UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

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

 

Check the appropriate box:

VITACOST.COM, INC.

(Name of Registrant as Specified In Its Charter)

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

Payment of Filing Fee (Check the appropriate box):

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VITACOST.COM, INC.

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
June 8, 2012

To Our Stockholders:

The Annual Meeting of Stockholders of Vitacost.com, Inc., a Delaware corporation, will be held at 10:00 a.m., local time, on Friday, June 8, 2012, at the Embassy Suites hotel at 661 Northwest 53 ^rd Street, Boca Raton, Florida for the following purposes:

1.  To elect six directors nominated by our Board of Directors to serve until our next annual meeting of stockholders or in each case until his successor is elected and qualified;

2.  To ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2012;

3.  To hold an advisory vote on executive compensation; and

4.  To transact such other business as may properly come before the meeting or any adjournment(s) or postponement(s) thereof.

These items of business are more fully described in the proxy statement accompanying this notice. We encourage you to read this information carefully.

Our Board of Directors has fixed the close of business on May 8, 2012 as the record date for the determination of holders of record of our Common Stock (as defined below) entitled to notice of, and to vote at, the meeting or any adjournment(s) or postponement(s) thereof. A list of our stockholders as of the record date will remain open for inspection during ordinary business hours beginning 10 days prior to the meeting at the address of our executive offices set forth in the proxy statement accompanying this notice and will remain open for inspection during the meeting.

All stockholders are cordially invited to attend the meeting and vote in person. Whether or not you plan to attend the meeting, and regardless of the number of shares of Common Stock you own, please sign, date and return the enclosed proxy card promptly or vote via the Internet or by telephone. A return envelope, which requires no postage if it is mailed in the United States, is enclosed for your convenience. You may vote in person at the meeting even if you have previously given your proxy.

Please read carefully and in its entirety the enclosed proxy statement, which explains the proposals to be considered by you and acted upon at the meeting. We look forward to seeing you at the Annual Meeting of Stockholders.

Sincerely,

Jeffrey J. Horowitz
Chief Executive Officer

Boca Raton, Florida
May 11, 2012

ALL HOLDERS OF RECORD OF OUR COMMON STOCK (WHETHER YOU INTEND TO ATTEND
THE MEETING OR NOT) ARE STRONGLY ENCOURAGED TO PROMPTLY COMPLETE, SIGN,
DATE AND RETURN THE PROXY CARD OR VOTING INSTRUCTION FORM ENCLOSED
WITH THE ACCOMPANYING PROXY STATEMENT OR VOTE BY USING THE
INTERNET OR BY TELEPHONE AS INSTRUCTED IN THE ENCLOSED
PROXY CARD OR VOTING INSTRUCTION CARD.

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		Page
ANNUAL MEETING OF STOCKHOLDERS			1
Householding of Annual Meeting Materials			1
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON JUNE 8, 2012			1
VOTING AND OTHER MATTERS			2
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND PROCEDURAL MATTERS			2
Annual Meeting			2
Why am I receiving these proxy materials?			2
Where is the Annual Meeting?			2
Who is Entitled to Vote at the Meeting?			2
Stock Ownership			2
What is the difference between holding shares as a stockholder of record and as a beneficial owner?			2
Quorum and Voting			2
How many shares must be present or represented to conduct business at the Annual Meeting?			2
How can I attend the Annual Meeting?			3
How can I vote my shares in person at the Annual Meeting?			3
How can I vote my shares without attending the Annual Meeting?			3
What proposals will be voted on at the Annual Meeting?			4
What is the voting requirement to approve these proposals?			4
What happens if I do not cast a vote?			4
How does the Board of Directors recommend that I vote?			5
If I sign a proxy, how will it be voted?			5
What happens if additional matters are presented at the Annual Meeting?			5
Can I change or revoke my vote?			5
Who will bear the costs of soliciting votes for the Annual Meeting?			5
Where can I find the voting results of the Annual Meeting?			5
Stockholder Proposals and Director Nominations at Future Meetings			6
What is the deadline to propose actions for consideration at the 2013 annual meeting of stockholders or to nominate individuals to serve as directors?			6
How may I obtain a copy of the bylaw provisions regarding stockholder proposals and director nominations?			6
How can I nominate director candidates?			6
Additional Information About the Proxy Materials			7
What should I do if I receive more than one set of proxy materials?			7
What is the mailing address for Vitacost’s principal executive offices?			7
Annual Report and Other Matters			7

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		Page
PROPOSAL ONE: ELECTION OF DIRECTORS			8
Nominees			8
Information and Qualifications Regarding the Nominees			8
PROPOSAL TWO: RATIFICATION OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM			11
FEES PAID TO ACCOUNTANTS			11
PROPOSAL THREE: ADVISORY APPROVAL OF COMPENSATION OF NAMED EXECUTIVE OFFICERS			13
CORPORATE GOVERNANCE			15
Director Independence			15
Board Committees			15
Consideration of Director Nominees			17
Board Meetings/Annual Meeting of Stockholders			18
Board’s Role in Risk Oversight			18
Board Leadership Structure			18
Compensation Committee Interlocks and Insider Participation			19
Contacting the Board of Directors			19
EXECUTIVE COMPENSATION			21
Compensation Discussion and Analysis			21
COMPENSATION COMMITTEE REPORT			25
Director Compensation			33
Equity Compensation Plan Information			34
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE			35
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT			36
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS			40
Transactions with Current and Former Directors and Officers			40
Procedures for Related Party Transactions			40
REPORT OF THE AUDIT COMMITTEE			41
OTHER MATTERS			42

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DIRECTIONS TO THE EMBASSY SUITES HOTEL
  
AT
  
661 NORTHWEST 53 ^RD STREET, BOCA RATON, FLORIDA 33487

Directions from I-95:

Exit Yamato Road (Exit 48) going west. Cross over the railroad tracks and take the first right on NW 53 ^rd Street.

Directions from the Florida Turnpike:

Exit Glades Road East to I-95 North. Exit Yamato Road and go west. Cross over the railroad tracks and take the first right on NW 53 ^rd Street.

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VITACOST.COM, INC.
5400 Broken Sound Blvd., NW, Suite 500
Boca Raton, Florida 33487

 

PROXY STATEMENT

 

ANNUAL MEETING OF STOCKHOLDERS
June 8, 2012

This proxy statement is being furnished to all holders of record, as of May 8, 2012, of the Common Stock of Vitacost.com, Inc., a Delaware corporation, in connection with the solicitation of proxies by our Board of Directors for our Annual Meeting of Stockholders to be held at the Embassy Suites hotel at 661 Northwest 53 ^rd Street, Boca Raton, Florida on Friday, June 8, 2012, at 10:00 a.m., local time, and at any adjournment(s) or postponement(s) of the meeting, solely for the purposes stated in this proxy statement and in the accompanying Notice of Annual Meeting of Stockholders. If you need directions to the location of the meeting, please call our investor relations department at (561) 982-4180.

Our principal executive office is located at 5400 Broken Sound Blvd., NW, Suite 500, Boca Raton, Florida 33487.

The approximate date of mailing of the Notice of Annual Meeting of Stockholders, this proxy statement, the enclosed proxy card and our 2011 Annual Report is May 11, 2012.

Householding of Annual Meeting Materials

Certain brokers and other nominee record holders may be participating in the practice of “householding” this proxy statement and other proxy materials. This means that only one copy of this proxy statement and other proxy materials may have been sent to multiple stockholders in a stockholder’s household. We will promptly deliver additional copies of this proxy statement and other proxy materials to any stockholder who contacts our investor relations department at (561) 982-4180 or at the address of our executive offices set forth in this proxy statement requesting such additional copies. If a stockholder is receiving multiple copies of this proxy statement and other proxy materials at the stockholder’s household and would like to receive in the future only a single copy of the proxy statement and other proxy materials for a stockholder’s household, such stockholder should contact their broker, other nominee record holder or our investor relations department at (561) 982-4180 or at the address of our executive offices set forth in this proxy statement to request the future mailing of only a single copy of our proxy statement and other proxy materials.

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
STOCKHOLDER MEETING TO BE HELD ON JUNE 8, 2012

This proxy statement, the form of the proxy card and our Annual Report on Form 10-K for our fiscal year ended December 31, 2011 are available electronically free of charge at http://investor.vitacost.com . Stockholders may also obtain a copy of these materials by writing to our investor relations department at the address of our executive offices set forth in this proxy statement.

VOTING AND OTHER MATTERS

QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING
AND PROCEDURAL MATTERS

Annual Meeting

Stock Ownership

Beneficial owners  — Most Vitacost stockholders hold their shares through a broker, trustee, nominee or similar organization, rather than directly in their own name. If, on May 8, 2012, your shares were held in a brokerage account or by a bank or another nominee or similar organization, you are considered the “beneficial owner” of shares held in “street name.” If you hold your shares in street name, these proxy materials have been forwarded to you by your broker, trustee or nominee who is considered, with respect to those shares, the stockholder of record.

As the beneficial owner, you have the right to direct your broker, trustee or nominee on how to vote your shares. Since a beneficial owner is not the stockholder of record, you may not vote these shares in person at the Annual Meeting unless you obtain a “legal proxy” from the broker, trustee or nominee that holds your shares, giving you the right to vote the shares at the Annual Meeting.

Quorum and Voting

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A broker “non-vote” occurs when a broker, trustee, nominee or similar organization holding shares for a beneficial owner does not vote on a particular proposal because the broker, trustee or nominee does not have discretionary voting power with respect to that item and has not received instructions from the beneficial owner as to how to vote on that proposal. Brokers do not have discretionary authority with respect to any of the proposals except for the ratification of the independent registered public accounting firm.

If you are a stockholder of record, you may instruct the proxy holders how to vote your shares by (i) using the Internet voting site or the toll-free telephone number listed on the proxy card, (ii) mail by completing, signing, dating and returning the proxy card in the postage pre-paid envelope provided or (iii) attending the Annual Meeting and voting by ballot, as described below. Proxy cards submitted by mail must be received by the time of the meeting in order for your shares to be voted. Specific instructions for using the telephone and Internet voting systems are on the proxy card. The telephone and Internet voting systems for stockholders of record will be available until 11:59 p.m. (Eastern Time) on June 7, 2012. Whichever of these methods you select to transmit your instructions, the proxy holders will vote your shares in accordance with those instructions. If you sign and return a proxy card without giving specific voting instructions, your shares will be voted as recommended by our Board of Directors.

At the commencement of the meeting, we will distribute a written ballot to any stockholder of record who attends the meeting and wishes to vote in person. Whether or not you plan to attend the meeting, we urge you to fill out and return the enclosed proxy card to ensure your vote is counted. Even if you have submitted a proxy before the meeting, you may still attend the meeting and vote in person.

Beneficial Owners (Street Name)

If a broker, trustee, nominee or similar organization holds your shares and you are a beneficial owner, you will receive instructions from them that you must follow in order to have your shares voted. The instructions from your broker, trustee, nominee or similar organization will indicate if Internet and telephone voting are available, and if they are available, will provide details regarding Internet and telephone voting. Only that organization can sign a proxy card with respect to your shares. If you have not received a voting instruction form and voting instructions with these proxy materials from that organization, you are urged to contact the person(s) responsible for your account and give them instructions for how to complete a proxy representing your shares so that a proxy can be timely returned on your behalf. You are also invited to attend the meeting. However, because you are not a holder of record of our Common Stock, if you wish instead to vote your shares held in “street name” in person at the meeting, you must obtain a “legal proxy” from your broker, bank or other nominee.

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You may vote “FOR” or “WITHHOLD” on each of the six nominees for election as director. Abstentions and broker non-votes will not affect the outcome of the election although they will be counted for purposes of determining whether there is a quorum.

Proposal Two  — The affirmative vote of a majority of the votes duly cast is required to ratify the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm.

You may vote “FOR,” “AGAINST” or “ABSTAIN” on this proposal. Abstentions are deemed to be votes cast and have the same effect as a vote against this proposal . Your broker, bank, trust or other nominee has the discretion to vote on routine corporate matters, including the ratification of the appointment of the independent registered public accounting firm, without your specific voting instructions, and their votes will be calculated in the tabulation of the voting results on this proposal.

