SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant: [X] Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
RELIV' INTERNATIONAL, INC.
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (check the appropriate box):
[X] No Fee Required
RELIV' INTERNATIONAL, INC.
136 Chesterfield Industrial Boulevard
Chesterfield, Missouri 63005
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO
BE HELD ON MAY 23, 2002
To: Shareholders of Reliv' International, Inc.
The Annual Meeting of the shareholders of Reliv' International, Inc. will
be held at the Doubletree Hotel and Conference Center, 16625 Swingley Ridge
Road, Chesterfield, Missouri 63017, on Thursday, May 23, 2002, at 10:00 a.m.,
Central Daylight Savings Time, for the following purposes:
1. To elect 10 directors to hold office during the year following the
Annual Meeting or until their successors are elected (Item No. 1 on
proxy card);
2. To ratify the appointment of Ernst & Young LLP as auditors of the
Company for 2002 (Item No. 2 on proxy card); and
3. To transact such other business as may properly come before the
meeting.
The close of business on April 11, 2002, has been fixed as the record date
for determining the shareholders entitled to receive notice of and to vote at
the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
April 19, 2002 /s/ Stephen M. Merrick
-------------------------------
Stephen M. Merrick, Secretary
YOUR VOTE IS IMPORTANT
It is important that as many shares as possible be represented
at the Annual Meeting. Please date, sign, and promptly return
the proxy in the enclosed envelope. Your proxy may be revoked
by you at any time before it has been voted.
RELIV' INTERNATIONAL, INC.
136 Chesterfield Industrial Boulevard
Chesterfield, Missouri 63005
PROXY STATEMENT
Information Concerning the Solicitation
This statement is furnished in connection with the solicitation of proxies
to be used at the annual shareholders meeting (the "Annual Meeting") of Reliv'
International, Inc. (the "Company"), a Delaware corporation, to be held on
Thursday, May 23, 2002. The proxy materials are being mailed to shareholders of
record on April 19, 2002.
The solicitation of proxies in the enclosed form is made on behalf of the
Board of Directors of the Company.
The cost of preparing, assembling and mailing the proxy material and of
reimbursing brokers, nominees and fiduciaries for the out-of-pocket and clerical
expenses of transmitting copies of the proxy material to the beneficial owners
of shares held of record by such persons will be borne by the Company. The
Company does not intend to solicit proxies otherwise than by use of the mail,
but certain officers and regular employees of the Company or its subsidiaries,
without additional compensation, may use their personal efforts, by telephone or
otherwise, to obtain proxies.
Quorum and Voting
Only shareholders of record at the close of business on April 11, 2002,
are entitled to vote at the Annual Meeting. On that day, there were issued and
outstanding 9,513,064 shares of Common Stock. Each share has one vote. A simple
majority of the outstanding shares is required to be present in person or by
proxy at the meeting for there to be a quorum for purposes of proceeding with
the Annual Meeting. A simple majority of the shares present in person or by
proxy at the Annual Meeting, at which a quorum is present, is required to elect
directors and approve the appointment of the Company's auditors. Abstentions and
withheld votes have the effect of votes against these matters. Broker non-votes
(shares held of record by a broker for which a proxy is not given) will be
counted for purposes of determining shares outstanding for purposes of a quorum,
but will not be counted as present for purposes of determining the vote on any
matter considered at the meeting.
A shareholder signing and returning a proxy on the enclosed form has the
power to revoke it at any time before the shares subject to it are voted by
notifying the Secretary of the Company in writing. If a shareholder specifies
how the proxy is to be voted with respect to any of the proposals for which a
choice is provided, the proxy will be voted in accordance with such
specifications. If a shareholder fails to so specify with respect to such
proposals, the proxy will be voted "FOR" the nominees for directors contained in
these proxy materials and "FOR" the appointment of the Company's auditors.
Stock Ownership by Management and Others
The following table provides information concerning the beneficial
ownership of Common Stock of the Company by each director and nominee for
director, certain executive officers, and by all directors and officers of the
Company as a group as of April 11, 2002. In addition, the table provides
information concerning the beneficial owners known to the Company to hold more
than 5 percent of the outstanding Common Stock of the Company as of April 11,
2002.
Amount and nature of
Name of beneficial owner beneficial ownership(1) Percent of class(1)(2)
------------------------ ----------------------- ----------------------
Robert L. and Sandra S. Montgomery(3) 2,660,145 26.58%
Carl W. Hastings(4) 902,450 9.21%
David G. Kreher 376,015 3.83%
Stephen M. Merrick(5) 676,090 6.95%
Donald L. McCain 441,637 4.55%
Marvin W. Solomonson 349,925 3.66%
Thomas T. Moody 156,151 1.63%
Thomas W. Pinnock III 72,122 *
John B. Akin 48,380 *
Donald E. Gibbons, Jr. 194,849 2.02%
Steven D. Albright 38,862 *
Lynn Stiles 7,500 *
All Directors and Executive Officers as a
Group (13 persons) 5,924,126 52.35%
* less than one percent
(1) In each case the beneficial owner has sole voting and investment power.
The figures include the following number of shares of Common Stock for
which an individual has the right to acquire beneficial ownership, within
sixty (60) days from April 11, 2002, through the exercise of stock options
or warrants: Mr. Montgomery - 484,567, Dr. Hastings - 278,944, Mr. Kreher
- 303,600, Mr. Merrick - 201,000, Mr. McCain - 192,334, Mr. Solomonson -
37,500, Mr. Moody - 40,119, Mr. Pinnock - 38,021, Mr. Akin - 47,500, Mr.
Gibbons - 143,333, Mr. Albright - 35,166 and Mr. Stiles - 7,500.
(2) The calculation of percent of class is based upon the number of shares of
Common Stock outstanding as of April 11, 2002.
