Related Party Transactions | 6 Months Ended |
Jun. 30, 2014 |
Related Party Transaction, Due from (to) Related Party [Abstract] | ' |
Related Party Transactions | ' |
Related Party Transactions |
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In August 2008, the Company signed a membership interest purchase agreement to acquire ViSalus, a network marketing |
company that sells weight management products, nutritional supplements, functional foods and energy drink mixes, through a series of investments as discussed in further detail in Note 2. Through December 2012, the Company made investments that |
increased its ownership in ViSalus to approximately 80.9%. In connection with the December 2012 closing, ViSalus issued |
shares of its redeemable convertible preferred stock to the holders of the 19.1% of ViSalus that was not owned by the |
Company. The Company and ViSalus have agreed to redeem all of the shares of preferred stock on December 31, 2017 for $143.2 million, which date can be extended with the consent of holders of a majority of the voting power of the preferred stock, unless prior to such date ViSalus has made an initial public offering of its common stock at a price that indicates a valuation of |
ViSalus of $800 million or more, in which event the preferred stock will automatically convert into common stock of ViSalus |
on a one-to-one basis. The threshold valuation in the preceding sentence is an aspirational goal and should not be considered |
the valuation of ViSalus at the date hereof or to predict ViSalus’s valuation at any time in the future. The Company has |
guaranteed the performance by ViSalus of its redemption obligation. In the event that ViSalus does not redeem the preferred |
shares, each of the preferred shares will become convertible, in the holder's sole discretion, into 100 shares of common stock of ViSalus. |
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At the time of the first closing in October 2008, ViSalus was owned in part by Ropart Asset Management Fund, LLC and |
related entities (collectively, “RAM”), which owned a significant non-controlling interest in ViSalus. In September 2012, |
RAM distributed its interest in ViSalus to its members, including Robert B. Goergen, Robert B. Goergen, Jr. and Todd A. |
Goergen. Robert B. Goergen beneficially owns approximately 36.0% of the Company’s outstanding common stock, and together with members of his family, owns substantially all of RAM. |
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As of June 30, 2014, Robert B. Goergen, Robert B. Goergen, Jr. and Todd A. Goergen (the son of Robert B. Goergen and the brother of Robert B. Goergen, Jr.) own 1.8%, 0.1% and 0.6%, respectively, of the outstanding capital stock of ViSalus. In addition, Ryan J. Blair owns 4.6% of the outstanding capital stock of ViSalus. Of the $143.2 million aggregate redemption amount that will be paid upon redemption of the preferred stock in December 2017, $13.2 million will paid to Robert B. Goergen, $0.5 million will be paid to Robert B. Goergen, Jr., $4.5 million will be paid to Todd A. Goergen (and trusts affiliated with him) and $34.3 million will be paid to Ryan J. Blair. |
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ViSalus Salary Deferral Program. In February 2014, ViSalus offered its senior executives, founders and independent board member the right to participate in a long-term incentive program, which we refer to as the 2014 ViSalus LTIP, in exchange for their agreement to defer the receipt of a portion of their salary or commissions until no later than March 15, 2015. The award under the 2014 ViSalus LTIP is a performance award payable in cash and the amount of the award will be determined by the amount deferred. For those participants who elected to defer less than 50% of their base salary or commissions, the award will equal the amount deferred, and for those participants who elected to defer 50% or more of their base salary or commissions, the award will equal two times the amount deferred. The award will only be paid if ViSalus achieves trailing twelve month earnings before interest and taxes of $20.0 million or more, inclusive of the entire compensation award associated with the 2014 ViSalus LTIP (the “performance goal”), and the participant is associated with ViSalus through the payment date. Ryan J. Blair elected to defer 50% of his 2014 salary (after giving effect to insurance premiums for health and welfare programs), representing $368,159, which amount will be paid to him by March 15, 2015. Todd A. Goergen elected to defer 50% of his 2014 salary (after giving effect to insurance premiums for health and welfare programs), representing $243,521, which amount will be paid to him by March 15, 2015. In addition, because Mr. Blair and Mr. Goergen elected to defer 50% of their respective salaries (after giving effect to insurance premiums for health and welfare programs), they are eligible for LTIP awards of $736,317 and $487,042, respectively, if ViSalus achieves the performance goal and if they are employed by ViSalus on the LTIP payment date. As of June 30, 2014, no amounts for the LTIP award have been accrued for under this program as the probability of whether these targets will be achieved remains uncertain. |
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FragMob. ViSalus entered into an agreement with FragMob LLC in October 2011 under which FragMob agreed to provide |
ViSalus with software development and hosting services for a mobile phone application that allows ViSalus's promoters to |
access their Vi-Net promoter account information on their smart phones. In March 2012, ViSalus added a second application, a |
credit card swiper for mobile phones, to the services provided by FragMob pursuant to the agreement. In September 2012, |
ViSalus and FragMob entered into a new revised agreement that extended the terms to December 31, 2014 and revised certain |
terms of the agreement. Ryan Blair directly and indirectly owns a total of 11.8% of FragMob, RAM directly and indirectly |
owns a total of 7.1% of FragMob and Todd A. Goergen indirectly owns 5.3% of FragMob. Fees paid to FragMob for the three and six months ended June 30, 2014 and 2013 for both services were $0.5 million and $0.9 million, respectively. |
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Software Services. ViSalus’s promoters may use a direct-selling software, which provides the promoters with an array of |
promoter and corporate web modules. ViSalus licenses this software pursuant to a software and hosting services agreement that |
expires in June 2016 and has annual renewal terms. ViSalus currently owns approximately 2.7% of this software provider. In |
addition, Ryan J. Blair owns directly and indirectly a total of 2.2%, RAM directly and indirectly owns a total of 4.8% and Todd |
A. Goergen indirectly owns 0.8% of the software provider. Fees paid to the company for software licensing and other services |
for the three and six months ended June 30, 2014 were $0.2 million and $0.5 million, respectively. Fees paid to the company for software licensing and other services for the three and six months ended June 30, 2013 were $0.3 million and $0.7 million, respectively. |
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Employment Agreement with Todd A. Goergen. In February 2014, Todd A. Goergen became the Chief Operating Officer of |
ViSalus. Mr. Goergen's base salary is $500,000 and he has an annual target bonus opportunity equal to 100% of his base salary |
(with a maximum annual bonus opportunity equal to 200% of his base salary). In May 2013, Todd A. Goergen was issued |
507,375 restricted stock units and 620,125 nonqualified stock options under the ViSalus Plan. Todd A. Goergen is also a member of the Board of Directors of ViSalus. |
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Management Services with ViSalus. On July 25, 2012, ViSalus and the Company entered into a management services |
agreement whereby the Company will provide certain administrative support services to ViSalus for what is believed to be an |
arm's length price for such services. The basis for determining the price for the services is on a cost recovery basis and requires |
ViSalus to pay for such services within 30 days of receipt of the invoice. The agreement terminates on December 31, 2015 but |
can be amended by either party. The estimated cost of services to be provided in 2014 is $1.1 million. |
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RAM Sublease. For the six months ended June 30, 2014 and 2013, RAM paid the Company $0.1 million, respectively, to sublet office space, which the Company believes approximates the fair market rental for the rental period. |