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]
December 14, 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 January 7, 1999 at the Sheraton Eatontown, 6 Industrial
Way, Eatontown, New Jersey 07724.
At the Annual Meeting, shareholders will be asked to (i) elect nominees to
serve as the directors of IVC for the ensuing year, (ii) approve an amendment to
IVC's Certificate of Incorporation to provide that the Board of Directors shall
consist of not less than seven nor more than fifteen persons, (iii) ratify the
appointment of auditors of IVC to serve until the next annual meeting of
shareholders, and (iv) 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. ("IVC"), a Delaware corporation, will be held at 10:00 a.m.
on January 7, 1999 at the Sheraton Eatontown, 6 Industrial Way, Eatontown, New
Jersey 07724 for the following purposes:
(1) To elect nominees to serve as the directors of IVC for the ensuing
year;
(2) To approve an amendment to IVC's Certificate of Incorporation to
provide that the Board of Directors shall consist of not less than seven
nor more than fifteen persons;
(3) To ratify the appointment of auditors of IVC to serve until the next
annual meeting of shareholders; and
(4) 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 December
7, 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 December 28, 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
December 14, 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. ("IVC"
or the "Company"), a Delaware corporation, for use at the Annual Meeting of
Shareholders of the Company scheduled to be held at 10:00 a.m. on January 7,
1999 at the Sheraton Eatontown, 6 Industrial Way, Eatontown, New Jersey 07724,
and at any adjournments or postponements thereof. At the Annual Meeting,
shareholders of record of the Company's Common Stock, par value $.01 per share,
as of the close of business on December 7, 1998 (the "Record Date") will be
entitled to consider and vote upon the election of directors for the ensuing
year and an amendment to the Company's Certificate of Incorporation and to
ratify the appointment of auditors of the Company to serve until the next annual
meeting of shareholders.
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 December 14, 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 and broker
"non-votes" are included in the determination of the number of shares present at
the Annual Meeting for quorum purposes, and will have the same effect as votes
against the propsal to amend the Company's Certificate of Incorporation.
However, they will have no effect on the votes on the other proposals. 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 the amendment to IVC's Certificate of Incorporation and
FOR ratification of the appointment of auditors. If the proposal to amend the
Company's Certificate of Incorporation does not pass, the nominee for director
who is not currently serving on the Board of Directors will not become a
director. 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.
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 17,211,540 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.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information regarding shares of IVC
Common Stock beneficially owned as of November 23, 1998 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 7 hereof, and (iv) all officers and
directors as a group.
Name and Address of Number of Percentage
Title of Class Beneficial Owner Shares of Class
- -------------- ---------------- ------ --------
Common E. Joseph Edell (1) 5,357,430 31.13%
c/o IVC Industries, Inc.
500 Halls Mill Road
Freehold, NJ 07728
Common Andrew M. Pinkowski (2) 2,654,062 15.42%
c/o IVC Industries, Inc.
3580 N.E. Broadway
Portland, OR 97232
Common I. Alan Hirschfeld (3) 2,228,689 12.95%
c/o IVC Industries, Inc.
500 Halls Mill Road
Freehold, NJ 07728
Common Arthur S. Edell (4) 1,836,488 10.67%
c/o IVC Industries, Inc.
500 Halls Mill Road
Freehold, NJ 07728
Common Duane J. Baxter (5) 234,904 1.36%
c/o IVC Industries, Inc.
3580 N.E. Broadway
Portland, OR 97232
Common Marc Z. Edell (6) 96,800 .56%
c/o Edell & Associates
1776 On the Green
Morristown, NJ 07962
Common Dr. Mark S. Gold (6) 30,000 .17%
2002 San Marco Boulevard
Jacksonville, FL 32207
2
<PAGE>
Name and Address of Number of Percentage
Title of Class Beneficial Owner Shares of Class
- -------------- ---------------- ------ --------
Common Dennis E. Groat (6) 30,000 .17%
c/o IVC Industries, Inc.
