SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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
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Check the appropriate box:
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x
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Preliminary Proxy Statement
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Confidential, for the use of the Commission only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-12
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MUSCLEPHARM CORPORATION
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(Name of Registrant as Specified In Its
Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Payment of Filing Fee (Check the appropriate box):
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title of each class of securities to which transaction applies:
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(2)
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Aggregate number of securities to which transaction applies:
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(3)
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on
which the filing fee is calculated and state how it was determined):
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(4)
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Proposed maximum aggregate value of transaction:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-1l (a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and
the date of its filing.
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(1)
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Amount Previously Paid:
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(2)
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Form, Schedule or Registration Statement No.:
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MusclePharm Corporation
2014
NOTICE OF ANNUAL MEETING
AND
PROXY STATEMENT
August 25, 2014
at 10:00 a.m. Mountain Time
4721 Ironton Street, Building A
Denver, Colorado 80239
MusclePharm Corporation
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 25, 2014
The 2014 Annual Meeting of Stockholders
(the “Annual Meeting”) of MusclePharm Corporation (“MusclePharm” or the “Company”) will be
held at MusclePharm corporate offices at 4721 Ironton Street, Building A, Denver, Colorado 80239, on Monday, August 25, 2014, at
10:00 a.m. Mountain Time, to consider the following proposals:
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1.
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To elect the five director nominees named in the Proxy
Statement to hold office until the next annual meeting of stockholders;
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2.
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To ratify the appointment of EKS&H LLP as the Company’s
independent auditors for the fiscal year ending December 31, 2014;
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3.
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To approve the issuance of 1,500,000 shares of Company common stock to certain employees, including executive, pursuant to
restricted stock agreements;
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4.
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To act on such other matters as may properly come before
the meeting or any adjournment thereof.
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BECAUSE OF THE SIGNIFICANCE OF THESE PROPOSALS TO THE COMPANY
AND ITS STOCKHOLDERS, IT IS VITAL THAT EVERY STOCKHOLDER VOTE AT THE ANNUAL MEETING IN PERSON OR BY PROXY.
These proposals are fully set forth in the
accompanying Proxy Statement, which you are urged to read thoroughly. For the reasons set forth in the Proxy Statement, your Board
of Directors recommends a vote "FOR" Proposals 1 - 3. A list of all stockholders entitled to vote at
the Annual Meeting will be available at the principal office of the Company during usual business hours, for examination by any
stockholder for any purpose germane to the Annual Meeting for 10 days prior to the date thereof. Stockholders
are cordially invited to attend the Annual Meeting. If you plan to attend the Annual Meeting in person, please be sure to bring
your proxy card and photo identification. However, whether or not you plan to attend the meeting in person, your shares should
be represented and voted. After reading the enclosed Proxy Statement, please sign, date, and return promptly the enclosed Proxy
in the accompanying postpaid envelope we have provided for your convenience to ensure that your shares will be represented.
The Company is pleased to take advantage
of the Securities and Exchange Commission rules that allow issuers to furnish proxy materials to their stockholders on the Internet.
The Company believes these rules allow it to provide you with the information you need while lowering the Company’s costs.
Alternatively, you may wish to provide your
response by telephone or electronically through the Internet by following the instructions set out on the enclosed Proxy card.
If you do attend the meeting and wish to vote your shares personally, you may revoke your Proxy.
Important Notice Regarding the Availability of Proxy Materials
for the Annual Meeting of Stockholders to be held August 25, 2014. The Proxy Statement and our 2013 Annual Report to Stockholders
are available at:
www.musclepharm.com/investorrelations/proxy
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By Order of the Board of Directors
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/s/ Bradley J. Pyatt
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Bradley J. Pyatt
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Chair of the Board of Directors
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WHETHER OR NOT YOU PLAN ON ATTENDING THE
MEETING IN PERSON, PLEASE VOTE AS PROMPTLY AS POSSIBLE TO ENSURE THAT YOUR VOTE IS COUNTED.
MusclePharm Corporation
4721 Ironton Street, Building A
Denver, Colorado 80239
(303) 396-6100
PROXY STATEMENT
This Proxy Statement is furnished in connection
with the solicitation of proxies by the Board of Directors of MusclePharm Corporation (“MusclePharm” or the “Company”)
to be voted at the Annual Meeting of Stockholders (“Annual Meeting”) which will be held at MusclePharm corporate offices
at 4721 Ironton Street, Building A, Denver, Colorado 80239, on Monday, August 25, 2014, at 10:00 a.m. Mountain Time, and at any
postponements or adjournments thereof. The proxy materials will be furnished to stockholders on or about July 24, 2014. If you
require directions to the Annual Meeting please call Matt Sheldon of PondelWilkinson, Inc. at (310) 279-5975.
REVOCABILITY OF PROXY AND SOLICITATION
Any stockholder executing a proxy that is
solicited hereby has the power to revoke it prior to the voting of the proxy. Revocation may be made by attending the
Annual Meeting and voting the shares of stock in person, or by delivering to the Secretary of the Company at the principal office
of the Company prior to the Annual Meeting a written notice of revocation or a later-dated, properly executed proxy. Solicitation
of proxies may be made by directors, officers and other employees of the Company by personal interview, telephone, facsimile transmittal
or electronic communications. No additional compensation will be paid for any such services. This solicitation
of proxies is being made by the Company which will bear all costs associated with the mailing of this proxy statement and the solicitation
of proxies.
INTERNET AND ELECTRONIC AVAILABILITY
OF PROXY MATERIALS
Under rules adopted by the Securities and
Exchange Commission (the “SEC”), the Company is making this Proxy Statement and the Company’s Annual Report on
Form 10-K for the fiscal year ended December 31, 2013 available on the Internet instead of mailing a printed copy of these materials
to each stockholder. Stockholders who received a Notice of Internet Availability of Proxy Materials (the “Notice”)
by mail will not receive a printed copy of these materials other than as described below. Instead, the Notice contains instructions
as to how stockholders may access and review all of the important information contained in the materials on the Internet, including
how stockholders may submit proxies by telephone or over the Internet.
If you received the Notice by mail and
would prefer to receive a printed copy of the Company’s proxy materials, please follow the instructions for requesting printed
copies included in the Notice.
RECORD DATE
Stockholders of record at the close of business
on June 23, 2014, will be entitled to receive notice of, attend and vote at the meeting.
INFORMATION ABOUT THE ANNUAL MEETING
AND VOTING
Why am I receiving these materials?
MusclePharm Corporation has made these materials
available to you on the Internet or, upon your request, has delivered printed versions of these materials to you by mail, in connection
with the Company’s solicitation of proxies for use at the Annual Meeting of Stockholders to be held on August 25, 2014, at
10:00 a.m. Mountain time at 4721 Ironton Street, Building A, Denver, Colorado 80239. These materials describe the proposals on
which the Company would like you to vote and also give you information on these proposals so that you can make an informed decision.
We are furnishing our proxy materials on or about July 24, 2014 to all stockholders of record entitled to vote at the Annual Meeting.
What is included in these materials?
These materials include:
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this Proxy Statement for the Annual Meeting;
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the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013; and
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if you requested printed versions of these materials by mail, these materials also include the
proxy card or vote instructions for the Annual Meeting.
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What is the proxy card?
The proxy card enables you to appoint Brad
Pyatt, our Chief Executive Officer, and Don Prosser, our Chief Financial Officer, as your representatives at the Annual Meeting. By
completing and returning a proxy card, you are authorizing these individuals to vote your shares at the Annual Meeting in accordance
with your instructions on the proxy card. This way, your shares will be voted whether or not you attend the Annual Meeting.
What is the purpose of the Annual Meeting?
At our Annual Meeting, stockholders will
act upon the matters outlined in the Notice of Annual Meeting on the cover page of this Proxy Statement, including (i) the election
of five persons named herein as nominees for directors of the Company, to hold office subject to the provisions of the bylaws of
the Company, until the next annual meeting of stockholders and until their successors are duly elected and qualified,
(ii) ratification of the appointment of EKS&H LLP as the Company’s independent auditors for the fiscal year
ending December 31, 2014, and (iii) to approve the issuance of 1,500,000 shares of Company common stock to certain employees, including
executive, pursuant to restricted stock agreements. In addition, management will report on the performance of the Company during
fiscal year 2013 and 2014 and respond to questions from stockholders.
What constitutes a quorum?
The presence at the meeting, in person or
by proxy, of the holders of a majority of the number of shares of common stock issued and outstanding on the record date will constitute
a quorum permitting the meeting to conduct its business. As of the record date, there are 11,175,970 shares of MusclePharm common
stock.
What is the difference between a stockholder of record
and a beneficial owner of shares held in street name?
Most of our stockholders hold their shares
in an account at a brokerage firm, bank or other nominee holder, rather than holding share certificates in their own name. As
summarized below, there are some distinctions between shares held of record and those owned beneficially in street name.
Why did I receive a one-page notice in the mail regarding
the Internet availability of proxy materials this year instead of a full set of proxy materials?
Pursuant to rules adopted by the SEC, the
Company has elected to provide access to its proxy materials over the Internet. Accordingly, the Company is sending the Notice
to the Company’s stockholders of record and beneficial owners. All stockholders will have the ability to access the proxy
materials on the website referred to in the Notice or request to receive a printed set of the proxy materials. Instructions on
how to access the proxy materials over the Internet or to request a printed copy may be found in the Notice. In addition, stockholders
may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis. The Company encourages
you to take advantage of the availability of the proxy materials on the Internet.
What does it mean if I receive more than one Notice?
You may have multiple accounts at the transfer
agent and/or with brokerage firms. Please follow directions on each Notice to ensure that all of your shares are voted.
Stockholder of Record
If on July 23, 2014, your shares were registered
directly in your name with our transfer agent, Corporate Stock Transfer, you are considered a stockholder of record with respect
to those shares, and the Notice of Annual Meeting and Proxy Statement was sent directly to you by the Company. As
the stockholder of record, you have the right to direct the voting of your shares by returning the proxy card to us. Whether
or not you plan to attend the Annual Meeting, if you do not vote over the Internet, please complete, date, sign and return a proxy
card to ensure that your vote is counted.
Beneficial Owner of Shares Held in Street Name
If on July 23, 2014, your shares were held
in an account at a brokerage firm, bank, broker-dealer, or other nominee holder, then you are considered the beneficial owner of
shares held in “street name,” and the Notice of Annual Meeting & Proxy statement was forwarded to you by that
organization. The organization holding your account is considered the stockholder of record for purposes of voting at
the Annual Meeting. As the beneficial owner, you have the right to direct that organization on how to vote the shares
held in your account. However, since you are not the stockholder of record, you may not vote these shares in person
at the Annual Meeting unless you receive a valid proxy from the organization.
How do I vote?
Stockholders of Record.
If
you are a stockholder of record, you may vote by any of the following methods:
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By Mail.
You may vote by completing, signing, dating and returning your proxy card in the pre-addressed,
postage-paid envelope provided.
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In Person.
You may attend and vote at the Annual Meeting. The Company will give you a ballot when you arrive.
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Beneficial Owners of Shares Held in Street
Name.
