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:
|X| Preliminary Proxy Statement
|_| 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 Logo]
December __, 1999
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, 2000 at the Sheraton Eatontown, 6 Industrial
Way, Eatontown, New Jersey 07724.
At the Annual Meeting, shareholders will be asked to vote on a number of
matters itemized in the accompanying Notice of Annual Meeting of Shareholders.
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,
E. Joseph Edell
Chairman of the Board, President
and Chief Executive Officer
<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, 2000 at the Sheraton Eatontown, 6 Industrial Way, Eatontown, New
Jersey 07724, for the following purposes:
(i) To elect eight directors of IVC to serve for one-year terms;
(ii) To approve an amendment to IVC's Certificate of Incorporation to
provide for the limitation of the liability of IVC's directors;
(iii) To approve amendments to IVC's 1995 Stock Option Plan to (a)
increase the number of shares of IVC common stock available under
the Plan to 500,000 shares, (b) provide the Compensation Committee
with greater discretion with respect to the exercisability of
options granted under the Plan and (c) provide that options granted
under the Plan will become immediately exercisable in full upon a
change in control of IVC;
(iv) To ratify the grant during 1999 of stock options to the non-employee
directors of IVC and to approve amendments to IVC's Non-Employee
Directors' Stock Option Plan to (a) increase the number of shares of
IVC common stock available under the Plan to 125,000 shares, (b)
increase the number of options granted annually to each non-employee
director of IVC and (c) provide that upon the death or retirement of
a non-employee director, options granted under the Plan shall remain
exercisable for the remaining term of the options;
(v) To ratify the appointment of auditors of IVC to serve until the next
annual meeting of shareholders; and
(vi) 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, 1999 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, 1999
for inspection by any shareholder for any proper purpose.
<PAGE>
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,
Freehold, New Jersey Domenic Golato
December __, 1999 Secretary
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") for use at the Annual Meeting of Shareholders of the Company
scheduled to be held at 10:00 a.m. on January 7, 2000 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 $.08 per share (the "Common Stock"), as of the
close of business on December 7, 1999 (the "Record Date") will be entitled to
consider and vote upon (i) the election of directors for the ensuing year, (ii)
an amendment to the Company's Certificate of Incorporation, (iii) amendments to
the Company's 1995 Stock Option Plan (the "1995 Plan"), (iv) the ratification of
the grant of stock options to the non-employee directors of IVC and amendments
to the Company's Non-Employee Directors' Stock Option Plan (the "Directors'
Plan") and (v) the ratification of the appointment of auditors of the Company.
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 __, 1999.
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 proposal to amend the Company's Certificate of Incorporation.
However, they will have no effect on the votes on 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, FOR
the amendments to the 1995 Plan, FOR the ratification of the grant of stock
options to the non-employee directors of IVC and the amendments to the
Directors' Plan and FOR the ratification of the appointment of auditors. 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 2,088,092 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 29, 1999 by (i) each person or
group, known to the Company, who beneficially owns more than 5% of the IVC
Common Stock, (ii) each of the Company's directors, (iii) each executive officer
named in the summary compensation table on page 8 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) 669,805 32.1%
c/o IVC Industries, Inc.
500 Halls Mill Road
Freehold, NJ 07728
Common Domenic Golato (2) 3,750 *
c/o IVC Industries, Inc.
500 Halls Mill Road
Freehold, NJ 07728
Common William Lederman (2) 6,250 *
c/o IVC Industries, Inc.
500 Halls Mill Road
Freehold, NJ 07728
Common Michael Durso (2) 17,292 *
c/o IVC Industries, Inc.
500 Halls Mill Road
Freehold, NJ 07728
Common Jesus Febus (2) 7,125 *
c/o IVC Industries, Inc.