3580 N.E. Broadway
Portland, OR 97232
Common David Popofsky (6) 30,000 .17%
c/o Popofsky Advertising
60 Madison Avenue
New York, NY 10010
Common All Executive Officers 12,498,373 72.62%
and Directors as a group
(9 persons) (7)
(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 943,845 shares owned by his wife. 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 210,000 shares of IVC Common Stock issuable upon exercise of
stock options and 1,500,000 shares owned by the two Edell Family
Partnerships (750,000 each).
(5) Includes 72,036 shares of IVC Common Stock issuable upon exercise of stock
options.
(6) Includes 30,000 shares of IVC Common Stock issuable upon exercise of stock
options.
(7) Includes 453,036 shares of IVC Common Stock issuable upon the exercise of
stock options and warrants held by all executive officers and directors.
3
<PAGE>
PROPOSAL 1 - ELECTION OF DIRECTORS
At the Annual Meeting, IVC shareholders will elect eight or nine
persons to serve on the Board of Directors until the 2000 Annual Meeting of
Shareholders or until their respective successors have been elected and shall
qualify.
The election of directors requires the affirmative vote of the
holders 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 eight nominees are currently directors of the Company
whose terms of office expire at the Annual Meeting. All of these persons have
previously been elected directors of the Company by the shareholders.
Name Position Age Director Since
- ---- -------- --- --------------
E. Joseph Edell Chief Executive Officer and 71 1993
Chairman of the Board of
Directors
Andrew M. Pinkowski Vice Chairman of the Board 64 1996
of Directors
I. Alan Hirschfeld Executive Vice President, 47 1995
Chief Financial Officer and
Director*
Arthur S. Edell Director 65 1989
Dr. Mark S. Gold Director 49 1996
Dennis E. Groat Director 57 1996
David Popofsky Director 64 1996
Marc Z. Edell Director 48 1996
* As of September 30, 1998, I. Alan Hirschfeld took a medical leave of
absence. During his absence, Domenic Golato, IVC's Chief Accounting
Officer, is assuming Mr. Hirschfeld's responsibilities as Chief Financial
Officer.
4
<PAGE>
In addition, the Board of Directors has nominated Erwin Lehr, age
70, to serve as a director. Mr. Lehr's election to the Board of Directors is
contingent upon the approval by IVC shareholders of an amendment to the
Company's Certificate of Incorporation increasing the maximum number of persons
who may serve on the Board to fifteen. See "Proposal 2 - Amendment to
Certificate of Incorporation."
E. Joseph Edell has been Chairman of the Board of Directors and
Chief Executive Officer of IVC since the Company's merger with American. Prior
to that merger, E. Joseph Edell had been president of American since 1955. Mr.
Edell is the brother of Arthur S. Edell.
Andrew M. Pinkowski has been Vice Chairman of the Board of Directors
of IVC since the merger with Hall. He had previously 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 on IVC's Board of Directors since the Company's merger with
American. At the time of the merger, he 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.
Arthur S. Edell has been on IVC's Board of Directors since 1989. He
was President of IVC from 1989 to 1998. 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., 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
pleaded guilty to a single count of vehicular homicide and received a five year
suspended sentence.
Marc Z. Edell has been on IVC's Board of Directors since 1996. He 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.
Dr. Mark S. Gold has been on IVC's Board of Directors since 1996. He
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 has been on IVC's Board of Directors since 1996. He
is also 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.
5
<PAGE>
Prior to joining Hall, he held executive positions with Scherer Healthcare,
Inc., R.P. Scherer Corporation and Mead Johnson Laboratories.
David Popofsky has been on IVC's Board of Directors since 1996. He
is currently 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.
Erwin Lehr was President, Chief Executive Officer and a director of
Valley Fair Corp., a chain of discount drug stores in New Jersey, and L.F.
Widman, Inc., a chain of health, beauty-aid and drug stores in Pennsylvania,
from 1978 to 1998. He also was Chairman and a director of the Associated Chain
Drug Stores.
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 4 meetings during the fiscal year ended July 31, 1998. 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 3 meetings during the
fiscal year ended July 31, 1998.
During the fiscal year ended July 31, 1998, there were 3 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,
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, except that the following
persons filed, or will be filing, late: I. Alan Hirschfeld, two reports for four
sale transactions; Marc Z. Edell, one report for four sale transactions; Andrew
M. Pinkowski, one report for one gift; and each of the non-employee directors,
one report for their receipt of stock options. This conclusion is based solely
on a
6
<PAGE>
review of such forms 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.