Proposal Three  — The affirmative vote of a majority of the shares present in person or represented by proxy and entitled to vote are required to approve our executive compensation, on an advisory basis.

You may vote “FOR,” “AGAINST” or “ABSTAIN” on this proposal. Abstentions are deemed to be votes cast and have the same effect as a vote against this proposal . However, broker non-votes are not deemed to be votes cast and, therefore, are not included in the tabulation of the voting results on this proposal.

Beneficial owners  — If you hold your shares in street name it is critical that you cast your vote if you want it to count in the election of directors (Proposal One) and the approval of our executive compensation, on an advisory basis (Proposal Three). Proposals One and Three are “non-routine” matters and your broker cannot vote your shares in its discretion on your behalf on any “non-routine” matters.

In the past, if you held your shares in street name and you did not indicate how you wanted your shares voted in the election of directors, your broker was allowed to vote those shares on your behalf in the election of directors as the broker felt appropriate. Recent rule changes eliminate the ability of your broker to vote your uninstructed shares in the election of directors on a discretionary basis. Thus, if you hold your shares in street name and you do not instruct your broker how to vote in the election of directors, no votes will be cast on your behalf. Your broker will, however, continue to have discretion to vote any uninstructed shares on the ratification of the appointment of the Company’s independent registered public accounting firm (Proposal Two). Proposal Two is the only “routine” matter on the ballot and your broker can vote your shares in its discretion on your behalf if you do not provide instructions to your broker.

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If you are a beneficial owner of shares held in street name, subject to any rules your broker, trustee, nominee or similar institution may have, you may change your vote (1) by submitting new voting instructions to your broker, trustee, nominee or similar organization, or (2) if you have obtained a legal proxy from the broker, trustee, nominee or similar organization that holds your shares giving you the right to vote the shares, by attending the Annual Meeting and voting in person.

Any written notice of revocation or subsequent proxy card must be received by Vitacost’s General Counsel and Corporate Secretary prior to the taking of the vote at the Annual Meeting. Such written notice of revocation or subsequent proxy card should be hand delivered to Vitacost’s General Counsel and Corporate Secretary or should be sent so as to be delivered to Vitacost.com, Inc., 5400 Broken Sound Blvd., NW, Suite 500, Boca Raton, Florida 33487, Attention: General Counsel and Corporate Secretary.

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Stockholder Proposals and Director Nominations at Future Meetings

Requirements for stockholder proposals to be considered for inclusion in Vitacost’s proxy material  —  Stockholders may present proper proposals for inclusion in Vitacost’s proxy statement and for consideration at the next annual meeting of its stockholders by submitting their proposals in writing to Vitacost’s General Counsel and Corporate Secretary in a timely manner. In order to be included in the proxy statement for the 2013 annual meeting of stockholders, stockholder proposals must be received by Vitacost’s General Counsel and Corporate Secretary no later than January 11, 2013, and must otherwise comply with the requirements of Rule 14a-8 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Requirements for stockholder proposals to be brought before an annual meeting  — In addition, Vitacost’s bylaws establish an advance notice procedure for stockholders who wish to present certain matters before an annual meeting of stockholders. In general, nominations for the election of directors and proposals for any new business to be taken up at an annual meeting of the stockholders may be made (1) by or at the direction of the Board of Directors, or (2) by any stockholder entitled to vote who has timely delivered written notice to Vitacost’s General Counsel and Corporate Secretary during the Notice Period (as defined below). Any notice relating to a director nomination must contain specified information concerning the nominees and concerning the stockholder proposing such nominations and any notice relating to other business must contain specified information concerning the business and the stockholder proposing the consideration of such business, in each case as described in the Company’s bylaws. However, if a stockholder wishes only to recommend a candidate for consideration by the Nominating/ Corporate Governance Committee as a potential nominee for director, see the procedures discussed in “Consideration of Director Nominees”.

The “Notice Period” is defined as the period commencing on the date 120 days prior to the one year anniversary of the previous year’s annual meeting of stockholders and terminating on the date 90 days prior to the one year anniversary of the previous year’s annual meeting of stockholders, unless the date of the annual meeting is more than 30 days before or more than 30 days after such anniversary date, in which case notice by the stockholder must be received not earlier than the 120th day prior to the annual meeting and not later than the later of the 90th day prior to the annual meeting or the l0th day following the day on which public announcement of the date of the meeting is first made by the Company. As a result, the Notice Period for the 2013 annual meeting of stockholders will be from February 8, 2013 to March 10, 2013.

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Additional Information About the Proxy Materials

Any written requests for additional information, additional copies of the proxy materials and Annual Report, notices of stockholder proposals, recommendations for candidates to the Board of Directors, communications to the Board of Directors or any other communications should be sent to this address.

Our internet address is www.vitacost.com . The information posted on our website is not incorporated into this proxy statement.

Annual Report and Other Matters

Our Annual Report to Stockholders, which includes our Annual Report on Form 10-K for our fiscal year ended December 31, 2011, was made available to stockholders with or preceding this proxy statement. Such Annual Report to Stockholders contains financial and other information about our company, but is not incorporated into this proxy statement and is not to be considered a part of these proxy soliciting materials or subject to Regulations 14A or 14C or to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The information contained in the “Compensation Committee Report” and the “Report of the Audit Committee” shall not be deemed “filed” with the Securities and Exchange Commission or subject to Regulations 14A or 14C or to the liabilities of Section 18 of the Exchange Act.

Upon payment of a reasonable fee, stockholders may also obtain a copy of the exhibits to our Annual Report on Form 10-K for our fiscal year ended December 31, 2011. All such requests should be directed to our Director of Investor Relations at the address of our executive offices located at 5400 Broken Sound Blvd., NW, Suite 500, Boca Raton, Florida 33487.

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PROPOSAL ONE:
  
ELECTION OF DIRECTORS

Nominees

Our articles of incorporation and bylaws provide that the number of directors shall be fixed from time to time by resolution of our Board of Directors. The number of directors is currently fixed at six directors. Our articles of incorporation and bylaws provide that all directors are elected at each annual meeting of our stockholders for a term of one year and hold office until their successors are duly elected and qualified.

Six directors have been nominated by our Board of Directors for election at this meeting. Unless otherwise instructed, the shares represented by validly submitted proxies will be voted for the election of each of the below-listed Board nominees to serve as directors. The below-listed Board nominees have consented to be named in this proxy statement and to serve as company directors, if elected. Our Board of Directors has no reason to believe that any of such nominees will be unable or will decline to serve as company directors if they are elected at the meeting. However, in the event that any of the nominees should become unable or unwilling to serve as a director, the form of proxy will be voted “for” the election of such substitute nominees, if any, as shall be designated by the remaining incumbent directors of our Board to fill the vacancy. In such event, we intend to supplement this proxy statement to identify the substitute nominees, if any, and provide other relevant information regarding such nominees as required by applicable securities laws.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT YOU VOTE “FOR” THE ELECTION OF EACH OF THE NOMINEES LISTED BELOW.

Information and Qualifications Regarding the Nominees

The name, age and principal occupation of each nominee as of May 11, 2012, are set forth in the table below. Except as described below, each of the nominees has been engaged in his or her principal occupation during the past five years. There are no family relationships among any of our directors or executive officers. Following the table below is additional narrative disclosure regarding each nominee, including each nominee’s unique qualifications to serve on the Board of Directors.

See “Corporate Governance” and “Executive Compensation — Director Compensation” below for additional information regarding the Board of Directors, including procedures for nominations of directors.

Term to Expire in 2013

Name		Age		Position		Year First Became a Director
Christopher S. Gaffney (2) (3)		49		Director		2010
Stuart Goldfarb (1)		57		Director		2011
Jeffrey J. Horowitz		65		Chief Executive Officer and Director		2010
Edwin J. Kozlowski (1)		63		Director		2011
Michael A. Kumin (2) (3)		39		Chairman of the Board		2010
Robert G. Trapp, M.D. (1)		63		Director		2007

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Michael A. Kumin has served as Interim Chairman of the Board of Vitacost since July 2010. Mr. Kumin is a Partner with Great Hill Partners (“GHP”), a Boston-based investment firm. Mr. Kumin has served in a number of positions since joining GHP in 2002, and is presently a Partner responsible for originating and evaluating investment opportunities in the media, internet, software, and business and consumer services sectors. Mr. Kumin was designated by Great Hill pursuant to the Stockholder Agreement between the Company and Great Hill. Prior to joining GHP, Mr. Kumin held various executive and investing positions, including roles at both Apollo Management, L.P. and Goldman, Sachs, L.P. Mr. Kumin has served on the Board of Directors of Spark Networks since June 2006. Mr. Kumin serves and has served on the Boards of Directors of numerous private internet companies, including BuscaPé.com and IGN Entertainment. Mr. Kumin graduated with honors from the Woodrow Wilson School of Public & International Affairs at Princeton University with a Bachelor of Arts. We believe Mr. Kumin’s extensive experience as a board member of both public and private growth-oriented technology companies, his knowledge of the media, internet, software, and business and consumer services sectors, and his wealth of expertise, particularly in the areas of strategy, mergers and acquisitions, and corporate finance, provide the requisite qualifications, skills, perspective and experience that make him well qualified to serve on our Board of Directors.

Christopher S. Gaffney has served as a Director of Vitacost since July 2010. Mr. Gaffney is a Managing Partner with, and one of the co-founders of GHP. Mr. Gaffney has been a Managing Partner at GHP since its founding in 1998, and in such position he shares responsibility for the general management, investment policy, fund raising and investor relations at GHP. Mr. Gaffney also continues to actively pursue new investments and manage portfolio companies. Mr. Gaffney was designated by Great Hill, pursuant to the Stockholder Agreement between the Company and Great Hill. Prior to GHP, Mr. Gaffney served as an Associate, Principal and General Partner for Media/Communications Partners, a predecessor organization to GHP. Mr. Gaffney began his career as a commercial lending officer for the First National Bank of Boston in the specialized media lending unit. Mr. Gaffney has served on the Board of Directors of LECG Corporation, a publicly-traded provider of professional services, since December 2009. Mr. Gaffney previously served on the Boards of Directors of Spark Networks from November 2006 to October 2007, Incentra Solutions, Inc., a provider of information technology services that, at the time of Mr. Gaffney’s service, traded on the OTC Bulletin Board, from August 2004 to July 2005, and Haights Cross Communications, Inc., an educational and library publisher with publicly-registered debt, from March 1997 to September 2007. Mr. Gaffney serves and has served on the Boards of Directors of numerous private companies, including BuscaPé.com and IGN. Mr. Gaffney is a summa cum laude graduate of Boston College with a degree in Accounting and Economics. We believe Mr. Gaffney’s extensive experience in all phases of the lifecycles of growth companies, with a particular emphasis on companies in the media, internet, and business and consumer services sectors, gained as a Managing Partner at a well-known investment firm with $2.7 billion under management and his membership on numerous public and private company boards of directors provide the requisite qualifications, skills, perspective and experience that make him well qualified to serve on our Board of Directors.

Stuart Goldfarb has served as our Director since February 2011. Mr. Goldfarb has more than 25 years of direct marketing, media and e-commerce experience. Since January 2012, Mr. Goldfarb has been the President of Fullbridge, Inc, a provider of an accelerated, rigorous business education program. He currently serves on the board of Atrinsic, Inc., a marketer of direct-to-consumer subscription products and an internet search-marketing agency., and on the board and as a member of the audit committee of WWE, Inc. (NYSE:WWE). Mr. Goldfarb served as the President and CEO of Direct Brands, Inc., the world’s largest direct marketer of music, DVDs, and books, from 2001 to 2009. Prior to joining Direct Brands, Inc., Mr. Goldfarb was President and CEO of bol.com, Bertelsmann’s premier online retailer of books and music, doing business in eighteen European and Asian countries. Before joining Bertelsmann, he was Vice Chairman of Value Vision International, a cable TV home shopping and e-commerce company and was also the former Executive Vice President, Worldwide Business Development at NBC. We believe Mr. Goldfarb’s experience as an executive at multiple online and ecommerce companies and his experience as a member of other boards of directors provide the requisite qualifications, skills, perspective and experience that make him well qualified to serve on our Board of Directors.

