Beneficially Owned | | | | Common Stock (1) | | Name of Beneficial Owner | | Shares | | | % (2) | | Wynnefield Capital (3) | | | 920,415 | | | | 6 | % | Consac, LLC (4) | | | 4,140,028 | | | | 26 | % | Marine MP (5) | | | 780,000 | | | | 5 | % |
| Shares Beneficially Owned | | | | | | Wynnefield Capital (3) | 1,671,305 | 10.8% | Ryan Drexler | 18,516,023 | 58.7% | Amerop Holdings, Inc. (4) | 2,927,677 | 19.1% |
(1) | This column lists beneficial ownership of voting securities as calculated under SEC rules. Otherwise, except to the extent noted below, each director, named executive officer or entity has sole voting and investment power over the shares reported. Standard brokerage accounts may include nonnegotiable provisions regarding set-offs or similar rights. |
(2) | Percent of total voting power represents voting power with respect to 13,600,78515,314,667 shares of common stock outstanding as of April 18, 2016, plus 2,608,696October 22, 2018. To compute the percentage of outstanding shares of common stock as ifheld by each person and unless otherwise noted, any share of common stock which such person has the right to acquire pursuant to the exercise of stock options exercisable within 60 days of October 22, 2018 or upon conversion option of the outstanding convertible debt was exercised (16,209,481 common shares).is deemed to be outstanding, but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. |
(3) | Joshua Landes and Nelson Obus may be deemed to hold an indirect beneficial interest in these shares, which are directly beneficially owned by Wynnefield Partners Small Cap Value, L.P., Wynnefield Partners Small Cap Value, L.P. I, Wynnefield Small Cap Value Offshore Fund and Wynnefield Capital, Inc. Profit Sharing Plan because they are a co-managing members of Wynnefield Capital Management, LLC and principal executive officers of Wynnefield Capital, Inc. The principal place of business for Wynnefield Capital is 450 Seventh Avenue, Suite 509, New York, New York 10123. This information is based on a Schedule 13D/A filed on October 18, 2018 with the SEC. |
(4) | Ryan Drexler,Amerop Holdings, Inc. and Leonard P. Wessell III may be deemed to hold an indirect beneficial interest to 1,463,839 of these shares. White Winston Select Asset Funds, LLC, Todd M. Enright, Mark Blundell, Donald Feagan, and Robert Mahoney may be deemed to hold an indirect beneficial interest in these shares. White Winston Select Asset Fund Series Fund MP-18, LLC reported sole voting power with respect to 2,927,677 shares. The address of White Winston Select Asset Funds Series Fund MP-18, LLC is 265 Franklin St., Suite 1702, Boston, MA 02110.This information is based on a Schedule 13D filed on August 24, 2018 with the Company’s interim chief executive officer, interim president and chairman of the board of directors is the sole member of Consac, LLC, and as such has voting and investment power over the securities owned by the stockholder. These shares are also included in the Named Executive Officers portion of the Management Beneficial Ownership table above.SEC. |
(5) | Arnold Schwarzenegger is the sole member of Marine MP, LLC, and as such has voting and investment power over the securities owned by the stockholder. |
EQUITY COMPENSATION PLAN INFORMATION In 2015, we adopted the MusclePharm Corporation 2015 Equity Incentive Compensation Plan that has been(the “2015 Plan”). The 2015 Plan was approved by our stockholders to replace theand replaced our 2010 Equity Incentive Plan. We have not issued any shares under the 2015 Equity Incentive Plan and all options issued under the 2010 Equity Incentive Plan have expired. The following table sets forth the number and weighted-average exercise price of securities to be issued upon exercise of outstanding options, warrants and rights, and the number of securities remaining available for future issuance under all of our equity compensation plans, atas of December 31, 2015: | | | | | | | | | | | | | PLAN CATEGORY
| | Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights (a) | | | Weighted average
exercise price of
outstanding
options, warrants
and rights (b) | | | Number of securities remaining
available for future issuance
under equity compensation
plans (excluding securities
reflected in column a) (c) | | Equity compensation plans approved by security holders:
| | | | | | | | | | | | | 2015 Equity Incentive Purchase Plan
| | | — | | | $ | — | | | | 2,000,000 | | 2015 Employee Stock Purchase Plan
| | | — | | | | — | | | | 1,500,000 | | 2014 Restricted Stock Pool
| | | — | | | | — | | | | 170,000 | | Equity compensation plans not approved by security holders:
| | | — | | | | — | | | | — | | | | | | | | | | | | | | | Total
| | | — | | | $ | — | | | | 3,670,000 | | | | | | | | | | | | | | |
2017: | Number of securities to be issued uponexercise of outstanding options, warrants and rights (a) | Weighted average exercise price of outstanding options, warrants and rights (b) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a) (c) | Equity compensation plans approved by security holders: | | | | 2015 Incentive Compensation Plan | 331,584 | $2.10 | 1,374,519 | | | | | Total | 331,584 | $2.10 | 1,374,519 |
The Audit Committee of the Board of Directors (the “Audit Committee”) has furnished this report concerning the independent audit of the Company’s financial statements. Each member of the Audit Committee meets the enhanced independence standards established by the Sarbanes-Oxley Act of 2002 and rulemaking of the Securities and Exchange Commission (the “SEC”) and the NASDAQNasdaq Stock Market regulations. A copy of the Audit Committee Charter is available on the Company’s website at http://www.musclepharmcorp.ir.musclepharmcorp.com/governance-documents.