If you are a beneficial owner of shares held in street name, you may vote by any of the following methods:
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By Mail.
You may vote by proxy by filling out the vote instruction form and returning it in the pre-addressed,
postage-paid envelope provided.
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In Person.
If you are a beneficial owner of shares held in street name and you wish to vote in person at the Annual
Meeting, you must obtain a legal proxy from the organization that holds your shares.
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Abstentions and broker non-votes
While the inspectors of election will treat
shares represented by Proxies that reflect abstentions or include "broker non-votes" as shares that are present and entitled
to vote for purposes of determining the presence of a quorum, abstentions or "broker non-votes" do not constitute a vote
"for" or "against" any matter and thus will be disregarded in any calculation of "votes cast." However,
abstentions and "broker non-votes" will have the effect of a negative vote if an item requires the approval of a majority
of a quorum or of a specified proportion of all issued and outstanding shares.
Brokers holding shares of record for customers
generally are not entitled to vote on “non-routine” matters, unless they receive voting instructions from their customers. As
used herein, “uninstructed shares” means shares held by a broker who has not received voting instructions from its
customers on a proposal. A “broker non-vote” occurs when a nominee holding uninstructed shares for a beneficial
owner does not vote on a particular proposal because the nominee does not have discretionary voting power with respect to that
non-routine matter. In connection with the treatment of abstentions and broker non-votes, the proposed ratification of EKS&H
LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2014 is considered
a “routine” matter. Accordingly, brokers are entitled to vote uninstructed shares with respect to this proposal.
What happens if I do not give specific voting instructions?
Stockholders of Record.
If
you are a stockholder of record and you:
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sign and return a proxy card without giving specific voting instructions,
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then the proxy holders will vote your shares in the manner recommended
by the Board of Directors on all matters presented in this proxy statement and as the proxy holders may determine in their discretion
with respect to any other matters properly presented for a vote at the Annual Meeting.
Beneficial Owners of Shares Held in Street
Name.
If you are a beneficial owner of shares held in street name and do not provide the organization that holds
your shares with specific voting instructions, under the rules of various national and regional securities exchanges, the organization
that holds your shares may generally vote on routine matters, such as the ratification of EKS&H LLP as the Company’s
independent registered public accounting firm for the year ending December 31, 2014, but cannot vote on non-routine matters, such
as the election of directors.
What are the Board’s recommendations?
The Board’s recommendation is set
forth together with the description of each item in this Proxy Statement. In summary, the Board recommends a vote:
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for
election of the five (5) directors nominated by the Company to hold office subject to the provisions of the Bylaws
of the Company, until the next annual meeting of stockholders and until their successors are duly elected and qualified;
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for
ratificatio
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of the appointment of EKS&H LLP as the Company’s independent auditors for fiscal year
2014; and
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for
approval of the issuance of 1,500,000 shares of Company common stock to certain employees, including executive,
pursuant to restricted stock agreements,
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With respect to any other matter that properly
comes before the meeting, the proxy holders will vote as recommended by the Board of Directors or, if no recommendation is given,
in their own discretion.
Dissenters’ Right of Appraisal
Holders of shares of our Common Stock do
not have appraisal rights under Nevada law or under the governing documents of the Company in connection with this solicitation.
How Are Proxy materials delivered to households?
Only one copy of the Company's 10-K
for the fiscal year ending December 31, 2013 and this Proxy Statement will be delivered to an address where two or more stockholders
reside with the same last name or who otherwise reasonably appear to be members of the same family based on the stockholders’
prior express or implied consent.
We will deliver promptly upon written or
oral request a separate copy of the Company's 10-K for the fiscal year ending December 31, 2013 and this Proxy Statement upon such
request. If you share an address with at least one other stockholder, currently receive one copy of our Annual Report and
Proxy Statement at your residence, and would like to receive a separate copy of our Annual Report and Proxy Statement for future
stockholder meetings of the Company, please specify such request in writing and send such written request to MusclePharm Corporation,
4721 Ironton Street, Building A, Denver Colorado 80239; Attention: Corporate Secretary.
Interest of Officers and Directors in Matters to Be Acted
Upon
Except for the election to our Board of
the five nominees set forth herein, none of our officers or directors has any interest in any of the matters to be acted upon at
the Annual Meeting.
How much stock is owned by 5% stockholders, directors,
and executive officers?
The following
table sets forth the number of shares known to be beneficially owned by all persons who own at least 5% of MusclePharm's outstanding
common stock, the Company's directors, the executive officers, and the directors and executive officers as a group as of July 23,
2014, unless otherwise noted. Unless otherwise indicated, the stockholders listed in the table have sole voting and investment
power with respect to the shares indicated.
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Shares Beneficially Owned
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Common Stock
(1)
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Name of Beneficial Owner
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Shares
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%
(2)
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Named Executive Officers:
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Brad J. Pyatt
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254,222
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2.27
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%
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Richard Estalella
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34,000
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*
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Donald W. Prosser
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18,183
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*
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James J. Greenwell
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26,183
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*
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Sydney Rollock
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14,485
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*
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Cory J. Gregory
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181,273
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1.62
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%
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Non-Employee Directors:
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Michael J. Doron
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18,183
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*
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Daniel J. McClory
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5,071
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*
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Gregory Macosko(3)
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1,000
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*
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Officers and Directors as a Group (nine persons):
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552,600
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4.95
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%
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*
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Represents less than one percent.
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(1)
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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. The shares are not subject to any pledge. Standard brokerage accounts may include nonnegotiable provisions regarding
set-offs or similar rights.
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(2)
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Percent of total voting power represents voting power with respect to 4.95% shares of common stock
outstanding as of July 23, 2014. This percentage does not include issued, non-vested shares.
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(3)
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Share held by Mr. Macosko’s spouse, Sharon Zane.
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Beneficial Owners of More than Five
Percent
The following table shows the number of
shares of our common stock, as of July 23, 2014, held by persons known to us to beneficially own more than five percent of our
outstanding common stock.
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Shares Beneficially Owned
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Common Stock
(1)
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Name of Beneficial Owner
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Shares
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%
(2)
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Cocrystal Pharma, Inc. (f/k/a Biozone Pharmaceuticals Inc.)
(3)
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1,200,000
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10.74
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%
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Wynnefield Capital
(4)
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1,000,000
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8.95
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%
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Marine MP
(5)
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780,000
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6.98
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%
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(1)
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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. The shares are not subject to any pledge. Standard brokerage accounts may include nonnegotiable provisions regarding
set-offs or similar rights.
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(2)
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Percent of total voting power represents voting power with respect to 28.08% shares of common stock
outstanding as of July 23, 2014. This percentage does not include issued, non-vested shares.
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(3)
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Dr. Gary Wilcox, as the Chief Executive Officer of Cocrystal Pharma, Inc. (f/k/a Biozone Pharmaceutical,
Inc.) and as such has voting and investment power over the securities owned by the stockholder.
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(4)
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Joshua Landes 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 and Wynnefield
Small Cap Value Offshore Fund because he is a co-managing member of Wynnefield Capital Management, LLC and a principal executive
officer of Wynnefield Capital, Inc. The principal place of business for Wynnefield Capital is 450 Seventh Avenue, Suite
509, New York, New York 10123.
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(5)
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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.
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There are no arrangements known to the Company,
including any pledge by any person of securities of the Company, the operation of which may at a subsequent date result in a change
in control of the Company.
INFORMATION ABOUT THE BOARD OF DIRECTORS
The Board of Directors oversees our
business and affairs and monitors the performance of management. In accordance with corporate governance principles, the
Board does not involve itself in day-to-day operations. The directors keep themselves informed through discussions with the
Chief Executive Officer and other key executives, visits to the Company’s facilities, by reading the reports and other
materials that we send them and by participating in Board and committee meetings. Each director’s term will continue
until the election and qualification of his or her successor, or his or her earlier death, resignation or removal.
Biographical information about our directors is provided in “Item 1 - Proposal for the Election of Five
Directors” on page 22. Except as set forth in this Proxy Statement, none of our directors held directorships in
other reporting companies and registered investment companies at any time during the past five years.
Our Board currently
consists of five persons, all of which have been nominated by the Company to stand for election.
Name
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Age
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Position
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Bradley J. Pyatt
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33
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Chairman of the Board, Chief Executive Officer
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Richard F. Estalella
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52
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Chief Operating Officer, Director
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Michael J. Doron (1)(2)(3*)
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52
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Director
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Daniel J. McClory (1)(2)(3)
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54
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Director
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Gregory Macosko (1*)(2)(3)
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67
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Director
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(2)
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Nominating and Corporate Governance Committee
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(3)
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Compensation Committee
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* Committee Chair
Involvement in Certain Legal Proceedings
To our knowledge, during the last ten years,
none of our directors or executive officers has:
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Had a bankruptcy petition filed by or against any business of which such person was a general partner or executive officer
either at the time of the bankruptcy or within two years prior to that time.
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Been convicted in a criminal proceeding or been subject to a pending criminal proceeding, excluding traffic violations and
other minor offenses.
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Been subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities
or banking activities.
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Been found by a court of competent jurisdiction (in a civil action), the SEC, or the Commodities Futures Trading Commission
to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.
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Been the subject to, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory
organization, any registered entity, or any equivalent exchange, association, entity or organization that has disciplinary authority
over its members or persons associated with a member.
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Mr. Pyatt filed for protection under Chapter
7 of the federal bankruptcy laws in 2008. He received a discharge relating to the matter in 2008.
There are no material
proceedings to which any director of the Company is a party adverse to the Company or has a material interest adverse to the Company.
How often did the Board meet during
fiscal 2013?
During 2013, the Board of Directors held
14 meetings. Each director attended no fewer than 75% of the aggregate of the total number of meetings of the Board
and the total number of meetings held by all committees on which such director served. The Board also approved certain actions
by unanimous written consent.
What committees has the Board established?
The Board of Directors has standing Audit,
Compensation, Nominating and Corporate Governance Committees. Information concerning the function of each Board committee follows.
Audit Committee
Our Audit Committee’s main function
is to oversee our accounting and financial reporting processes, internal systems of control, independent auditor relationships
and the audits of our financial statements. The Audit Committee’s responsibilities include:
· selecting,
hiring, and compensating our independent auditors;
· evaluating
the qualifications, independence and performance of our independent auditors;
· overseeing
and monitoring the integrity of our financial statements and our compliance with legal and regulatory requirements as they relate
to financial statements or accounting matters;
· approving
the audit and non-audit services to be performed by our independent auditor;
· reviewing
with the independent auditor the design, implementation, adequacy and effectiveness of our internal controls and our critical accounting
policies; and
· preparing
the report that the SEC requires in our annual proxy statement.
The current members of the Audit Committee
are Gregory Macosko, Michael Doron and Daniel McClory. The Board has determined that Gregory Macosko is an “audit committee
financial expert” as defined by the SEC. During 2013, the Audit Committee held 8 meetings in person or through
conference calls.