500 Halls Mill Road
Freehold, NJ 07728
Common Arthur S. Edell (3) 231,436 11.1%
Channel Towers
511 Channel Towers Drive
Monmouth Beach, NJ 07750
Common Marc Z. Edell (4) 13,975 *
c/o Edell & Associates
1776 On the Green
Morristown, NJ 07962
Common Dr. Mark S. Gold (2) 5,625 *
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 (2) 5,625 *
c/o Groat & Associates
411 Lonestar Lane
Lindale, TX 75771
Common Erwin Lehr (2) 2,500 *
156 Clarkin Drive
West Orange, NJ 07052
Common Andrew M. Pinkowski (5) 328,509 15.7%
5725 Southwest Menefee Drive
Portland, OR 97201
Common David Popofsky (2) 5,625 *
c/o Popofsky Advertising
60 Madison Avenue
New York, NY 10010
Common I. Alan Hirschfeld (6) 232,488 11.1%
14 Malke Drive
Ocean, NJ 07712
Common All Executive Officers and
Directors as a group
(13 persons) (7) 1,530,005 73.3%
* Less than 1%
(1) Includes 75,177 shares owned by Beverlee Edell, the wife of E. Joseph
Edell. Mr. Edell disclaims beneficial ownership of the shares owned by his
wife.
(2) Represents shares issuable upon exercise of stock options that are
presently exercisable or exercisable within 60 days of the date of this
proxy statement.
(3) Includes 28,125 shares issuable upon exercise of stock options and 187,500
shares owned by the Edell Family Partnership.
(4) Includes 5,625 shares issuable upon exercise of stock options that are
presently exercisable or exercisable within 60 days of this proxy
statement.
(5) Includes 117,981 shares owned by Rita Pinkowski, the wife of Mr.
Pinkowski. Mr. Pinkowski disclaims beneficial ownership of the shares
owned by his wife.
(6) Information as to shares owned by Mr. Hirschfeld is as of October 30,
1999. Includes 6,250 shares issuable upon exercise of stock options,
22,484 shares owned by Susan H. Hirschfeld, the wife of I. Alan
Hirschfeld, 3,900 shares owned by Mr. Hirschfeld's minor children and
15,000 shares owned by Two Seas Ventures, a family partnership. Mr.
Hirschfeld disclaims beneficial ownership of the shares owned by his wife
and children.
(7) Includes 93,792 shares issuable upon the exercise of stock options held by
all executive officers and directors that are presently exercisable or
exercisable within 60 days of this proxy statement.
3
<PAGE>
PROPOSAL ONE - ELECTION OF DIRECTORS
At the Annual Meeting, IVC shareholders will elect eight persons to
serve on the Board of Directors until the 2001 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 Age Director Since
---- --- --------------
Arthur S. Edell 66 1989
E. Joseph Edell 72 1993
Marc Z. Edell 49 1996
Dr. Mark S. Gold 50 1996
Dennis E. Groat 58 1996
Erwin Lehr 71 1999
Andrew M. Pinkowski 65 1996
David Popofsky 65 1996
Arthur S. Edell was President of the Company 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 Vitamin 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.
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
in 1995. Prior to that merger, Mr. Edell had been president of American Vitamin
since 1955. In 1999, he was also appointed President of the Corporation. Mr.
Edell is the brother of Arthur S. Edell and the father of Marc Z. Edell.
Marc Z. Edell is an attorney who has been practicing law in New York
and New Jersey for the past twenty years. Since 1995 he has been a Partner of
Edell and Associates, a law firm in
4
<PAGE>
Morristown, New Jersey. From 1985 through 1995, Mr. Edell was a Partner with
Budd Larner Gross in Short Hills, New Jersey. Mr. Edell is the son of E. Joseph
Edell.
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 also 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 Laboratories from 1984 to 1988. Prior to joining Hall
Laboratories, he held executive positions with Scherer Healthcare, Inc., R.P.
Scherer Corporation and Mead Johnson Laboratories.
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.