(footnotes continued on next page)
2
(3) Mr. Robert L. Montgomery is Chairman of the Board of Directors, Chief
Executive Officer and President of the Company. Mrs. Montgomery is a
director of the Company. The Montgomerys' mailing address is 136
Chesterfield Industrial Boulevard, Chesterfield, Missouri 63005.
(4) Dr. Carl W. Hastings is Vice President and a director of the Company. Dr.
Hastings' mailing address is 136 Chesterfield Industrial Boulevard,
Chesterfield, Missouri 63005.
(5) Stephen M. Merrick is Senior Vice President, Secretary and a director of
the Company. Mr. Merrick's mailing address is 136 Chesterfield Industrial
Boulevard, Chesterfield, Missouri 63005.
PROPOSAL ONE - ELECTION OF DIRECTORS
Ten directors will be elected at the Annual Meeting to serve for terms of
one year expiring on the date of the Annual Meeting in 2003. Each director
elected will continue in office until a successor has been elected. If a nominee
is unable to serve, which the Board of Directors has no reason to expect, the
persons named in the accompanying proxy intend to vote for the balance of those
named and, if they deem it advisable, for a substitute nominee.
Information Concerning Nominees
The following is information concerning nominees for election as directors
of the Company. Each of such persons is presently a director of the Company.
ROBERT L. MONTGOMERY, age 60, Chairman of the Board, Chief Executive
Officer, President and Treasurer of the Company. Mr. Montgomery became Chairman
of the Board of Directors and Chief Executive Officer of the Company on February
15, 1985, and President on July 1, 1985. Mr. Montgomery has been a director of
the Company since 1985. Mr. Montgomery is also the President and a director of
Reliv', Inc. and President and a director of Reliv' World Corporation, both
wholly-owned subsidiaries of the Company. Mr. Montgomery was, from 1982 to July,
1985, President of Spectrum Foods, Inc., a corporation engaged in the
development, manufacture and sale of specialized food products utilizing soy as
a base. Mr. Montgomery, together with Dr. Carl W. Hastings, founded Spectrum
Foods in 1981. From 1970 to 1980, Mr. Montgomery was the Executive Vice
President of Modern Income Life Insurance Company and from 1965 to 1979 was an
agent, manager and Vice President of Modern American Life Insurance Company. Mr.
Montgomery received a B.A. degree in economics from the University of Missouri
in Kansas City, Missouri in 1965.
DR. CARL W. HASTINGS, age 60, Vice President of Manufacturing and Product
Development, Assistant Secretary and a director of the Company. Dr. Hastings has
been employed by the Company since February, 1991, and became Vice President of
the Company on July 1, 1992. He has been a director of the Company since
February, 1990. Dr. Hastings is also a director of
3
Reliv', Inc. and Reliv' World Corporation. Dr. Hastings holds B.S. and M.S.
degrees and a Ph.D. degree in food science from the University of Illinois. For
more than the past 20 years, Dr. Hastings has been engaged in a variety of
employment and consulting capacities as a food scientist. From May, 1988 to
December, 1990, Dr. Hastings was employed as President of Grove Country Foods,
Inc. which was a principal supplier to Reliv', Inc.
DAVID G. KREHER, age 49, Senior Vice President, Chief Operating Officer
and Assistant Secretary of the Company. He is also Secretary and a director of
Reliv', Inc. and Reliv' World Corporation. Mr. Kreher was employed by the
Company in August, 1991, and became Senior Vice President on July 1, 1992. Mr.
Kreher was named Chief Operating Officer in January, 2001. From 1988 to August,
1991, Mr. Kreher was owner and President of Creative Options Corporation in
Washington, D.C., a firm that provided specialized advertising services. From
1981 to 1988, Mr. Kreher was Chief Operating Officer of Sandven Advertising &
Marketing in Kansas City, Missouri. Mr. Kreher holds a B.S. degree in accounting
from Southwest Missouri State University. Mr. Kreher has been a director of the
Company since June 1, 1994. Mr. Kreher is the brother of Sandra S. Montgomery.
STEPHEN M. MERRICK, age 60, Senior Vice President/Corporate and
International Development, Secretary, General Counsel and director of the
Company since July 20, 1989; and Senior Vice President, Secretary and director
of Reliv', Inc. and Reliv' World Corporation. Mr. Merrick is also a principal of
the law firm of Merrick & Klimek, P.C. of Chicago, Illinois, and has been
engaged in the practice of law for over 30 years. Mr. Merrick has represented
the Company and its subsidiaries since the founding of the Company. Mr. Merrick
received a Juris Doctor degree from Northwestern University School of Law in
1966. Mr. Merrick is also Executive Vice-President and a director of CTI
Industries Corporation (NASDAQ SmallCap Market-CTIB).
THOMAS W. PINNOCK III, age 51, independent distributor for Reliv', Inc.
Mr. Pinnock has been an independent distributor for Reliv', Inc. since January
15, 1990. He has been a director of the Company since April 29, 1992. Mr.
Pinnock was commissioned as a U.S. Army Officer in 1978 and commanded an armored
company in the 1st Infantry Division. For a period of more than five years prior
to the time he became a Reliv' distributor, Mr. Pinnock was a reporter for the
Orlando Sentinal. Mr. Pinnock holds a B.A. degree from Valencia College,
Orlando, Florida and studied journalism at the University of Florida and the
Defense Department School of Journalism.
THOMAS T. MOODY, age 43, independent distributor for Reliv', Inc. Mr.
Moody has been an independent distributor for Reliv', Inc. since July, 1989. Mr.
Moody received a B.A. degree from St. Mary's College in Winona, Minnesota in
1981. He has been a director of the Company since October 20, 1989.
DONALD L. MCCAIN, age 58, has been a director of the Company since July
20, 1989, and is also a director of Reliv', Inc. and Reliv' World Corporation.
