<PAGE>
Schedule 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
IVC INDUSTRIES, 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):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
[IVC Letterhead]
March 24, 1998
Dear Shareholder:
On behalf of our Board of Directors, I cordially invite you to attend
the IVC Industries, Inc. Annual Meeting of Shareholders. The Annual Meeting will
be held at 10:00 a.m. on April 16, 1998 at The Sheraton at Woodbridge Place, 515
Route 1 South, Iselin, New Jersey 08830.
At the Annual Meeting, shareholders will be asked to (i) elect nine
nominees to serve as the directors of IVC for the ensuing year, (ii) approve an
increase in the number of shares subject to IVC's 1995 Stock Option Plan, (iii)
ratify the grant in 1996 and 1997 of stock options to the non-employee directors
of IVC, (iv) approve IVC's Non-Employee Directors' Stock Option Plan and (v)
consider such other business as may properly come before the meeting.
Your vote is very important. Please ensure that your shares will be
represented at the meeting by filling in, dating, signing, and returning your
proxy card in the envelope provided even if you plan to attend the Annual
Meeting. Sending us your proxy will not prevent you from voting in person at the
Annual Meeting should you wish to do so.
On behalf of your Board of Directors, thank you for your continued
support and interest in IVC.
Sincerely,
/s/ E. Joseph Edell
E. Joseph Edell
Chairman of the Board and
Chief Executive Officer
PLEASE FILL IN, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD.
<PAGE>
IVC INDUSTRIES, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
NOTICE is hereby given that the Annual Meeting of Shareholders of IVC
Industries, Inc., a Delaware corporation ("IVC"), will be held on April 16, 1998
at The Sheraton at Woodbridge Place, 515 Route 1 South, Iselin, New Jersey 08830
at 10:00 a.m. for the following purposes:
(1) To elect nine directors of IVC to serve for the ensuing year;
(2) To approve an increase in the number of shares subject to
IVC's 1995 Stock Option Plan;
(3) To ratify the grant in 1996 and 1997 of stock options to the
non-employee directors of IVC;
(4) To approve IVC's Non-Employee Directors' Stock Option Plan;
and
(5) To transact such other business as may properly come before
the Annual Meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on March 16,
1998 as the record date for the determination of shareholders entitled to notice
of and to vote at the Annual Meeting. A complete list of such shareholders will
be available during regular business hours at IVC's offices, 500 Halls Mill
Road, Freehold, New Jersey 07728 on and after April 6, 1998 for inspection by
any shareholder for any proper purpose.
Whether or not you plan to attend the Annual Meeting, please fill in,
date, sign and return the enclosed proxy card promptly. A return envelope is
enclosed for your convenience and requires no postage for mailing in the United
States. Any shareholder attending the Annual Meeting may vote in person even if
that shareholder has returned a proxy.
By Order of the Board of Directors,
/s/ E. Joseph Edell
Freehold, New Jersey E. Joseph Edell
March 24, 1998 Chairman of the Board and
Chief Executive Officer
YOUR VOTE IS IMPORTANT
TO VOTE YOUR SHARES, PLEASE FILL IN, DATE AND SIGN THE ENCLOSED PROXY
CARD AND MAIL IT PROMPTLY IN THE ENCLOSED RETURN ENVELOPE. NO
POSTAGE IS REQUIRED IF MAILED WITHIN THE UNITED STATES.
<PAGE>
IVC INDUSTRIES, INC.
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of IVC Industries, Inc., a Delaware
corporation ("IVC" or the "Company"), for use at the Annual Meeting of
Shareholders of the Company scheduled to be held on April 16, 1998 at 10:00 a.m.
at The Sheraton at Woodbridge Place, 515 Route 1 South, Iselin, New Jersey
08830, and at any adjournments or postponements thereof (the "Annual Meeting").
At the Annual Meeting, shareholders of record ("IVC Shareholders") of the
Company's common stock, par value $.01 per share ("IVC Common Stock"), as of the
close of business on March 16, 1998 (the "Record Date") will be entitled to
consider and vote upon the election of directors for the ensuing year, to
approve an increase in the number of shares subject to IVC's 1995 Stock Option
Plan, to ratify the grant in 1996 and 1997 of stock options to the non-employee
directors of IVC and to approve IVC's Non-Employee Directors' Stock Option Plan.
The principal executive offices of IVC are at 500 Halls Mill Road,
Freehold, New Jersey 07728. This Proxy Statement and the form of proxy are being
mailed to shareholders on or about March 24, 1998.
Revocability of Proxies and Voting Proxies
A proxy given by a shareholder may be revoked at any time before the
Annual Meeting by giving another proxy bearing a later date, by notifying the
Secretary of the Company in writing of such revocation at any time before the
Annual Meeting, or by attending the Annual Meeting in person and casting a
ballot. The shares represented by the proxies solicited by the Board of
Directors of the Company will be voted in accordance with the directions given
therein. IVC Shareholders vote at the meeting by casting ballots (in person or
by proxy) which are tabulated by a person who is appointed by the Board of
Directors before the meeting to serve as inspector of election at the meeting
and who has executed and verified an oath of office. Abstentions will be treated
as present for purposes of determining whether a quorum is present at the Annual
Meeting and as votes AGAINST the proposals under consideration; broker non-votes
will have no effect on the votes. A broker "non-vote" occurs when a nominee
holding shares for a beneficial owner does not vote on a particular proposal
because the nominee does not have discretionary voting power with respect to
that item and has not received instructions from the beneficial owner.
If no instructions are indicated on a proxy, the proxy will be voted
FOR the election of the persons nominated by the Board of Directors to serve as
directors of IVC, FOR approval of an increase in the number of shares subject to
IVC's 1995 Stock Option Plan, FOR ratification of the grant in 1996 and 1997 of
stock options to the non-employee directors of IVC and FOR approval of IVC's
Non-Employee Directors' Stock Option Plan. The Board of Directors knows of no
matters, other than those described herein, that are to be presented at the
Annual Meeting. If matters other than those described herein properly come
before the Annual Meeting, each proxy will be voted in a manner that the members
of the Board of Directors appointed to vote the proxies, in their judgment,
consider to be in the best interest of IVC and its shareholders.
1
<PAGE>
Voting Rights
Only shareholders of record at the close of business on the Record Date
are entitled to notice of and to vote at the Annual Meeting. On the Record Date
there were 17,127,392 shares of IVC Common Stock outstanding and entitled to
vote at the Annual Meeting. Each shareholder entitled to vote shall have one
vote for each share of IVC Common Stock registered in such shareholder's name on
the books of IVC as of the Record Date.
2
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information regarding shares of
IVC Common Stock beneficially owned by (i) each person or group, known to the
Company, who beneficially owns more than 5% of IVC Common Stock, (ii) each of
the Company's directors, (iii) each executive officer named in the summary
compensation table on page 8, and (iv) all officers and directors as a group,
as of February 12, 1998.
Name and Address of Number of Percentage
Beneficial Owner Shares of Class
- ---------------- --------- ----------
E. Joseph Edell (1) 5,388,591 31.5%
c/o IVC Industries, Inc.
500 Halls Mill Road
Freehold, NJ 07728
Andrew M. Pinkowski (2) 2,794,062 16.3%
c/o IVC Industries, Inc.
3580 N.E. Broadway
Portland, OR 97232
I. Alan Hirschfeld (3) 2,278,689 13.3%
c/o IVC Industries, Inc.
500 Halls Mill Road
Freehold, NJ 07728
Arthur S. Edell (4) 2,026,488 11.8%
c/o IVC Industries, Inc.
500 Halls Mill Road
Freehold, NJ 07728
Duane J. Baxter (5) 222,904 1.3%
c/o IVC Industries, Inc.
3580 N.E. Broadway
Portland, OR 97232
Marc Z. Edell (6) 179,000 1.0%
c/o Edell & Associates
1776 On the Green
Morristown, NJ 07962
Dr. Mark S. Gold (6) 20,000 *
2002 San Marco Boulevard
Jacksonville, FL 32207
3
<PAGE>
Name and Address of Number of Percentage
Beneficial Owner Shares of Class
- ---------------- --------- ----------
Dennis E. Groat (6) 20,000 *
c/o Groat & Associates
3007 Paxton Knoll
Cincinnati, OH 45208
David Popofsky (6) 20,000 *
c/o Popofsky Advertising
60 Madison Avenue
New York, NY 10010
Mac Allen Culver III (7) 10,000 *
15500 Sunset Boulevard
Pacific Palisades, CA 90272
All Executive Officers and
Directors as a group
(10 persons)(8) 12,959,734 75.67%
* Less than 1%.