The Audit Committee’s responsibilities include assisting the Board of Directors regarding the oversight of the integrity of the Company’s financial statements, the Company’s compliance with legal and regulatory requirements, the Independent Registered Public Accounting Firm’s qualifications and independence, and the performance of the Company’s internal audit function and the Independent Registered Public Accounting Firm. In fulfilling its oversight responsibilities, the Audit Committee reviewed and discussed the Company’s financial statements for the fiscal year ended December 31, 20152017 with the Company’s management and EKS&H LLLP,Plante & Moran,PLLC, the Company’s Independent Registered Public Accounting Firm. In addition, the Audit Committee has discussed with EKS&H LLLP,Plante & Moran,PLLC, with and without management present, their evaluation of the Company’s internal accounting controls and overall quality of the Company’s financial reporting. The Audit Committee also discussed with EKS&H LLLPPlante & Moran, PLLC the matters required to be discussed by AICPA, Professional Standards, Vol. 1, AU Section 380 (Communication with Audit Committees), as modified or supplemented. The Audit Committee also received the written disclosures and the letter from EKS&H LLLPPlante & Moran, PLLC required by the Public Company Accounting Oversight Board Rule 3526 (Communication with Audit CommitteeCommittees Concerning Independence) and the Audit Committee discussed with EKS&H LLLPPlante & Moran, PLLC the independence of EKS&H LLLPPlante & Moran, PLLC from the Company and the Company’s management. Based on the Audit Committee’s review and discussions noted above, the Audit Committee recommended to the Board of Directors, and the Board of Directors approved, that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 20152017 for filing with the Securities and Exchange Commission. The Audit Committee and the Board of Directors also have recommended, subject to stockholder approval, the selection of EKS&H LLLPPlante & Moran, PLLC as the Company’s Independent Registered Public Accounting Firm for the year ending December 31, 2016.AUDIT COMMITTEE
/s/ William J. Bush, CHAIRMAN
Michael Doron
Stacey Y. Jenkins
2018. RELATED PARTY TRANSACTIONS Interim Chief Executive Officer, Interim President and
Related-Party Notes Payable On November 3, 2017, we entered into a refinancing transaction (the “Refinancing”) with Mr. Ryan Drexler, the Company’s Chairman of the Board of Directors’ Debt GuaranteeIn October 2015, the Company entered into loan modification agreements with ANB Bank under the line of credit and term loan to: (i) change the maturity date of the loans to January 15, 2016, (ii) prohibit the loans to be declared in default prior to December 10, 2015, except for defaults resulting from failure to make timely payments, and (iii) delete certain financial covenants from the line of credit. In consideration for these modifications, Ryan Drexler, the Company’s interim chief executive officer, interim president and chairman of the board of directors and a family member, provided their individual guaranty for the remaining balance of the term loan and line credit of $6.2 million. In consideration for executing his guaranty, the Company issued Ryan Drexler 28,571 shares of common stock with a grant date fair value of $80,000 (based upon the closing price of common stock on the date of issuance).
InterimDirectors, Chief Executive Officer Interim President and ChairmanPresident. The refinancing was overseen and approved by a Special Committee of the Board of Directors’Directors, comprised of John J. Desmond and William Bush, each of whom is an independent member of our Board of Directors. As part of the Refinancing, we issued to Mr. Drexler an amended and restated convertible secured promissory note (the “Refinanced Convertible Secured Promissory Note Agreement
In December 2015,Note”) in the Company entered intooriginal principal amount of $18,000,000, which amends and restates (i) a convertible secured promissory note agreementdated as of December 7, 2015, and amended as of January 14, 2017, in the original principal amount of $6,000,000 with Ryan Drexler, interim chief executive officer, interim presidentan interest rate of 8% prior to the amendment and chairman10% following the amendment (the “2015 Convertible Note”), (ii) a convertible secured promissory note dated as of November 8, 2016, in the original principal amount of $11,000,000 with an interest rate of 10% (the “2016 Convertible Note”) , and (iii) a secured demand promissory note dated as of July 27, 2017, in the original principal amount of $1,000,000 with an interest rate of 15% (the “2017 Note”, and together with the 2015 Convertible Note and the 2016 Convertible Note, collectively, the “Prior Notes”). The due date of the board2015 Convertible Note and the 2016 Convertible Note was November 8, 2017. The 2017 Note was due on demand.