Mr. McCain is the Chairman and co-owner of The Baughan Group Inc., formerly
Robertson International Inc., a worldwide supplier and manufacturer of mining
equipment and supplies with plants and facilities throughout the United States
and South Africa. Mr. McCain acquired his interest in The Baughan Group in
September, 1995. He is also Chairman and co-owner of Coal Age Incorporated, a
mining equipment manufacturer and rebuilding company. He acquired his interest
in Coal Age, Inc. in September,
4
1994. Mr. McCain co-founded G&T Resources, Inc., an owner and operator of
nursing homes, in 1980 and was engaged in the management of that company until
he sold his interest in September, 1994. Prior to that time, Mr. McCain
privately invested in real estate and owned and operated Expertune, Inc., a
company with two locations that specialized in fast oil changes. Mr. McCain was
employed in the food processing industry for fifteen years. Most of that time
was with Archer Daniels Midland Company as a manager of plant operations.
JOHN B. AKIN, age 73, has been a director of the Company since June, 1986.
Mr. Akin retired as Vice President, A.G. Edwards & Sons and resident manager of
the Decatur, Illinois branch office in 1995. Mr. Akin had been associated with
A.G. Edwards & Sons as a stock broker, manager and officer since April, 1973.
Mr. Akin holds a B.A. degree from the University of Northern Iowa, Cedar Falls,
Iowa.
SANDRA S. MONTGOMERY, age 56, has been a director of the Company since
April 29, 1992. For more than the past five years, Mrs. Montgomery has been
engaged actively in the business of the Company. Mrs. Montgomery is also a
director of Reliv', Inc. Sandra S. Montgomery and Robert L. Montgomery are
husband and wife.
MARVIN W. SOLOMONSON, age 49, has been a director of the Company since
June 1, 1994. Mr. Solomonson was the founder and owner of Solomonson Investment
Services, engaged in the marketing of investments and insurance products, and
operated that business from 1983 until he sold it in December, 1998. Since 1993,
Mr. Solomonson has also served as President and Chief Executive Officer for the
following corporations: Superior Family Foods, Inc. and Service Contracts, Inc.
d/b/a Dealership Services. Mr. Solomonson is currently self-employed as a
marketer of financial services.
Executive Officers Other Than Nominees
DONALD E. GIBBONS, JR., age 46, is Vice President of U.S. and Canada Sales
of the Company. Mr. Gibbons was employed by the Company in June, 1991, and
became Vice President of Finance. He became Vice President of Distributor
Relations in 1992, and accepted the position of Vice President of U.S. Sales in
June, 1994. Currently, Mr. Gibbons manages all sales efforts in the U.S. and
Canada. Mr. Gibbons was an executive correspondent for the governor of Illinois
1974-1976. From 1978 to 1990, Mr. Gibbons was a journeyman electrician with
I.B.E.W. Local 193. In 1981, Mr. Gibbons, with his wife Elizabeth, became an
independent distributor in a network marketing company and operated that home
business for 5 years. Mr. Gibbons received a B.A. degree in accountancy from the
University of Illinois, Springfield, graduating with highest honors.
STEVEN D. ALBRIGHT, Age 40, is Vice-President of Finance/Controller of the
Company. Mr. Albright has been employed by the Company since February 1992 as
Controller. From 1987 to 1992, Mr. Albright was employed as Assistant Controller
for Kangaroos USA, Inc., an athletic shoe importer and distributor. From 1983 to
1987, Mr. Albright was employed by the public accounting firm of Ernst & Young.
Mr. Albright has a B.S. degree in Accountancy from the University of Illinois at
Urbana-Champaign and is a CPA.
5
Committees of the Board of Directors
The Company's Board of Directors has standing Management, Compensation,
Executive and Audit Committees. The Company has no standing nominating
committee.
The Executive Committee is composed of Mr. Montgomery, Mr. Merrick, Mr.
Kreher and Mr. McCain. The Executive Committee has all of the authority of the
Board of Directors during the interim periods between Board meetings, except for
certain specified powers that are stated in the Company's Bylaws. The Executive
Committee met ten times during 2001.
The Compensation Committee is composed of Mr. McCain, Mr. Merrick and Mr.
Akin. The Compensation Committee reviews and makes recommendations to the Board
of Directors concerning the compensation of officers and key employees of the
Company. The Compensation Committee met three times during 2001.
The Management Committee is composed of Mr. Montgomery, Dr. Hastings, Mr.
Kreher, Mr. McCain, Mr. Merrick, Mr. Gibbons, Mr. Albright, Mr. Scott
Montgomery, Mr. Steve Hastings, Mr. David Barnes, Mr. Ron McCain and Mr. Ryan
Montgomery. The Management Committee is composed of members of the Board of
Directors and management and reviews operations and policies on a monthly basis.
The Management Committee met five times during 2001.
Since 2000, the Company has had a standing Audit Committee which is
composed of Mr. McCain, Mr. Akin and Mr. Solomonson. The Audit Committee held
four meetings during fiscal year 2001, including quarterly meetings with
management and the independent auditors to discuss the Company's financial
statements. Each appointed member of the Committee satisfies the definition of
"independent" as defined by Nasdaq Marketplace Rule 4460(d)(2). The Company's
Board of Directors has adopted a written charter for the Audit Committee. The
Audit Committee reviews and makes recommendations to the Company about its
financial reporting requirements. Information regarding the functions performed
by the Committee is set forth in the "Report of the Audit Committee," included
in this annual Proxy Statement below.
The Board of Directors met 4 times during 2001. No director attended less
than 75% of the combined Board of Director and Committee meetings, except that
Mr. Dick Vermeil (who resigned from the Board of Directors on November 14, 2001)
and Mr. Styles attended no meetings of the Board of Directors.