(1) Includes 1,000 shares of IVC Common Stock issuable upon exercise of
warrants and 601,410 shares of IVC Common Stock owned by Beverlee
Edell, the wife of E. Joseph Edell. Mr. Edell disclaims beneficial
ownership of the shares owned by his wife.
(2) Includes 999,845 shares owned by Rita Pinkowski, the wife of Andrew M.
Pinkowski. Mr. Pinkowski disclaims beneficial ownership of the shares
owned by his wife.
(3) Includes 50,000 shares of IVC Common Stock issuable upon exercise of
stock options, 179,868 shares of IVC Common Stock owned by Susan H.
Hirschfeld, the wife of I. Alan Hirschfeld, 31,194 shares of IVC Common
Stock owned by Mr. Hirschfeld's minor children, and 120,000 shares
owned by Two Seas Ventures, a family partnership. Mr. Hirschfeld
disclaims beneficial ownership of the shares owned by his wife and
children.
(4) Includes 400,000 shares of IVC Common Stock issuable upon exercise of
stock options and 1,500,000 shares owned by two Edell Family
Partnerships (750,000 each).
(5) Includes 60,036 shares of IVC Common Stock issuable upon exercise of
stock options.
(6) Includes 20,000 shares of IVC Common Stock issuable upon exercise of
stock options, the grants of which are subject to the approval of the
IVC Shareholders.
(7) Includes 10,000 shares of IVC Common Stock issuable upon exercise of
stock options, the grant of which is subject to the approval of the IVC
Shareholders.
(8) Includes 600,036 shares of IVC Common Stock issuable upon the exercise
of stock options and warrants held by all executive officers and
directors.
4
<PAGE>
PROPOSAL 1 -- ELECTION OF DIRECTORS
At the Annual Meeting, IVC Shareholders will elect 9 members of the
Board of Directors to serve until the 1999 Annual Meeting of Shareholders or
until their respective successors have been elected and shall qualify.
The election of directors requires the affirmative vote of a plurality
of the shares of IVC Common Stock present in person or by proxy at the Annual
Meeting. At this time, the Board of Directors knows of no reason why any nominee
might be unable to serve. There are no arrangements or understandings between
any director or nominee and any other person pursuant to which such person was
selected as a director or nominee.
The following nine nominees are currently directors of the Company
whose terms of office expire at the Annual Meeting. All of these persons, except
Dr. Mark S. Gold, David Popofsky and Marc Z. Edell, have previously been elected
directors of the Company by the shareholders.
<TABLE>
<CAPTION>
Name Position Age Director Since
---- -------- --- --------------
<S> <C> <C> <C>
E. Joseph Edell Chief Executive Officer and 71 1993
Chairman of the Board of
Directors
Arthur S. Edell President and Director 64 1989
Andrew M. Pinkowski Vice Chairman of the Board 63 1996
of Directors
I. Alan Hirschfeld Executive Vice President and 46 1995
Chief Financial Officer
Dr. Mark S. Gold Director 48 1996
Mac Allen Culver III Director 55 1997
Dennis E. Groat Director 57 1996
David Popofsky Director 64 1996
Marc Z. Edell Director 47 1996
E. Joseph Edell has been Chairman of the Board of Directors and Chief
Executive Officer of IVC since the Company's merger with American Vitamin
Products, Inc. ("American") on May 5, 1995. He previously had been President of
American since 1955. Mr. Edell is the brother of Arthur S. Edell, father of Marc
Z. Edell and father-in-law of I. Alan Hirschfeld.
Arthur S. Edell has been President of IVC since 1989. The brother of
E. Joseph Edell, he has over 40 years of experience in the vitamin,
pharmaceutical and health food industries in all facets of production,
distribution and marketing. Since 1979, Mr. Edell has owned Healthfair Vitamin
Centers, Inc.,
5
<PAGE>
a company which operates two health food stores in New Jersey. Mr. Edell was a
50% owner of Hitex Investments, Inc., a vitamin manufacturing company, from 1974
to 1979, and was a 50% owner of American from 1955 to 1975. In March 1995, Mr.
Edell was involved in a fatal automobile accident. In connection with the
accident, Mr. Edell plead guilty to a single count of vehicular homicide and
received a five year suspended sentence.
Andrew M. Pinkowski has been Vice Chairman of the Board of Directors of
IVC since the Company's merger with Hall Laboratories, Inc. ("Hall") on April
30, 1996. He previously had been President and Chief Executive Officer of Hall
since 1970. He joined Hall in 1969 as manager of marketing. Prior to joining
Hall, he held various marketing positions with Boise Cascade, Sterling Drug and
Universal Oil Products.
I. Alan Hirschfeld, Executive Vice President and Chief Financial
Officer, has been Chief Operating Officer of IVC since the Company's merger with
American. He previously had been Chief Operating Officer of American. He joined
American in 1987 as Chief Financial Officer. Prior to 1987, he was a Partner in
Grossman, Brown, Weinberg & Lawson, certified public accountants, where he was
employed since 1979. Prior to that time, Mr. Hirschfeld held various positions
at Coopers & Lybrand, a national public accounting and consulting firm, where he
was employed for six years. Mr. Hirschfeld's wife is the daughter of E. Joseph
Edell. Mr. Hirschfeld currently serves on the Board of Directors of Room Plus,
Inc.
Dr. Mark S. Gold is a Professor at the University of Florida Brain
Institute. Dr. Gold is a medical researcher, author and inventor. He was
previously a Resident, Chief Resident and Faculty Member at the Yale University
School of Medicine, and has written over 500 scientific publications and
numerous professional texts. Dr. Gold currently serves on the Board of Directors
of Somerset Valley Bank.
Dennis E. Groat is a Principal of Groat and Associates, a consulting
firm. He was President of Dentalogic, a dental technology business, from 1993 to
1996. From 1989 to 1993 he was President of Denar Corporation, a business
specializing in precision dental instrumentation. Mr. Groat was Chief Operating
Officer of Hall from 1984 to 1988. Prior to joining Hall, he held executive
positions with Scherer Healthcare, Inc., R.P. Scherer Corporation and Mead
Johnson Laboratories.
David Popofsky is President of Popofsky Advertising in New York City.
He has been the creative/marketing strategist responsible for the consumer
launch of various leading over-the-counter products. Mr. Popofsky is also the
founder of The Retail Drug Institute at Arnold Marie College of Pharmacy, served
as visiting professor for ten years in their graduate school and on the Board of
Overseers for many years. In addition, he served on the Graduate School faculty
of Columbia University Pharmacy School.
Marc Z. Edell is an attorney who has been practicing law in New York
and New Jersey for the past twenty years. He has been Managing Partner of Edell
and Associates, a Morristown, NJ law firm, since 1995. From 1985 through 1995,
Mr. Edell was a Partner with Budd Larner Gross in Short Hills, NJ. Mr. Edell is
the son of E. Joseph Edell.
Mac Allen Culver III is an investor, a director of Camera World
Company, LLC and a consultant to Enomarel Cosmetics, Inc. He was President and
Chief Operating Officer of St. Ives Laboratories, Inc., a hair and skin care
company, from 1987 until 1996. Prior to 1987, he was Chairman and Chief
Executive Officer of Pay 'N Save, Inc., President and Chief Executive Officer of
Gray Drug Fair and a Senior Vice President of Payless Drugstores NW, Inc., all
retail drug store chains.
6
<PAGE>
The Board of Directors of the Company has two standing committees: an
Audit Committee, consisting of Messrs. Marc Edell, Gold and Popofsky (chairman),
and a Compensation Committee, consisting of Messrs. Gold, Groat (chairman) and
Popofsky. The Audit Committee is charged with recommending annually to the Board
of Directors the independent auditors to be retained by the Company, reviewing
the audit plan with the auditors and reviewing the results of the audit with the
officers of the Company and its auditors. The Audit Committee held one meeting
during the fiscal year ended July 31, 1997. The Compensation Committee is
charged with administering the Company's 1995 Stock Option Plan and fixing the
compensation, including salaries and bonuses, of all officers of the Company.