EXECUTIVE COMPENSATION
The following table sets forth all compensation paid or distributed
during the years ended July 31, 1998, 1997 and 1996 by the Company for services
rendered by (i) the Chief Executive Officer of IVC and (ii) the four most highly
compensated executive officers of the Company.
SUMMARY COMPENSATION 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 1998 442,307 - - -
Chairman and 1997 500,000 - - -
Chief Executive Officer 1996 500,000 - - -
Arthur S. Edell 1998 150,384 - - 8,378
President 1997 170,000 - - 9,190
1996 170,000 - - 3,640
I. Alan Hirschfeld 1998 221,153 - 1,528
Executive Vice President 1997 250,000 - 50,000 1,528
and Chief Financial Officer 1996 250,000 50,000 - 1,028
Andrew M. Pinkowski 1998 159,230 - 500
Vice Chairman 1997 180,000 - - 500
1996 120,308 90,000 - -
Duane J. Baxter 1998 144,630 78,100 12,000 1,100
President/Hall Division 1997 120,000 81,000 10,000 1,100
1996 100,000 10,873 50,036 -
</TABLE>
(1) Represents term life insurance premiums and the value of shares granted
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.
7
<PAGE>
Directors
On September 10, 1996 and November 24, 1997, each of IVC's
non-employee directors was granted, subject to approval of IVC's shareholders,
an option to purchase 10,000 shares of IVC Common Stock as compensation for his
services to the Company. IVC's shareholders approved these grants at the Annual
Shareholder's Meeting held on April 16, 1998. 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. In addition, the
Company's new Non-Employee Directors' Stock Option Plan provides for the grant
as of September 1 of each year of an option to purchase 10,000 shares of IVC
Common Stock to each of IVC's non-employee directors. The exercise price of such
option is the fair market value of IVC Common Stock at the time the option is
granted. The exercise price of the options granted as of September 1, 1998 was
$1.50 per share.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Number of Percent of Potential Realizable Value
Securities Total Options at Assumed Annual Rates of
Underlying Granted to Stock Price Appreciation for
Options Employees in Exercise Expiration Option Term
Name Granted (#) Fiscal Year Price Date 5% ($) 10% ($)
---- ----------- ----------- ----- ---- ------ -------
($/Sh)
-----
<S> <C> <C> <C> <C> <C> <C>
Duane J. Baxter 2,000 1% $1.969 08/01/07 $ 2,500 $ 6,300
10,000 6% $2.188 04/30/08 $13,800 $34,900
</TABLE>
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options At Fiscal Year-End Options at Fiscal Year-End (1)
------------------------------- ------------------------------
(1)
Name Exercisable Unexercisable Exercisable --- Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Arthur S. Edell 400,000 - $ 82,000 -
I. Alan Hirschfeld 50,000 - - -
Duane J. Baxter 72,036 10,000 $ 4,700 -
</TABLE>
(1) The fair market value of the Company's Common Stock on July 31, 1998
($1.91 per share) minus the exercise price.
None of the named executive officers exercised options during the fiscal year
ended July 31, 1998.