Executive Compensation
The following table sets forth a summary of the compensation paid during
the last three fiscal years to the Chief Executive Officer of the Company and to
each of the four most highly compensated officers of the Company who were
officers of the Company at December 31, 2001, and any executive officer who left
during the last fiscal year who would have been included in this group (the
"Named Executives").
6
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation Awards
--------------------------------------------- ------------------------
Salary Bonus Options/ All other
Name and Principal Position Year ($) ($) SARs(#) compensation
($)
- ----------------------------------------------------------------------------------------------------------------------------
Robert L. Montgomery 2001 578,364 $ 32,480(1) 250,000(6) $13,727(11)
Chief Executive Officer 2000 $546,238 -- -- $99,893(12)
and President 1999 $589,073 -- 450,800(7) $12,646(13)
Carl W. Hastings 2001 $298,868 -- 15,000(8) $ 9,551(11)
Vice President 2000 $309,719 -- -- $39,690(12)
1999 $334,010 -- 245,600(7) $ 9,533(13)
David G. Kreher 2001 $238,500 $ 20,880(1) 120,000(9) $ 7,996(11)
Senior Vice President and Chief 2000 $225,250 $ 76,824(2) -- $19,583(12)
Operating Officer 1999 $242,917 $ -- 208,600(7) $ 6,870(13)
Donald E. Gibbons, Jr. 2001 $212,500 5,924(1) 60,000(9) $ 7,918(11)
Vice President of U.S. and 2000 $175,000 $ 23,488(3) -- $11,708(12)
Canada Sales 1999 $175,000 $ 3,000(4) 50,000(10) $ 6,790(13)
$
Steven D. Albright 2001 $112,500 $ 5,800(1) 23,500(9) $ 5,179(11)
Vice President of 2000 $105,000 $ 6,150(5) -- $ 5,721(12)
Finance/Controller 1999 $ 95,000 $ 3,000(4) 20,000(10) $ 3,209(13)
- -----------------
(1) Reflects bonus payments under the Company's 2001 Incentive Compensation
Plan.
(2) Reflects bonus payments totaling $40,299 pursuant to a worldwide sales
incentive program based on worldwide sales volume plus a bonus of $36,525
related to Mr. Kreher's management of the manufacturing operations of the
Company.
(3) Reflects bonus payments totaling $22,488 pursuant to a U.S. sales
incentive program based on U.S. sales volume plus a $1,000 year-end bonus.
(4) Reflects year-end bonus.
(5) Reflects bonus payment totaling $5,150 pursuant to a worldwide sales
incentive program based on worldwide sales volume plus a $1,000 year-end
bonus.
(footnotes continued on next page)
7
(6) Non-qualified and incentive stock options issued on July 17, 2001,
pursuant to the Company's 2001 Stock Option Plan (See Option/SAR Grants
table below).
(7) Non-qualified and incentive stock options issued on December 15, 1999,
pursuant to the Company's 1999 Stock Option Plan (See Option/SAR Grants
table below).
(8) Non-Qualified stock options issued on July 17, 2001, pursuant to the
Company's 2001 Stock Option Plan (See Option/SAR Grants table below).
(9) Incentive stock options issued on July 17, 2001, pursuant to the Company's
2001 Stock Option Plan (See Option/SAR Grants table below).
(10) Incentive stock options issued on December 15, 1999, pursuant to the
Company's 1999 Stock Option Plan (See Option/SAR Grants table below).
(11) Includes the value of cash contributions by the Company to the Reliv
International, Inc. 401(k) Plan, a defined contribution plan, of $7,500
for each of Messrs. Montgomery, Hastings, Kreher and Gibbons, and $4,955
for Mr. Albright. Also includes the portion of premiums paid by the
Company on life insurance policies on each executive's life attributable
to the death benefit which each executive's estate is entitled to. The
allocated portion of premium paid was $6,227 for Mr. Montgomery, $2,061
for Mr. Hastings, $496 for Mr. Kreher, $418 for Mr. Gibbons and $224 for
Mr. Albright. (See "Employment Agreements.")
(12) Includes the value of cash contributions by the Company to the Reliv'
International, Inc. 401(k) Plan, a defined contribution plan, of $7,500
for each of Messrs. Montgomery, Hastings, Kreher and Gibbons and $3,938
for Mr. Albright. Also includes the portion of premiums paid by the
Company on life insurance policies on each executive's life attributable
to the death benefit which each executive's estate is entitled to. The
allocated portion of premium paid was $6,804 for Mr. Montgomery, $2,245
for Dr. Hastings, $675 for Mr. Kreher and $643 for Mr. Gibbons. (See
"Employment Agreements".) The total also includes the taxable fringe
benefit on the exercise of stock options on December 1, 2000. The value
realized upon exercise was $85,589 for Mr. Montgomery, $29,945 for Dr.
Hastings, $11,408 for Mr. Kreher, $3,565 for Mr. Gibbons, and $1,783 for
Mr. Albright.
(13) Includes the value of cash contributions by the Company to the Reliv'
International, Inc. 401(k) Plan, a defined contribution plan of $6,250 for
each of Messrs. Montgomery, Kreher and Gibbons, $7,500 for Dr. Hastings,
and $2,969 for Mr. Albright. Also includes the portion of premiums paid by
the Company on life insurance policies on each executive's life
attributable to the death benefit which each executive's estate is
entitled to. The allocated portion of premium paid was $6,396 for Mr.
Montgomery, $2,033 for Dr. Hastings, $620 for Mr. Kreher, $540 for Mr.
Gibbons and $240 for Mr. Albright. (See "Employment Agreements.")
The Company has never granted any stock appreciation rights. During the
period from January 1, 1997 to December 31, 2001, there have been no awards or
payments made for long term incentive compensation and there have been no
restricted stock awards to any of the Named Executives.