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Jeffrey J. Horowitz was appointed Chief Executive Officer on February 17, 2011. He served as Interim Chief Executive Officer and a Director of Vitacost from August 2010 through February 17, 2011. Mr. Horowitz provided consulting services to Vitacost in 2010 prior to being appointed Interim Chief Executive Officer. Over the five years prior to joining Vitacost, Mr. Horowitz pursued personal interests. Mr. Horowitz founded Vitamin Shoppe, Inc. (“Vitamin Shoppe”) in 1977 and served as its President and Chief Executive Officer from 1977 to January 2000, during which time he oversaw the retail expansion from one store in 1977 to over 200 stores in 11 states. In addition, Mr. Horowitz expanded Vitamin Shoppe’s business by establishing a catalog to solicit mail order sales in 1981 and pioneered the online vitamin sales industry in 1998 with the launch of VitaminShoppe.com. Mr. Horowitz also led Vitamin Shoppe during its initial public offering on The NASDAQ Stock Market in 1999. Mr. Horowitz served as President and Chief Executive Officer of VitaminShoppe.com, Inc. from July 1999 to January 2000. Mr. Horowitz served as Chairman of the Board of Directors of VitaminShoppe.com, Inc. from June 1999 to January 2000, as a Director of VitaminShoppe.com, Inc. from May 1999 to 2004 and as a Director of Vitamin Shoppe Industries Inc. from its inception to 2004. We believe Mr. Horowitz’s knowledge and valuable insight into the health and wellness industry, his experience as the Chief Executive Officer of Vitamin Shoppe and his service on several boards of directors provide the requisite qualifications, skills, perspective and experience that make him well qualified to serve on our Board of Directors and as our Chief Executive Officer.

Edwin J. Kozlowski has served as our Director since February 2011. Mr. Kozlowski has over 30 years of financial experience working in the retail and nutritional supplement industries. Mr. Kozlowski currently serves on the board and Executive Committee of Suncoast Centers, Inc., a social service, non-profit organization. Mr. Kozlowski served as Executive Vice President and Chief Operating Officer of Retail Ventures, Inc. from 2001 to 2004 and Senior Vice President and Chief Financial Officer — Chief Operating Officer of DSW in 2001. Prior to joining Retail Ventures, Inc., Mr. Kozlowski served as Executive Vice President and Chief Financial Officer of General Nutrition Companies, Inc. (“GNC”) from 1990 to 2000. From 1978 to 1990, Mr. Kozlowski held various management positions within GNC. He has also served in senior financial positions at H.K. Porter Company and Arthur Young, LLP. Mr. Kozlowski was an officer with the United States Secret Service and served in the United State Army. He received a Bachelor of Science in accounting from Robert Morris University in 1975. We believe that Mr. Kozlowski’s prior retail, operations, management and finance background and his role as the Chief Financial Officer of GNC and DSW provide the requisite qualifications, skills, perspective and experience that make him well qualified to serve on our Board of Directors.

Robert G. Trapp, M.D. has served as our Director since April 2007. Dr. Trapp has maintained a private practice in rheumatology in Springfield, Illinois since 1989. He was a faculty member at Southern Illinois University School of Medicine from 1981 – 1989 where he served as Chief of the Division of Rheumatology. He has been a principal investigator in more than 125 phase I, II and III clinical trials evaluating new therapies in the treatment of rheumatological diseases. Dr. Trapp is board certified in internal medicine and rheumatology. He is a Fellow of the American College of Physicians and a member of the American College of Rheumatology. He received a Bachelor of Arts from Earlham College and his M.D. from Northwestern University School of Medicine. We believe Dr. Trapp’s prior extensive service with our company and his medical expertise and knowledge of our products provide the requisite qualifications, skills, perspective and experience that make him well qualified to serve on our Board of Directors.

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PROPOSAL TWO:
  
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM

The Audit Committee has selected PricewaterhouseCoopers LLP as the independent registered public accounting firm to audit the consolidated financial statements of Vitacost for the fiscal year ending December 31, 2012, and recommends that the stockholders vote for ratification of such appointment. In the event of a negative vote on such ratification, the Audit Committee may reconsider its selection. Even if the selection of PricewaterhouseCoopers LLP is ratified, the Audit Committee, in its discretion, may direct the selection of a different independent registered public accounting firm at any time during the year if the Audit Committee determines that such a change would be in the Company’s and its stockholders’ best interests.

On March 11, 2011, McGladrey & Pullen, LLP resigned as the Company’s independent registered public accounting firm. McGladrey resigned after concluding that their independence had been impaired as a result of being named a defendant in a class action complaint filed in the United States District Court, Southern District of Florida. The decision of McGladrey to resign was not recommended or approved by the Company’s Board of Directors or the Audit Committee of the Board of Directors. On April 20, 2011, the Company’s Board of Directors adopted and approved the recommendation of the Audit Committee of the Board of Directors that the Company engage PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm, effective April 21, 2011.

PricewaterhouseCoopers LLP has audited our financial statements for the fiscal year ended December 31, 2010 and 2011.

We expect a representative of PricewaterhouseCoopers LLP to be present at the meeting. The PricewaterhouseCoopers LLP representative will have the opportunity to make a statement if he or she desires to do so and will be available to respond to appropriate questions.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR”
THE RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP
AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.

FEES PAID TO ACCOUNTANTS

PricewaterhouseCoopers LLP is the Company’s principal accountant for the years ended December 31, 2011 and 2010. The table below sets forth the audit fees, audit-related fees, and tax fees billed to the Company by PricewaterhouseCoopers LLP for the years ended December 31, 2011 and 2010, respectively.

		2011 (1)		2010 (2)
Audit fees			542,500				532,500
Audit-related fees			—				—
Tax fees			—				—
			542,500				532,500

For purposes of the preceding table, the professional fees are classified as follows:

Audit Fees — (1)  The Company incurred $542,500 in fees for professional services rendered by PricewaterhouseCoopers in connection with the audit of the consolidated financial statements included in the Annual Report on Form 10 K, the review of the quarterly consolidated financial statements included in the Quarterly Report on Form 10 Q for the three, six and nine month periods ended March 31, 2011, June 30, 2011 and September 30, 2011, the assessment of the internal control assertions required by Section 404 of the Sarbanes-Oxley Act of 2002 and other SEC filings and accounting consultations on matters related to the annual audit or interim reviews.

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(2)  The Company incurred $532,500 in fees for professional services rendered by PricewaterhouseCoopers in connection with the audit of the consolidated financial statements included in the Annual Report on Form 10 K, the review of the quarterly consolidated financial statements included in the Quarterly Report on Form 10 Q for the three and nine month period ended September 30, 2011, the assessment of the internal control assertions required by Section 404 of the Sarbanes-Oxley Act of 2002 and other SEC filings and accounting consultations on matters related to the annual audit or interim review.

Audit-Related Fees — The Company did not incur any Audit Related Fees by our principal accountants during 2011 and 2010.

Tax Fees — The Company did not incur any Tax Fees by our principal accountants during 2011 and 2010.

Audit Committee Pre-Approval Policy .  Our Audit Committee has reviewed and approved all of the fees charged by our principal accountants. The Audit Committee concluded that all services rendered during 2011 and 2010 by our principal accountants were consistent with maintaining their respective independence. As a matter of policy, we will not engage our principal accountants for non-audit services other than “audit-related services,” as defined by the Securities and Exchange Commission, certain tax services, and other permissible non-audit services as specifically approved by the chairperson of the Audit Committee and presented to the full Board at its next regular meeting. The policy also includes limits on hiring partners of, and other professionals employed by, the principal accountants to ensure that the Securities and Exchange Commission’s auditor independence rules are satisfied.

Under the policy, the Audit Committee must pre-approve all services provided by our principal accountants and fees charged for these services including an annual review of audit fees, audit-related fees, tax fees, and other fees with specific dollar value limits for each category of service. The Audit Committee will also consider and, if appropriate, approve specific engagements on a case-by-case basis that are not otherwise pre-approved. Any proposed engagement that does not fit within the definition of a pre-approved service may be presented to the chairperson of the Audit Committee for approval.

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PROPOSAL THREE:
  
ADVISORY APPROVAL OF COMPENSATION OF NAMED EXECUTIVE OFFICERS

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the Dodd-Frank Act, enables our stockholders to vote to approve, on an advisory basis, the compensation of our Named Executive Officers as disclosed in accordance with the Securities and Exchange Commission’s rules in the “Executive Compensation” section of this proxy statement beginning on page 21 below. This proposal, commonly known as a “say-on-pay” proposal, gives our stockholders the opportunity to express their views on our Named Executive Officers’ compensation as a whole. This vote is not intended to address any specific item of compensation or any specific Named Executive Officer, but rather the overall compensation of all of our Named Executive Officers and the philosophy, policies and practices described in this proxy statement.

The say-on-pay vote is advisory, and therefore not binding on the Company, the Compensation Committee or our Board of Directors. The say-on-pay vote will, however, provide information to us regarding investor sentiment about our executive compensation philosophy, policies and practices, which the Compensation Committee will be able to consider when determining executive compensation for the remainder of the current fiscal year and beyond. Our Board of Directors and our Compensation Committee value the opinions of our stockholders and to the extent there is any significant vote against the Named Executive Officer compensation as disclosed in this proxy statement, we will consider our stockholders’ concerns and the Compensation Committee will evaluate whether any actions are necessary to address those concerns.

As described in detail in the section entitled “Compensation Discussion and Analysis” in this proxy statement, our executive compensation program is designed, through the efforts of our Compensation Committee, to align our executive officers’ incentives with stockholder value creation. Our executive compensation program is designed to attract and retain the most talented and dedicated executive officers possible, including the Named Executive Officers, who are key to our continued successful growth. Under our compensation program, we seek to correlate annual and long-term cash and stock incentives to achievement of measurable performance objectives.

The Compensation Discussion and Analysis, beginning on page 21 of this proxy statement, describes the Company’s executive compensation program and the decisions made by the Compensation Committee in fiscal 2011 in more detail. Highlights of the program include the following:

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We believe that our executive compensation program was designed appropriately and is working to ensure management’s interests are aligned with our stockholders’ interests to support long-term value creation. Accordingly, we ask our stockholders to vote “FOR” the following resolution at the Annual Meeting:

“RESOLVED, that the Company’s stockholders approve, on an advisory basis, the compensation of the Named Executive Officers, as disclosed in the Company’s proxy statement for the Annual Meeting of Stockholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the compensation tables and the other related disclosure.”

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR”
THE ADVISORY (NON-BINDING) VOTE APPROVING EXECUTIVE COMPENSATION.
THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE SHARES
PRESENT AND ENTITLED TO VOTE IS NECESSARY FOR APPROVAL.

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CORPORATE GOVERNANCE

Director Independence

The Board of Directors has determined that, with the exception of Jeffrey J. Horowitz, our Chief Executive Officer, all of its members are “independent directors” as that term is defined in the listing standards of The NASDAQ Stock Market. Such independence definition includes a series of objective tests, including that the director is not an employee of the Company and has not engaged in various types of business dealings with the Company. In addition, as further required by the NASDAQ listing standards, the Board of Directors has made a subjective determination as to each independent director that no relationships exist which, in the opinion of the Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

The independent directors meet regularly in executive session, without executive officers present, as part of its meeting procedures.

Board Committees

Our Board of Directors directs the management of our business and affairs, in accordance with applicable Delaware law, and conducts its business through meetings of our Board of Directors and standing committees. Our Board of Directors currently has an Audit Committee, Compensation Committee and Nominating/Corporate Governance Committee. Our Board of Directors may establish other committees to facilitate the management of our business.

Our Board of Directors has adopted charters for our Audit, Compensation and Nominating/Corporate Governance Committees describing the authority and responsibilities delegated to each committee by our Board of Directors. Our Board of Directors has also adopted a Code of Conduct and Ethics. We post on our website, at http://investor.vitacost.com , the charters of our Audit, Compensation and Nominating/Corporate Governance Committees; our Code of Conduct and Ethics, and any amendments or waivers thereto; and any other corporate governance materials contemplated by Securities and Exchange Commission or NASDAQ regulations. These documents are also available in print to any stockholder requesting a copy in writing from our Director of Investor Relations at the address of our executive offices set forth in this proxy statement.