2017 Refinanced Convertible Note The $18 million Refinanced Convertible Note bears interest at the rate of directors pursuant12% per annum. Interest payments are due on the last day of each quarter. At our option (as determined by its independent directors), we may repay up to which he lendedone sixth of any interest payment by either adding such amount to the Company $6.0 million. Proceeds fromprincipal amount of the note were usedor by converting such interest amount into an equivalent amount our common stock. Any interest not paid when due shall be capitalized and added to fund working capital requirements. The convertible note is secured by all assets and propertiesthe principal amount of the CompanyRefinanced Convertible Note and its subsidiaries whether tangible or intangible. The convertible note carries anbear interest at 8% per annum, or 10% inon the event of default. applicable interest payment date along with all other unpaid principal, capitalized interest, and other capitalized obligations. Both the principal and the interest under the convertible noteRefinanced Convertible Note are due in January 2017,on December 31, 2019, unless converted earlier. The holder can
Mr. Drexler may convert the outstanding principal and accrued interest into shares of our common stock for $2.30at a conversion price of $1.11 per share at any time. The CompanyWe may prepay the convertible note at the aggregate principal amount therein plus accrued interestRefinanced Convertible Note by giving the holderMr. Drexler between 15 and 60 day-notice,days’ notice depending upon the specific circumstances, provided thatsubject to Mr. Drexler’s conversion right. The Refinanced Convertible Note contains customary events of default, including, among others, the holder mayfailure by us to convertmake a payment of principal or interest when due. Following an event of default, interest will accrue at the note duringrate of 14% per annum. In addition, following an event of default, any conversion, redemption, payment or prepayment of the noticeRefinanced Convertible Note will be at a premium of 105%. The Refinanced Convertible Note also contains customary restrictions on the ability of us to, among other things, grant liens or incur indebtedness other than certain obligations incurred in the ordinary course of business. The restrictions are also subject to certain additional qualifications and carveouts, as set forth in the Refinanced Convertible Note. The Refinanced Convertible Note is subordinated to certain other indebtedness of us, as described below. As part of the Refinancing, we and Mr. Drexler entered into a restructuring agreement (the “Restructuring Agreement”) pursuant to which the parties agreed to enter into the Refinanced Convertible Note and to amend and restate the security agreement pursuant to which the Prior Notes were secured by all of the assets and properties of us and our subsidiaries whether tangible or intangible, by entering into the Third Amended and Restated Security Agreement (the “Amended Security Agreement”). Pursuant to the Restructuring Agreement, we agreed to pay, on the effective date of the Refinancing, all outstanding interest on the Prior Notes through November 8, 2017 and certain fees and expenses incurred by Mr. Drexler in connection with the Restructuring. In connection with the refinancing, the Company recorded a debt discount of $1.2 million. The debt discount is equal to the change in the fair value of the conversion option between the Refinanced Convertible Note and the Prior Notes. The fair value of the conversion option was determined a Monte Carlo simulation and the model of stock price behavior known as GBM which simulates a future period as a random step from a previous period. The Company recordedengaged a third-party valuation firm to perform this complex valuation. In addition, the convertible noteRefinanced Convertible Note contains two embedded derivatives for default interest and an event of $6.0default put. Due to the unlikely event of default, the embedded derivatives have a de minimis value as of December 31, 2017. For the years ended December 31, 2017 and 2016, interest expense related to the related party notes was $2.4 million as a liabilityand $0.7 million, respectively. During the years ended December 31, 2017 and 2016, $2.2 million and $0.5 million, respectively, in interest was paid to Mr. Drexler. For the balance sheet and alsoyear ended December 31, 2016, in connection with issuing the Prior Notes, the Company recorded a beneficial conversion feature of $52,000$601,000 as a debt discount upon issuance of the convertible note, which is beingwas amortized over the original term of the convertible debt using the effective interest method. The beneficial conversion feature was calculated based on the difference between the fair value of common stock and the effective conversion price of the convertible note. As of December 31, 2015, the convertible note had an outstanding principal balance of $6.0 million.In connection with the Company entering into the convertible promissory note with Mr. Drexler, the Company granted Mr. Drexler the right to designate two directors to the Company’s Board of Directors. The Company agreed to take all actions necessary to permit such designation.
Charitable Youth Sports Program
In March 2014, the Board of Directors of the Company approved and the Company established a charitable youth sports grant program (the “Program”) pursuant to which the Company will donate product, equipment and cash to organizations such as schools, sports teams and training facilities. The Company had tentatively established an annual budget of approximately $250,000 for the Program. The primary intent of the Program was to build MusclePharm brand awareness with youth athletes. The Company’s other business purposes in establishing the Program was to help needy organizations achieve their goals, promote the Company’s brand, help athletes develop stronger and better skills and to build the reputation of the Company as a contributor to the community. A committee formerly consisting of the Company’s former president, former director of team development, and former chief operating officer oversaw the Program. In 2014, the Company made an initial grant in the amount of approximately $250,000 to Arvada West High School and similar charitable contributions to other charitable sports organizations of approximately $30,000. The Company’s former chief executive officer, Mr. Brad Pyatt, is a graduate of Arvada West High School and serves as a volunteer football coach. The Company did not make a
charitable grant to Arvada West High School during 2015. The Company did make charitable grants to other youth sports organizations during 2015 totaling approximately $278,000. We expect this amount to decrease substantially in 2016 and any future grant will be approved by the chief executive officer and chief financial officer.