Compensation Committee
Our Compensation Committee’s main
functions are assisting our board of directors in discharging its responsibilities relating to the compensation of outside directors,
the Chief Executive Officer and other executive officers, as well as administering any stock incentive plans we may adopt. The
Compensation Committee’s responsibilities include the following:
· reviewing
and recommending to our board of directors the compensation of our Chief Executive Officer and other executive officers, and the
outside directors;
· conducting
a performance review of our Chief Executive Officer;
· reviewing
our compensation policies; and
· if required,
preparing the report of the Compensation Committee for inclusion in our annual proxy statement.
The board of directors has adopted a Compensation
Committee Charter.
The Compensation Committee’s policy
is to offer our executive officers competitive compensation packages that will permit us to attract and retain highly qualified
individuals and to motivate and reward these individuals in an appropriate fashion aligned with the long-term interests of our
Company and our stockholders.
The current members of the Compensation
Committee are Michael Doron and Daniel McClory. During 2013, the Compensation Committee held 4 meetings in person or through conference
calls.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance
Committee’s responsibilities include:
· identify qualified individuals
to serve as members of the Company’s board of directors;
· review the qualifications
and performance of incumbent directors;
· review and consider candidates
who may be suggested by any director or executive officer or by any stockholder of the Company;
· review considerations relating
to board composition, including size of the board, term and age limits, and the criteria for membership on the board;
· review periodically the
management succession plan of;
· review and recommend corporate
governance policies; and
· monitor, oversee and review
compliance with the Company’s code of ethics.
The board of directors has adopted a Nominating
and Corporate Governance Committee Charter.
The current members of the Governance and
Nominating Committee are Michael Doron (Chairman) and Daniel McClory. During 2013, the Governance and Nominating Committee held
4 meetings in person or through conference calls.
Financial Disclosure Committee
On March 21, 2014, the Board of Directors approved the creation
of a Financial Disclosure Committee, to be comprised of certain officers and directors of the Company, for the purpose of assisting
the Chief Executive Officer, President, Chief Financial Officer, and Audit Committee Chairman in fulfilling their responsibility
for oversight of the accuracy and timeliness of the disclosures made by the Company.
Nomination of Directors
As provided in its charter, the Nominating
and Corporate Governance Committee is responsible for identifying individuals qualified to become directors. The Nominating and
Corporate Governance Committee seeks to identify director candidates based on input provided by a number of sources, including
(1) the Nominating and Corporate Governance Committee members, (2) our other directors, (3) our stockholders, (4) our Chief Executive
Officer or Chair of the Board, and (5) third parties such as service providers. In evaluating potential candidates for director,
the Nominating and Corporate Governance Committee considers the entirety of each candidate’s credentials.
Qualifications for consideration as a director
nominee may vary according to the particular areas of expertise being sought as a complement to the existing composition of the
Board of Directors. However, at a minimum, candidates for director must possess:
|
·
|
high personal and professional ethics and integrity;
|
|
·
|
the ability to exercise sound judgment;
|
|
·
|
the ability to make independent analytical inquiries;
|
|
·
|
a willingness and ability to devote adequate time and resources to diligently perform Board and committee duties; and
|
|
·
|
the appropriate and relevant business experience and acumen.
|
The Nominating and Corporate Governance
Committee will consider nominees recommended by stockholders if such recommendations are made in writing to the committee. The
Nominating and Corporate Governance Committee does not plan to change the manner in which the committee evaluates nominees for
election as a director based on whether the nominee has been recommended by a stockholder or otherwise.
The Nominating and Corporate Governance
Committee does not have a formal policy relating to diversity among directors. In considering new nominees and whether to re-nominate
existing members of the Board, the committee seeks to achieve a Board with strengths in its collective knowledge and a broad diversity
of perspectives, skills and business and professional experience. Among other items, the committee looks for a range of experience
in strategic planning, sales, finance, executive leadership, industry and similar attributes.
Board Leadership Structure and Role
in Risk Oversight
Our Board has overall responsibility for
risk oversight. The oversight is conducted primarily through committees of the Board of Directors, as disclosed in each of the
descriptions of each of the committees above and in the charters of each of the committees, but the full Board of Directors has
retained responsibility for general oversight of risks.
Stockholder Communications
Stockholders requesting communication with
directors can do so by writing to MusclePharm Corporation, c/o Corporate Secretary, 4721 Ironton Street, Building A, Denver,
Colorado 80239. At this time we do not screen communications received and would forward any requests directly to the named
director. If no director was named in a general inquiry, the Secretary would contact either the Chair of the Board of Directors
or the chairman of a particular committee, as appropriate. We do not provide the physical address, email address, or phone numbers
of directors to outside parties without a Director’s permission.
Code of Ethics and Business Conduct
We adopted a Code of Ethics on July 24, 2012 that applies to
all directors, officers and employees. Our Code of Ethics is available on our website at http://www.musclepharm.com. Our Code of
Ethics provides general statements of our expectations regarding ethical standards that we expect our directors, officers and employees
to adhere to while acting on our behalf. Among other things, the Code of Ethics provides that:
|
·
|
We will comply with all laws, rules and regulations;
|
|
·
|
Our directors, officers, and employees are to avoid conflicts of interest and are prohibited from competing with the Company
or personally exploiting our corporate opportunities;
|
|
·
|
Our directors, officers, and employees are to protect our assets and maintain our confidentiality;
|
|
·
|
We are committed to promoting values of integrity and fair dealing; and
|
|
·
|
We are committed to accurately maintaining our accounting records under generally accepted accounting principles and timely
filing our periodic reports and tax returns.
|
Our Code of Ethics also contains procedures for employees to
report, anonymously or otherwise, violations of the Code of Ethics.
COMPENSATION OF DIRECTORS
In 2013 the Compensation Committee engaged
an independent third party to study and evaluate a cash and stock compensation plan for MusclePharm’s independent board of
directors. The following table sets forth the aggregate compensation paid to our independent, non-employee directors during 2013.
Name
|
|
Fees Earned
or Paid In Cash
($)
|
|
|
Stock Awards
(1)(2)(3)(4)
($)
|
|
|
Total
($)
|
|
Michael J. Doron
|
|
|
156,000
|
|
|
|
365,262
|
|
|
|
521,262
|
|
James J. Greenwell
(5)
|
|
|
157,500
|
|
|
|
365,262
|
|
|
|
522,762
|
|
Donald W. Prosser
(6)
|
|
|
196,500
|
|
|
|
365,262
|
|
|
|
561,762
|
|
Daniel F. McClory
|
|
|
71,383
|
|
|
|
32,000
|
|
|
|
103,383
|
|
|
(1)
|
Reflects the full grant date fair value of restricted stock awards granted in 2013 calculated in
accordance with FASB ASC Topic 718 based on the closing price of the common stock of $6.00 on February 14, 2013, the date of grant.
|
|
(2)
|
Reflects the full grant date fair value of restricted stock awards granted for 2013 calculated
in accordance with FASB ASC Topic 718 based on the stock price of $4.00 as stipulated in the grant agreement.
|
|
(3)
|
Reflects the full grant date fair value of restricted stock awards granted for 2013 calculated
in accordance with FASB ASC Topic 718 based on the closing price of the common stock of $7.85 on December 10, 2013.
|
|
(4)
|
Reflects the full grant date fair value of restricted stock awards granted for 2013 calculated
in accordance with FASB ASC Topic 718 based on the closing price of the common stock of $11.01 on July 1, 2013.
|
|
(5)
|
Resigned from serving on the Company’s Board of Directors effective May 12, 2014.
|
|
(6)
|
Resigned from serving on the Company’s Board of Directors effective April 10, 2014.
|
The actual amounts paid to directors in
2013 differ from the program amounts in the table below due to special project bonuses and other cash payments and stock grants
that were paid to the directors under the old compensation plan prior to the adoption of the plan described below.
2014 Non-Employee Director Compensation Program
In October 2013, our board of directors
adopted a non-employee director compensation program based on recommendations by the Compensation Committee’s independent
third party director’s pay study that was completed in 2013. Directors who are employees of the Company receive no additional
compensation for their services as directors. Non-employee directors are compensated for their service on our board of directors
as described below. The following table describes the components of compensation for non-employee directors in effect beginning
January 2014:
Compensation Element
|
|
2014 Compensation Program ($)
|
|
Annual Cash Retainer
|
|
|
35,000
|
|
Annual Equity Retainer Award
|
|
|
80,000
|
|
Audit Committee Chair Fee
|
|
|
15,000
|
|
Compensation Committee Chair Fee
|
|
|
10,000
|
|
Nominating and Corporate Governance Chair Fee
|
|
|
7,000
|
|
Audit Committee Member Fee
|
|
|
10,000
|
|
Compensation Committee Member
|
|
|
5,000
|
|
Nominating and Corporate Governance Member Fee
|
|
|
5,000
|
|
Annual Cash Retainer and Committee
Fees
.
Beginning in January 2014, each non-employee director who continues to serve as a director will receive an annual
cash retainer fee of $35,000 per year, pro rata for service less than one year. Non-employee directors will also receive $15,000
or $10,000 for serving as chair or member, respectively, of the audit committee, $10,000 or $5,000 for serving as chair or member,
respectively, of the Compensation Committee, and $7,000 or $5,000 for serving as chair or member, respectively, of the nominating
and governance committee.
Annual Equity Retainer Award.
Beginning
in July 2013, each non-employee director will receive $80,000 of the annual board retainer fee in the form of restricted common
stock with the number of shares of restricted common stock determined by dividing that dollar amount by the closing price of our
common stock on the date of grant. These shares of restricted common stock will vest in three equal annual installments. The restricted
common stock awards are to be issued near the start of each calendar year without forfeiture.
REPORT OF THE AUDIT COMMITTEE OF THE
BOARD OF DIRECTORS
The Audit Committee, on behalf of our Board
of Directors, serves as an independent and objective party to monitor and provide general oversight of the integrity of our financial
statements, our independent registered public accounting firm’s qualifications and independence, the performance of our independent
registered public accounting firm and our standards of business conduct. The Audit Committee performs these oversight responsibilities
in accordance with its Audit Committee Charter.
Our management is responsible for preparing
our financial statements and managing our financial reporting process. Our independent registered public accounting firm is responsible
for expressing an opinion on the conformity of our audited financial statements to generally accepted accounting principles in
the United States of America. The Audit Committee met with our independent registered public accounting firm, with and without
management present, to discuss the results of their examinations and the overall quality of our financial reporting.
In this context, the Audit Committee reviewed
and discussed our audited financial statements for the year ended December 31, 2013 with management and with our independent registered
public accounting firm. The Audit Committee has discussed with our independent registered public accounting firm the matters required
to be discussed by the statement on Auditing Standards No. 61, as amended (Communications with Audit Committees), as adopted by
the Public Company Accounting Oversight Board in Rule 3200T, which includes, among other items, matters related to the conduct
of the audit of our annual financial statements.
The Audit Committee has received the written
disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the Public
Company Accounting Oversight Board regarding such independent registered public accounting firm's communications with the Audit
Committee concerning independence, and has discussed with the independent registered public accounting firm its independence from
us and our management.
Based on its review of the audited financial
statements and the various discussions noted above, the Audit Committee recommended to our Board of Directors that our audited
financial statements be included in our Annual Report on Form 10-K for the year ended December 31, 2013.