The current composition of our Audit Committee, Compensation Committee and Nominating/Corporate Governance Committee is as follows:

Audit Committee		Compensation Committee		Nominating/Corporate Governance Committee
Edwin J. Kozlowski, Chair		Christopher S. Gaffney		Christopher S. Gaffney
Stuart Goldfarb		Michael A. Kumin		Michael A. Kumin
Robert G. Trapp

  Audit Committee

Our Audit Committee currently consists of Messrs. Kozlowski, Goldfarb and Trapp. Mr. Kozlowski serves as chairman of the Audit Committee. Our Board of Directors has determined that each current member of the Audit Committee satisfies the independence requirements of The NASDAQ Stock Market and meets the requirements for financial literacy under the requirements of The NASDAQ Stock Market and the Securities and Exchange Commission rules and regulations. Our Board of Directors also determined that all persons who served on our Audit Committee during fiscal 2011 satisfied the independence requirements of The NASDAQ Stock Market and met the requirements for financial literacy under the requirements of The NASDAQ Stock Market and the Securities and Exchange Commission rules and regulations.

Our Board of Directors has determined that Mr. Kozlowski qualifies as an “audit committee financial expert” as that term is defined in the rules and regulations established by the Securities and Exchange Commission. This designation is a disclosure requirement of the Securities and Exchange Commission and does not impose upon Mr. Kozlowski any duties, obligations, or liabilities greater than that which would otherwise be imposed by virtue of his membership on the Board of Directors or the Audit Committee. In addition, this designation does not affect the duties, obligations, or liabilities of any other director or Audit Committee member.

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The charter for the Audit Committee is available on our website at http://investor.vitacost.com . Our Audit Committee held 8 meetings in fiscal 2011.

The functions of this committee include:

Both our independent auditors and internal financial personnel meet regularly with our Audit Committee and have unrestricted access to this committee.

See “Report of the Audit Committee” below for more information regarding the functions of the Audit Committee.

  Compensation Committee

Our Compensation Committee currently consists of Messrs. Gaffney and Kumin. Our Board of Directors has determined that the current committee members satisfy the independence requirements of The NASDAQ Stock Market. Each member of this committee also qualifies as a non-employee director, as defined pursuant to Rule 16b-3 promulgated under the Exchange Act. Both Messrs. Gaffney and Kumin qualify as outside directors, as defined pursuant to Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). The Board of Directors also determined that all persons who served on our Compensation Committee during fiscal 2011 satisfied the independence requirements of The NASDAQ Stock Market, qualified as non-employee directors as defined pursuant to Rule 16b-3 and as outside directors as defined pursuant to Section 162(m) of the Code.

The functions of this committee include:

The Compensation Committee charter is available on our website at http://investor.vitacost.com . Our Compensation Committee held 1 meeting in fiscal 2011.

The “Compensation Committee Report” is included in this proxy statement on page 25 .

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  Nominating/Corporate Governance Committee

Our nominating/corporate governance committee consists of Messrs. Gaffney and Kumin. Our Board of Directors has determined that the committee members satisfy the independence requirements of The NASDAQ Stock Market. The Board of Directors also determined that all persons who served on our Nominating/Corporate Governance Committee during fiscal 2011 satisfied the independence requirements of The NASDAQ Stock Market. The functions of this committee include:

The Nominating/Corporate Governance Committee charter is available on our website at http://investor.vitacost.com . Our Nominating/Corporate Governance Committee held 1 meeting in fiscal 2011.

Consideration of Director Nominees

  Stockholder Nominees

The Nominating/Corporate Governance Committee will consider properly submitted stockholder nominations for candidates for membership on the Board of Directors as well as candidates recommended for consideration by the Nominating/Corporate Governance Committee as described below under “Identifying and Evaluating Nominees for Directors.” Any stockholder nominations must comply with the requirements of the Company’s amended and restated bylaws and should include all information relating to such nominee as would be required to be disclosed in solicitations of proxies for the election of such nominee as a director pursuant to Regulation 14A under the Exchange Act, such nominee’s written consent to be named in the proxy statement as a nominee and to serve as a director if elected. In addition, stockholder nominations should be submitted within the time frame required by the Company’s amended and restated bylaws and addressed to: Vitacost.com, Inc., Attention: General Counsel and Corporate Secretary, 5400 Broken Sound Blvd., NW, Suite 500, Boca Raton, Florida.

A stockholder that instead desires to merely recommend a candidate for consideration by the
Nominating/Corporate Governance Committee shall direct the recommendation in writing to Vitacost.com, Inc., Attention: General Counsel and Corporate Secretary, 5400 Broken Sound Blvd., NW, Suite 500, Boca Raton, Florida, and must include the candidate’s name, home and business contact information, detailed biographical data and qualifications, information regarding any relationships between the candidate and the Company within the last three years and evidence of the nominating person’s ownership of Company stock.

  Director Qualifications

In discharging its responsibilities to nominate candidates for election to the Board of Directors, the Nominating/Corporate Governance Committee has not specified any minimum qualifications for serving on the Board of Directors. However, the Nominating/Corporate Governance Committee endeavors to evaluate, propose and approve candidates with business experience and personal skills in the health and wellness industry, finance, marketing, financial reporting and other areas that may be expected to contribute to an effective Board of Directors. The Nominating/Corporate Governance Committee seeks to ensure that the Board of Directors is composed of individuals who have experience relevant to the needs of the Company and who have the highest professional and personal ethics, consistent with the Company’s values and standards. Candidates should be committed to enhancing stockholder value and should have sufficient time to carry out their duties and to provide insight and practical wisdom based on experience.

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  Identifying and Evaluating Nominees for Directors

The Nominating/Corporate Governance Committee utilizes a variety of methods for identifying and evaluating director nominees. Candidates may come to the attention of the Nominating/Corporate Governance Committee through current members of the Board of Directors, professional search firms, stockholders or other persons. These candidates are evaluated at regular or special meetings of the Nominating/Corporate Governance Committee and may be considered at any point during the year. As described above, the Nominating/Corporate Governance Committee considers properly submitted stockholder nominations and recommendations for candidates for the Board of Directors. Following verification of the stockholder status of persons proposing candidates, nominations and recommendations are aggregated and considered by the Nominating/Corporate Governance Committee. If any materials are provided by a stockholder in connection with the nomination or recommendation of a director candidate, such materials are forwarded to the Nominating/Corporate Governance Committee. The Nominating/Corporate Governance Committee also reviews materials provided by professional search firms or other parties in connection with a nominee who is not proposed by a stockholder.

Board Meetings/Annual Meeting of Stockholders

Our Board of Directors held a total of 10 meetings during our fiscal year ended December 31, 2011. Each director attended at least 75% of all Board of Directors and applicable committee meetings that were held while he was serving as a Director of the Company. While the Company does not have a formal policy regarding attendance by members of the Board of Directors at the Company’s annual meeting of stockholders, we encourage, but do not require, each of our Directors to attend our annual meeting of stockholders. For the Company’s 2011 annual meeting of stockholders, 2 directors attended the meeting.

Board’s Role in Risk Oversight

Risk is inherent in every business. As is the case in virtually all businesses, we face a number of risks, including operational, economic, financial, legal, regulatory and competitive risks. Our management is responsible for the day-to-day management of the risks we face. Our Board of Directors, as a whole and through its committees, has responsibility for the oversight of risk management.

In its oversight role, our Board of Directors’ involvement in our business strategy and strategic plans plays a key role in its oversight of risk management, its assessment of management’s appetite for risk and its determination of the appropriate level of enterprise risk. Our Board of Directors receives updates at least quarterly from senior management and periodically from outside advisors regarding the various risks we face, including operational, economic, financial, legal, regulatory and competitive risks. Our Board of Directors also reviews the various risks we identify in our filings with the Securities and Exchange Commission as well as risks relating to various specific developments, such as acquisitions, securities repurchases, debt and equity placements and product introductions.

Our Board committees assist our Board of Directors in fulfilling its oversight role in certain areas of risk, as disclosed in the descriptions of each of the committees above and in the charters of each of the committees, but the full Board has retained responsibility for general oversight of risks. Our Board of Directors satisfies this responsibility through full reports by each committee chair regarding the committee’s considerations and actions, as well as through regular reports directly from officers responsible for oversight of particular risks within our company.

Board Leadership Structure

We believe that effective board leadership structure can depend on the experience, skills and personal interaction between persons in leadership roles as well as the needs of our company at any point in time. We maintain separate roles between the Chief Executive Officer and the Chairman of the Board of Directors, in recognition of the differences between the two responsibilities. Our Chief Executive Officer is responsible for setting our strategic direction and day-to-day leadership and performance of our company. Our Chairman of the Board of Directors provides input to our Chief Executive Officer, sets the agenda for Board meetings and presides over meetings of the full Board of Directors as well as executive sessions of our Board of Directors.

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Separating the positions of Chief Executive Officer and Chairman of the Board of Directors allows our Chief Executive Officer to focus on our day-to-day business, while allowing the Chairman of the Board of Directors to lead the Board of Directors in its fundamental role of providing independent advice to and oversight of management. The Board of Directors believes that having an independent director serve as Chairman of the Board of Directors is the appropriate leadership structure for the Company at this time and demonstrates our commitment to good corporate governance.

Compensation Committee Interlocks and Insider Participation

Our Compensation Committee currently consists of Messrs. Gaffney and Kumin. None of the members of our Compensation Committee has, at any time, served as an officer or employee of Vitacost. None of our executive officers currently serves, or in the past year has served, as a member of the Board of Directors or Compensation Committee of any entity that has one or more executive officers serving on our Board of Directors or Compensation Committee.

Contacting the Board of Directors

Communications from stockholders to the non-employee directors should be addressed to the Chairman or any specified individual director as follows: Vitacost.com, Inc., 5400 Broken Sound Blvd., NW, Suite 500, Boca Raton, Florida 33487, Attention: Chairman or any specified individual director.

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EXECUTIVE OFFICERS

The following table sets forth certain information regarding our current executive officers:

Name		Age		Position
Jeffrey J. Horowitz		65		Chief Executive Officer/Director
Brian D. Helman		42		Chief Financial Officer
David Zucker		44		Chief Marketing Officer
Robert Wegner		43		Chief Operating Officer
Nachiket Desai		38		Chief Information Officer
Mary L. Marbach		45		General Counsel and Corporate Secretary

Jeffrey J. Horowitz was appointed Interim Chief Executive Officer and a Director of our company in August 2010 and became our Chief Executive Officer in February 2011. Mr. Horowitz’s biographical information is listed above under the heading, “Election of Directors — Nominees.”

Brian D. Helman was appointed Chief Financial Officer effective February 29, 2012. Prior to joining Vitacost, Mr. Helman had been the Chief Financial Officer of Intermedix Corporation since 2010. Prior to that time, Mr. Helman was Chief Financial Officer of Rosetta Stone Inc. from 2007 to 2010, Chief Financial Officer of JME Software from 2006 to 2007, and Chief Financial Officer of Neon Systems, Inc. from 2002 to 2006.

David Zucker was appointed Chief Marketing Officer effective September 6, 2011. Prior to joining the Company, Mr. Zucker was the Chief Marketing Officer of Gilt Group, Inc., an online lifestyle retailer, from 2009 to 2011. Prior to joining Gilt Group, Inc., Mr. Zucker was the Global Director of Customer Relationship Management and Implementation at Dell Inc. from 2006 to 2009 and was Vice President of Customer Relationship Management at Home Shopping Network from 2004 to 2006. Mr. Zucker has also held senior positions at Martha Stewart Living Omnimedia and Priceline.com.

Robert Wegner was appointed Chief Operating Officer on August 4, 2011. Prior to his appointment as the Company’s Chief Operating Officer, Mr. Wegner was the Director of Operations, North America at Amazon.com from 2006 through 2010 and served in other senior operational and managerial roles at Amazon from 1999 through 2006.

Nachiket Desai was appointed Chief Information Officer on November 28, 2011. Prior to joining the Company, Mr. Desai was the Vice President, Strategy, Enterprise Architecture and Business Intelligence of 1-800-Flowers.com from 2007 to 2011. Prior to joining 1-800-Flowers.com in 2007, Mr. Desai was a Senior Information Technology Applications Architect, Performance Architect at MetLife from 2006 to 2007 and held various positions at Triveni Digital Inc. from 2001 to 2006.