Sports Tickets
The Company maintains a luxury box at the Sports Authority Field in Denver, Colorado. Employees are able to attend Denver Bronco football games and utilize the luxury box. During 2015, our chief executive officer donated tickets to one of the Denver Broncos games to a youth football team for fund raising. Brad’s son is a member of the youth football team. The total cost for the event was approximately $15,000.
Key Executive Life Insurance
For the year ended December 31, 2015, the Company purchased split dollar life insurance policies on certain key executives. In September 2015, the Company increased the coverage on one of its key executives officers. These policies provide a split of 50% of the death benefit proceeds to the Company and 50% to the officer’s designated beneficiaries.
Lease Agreement with Significant Shareholder
In October 2013, the Company entered into an Office Lease Agreement with Frost Real Estate Holdings, LLC, a Florida limited liability company owned by Dr. Phillip Frost, a significant shareholder. Pursuant to the lease, the Company rented 1,437 square feet of office space for an initial term of three years, with an option to renew the lease for an additional three-year term. This facility was closed in September 2015 and included in the Company’s restructuring plan. The remaining lease obligation through April 2017 for $77,000 was included in the restructuring expense. For the years ended December 31, 2015, 2014 and 2013, the Company incurred rent expense of $39,000, $54,000 and $13,000, respectively.
Lease Agreement with Former Employee
The Company leased office and warehouse facility in Hamilton, Ontario, Canada from 2017275 Ontario Inc., which is a company owned by Renzo Passaretti, vice president and general manager of MusclePharm Canada Enterprises Corp, the Company’s wholly-owned Canadian subsidiary. Mr. Passaretti separated from the Company on September 2, 2015. For the years ended December 31, 2015, 2014 and 2013, the Company paid rent of $83,000, $86,000 and $75,000, respectively. The lease was terminated in November 2015.
Business Relationship with Former Employee
Ryan DeLuca, the former chief executive officer of Bodybuilding.com, is the brother of Jeremy DeLuca, MusclePharm’s former executive vice president, MusclePharm brand and global business development. The Company maintained a business relationship with Bodybuilding.com prior to hiring Mr. DeLuca. The Company does not offer preferential pricing of our products to Bodybuilding.com based on these relationships. Mr. DeLuca separated from MusclePharm on September 15, 2015. Net revenue from products sales to Bodybuilding.com were $16.9 million, $24.0 million and $29.8 million for the years ended December 31, 2015, 2014 and 2013, respectively. The Company had $1.5 million and $1.9 million in trade receivables with Bodybuilding.com as of December 31, 2015 and 2014, respectively. The Company purchased marketing services from Bodybuilding.com of $0.4 million and $1.4 million for the years ended December 31, 2015 and 2014, respectively.
Indemnification Agreements
We have entered into indemnification agreements with each of our directors and named executive officers. The indemnification agreements and our bylaws require us to indemnify our directors to the fullest extent permitted by Nevada law.
Review, Approval or Ratification of Transactions with Related Parties We intend to adoptadopted a written related person transactions policy that our executive officers, directors, nominees for election as a director, beneficial owners of more than 5% of our common stock, and any members of the immediate family of and any entity affiliated with any of the foregoing persons, are not permitted to enter into a material related person transaction with us without the review and approval of our Audit Committee, or a committee composed solely of independent directors in the event it is inappropriate for our Audit Committee to review such transaction due to a conflict of interest. We expect theThe policy to provideprovides that any request for us to enter into a transaction with an executive officer, director, nominee for election as a director, beneficial owner of more than 5% of our common stock or with any of their immediate family members or affiliates, in which the amount involved exceeds $120,000 will be presented to our Audit Committee for review, consideration and approval. In approving or rejecting any such proposal, we expect that our Audit Committee will consider the relevant facts and circumstances available and deemed relevant to the Audit Committee, including, but not limited to, whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related person’spersons interest in the transaction.