The Compensation Committee held two meetings during the fiscal year ended July
31, 1997.
During the fiscal year ended July 31, 1997, there were 5 regularly
scheduled meetings of the Board of Directors and no special meetings. Each of
the directors attended at least 75 percent of the aggregate number of meetings
of the Board and of any Committees of the Board on which he serves.
The Company will consider for election to the Board of Directors a
nominee recommended by a shareholder if the recommendation is made in writing
and includes (i) the qualifications of the proposed nominee to serve on the
Board of Directors, (ii) the principal occupation and employment of the proposed
nominee during the past five years, (iii) each directorship currently held by
the proposed nominee and (iv) a statement that the proposed nominee has
consented to the nomination. The recommendation should be addressed to the
Secretary of the Company.
Directors hold their offices until the next annual meeting of
shareholders and thereafter until their successors have been duly elected and
qualified.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's executive officers and directors to file
reports of ownership with the Securities and Exchange Commission ("SEC") and
with Nasdaq. The Company believes that its executive officers and directors have
complied with all applicable Section 16(a) filing requirements during the
current fiscal year and the fiscal year ended July 31, 1997, except that E.
Joseph Edell filed late with respect to four transactions. This conclusion is
based solely on a review of such reports furnished to the Company in accordance
with SEC regulations and on representations from its executive officers and
directors.
The Board of Directors recommends a vote FOR election of each of the
nominees for directors and it is intended that proxies not voted to the contrary
will be so voted.
7
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth all compensation earned by or paid to
the Chief Executive Officer of IVC and the four most highly compensated
executive officers of the Company (the "Named Executive Officers") during the
fiscal years ended July 31, 1997, 1996 and 1995.
</TABLE>
<TABLE>
<CAPTION>
Long-Term
Compensation
--------------
Annual Compensation Awards
--------------------------------------------
Securities All
Underlying Other
Name and Salary Bonus Options Compensation
Principal Position Year ($) ($) (Shares) ($) (1)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
E. Joseph Edell 1997 500,000 - - -
Chairman and 1996 500,000 - - -
Chief Executive Officer 1995 494,000 80,000 - -
Arthur S. Edell 1997 170,000 - - 9,190
President 1996 170,000 - - 3,640
1995 125,571 - 200,000 3,640
I. Alan Hirschfeld 1997 250,000 - 50,000 1,528
Executive Vice President 1996 250,000 50,000 - 1,028
and Chief Financial Officer 1995 257,500 207,165 - 1,028
Andrew M. Pinkowski 1997 180,000 - - 500
Vice Chairman 1996 120,308 90,000 - -
1995 100,308 81,000 - -
Duane J. Baxter 1997 120,000 81,000 10,000 500
President/Hall Division 1996 100,000 10,873 50,036 -
1995 97,344 8,104 - -
</TABLE>
(1) Represents term life insurance premiums and, in the 1997 fiscal year, a
$500 contribution by the Company under the 401(k) Savings Plan.
No other annual compensation, stock appreciation rights, long-term
restricted stock awards, or long-term incentive plan payouts were awarded to,
earned by, or paid to the Named Executive Officers during any of the Company's
last three fiscal years.
8
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information with respect to grants of
stock options to purchase IVC Common Stock pursuant to the 1995 Stock Option
Plan to the Named Executive Officers for the fiscal year ended July 31, 1997.
<TABLE>
<CAPTION>
Number of Percent of Potential Realizable Value
Securities Total Options at Assumed Annual Rates of
Underlying Granted to Stock Price Appreciation for
Options Employees in Exercise Expiration Option Term
Name Granted (#) Fiscal Year Price ($/Sh) Date 5% ($) 10% ($)
---- ----------- ----------- ------------ ---- ------ -------
<S> <C> <C> <C> <C> <C> <C>
I. Alan Hirschfeld 50,000 42% $1.925 09/10/01 $15,000 $ 45,000
Duane J. Baxter 10,000 8% $1.438 04/30/02 $ 4,000 $ 9,000
</TABLE>
FISCAL YEAR-END OPTION VALUES
The following table sets forth information with respect to the value at
July 31, 1997 of unexercised stock options held by the Named Executive Officers.
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at Fiscal Year-End Options at Fiscal Year-End (1)
-------------------------- -----------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
----
Arthur S. Edell 400,000 - $285,000 -
I. Alan Hirschfeld 50,000 - $ 2,000 -
Duane J. Baxter 50,036 10,000 - $ 5,000
(1) The fair market value of the IVC Common Stock on July 31, 1997 ($1.97 per
share) minus the exercise price.
None of the Named Executive Officers exercised options during the
fiscal year ended July 31, 1997.
COMPENSATION OF DIRECTORS
On each of September 10, 1996 and November 24, 1997, the Board of
Directors granted, subject to approval of the IVC Shareholders, an option to
purchase 10,000 shares of IVC Common Stock to each of the Company's non-employee
directors as compensation for their services to the Company. The options granted
on September 10, 1996 have an exercise price of $1.75 per share and the options
granted on November 24, 1997 have an exercise price of $2.34 per share.
EMPLOYMENT AGREEMENTS
The Company entered into employment agreements with E. Joseph Edell and
I. Alan Hirschfeld as of April 28, 1996, providing for base annual compensation
of $500,000 and $250,000 per annum, respectively. The agreements are for one
year and are automatically extended for successive one-year
9
<PAGE>
periods unless the Company or these executives give three months' notice that
they elect that the term of employment shall not be further extended. In the
event notice is given in accordance with the terms of the agreements, these
executives shall receive a severance payment equal to their base annual
salaries, provided that no severance payment shall be required in the event that
an executive retires. The Board of Directors, at its discretion, may increase
the executive's base annual salary if the term is extended. In the event the
Company terminates without cause the employment of either of the executives,
such executive shall receive a severance payment equal to the remaining salary
due under the unexpired term of his agreement, plus one year's base salary. The
agreements each contain confidentiality and non-disclosure provisions.
The Company entered into an employment agreement with Arthur S. Edell,
effective as of January 1, 1996, providing for base annual compensation of
$170,000. The agreement is for an one-year period from its effective date, and
is automatically renewed for successive one-year periods unless canceled by
either party. In the event the Company terminates his employment without cause,
Mr. Arthur Edell shall receive a severance payment equal to six months' base
salary plus accrued benefits. The employment agreement also contains a provision
in which he would receive three times one year's base salary plus the value of
his other employment benefits in the event of a hostile takeover. The agreement
contains confidentiality and non-disclosure provisions.
The Company entered into an employment agreement with Andrew M.
Pinkowski, dated as of April 30, 1996, providing for base compensation of
$180,000 per annum. The agreement is effective for three years. In the event the
Company terminates his employment without cause, the Company is obligated to pay
his base salary throughout the remainder of his term of employment. The
agreement contains confidentiality and non-disclosure provisions. In addition,
upon expiration of his term of employment, the agreement provides that he remain
a consultant to the Company for a term of five years at $80,000 per annum.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee for the fiscal year ended
July 31, 1997 were Dr. Mark S. Gold, Dennis E. Groat (Chairman) and David
Popofsky. There were no interlocks or insider participation, as defined in the
SEC's Regulation S-K.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The responsibilities of the Compensation Committee include
administering the Company's 1995 Stock Option Plan and fixing the compensation,
including salaries and bonuses, of all officers of the Company.
Overall Policy
The Compensation Committee believes that the Company's officers have
been largely responsible for the Company's success. Based on this belief, the
Compensation Committee has structured the Company's compensation program to
compensate its executive officers on an annual basis with a cash salary at a
sufficient level to retain and motivate these officers. In addition, executive
officers may be granted a bonus based on the Company's performance and may be
granted stock options in order to link a portion of executive compensation to
appreciation of the Company's stock price. The objectives of this strategy are
to attract and retain effective and highly qualified executives, to motivate
executives to
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<PAGE>
achieve the goals inherent in the Company's business strategy and to link
executive and shareholder interest through stock options.