During fiscal year ended December 31, 2001, the Company made the following
stock option grants to purchase the Company's Common Stock to the following
Named Executives.
8
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
Number of % of Total Options
Securities Underlying Granted to Employees Exercise Expiration
Name Options Granted In Fiscal Year Price Date
---- --------------- -------------- ----- ----
Robert L. Montgomery 196,000 20.06% $1.155 7/17/2006
Robert L. Montgomery 54,000 5.53% $1.05 7/17/2006
David G. Kreher 120,000 12.28% $1.05 7/17/2006
Carl W. Hastings 15,000 1.54% $1.05 7/17/2006
Donald E. Gibbons, Jr. 60,000 6.14% $1.05 7/17/2006
Steven D. Albright 23,500 2.41% $1.05 7/17/2006
The following table provides information related to options to purchase
the Company's Common Stock exercised by the Named Executives during the fiscal
year ended December 31, 2001, and the number and value of such options held as
of the end of such fiscal year:
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values
Number of securities underlying Value of unexercised in-
Shares Value unexercised options/SARs at the-money options/SARs
acquired on realized year end (#) at fiscal year end ($)
Name exercise ($) exercisable/unexercisable exercisable/unexercisable
- ---- -------- -------- ----------------------------- -------------------------
Robert L. Montgomery 0 $ 0 483,740/387,060 $10,599.25/$30,570.75(1)
Carl W. Hastings 0 $ 0 271,444/54,156 $12,605.50/$7,894.50(1)
David G. Kreher 0 $ 0 303,600/80,000 $23,625.00/$16,000.00(1)
Donald E. Gibbons, Jr. 0 $ 0 143,333/16,667 $4,916.60/$3,333.40(1)
Steven D. Albright 0 $ 0 35,166/13,334 $4,533.00/$2,666.80(1)
- ----------------------
(1) The value of unexercised in-the-money options is based on the difference
between the exercise price and the fair market value of the Company's
Common Stock on December 31, 2001.
9
Report of the Audit Committee
The Audit Committee oversees the Company's financial reporting process on
behalf of the Board of Directors. Management has the primary responsibility for
the financial statements and the reporting process including the systems of
internal controls. In fulfilling its oversight responsibilities, the Committee
reviewed the audited financial statements in the Annual Report with management
including a discussion of the quality, not just the acceptability, of the
accounting principles, the reasonableness of significant judgments, and the
clarity of disclosures in the financial statements.
The Committee reviewed with the independent auditors, who are responsible
for expressing an opinion on the conformity of those audited financial
statements with generally accepted accounting principles, their judgments as to
the quality, not just the acceptability, of the Company's accounting principles
and such other matters as are required to be discussed with the Committee under
generally accepted auditing standards. In addition, the Committee has discussed
with the independent auditors the auditor's independence from management and the
Company including the matters in the written disclosures required by the
Independence Standards Board.
The Committee discussed with the Company's independent auditors the
overall scope and plans for their respective audits. The Committee meets with
the independent auditors, with and without management present, to discuss the
results of their examinations, their evaluations of the Company's internal
controls, and the overall quality of the Company's financial reporting.
In reliance on the reviews and discussions referred to above, the
Committee recommended to the Board of Directors (and the Board has approved)
that the audited financial statements be included in the Annual Report on Form
10-K for the year ended December 31, 2001 for filing with the Securities and
Exchange Commission. The Committee and the Board have also recommended, subject
to shareholder approval, the selection of Ernst & Young LLP as the Company's
independent auditors.
Donald L. McCain, Audit Committee Chair
John B. Akin, Audit Committee Member
Marvin W. Solomonson, Audit Committee Member
Fees Billed By Independent Public Accountants
The following table sets forth the amount of audit fees and all other fees
billed or expected to be billed by Ernst & Young LLP, the Company's principal
accountant, for the year ended December 31, 2001:
10
Amount
------
Audit fees (1) $ 151,600
Other audit related fees (2) 18,100
All other fees(3) 59,800
----------
Total fees $ 229,500
- -----------------
(1) Includes the annual financial statement audit and limited quarterly
reviews and expenses.
(2) Includes fees and expenses for other audit related activity provided by
Ernst & Young LLP.
(3) Primarily represents tax services which include preparation of tax returns
and other tax consulting services. Compensation Committee Report on
Executive Compensation
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors of the Company is
composed of three members of the Board of Directors. The Compensation Committee
is responsible for establishing the standards and philosophy of the Board of
Directors regarding executive compensation, for reviewing and evaluating
executive compensation and compensation programs, and for recommending levels of
salary and other forms of compensation for executives of the Company to the
Board of Directors. The full Board of Directors of the Company is responsible
for setting and administering salaries, bonus payments and other compensation
awards to executives of the Company.
Compensation Philosophy
The philosophy of the Compensation Committee, and of the Board of
Directors of the Company, regarding executive compensation includes the
following principal components:
o To attract and retain quality executive talent, which is regarded as
critical to the long and short term success of the Company, in
substantial part by offering compensation programs which provide
attractive rewards for successful effort.
o To provide a reasonable level of base compensation to senior
executives and to provide annual incentive compensation based on the
success and profitability of the Company.
o To create a mutuality of interest between executive officers of the
Company and shareholders through long-term compensation structures,
particularly stock option programs, so that executive officers share
the risks and rewards of strategic-decision making and its effect on
shareholder value.
The Compensation Committee has recommended, and the Board of Directors has
determined, to take appropriate action to comply with the provisions of Section
162(m) of the Internal Revenue Code so that executive compensation will be
deductible as an expense to the fullest extent allowable.
The Company's executive compensation program consists of two key elements:
(i) an annual component consisting of base salary and annual bonus and (ii) a
long-term component, principally stock options.