Although we have not always had a written policy for the review and approval of transactions with related persons, our Board of Directors has historically reviewed and approved any transaction where a director or officer had a financial interest, including all of the transactions described above. Prior to approving such a transaction, the material facts as to a director’s or officer’s relationship or interest as to the agreement or transaction were disclosed to our Board of Directors. Our Board of Directors would take this information into account when evaluating the transaction and in determining whether such transaction was fair to us and in the best interest of all of our stockholders. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Exchange Act, requires our directors and named executive officers, and persons who beneficially own more than 10% of our common stock, to file initial reports of ownership and reports of changes in ownership of our common stock and our other equity securities with the SEC. As a practical matter, we assist our directors and officers by monitoring transactions and completing and filing Section 16 reports on their behalf. Based solely on a review of the copies of such forms in our possession and on written representations from reporting persons, we believe that during 2015, all ofDuring 2017, our named executive officers and directors filed the required reports on a timely basis under Section 16(a) of the Exchange Act except for (i) Michael Doron, William Bush, Stacey Jenkins and Noel Thompson regarding the July 2015 board grant.as follows:
| | | | Ryan Drexler | 12/08/2016 | | 200,000 | Ryan Drexler | 1/01/2017 | | 350,000 | Michael Doran | 4/21/2017 | —
| 10,081 | William J. Bush | 4/21/2017 | | 10,081 | William J. Bush | 7/24/2017 | | 53,476 | John J. Desmond | 7/24/2017 | | 80,214 |
The Board of Directors has nominated the four (4) individuals identified under “Director Nominees” below for election as directors, all of whom are currently directors of the Company. Each of the nominees has agreed to be named in this proxy statement and to serve as a director if elected. Our Board of Directors is currently comprised of six (6) members, however Messrs. Estalella and Thompson are not standing for reelection and will retire from the Board of Directors following the Annual Meeting.four (4) members. Directors are elected at each annual meeting and hold office until their successors are duly elected and qualified at the next annual meeting. In the absence of instructions to the contrary, the persons named as proxy holders in the accompanying proxy intend to vote in favor of the election of the four (4) nominees designated below to serve until the 20172018 Annual Meeting of Stockholders and until their respective successors shall have been duly elected and qualified. The following table sets forth certain information concerning the nominees for directors of the Company as of May 13, 2016. | | | | | | | | | | | Name | | Age | | | Director Since | | | Position with the Company | Ryan Drexler | | | 45 | | | | 2015 | | | Chairman of the Board, Interim Chief Executive Officer and President | Michael Doron | | | 55 | | | | 2012 | | | Director | William Bush | | | 51 | | | | 2015 | | | Director | Stacey Jenkins | | | 41 | | | | 2015 | | | Director |
October 22, 2018. Name | | Age | | DirectorSince | | Position with the Company | Ryan Drexler | | 47 | | 2015 | | Chairman of the Board, Chief Executive Officer and President | Brian Casutto | | 47 | | 2017 | | Executive Vice President of Sales and Operations and Director | William Bush | | 53 | | 2015 | | Director | John J. Desmond | | 68 | | 2017 | | Director |
The election of the directors of the Company requires the affirmative vote of a pluralitythe majority of the votes cast by stockholders, who are entitled to vote, present in person or represented by Proxy at the Annual Meeting, which will be the nominees receiving the largest number of votes, which may or may not constitute less than a majority.Meeting. THE BOARD RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH OF THE DIRECTOR NOMINEES
RATIFICATION OF APPOINTMENT OF EXTERNAL AUDITORS The Audit Committee has selected EKS&H LLLP,Plante & Moran,PLLC, an independent registered public accounting firm, to audit the consolidated financial statements of MusclePharm Corporation for the fiscal year ending December 31, 20162018 and recommends that stockholders vote for ratification of such appointment. Although we are not required to submit to a vote of the stockholders the ratification of the appointment of EKS&H LLLP,Plante & Moran,PLLC, the Company, the Board and the Audit Committee, as a matter of good corporate governance, have determined to ask the stockholders to ratify the appointment. If the appointment of EKS&H LLLPPlante & Moran, PLLC is not ratified, the Audit Committee will take the vote under advisement in evaluating whether to retain EKS&H LLLP.Plante & Moran,PLLC. Representatives of EKS&H LLLPPlante & Moran, PLLC attend meetings of the Audit Committee of the Board including executive sessions of the Audit Committee at which no members of MusclePharm’s management are present. EKS&H LLLPPlante & Moran, PLLC has audited the Company’s financial statements for each fiscal year since the fiscal year ended December 31, 2013. Representatives of EKS&H LLLPPlante & Moran, PLLC are not expected to be present at the Annual Meeting. In addition,However, if they are present they will have an opportunity to make a statement if they desire to do so, and if they are present they would be expected to be available to respond to appropriate questions from stockholders. The following table shows fees and expenses that we paid (or accrued) for professional services rendered by EKS&H LLLPPlante & Moran, PLLC for the years ended December 31, 20142017 and 2015: | | | | | | | | | | | 2015 | | | 2014 | | Audit fees (1) | | $ | 305,000 | | | $ | 305,000 | | Audit-related fees (2) | | | 55,000 | | | | 53,000 | | Tax fees (3) | | | 0 | | | | 1,000 | | All other fees (4) | | | 20,000 | | | | 25,000 | | | | | | | | | | | Total | | $ | 380,000 | | | $ | 384,000 | |
2016: | | | Audit fees (1) | $245,000 | $239,000 | Audit-related fees (2) | 62,000 | 60,000 | All other fees (3) | 17,000 | 25,000 | Total | $324,000 | $324,000 |
(1) | Represents the aggregate fees billed for the audit of the Company’s financial statements, review of the financial statements included in the Company’s quarterly reports and services in connection with the statutory and regulatory filings or engagements for those fiscal years.statements. |