Base Salaries
Annual base salaries for the officers are determined by evaluating the
performance of the individuals and their contributions to the performance of the
Company and are based on the recommendation of E. Joseph Edell as Chief
Executive Officer. Financial results, as well as non-financial measures such as
the magnitude of responsibility of the position, individual experience, and the
Compensation Committee's knowledge of compensation practices for comparable
positions at other companies are considered.
In establishing E. Joseph Edell's annual base salary of $500,000 for
the fiscal year ending July 31, 1998 (which amount was originally established in
1996 in conjunction with execution of his employment agreement), the
Compensation Committee took into account the Company's achievements in fiscal
1995 and 1996, its assessment of Mr. Edell's individual performance, as well as
base salaries for chief executive officers at companies of comparable size and
complexity, both public and private, known to members of the Compensation
Committee. The Compensation Committee also took into account Mr. Edell's
contribution to the Company's growth and diversity and his future anticipated
contributions to the Company.
Long-Term Incentives
Under the 1995 Stock Option Plan, stock options may be granted to
executives of the Company. Stock options are designed to focus the executives'
attention on stock values and to align the interests of executives with those of
the shareholders. Stock options are generally granted at prices equal to the
fair market value at the date of grant, except that in the case of an incentive
stock option, options are granted to executives who own more than 10% of IVC
Common Stock at prices not less than 110% of the fair market value at the date
of grant. Options are not exercisable until six months after the date of the
grant. The options generally remain exercisable during employment until the
tenth anniversary of the date of the grant or five years with respect to grants
to executives who own more than 10% of the IVC Common Stock. This approach
provides an incentive to executives to increase shareholder value over the long
term since the full benefit of the options cannot be realized unless stock price
appreciation occurs over a number of years.
Compensation Committee
Dr. Mark S. Gold
Dennis E. Groat (Chairman)
David Popofsky
11
<PAGE>
PERFORMANCE GRAPH
The following performance graph is a line graph comparing the yearly
change in the cumulative total shareholder return on IVC Common Stock against
the cumulative return of the Nasdaq Index and the S&P Health Care - Drugs Index
for the fiscal years ended July 31, 1994, 1995, 1996 and 1997. IVC Common Stock
was initially registered under Section 12 of the Exchange Act in February 1994.
IVC Industries, NASDAQ Composite S&P Health Care
Inc. Index -Drugs Index
7/94 $85 $ 97 $106
7/95 64 135 168
7/96 69 145 228
7/97 48 214 376
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PROPOSAL 2 -- APPROVAL OF INCREASE IN NUMBER OF SHARES SUBJECT TO IVC'S
1995 STOCK OPTION PLAN
In July 1995, the Board of Directors adopted IVC's 1995 Stock Option
Plan (the "1995 Plan"), which was approved by the IVC Shareholders at the Annual
Meeting of Shareholders on March 15, 1996. The 1995 Plan currently authorizes
the Company to grant options to purchase an aggregate of 1,000,000 shares of IVC
Common Stock to employees, officers and key employees of the Company, including
members of the Board of Directors who are also employees of the Company and its
subsidiaries, and any other person who, in the opinion of the Compensation
Committee, has rendered valuable services to the Company or its subsidiaries.
The 1995 Plan currently has 629,016 shares remaining available for grant, and
the Board of Directors believes that this amount is inadequate for future
requirements.
At the recommendation of the Compensation Committee, as of March 16,
1998, the Board of Directors unanimously adopted and recommended that the IVC
Shareholders approve an increase of 1,000,000 in the number of shares with
respect to which options may be granted pursuant to the 1995 Plan, thus
increasing the shares of IVC Common Stock subject to the 1995 Plan from
1,000,000 shares to 2,000,000 shares.
If the increase in the number of shares subject to the 1995 Plan is not
approved, the 1995 Plan will continue to remain in effect in its present form.
Nature and Purpose of the Plan
The purpose of the 1995 Plan is to provide an incentive to certain
employees of the Company and its subsidiaries in order to encourage them to
remain in the employ of the Company and contribute to the Company's success.
Options granted under the 1995 Plan are intended to qualify as nonqualified
stock options ("NQSOs") or incentive stock options ("ISOs") within the meaning
of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). As
of March 16, 1997, approximately 55 persons were eligible to receive options and
options had been granted to approximately 50 such persons pursuant to the 1995
Plan.
Duration and Modification
The 1995 Plan will terminate not later than March 15, 2005. The Board
of Directors may at any time amend, modify, terminate or suspend the 1995 Plan.
However, the Board of Directors may not, without further approval by the
shareholders, materially increase the benefits accruing to the optionees under
the 1995 Plan, increase the aggregate number of shares of IVC Common Stock which
may be issued under the 1995 Plan or to any individual or modify the
requirements for eligibility for participation in the 1995 Plan. No such
termination, modification, amendment or suspension may alter or impair the
rights of an optionee under an outstanding option without the consent of such
optionee.
Administration
The 1995 Plan is administered by the Company's Compensation Committee,
consisting of three non-employee directors of the Company. The members of the
Compensation Committee are appointed by the Board of Directors. Currently, the
Compensation Committee is comprised of Dr. Mark S. Gold, Dennis E. Groat and
David Popofsky.
Subject to the express provisions of the 1995 Plan, the Compensation
Committee has the power and authority to interpret the 1995 Plan, the options
and the option agreements, to adopt such rules and
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<PAGE>
regulations for the administration, interpretation and application of the 1995
Plan as are consistent therewith, and to interpret, amend or revoke any such
rules and regulations. The members of the Compensation Committee do not receive
additional compensation for service in connection with the administration of the
1995 Plan.
Description of Options Under the Plan
Each option granted under the 1995 Plan is designated either as a NQSO
or an ISO within the meaning of Section 422 of the Code by the Compensation
Committee. ISOs are only granted to employees. Awards are in such amounts as the
Compensation Committee may determine; provided that no optionee is entitled to a
grant of options with respect to more than 1,000,000 shares of IVC Common Stock,
and provided further that the aggregate fair market value (determined as of the
date of grant) of the IVC Common Stock for which ISOs may first become
exercisable during any calendar year, together with IVC Common Stock subject to
incentive stock options first exercisable by an optionee under any other plan of
the Company or any subsidiary, may not exceed $100,000.
Pursuant to the 1995 Plan, options granted thereunder are exercisable
in accordance with the terms of each optionee's option agreement, as determined
by the Compensation Committee in its sole discretion, but in no event prior to
six months from the date of grant. In addition, no option may be exercised after
the stated expiration date, which shall be no later than ten years from the date
of grant (five years in the case of an optionee who owns more than 10% of the
total combined voting power of all classes of the Company's stock). The exercise
price of an option may not be less than the fair market value of IVC Common
Stock on the date of grant, except that in the case of an ISO, an optionee who
owns more than 10% of the total combined voting power of all classes of the
Company's stock, the exercise price must be not less than 110% of the fair
market value of the IVC Common Stock on the date the ISO is granted. For
purposes of the 1995 Plan, "fair market value" means the closing price per share
of IVC Common Stock as reported on the Nasdaq SmallCap Market for the last
preceding date on which a sale was reported, unless otherwise determined by the
Compensation Committee. Upon the exercise of an option, the option price must be
paid in full, either in cash or in such other consideration as the Compensation
Committee deems appropriate, including, but not limited to, shares of IVC Common
Stock.
Upon (a) the death or disability of an optionee while in the employ of
the Company or a subsidiary, (b) the voluntary resignation of the optionee or
(c) the termination of an optionee's employment other than for cause, the
optionee will be entitled to exercise his options, to the extent then
exercisable or vested, for a period of 90 days following such event. In the
event the optionee is terminated for cause, the optionee's right to exercise his
options shall immediately terminate. For purposes of the 1995 Plan, "for cause"
means (i) the continued failure by the optionee to substantially perform his
duties with the Company or a subsidiary (other than any failure resulting from
his incapacity due to physical or mental illness) or (ii) the engaging by such
optionee in conduct which is injurious to the Company or a subsidiary,
monetarily or otherwise, in either case as determined by the Company. In the
event that the optionee is not an employee of the Company or a subsidiary and
such optionee's relationship with the Company and its subsidiaries ceases, the
Compensation Committee, in its sole discretion, shall determine whether (x) such
optionee will have the right to exercise his options, to the extent then vested,
or (y) such options shall terminate and be rendered null and void.