8
<PAGE>
Employment Agreements
The Company entered into amendments to its employment agreements
with E. Joseph Edell and I. Alan Hirschfeld as of February 1, 1998. Mr. Edell's
agreement now provides for a base salary of $312,500 for the period of February
1, 1998 through January 31, 1999 and $343,750 for the period of February 1, 1999
through January 31, 2000. Mr. Hirschfeld's agreement now provides for a base
salary of $156,250 for the period beginning on February 1, 1998 through January
31, 1999 and $171,875 for the period beginning on February 1, 1999 through
January 31, 2000. Each agreement also now provides that on each January 31
during the executive's term of employment, he shall be entitled to
performance-based bonus compensation in an amount equal to the sum of (i) the
executive's base salary on such January 31 multiplied by (ii) the percentage
increase, if any, in the income before income taxes of the Company for the
12-month period ended on such January 31 over the income before income taxes of
the Company for the 12-month period ended the prior January 31. In addition,
each agreement now provides that the Company may, in its discretion, grant the
executive options to purchase shares of IVC Common Stock pursuant to the
Company's 1995 Stock Option Plan. The term of each agreement ends on January 31,
2000 and is automatically extended for successive one-year periods unless the
Company or executive gives 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 agreement, the executive shall receive a
severance payment equal to his base annual salary, provided that no severance
payment shall be required in the event that the 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 also entered into an amendment to its employment
agreement with Andrew M. Pinkowski as of February 1, 1998. Mr. Pinkowski's
agreement now provides for a base salary of $112,500 for the period of February
1, 1998 through April 30, 1999. The agreement also now provides that on January
31, 1999, Mr. Pinkowski shall be entitled to performance-based bonus
compensation in an amount equal to the sum of (i) his base salary on such
January 31 multiplied by (ii) the percentage increase, if any, in the income
before income taxes of the Company for the 12-month period ended on such January
31 over the income before income taxes of the Company for the 12-month period
ended the prior January 31. In addition, the agreement now provides that the
Company may, in its discretion, grant Mr. Pinkowski options to purchase shares
of IVC Common Stock pursuant to the Company's 1995 Stock Option Plan. The term
of the agreement ends on April 30, 1999. 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.
The Company entered into a severance agreement with Arthur S. Edell,
effective as of June 1, 1998, in which the Company and Mr. Edell agreed that his
employment with IVC, including his tenure as President, terminated. Pursuant to
the agreement, Mr. Edell's resignation is considered a "retirement" under IVC's
stock option plans. The agreement provides for a severance payment of $85,000
per annum for a period of three years. The agreement provides for certain
medical benefits and for the reimbursement of certain expenses, and contains
mutual releases and confidentiality and non-disclosure provisions.
9
<PAGE>
Compensation Committee Interlocks and Insider Participation
The members of the Compensation Committee for the fiscal year ended
July 31, 1998 were Dr. Mark S. Gold, Dennis E. Groat (Chairman) and David
Popofsky. There were no interlocks or insider participation as defined in the
Securities and Exchange Commission'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 are
largely responsible for the Company's results of operations. Based on this
belief, the Compensation Committee revised its compensation program for the
Company's executive officers to reduce each executive's base salary and provide
for bonus compensation based on the Company's performance and for the granting
of stock options in order to link a portion of executive compensation to
appreciation of the Company's stock price (see "Employment Agreements"). The
objectives of this strategy are to attract and retain effective and highly
qualified executives, to motivate executives to 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 and
performance-based bonus compensation under the amendment to his employment
agreement, the Compensation Committee took into account the Company's results of
operations in fiscal 1996 and 1997, the desires of IVC's lenders, its assessment
of Mr. Edell's individual performance, as well as base salaries and bonuses 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, or 110% of such value with respect to
grants to executives
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who own more than 10% of the Common Stock of the Company, and 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 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
PERFORMANCE GRAPH
The following performance graph is a line graph comparing the yearly
change in the cumulative total shareholder return on the Company's Common Stock
against the cumulative return of the Nasdaq Composite Index and the S&P Health
Care - Drugs Index for each of the fiscal years ended July 31, 1994 through
1998. The Company's Common Stock was initially registered under Section 12 of
the Securities Exchange Act of 1934 in February 1994.
[The following table was depicted as a line chart in the printed material.]
Jul-94 Jul-95 Jul-96 Jul-97 Jul-98
------ ------ ------ ------ ------
IVC Industries, Inc. $ 85 $ 84 $ 69 $ 48 $ 45
NASDAQ Composite Index $ 87 $ 138 $ 145 $ 214 $ 252
S&P Health Care-Drugs Index $ 107 $ 174 $ 228 $ 380 $ 540
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PROPOSAL 2 - AMENDMENT TO CERTIFICATE OF INCORPORATION
At the Annual Meeting, IVC shareholders will vote upon a proposal to
approve an amendment to IVC's Certificate of Incorporation to provide that the
Company's Board of Directors shall consist of not less than seven nor more than
fifteen persons. IVC's Certificate of Incorporation presently provides for not
less than two nor more than eight directors.