(2) | Represents the aggregate fees billed for assurance and related services, including the fees for the Quarterly reviews, that are reasonably related to the performance of the audit or review of the Company’s financial statements and are not reported under “auditaudit fees.” |
(3) | Represents the aggregate fees billed for tax compliance, advice and planning. |
(4) | Represents the aggregate fees billed for all products and services provided that are not included under “auditaudit fees,” “audit-related fees” audit-related fees or “taxtax fees.” These services included a review of a Registration Statement on Form S-8 and related consent procedures, review of the agreement to sell our wholly-owned subsidiary, BioZone Laboratories, Inc. and various Current Reports on Form 8-K. |
Audit Committee Pre-Approval Policies Before an Independent Registered Public Accounting Firm is engaged by us or our subsidiaries to render audit or non-audit services, the Audit Committee shall pre-approve the engagement. Audit Committee pre-approval of audit and non-audit services will not be required if the engagement for the services is entered into pursuant to pre-approval policies and procedures established by the Audit Committee regarding our engagement of the Independent Registered Public Accounting Firm, provided the policies and procedures are detailed as to the particular service, the Audit Committee is informed of each service provided and such policies and procedures do not include delegation of the Audit Committee’s responsibilities under the Exchange Act to our management. The Audit Committee may delegate to one or more designated members of the Audit Committee the authority to grant pre-approvals, provided such approvals are presented to the Audit Committee at a subsequent meeting. If the Audit Committee elects to establish pre-approval policies and procedures regarding non-audit services, the Audit Committee must be informed of each non-audit service provided by the Independent Registered Public Accounting Firm. Audit Committee pre-approval of non-audit services (other than review and attest services) also will not be required if such services fall within available exceptions established by the SEC. All non-audit services provided by EKS&H LLLPPlante & Moran, PLLC during fiscal years 20142015 and 20152016 were pre-approved by the Audit Committee in accordance with the pre-approval policy described above. The affirmative vote of the holders of a majority of the outstanding shares of common stock present or represented by proxy and entitled to vote at the Annual Meeting will be required to ratify the appointment of EKS&H LLLP.Plante & Moran,PLLC. Recommendation of the Board of Directors THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF EKS&H LLLPPlante & Moran, PLLC AS THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM OF THE COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31, 2016.2018.
ADVISORY VOTE ON EXECUTIVE COMPENSATION The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act) enables our stockholders to vote to approve, on an advisory (non-binding) basis, the compensation of our named executive officers as disclosed in this proxy statement in accordance with SEC rules. Our executive officer compensation program is designed to attract and retain talented and qualified senior executives to manage and lead our Company and to motivate them to pursue and meet our corporate objectives. Under this program, our named executive officers are rewarded for individual and collective contributions to our success consistent with our “pay for performance” orientation. Furthermore, the executive officer total compensation program is aligned with the nature and dynamics of our business, which focuses management on achieving the Company’s annual and long-term business strategies and objectives. Additional details about our executive compensation programs are described under the section titled “Compensation Discussion and Analysis.”Our Compensation Committee regularly reviews theour executive officer compensation program to ensure that it achieves the desired goals of emphasizing long-term value creation and aligning the interests of management and stockholders through the use of equity-based awards. We are asking our stockholders to indicate their support for our named executive officer compensation as described in this proxy statement. This proposal, commonly known as a “say-on-pay” proposal, gives our stockholders the opportunity to express their views on our named executive officers’ compensation. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the philosophy, policies and practices described in this proxy statement. Accordingly, we ask our stockholders to vote “FOR” the following resolution at the Annual Meeting: “RESOLVED, that the Company’s stockholders approve, on an advisory basis, the compensation of the named executive officers, as disclosed in the Company’s proxy statement for the 20162017 Annual Meeting of Stockholders pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, the Summary Compensation Table and the other related tables and disclosure.” The affirmative vote of the holders of a majority of the outstanding shares of common stock present or represented by proxy and entitled to vote at the Annual Meeting will be required to approve the compensation of the named executive officers as disclosed in this proxy statement. The “say-on-pay” vote is advisory, and therefore not binding on the Company, the Compensation Committee or our Board of Directors. Although the vote is non-binding, the Compensation Committee and the Board of Directors value the opinions of the stockholders and will consider the outcome of the vote when making future compensation decisions. Recommendation of the Board of Directors THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE COMPENSATION OF THE NAMED EXECUTIVE OFFICERS, AS DESCRIBED IN THIS PROXY STATEMENT PURSUANT TO THE COMPENSATION DISCLOSURE RULES OF THE SEC. PROPOSAL 4
ADVISORY VOTE ON THE FREQUENCY OF THE ADVISORY VOTE ON EXECUTIVE COMPENSATION
In addition to the advisory approval of our executive compensation program, we are also holding a non-binding advisory vote by stockholders on the frequency with which stockholders would have an opportunity to hold a non-binding advisory vote on our executive compensation program. We have included this proposal among the items to be considered at the annual meeting pursuant to the requirements of Section 14A of the Securities Exchange Act of 1934. We are providing stockholders the option of selecting a frequency of one, two or three years, or abstaining. We recommend that our stockholders select “One Year” when voting on the frequency.