Mary L. Marbach was appointed General Counsel in December 2009 and our Corporate Secretary in July 2010. Ms. Marbach has been an attorney at the Company since July 2009. Prior to joining the Company, Ms. Marbach was Senior Transactional Counsel at Imperial Finance and Trading, LLC. Ms. Marbach was an associate at Greenberg Traurig, LLP from 2002 through 2004. Prior to that, she was an associate at Morrison & Foerster, LLP. Ms. Marbach is a member of the State Bar of California and the State Bar of Florida.

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EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

Overview

Our executive compensation program is designed to enable us to attract and retain key personnel and provide incentives that promote short and long-term financial growth and stability to enhance stockholder value based on a pay-for-performance model. Our compensation committee reviews and recommends to our Board of Directors the compensation program for our “Named Executive Officers” and oversees our executive compensation strategy. In 2011, our Named Executive Officers were, Jeffrey Horowitz, our Chief Executive Officer, Stephen E. Markert, Jr., our Interim Chief Financial Officer, David Zucker, our Chief Marketing Officer, Robert Wegner, our Chief Operating Officer, Nachiket Desai, our Chief Information Officer, Mary Marbach, our General Counsel and Corporate Secretary, Robert D. Hirsch, our former Vice President Information Technology and Chief Information Officer and Sonya L. Lambert, our former Chief Marketing Officer.

The discussion in this section describes compensation paid to our Named Executive Officers for services rendered to us in all capacities during our fiscal year ended December 31, 2011.

Our executive compensation program provides for the following elements:

We provided stockholders a “say-on-pay” advisory vote on our executive compensation in 2011 under recently adopted rules under Section 14A of the Securities Exchange Act of 1934 (the “Exchange Act”), as amended. At the Company’s 2011 Annual Meeting of Stockholders, stockholders expressed substantial support for the compensation of the Company’s NEOs, with approximately 79.35% of the votes cast for approval of the “say-on-pay” advisory vote. The compensation committee carefully evaluated the results of the 2011 advisory vote, in connection with its evaluation of our executive compensation programs more generally. Taking into account the results of the say-on-pay vote, along with other factors such as our corporate business objectives and the compensation committee’s review of peer group data (as discussed in more detail below), the compensation committee did not make any changes to the Company’s executive compensation program and policies as a result of the 2011 “say-on-pay” advisory vote.

A detailed description of these components is provided below.

Elements of Our Executive Compensation Program

Base Salary .  The base salary provides cash compensation for performing the essential elements of our executive positions. We strive to set our base salaries at levels which we believe are competitive in our market and provide our executives a level of compensation that permits them to focus their energies on job performance.

Annual Bonus/Incentive Compensation .  Our incentive compensation, in the form of cash payment, is intended to compensate our executives after the end of the calendar year for meeting our corporate and/or financial objectives and, in the case of certain executives, their individual performance objectives and to incentivize our executives to meet these objectives. We may set multiple objectives for an executive to achieve. A specific incentive payment may be earned for meeting one or more of such objectives. Further, our incentive compensation is intended to reward and incentivize our executives for exceeding their objectives. We may grant discretionary cash bonuses as an award to our executives for performance that is not necessarily rewarded by the incentive compensation or to attract new executives to join our management team. For those

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Named Executive Officers who received a bonus, their objectives were set by the appropriate executive or compensation committee. The potential incentive compensation of our Named Executive Officers in 2011 ranged from 50.0% to 68.8% of base salary.

Equity-Based Compensation .  Generally, the goals of our equity based compensation are intended to align the interests of our Named Executive Officers with the interests of our stockholders. Our Named Executive Officers typically receive equity awards in the form of stock options that vest equally over a period of five years in an effort to encourage the long-term retention of our executives. We may, however, grant options or other awards that vest immediately as determined by our compensation committee to be consistent with our objectives. The exercise price of our stock option grants is the fair market value of our stock on the grant date. Also, our stock option awards typically provide for the acceleration of vesting of options in the event of a change in control of our company. We have not yet established policies for the timing of awarding stock option grants to our executives. The compensation committee intends to adopt a policy regarding the timing of grants in relation to the release of material information to our stockholders.

Benefits.   We provide our Named Executive Officers other benefits generally available to our employees such as health benefits, a 401(k) plan and life and disability insurance. These benefits are intended to provide support to our executives and their families throughout various stages of their careers, and these core benefits are provided to all executives regardless of their individual performance levels. The 401(k) plan allows participants to defer their annual compensation, subject to the limitations set by the Internal Revenue Code, which was $16,500 per person for 2011. The executives’ elective deferrals are immediately vested and non-forfeitable upon contribution to the 401(k) plan.

Determining the Amount of Each Element of Compensation

Base Salary .  Generally, base salaries for our Named Executive Officers are established through negotiation when the executive is hired. Factors we considered in the negotiation are prior experience, qualifications, prior salary and our need for the particular qualifications of such executive. Adjustments in base salary are based on the executive’s responsibilities, performance and their overall compensation package. We review our executives’ base salaries annually taking into consideration the executive’s level of responsibilities, performance, tenure and salaries of our comparable executive and an employee’s overall compensatory arrangement. In the event of material changes in position, responsibilities or other factors, the compensation committee may consider changes in base pay during the year. Our Named Executive Officers’ base salaries are reviewed and approved by our Board of Directors.

In 2011, our Compensation Committee, as approved by our Board of Directors, made the following increases in the base salaries of our executives:

		2011 Base Salary		2010 Base Salary		Percentage Increase		Change
Jeffrey Horowitz, Chief Executive Officer		$	400,000			$	400,000				0.0	%		$	—
Stephen E. Markert, Jr. Interim Chief Financial Officer		$	300,000			$	235,000				27.7	%		$	65,000
Mary L. Marbach, General Counsel and Corporate Secretary		$	200,000			$	140,000				42.9	%		$	60,000
Sonya L. Lambert, Former Chief Marketing Officer		$	225,000			$	225,000				0.0	%		$	—
Robert Hirsch, Former Vice President Information Technology and Chief Information Officer		$	178,000			$	178,000				0.0	%		$	—

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Annual Bonus/Incentive Compensation .  Our incentive compensation is payable subsequent to completion of our annual audit and after it has been determined the goals have been achieved. Our Compensation Committee or appropriate executive has the authority to modify a bonus structure during the year if deemed appropriate. Examples of circumstances in which we may consider revising a bonus plan include acquisitions, mergers, divestitures, successful expansion of distribution or manufacturing capabilities and other material changes in our Company.

Our executive bonus plan for 2011 provides a potential bonus for each executive. In certain cases, bonuses were guaranteed in 2011 under our Named Executive Officers’ employment agreements. In 2011, the potential awards were as follows:

Name		Annual Maximum Bonus Opportunity		Maximum Bonus as a Percentage of Base Salary 2011
Jeffrey Horowitz, Chief Executive Officer		$	275,000				68.8	%
Stephen E. Markert, Jr., Interim Chief Financial Officer		$	150,000				50.0	%
David Zucker, (1) Chief Marketing Officer		$	150,000				50.0	%
Robert Wegner, (1) Chief Operating Officer		$	125,000				50.0	%
Nachiket Desai, (1) Chief Information Officer		$	125,000				50.0	%
Mary L. Marbach,		$	100,000				50.0	%

Allocation of Equity Compensation Awards

In 2011, we granted stock options to certain of our Named Executive Officers. Stock options were granted to our Chief Executive Officer (option to purchase 950,000 shares of our common stock), Chief Marketing Officer (option to purchase 300,000 shares of our common stock), Chief Operating Officer (Option to purchase 300,000 shares of our common stock), and Chief Information Officer (option to purchase 250,000 shares of our common stock).

Our Compensation Committee does not apply a rigid formula in allocating stock options to executives as a group or to any particular executive. Instead, our Compensation Committee exercises its judgment and discretion and considers, among other things, the role and responsibility of the executive, competitive factors, the amount of stock-based equity compensation already held by the executive, the non-equity compensation received by the executive and the total number of options to be granted to all participants during the year. Our Compensation Committee typically makes annual grants of equity awards to our Named Executive Officers in connection with its annual review of our employees’ compensation. These options were granted pursuant to the terms of employment agreements entered into in 2011 with the executives listed above (See “Employment Agreements and Change in Control Agreements”).

Executive Equity Ownership

We believe it is important for our Named Executive Officers to have their interests aligned with our stockholders and, therefore, to be granted equity incentive awards. We have not, however, established specific stock retention and ownership guidelines for our executives.

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Type of Equity Awards

Our stock award plans permits us to issue qualified and non-qualified stock options, stock appreciation rights, restricted stock, stock units, bonus stock, and other equity awards.

Severance and Change in Control Arrangements

For a description of the severance and change in control arrangements we have with our Named Executive Officers, see “Executive Compensation — Employment Agreements” and “Executive Compensation — Payments Upon Termination or Upon Change in Control.” The Compensation Committee believed that these arrangements were necessary to attract and retain our Named Executive Officers. The terms of each arrangement were determined in negotiation with the applicable Named Executive Officer in connection with the executive’s hiring and were not based on any set formula.

Effect of Accounting and Tax Treatment on Compensation Decisions

In the review and establishment of our compensation programs, we consider the anticipated accounting and tax implications to us and our executives. In this regard, we may begin utilizing restricted stock and restricted stock units as additional forms of equity compensation incentives in response to changes in the accounting treatment of equity awards under the authoritative accounting guidance. While we consider the applicable accounting and tax treatment of alternative forms of equity compensation, these factors alone are not dispositive, and we also consider the cash and non-cash impact of the programs and whether a program is consistent with our overall compensation philosophy and objectives.

Section 162(m) of the Internal Revenue Code imposes a limit on the amount of compensation that we may deduct in any one year with respect to our Chief Executive Officer and each of our three highest compensated officers excluding our Chief Financial Officer, unless specific and detailed criteria are satisfied. Performance-based compensation, as defined in the Internal Revenue Code, is fully deductible if the programs are approved by stockholders and meet other requirements. In general, we have determined that we will not seek to limit executive compensation so that it is deductible under Section 162(m). However, from time to time, we monitor whether it might be in our interests to structure our compensation programs to satisfy the requirements of Section 162(m). We seek to maintain flexibility in compensating our executives in a manner designed to promote our corporate goals and, therefore, our compensation committee has not adopted a policy requiring all compensation to be deductible.

Role of Executives in Executive Compensation Decisions

Our Compensation Committee seeks input from our Chief Executive Officer when discussing the performance of, and compensation levels for, our Named Executive Officers other than himself. The Compensation Committee also works with the Chief Executive Officer and with our Chief Financial Officer in evaluating the financial, accounting, tax and retention implications of our various compensation programs. No Executive participates in deliberations relating to his or her own compensation.

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COMPENSATION COMMITTEE REPORT

The information contained in this report will not be deemed to be “soliciting material” or to be “filed” with the Securities and Exchange Commission, nor will such information be incorporated by reference into any future filing under the Securities Act or the Exchange Act, except to the extent that we specifically incorporate it by reference in such filing.

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis set forth in this Proxy Statement on Schedule 14A with our management. Based on such review and discussions, the Compensation Committee has recommended to our board that the Compensation Discussion and Analysis be included in this Proxy Statement on Schedule 14A.

Compensation Committee
Michael A. Kumin
Christopher S. Gaffney

Summary of Cash and Other Compensation

The Summary Compensation Table below presents information concerning the total compensation of our Named Executive Officers for the fiscal years ended December 31, 2011, 2010 and 2009. Mr. Zucker, Mr. Wegner, and Mr. Desai were not Named Executive Officers prior to 2011; therefore, their compensation information is not presented for fiscal 2009 and 2010. Mr. Horowitz and Mr. Markert were not Named Executive Officers prior to 2010; therefore, their compensation information is not presented for fiscal 2009.