The Board of Directors has proposed this amendment to allow the
Company to increase the number of persons serving on the Board as may be
appropriate to effectively manage the Company consistent with its size. The
Company has experienced significant revenue growth, through mergers,
acquisitions and otherwise, since the size of the Board was last set in the
Certificate of Incorporation in 1994.
To effect the increase in the size of the Board, the first sentence
of the second paragraph of the Fifth Article of IVC's Certificate of
Incorporation would be amended to read in its entirety as follows:
"The business and affairs of the Corporation shall be managed by, or
under the direction of, a Board of Directors consisting of not less
than seven nor more than fifteen persons."
The amendment to IVC's Certificate of Incorporation requires the
affirmative vote of the holders of a majority of the shares of IVC Common Stock
present in person or by proxy at the Annual Meeting.
The Board of Directors recommends a vote FOR the amendment to IVC's
Certificate of Incorporation and it is intended that proxies not voted to the
contrary will be so voted.
PROPOSAL 3 - SELECTION OF AUDITORS
The Audit Committee has recommended to the Board of Directors, and
the Board of Directors selected, Amper, Politziner & Mattia P.A., independent
auditors, as auditors of the Company for the fiscal year ending July 31, 1999.
Although shareholder ratification of the Board of Directors' action in this
respect is not required, the Board considers it desirable for shareholders to
pass upon the selection of auditors and, if the shareholders disapprove of the
selection, intends to select other auditors for the fiscal year ending July 31,
1999.
It is expected that representatives of Amper, Politziner & Mattia
P.A. 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.
The Board of Directors recommends a vote FOR ratification of the
appointment of the auditors and it is intended that proxies not voted to the
contrary will be so voted.
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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 $80,000. This loan bears interest at 6% per annum
and is to be repaid in weekly installments of $5,000 plus interest. 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 July 31,
1998, the aggregate net advances to E. Joseph Edell and I. Alan Hirschfeld were
$347,000 and $133,500, respectively. The balances due the Company at July 31,
1998 are payable by July 31, 2000.
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
years ended July 31, 1998, 1997 and 1996 were $104,000, $169,000 and $154,000,
respectively.
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 years ended July 31, 1998, 1997 and
1996 were approximately $491,000, $313,000 and $389,000, respectively.
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 $850,000 and
$878,000, as at July 31, 1998 and 1997, respectively. Interest income earned by
the Company on this contract was $78,000, $80,000 and $85,000 for the years
ended July 31, 1998, 1997 and 1996, respectively. The Company leases its
manufacturing and administration facility in Portland, Oregon from Agora. Rent
expense incurred by the Company for this property was $169,000, $163,000 and
$161,000 for the years ended July 31, 1998, 1997 and 1996, respectively. The
above sales and rentals were made on terms no less favorable to the Company than
could be obtained from non-related parties.
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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 September 10, 1999.
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,
have previously been mailed to shareholders.
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
December 14, 1998
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IVC INDUSTRIES, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
JANUARY 7, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints E. JOSEPH EDELL and DENNIS E. GROAT, or
either of them, attorneys and proxies, with power of substitution and
revocation, to vote, as designated below, all shares of IVC Common 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, January 7, 1999 at 10:00 A.M. at the Sheraton Eatontown, 6 Industrial
Way, Eatontown, New Jersey 07724. The Board of Directors recommends a vote FOR
proposals 1, 2 and 3.
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, Dennis E. Groat, David Popofsky, Marc Z. Edell, Erwin Lehr.
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 amendment to IVC's Certificate of Incorporation.
|_| FOR |_| AGAINST |_| ABSTAIN
3. RATIFICATION of the appointment of Amper, Politziner & Mattia, P.A., as
independent auditors for the fiscal year ending July 31, 1999.
|_| FOR |_| AGAINST |_| ABSTAIN
4. The proxy is authorized to transact such other business as may properly
come before the meeting.
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 proposals 1, 2 and 3 and in the discretion of said proxy on any
other matter which may come before the meeting or any adjournments thereof.
Dated: ______________ , ________
______________________________________
Signature
______________________________________
Signature, if held jointly
<PAGE>
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 FILL IN, DATE, SIGN AND RETURN THE PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