Andrew M. Pinkowski served as the Vice Chairman of the Board of
Directors of IVC from the merger with Hall Laboratories in 1996 until May 1999
and since that date has served as a consultant to IVC. He had previously been
president and Chief Executive Officer of Hall Laboratories since 1970. He joined
Hall Laboratories in 1969 as manager of marketing. Prior to joining Hall
Laboratories, he held various marketing positions with Boise Cascade, Sterling
Drug and Universal Oil Products.
David Popofsky 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.
Directors hold their offices until each annual meeting of the
stockholders and thereafter until their successors have been duly elected and
qualified.
The Board of Directors recommends a vote FOR the election of each of
the nominees for director and it is intended that proxies not voted to the
contrary will be so voted.
Committees, Meetings and Compensation of the Board of Directors
The Board of Directors of the Company has an Audit Committee
currently comprised of Messrs. Gold, Groat and Popofsky (chairman). Mr. Marc Z.
Edell served as a member of the Audit Committee during the fiscal year ended
July 31, 1999; he stepped down in October 1999 and was replaced by Mr. Groat.
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 the auditors. The Audit Committee held one meeting
during the fiscal year ended July 31, 1999.
The Board of Directors of the Company has a Compensation Committee
currently comprised of Messrs. Gold, Groat (chairman) and Popofsky. The
Compensation Committee is charged with administering the Company's 1995 Plan and
fixing the compensation, including salaries and
5
<PAGE>
bonuses, of all officers of the Company. The Compensation Committee held two
meetings during the fiscal year ended July 31, 1999.
During the fiscal year ended July 31, 1999, there were five
regularly scheduled meetings of the Board of Directors and five 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 does not have a standing Nominating Committee. 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.
The Company's Directors' Plan provides for the grant as of September
1 of each year of an option to purchase 1,250 shares of IVC Common Stock to each
of IVC's non-employee directors. On March 10, 1999, the Board of Directors
unanimously approved, subject to shareholder approval, an amendment to the
Directors' Plan to increase as of September 1 of each year commencing with 1999
the number of options granted to each non-employee director to 3,125 shares of
IVC Common Stock and the grant under the Directors' Plan to each of IVC's
non-employee directors of an option to purchase 1,875 shares of IVC Common Stock
at an exercise price of $7.52. See "Proposal Four." The exercise price of each
option is the fair market value of IVC Common Stock at the time the option is
granted.
Executive Officers
In addition to E. Joseph Edell, the Chairman, Chief Executive
Officer and President of the Company, the following individuals also serve as
executive officers of the Company.
Executive
Name Age Position Officer Since
---- --- -------- -------------
Domenic N. Golato 44 Vice President, Chief October 1999
Financial Officer and
Secretary
William Lederman 52 Chief Operating Officer October 1999
Michael Durso 41 Senior Vice President of October 1999
Sales and Marketing
Jesus Febus 37 Chief Information Officer October 1999
and Senior Vice President
of Information
Technologies
John H. Dettra Jr. 54 Senior Vice President of October 1999
Operations and
Manufacturing Systems
Domenic N. Golato has been Chief Financial Officer and Secretary of
IVC since March 1999. He joined the Company in 1998 as Vice President Finance,
Corporate Controller. From 1993 to 1998, Mr. Golato was Vice President and Chief
Financial Officer of RF Power Products, Inc., a publicly traded company in the
semiconductor industry.
6
<PAGE>
William Lederman has been Chief Operating Officer of the Company
since December 1998. From 1996 to 1998, Mr. Lederman was the Chief Operating
Officer of Solgar Vitamin & Herb Company, Inc., a leading manufacturer of
vitamins and nutritional products. From 1995 to 1996, he was the Vice President
of Operations of Solgar. From 1991 to 1995, he was Vice President of Operations
at Pharmline, Inc., a leading vitamin raw material supplier.
Michael A. Durso has been Senior Vice President of Sales and
Marketing of the Company since September 1998. From 1997 to 1998, he was
Director of Sales at Pharmaceutical Formulations, Inc., a manufacturer and
distributor of private label, over the counter products. From 1995 to 1997, he
was Director of Sales and Merchandising at Pathmark Stores, Inc. From 1993 to
1995, he was Director of Category Management at Pathmark Stores, Inc.