No option is transferable other than by will or the laws of descent and
distribution. However, the Compensation Committee, in its sole discretion, may
provide in the option agreement that the optionee may transfer, without
consideration, all or a portion of his option to his children, grandchildren or
spouse, to trusts for his or their benefit and to partnerships in which he or
they are the only parties. No permitted transfer so effected shall be effective
to bind the Company unless the Company has been furnished with
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<PAGE>
written notice thereof and such evidence as the Compensation Committee may deem
reasonably necessary to establish the validity of the transfer and the
acceptance by the transferee or transferees of the terms and conditions of the
1995 Plan.
The number of shares reserved for issuance under the 1995 Plan and the
number of shares covered by each option granted under the 1995 Plan will be
adjusted in the event of a stock dividend, reorganization, recapitalization,
stock split-up, combination of shares, sale of assets, merger or consolidation
in which the Company is the surviving corporation. In the event of the
dissolution or liquidation of the Company, or a merger, reorganization or
consolidation in which the Company is not the surviving corporation, each option
will terminate.
Securities Subject to the Plan; Market Price
1,000,000 shares of IVC Common Stock currently are authorized for
issuance upon exercise of options granted under the 1995 Plan. If the proposed
increase in the number of shares subject to the 1995 Plan is adopted, such
amount will be increased to 2,000,000 shares. The number of authorized but
unissued shares will be reduced from time to time to the extent that a
corresponding amount of outstanding shares are purchased by the Company and set
aside for issuance upon the exercise of options granted under the 1995 Plan. If
any such options were to expire or terminate for any reason without having been
exercised in full, the unpurchased shares subject thereto would again become
available for the purposes of the 1995 Plan.
The market value of IVC Common Stock, as of March 10, 1998, was $2.00
per share.
Federal Income Tax Consequences of Issuance and Exercise of Options
The following discussion of the Federal income tax consequences of the
granting and exercise of options under the 1995 Plan, and the sale of IVC Common
Stock acquired as a result thereof, is based on an analysis of the Code, as
currently in effect, existing laws, judicial decisions and administrative
rulings and regulations, all of which are subject to change. In addition to
being subject to the Federal income tax consequences described below, an
optionee may also be subject to state and/or local income tax consequences in
the jurisdiction in which he works and/or resides.
Nonqualified Stock Options:
No income will be recognized by an optionee at the time a NQSO is
granted.
Ordinary income will be recognized by an optionee at the time a NQSO is
exercised, and the amount of such income will be equal to the excess of the fair
market value on the exercise date of the shares issued to the optionee over the
exercise price. In the case of an optionee who is an employee of the Company or
its subsidiaries, this ordinary income may also constitute wages subject to the
withholding of income tax, and the Company or its subsidiaries will be required
to make whatever arrangements are necessary to ensure that the amount of the tax
required to be withheld is available for payment to the Internal Revenue Service
in money.
An optionee generally will recognize capital gain or loss on a
subsequent sale or other taxable disposition of the shares of IVC Common Stock
acquired upon exercise of a NQSO, and such gain or loss will be measured by the
difference between the amount realized on the disposition and the tax basis of
such shares. The tax basis of the shares acquired upon the exercise of the NQSO
will be equal to the sum of the exercise price of the NQSO and the amount
included in income upon exercise of the NQSO. The
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<PAGE>
holding period of the shares will be measured from the date of exercise.
Depending on whether the shares are held less than 12 months, 12 to 18 months or
longer than 18 months, capital gain or loss will be either short-term, mid-term
or long-term.
If an optionee makes payment of the exercise price of a NQSO by
delivering shares of IVC Common Stock, he generally will not recognize any gain
with respect to such shares as a result of such delivery, but the amount of
gain, if any, which is not so recognized will be excluded from his basis in the
new shares received.
The Company or its subsidiaries generally will be entitled to a
deduction for Federal income tax purposes at such time and in the
same amount as the amount included in ordinary income by the optionee upon
exercise of his NQSO, subject to the usual rules as to reasonableness of
compensation and provided that the Company or its subsidiaries timely complies
with applicable information reporting requirements.
Incentive Stock Options:
In general, neither the grant nor the exercise of an ISO will result in
taxable income to an optionee or a deduction to the Company or its subsidiaries.
However, for purposes of the alternative minimum tax, the spread on the exercise
of an ISO will be considered as part of the optionee's income.
The sale of the shares of IVC Common Stock received pursuant to the
exercise of an ISO which satisfies the holding period rules will result in
capital gain to an optionee and will not result in a tax deduction to the
Company or its subsidiaries. To receive incentive stock option treatment as to
the shares acquired upon exercise of an ISO, an optionee must neither dispose of
such shares within two years after the ISO is granted nor within one year after
the exercise of the ISO. In addition, an optionee generally must be an employee
of the Company (or a subsidiary of the Company) at all times between the date of
grant and the date three months before exercise of the ISO.
If the holding period rules are not satisfied, the portion of any gain
recognized by an optionee on the disposition of the shares acquired upon the
exercise of an ISO that is equal to the lesser of (a) the fair market value of
the IVC Common Stock on the date of exercise minus the exercise price or (b) the
amount realized on the disposition minus the exercise price, will be treated as
ordinary income, with any remaining gain being treated as capital gain. The
Company or its subsidiaries generally will be entitled to a deduction for
Federal income tax purposes equal to the amount of such ordinary income.
If an optionee makes payment of the exercise price of an ISO by
delivering shares of IVC Common Stock, he generally will not recognize any gain
with respect to such shares as a result of such delivery, but the amount of
gain, if any, which is not so recognized will be excluded from his basis in the
new shares received. However, the use by an optionee of shares previously
acquired pursuant to the exercise of an ISO to exercise an ISO will be treated
as a taxable disposition if the transferred shares were not held by the optionee
for the requisite holding period.
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<PAGE>
Certain Information With Respect to Options Granted
The following table sets forth, with respect to the Named Executive
Officers, all executive officers as a group, all non-employee directors as a
group, and all employees as a group (excluding executive officers), the number
of shares of IVC Common Stock subject to options granted under the 1995 Plan
during the year ended July 31, 1997:
<TABLE>
<CAPTION>
Name of Individual or Capacities in which Number of Shares Average per share
Identity of Group Served Subject to Option Exercise Price
- --------------------- ------------------- ----------------- -----------------
<S> <C> <C> <C>
E. Joseph Edell Chairman and Chief _ _
Executive Officer
Arthur S. Edell President _ _
I. Alan Hirschfeld Executive Vice 50,000 $1.93
President and Chief
Financial Officer
Andrew M. Pinkowski Vice Chairman _ _
Duane J. Baxter President/Hall Division 10,000 $1.44
All executive officers 60,000 $1.85
as a group (5 persons)
All non-employee _ _
directors as a group (5
persons)
All employees (except 60,000 $1.66
executive officers) as a
group (4 persons)
</TABLE>
Vote Required. The affirmative vote of the holders of a majority of the
shares of IVC Common Stock present or represented and entitled to vote at the
Annual Meeting is required to approve the increase in the number of shares
subject to the 1995 Plan.
The Board of Directors recommends a vote FOR approval of the increase
in the number of shares subject to IVC's 1995 Stock Option Plan and it is
intended that proxies not voted to the contrary will be so voted.
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PROPOSAL 3 -- RATIFICATION OF GRANT OF OPTIONS TO NON-EMPLOYEE DIRECTORS
On each of September 10, 1996 and November 24, 1997, the Board of
Directors granted, subject to approval of the IVC Shareholders, an option to
purchase 10,000 shares of IVC Common Stock to each of the Company's non-employee
directors, as compensation for their services to the Company. All such options
will be exercisable upon shareholder approval, and expire ten years from the
date of grant. The options granted on September 10, 1996 have an exercise price
of $1.75 per share, and the options granted on November 24, 1997 have an
exercise price of $2.34 per share. On March 10, 1998, the closing price of a
share of IVC Common Stock was $2.00.
The general features of these options, and the Federal income tax
consequences of the grant and exercise thereof, are identical to options under
the proposed Non-Employee Directors' Stock Option Plan (see "PROPOSAL 4 -
APPROVAL OF IVC'S NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN").
Vote Required. The affirmative vote of the holders of a majority of the
shares of IVC Common Stock present or represented and entitled to vote at the
Annual Meeting is required to ratify the grants of stock options described
above.