After careful consideration, the Board believes that holding an advisory vote annually on executive compensation is currently the most appropriate alternative for the Company. We therefore recommend that our stockholders select “One Year” when voting on the frequency of advisory votes on executive compensation. Although the advisory vote is non-binding, our Board will review the results of the vote and take them into account in making a determination concerning the frequency of future advisory votes on executive compensation.
The option of one year, two years or three years that receives the highest number of votes cast by stockholders will be the frequency of the advisory note on executive compensation that has been selected by stockholders. However, because this vote is advisory and not binding on the Board of Directors or the Company, the Board may decide that it is in the best interests of our stockholders and the Company to hold an advisory vote on executive compensation more or less frequently than the option approved by our stockholders.
Required Vote
The affirmative vote of the holders of a majority of the outstanding shares of common stock present or represented by proxy and entitled to vote at the Annual Meeting will be required to approve the advisory vote on the frequency of the advisory vote on the compensation of the named executive officers as disclosed in this proxy statement.
The stockholder vote on executive compensation is an advisory vote only, and it is not binding on the Company, the Board of Directors, or the Compensation Committee. Although the vote is non-binding, the Compensation Committee and the Board of Directors value the opinions of the stockholders and will consider the outcome of the vote when making future compensation decisions.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR HOLDING FUTURE ADVISORY VOTES REGARDING COMPENSATION OF THE NAMED EXECUTIVE OFFICERS EVERY ONE YEAR.
HOUSEHOLDING OF PROXY MATERIALS We have adopted a procedure approved by the SEC known as “householding.” This procedure allows multiple stockholders residing at the same address the convenience of receiving a single copy of our Annual Report on Form 10-K and proxy statement, if they have elected to receive proxy materials by mail.the Notice. This allows us to save money by reducing the number of documents we must print and mail, and helps protect the environment as well.Householding is available to both registered stockholders (i.e., those stockholders with certificates registered in their name) and streetname holders (i.e., those stockholders who hold their shares through a brokerage). The Company will promptly deliver, upon oral or written request, a separate copy of the Notice to any stockholder residing at an address to which only one copy was mailed. Requests for additional copies should be directed to Investor Relations.
If you are a registered stockholder that has requested to receive proxy materials by mail and you have consented to our mailing of proxy materials and other stockholder information only to one account in your household, as identified by you, we will deliver or mail a single copy of our Annual Report on Form 10-K and proxy statement for all registered stockholders residing at the same address. Your consent will be perpetual unless you revoke it, which you may do at any time by contacting the Householding Department of Broadridge Financial Solutions, Inc., at 51 Mercedes Way, Edgewood, NY 11717, or by calling 1-800-542-1061. If you revoke your consent, we will begin sending you individual copies of future mailings of these documents within 30 days after we receive your revocation notice. If you received a householded mailing this year, and you would like to receive additional copies of our Annual Report on Form 10-K and proxy statement mailed to you, please callsend a e-mail request to Investor Relations at (301) 279-5980, send an e-mail request to investors@musclepharm.com, or write to c/o Investor Relations, MusclePharm Corporation, 4721 Ironton Street, Building A, Denver, CO 802394400 Vanowen St., Burbank, CA 91505 and we will promptly deliver the requested copy. Registered stockholders that have requested to receive proxy materials by mail and have not consented to householding will continue to receive copies of our Annual Reports on Form 10-K and our proxy statements for each registered stockholder residing at the same address. As a registered stockholder, you may elect to participate in householding and receive only a single copy of the Annual Reports on Form 10-K and proxy statements for all registered stockholders residing at the same address by contacting Broadridge as outlined above. Stockholders who hold their shares through a brokerage may elect to participate in householding or revoke their consent to participate in householding by contacting their respective brokers.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This Proxy Statement, as well as other written reports and oral statements that we make from time to time, includes statements that express our opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results and therefore are, or may be deemed to be, “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Act”). The words “ongoing,” “believes,” “expects,” “may,” “will” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Forward-looking statements are not guarantees that the future results, plans, intentions or expectations expressed or implied will be achieved. Matters subject to forward-looking statements involve known and unknown risks and uncertainties, including regulatory, competitive and other factors, which may cause actual financial or operating results or the timing of events to be materially different than those expressed or implied by forward-looking statements. Important factors that could cause or contribute to such differences include, but are not limited to: execution of our restructuring plan, inability to raise capital with agreeable terms or at all, resolve litigation, failure of our manufacturers to meet our production needs; failure to successfully invest in or launch new product introductions; general economic conditions in the markets in which we operate, including financial market conditions, and the other factors set forth in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 20152017 and in other public filings with the SEC. Given these risks and uncertainties, you are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation to update any forward-looking statements or to publicly announce the results of any revisions to any of those statements to reflect future events or developments.