Respectfully submitted
by the Audit Committee,
Michael Doron
Daniel McClory
Gregory Macosko
The foregoing Audit Committee Report does
not constitute soliciting material and shall not be deemed filed or incorporated by reference into any other filing of our company
under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except to the extent we specifically
incorporate this Audit Committee Report by reference therein.
INFORMATION ABOUT THE EXECUTIVE OFFICERS
The following table sets forth certain
information as of March 31, 2014, regarding our directors and named executive officers:
Name
|
|
Age
|
|
Position
|
|
|
|
|
|
Bradley J. Pyatt
|
|
33
|
|
Chairman of the Board, Chief Executive Officer
|
Richard F. Estalella
|
|
52
|
|
President, Director
|
Donald W. Prosser
|
|
63
|
|
Chief Financial Officer & Treasurer
|
James J. Greenwell
|
|
54
|
|
Chief Operating Officer
|
Sydney R. Rollock
|
|
50
|
|
Chief Marketing & Sales Officer
|
Cory J. Gregory
|
|
35
|
|
Executive Vice President
|
Michael J. Doron
|
|
52
|
|
Director
|
Daniel J. McClory
|
|
54
|
|
Director
|
Gregory Macosko
|
|
67
|
|
Director
|
Bradley J. Pyatt
is our Chairman
of the Board, Chief Executive Officer and Director and founded the company in April 2008. His background includes seven years of
experience as a professional athlete, and more than five years of experience in the sports nutrition arena. Mr. Pyatt played in
National Football League for the Indianapolis Colts during the 2003, 2004, and 2005 NFL seasons as well for the Miami Dolphins
during the 2006 NFL season. Mr. Pyatt played in the Arena Football League for the Colorado Crush during the 2007 and 2008 AFL seasons.
Mr. Pyatt attended the University of Kentucky from 1999 to 2002, where he studied kinesiology exercise science, as well the University
of Northern Colorado, from 2002 to 2003.
Richard F. Estalella
has served
as our Chief Operating Officer since April 2013, and as a member of the Board of Directors since August 2013. Prior to joining
MusclePharm, Mr. Estalella served as Senior Vice President of Operations at Arbonne International, LLC since 2005. Mr. Estalella
was instrumental in Arbonne’s expansion operations and distribution upgrades and was responsible for all warehouse and distribution
facilities, facilities maintenance departments and Customer Service. Previously, between 1998 and 2005, he owned a consulting business
specializing in retail, operations, warehousing and distribution. Prior to that, Mr. Estalella served as Senior Vice President
of Warehouse Operations for Office Depot between 1987 and 1998 and established many of its retail markets, along with its nationwide
distribution center network which helped grow it into a $9 billion company.
Donald W. Prosser
served as
a director on our Board of Directors from July 2012 until April 2014, and since April 2014 has served as the Company’s Chief
Financial Officer. Mr. Prosser has been the principal executive officer and principal financial officer of Arête Industries,
Inc. since January 2011 and a director of Arête since September, 2003. Arête is a voluntary filer with the SEC under
the Securities Exchange Act of 1934. Mr. Prosser owns a certified public accounting firm, Donald W. Prosser, P.C., specializing
in tax services and accounting and has represented a number of private and public companies serving in the capacity of accountant,
member of boards of directors, and as chief financial officer. From 1997 to 1999, Mr. Prosser served as Chief Financial Officer
and Director for Chartwell International, Inc., a public company publishing high school athletic information and providing athletic
recruiting services. From 1999 to 2000, he served as Chief Financial Officer and Director for Anything Internet, Inc. and from
2000 to 2001, served as Chief Financial Officer and Director for its successor, Inform Worldwide Holdings, Inc., a publicly traded
company. From November 2002 through June 2008, Mr. Prosser served as CFO of VCG Holding Corp., a public company. From July 2008
through August 2009 Mr. Prosser was Chief Financial Officer of Iptimize, Inc., a provider of broadband and data services that filed
a petition under federal bankruptcy laws in October 2009. He also has served on the Board of Directors of Veracity Management Global,
Inc., a publicly traded company, since January, 2008. Mr. Prosser has been a certified public accountant since 1975. Mr. Prosser
attended the University of Colorado from 1970 to 1971 and Western State College of Colorado from 1972 to 1975, where he earned
a Bachelor’s Degree in Accounting and History (1973) and a Master’s Degree in Accounting – Income Taxation (1975).
James J. Greenwell
served as
a director from October 15, 2012 until May 2014 and became the Company’s Chief Operating Officer in May of 2014. Since March
20, 2013 he has been Vice-President of Voice Technology for Intelligrated. (Intelligrated is one of the top material handling automation
companies in the U.S.) Intelligrated acquired Datria Systems in March 2013. Since 2000, he has been the Chief Executive Officer
of Datria Systems Inc., a speech recognition application software company. He has also served as the Datria Systems’ Chairman
since 2002. In prior employment, he served as a technology executive in a number of private and public companies .He has served
on the Board of the Cherry Creek School Foundation since September 2010. He was a founding member of Friends of Denver Fire and
served on its Board from 2007 through 2010. Mr. Greenwell served on the Board of the Denver Chapter of the American Heart Association
from 2002 through 2008 and was Chairman of the Board in 2007. He also served on the Board of Trustees of the Bonfils Blood Center
Foundation from 1999 through 2003. Mr. Greenwell earned a BS from the College of Business at Michigan State University and an MBA
degree from Saint Mary’s College.
Sydney R. Rollock
has served
as our Chief Marketing & Sales Officer since October 2013. Prior to joining MusclePharm, Mr. Rollock served as President of
XXIC Growth Ventures LLC, a company he founded to partner with investors to identify and evaluate Non-Core Consumer Fortune 500
brand businesses in the Over the Counter (“OTC”) Health & Wellness sector to bring buyers and sellers together
to form a stand-alone consumer OTC company. Prior to that, Mr. Rollock served as Chief Marketing and Business Development Officer
for Brightside Academy in Pittsburgh, Pennsylvania as well as Vice President and General Manager of Health & Wellness OTC Business
Unit for GlaxoSmithKline. Mr. Rollock has expertise in general management, global marketing, and corporate strategy as well as
wide-ranging experience in leadership roles for Fortune 500 companies including GlaxoSmithKline, Coca-Cola, Campbell’s, and
General Mills.
Cory J. Gregory
has served
as an executive officer of Muscle Pharm, LLC, since its inception in 2008 and our Senior Vice President (formerly Senior President)
since May 2010. Prior to joining us, Mr. Gregory served as President, managing member, and owner of T3 Personal Training LLC, or
T3, from April 2009 until November 2011. T3 was a personal training service that managed and oversaw over 40 clients using seven
trainers over a ten-year period. During the same period, Mr. Gregory served as President of the Ohio Natural Bodybuilding Federation,
a federation founded by Mr. Gregory in 2004 which hosted 14 bodybuilding competitions over a six-year period. He consulted for
Agile Enterprises, a nutritional supplement company from January 2006 through January 2008. In 2004, Mr. Gregory purchased the
Old School Gym, located in Pataskala, Ohio, which he continues to own at present day.
Michael J. Doron
has served
as a director since November 5, 2012. He has been the Managing Director of DDR & Associates, LLC since January 2009, and Evolution
Capital Partners, LLC since October 2009. From January 2007 to December 2008, he served as Chief Operating Officer and director
of Toyshare, Inc. From February 2006 to January 2007, Mr. Doron served as Chief Operating Officer and Chief Financial Officer of
Frontgate Sundance Alliance. From September 2005 to January 2007, he served as Vice President – Private Banking of the Bank
of the West. Mr. Doron earned a BA from the University of Maryland and a Master’s of Science from American University.
Daniel J. McClory
was appointed
as an independent director of the Company’s Board of Directors in August 2013. Mr. McClory has been a member of Burnham Securities
Inc. since February 2014, currently serving as its Managing Director. His investment banking career includes an affiliation with
Hunter Wise Financial Group, LLC from 2003 to 2014. At Burnham Securities and Hunter Wise Financial Group, Mr. McClory has completed
public offerings, financings and M&A deals for clients listed on the London Stock Exchange, NASDAQ, NYSE Amex, the Toronto
Stock Exchange, the Stock Exchange of Hong Kong, and the Over-the-Counter Markets. He opened Hunter Wise Financial Group offices
in London and Beijing in support of the firm’s investment banking clients in both locations. Mr. McClory earned his BS in
English and an MA in Language and International Trade from Eastern Michigan University.
Gregory Macosko
was appointed
as an independent director of the Company’s Board of Directors in June 2014. Mr. Macosko is currently a member of the Board
of Directors of Montrose Advisors, and an SEC-registered investment advisor. He also serves as a business advisor to the Board
of Directors of Bioxiness Pharmaceuticals, a California-based pre-clinical stage company. In September of 2013, Mr. Macosko retired
as a Partner from Lord Abbett & Co., a privately held investment management firm. He was a Portfolio Manager of Lord Abbet's
Small Cap Value Fund and a founding member of the company’s Proxy Committee. Mr. Macosko is a Phi Beta Kappa graduate of
Albion College, a Fulbright Scholar in Germany, and holds an MBA from Columbia University. His twenty-four years of experience
on Wall Street bring to MusclePharm broad knowledge of public company management, and investment community relationships among
institutional investors, analysts and investment bankers.
Family Relationships
There are no family relationships between
any of our directors and our executive officers.
Involvement in Certain Legal Proceedings
Except as outlined below, to our knowledge,
during the past ten (10) years, none of our directors, executive officers, promoters, control persons, or nominees has been:
|
·
|
the subject of any bankruptcy petition filed by or against any business of which such person was a general partner or executive
officer either at the time of the bankruptcy or within two years prior to that time;
|
|
·
|
convicted in a criminal proceeding or is subject to a pending criminal proceeding (excluding traffic violations and other minor
offenses);
|
|
·
|
subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities
or banking activities; or
|
|
·
|
found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission
to have violated a federal or state securities or commodities law
|
Mr. Pyatt filed for protection under Chapter
7 of the federal bankruptcy laws in 2008. He received a discharge relating to the matter in 2008.
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Executive Compensation Objectives
The objectives of our compensation program
are as follows:
|
·
|
Attract, hire and retain well-qualified executives.
|
|
·
|
Reward performance that drives substantial increases in shareholder value, as evidenced through both future operating profits
and increased market price of our common shares.
|
Compensation Setting Process
Role of Compensation Committee.
The role of the Compensation Committee is to oversee the Company’s executive compensation strategy, oversee the administration
of its executive compensation and its equity based compensation plans, review and approve the compensation of the Company’s
CEO, and oversee the Company’s compensation plan for the Board of Directors. The Compensation Committee is comprised exclusively
of independent outside directors and includes members with executive level experience in other companies who bring a perspective
of reasonableness to compensation matters with our Company. In addition, the Compensation Committee compares executive compensation
practices of similar companies at similar stages of development.
Role of Management.
In
setting compensation for 2013, our CEO worked closely with the Compensation Committee and attended its meetings of the Compensation
Committee. Our CEO made recommendations to the Compensation Committee regarding compensation of our executive officers other than
him. No executive officer participated directly in the final deliberations regarding his or her own compensation package.