The Board of Directors recommends a vote FOR ratification of the grant
in 1996 and 1997 of stock options to the non-employee directors of IVC and it is
intended that proxies not voted to the contrary will be so voted.
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PROPOSAL 4 -- APPROVAL OF IVC'S NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
On March 16, 1998, the Board of Directors adopted, upon the
recommendation of the Compensation Committee and subject to approval of the IVC
Shareholders, the IVC Industries, Inc. Non-Employee Directors' Stock Option Plan
(the "Non-Employee Directors' Plan"). The Non-Employee Directors' Plan is
intended to compensate the non-employee directors of the Company for their
service to the Company and to provide them an incentive to remain as directors
of the Company and contribute to the Company's success. The Company's
non-employee directors are not eligible to participate in the 1995 Plan.
The following summary of certain features of the Non-Employee
Directors' Plan is qualified in its entirety by reference to the full text of
the Non-Employee Directors' Plan, which is Exhibit A to this Proxy Statement.
The Non-Employee Directors' Plan provides for the grant to each of the
Company's non-employee directors, as of September 1 of each year, of an option
to purchase 10,000 shares of IVC Common Stock. The Non-Employee Directors' Plan
also authorizes the grant of additional options, in such amounts and at such
times as the Board of Directors may determine, to non-employee directors of the
Company.
Nature and Purpose of the Plan
The purpose of the Non-Employee Directors' Plan is to compensate the
non-employee directors of the Company for their service to the Company and to
provide them an incentive to remain as directors of the Company and contribute
to the Company's success. The Board of Directors believes that the Non-Employee
Directors' Plan will promote continuity of membership on the Board of Directors
and increased incentive and personal interest in the welfare of the Company. The
number of persons currently eligible to participate in the Non-Employee
Directors' Plan is 5.
Duration and Modification
The Non-Employee Directors' Plan will terminate not later than March
16, 2008. The Board of Directors may at any time amend or terminate the
Non-Employee Directors' Plan or make such modifications of the Non-Employee
Directors' Plan as it may deem advisable. However, the Board of Directors may
not, without further approval by the shareholders, increase the number of shares
of IVC Common Stock as to which options may be granted under the Non-Employee
Directors' Plan, change the manner of determining the option prices, or
materially increase the benefits accruing to optionees under the Non-Employee
Directors' Plan.
Administration
The Non-Employee Directors' Plan is administered by the Board of
Directors. Subject to the express provisions of the Non-Employee Directors'
Plan, the Board of Directors shall have the power and authority to interpret the
Non-Employee Directors' Plan, the options and the option agreements, to adopt
such rules and regulations for the administration, interpretation and
application of the Non-Employee Directors' Plan as are consistent therewith, and
to interpret, amend or revoke any such rules and regulations. The members of the
Board of Directors do not receive additional compensation for service in
connection with the administration of the Non-Employee Directors' Plan.
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<PAGE>
Description of Options Under the Plan
Under the Non-Employee Directors' Plan, the per share exercise price of
an option is the closing price per share of IVC Common Stock as reported on the
Nasdaq SmallCap Market for the last preceding date on which a sale was reported.
Options granted under the Non-Employee Directors' Plan are exercisable in
accordance with the terms of an optionee's option agreement as determined in the
sole discretion of the Board of Directors. Upon the exercise of an option, the
option price must be paid in full, either in cash or in such other consideration
as the Board of Directors deems appropriate, including, but not limited to,
shares of IVC Common Stock. An option may not be granted for a period in excess
of 10 years from the date of grant.
In the event (i) the Board of Directors does not nominate an optionee
for re-election as a director, (ii) an optionee voluntarily terminates his
service as a director of the Company or (iii) an optionee shall die or become
disabled while the optionee is serving as a director of the Company, such
optionee, his estate or his legal guardian, as the case may be, will be entitled
to exercise such optionee's options for a period of 90 days following the date
the optionee ceases to serve as a director. In the event that an optionee's
service as a director with the Company is terminated by the Company for cause
under Delaware law, such optionee's right to exercise his options terminates and
all of such optionee's options, whether or not vested, are rendered null and
void and become unexercisable.
No option is transferable other than by will or the laws of descent and
distribution. However, the Board of Directors, in its sole discretion, may
provide in the option agreement that the optionee may transfer, without
consideration, all or a portion of his option to his children, grandchildren or
spouse, to trusts for his or their benefit and to partnerships in which he or
they are the only parties. No permitted transfer so effected shall be effective
to bind the Company unless the Company has been furnished with written notice
thereof and such evidence as the Board of Directors may deem reasonably
necessary to establish the validity of the transfer and the acceptance by the
transferee or transferees of the terms and conditions of the Non-Employee
Directors' Plan.
The number of shares reserved for issuance under the Non-Employee
Directors' Plan and the number of shares covered by each option granted under
the Non-Employee Directors' Plan will be adjusted in the event of a stock
dividend, reorganization, recapitalization, stock split-up, combination of
shares, sale of assets, merger or consolidation in which the Company is the
surviving corporation. In the event of the dissolution or liquidation of the
Company, or a merger, reorganization or consolidation in which the Company is
not the surviving corporation, each option will terminate.
Securities Subject to the Plan; Market Price
500,000 authorized but unissued shares of IVC Common Stock have been
reserved for issuance upon the exercise of options granted under the
Non-Employee Directors' Plan. The number of authorized but unissued shares so
reserved will be reduced from time to time to the extent that a corresponding
amount of outstanding shares are purchased by the Company and set aside for
issuance upon the exercise of options granted under the Non-Employee Directors'
Plan. If any such options were to expire or terminate for any reason without
having been exercised in full, the unpurchased shares subject thereto would
again become available for the purposes of the Non-Employee Directors' Plan.
The market value of IVC Common Stock, as of March 10, 1998, was $2.00
per share.
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<PAGE>
Grants Under the Plan
No grants have been made under the Non-Employee Directors' Plan. Each
of the Company's non-employee directors will receive an option to purchase
10,000 shares of IVC Common Stock as of September 1 of each year. As stated
above, the Board of Directors may also grant additional options to the Company's
non-employee directors, in such amounts and at such times as the Board of
Directors may determine. It is not possible to predict the nature of any such
additional option grants.
Federal Income Tax Consequences of Issuance and Exercise of Options
The following discussion of the Federal income tax consequences of the
granting and exercise of options under the Non-Employee Directors' Plan, and the
sale of IVC Common Stock acquired as a result thereof, is based on an analysis
of the Code, as currently in effect, existing laws, judicial decisions and
administrative rulings and regulations, all of which are subject to change. In
addition to being subject to the Federal income tax consequences described
below, an optionee may also be subject to state and/or local income tax
consequences in the jurisdiction in which he works and/or resides.
No income will be recognized by an optionee at the time an option is
granted. Ordinary income will be recognized by an optionee at the time an option
is exercised, and the amount of such income will be equal to the excess of the
fair market value on the exercise date of the shares issued to the optionee over
the option price.
The Company will be entitled to a deduction for Federal income tax
purposes in the same amount that the optionee is required to include in income,
subject to the usual rules as to reasonableness of compensation and provided
that the Company timely complies with the applicable information reporting
requirements.
If an optionee makes payment of the option price by delivering shares
of IVC Common Stock, the optionee generally will not recognize any gain as a
result of such delivery, but the amount of gain, if any, which is not so
recognized will be excluded from his basis in the new shares received.
Capital gain or loss on a subsequent sale or other disposition of the
shares acquired upon the exercise of an option will be measured by the
difference between the amount realized on the disposition and the tax basis of
such shares. The tax basis of the shares acquired upon the exercise of any
option will be equal to the sum of the exercise price of such option and the
amount included in income with respect to such option. The holding period will
be measured from the date of exercise. Depending on whether the shares are held
less than 12 months, 12 to 18 months or longer than 18 months, capital gain or
loss will be either short-term, mid-term or long-term.
Vote Required. The affirmative vote of the holders of a majority of the
shares of IVC Common Stock present or represented and entitled to vote at the
Annual Meeting is required to approve the Non-Employee Directors' Plan.
The Board of Directors recommends a vote FOR approval of the
Non-Employee Directors' Plan and it is intended that proxies not voted to the
contrary will be so voted.