We are not aware of any matters that may come before the meeting other than those referred to in the Notice of Annual Meeting of Stockholders. If any other matter shall properly come before the Annual Meeting, however, the persons named in the accompanying proxy intend to vote all proxies in accordance with their best judgment. Accompanying this proxy statement is our Annual Report on Form 10-K for the fiscal year ended December 31, 2015. Copies of our Annual Report on Form 10-K for the fiscal year ended December 31, 2015,2017, as filed with the SEC, are available free of charge on our website at www.musclepharmcorp.com or you can request a copy free of charge by callinge-mail request to Investor Relations at 301-279-5980 or sending an e-mail request to investors@musclepharm.com. Please include your contact information with the request.
By Order
Burbank, California October 26, 2018
Important Notice Regarding the Availability of Proxy Materials for the Board of DirectorsMusclePharm Corporation.
Sincerely,
/s/ John Price
John Price
Corporate Secretary
Denver, Colorado
May 13, 2016
Annual Meeting: The Notice and Proxy Statement and Annual Report are available atwww.musclepharm.com. | | | | | PROXY | | ANNUAL MEETING OF SHAREHOLDERSSTOCKHOLDERS | | PROXY | | | OF | | | | | MUSCLEPHARM CORPORATION | | | | | JUNE 27, 2016December 7, 2018 | | |
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned hereby appoints Ryan Drexler and John Price and each or any of them proxies,as proxy, with power of substitution, to vote all shares of the undersigned at the annual meeting of shareholdersstockholders of MusclePharm Corporation to be held on June 27, 2016December 7, 2018 at 11:00 a.m. localPacific time at 4721 Ironton Street the 4400 Vanowen St., Denver, CO 80239,Burbank, CA 91505, or at any adjournment thereof, upon the matters set forth in the proxy statement for such meeting, and in their discretion, on such other business as may properly come before the meeting. 1. | TO ELECT DIRECTORS, EACH TO SERVE SUCH TERM AS SET FORTH IN THE PROXY STATEMENT OR UNTIL HIS SUCCESSOR HAS BEEN DULY ELECTED AND QUALIFIED. |
| ¨ | FOR THE NOMINEES LISTED BELOW | | For | Against | | Abstain |
| ¨ | WITHHOLD AUTHORITY to vote for the nominee listed belowRyan Drexler | | ☐ | ☐ | | ☐ |
| ¨ | FOR ALL EXCEPT (See instructions below) |
| | | | | John J. Desmond | | (INSTRUCTION:☐ | ☐ | | To withhold authority to vote for any individual nominee(s) mark “FOR ALL EXCEPT” and fill in the box next to each nominee you wish to withhold as shown here: |
| | | | ☐ | | | ¨Ryan Drexler William J. Bush | | ¨Stacey Y. Jenkins ☐ | ☐ | | ¨Michael Doron ☐ | | | ¨William J. Bush Brian Casutto | | ☐ | ☐ | | ☐ |
2. | TO RATIFY THE APPOINTMENT OF EKS&H LLLPPlante & Moran, PLLC AS THE INDEPENDENT AUDITORS. |
| | | | | | | | | ¨ FOR
| | ¨ AGAINST
| | ¨
| | | ☐ FOR | | ☐ AGAINST | | ☐ ABSTAIN |
3. | TO HOLD AN ADVISORY VOTE ON EXECUTIVE COMPENSATION. |
| | | | | | | | | ¨ FOR
| | ¨ AGAINST
| | ¨ ABSTAIN
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4. | TO HOLD AN ADVISORY VOTE ON THE FREQUENCY OF THE ADVISORY VOTE ON EXECUTIVE COMPENSATION. |
| | | | | | | | | ¨☐ FOR
| | ¨☐ AGAINST
| | ¨☐ ABSTAIN
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5. | | | | | | | 4. | TO TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJORNMENT OR POSTPONEMENT THEROF.THEREOF. |
IF NO CONTRARY SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2, 3, & 4.3. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO TRANSACT ANY OTHER BUSINESS THAT MAY PROPERLY COME BEFORE THE MEETING. PLEASE MARK, SIGN AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE. | | | | | Dated: | | | | , 20162018 | | | | Signature | | | | | | | | | Signature if held jointly | | | | | NOTE: When shares are held by joint tenants,both should sign. Persons signing as executor, administrator, trustee, etc., should so indicate. Please sign exactly as the name appears on the proxy.
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