Elements of Executive Compensation
The compensation level of our
executives generally reflects their level of experience and is designed to provide an incentive to positively affect our future
operating performance and shareholder value.
Salary.
Base salary is
the primary fixed element in the Company’s compensation program and is intended to provide an element of certainty and security
to the Company’s executive officers on an ongoing basis. Most of the executive officers have employment agreements with the
Company and their initial salaries are set by contract.
Equity.
Part of the compensation
paid to our executives is in the form of equity, which to date has been exclusively through stock option grants. The stock option
exercise price is generally the fair market value of the stock on the date of grant. Therefore, a gain is only recognized if the
value of the stock increases, which promotes a long term alignment between the interests of the Company’s executives and
its stockholders.
Bonus.
The executive officers’
cash incentive awards are tied to achieving performance metrics established by the Compensation Committee at the beginning of each
year, with input from the Chief Executive Officer, which are not re-set during the year, regardless of Company performance or economic
conditions. The program creates incentive for the executive officers to direct their efforts toward achieving specified company
goals and individual goals.
Summary Compensation Table for 2013
The following summary compensation tables
sets forth all compensation awarded to, earned by, or paid to each person serving as a named executive officer of the Company during
the year ended December 31, 2013.
Name and Principal Position
|
|
Year
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Stock Awards
(1)
($)
|
|
|
Option Awards
(1)
($)
|
|
|
All Other
Compensation
($)**
|
|
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bradley J. Pyatt
|
|
2013
|
|
|
250,000
|
|
|
|
260,000
|
|
|
|
3,853,500
|
(4)
|
|
|
-
|
|
|
|
44,356
|
(6)
|
|
|
4,407,856
|
|
Chief Executive Officer and President
|
|
2012
|
|
|
322,022
|
|
|
|
160,000
|
|
|
|
|
|
|
|
-
|
|
|
|
59,951
|
(7)
|
|
|
541,973
|
|
|
|
2011
|
|
|
250,000
|
|
|
|
140,099
|
(2)
|
|
|
1,555,921
|
(2)(3)
|
|
|
-
|
|
|
|
47,713
|
(8)
|
|
|
1,993,733
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
L. Gary Davis
|
|
2013
|
|
|
175,000
|
|
|
|
235,000
|
|
|
|
2,202,000
|
(4)
|
|
|
-
|
|
|
|
9,310
|
(9)
|
|
|
2,621,310
|
|
Chief Financial Officer (former)
(30)
|
|
2012
|
|
|
65,000
|
|
|
|
75,000
|
|
|
|
204,500
|
(5)
|
|
|
-
|
|
|
|
-
|
|
|
|
344,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard F. Estalella
(24)
|
|
2013
|
|
|
163,000
|
|
|
|
250,000
|
|
|
|
1,101,000
|
(4)
|
|
|
|
|
|
|
31,388
|
(10)
|
|
|
1,545,388
|
|
Chief Operating Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sydney R. Rollock
(25)
|
|
2013
|
|
|
41,667
|
|
|
|
35,160
|
|
|
|
-
|
|
|
|
-
|
|
|
|
11,107
|
(11)
|
|
|
87,934
|
|
Chief Marketing and Sales Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cory J. Gregory
|
|
2013
|
|
|
150,000
|
|
|
|
160,000
|
|
|
|
1,651,500
|
(4)
|
|
|
-
|
|
|
|
13,765
|
(12)
|
|
|
1,975,265
|
|
Executive Vice President of Brand
|
|
2012
|
|
|
201,796
|
|
|
|
130,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
22,901
|
(13)
|
|
|
354,697
|
|
Awareness and Social Media
|
|
2011
|
|
|
150,000
|
|
|
|
140,099
|
(2)
|
|
|
1,555,921
|
(2)(3)
|
|
|
-
|
|
|
|
19,966
|
(14)
|
|
|
1,865,986
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeremy R. DeLuca
|
|
2013
|
|
|
225,000
|
|
|
|
225,000
|
|
|
|
2,477,250
|
(4)
|
|
|
-
|
|
|
|
20,092
|
(15)
|
|
|
2,947,342
|
|
Executive Vice President and Chief
|
|
2012
|
|
|
187,500
|
|
|
|
130,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
34,899
|
(16)
|
|
|
352,399
|
|
Marketing Officer (former)
(26)
|
|
2011
|
|
|
65,833
|
|
|
|
140,099
|
(2)
|
|
|
1,555,921
|
(2)(3)
|
|
|
-
|
|
|
|
5,717
|
(17)
|
|
|
1,767,570
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John H. Bluher
|
|
2013
|
|
|
366,379
|
(27)
|
|
|
158,750
|
|
|
|
1,651,500
|
(4)
|
|
|
-
|
|
|
|
3,961
|
(18)
|
|
|
2,180,590
|
|
Executive Vice President (former)
(27)
|
|
2012
|
|
|
182,292
|
|
|
|
130,000
|
|
|
|
245,400
|
(5)
|
|
|
-
|
|
|
|
8,311
|
(19)
|
|
|
566,003
|
|
|
|
2011
|
|
|
36,458
|
|
|
|
50,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
485
|
(20)
|
|
|
86,943
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Larry S. Meer
(28)
|
|
2012
|
|
|
120,000
|
|
|
|
31,797
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,366
|
(21)
|
|
|
156,163
|
|
Chief Financial Officer and Treasurer (former)
|
|
2011
|
|
|
74,400
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,000
|
(22)
|
|
|
77,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leonard Armenta
(29)
|
|
2011
|
|
|
86,400
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,217
|
(23)
|
|
|
87,617
|
|
Chief Operating Officer (former)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
** The Company’s executive compensation
table and, specifically, perquisites as disclosed in the “Other Compensation” column of the executive compensation
table is currently under review with the SEC as part of the SEC Investigation as discussed in Note 13(F) of the Notes to Consolidated
Financial Statements. The audit committee has conducted a detailed and thorough analysis of the perquisites for the periods of
2010, 2011, 2012 and 2013 as part of the preparation of these tables and the SEC Investigation.
|
(1)
|
Amounts reflect the aggregate grant date fair value of stock awards computed in accordance with
FASB ASC Topic 718. The grant date fair value of each stock award is measured based on the closing price of our common stock on
the date of grant. A portion of such stock is subject to forfeiture.
|
|
(2)
|
Reflects the amount returned to the Company in July 2012 as a result of restated revenues for the
years ended December 31, 2011 and 2010. Mr. Pyatt, Mr. Gregory, and Mr. DeLuca each received cash bonuses and stock compensation
in 2011 based on the attainment of certain revenue thresholds, and the restatement resulted in the reduction of 2011 net revenue
by approximately $3,626,000. As a result of the restatement each executive voluntarily returned (i) $30,311 each of
their cash bonus and (ii) their stock grant was reduced by 31,008 shares (equal to a value as of the grant date of $276,746).
|
|
(3)
|
Mr. Pyatt, Mr. Gregory, and Mr. DeLuca each received a stock award of $1,555,921, equal to 148,182,972
of shares as of 12/31/11. After giving effect to the 850 for 1 reverse stock split in November 2012, the grant was equivalent
to 174,333 shares of common stock at a price per share of $8.92, which was the closing price of our common stock on December 31,
2011, the effective date of the grant. After the return of the 31,008 shares described in note 2 above, each of Mr.
Pyatt, Mr. Gregory, and Mr. Deluca received 143,325 shares.
|
|
(4)
|
Reflects the full grant date fair value of restricted stock unit award granted in 2013 calculated
in accordance with FASB ASC topic 718 based on the closing price of the common stock of $11.01 on the date of the grant.
|
|
(5)
|
Reflects the full grant date fair value of restricted stock unit award granted in 2012 calculated
in accordance with FASB ASC Topic 718 based on the closing price of the common stock of $3.48 (after adjustment for the reverse
split of 1-for-850) on the date of grant.
|
|
(6)
|
Amount reflects 401k matching contributions of $14,566 and club membership of $8,119. The
remaining balance consists of miscellaneous executive perquisites including cell phone charges, auto allowance, apparel, travel
and promotional expenses.
|
|
(7)
|
Amount reflects 401k matching contributions of $10,667 and club memberships of $12,987. The
remaining balance consists of miscellaneous executive perquisites including auto allowance, apparel, travel and other promotional
expenses.
|
|
(8)
|
Amount reflects automobile allowances of $16,761 and club memberships of $3,519. The
remaining balance includes miscellaneous executive perquisites including medical expenses, apparel, travel and other promotional
expenses.
|
|
(9)
|
Amount reflects 401k matching contributions of $2,250 and other allowances for apparel, automobile,
phone and travel expenses.
|
|
(10)
|
Amount reflects relocation expenses of $25,600 and the remaining balance includes allowances for
apparel, auto, phone and travel expenses.
|
|
(11)
|
Amount reflects relocation expenses of $8,940 and the remaining balance includes allowances for
apparel, auto and phone expenses.
|
|
(12)
|
Amount reflects auto expenses and auto allowance of $6,715, apparel and product allowance of $5,000,
and other minor miscellaneous expenses.
|
|
(13)
|
Amount reflects auto expenses of $4,982 and 401k matching contributions of $1,333. The remaining
balance consists of miscellaneous executive perquisites including allowances for apparel, travel, furniture, equipment and other
promotional expenses.
|
|
(14)
|
Amount reflects $11,890 for medical expense reimbursements. The remaining balance consists
of miscellaneous executive perquisites allowances for automobile, equipment, phone and other promotional expenses.
|
|
(15)
|
Amount reflects $7,361 in club memberships and $5,079 in 401k matching contributions. The
remaining balance consists of miscellaneous executive perquisites including allowances for apparel, automobile travel and promotional
expenses.
|
|
(16)
|
Amount reflects $6,141 in club memberships and 401k matching contributions of $5,750. The
remaining balance consists of miscellaneous executive perquisites including allowances for automobile, entertainment, phone, travel
and other promotional expenses.
|
|
(17)
|
Amount reflects miscellaneous executive perquisites including travel and other promotional expenses.
|
|
(18)
|
Amount reflects $2,500 in 401k matching contributions and other miscellaneous executive perquisites
for phone, travel and other promotional expenses.
|
|
(19)
|
Amount reflects $6,683 in 401k matching contributions and other miscellaneous executive perquisites
for phone, travel and other promotional expenses.
|
|
(20)
|
Amount reflects miscellaneous executive perquisites including travel and other promotional expenses.
|
|
(21)
|
Amount reflects $2,700 in 401k matching contributions and other miscellaneous executive perquisites
for automobile, travel and other promotional expenses.
|
|
(22)
|
Amount reflects miscellaneous executive perquisites for apparel, phone and other promotional expenses.
|
|
(23)
|
Amount reflects miscellaneous executive perquisites.
|
|
(24)
|
Mr. Estalella was initially appointed to his position as the Company’s Chief Operating Officer
on April 29, 2013.
|
|
(25)
|
Mr. Rollock was initially appointed to his position as the Company’s Chief Marketing and
Sales Officer on October 16, 2013.