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<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee recommended to the Board of Directors, and the
Board of Directors selected, Amper, Politziner & Mattia, independent auditors,
as auditors of the Company for the fiscal year ending July 31, 1998.
It is expected that representatives of Amper, Politziner & Mattia will
be present at the Annual Meeting, will have an opportunity to make a statement
if they so desire and will be available to respond to appropriate questions from
IVC Shareholders.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Loans, Guarantees and Advances
Prior to fiscal 1994, Arthur S. Edell loaned the Company $250,000. The
current loan balance is $165,000. This loan has no stated terms of repayment and
bears interest at 6% per annum. The loan was obtained on terms no less favorable
to the Company than could be obtained from non-related parties.
From time to time the Company has made advances to E. Joseph Edell and
I. Alan Hirschfeld. Such advances bear interest at 5% per annum. At January 31,
1998, the aggregate net advances to E. Joseph Edell and to I. Alan Hirschfeld
were $339,000 and $163,000 respectively. The balances due the Company are
payable by July 1998.
Other Matters
The Company routinely sells its products on arm's-length terms to
Healthfair Vitamin Centers, Inc., a company wholly owned by Arthur S. Edell and
his wife, Ethel Edell. The Company's sales to Healthfair Vitamin Centers for the
fiscal year ended July 31, 1997 were $169,000.
The Company periodically sells its products on arm's-length terms to
D.N.R. Inc., a company located in Israel. A principal shareholder of D.N.R. Inc.
is the brother-in-law of the president of the Company's International Division.
The Company's sales to D.N.R. Inc. for the fiscal year ended July 31, 1997 were
$313,000.
The Company holds a contract receivable, due in January 2012, from
Agora Holding Company ("Agora"), a partnership consisting of Andrew M. Pinkowski
and certain previous shareholders of Hall in the amount of $878,000, as at July
31, 1997. Interest income earned by the Company on this contract was $80,000 for
the fiscal year ended July 31, 1997. The Company leases its manufacturing and
administration facility in Portland, Oregon from Agora. Rent expense incurred by
the Company for this property was $163,000 for the fiscal year ended July 31,
1997. The above sales and rentals were made on terms no less favorable to the
Company than could be obtained from non-related parties.
22
<PAGE>
MISCELLANEOUS
Any proposal of an eligible shareholder intended to be presented at the
next annual meeting of shareholders must be received by the Company for
inclusion in its proxy statement and form of proxy relating to that meeting no
later than December 17, 1998.
The Board of Directors of the Company does not intend to present, and
does not have any reason to believe that others intend to present, any matter of
business at the meeting other than those set forth in the accompanying Notice of
Annual Meeting of Shareholders. However, if other matters properly come before
the meeting, it is the intention of the persons named in the enclosed form of
proxy to vote any proxies in accordance with their judgment.
The Company will bear the cost of preparing, assembling and mailing the
enclosed form of proxy, this Proxy Statement and other material which may be
sent to shareholders in connection with this solicitation. Solicitation may be
made by mail, telephone, telegraph and personal interview. The Company may
reimburse persons holding shares in their names or in the names of nominees for
their expense in sending proxies and proxy material to their principals.
Copies of the 1998 Annual Report to Shareholders, which is the
Company's Annual Report to the Securities and Exchange Commission on Form 10-K,
are being mailed to shareholders simultaneously with this Proxy Statement.
By order of the Board of Directors,
/s/ E. Joseph Edell
E. Joseph Edell
Chairman of the Board and
Chief Executive Officer
Freehold, New Jersey
March 24, 1998
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<PAGE>
EXHIBIT A
IVC INDUSTRIES, INC.
NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
(Effective March 17, 1998)
1. Purpose. The purpose of the IVC Industries, Inc. Non-Employee
Directors' Stock Option Plan (the "Plan") is to provide an incentive to the
non-employee directors (the "Non-Employee Directors") of IVC Industries, Inc., a
Delaware corporation (the "Company"), in order to encourage them to remain in
the service of the Company as directors and contribute to the Company's success,
by granting them nonqualified stock options ("Options").
2. Administration. (a) The Plan shall be administered by the Board
of Directors (the "Board").
(b) It shall be the duty of the Board to administer the Plan in
accordance with its terms and provisions. Subject to the express provisions of
the Plan, the Board shall have the power and authority to interpret the Plan,
the Options and the Option Agreements (as defined herein), to adopt such rules
and regulations for the administration, interpretation and application of the
Plan as are consistent therewith, and to interpret, amend or revoke any such
rules and regulations. Each determination, interpretation, or other action made
or taken pursuant to the provisions of the Plan by the Board shall be final and
shall be binding and conclusive for all purposes.
(c) The Board shall act by a majority of its members in attendance at a
meeting at which a quorum is present or by a memorandum or other written
instrument signed by all members of the Board.
(d) All expenses and liabilities incurred by members of the Board in
connection with the administration of the Plan shall be borne by the Company.
The Board may employ attorneys, consultants, accountants, appraisers, brokers or
other persons. The Board shall be entitled to rely upon the advice, opinions or
valuations of any such persons. All actions taken and all interpretations and
determinations made by the Board in good faith shall be final and binding upon
all persons, including the Non-Employee Directors to whom Options have been
granted (the "Optionees"). No member of the Board shall be personally liable for
any action, determination or interpretation with respect to the Plan, the
Options or the Option Agreements, made in good faith, and all members of the
Board shall be fully protected by the Company in respect of any such action,
determination or interpretation.
3. Stock Subject to the Plan. The stock to be made the subject of any
Option granted hereunder shall be shares of the common stock of the Company, par
value $.01 per share (the "Stock"), whether authorized and unissued or treasury
stock, and the total number of shares of Stock for which Options may be granted
under the Plan shall not exceed, in the aggregate, 500,000 shares, subject to
adjustment in accordance with the provisions of Section 11 hereof.
4. Grant of Options. (a) As of September 1 of each year, each
Non-Employee Director shall be granted an Option to purchase 10,000 shares of
Stock; provided, however, that, if a Non-Employee Director shall become a
Non-Employee Director subsequent to September 1 of such fiscal year, on the
first day on which he shall become a Non-Employee Director he shall be granted
an Option to purchase the number of shares of Stock equal to the product of
10,000 and the fraction the numerator of which shall be the number of full
months remaining in such fiscal year and the denominator of which shall be 12.
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(b) The Board may grant additional Options, in such amounts and at such
times as the Board may determine, to Non-Employee Directors who perform services
for the Company.
(c) Each Option granted to a Non-Employee Director shall be evidenced
by a written agreement in such form and containing such provisions not
inconsistent with the Plan as the Board shall from time to time approve (an
"Option Agreement") and which, in the case of Options granted pursuant to
Section 4(b) hereof, need not be identical in respect of each Optionee.
5. Exercise Price. The exercise price (the "Exercise Price") of an
Option shall be the fair market value per share of Stock covered by the Option
at the time that the Option is granted. For purposes of this Section 5, the fair
market value per share of Stock as of a particular date shall mean, unless
otherwise determined by the Board, the closing price per share of Stock as
reported on the Nasdaq SmallCap Market for the last preceding date on which a
sale was reported.
6. Option Period. Each Option shall expire on such date as shall be
determined by the Board, but not later than ten years from the date such Option
was granted.
7. Exercise of Options. (a) Each Option will be exercisable in
accordance with the terms of the Optionee's Option Agreement, as determined in
the sole discretion of the Board.
(b) Each Option, to the extent vested, may be exercised in whole or in
part at any time prior to its expiration or termination, by written notice of
such exercise to the Secretary of the Company, which notice shall specify the
number of shares of Stock as to which such Option is being exercised.
Notwithstanding the foregoing, no Option may be exercised prior to the date the
Plan is approved by the shareholders of the Company.
8. Payment for Stock. (a) The aggregate purchase price of Stock issued
upon the exercise of any Option shall be paid in full on the date of exercise.
Payment shall be made either in cash or in such other consideration as the Board
deems appropriate, including, but not limited to, Stock already owned by the
Optionee or Stock to be acquired by the Optionee upon exercise of Options having
a total fair market value, as determined by the Board, equal to the aggregate
purchase price, or a combination of cash and Stock having a total fair market
value, as so determined, equal to the aggregate purchase price.