11
Annual Base Compensation
The Compensation Committee recommends annual salary levels for each of the
Named Executives, and for other senior executives of the Company, to the Board
of Directors. The recommendations of the Compensation Committee for base salary
levels for senior executives of the Company are determined annually, in part, by
evaluating the responsibilities of the position and examining market
compensation levels and trends for similar positions in the marketplace.
Additional factors which the Compensation Committee considers in
recommending annual adjustments to base salaries include: results of operation
of the Company, sales, shareholder returns, and the experience,
work-performance, leadership and team building skills of each executive. The
Company receives information from the Chief Executive Officer with regard to
these matters. While each of these factors is considered in relatively equal
weight, the Compensation Committee does not utilize performance matrices or
measured weightings in its review. Each year, the Compensation Committee
conducts a structured review of base compensation of senior executives with
input from the Chief Executive Officer.
Three of the senior executives of the Company are employed under
Employment Agreements with the Company which provide a minimum base salary:
Robert L. Montgomery, Carl W. Hastings and David G. Kreher. Over the period 1995
through 1998, the Company experienced increases in sales and profits and the
base salary levels of each of these executives was increased over this time to
levels above the minimums provided in their respective Agreements. In mid-1999,
in light of the results of operation for the first six months of the year, on
the recommendation of the Compensation Committee and with the agreement of each
of these executives, the annualized rate of the base salaries of these
executives was reduced by 20%. In mid-2000, on the recommendation of the
Compensation Committee and in light of improved results for the year to date,
the annualized rate of the base compensation of these three executives was
increased by one-half of the amount of the reduction taken in 1999.
Annual Incentive Compensation.
During 2001, the Compensation Committee recommended and the Board of
Directors approved an annual incentive compensation plan for members of
management. Under the terms of the plan, a percentage of net income above the
annual rate of income of $250,000 is allocated to be paid to senior executives
and managers of the Corporation. The amount of profit and incentive compensation
for each participant is determined on a quarterly basis. During 2001, incentive
compensation under the plan was paid to Robert L. Montgomery, David G. Kreher,
Donald E. Gibbons, Jr, Steven D. Albright, Stephen M. Merrick, Scott Montgomery,
David Barnes, Steve Hastings and 13 other managers of the Company.
Long-Term Component - Stock Options
The long-term component of compensation provided to executives of the
Company has been in the form of stock options. The Compensation Committee has
recommended to the Board of Directors that a significant portion of the total
compensation to executives be in the form of incentive stock options. Stock
options are granted with an exercise price equal to or greater than the fair
market value of the Company's Common Stock on the date of the grant. Stock
options are exercisable between one and ten years from the date granted. Such
stock options provide incentive for the creation of shareholder value over the
long-term since the full benefit of
12
the compensation package for an executive cannot be realized unless an
appreciation in the price of the Company's Common Stock occurs over a specified
number of years.
The magnitude of the stock option awards is determined annually by the
Compensation Committee and the Board of Directors. Generally, the relative
number of options granted to an executive has been based on the relative salary
level of the executive.
On December 4, 1995, options to purchase 220,000, 92,400, 70,400, 11,000
and 5,500 shares of the Company's Common Stock were granted to Messrs.
Montgomery, Hastings, Kreher, Gibbons, and Albright, respectively, under the
1995 Stock Option Plan (the "1995 Plan"). These options expired on December 4,
2000. On December 18, 1997, options to purchase 50,000 and 5,000 shares of the
Company's Common Stock were granted to Messrs. Gibbons and Albright. On December
30, 1998, options to purchase 75,000, 65,000, and 55,000 shares of the Company's
Common Stock were issued to Messrs. Montgomery, Hastings, and Kreher,
respectively. On December 15, 1999, options to purchase 200,000, 140,000,
125,000, 50,000 and 20,000 shares of the Company's Common Stock were granted to
Messrs. Montgomery, Hastings, Kreher, Gibbons and Albright, respectively, under
the 1999 Stock Option Plan (the "1999 Plan"). In addition to the incentive stock
options that were issued in 1999, non-qualified stock options to purchase
250,800, 105,600, and 83,600 shares of the Company's Common Stock were granted
in 1999 to Messrs. Montgomery, Hastings, and Kreher, respectively, to replace
incentive stock options that were previously issued in 1994 and expired in
December 1999 unexercised. These options were issued as part of the overall
compensation plan for these executives. At present, options have been granted
under the Company's 1999 Plan to purchase substantially all of the shares of
Common Stock authorized for issuance under the 1999 Plan.
On July 17, 2001, incentive stock options to purchase up to 196,000,
120,000, 60,000 and 23,500 shares of the Company's Common Stock were granted to
Messrs. Montgomery, Kreher, Gibbons, and Albright, respectively, under the 2001
Stock Option Plan (the "2001 Plan"). In addition, on July 17, 2001,
non-qualified stock options to purchase up to 54,000 and 15,000 shares of the
Company's Common Stock were granted to Messrs. Montgomery and Hastings
respectively, under the 2001 Plan.
CEO Compensation
The Compensation Committee utilizes the same standards and methods for
recommending annual base compensation for the Chief Executive Officer of the
Company as it does for other senior executive officers of the Company.
In 1997, the Company entered into an Employment Agreement with Robert L.
Montgomery, Chief Executive Officer of the Company, providing that Mr.
Montgomery's base annual compensation would not be less than $485,000. During
1999, Mr. Montgomery received an overall annual base compensation of $589,073.
In mid-2000, the annualized base rate of Mr. Montgomery's compensation was
increased by one-half of the amount of a reduction that was made in 1999. In
2000, no annual incentive compensation was paid to Mr. Montgomery and in 2001,
Mr. Montgomery was awarded $32,480 of incentive compensation under the Company's
annual incentive compensation plan based on profits of the Company.