Summary Compensation Table

				Salary		Bonus (1)		Option Awards (2)		Non-Equity Incentive Plan Compensation		All Other Compensation (3)		Total Compensation
Jeffrey Horowitz, (4) Chief Executive Officer			2011			$	374,141			$	—			$	2,434,155			$	275,000			$	25,470			$	3,108,765
		2010			$	153,846			$	—			$	894,000			$	75,000			$	—			$	1,122,846
		2009			$	—			$	—			$	—			$	—			$	—			$	—
Stephen E. Markert, Jr., Interim Chief Financial Officer			2011			$	276,021			$	—			$	—			$	150,000			$	—			$	426,021
		2010			$	37,058			$	—			$	—			$	10,000			$	—			$	47,058
		2009			$	—			$	—			$	—			$	—			$	—			$	—
David Zucker (5) Chief Marketing Officer			2011			$	108,892			$	—			$	789,000			$	19,028			$	17,576			$	934,496
		2010			$	—			$	—			$	—			$	—			$	—			$	—
		2009			$	—			$	—			$	—			$	—			$	—			$	—
Robert Wegner, (5) Chief Operating Officer			2011			$	93,165			$	—			$	789,000			$	15,857			$	36,523			$	934,545
		2010			$	—			$	—			$	—			$	—			$	—			$	—
		2009			$	—			$	—			$	—			$	—			$	—			$	—
Nachiket Desai (5) Chief Information Officer			2011			$	24,161			$	—			$	977,500			$	—			$	—			$	1,001,661
		2010			$	—			$	—			$	—			$	—			$	—			$	—
		2009			$	—			$	—			$	—			$	—			$	—			$	—
Mary Marbach, General Counsel and Corporate Secretary			2011			$	200,450			$	—			$	—			$	100,000			$	—			$	300,450
		2010			$	140,000			$	—			$	326,000			$	40,000			$	—			$	506,000
		2009			$	31,877			$	1,000			$	—			$	10,000			$	—			$	42,877
Sonya L. Lambert, (6) Former Chief Marketing Officer			2011			$	141,923			$	—			$	—			$	—			$	685,800			$	827,723
		2010			$	209,408			$	—			$	—			$	—			$	—			$	209,408
		2009			$	154,735			$	15,600			$	565,600			$	103,680			$	—			$	839,615
Robert D. Hirsch, (7) Former Vice President Information Technology and Chief Information Officer			2011			$	164,321			$	—			$	—			$	—			$	240,000			$	404,321
		2010			$	177,778			$	—			$	—			$	31,710			$	—			$	209,488
		2009			$	159,046			$	11,700			$	141,400			$	36,240			$	—			$	348,386

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Stock and Option Award Grants and Exercises

The following table summarizes information concerning grants of plan-based awards made by us for services rendered during the fiscal year ended December 31, 2011 to each of the Named Executive Officers.

Grants of Plan-Based Awards

		All Other Option Awards
				Estimated Future Payouts Under Non-Equity Incentive Plan Awards		Number of Securities Underlying Options (#)		Exercise or Base Price of Option Awards ($/Sh) (1)		Grant Date Fair Value of Stock and Options Awards (2)
Name		Grant Date		Threshold ($)		Target ($)		Maximum ($)
Jeffrey Horowitz			2011				—			$	275,000				—				—				—				—
			6/22/2011				—				—				—				582,750			$	3.75			$	1,497,667
			9/12/2011				—				—				—				367,250			$	4.33			$	936,488
Stephen E. Markert, Jr.			2011				—			$	150,000				—				—				—				—
David Zucker			2011				—			$	150,000				—				—				—				—
			9/12/2011				—				—				—				300,000			$	4.33			$	789,000
Robert Wegner			2011				—			$	125,000				—				—				—				—
			9/12/2011				—				—				—				300,000			$	4.33			$	789,000
Nachiket Desai			2011				—			$	125,000				—				—				—				—
			12/9/2011				—				—				—				250,000			$	6.44			$	977,500
Mary Marbach			2011				—			$	100,000				—				—				—				—

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Outstanding Equity Awards at Fiscal Year End

Name		Number of Securities Underlying Unexercised Options (1) Exercisable		Number of Securities Underlying Unexercised Options (1) Unexercisable		Option Exercise Price		Option Expiration Date
Jeffrey Horowitz			200,000				—			$	8.910				8/1/2021
			242,528				340,222	(2)		$	3.750				6/21/2022
			51,010				316,240	(3)		$	4.330				9/11/2022
David Zucker							300,000	(4)		$	4.330				9/11/2021
Robert Wegner							300,000	(5)		$	4.330				9/11/2021
Nachiket Desai							250,000	(6)		$	6.440				12/8/2021
Mary Marbach			10,000				40,000	(7)		$	9.720				2/3/2019
Sonya L. Lambert			35,200				—			$	3.750				3/4/2015
			20,000				—			$	3.750				3/31/2016
			80,000				—			$	3.750				9/19/2016
			80,000				—			$	7.500				12/30/2017
			80,000				—			$	12.000				9/23/2019
Robert D. Hirsch			80,000				—			$	7.500				12/14/2018
			20,000				—			$	12.000				9/23/2019

Pension Benefits

We do not maintain any defined benefit pension plans.

Nonqualified Deferred Compensation

We do not maintain any nonqualified deferred compensation plans.

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Potential Payments Upon Termination or Change In Control

If the Named Executive Officers’ employment had been terminated on December 31, 2011 for any reason other than a change of control (as defined in the employment agreements entered into with each Named Executive Officer) or terminated pursuant to a change of control on December 31, 2011, each executive would have received the payments described in the following table.

Name		Benefit		Termination with Cause		Termination without Cause		Termination due to Change in Control		Death		Disability
Jeffrey Horowitz			Continuation of Salary	(1)		$	—			$	400,000			$	400,000			$	—			$	—
Stephen Markert			Continuation of Salary			$	—			$	225,000			$	225,000			$	—			$	—
David Zucker			Continuation of Salary	(2) (3) (4)		$	—			$	150,000			$	150,000			$	75,000			$	150,000
Robert Wegner			Continuation of Salary	(2) (3) (4)		$	—			$	125,000			$	125,000			$	62,500			$	125,000
Nachiket Desai			Continuation of Salary	(2) (3) (4)		$	—			$	125,000			$	125,000			$	62,500			$	125,000
Mary Marbach			Continuation of Salary	(2) (3) (4)		$	—			$	100,000			$	100,000			$	50,000			$	50,000

Employment Agreements and Change-In-Control Arrangements

  Jeffrey J. Horowitz

On February 17, 2011, in connection with his appointment as Chief Executive Officer, the Company and Mr. Horowitz entered into an employment agreement that has a four year term from its commencement date of August 16, 2010 and supersedes his previous consulting agreement with the Company. In consideration for Mr. Horowitz’s services, we will pay Mr. Horowitz an annual salary of $400,000. For the period from August 16, 2010 through December 31, 2010, Mr. Horowitz was paid a bonus of $75,000 and for the 2011 calendar year, Mr. Horowitz will be paid a guaranteed bonus of $275,000. For the period from August 16, 2010 until the date of the agreement, Mr. Horowitz was paid a lump sum equal to the difference between the annual salary that would have been paid under the employment agreement and the amount he was paid pursuant to his consulting agreement for such period. Mr. Horowitz was also granted nonqualified stock options to purchase 950,000 shares of the common stock of the Company. The options will vest periodically and will be fully vested on August 15, 2014. Under the employment agreement, in the event Mr. Horowitz’s employment is terminated by us without cause or by Mr. Horowitz for “good reason” (as such terms are defined in the employment agreement), Mr. Horowitz will be entitled to receive the following: severance equal to twelve months of Mr. Horowitz’s annual salary or, if less, the salary that would have been paid had he remained employed through August 15, 2014; prorated annual bonus for the year of termination; and complete vesting of any stock options that had not yet vested. If Mr. Horowitz’s employment is terminated due to his death or disability, he or his estate will be entitled to payment of a prorated annual bonus for the year of termination. Mr. Horowitz’s receipt of the severance benefits discussed above is contingent on Mr. Horowitz signing and not revoking a release of claims against us.

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  Stephen E. Markert, Jr.

On October 19, 2010, we entered into an employment agreement with Stephen E. Markert, Jr., Interim Chief Financial Officer, which can be terminated by the employee or us upon 60 days written notice. Mr. Markert initially received a salary of $235,000 annually, and was eligible to earn discretionary bonuses and employee benefits commensurate with his position. On May 14, 2011, Mr. Markert’s salary was increased to $300,000 annually. Mr. Markert is also entitled to reimbursement of living expenses of up to $2,000 per month. Under his agreement, Mr. Markert is subject to a confidentiality, non-solicitation and non-competition agreement during the period he is employed for a one-year period following termination. On January 25, 2012, Mr. Markert informed us of his resignation as Interim Chief Financial Officer. On February 24, 2012, we and Mr. Markert entered into an Employment Termination and General Release Agreement (the “Markert Agreement”) setting forth the terms of Mr. Markert’s departure. Under the terms of the Markert Agreement, Mr. Markert’s employment was terminated effective February 24, 2012. Upon receipt of an unconditional release, we paid Mr. Markert a lump sum payment of $225,000.

  David Zucker

On August 18, 2011, in connection with Mr. Zucker’s appointment as Chief Marketing Officer, we and Mr. Zucker entered into an employment agreement (the “Zucker Employment Agreement”), outlining the terms of Mr. Zucker’s employment. Under the terms of the Zucker Employment Agreement, Mr. Zucker will receive a base salary of $300,000 per year and an annual bonus equal to up to 50% of his base salary, which is guaranteed on a prorated basis for 2011. Subject to the approval of the award grant by our Board of Directors, we issued to Mr. Zucker options to purchase 300,000 shares of our common stock. The options will vest 20% per year over five years. In addition, Mr. Zucker receives $5,000 monthly for living and travel expenses and is eligible to participate in our standard employee benefits programs available to senior executives. The term of the Zucker Employment Agreement is one year, renewing automatically for additional one year periods unless the Zucker Employment Agreement is terminated by Mr. Zucker or us, in each case by 30 days’ written notice. In addition, we may terminate Mr. Zucker’s employment at any time, with or without cause, and Mr. Zucker may terminate his employment on 30 days’ written notice or immediately for good reason, as defined in the Zucker Employment Agreement. Under the Zucker Employment Agreement, in the event Mr. Zucker’s employment is terminated without cause, Mr. Zucker will be entitled to receive severance benefits equal to six months of his base salary, plus a prorated bonus for the year of termination. In the event that Mr. Zucker’s employment is terminated without cause or by Mr. Zucker for good reason during the twelve months following a change in control of the Company, then Mr. Zucker will be entitled to receive a bonus prorated through the date of his termination and a severance amount equal to six months of his current base salary. Mr. Zucker, or his estate, is also entitled to a prorated bonus and other benefits in the event that Mr. Zucker’s employment is terminated due to his death or disability.

  Robert Wegner

On August 4, 2011, in connection with Mr. Wegner’s appointment as Chief Operating Officer, we and Mr. Wegner entered into an employment agreement (the “Wegner Employment Agreement”), outlining the terms of Mr. Wegner’s employment. Under the terms of the Wegner Employment Agreement, Mr. Wegner will receive a base salary of $250,000 per year and an annual bonus equal to up to 50% of his base salary, which is guaranteed on a prorated basis for 2011. Subject to the approval of the award grant by our Board of Directors, we issued to Mr. Wegner options to purchase 300,000 shares of our common stock. The options will vest 20% per year over five years. In addition, Mr. Wegner received $25,000 for relocation expenses and is eligible to participate in our standard employee benefits programs available to senior executives. The term of the Wegner Employment Agreement is one year, renewing automatically for additional one year periods unless the Wegner Employment Agreement is terminated by Mr. Wegner or us, in each case by 30 days’ written notice. In addition, we may terminate Mr. Wegner’s employment at any time, with or without cause, and Mr. Wegner may terminate his employment on 30 days’ written notice or immediately for good reason, as defined in the Wegner Employment Agreement. Under the Wegner Employment Agreement, in the event Mr. Wegner’s employment is terminated without cause, Mr. Wegner will be entitled to receive severance benefits equal to six months of his base salary, plus a prorated bonus for the year of termination. In the event that Mr. Wegner’s employment is terminated without cause or by Mr. Wegner for good reason during the twelve months following a change in control of the Company, then Mr. Wegner will be entitled to receive a

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bonus prorated through the date of his termination and a severance amount equal to six months of his current base salary. Mr. Wegner, or his estate, is also entitled to a prorated bonus and other benefits in the event that Mr. Wegner’s employment is terminated due to his death or disability. Mr. Wegner’s receipt of the severance benefits discussed above is contingent on Mr. Wegner signing and not revoking a release of claims against us.