(b) Upon the exercise of an Option, the Company shall have the right to
require the Optionee to pay the amount of any taxes which the Company may be
required to withhold with respect to such transaction, provided that the Board
may permit an Optionee to elect, pursuant to such rules as the Board may
establish, to have the Company reduce the number of shares of Stock that
otherwise would be issued upon such exercise by the fair market value, as
determined by the Board, of the number of shares necessary to accomplish such
withholding; and provided further that the Board may impose such restrictions
and conditions on the payment of any withholding obligation as may be required
to satisfy applicable regulatory requirements.
9. Termination of Employment. (a) In the event (i) the Board does not
nominate an Optionee for re-election as a director, (ii) an Optionee voluntarily
terminates his service as a director of the Company or (iii) an Optionee shall
die or become disabled (within the meaning of Section 22(e)(3) of the Internal
Revenue Code of 1986) while the Optionee is serving as a director of the
Company, such Optionee, his estate or his legal guardian, as the case may be,
will be entitled to exercise such Optionee's Options for a period of 90 days
following the date the Optionee shall cease to serve as a director.
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<PAGE>
(b) In the event that an Optionee's service as a director with the
Company is terminated by the Company for cause under Delaware law, such
Optionee's right to exercise his Options shall thereupon terminate and all of
such Optionee's Options, whether or not vested, shall be rendered null and void
and shall become unexercisable.
10. Nontransferability. No Option shall be transferable other than by
will or the laws of descent and distribution; provided, however, that the Board,
in its sole discretion, may provide in the Option Agreement that the Optionee
may transfer, without consideration, all or a portion of his Option to his
children, grandchildren or spouse, to trusts for his or their benefit and to
partnerships in which he or they are the only parties. No permitted transfer so
effected shall be effective to bind the Company unless the Company has been
furnished with written notice thereof and such evidence as the Board may deem
reasonably necessary to establish the validity of the transfer and the
acceptance by the transferee or transferees of the terms and conditions of the
Plan.
11. Stock Adjustments. (a) If the outstanding shares of Stock are
increased, decreased or changed into, or exchanged for, a different number or
kind of shares or securities of the Company through a reorganization or merger
in which the Company is the surviving entity, or through a combination,
recapitalization, reclassification, stock split, stock dividend, stock
consolidation or otherwise, an appropriate adjustment shall be made in the
number and kind of shares that may be issued pursuant to outstanding Options.
Any such adjustment, however, shall be made without change in the total payment,
if any, applicable to the portion of an Option not exercised but with a
corresponding adjustment in the price for each share.
(b) Upon the dissolution or liquidation of the Company, or upon a
reorganization, merger or consolidation of the Company with one or more
corporations as a result of which the Company is not the surviving corporation,
the Plan shall terminate, and any outstanding Options shall terminate and be
forfeited. Notwithstanding the foregoing, the Board may provide in connection
with, or in contemplation of, any such transaction for any or all of the
following alternatives (separately or in combinations): (i) for the assumption
by the successor corporation of the Options theretofore granted or the
substitution by such corporation for such Options of awards covering the stock
of the successor corporation, or a parent or subsidiary thereof, with
appropriate adjustments as to the number and kind of shares and prices; (ii) for
the continuance of the Plan by the successor corporation, in which event the
Plan and the Options theretofore granted shall continue in the manner and under
the terms so provided; or (iii) for the payment in cash or shares of Stock in
lieu of and in complete satisfaction of such Options.
(c) In adjusting Options to reflect the changes described in this
Section 11, or in determining that no such adjustment is necessary, the Board
may rely upon the advice of independent counsel and accountants of the Company,
and the determination of the Board shall be conclusive. No fractional shares of
Stock shall be issued under the Plan on account of any such adjustment.
12. No Rights as a Shareholder. An Optionee or a permitted transferee
of a Option shall have no rights as a shareholder with respect to any Stock
covered by his Option until such Optionee or a permitted transferee shall have
become the holder of record of such Stock.
13. Amendment and Termination. (a) The Board may at any time terminate
or suspend the Plan and the Board may amend or modify the Plan; provided,
however, if an amendment would (i) materially increase the benefits accruing to
Optionees, (ii) increase the aggregate number of shares of Stock which may be
issued under the Plan or to any individual or (iii) modify the requirements of
eligibility for participation in the Plan, the amendment shall be approved by
the Company's shareholders.
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<PAGE>
(b) Notwithstanding the foregoing, no amendment, suspension or
termination of the Plan shall, without the consent of the holder of an Option
theretofore granted or awarded, alter or impair any rights or obligations under
such Option.
14. Investment Purpose. At the time of exercise of any Option, the
Company may, if it shall deem it necessary or desirable for any reason, require
the Optionee to represent in writing to the Company that it is such Optionee's
then intention to acquire the shares of Stock for investment and not with a view
to the distribution thereof.
15. Right to Terminate Service as a Director. Nothing contained herein
or in any Option Agreement shall restrict the right of the Company to terminate
the service as a director of any Optionee at any time.
16. Governing Law. The Plan shall be governed by the laws of the State
of Delaware without regard to the conflicts of law principles thereof.
17. Effective Date. The Plan shall be effective upon approval by the
shareholders of the Company. In the event that the Plan is not approved by the
shareholders of the Company prior to the first anniversary of the approval of
the Plan by the Board, the Plan and the Options granted hereunder shall be void
and of no force or effect.
18. Term of the Plan. Unless previously terminated by the Board, the
Plan shall terminate on March 16, 2008, and no Options shall be granted
thereafter. Such termination shall not affect any Option previously granted.
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<PAGE>
IVC INDUSTRIES, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
APRIL 16, 1998
This Proxy Is Solicited On Behalf of the Board of Directors
The undersigned hereby appoints E. JOSEPH EDELL and I. ALAN HIRSCHFELD,
or either of them, attorneys and proxies, with power of substitution and
revocation, to vote, as designated below, all shares of stock which the
undersigned is entitled to vote, with all powers which the undersigned would
possess if personally present, at the Annual Meeting of Shareholders (including
all adjournments thereof) of IVC INDUSTRIES, INC. ("IVC") to be held on
Thursday, April 16, 1998 at 10:00 A.M. at The Sheraton at Woodbridge Place, 515
Route 1 South, Iselin, New Jersey 08830. The Board of Directors recommends a
vote FOR proposals 1, 2, 3 and 4.
1. ELECTION OF DIRECTORS
/ / FOR all nominees / / WITHHOLD AUTHORITY to vote for all nominees
E. Joseph Edell, Arthur S. Edell, Andrew M. Pinkowski, I. Alan
Hirschfeld, Dr. Mark S. Gold, Mac Allen Culver III, Dennis E. Groat, David
Popofsky, Marc Z. Edell.
Shareholders may withhold authority to vote for any nominee(s) by
writing the name of that nominee in the space provided below.
- --------------------------------------------------------------------------------
2. APPROVAL of the increase in the number of shares subject to IVC's 1995 Stock
Option Plan as set forth in the accompanying Proxy Statement.
/ / FOR / / AGAINST / / ABSTAIN
- --------------------------------------------------------------------------------
3. APPROVAL of the grant of stock options to the non-employee directors of IVC
as set forth in the accompanying Proxy Statement.
/ / FOR / / AGAINST / / ABSTAIN
- --------------------------------------------------------------------------------
4. APPROVAL of IVC's Non-Employee Directors' Stock Option Plan as set forth in
the accompanying Proxy Statement.
/ / FOR / / AGAINST / / ABSTAIN
- --------------------------------------------------------------------------------
5. The proxy is authorized to transact such other business as may properly come
before the meeting.
28
<PAGE>
This proxy, when properly executed, will be voted in the manner
directed herein by the undersigned shareholder. If no direction is given, this
proxy will be voted FOR items 1, 2, 3 and 4 and in the discretion of said proxy
on any other matter which may come before the meeting or any adjournments
thereof.
Dated: , 1998
---------------------
-----------------------------------------
Print Name
-----------------------------------------
Signature
NOTE: When shares are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee, custodian, guardian or corporate
officer, please give your full title as such. If a corporation, please sign full
corporate name by authorized officer. If a partnership, please sign in
partnership name by authorized person.
PLEASE MARK, DATE, SIGN AND RETURN THE PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
29