The Compensation Committee recommended that Mr. Montgomery (and other
senior executives of the Company), receive incentive and non-qualified stock
options, consistent with observed market practices, so that a significant
portion of his total compensation will be based upon, and consistent with,
returns to shareholders.
13
Mr. Montgomery was granted incentive options to purchase up to 200,000 shares of
the Company's Common Stock in 1999. In addition, Mr. Montgomery was granted
non-qualified stock options to purchase up to 250,800 shares of the Company's
Common Stock in 1999 to replace incentive stock options that had expired
unexercised. In 2000, no stock options were granted to Mr. Montgomery by the
Company. In 2001, Mr. Montgomery was granted incentive stock options to purchase
up to 196,000 shares of the Company's Common Stock, and non-qualified stock
options to purchase up to 54,000 shares of the Company's Common Stock.
Compensation Committee:
Donald L. McCain, John B. Akin, Stephen M. Merrick
Compensation Committee Interlocks and Insider Participation
Stephen M. Merrick, a member of the Compensation Committee, is a Senior
Vice President of the Company. Mr. Merrick is a principal of the law firm of
Merrick & Klimek, P.C., which has served as General Counsel to the Company and
its subsidiaries since December 1, 1998. During the year ended December 31,
2001, the aggregate amounts paid or incurred by the Company to Merrick & Klimek,
P.C. and Stephen M. Merrick for services to the Company and its subsidiaries was
$343,460.
Comparative Stock Price Performance Graph
The following graph compares, for the period January 1, 1997 to December
31, 2001, the cumulative total return (assuming reinvestment of dividends) on
the Company's Common Stock with (i) NASDAQ Stock Market Index (U.S.) and (ii) a
peer group including the following companies: Herbalife International, Inc.,
Nature's Sunshine Products, Inc., Advanced Nutraceuticals, Inc. Rexall Sundown,
Inc. and USANA Health Sciences, Inc. The peer group consists of other companies
marketing nutritional products through direct sales. The graph assumes an
investment of $100 on January 1, 1997, in the Company's Common Stock and each of
the other investment categories.
ANNUAL RETURN PERCENTAGE
Years Ending
Company Name / Index Dec97 Dec98 Dec99 Dec00 Dec01
- ---------------------------------------------------------------------------------------------------------------------
RELIV INTERNATIONAL INC -46.96 -30.78 -49.75 21.21 0.00
NASDAQ US INDEX 22.48 40.99 85.83 -39.85 -20.65
PEER GROUP 36.50 -45.05 -24.64 -40.76 77.46
INDEXED RETURNS
Base Years Ending
Period
Company Name / Index Dec96 Dec97 Dec98 Dec99 Dec00 Dec01
- ---------------------------------------------------------------------------------------------------------------------
RELIV INTERNATIONAL INC 100 53.04 36.72 18.45 22.36 22.36
NASDAQ US INDEX 100 122.48 172.68 320.89 193.01 153.15
PEER GROUP 100 136.50 75.01 56.53 33.48 59.42
14
Peer Group Companies
- --------------------------------------------------------------------------------
ADVANCED NUTRACEUTICALS INC
HERBALIFE INTL INC -CL B
NATURES SUNSHINE PRODS INC
REXALL SUNDOWN INC
USANA HEALTH SCIENCES INC
The historical stock prices of the Company's Common Stock shown on the
above graph is not necessarily indicative of future price performance.
On March 8, 1993, the Company's Common Stock was listed on The Emerging
Company Marketplace of the American Stock Exchange (AMEX) and, in July 1993,
graduated to the main board of the AMEX. On September 6, 1996, the Company moved
the listing of its Common Stock to the NASDAQ National Market Tier of the NASDAQ
Stock Market. Per share value as of December 31, 1996, 1997, 1998, 1999, 2000
and 2001 is based on the Common Stock's closing price as of such date.
The information under this heading and under the heading "Compensation
Committee Report on Executive Compensation" shall not be deemed incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933 or under the
Securities Exchange Act of 1934 and shall not otherwise be deemed filed under
such Acts.
Employment Agreements
In June, 1997, the Company entered into an Employment Agreement with
Robert L. Montgomery replacing a prior agreement. The Agreement is for a term of
six years commencing on January 1, 1997, and provides for Mr. Montgomery to
receive base annual compensation during the term of not less than $485,000. Mr.
Montgomery is also to participate in the annual incentive compensation and the
long-term incentive compensation plans of the Company adopted in April, 1994,
the Company's stock option plan and such other compensation plans as the Company
may from time to time have for executives of the Company. In the event of Mr.
Montgomery's death during the term of the Agreement, payments equal to his total
compensation under the Agreement will be made to his heirs for a period of six
months. The Agreement also allows Mr. Montgomery the option, upon reaching age
60, to reduce his level of service to the Company by approximately one-half with
a corresponding decrease in position and compensation. Mr. Montgomery also has
the option upon reaching age 60 to terminate his active service, and continue in
a consulting capacity. The term of the consulting period shall be 10 years and
Mr. Montgomery will receive approximately 20% of his prior annual compensation
as a consulting fee. The Agreement includes the obligation of Mr. Montgomery to
maintain the confidentiality of confidential information of the Company and
contains a covenant of Mr. Montgomery not to compete with the Company.
15
In June, 1997, the Company entered into an Employment Agreement with Dr.
Hastings replacing a prior agreement. The Agreement is for a period of six years
commencing on January 1, 1997, and provides for Dr. Hastings to receive base
annual compensation during the term of not less than $275,000. Dr. Hastings is
also to participate in the annual incentive compensation and long-term incentive
compensation plans of the Company adopted in April, 1994, the Company's stock
option plan and such other compensation plans as the Company may from time to
time have for executives of the Company. In the event of Dr. Hastings' death
during the term of the Agreement, payments equal to his total compensation under
the Agreement will be made to his heirs for a period of six months. The
Agreement also allows Dr. Hastings the option, upon reaching age 60, to reduce
his level of service to the Company by approximately one-half with a
corresponding decrease in position and compensation. Dr. Hastings also has the
option upon reaching age 60 to terminate his active service, and continue in a
consulting capacity. The term of the consulting period shall be 10 years and Dr.