  Nachiket Desai

On November 28, 2011, in connection with Mr. Desai’s appointment as Chief Information Officer, we and Mr. Desai entered into an employment agreement (the “Employment Agreement”), outlining the terms of Mr. Desai’s employment. Under the terms of the Desai Employment Agreement, Mr. Desai will receive a base salary of $250,000 per year and an annual bonus of up to 50% of his base salary. Subject to the approval of the award grant by our Board of Directors, we issued to Mr. Desai options to purchase 250,000 shares of our common stock. The options will vest 20% per year over five years. In addition, Mr. Desai will receive $5,000 per month for living and travel expenses for his first three months’ of employment, $25,000 in relocation assistance and is eligible to participate in our standard employee benefits programs available to senior executives. The term of the Desai Employment Agreement is one year, renewing automatically for additional one year periods unless the Desai Employment Agreement is terminated by Mr. Desai or us, in each case by 30 days’ written notice. In addition, we may terminate Mr. Desai’s employment at any time, with or without cause, and Mr. Desai may terminate his employment on 30 days’ written notice or immediately for good reason, as defined in the Desai Employment Agreement. Under the Desai Employment Agreement, in the event Mr. Desai’s employment is terminated without cause, Mr. Desai will be entitled to receive severance benefits equal to six months of his base salary, plus a prorated bonus for the year of termination. In the event that Mr. Desai’s employment is terminated without cause or by Mr. Desai for good reason during the twelve months following a change in control of the Company, then Mr. Desai will be entitled to receive a bonus prorated through the date of his termination and a severance amount equal to six months of his current base salary. Mr. Desai, or his estate, is also entitled to a prorated bonus and other benefits in the event that Mr. Desai’s employment is terminated due to his death or disability.

  Sonya L. Lambert

Effective April 1, 2007, we entered into an employment, non-competition and proprietary rights agreement with Sonya L. Lambert, Chief Marketing Officer, for a one-year term, automatically renewable for additional one-year terms annually, unless otherwise terminated by the employee or us. Under the original agreement, Ms. Lambert earned a salary of $120,000 annually and was eligible to receive a marketing bonus based on performance (up to $21,600 per quarter), vacation and employee benefits commensurate with her position. If Ms. Lambert’s employment is terminated by us without “cause” (as defined in the agreement), in addition to any compensation and benefits accrued through such termination, Ms. Lambert may, subject to her execution of a general release of claims against us, receive a lump-sum severance payment of up to 12 months’ base salary plus a prorated portion of the performance bonuses, as well as up to 18 months of company-paid continuation medical benefits. If Ms. Lambert’s employment terminates due to her death or disability, she or her estate will receive a lump sum payment equal to the sum of three months’ base salary, accrued yet unused vacation pay and a prorated bonus, in addition to any compensation and benefits accrued through such termination. Under her agreement, Ms. Lambert was subject to a confidentiality, non-solicitation and non-competition agreement during the period she is employed and for a period thereafter. The confidentiality and non-competition provisions extend for a two-year period following termination and the non-solicitation provision extends for a period of one year following termination. For the year ended December 31, 2008, Ms. Lambert’s base salary under the agreement was increased to $144,000.

On June 30, 2009, the agreement was amended to increase her annual base salary to $165,600 and to increase the maximum amount of the quarterly bonus she may receive to $25,920 per quarter. Further, pursuant to the amendment, effective as of the successful registration of our initial public offering: (i) so long as Ms. Lambert had not voluntarily resigned from her employment with us, all of Ms. Lambert’s then-outstanding options, to the extent necessary, became fully vested and non-forfeitable; and (ii) so long as Ms. Lambert was then employed by us, Ms. Lambert was issued fully vested, non-forfeitable options to purchase 100,000 shares of our common stock at the initial public offering price (or 80,000 shares of our common stock after giving effect to the four-for-five reverse stock split of our common stock effected on September 17, 2009).

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On March 22, 2010, the amended agreement was further amended to provide for a two-year term commencing on March 15, 2010, renewable upon mutual agreement by us and Ms. Lambert. The amendment further amended the agreement to provide that in the event of a termination by us of Ms. Lambert “without cause” (as defined in the agreement), then, in addition to any compensation and benefits accrued through such termination, and subject to her execution of a general release of claims against us, and subject to her compliance with her confidentiality, non-solicitation and non-competition agreement, Ms. Lambert is entitled to (i) a severance payment equal to the greater of (a) two times the sum of her then current base salary and the average of her prior two years’ annual bonus, or (b) the amount she would be entitled to receive (e.g. base salary, bonus, vacation pay) for the remainder of the term as if she remained employed until the last day of such term, payable in 24 equal monthly payments and (ii) 18 months of company-paid continuation medical benefits. The amendment further amended the agreement to provide that if the employment of Ms. Lambert is terminated following a “Change in Control” (as defined in the amendment), either by the Company without cause or by Ms. Lambert for “Good Reason” (as defined in the amendment), then Ms. Lambert is entitled to the following severance terms (in addition to any compensation and benefits accrued through such termination), subject to her execution of a general release of claims against us, and subject to her compliance with her confidentiality, non-solicitation and non-competition agreement: if terminated without cause or for Good Reason within 18 months after Change in Control, a lump sum payment equal to two times her then current base salary and two times the higher of (i) the average of the prior two years’ annual bonus and (ii) last year’s bonus. Notwithstanding the foregoing, however, the second amendment also provided for certain cutbacks of amounts owed to Ms. Lambert in the event such payments to be made to her on account of a Change in Control was deemed to be “excess parachute payments” as defined in Section 280G of the Code and, as a result, Ms. Lambert may not receive that total severance payment amount. Capitalized terms used in this paragraph with regard to certain employment agreements have the meaning ascribed to them in that certain employment agreement.

On August 18, 2011 the Company and Ms. Lambert mutually agreed to the immediate termination of her employment with the Company as Chief Marketing Officer. In connection with the termination, Ms. Lambert received a severance payment of $685,800.

  Robert D. Hirsch

On September 16, 2008, we entered into an employment, non-competition and proprietary rights agreement with Robert D. Hirsch, Vice President Information Technology and Chief Information Officer, for a one-year term, automatically renewable for additional one-year terms annually, unless otherwise terminated by the employee or us. The contract term has been automatically renewed each year since September 16, 2008, with the current one-year term continuing to September 17, 2011. Under the original agreement, Mr. Hirsch earned a salary of $145,000 annually, and was eligible to earn annual performance bonuses, vacation and employee benefits commensurate with his position. On the initial date of Mr. Hirsch’s employment, he was also granted options to purchase up to 100,000 shares of our common stock at $6.00 per share (or 80,000 shares at $7.50 per share after giving effect to the four-for-five reverse stock split of our common stock affected on September 17, 2009). These options vest 20% each year on the anniversary date of Mr. Hirsch’s employment agreement and are fully vested after five years. Each option has a term of nine years. Upon Mr. Hirsch’s termination of employment for any reason, all unvested options are forfeited to us and all vested options must be exercised within 30 days and if not exercised during the 30-day period will be forfeited to us. If Mr. Hirsch’s employment is terminated by us without “cause” (as defined in the agreement), in addition to any compensation and benefits accrued through such termination, Mr. Hirsch may, subject to his execution of a general release of claims against us, receive a lump-sum severance payment in an amount equal to the sum of two weeks’ base salary for each year served, up to a total of six weeks’ base salary, accrued yet unused vacation pay and a prorated portion of the annual performance bonus earned through the date of termination, as well as up to 18 months of employee-paid continuation medical benefits. If Mr. Hirsch’s employment terminates due to his death or disability, he or his estate will receive a lump sum payment equal to the sum of three months’ base salary accrued yet unused vacation pay and a prorated portion of the annual performance bonus earned through the date of termination, in addition to any compensation and benefits accrued through such termination. Under his agreement, Mr. Hirsch is subject to a confidentiality, non-solicitation and non-competition agreement during the period he is employed and for a period of two years thereafter.

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On June 30, 2009, the agreement was amended to increase his annual base salary to $166,750. Further, pursuant to the amendment, effective as of the successful registration our initial public offering: (i) so long as Mr. Hirsch had not voluntarily resigned from his employment with us, all of Mr. Hirsch’s then-outstanding options, to the extent necessary, became fully vested and non-forfeitable; and (ii) so long as Mr. Hirsch was then employed by us, Mr. Hirsch was issued fully vested, non-forfeitable options to purchase 25,000 shares of our common stock at the initial public offering price (or 20,000 shares of our common stock after giving effect to the four-for-five reverse stock split of our common stock effected on September 17, 2009).

On March 22, 2010, the amended agreement was further amended to provide that in the event of a termination by us of Mr. Hirsch “without cause” (as defined in the agreement), then, in addition to any compensation and benefits accrued through such termination, and subject to his execution of a general release of claims against us, and subject to his compliance with his confidentiality, non-solicitation and non-competition agreement, Mr. Hirsch is entitled to (i) a severance payment equal to the greater of (a) the sum of his then current base salary and the average of his prior two years’ annual bonus, or (b) the amount he would be entitled to receive (e.g. base salary, bonus, vacation pay) for the remainder of the term as if he remained employed until the last day of such term, payable in 12 equal monthly payments and (ii) 18 months of company-paid continuation medical benefits. The amendment further amended the agreement to provide that if the employment of Mr. Hirsch is terminated following a “Change in Control” (as defined in the amendment), either by the Company without cause or by Mr. Hirsch for “good reason” (as defined in the amendment), then Mr. Hirsch is entitled to the following severance terms (in addition to any compensation and benefits accrued through such termination), subject to his execution of a general release of claims against us, and subject to his compliance with his confidentiality, non-solicitation and non-competition agreement: if terminated Without Cause or for Good Reason within 12 months after a Change in Control, a lump sum payment equal to his then current base salary and the higher of (i) the average of the prior two years’ annual bonus and (ii) last year’s bonus. Notwithstanding the foregoing, however, the second amendment also provided for certain cutbacks of amounts owed to Mr. Hirsch in the event such payments to be made to him on account of a Change in Control was deemed to be “excess parachute payments” as defined in Section 280G of the Code and, as a result, Mr. Hirsch may not receive that total severance payment amount. Capitalized terms used in this paragraph with regard to certain employment agreements have the meaning ascribed to them in that certain employment agreement.

On November 22, 2011, the Company and Mr. Hirsch mutually agreed to the immediate termination of his employment with the Company as Chief Information Officer. In connection with the termination, Mr. Hirsch received a severance payment of $240,000.

  Mary L. Marbach

On December 2, 2009, we entered into an employment, non-competition and proprietary rights agreement with Mary L. Marbach, General Counsel, for a one-year term, automatically renewable for additional one-year terms annually, unless otherwise terminated by the employee or us. The current one-year term will continue until December 2, 2012. Ms. Marbach earns a salary of $200,000 annually, and is eligible to earn annual performance bonuses, vacation and employee benefits commensurate with her position. If Ms. Marbach’s employment is terminated by us without “cause” (as defined in her agreement), in addition to any compensation and benefits accrued through such termination, Ms. Marbach may, subject to her execution of a general release of claims against us, receive a lump-sum severance payment in an amount equal to six months’ of base salary, accrued yet unused vacation pay and a prorated portion of the annual performance bonus earned through the date of termination, as well as up to 18 months of employee-paid continuation medical benefits. If Ms. Marbach’s employment is terminated by us without “cause” or by Ms. Marbach for “good reason” (as defined in her agreement), in either case during the twelve month period immediately following a “change in control” (as defined in her agreement), then in lieu of the amounts specified in the preceding sentence, in addition to any compensation and benefits accrued through such termination, Ms. Marbach shall be entitled to a severance amount equal to 6 months of her then base salary. If Ms. Marbach’s employment terminates due to her death or disability, she or her estate will receive a lump sum payment equal to the sum of three months’ base salary, accrued yet unused vacation pay and a prorated portion of the annual performance bonus earned through the date of termination, in addition to any

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compensation and benefits accrued through such termination. Under her agreement, Ms. Marbach is subject to a confidentiality, non-solicitation and non-competition agreement during the period she is employed and for a period of two years thereafter.