|
|
(26)
|
Effective 8/6/2013 Mr. DeLuca was no longer a named executive officer of the Company and his title
was changed from Executive Vice President and Chief Marketing Officer to President of Sales and Marketing. Mr. DeLuca reports to
Sydney Rollock, Chief Marketing Officer and Sales Officer. Amounts in the above table represent full year amount for salary, bonus,
and stock awards. The amounts in Other Compensation in 2013 were prorated for the period of time that he was a named executive
officer.
|
|
(27)
|
Effective October 15, 2013, Mr. Bluher resigned his position with the Company, but continued to
serve on the Company’s Board of Directors through December 31, 2013. The amounts in the above table represent
full year amounts paid to him including any severance compensation.
|
|
(28)
|
Effective July 3, 2012, Mr. Meer resigned his position as Chief Financial Officer with the Company.
|
|
(29)
|
Effective September 16, 2011, Mr. Armenta resigned his position with the Company.
|
|
(30)
|
Effective April 15, 2014, Mr. Davis resigned his position as Chief Financial Officer with the Company
and is no longer a named executive officer.
|
Outstanding Equity Awards at Year End
The following table provides information
concerning the holdings of restricted stock unit awards by our named executive officers as of December 31, 2013. This table includes
unexercised (both vested and unvested) stock option awards and unvested restricted stock unit awards with vesting conditions that
were not satisfied as of December 31, 2013. 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 or Units
of Stock that
Have Not
Vested
(1)
(#)
|
|
|
Market Value of
Shares or Units
of Stock that
Have Not
Vested
(2)
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bradley J. Pyatt
|
|
7/1/2013
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
290,500
|
|
|
|
2,408,245
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
L. Gary Davis
|
|
11/16/2012
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
39,216
|
|
|
|
325,101
|
|
|
|
7/1/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
166,000
|
|
|
|
1,376,140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard F. Estalella
|
|
7/1/2013
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
83,000
|
|
|
|
688,070
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sydney R. Rollock
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cory J. Gregory
|
|
7/1/2013
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
124,500
|
|
|
|
1,032,105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeremy R. DeLuca
|
|
7/1/2013
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
186,750
|
|
|
|
1,548,158
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John H. Bluher
|
|
11/16/2012
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
47,059
|
|
|
|
390,119
|
|
|
|
7/1/2013
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
124,500
|
|
|
|
1,032,105
|
|
|
(1)
|
The table below shows the vesting dates for the respective unvested restricted stock units listed
in the above Outstanding Equity Awards at Year-End for 2013 Table:
|
Vesting Date
|
|
Pyatt
|
|
|
Davis
|
|
|
Estalella
|
|
|
Gregory
|
|
|
Deluca
|
|
|
Bluher
|
|
01/01/2014
|
|
|
-
|
|
|
|
19,608
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
23,530
|
|
12/01/2014
|
|
|
-
|
|
|
|
19,608
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
23,529
|
|
12/31/2014
|
|
|
-
|
|
|
|
166,000
|
|
|
|
-
|
|
|
|
124,500
|
|
|
|
-
|
|
|
|
124,500
|
|
12/31/2015
|
|
|
290,500
|
|
|
|
-
|
|
|
|
83,000
|
|
|
|
-
|
|
|
|
186,750
|
|
|
|
-
|
|
|
(2)
|
Market value of the restricted stock units represents the product of the closing price of our common
stock as of December 31, 2013 (the last trading day of the year), which was $8.29, and the number of shares underlying each such
award.
|
Employment Arrangements
The following table reflects the current
executive team and their employment agreement termination dates as amended on December 31, 2013 and approved by the Board of Directors.
Name
|
|
Position
|
|
Term
|
|
|
|
|
|
Bradley J. Pyatt
|
|
Chief Executive Officer
|
|
December 31, 2018
|
Richard F. Estalella
|
|
President
|
|
December 31, 2018
|
Donald Prosser
|
|
Chief Financial Officer
|
|
April 15, 2015
|
James Greenwell
|
|
Chief Operating Officer
|
|
December 31, 2016
|
Sydney R. Rollock
|
|
Chief Marketing and Sales Officer
|
|
December 31, 2016
|
Cory J. Gregory
|
|
Executive Vice President
|
|
December 31, 2016
|
The employment agreements were executed
and approved by the Compensation Committee and the Board of Directors. During 2013, the Compensation Committee engaged an independent
third party to determine a competitive wage and bonus structure and the table below reflects the executive base salaries for 2014
based on the recommendations of the third party and approved by the Compensation Committee.
Name
|
|
Annual Base Salary
|
|
Bradley J. Pyatt
|
|
$
|
325,000
|
|
Richard F. Estalella
|
|
$
|
300,000
|
|
Donald Prosser
|
|
$
|
275,000
|
|
James Greenwell
|
|
$
|
275,000
|
|
Sydney R. Rollock
|
|
$
|
225,000
|
|
Cory J. Gregory
|
|
$
|
200,000
|
|
If the employment of an officer is terminated
due to the officer’s death or inability to perform, the employment agreements provide for payment to the officer of any unpaid
portion of the Officer’s base salary and benefits accrued through the date of death or inability to perform and, at the discretion
of the Compensation Committee, a bonus. The officer or his representatives will also be entitled to receive a reimbursement of
up to 12 months of Consolidated Omnibus Reconciliation Act, or COBRA, premiums, if the officer or his representatives timely elect
and remain eligible for COBRA. If the officer’s employment is terminated due to inability to perform, the officer will also
be entitled to (i) a lump sum payment equal to the greater of (A) the target bonus payable to the Officer for the year in
which the date of termination occurs or if no target bonus has been set, the officer’s most recent annual bonus, and (B)
a bonus for such year as may be determined by the Compensation Committee in its sole discretion; and (ii) a severance payment (payable
over six months) equal to six months of the officer’s base salary in effect as of the date of termination.
If the officer’s employment is terminated
for “cause” or if an Officer terminates his employment without “good reason” (as such terms are defined
in the employment agreement), the officer will not be entitled to a severance payment or any other termination benefits. However,
the Company will pay the officer any unpaid portion of the officer’s base salary and benefits accrued through the date of
such termination.
Upon a termination of an officer’s
employment (except for Mr. Pyatt) by the Company without cause and without a change in control or by the officer for good reason
without a change in control, the employment agreements provide that such officer will be entitled to (i) any unpaid portion of
the officer’s base salary and benefits accrued through the date of termination; (ii) an amount payable over three months
and equal to the lesser of (A) nine months of the officer’s base salary in effect as of the date of termination, or (B) the
officer’s base salary remaining under the term of his employment agreement; (iii) a lump sum payment equal to 25% of the
officer’s target bonus (or if no target bonus has been set, the Officer’s most recent annual bonus) if the termination
is between January 1 and June 30 or 50% of the Officer’s target bonus (or if no target bonus has been set, the Officer’s
most recent annual bonus) if the termination is between July 1 and December 31; (iv) acceleration of the officer’s outstanding
equity awards, unless otherwise provided in the equity award agreement for a particular equity award; and (v) the officer will
also be entitled to receive a reimbursement of up to 12 months of COBRA premiums, if the officer timely elects and remains eligible
for COBRA.
Upon a termination of Mr. Pyatt’s
employment by the Company without cause and without a change in control or by Mr. Pyatt for good reason without a change in control,
Mr. Pyatt’s employment agreement provides that he will be entitled to (i) any unpaid portion of his base salary and benefits
accrued through the date of termination; (ii) an amount payable over three months and equal to two times his base salary on the
date of termination; (iii) a lump sum payment equal to the greater of (A) two times his target bonus for the for the year in which
the date of termination occurs or if no target bonus has been set, then two times Mr. Pyatt’s most recent annual bonus, and
(B) a bonus for such year as may be determined by the Compensation Committee in its sole discretion; (iv) acceleration of
his outstanding equity awards, unless otherwise provided in the equity award agreement for a particular equity award; and (v) he
will also be entitled to receive a reimbursement of up to 12 months of COBRA premiums, if he timely elects and remains eligible
for COBRA.
Upon a termination of an officer’s
employment (except for Mr. Pyatt) by the Company without cause and with a change in control or by the officer for good reason after
a change in control, the employment agreement provides that such officer will be entitled to (i) any unpaid portion of the officer’s
base salary and benefits accrued through the date of termination; (ii) a severance payment (payable over 12 months) equal to 12
months of the officer’s base salary in effect as of the date of termination; (iii) a lump sum payment equal to the greater
of (A) 100% of the officer’s target bonus in the year of termination or if no target bonus has been set, then 100% of the
officer’s most recent annual bonus, and (B) a bonus for such year as may be determined by the Committee in its sole discretion;
(iv) a severance payment of $500,000 (payable within 30 days of the date of termination); (v) acceleration of the officer’s
outstanding equity awards; and (vi) the officer will also be entitled to receive a reimbursement of up to 12 months of COBRA premiums,
if the officer timely elects and remains eligible for COBRA.
Upon a termination of Mr. Pyatt’s
employment by the Company without cause and with a change in control or by Mr. Pyatt for good reason after a change in control,
Mr. Pyatt’s employment agreement provides that he will be entitled to (i) any unpaid portion of his base salary and benefits
accrued through the date of termination; (ii) a severance payment (payable over 12 months) equal to three times his base salary
in effect as of the date of termination; (iii) a severance payment of $2 million (payable within 30 days of the date of termination);
(v) acceleration of Mr. Pyatt’s outstanding equity awards; and (vi) he will also be entitled to receive a reimbursement of
up to 12 months of COBRA premiums, if he timely elects and remains eligible for COBRA.
The employment agreements also contain
customary confidentiality, non-competition and non-solicitation provisions. Under the non-compete provisions, during the term of
his employment agreement and for a period of six months after termination of employment, the officer is prohibited from, directly
or indirectly, engaging in or becoming interested financially in, as a principal, employee, partner, contractor, shareholder, agent,
manager, owner, advisor, lender, guarantor, officer or director, any business that is engaged in the nutritional supplement industry
and/or related products, subject to certain exceptions for passive investments.
Additionally, the non-solicitation provisions
of the employment agreements prohibit the officer from soliciting for employment any employee of the Company or any person who
was an employee of the Company in the 90-day period before such solicitation. This prohibition applies during the officer’s
employment with the Company and for 12 months following the termination of the officer’s employment.
Change in Control Payments
Our employment agreements with our executive officers provide
for certain provisions for payments to the executive upon termination as a result of a change in control. Under the employment
agreements upon termination as a result of a change in control, executives will receive the following:
|
·
|
Severance package equal to one year of the executive’s base salary immediately prior to the
change in control payable in 12 equal monthly installments pursuant to the Company’s normal payroll procedures. For Mr. Pyatt,
the severance package will be equal to three years of the executive’s base salary.
|
|
·
|
A lump sum payment of an amount equal to the greater of (1) one hundred percent of the Executive’s
target bonus for the year in which the date of the termination occurs, or (2) a bonus for such year as may be determined by the
Compensation Committee. Mr. Pyatt’s agreement does not provide for a lump sum bonus payment.
|
|
·
|
A one-time cash payment of $500,000 to be paid within 30 days of the date of termination. Mr. Pyatt’s
agreement provides for a one-time cash payment of $2,000,000.
|
|
·
|
Reimbursement of COBRA premiums on a monthly basis for up to 12 months after the date of termination.
|
|
·
|
All stock awards will become fully and immediately vested and any restrictions on restricted stock
held by the Executive will be removed subject to trading black-out periods for the next financial quarter following the date of
termination.
|
Transactions with Related Persons
In addition to the named executive officer
and director compensation arrangements discussed in “Executive Compensation”, below we describe transactions since
January 1, 2012, to which we have been a participant, in which the amount involved in the transaction exceeds or will exceed $120,000
and in which any of our directors, executive officers or holders of more than 5% of our capital stock, or any immediate family
member of, or person sharing the household with, any of these individuals, had or will have a direct or indirect material interest.