Hastings will receive approximately 20% of his prior annual compensation as a
consulting fee. The Agreement includes the obligation of Dr. Hastings to
maintain the confidentiality of confidential information of the Company and to
assign to the Company any and all inventions made or conceived by him during the
term of the agreement and a covenant of Dr. Hastings not to compete with the
Company.
In April, 1994, the Company entered into an Employment Agreement with
David G. Kreher, Senior Vice President and Chief Operating Officer, effective
from January 1, 1994. The initial term of the Agreement expired December 31,
1996, thereafter automatically renewing for one year terms. The Agreement
provides for Mr. Kreher to receive base annual compensation of not less than
$125,000. Mr. Kreher is also to participate in the annual incentive compensation
and long-term incentive compensation plans of the Company adopted in April,
1994, the Company's stock option plan and such other compensation plans as the
Company may from time to time have for executives of the Company. In the event
of Mr. Kreher's death during the term of the Agreement, payments equal to his
total compensation under the Agreement will be made to his heirs for a period of
six months. The Agreement includes the obligation of Mr. Kreher to maintain the
confidentiality of confidential information of the Company.
In March, 1997, the Company entered into Split Dollar Agreements with
Robert L. Montgomery, Carl W. Hastings, David G. Kreher, Donald E. Gibbons, Jr.
and Steven D. Albright, whereby the Company pays the premiums on life insurance
policies covering these executive's lives. Upon the death of an executive, the
Company shall be entitled to receive the greater of (i) one-third of the
insurance proceeds, (ii) the cash surrender value of the policy and (iii) the
total premiums paid under the policy, with the executive receiving the balance
of the insurance proceeds. On termination of the Agreement prior to an
executive's death, the executive shall have the right to purchase the policy for
the greater of (i) the cash surrender value of the policy and (ii) the total
premiums paid under the policy. The policy amounts are $3,124,000 for Mr.
Montgomery, $1,770,000 for Dr. Hastings, $750,000 for each of Messrs. Kreher and
Gibbons, and $500,000 for Mr. Albright.
In March, 1997, the Company entered into Salary Continuation Plan
Agreements with David G. Kreher, Donald E. Gibbons, Jr. and Steven D. Albright.
The Agreements provide for continuation of these executive's salaries upon
termination of employment or retirement, after these executives have reached the
age of 55 and have been employed by the Company for 15 years. Salary
continuation payments are also made in the event the executive is terminated
prior to reaching these thresholds for other than cause as defined in the
Agreements. Payments are to be made for a period of 10 years and the amount of
the payments are based on the executive's age at time of retirement or
termination of employment.
16
Compensation of Directors
Members of the Board of Directors who were not employees of the Company
received $900 per attendance at meetings of the Board of Directors and
Committees thereof. Members of the Executive Committee who were not employees of
the Company also received compensation of $1,000 per month for their services
and $2,000 per attendance at meetings of the Board of Directors or any
Committees of the Board. On any date at which a Board member attends more than
one meeting of the Board or Committee of the Board, the attendance fee is 150%
of the basic attendance fee. In addition to the options issued to the Named
Executives as described above, during fiscal 2001, 121,000 options were issued
to Mr. Merrick, 84,000 options were issued to Mr. McCain, 15,000 options were
issued to Mrs. Montgomery and 15,000 options were issued to each of Messrs.
Moody, Pinnock, Stiles, Solomonson and Akin. (See "Stock Ownership by Management
and Others).
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
and with the NASDAQ Stock Market. Officers, directors and greater than ten
percent shareholders are required by SEC regulation to furnish the Company with
copies of all Section 16(a) forms they file.
Based solely on a review of the copies of such forms furnished to the
Company, or written representations that no Form 5's were required, the Company
believes that during calendar year 2001, all Section 16(a) filing requirements
applicable to the officers, directors and ten percent beneficial owners were
complied with.
PROPOSAL TWO - SELECTION OF AUDITORS
Ratification of Appointment of Independent Auditors
The Board of Directors has selected and approved Ernst & Young LLP as the
principal independent auditor to audit the financial statements of the Company
for 2002, subject to ratification by the shareholders. It is expected that a
representative of the firm of Ernst & Young LLP will be present at the Annual
Meeting and will have an opportunity to make a statement if they so desire and
will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS SHAREHOLDERS VOTE FOR "FOR" SUCH
RATIFICATION.
Stockholder Proposals for 2003 Proxy Statement
Proposals by shareholders for inclusion in the Company's Proxy Statement
and form of Proxy relating to the 2003 Annual Meeting of stockholders, which is
scheduled to be held on May 22, 2003, should be addressed to the Secretary,
Reliv' International, Inc., 136 Chesterfield Industrial Boulevard, Chesterfield,
Missouri 63005, and must be received at such address no later than December 20,
2002. Upon receipt of any such proposal, the Company will determine whether or
not to include such proposal in the Proxy Statement and Proxy in accordance with
applicable law. It is suggested that such proposal be forwarded by certified
mail, return receipt requested.
17
Other Matters to Be Acted Upon at the Meeting
The management of the Company knows of no other matters to be presented at
the meeting. Should any other matter requiring a vote of the shareholders arise
at the meeting, the persons named in the proxy will vote the proxies in
accordance with their best judgment.
BY ORDER OF THE
BOARD OF DIRECTORS
Dated: April 19, 2002
/s/ Stephen M. Merrick
------------------------------
Stephen M. Merrick, Secretary