Compensation Risk Assessment

Our compensation committee and management have considered whether our compensation programs for employees create incentives for excessive or unreasonable risks that could have a material adverse effect on us. Our compensation committee believes that our compensation plans are consistent with practices for our industry and that risks arising from our compensation policies and practices are not reasonably likely to have a material adverse effect on us.

Director Compensation

Directors who are also our employees are not separately compensated for their services as directors but are reimbursed for out-of-pocket expenses incurred in connection with providing board services. The following table summarizes compensation earned by our non-employee directors in 2011:

		Fees Earned or Paid in Cash		Option Awards (1)		All Other Compensation		Total Compensation
Michael A. Kumin, Chairman		$	25,000			$	62,250			$	—			$	87,250
Edwin Kozlowski		$	20,000			$	41,500			$	—			$	61,500
Robert G. Trapp, M.D.		$	15,000			$	20,750			$	—			$	35,750
Christopher S. Gaffney		$	15,000			$	20,750			$	—			$	35,750
Stuart Goldfarb		$	15,000			$	20,750			$	—			$	35,750
Jeffrey M. Stibel (2)		$	2,500			$	—			$	—			$	2,500

The aggregate number of shares subject to stock options outstanding at December 31, 2011 for each non-employee director was as follows:

Name		Aggregate Number of Options Awards Outstanding as of December 31, 2011
Michael A. Kumin, Chairman			15,000
Edwin Kozlowski			10,000
Robert G. Trapp, M.D.			24,800
Christopher S. Gaffney			5,000
Stuart Goldfarb			5,000

  Cash Compensation of Non-Employee Directors in Fiscal 2011

During fiscal 2011, each of our non-employee directors received an annual retainer of $15,000 for service on the board and any committee of the board, except for the Chairman of the board, who received an annual retainer of $25,000 in lieu of the standard annual retainer of $15,000 for his services in such capacity. Directors were also reimbursed for certain expenses they incurred in connection with attendance at board and committee meetings. The Chairman of the audit committee received the additional annual compensation of $5,000 for his services as Chairman of the audit committee in fiscal 2011. The cash retainers are paid quarterly.

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  Equity and Non-cash Compensation of Non-Employee Directors in Fiscal 2011

The current practice of our board is to approve the grant of an option to purchase 5,000 shares of our common stock for each director. The exercise price for all options granted is 100% of the fair market value of the shares on the grant date. The options vest immediately upon grant. The Chairman of the board is also granted of an option to purchase an additional 10,000 shares of our common stock and the chairman of the audit committee is granted an option to purchase an additional 5,000 shares of our common stock.

Compensation Committee Interlocks and Insider Participation

Our compensation committee currently consists of Messrs. Gaffney and Kumin. None of the members of our compensation committee has, at any time, served as an officer or employee of Vitacost. None of our executive officers currently serves, or in the past year has served, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving on our board of directors or compensation committee.

Equity Compensation Plan Information

The following is summary of our equity compensation plans as of December 31, 2011

Plan Category		Number of Securities to Be Issued Upon Exercise of Outstanding Options, Warrants, and Rights		Weighted Average Exercise Price of Outstanding Options, Warrants, and Rights		Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans
Equity Compensation Plans Approved by Security Holders			4,262,230			$	5.69				6,531,514

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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Our executive officers, directors, and stockholders with beneficial ownership of more than 10% of our Common Stock are required, under the Securities Exchange Act of 1934, as amended, to file reports of ownership of our Common Stock with the Securities and Exchange Commission. The Form 3 Reports for Mr. Goldfarb and Mr. Kozlowski, each filed on June 3, 2011, were not filed on a timely basis. Two Form 4 Reports for Mr. Horowitz, filed on November 1, 2011 and November 14, 2011 were not filed on a timely basis. Other than these items set forth above, and based solely upon a review of the copies of reports furnished to us and written representations that no other reports were required to be filed during fiscal 2011, we are not aware of any late filings

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the beneficial ownership of our Common Stock on May 8, 2012, by the following:

Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of Common Stock subject to options or warrants held by that person that are currently exercisable or exercisable within 60 days of May 8, 2012 are deemed outstanding, but are not deemed outstanding for computing the percentage ownership of any other person.

Except as otherwise indicated and subject to applicable community property laws, each person named in the table has sole voting and investment power with respect to the shares of Common Stock set forth opposite such person’s name.

Name and Address of Beneficial Owner (1)		Number of Shares Beneficially Owned		Percent Beneficially Owned
Directors and Executive Officers:
Jeffrey J. Horowitz (2)			3,978,185				11.48	%
Brian D. Helman			—				*
David A. Zucker			—				*
Robert Wegner (3)			3,000				*
Nachiket Desai			—				*
Mary L. Marbach (4)			20,180				*
Sonya L. Lambert (5)			160,000				*
Robert D. Hirsch (6)			100,000				*
Stephen M. Markert			—				*
Christopher S. Gaffney (7)			6,367,713				19.15	%
Stuart Goldfarb (8)			5,000				*
Edwin J. Kozlowski (9)			10,000				*
Michael A. Kumin (10)			35,630				*
Robert G. Trapp, M.D. (11)			758,926				2.28	%
All current directors and executive officers as a group (11) persons) (12)			11,178,634				32.16	%
5% Stockholders:
Group comprised of Great Hill Investors, LLC, Great Hill Equity Partners III, L.P., Great Hill Partners GP III, L.P., GHP III, LLC, Great Hill Equity Partners IV, L.P., Great Hill Partners IV, L.P., and GHP IV, LLC (13)			6,362,713				19.13	%
Group comprised of Freshford Capital Management, LLC, Freshford GP, LLC and Freshford Partners, LP (14)			3,483,160				10.48	%
Group comprised of Baron Capital Group, Inc., BAMCO, Inc., Baron Small Cap Fund and Ronald Baron (15)			2,325,000				6.99	%
Jennison Associates, LLC and Prudential Financial, Inc. (16)			3,098,654				9.32	%
Allen S. Josephs (17)			2,082,197				6.16	%
JHH Capital, LLC (18)			3,049,013				8.96	%
Royce & Associates, LLC (19)			1,537,661				4.62	%

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Transactions with Current and Former Directors and Officers

We believe that there has not been any transaction or series of transactions during fiscal year 2011 to which we were or are to be a participant in which the amount involved exceeds $120,000 and in which any director, nominee for director, executive officer or holder of more than five percent of our common stock, or members of any such person’s immediate family, had or will have a direct or indirect material interest, other than compensation described in the sections titled “Executive Compensation, Management and Other Information” or “Director Compensation” elsewhere in this proxy statement and as described below.

Purchase Agreement

On February 16, 2012, we entered into a Purchase Agreement (the “Purchase Agreement”) by and among Vitacost, JHH Capital, LLC (an entity affiliated with Jeffrey Horowitz, our Chief Executive Officer, “JHH”), Great Hill Equity Partners III, L.P. (“Great Hill III”), Great Hill Equity Partners IV, L.P. (“Great Hill IV”), Great Hill Investors, LLC (“Great Hill Investors”), Freshford Partners, LP (“Freshford Partners”), Freshford Master Fund, Ltd (“Freshford Master Fund”) and Baron Small Cap Fund (“Baron” and, together with JHH, Great Hill III, Great Hill IV, Great Hill Investors, Freshford Partners, Freshford Master Fund, collectively, the “Investors”) pursuant to which the Investors purchased, and we sold, an aggregate of 4,920,288 shares of our common stock at a purchase price of $7.04 per share, and warrants to purchase an aggregate of 1,680,601 shares of our common stock for an aggregate purchase price of $34,848,903. The warrants have an exercise price of $7.04 per share and a term of four years.

Registration Rights Agreement

Concurrently with entering into the Purchase Agreement, we entered into a registration rights agreement with Jeffrey Horowitz and JHH which provides Jeffrey Horowitz and JHH with demand, shelf and piggyback registration rights. The registration rights agreement further provides that if we enter into a registration rights agreement (or similar agreement) with any person or entity on more favorable terms than those contained in the registration rights agreement, the registration rights agreement will be amended to include such more favorable terms. Pursuant to the registration rights agreement, we have agreed to pay all of the registration costs and expenses incurred in connection with such demand, shelf and piggyback registrations.

Procedures for Related Party Transactions

Under our code of conduct and ethics, our employees, officers and directors are encouraged to avoid actual or apparent conflicts of interest between personal and corporate-related relationships. In particular, our employees, officers and directors should not participate in a personal business transaction with us in which they will receive a significant profit or gain, unless otherwise approved by our Board. Further, our employees, officers and directors should advise the Board of any prospective or existing potential conflict. Pursuant to its charter, our audit committee must then approve any related-party transactions reported to the Board. In approving or rejecting such proposed transactions, the audit committee considers the facts and circumstances available and deemed relevant to the audit committee, including the material terms of the transactions, risks, benefits, costs, availability of other comparable services or products and, if applicable, the impact on a director’s independence. Our audit committee will approve only those transactions that, in light of known circumstances, are in, or are not inconsistent with, our best interests, as our audit committee determines in the good faith exercise of its discretion. A copy of our Code of Conduct and Ethics and Audit Committee Charter are available for review at the investor relations section of our corporate website at http://investor.vitacost.com . Each of the transactions described above was approved by our Audit Committee after making a determination that the transaction was in the Company’s best interests.

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REPORT OF THE AUDIT COMMITTEE

The following Audit Committee report does not constitute soliciting material and shall not be deemed filed or incorporated by reference into any of our filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent we specifically incorporate this Audit Committee report by reference herein.

As more fully described in its charter, the purpose of the Audit Committee is to assist the oversight of our Board of Directors in the integrity of the financial statements of our company, our company’s compliance with legal and regulatory matters, the independent auditor’s qualifications and independence, and the performance of our company’s independent auditor. The primary responsibilities of the committee include overseeing our company’s accounting and financial reporting process and audits of the financial statements of our company on behalf of the Board of Directors.

As part of its oversight of our financial statements, the committee reviews and discusses with both management and our independent registered public accountants all annual and quarterly financial statements prior to their issuance. During 2011, management advised the committee that each set of financial statements reviewed had been prepared in accordance with generally accepted accounting principles, and reviewed significant accounting and disclosure issues with the committee. These reviews included discussion with the independent registered public accountants of matters required to be discussed pursuant to U.S. Auditing Standards No. 61, as amended, including the quality of our accounting principles, the reasonableness of significant judgments and the clarity of disclosures in the financial statements. The committee also discussed with PricewaterhouseCoopers LLP matters relating to its independence, including a review of audit and non-audit fees and the written disclosures and letter from PricewaterhouseCoopers LLP to the committee pursuant to applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountants’ communications with the committee concerning independence. In addition, the committee discussed with the independent auditor (PricewaterhouseCoopers LLP) the overall scope and plans for its audit. The committee discussed with the independent auditor, with and without management present, the results of the examinations, its evaluations of our company and the overall quality of the financial reporting.

Based on the reviews and discussions referred to above, the committee recommended to the Board of Directors, and the Board approved, that the audited financial statements be included in the Annual Report on Form 10-K for the year ended December 31, 2011 for filing with the Securities and Exchange Commission.

The report has been furnished by the Audit Committee of the Board of Directors (as of May 11, 2012).

AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
Edwin J. Kozlowski, Chairman
Stuart Goldfarb
Robert G. Trapp

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OTHER MATTERS

The Board of Directors does not know of any other matters to be presented at the Annual Meeting. If any other matters are properly presented at the Annual Meeting, it is the intention of the persons named as proxies to vote the shares they represent as the Board of Directors may recommend.

It is important that your shares be represented at the Annual Meeting, regardless of the number of shares that you hold. Therefore, you are urged to vote at your earliest convenience.

THE BOARD OF DIRECTORS
May 11, 2012
Boca Raton, Florida

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