Consulting Agreements
On July 12, 2012, we entered into a consulting
agreement with Melechdavid, Inc. (“Melechdavid”), an affiliate of Mark E. Groussman, a former director, prior to Mr.
Groussman becoming a director of the Company. The consulting agreement provides that Melechdavid will provide consulting services
to us related to strategic acquisitions, capital restructuring and Mr. Groussman will serve as a member of the board of directors.
Mr. Groussman was appointed to our board of directors on July 19, 2012, and resigned from our board effective October 18, 2012.
The consulting agreement provides that we will issue to Melechdavid shares of common stock in an amount equal to 4.2% of our outstanding
common stock on a fully diluted (as-converted) basis. Further, until July 12, 2014, we are required to ensure that Melechdavid
shall maintain its 4.2% fully diluted equity position. The term of the consulting agreement was 12 months.
On April 2, 2013, the Company entered into
a first amendment to the Original Melechdavid Consulting Agreement with Melechdavid, effective as of March 28, 2013 (the “Melechdavid
Amended Agreement”). Pursuant to the Melechdavid Amended Agreement, Melechdavid agreed to cap the shares of the Company’s
common stock, $0.001 par value per share (the “Common Stock”) that it is entitled to receive under the Original Melechdavid
Consulting Agreement to no more than 570,000 shares of Common Stock of the Company, after giving effect to the 1-for-850 reverse
stock split of the Common Stock effected by the Company on November 26, 2012. In connection with the execution and delivery of
the Melechdavid Amended Agreement, the Company issued Melechdavid an aggregate of 341,247 shares of Common Stock on March 29, 2013
and 228,753 shares of Common Stock on April 5, 2013 as full satisfaction of the Company’s obligations under the Original
Melechdavid Consulting Agreement. The Company’s obligations under the Melechdavid agreement was completely satisfied as of
July 12, 2013 and the agreements have not been renewed or extended.
On July 12, 2012, we entered into a consulting
agreement with GRQ Consultants, Inc. (“GRQ”), an affiliate of Barry C. Honig. The consulting agreement provides that
GRQ will provide consulting services to us related to banking relationships, strategic acquisitions and capital restructuring.
The consulting agreement provides that we will issue to GRQ shares of common stock in an amount equal to 4.2% of our outstanding
common stock on a fully diluted (as-converted) basis. Further, until July 12, 2014, we are required to ensure that GRQ shall maintain
its 4.2% fully diluted equity position. The term of the consulting agreement was 12 months.
On April 2, 2013, the Company entered into
a first amendment to the Original GRQ Consulting Agreement with GRQ, effective as of March 28, 2013 (the “GRQ Amended Agreement”).
Pursuant to the GRQ Amended Agreement, GRQ agreed to cap the shares of the Company’s Common Stock that it is entitled to
receive under the Original GRQ Consulting Agreement to no more than 420,000 shares of Common Stock of the Company, after giving
effect to the 1-for-850 reverse stock split of the Common Stock effected by the Company on November 26, 2012. In connection with
the execution and delivery of the GRQ Amended Agreement, the Company issued GRQ an aggregate of 305,889 shares of Common Stock
on March 29, 2013 and 78,753 shares of Common Stock on April 5, 2013 as full satisfaction of the Company’s obligations under
the Original GRQ Consulting Agreement. The Company had previously issued GRQ 35,359 shares of Common Stock pursuant to the Original
GRQ Consulting Agreement. The Company’s obligations under the GRQ agreement was completely satisfied as of July 12, 2013
and the agreements have not been renewed or extended.
Other Agreements
On February 15, 2012, Mr. Drew Ciccarelli
filed a Schedule 13G with the Securities and Exchange Commission which indicated Mr. Ciccarelli owned approximately 9.94% of the
Company’s common stock at that time. Prior to such date, the Company entered into a Sportswear License Agreement with MusclePharm
Sportswear LLC (“MPS”), of which Mr. Ciccarelli was the principle owner, pursuant to which the Company received $250,000
in fees. In November 2013, that agreement was terminated.
Subsequent to February 15, 2012, the Company
entered in a Mutual Rescission and Release Agreement with Mr. Ciccarelli pursuant to which certain purchases of the Company’s
common stock previously made by Mr. Ciccarelli were rescinded. Also subsequent to February 15, 2012, the Company entered into a
Warrant Conversion Agreement with Mr. Ciccarelli pursuant to which certain outstanding warrants to purchase shares of the Company’s
common stock then owned by Mr. Ciccarelli were converted into shares of the Company’s common stock.
Ryan DeLuca, the Chief Executive Officer
of one of our major customers, Bodybuilding.com, is the brother of Jeremy DeLuca, MusclePharm’s President of Sales and Marketing.
Additionally, Gary Davis, MusclePharm’s former Chief Financial Officer also indirectly owns 1.75% of Ryan DeLuca’s
equity interest in Bodybuilding.com. We do not offer preferential pricing of our products to Bodybuilding.com based on these relationships.
Sales of products to Bodybuilding.com were $33,977,368 and $25,060,518 for the years ended December 31, 2013 and 2012,
respectively. Bodybuilding.com owed the Company approximately $2 million and $827,000 in trade receivables as of December
31, 2013 and 2012, respectively.
We lease our office and warehouse facility
in Hamilton, Ontario, Canada from 2017275 Ontario Inc., which is a company owned by Renzo Passaretti, VP and General Manager of
MusclePharm Canada Enterprises Inc., our wholly owned Canadian subsidiary. In 2013 and 2012, we paid rent of $75,035 and $59,303,
respectively. The lease expires March 31, 2014.
On August 26, 2013, we entered into a Securities
Purchase Agreement with BioZone Pharmaceuticals, Inc. (“Biozone”) pursuant to which we bought (i) $2,000,000 of a 10%
secured convertible promissory notes and (ii) a warrant to purchase 10,000,000 shares of the Seller’s common stock, at an
exercise price of $0.40 per share, for an aggregate purchase price of $2,000,000. Dr. Philip Frost, a significant investor in the
Company and a member of its scientific advisory board, is the Chairman and CEO of OPKO Health, Inc. (“OPKO”), and is
the trustee of Frost Gamma Investments Trust (“Frost Gamma”). Each of Dr. Frost, OPKO, and Frost Gamma were significant
shareholders in Biozone.
On October 16, 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.
Pursuant to the Lease, the Company rents 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. Total lease commitments under the initial term of the lease are $142,923. As
of December 31, 2013, we owed Frost Real Estate Holding, LLC, $13,289 under the terms of the lease.
Subsequent to year end, the Company purchased
split dollar life insurance policies on certain key executives. These policies provide a split of 50% of the death benefit proceeds
to the Company and 50% to the officer’s designated beneficiaries.
Indemnification Agreements
We have entered into indemnification agreements
with each of our directors and named executive officers. The indemnification agreements and our bylaws will 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 adopt 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 the policy to provide 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’s interest in the transaction.
Although we have not 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 the Company’s
directors and named executive officers, and persons who beneficially own more than ten percent 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, the Company assists its 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 2013 all of 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) the Amendment No. 1 to Schedule 13D filed with the SEC
on October 21, 2013 for Brad Pyatt, and (ii) the Amendment No. 1 to Schedule 13D filed with the SEC on October 21, 2013 for Cory
Gregory.
ACTIONS TO BE TAKEN AT THE MEETING
PROPOSAL NO. 1
PROPOSAL FOR ELECTION OF FIVE DIRECTORS
At this year’s Annual Meeting, the
Board of Directors proposes that the nominees listed below be elected to hold office until the next annual meeting of stockholders
and until their successors are duly elected and qualified. All of the nominees are currently serving as directors. All nominees
have consented to being named in this Proxy Statement and to serve if elected.
Assuming a quorum is present, the five nominees
receiving the highest number of affirmative votes of shares entitled to be voted for such persons will be elected as directors
of the Company to hold office until the next annual meeting of stockholders and until their successors are duly elected and qualified.
Unless marked otherwise, proxies received will be voted "FOR" the election of the nominees named below. In the event
that additional persons are nominated for election as directors, the proxy holders intend to vote all proxies received by them
in such a manner as will ensure the election of the nominees listed below, and, in such event, the specific nominees to be voted
for will be determined by the proxy holders.
Information With Respect to Director
Nominees
Listed below are the nominees for election
to our Board with information showing the principal occupation or employment of the nominees for director, the principal business
of the corporation or other organization in which such occupation or employment is carried on, and such nominees’ business
experience during the past five years. Such information has been furnished to the Company by the director nominees.
Name
|
|
Age
|
|
Position
|
Bradley J. Pyatt
|
|
33
|
|
Chairman of the Board, Chief Executive Officer
|
Richard F. Estalella
|
|
52
|
|
President, Director
|
Michael J. Doron
|
|
52
|
|
Director
|
Daniel J. McClory
|
|
54
|
|
Director
|
Gregory Macosko
|
|
67
|
|
Director
|
Bradley J. Pyatt
is our Chairman of the Board, Chief
Executive Officer and Director and founded the company in April 2008. His background includes seven years of experience as a professional
athlete, and more than five years of experience in the sports nutrition arena. Mr. Pyatt played in National Football League for
the Indianapolis Colts during the 2003, 2004, and 2005 NFL seasons as well for the Miami Dolphins during the 2006 NFL season. Mr.
Pyatt played in the Arena Football League for the Colorado Crush during the 2007 and 2008 AFL seasons. Mr. Pyatt attended the University
of Kentucky from 1999 to 2002, where he studied kinesiology exercise science, as well the University of Northern Colorado, from
2002 to 2003.
Richard F. Estalella
is our President and previously
has served as our Chief Operating Officer since April 2013, and as a member of the Board of Directors since August 2013. Prior
to joining MusclePharm, Mr. Estalella served as Senior Vice President of Operations at Arbonne International, LLC since 2005. Mr.
Estalella was instrumental in Arbonne’s expansion operations and distribution upgrades and was responsible for all warehouse
and distribution facilities, facilities maintenance departments and Customer Service. Previously, between 1998 and 2005, he owned
a consulting business specializing in retail, operations, warehousing and distribution. Prior to that, Mr. Estalella served as
Senior Vice President of Warehouse Operations for Office Depot between 1987 and 1998 and established many of its retail markets,
along with its nationwide distribution center network which helped grow it into a $9 billion company.
Michael J. Doron
has served as a director since
November 5, 2012. He has been the Managing Director of DDR & Associates, LLC since January 2009, and Evolution Capital Partners,
LLC since October 2009. From January 2007 to December 2008, he served as Chief Operating Officer and director of Toyshare, Inc.
From February 2006 to January 2007, Mr. Doron served as Chief Operating Officer and Chief Financial Officer of Frontgate Sundance
Alliance. From September 2005 to January 2007, he served as Vice President – Private Banking of the Bank of the West. Mr.
Doron earned a BA from the University of Maryland and a Master’s of Science from American University.
Daniel J. McClory
was appointed as an independent
director of the Company’s Board of Directors in August 2013. Mr. McClory has been a member of Burnham Securities, Inc. since
February 2014, currently serving as its Managing Director. His investment banking career includes an affiliation with Hunter Wise
Financial Group, LLC from 2003 to 2014. At Burnham Securities and Hunter Wise Financial Group, Mr. McClory has completed public
offerings, financings and M&A deals for clients listed on the London Stock Exchange, NASDAQ, NYSE Amex, the Toronto Stock Exchange,
the Stock Exchange of Hong Kong, and the Over-the-Counter Markets. He opened Hunter Wise Financial Group offices in London and
Beijing in support of the firm’s investment banking clients in both locations. Mr. McClory earned his BS in English and an
MA in Language and International Trade from Eastern Michigan University.
Gregory Macosko
was appointed as an independent
director of the Company’s Board of Directors in June 2014. Mr. Macosko is currently a member of the Board of Directors of
Montrose Advisors, and an SEC-registered investment advisor. He also serves as a business advisor to the Board of Directors of
Bioxiness Pharmaceuticals, a California-based pre-clinical stage company. In September of 2013, Mr. Macosko retired as a Partner
from Lord Abbett & Co., a privately held investment management firm. He was a Portfolio Manager of Lord Abbet's Small Cap Value
Fund and a founding member of the company’s Proxy Committee. Mr. Macosko is a Phi Beta Kappa graduate of Albion College,
a Fulbright Scholar in Germany, and holds an MBA from Columbia University. His twenty-four years of experience on Wall Street bring
to MusclePharm broad knowledge of public company management, and investment community relationships among institutional investors,
analysts and investment bankers.
Required Vote
The election of the directors of the Company
requires the affirmative vote of a plurality 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.
RECOMMENDATION OF THE BOARD FOR PROPOSAL
NO. 1:
THE BOARD RECOMMENDS A VOTE FOR THE ELECTION
OF ALL THE NOMINEES DESCRIBED ABOVE.
PROPOSAL NO. 2
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT
AUDITORS
EKS&H LLP (“EKS&H”),
our independent auditors, audited our financial statements for the 2013 fiscal year. The Audit Committee selected EKS&H as
the independent auditors of the Company for the fiscal year ending December 31, 2014. Representatives of EKS&H are not expected
to attend the 2014 Annual Meeting of Stockholders. EKS&H was first engaged by us on August 2012.
During the years ended December 31, 2013
and 2012, neither the Company nor anyone acting on its behalf consulted with EKS&H regarding any of the matters or events set
forth in Item 304(a)(2) of Regulation S-K, nor did EKS&H receive any fees for any services during that time period.
Audit Fees
The following is a summary and description
of fees for services for the fiscal years ended December 31, 2013 and 2012.
Services
|
|
2013
|
|
|
2012
|
|
Audit Fees
|
|
$
|
189,188
|
|
|
$
|
189,520
|
(1)
|
Audit-Related Fees
|
|
|
63,852
|
|
|
|
182,236
|
(2)
|
Tax Fees
|
|
|
-
|
|
|
|
-
|
|
All Other Fees
|
|
|
3,400
|
|
|
|
10,984
|
|
Total
|
|
$
|
256,440
|
|
|
$
|
382,740
|
|
|
(1)
|
Includes EKS&H fees of $101,000 and Berman & Company fees of $88,520.
|
|
(2)
|
Includes EKS&H fees of $55,309 and Berman & Company fees of $126,927.
|
Audit Fees.
Audit
fees relate to professional services rendered in connection with the audit of our annual financial statements and quarterly reviews
of financial statements included in our quarterly reports on Form 10-Q.
Audit-Related Fees.
This
category includes the aggregate fees billed in each of the last two fiscal years for assurance and related services by the independent
auditors that are reasonably related to the performance of the audits or reviews of the financial statements and are not reported
above under “Audit Fees,” and generally consist of fees for accounting consultation on mergers and acquisitions, S-1
review and S-1 audit opinion consents, and compliance fees for regulatory inquiries and subpoenas.
All Other Fees.
All
other fees relate to professional services for tax related consultations.
Required Vote
The ratification of the appointment of the
Company's independent auditors requires the receipt of the affirmative vote of a majority of the shares of the Company's common
stock and Series D Preferred Stock (on an as converted basis with the Common stock) present in person or by proxy and voting at
the Annual Meeting.
RECOMMENDATION OF THE BOARD FOR PROPOSAL
NO. 2:
THE BOARD RECOMMENDS A VOTE FOR RATIFICATION
OF APPOINTMENT OF EKS&H LLP AS OUR INDEPENDENT AUDITORS FOR THE YEAR ENDED DECEMBER 31, 2014
.
PROPOSAL NO. 3
To
approve the issuance of 1,500,000 shares of Company common stock to certain employees, including executive, pursuant to restricted
stock agreements
The Company’s
Board of Directors has approved, subject to the approval of the Company’s shareholder permitted to vote on such proposal,
issuing and/or allocating 1,500,000 shares of the Company’s common stock (“Shares”) to be issued to certain of
the Company’s executive officers and other employees pursuant to restricted stock agreements to be entered into by and between
the Company and each employee. Such issuances and/or allocation are as follows:
Name
|
|
Restricted Shares to
Receive
|
|
Brad Pyatt
|
|
|
500,000
|
|
Richard Estalella
|
|
|
250,000
|
|
Cory Gregory
|
|
|
100,000
|
|
Don Prosser
|
|
|
100,000
|
|
Jim Greenwell
|
|
|
100,000
|
|
Non-Executive Employees (7 persons)
|
|
|
165,000
|
|
Future Employee Grants
|
|
|
285,000
|
|
|
|
|
|
|
TOTAL
|
|
|
1,500,000
|
|
These shares of restricted common stock
would vest in five equal annual installments.
Required Vote
The ratification of the appointment of the
Company's independent auditors requires the receipt of the affirmative vote of a majority of the shares of the Company's common
stock and Series D Preferred Stock (on an as converted basis with the Common stock) present in person or by proxy and voting at
the Annual Meeting.
RECOMMENDATION OF THE BOARD FOR PROPOSAL
NO. 3:
THE BOARD OF DIRECTORS RECOMMENDS THAT
STOCKHOLDERS VOTE TO APPROVE
the issuance of 1,500,000 shares of Company common stock to
certain employees, including executive, pursuant to restricted stock agreements
.
OTHER MATTERS
The Board of Directors knows of no other
business which will be presented at the Annual Meeting. If any other matters properly come before the meeting, the persons named
in the enclosed Proxy, or their substitutes, will vote the shares represented thereby in accordance with their judgment on such
matters.
ADDITIONAL INFORMATION
Annual Reports on Form 10-K
Additional copies of MusclePharm's Annual
Report on Form 10-K for the fiscal year ended December 31, 2013 may be obtained without charge by writing to the Corporate Secretary,
MusclePharm Corporation, 4721 Ironton Street, Building A, Denver, Colorado 80239. MusclePharm's Annual Report on Form
10-K can also be found on MusclePharm's website: www.MusclePharm.com.
Stockholders Proposals for the 2015
Annual Meeting.
Proposals by any stockholder intended to
be presented at the next Annual Meeting of Stockholders must be received by the Company for inclusion in material relating to such
meeting not later than March 1, 2015.
Any stockholder who wishes to present proposals
for inclusion in the Company’s proxy materials for the 2015 Annual Meeting of Stockholders may do so by following the procedures
prescribed in Rule 14a-8 under the Securities Exchange Act of 1934, as amended. To be eligible, the stockholder proposals
must be received by our Corporate Secretary at our principal executive office on or before March 1, 2015. Such proposal must also
meet the other requirements of the rules of the SEC relating to stockholders’ proposals.
Proxy Solicitation Costs
The proxies being solicited hereby are being
solicited by the Company. The Company will bear the entire cost of solicitation of proxies, including preparation, assembly, printing
and mailing of the Notice, the Proxy Statement, the Proxy card and establishment of the Internet site hosting the proxy material. Copies
of solicitation materials will be furnished to banks, brokerage houses, fiduciaries and custodians holding in their names shares
of common stock beneficially owned by others to forward to such beneficial owners. Officers and regular employees of the Company
may, but without compensation other than their regular compensation, solicit proxies by further mailing or personal conversations,
or by telephone, telex, facsimile or electronic means. We will, upon request, reimburse brokerage firms and others for their reasonable
expenses in forwarding solicitation material to the beneficial owners of stock.
|
By Order of the Board of Directors,
|
|
|
|
|
|
/s/ Bradley J. Pyatt
|
|
|
Bradley J. Pyatt
|
|
|
Chair of the Board of Directors
|
|
PROXY
ANNUAL MEETING
OF SHAREHOLDERS
OF
Musclepharm,
corporation
August 25,
2014
This Proxy
is Solicited on Behalf of the Board of directors
The
undersigned hereby appoints Bradley J. Pyatt and Donald W. Prosser and each or any of them proxies, with power of substitution,
to vote all shares of the undersigned at the annual meeting of shareholders of
MusclePharm
Corporation to be held on August 25, 2014 at 10:00 a.m. local time at 4721 Ironton Street , Denver, CO 80239, 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
|
|
¨
|
WITHHOLD AUTHORITY to vote for the nominee listed below
|
|
¨
|
FOR ALL EXCEPT (See instructions below)
|
(INSTRUCTION:
|
To withhold authority to vote for any individual nominee(s) mark "
FOR ALL EXCEPT
" and Fill in the circle next to each nominee you wish to withhold as shown here:
|
|
¡
Bradley J. Pyatt
|
¡
Richard F. Estalella
|
|
|
|
|
¡
Michael J. Doron
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¡
Daniel J. McClory
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¡
Gregory Macosko
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2.
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TO RATIFY THE APPOINTMENT OF EKS&H LLP AS THE INDEPENDENT AUDITORS.
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¨
FOR
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¨
AGAINST
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¨
ABSTAIN
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3
.
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TO APPROVE THE ISSUANCE OF 1,500,000 SHARES OF COMPANY
COMMON STOCK TO CERTAIN EMPLOYEES, INCLUDING EXECUTIVE, PURSUANT TO RESTRICTED STOCK AGREEMENTS.
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¨
FOR
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¨
AGAINST
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¨
ABSTAIN
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4.
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TO TRANSACT ANY OTHER BUSINESS THAT MAY PROPERLY BE PRESENTED
AT THE ANNUAL MEETING OR ANY ADJOURNMENT THEREOF
.
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Dated: ____________________________
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Signature
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Dated: ____________________________
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Signature if held jointly
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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.
IF NO CONTRARY SPECIFICATION IS MADE, THIS
PROXY WILL BE VOTED FOR PROPOSALS 1, 2, 3, and 5. 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.
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