Jesus Febus has been Chief Information Officer and Senior Vice
President of Information Technologies of the Company since August 1999. From
1998 to 1999, he was Vice President of Information Technologies of the Company,
and from 1997 to 1998, he was Director of Information Technologies of the
Company. Prior to joining the Company, he was a Systems Manager for Materials
Research Corporation, a division of Sony Corporation, from 1996 to 1997 and a
Senior Project Manager for Kuehne & Nagel, Inc., an international freight
forwarding company, from 1995 to 1996. From 1989 to 1995, he was a Systems
Manager for Lever Brothers Company, a major manufacturer of consumer products.
John H. Dettra Jr. has been Senior Vice President
Operations/Manufacturing Systems since the merger with Hall Laboratories in
1996. Prior to that he was Senior Vice President Operations of Hall Laboratories
from 1987 to 1996.
Executive officers are elected by the Board of Directors on an
annual basis and serve at the discretion of the Board or pursuant to employment
agreements. See "Employment Agreements."
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors to file reports of ownership with the
Securities and Exchange Commission ("SEC"). The Company believes that during the
fiscal year ended July 31, 1999, its executive officers and directors complied
with all applicable Section 16(a) filing requirements. This conclusion is based
solely on a review of such forms furnished to the Company in accordance with SEC
regulations and on representations from its executive officers and directors.
7
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth all compensation paid or distributed
during the years ended July 31, 1999, 1998 and 1997 by the Company for services
rendered by (i) the Chief Executive Officer of IVC, (ii) the four most highly
compensated executive officers of the Company who were serving as executive
officers at the end of the last fiscal year and (iii) I. Alan Hirschfeld and
Andrew Pinkowski, former executives of IVC, who would have been two of IVC's
four most highly compensated executive officers but for the fact that they were
not serving as executive officers at the end of IVC's last fiscal year (the
"Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
Annual Compensation -------------
----------------------------------- Securities All
Underlying Other
Name and Salary Bonus Options Compensation
Principal Position Year ($) ($) (Shares) ($) (1)
---------------------------- ---------- ------------- ------------- -------------- ----------
<S> <C> <C> <C> <C> <C>
E. Joseph Edell 1999 295,432 -- -- --
Chairman, Chief Executive Officer 1998 442,307 -- -- --
And President 1997 500,000 -- -- --
Domenic N. Golato 1999 132,596 -- 23,750 500
Vice President, Chief Financial 1998 16,153 -- -- --
Officer and Secretary
William Lederman 1999 87,019 25,000 12,500 360
Chief Operating Officer
Michael Durso 1999 130,411 -- 25,625 500
Senior Vice President
of Sales and Marketing
Jesus Febus 1999 119,885 -- 18,875 --
Chief Information Officer and Senior 1998 91,730 -- 250 --
Vice President of
Information Technologies
I. Alan Hirschfeld 1999 147,249 -- -- 336
Former Executive Vice 1998 221,153 -- -- 1,528(2)
President and Chief 1997 250,000 -- 50,000 1,528(2)
Financial Officer
Andrew M. Pinkowski 1999 90,962 -- -- 550
Former Vice Chairman 1998 159,230 -- -- 500
1997 180,000 -- -- 500
</TABLE>
- ----------
(1) Unless otherwise noted, represents the value of shares granted as
contributions under the IVC Industries, Inc. Savings Plan.
(2) Represents term life insurance premiums and the value of shares granted as
contributions under the IVC Industries, Inc. 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 Plan to the
Named Executive Officers for the fiscal year ended July 31, 1999.
<TABLE>
<CAPTION>
Number of
Securities Percent of Total Potential Realizable Value
Underlying Options Granted at Assumed Annual Rates of Stock
Options to Employees in Exercise Expiration Price Appreciation for Option Term
Name Granted (#) Fiscal Year Price ($/Sh) Date 5% ($) 10% ($)
---- ----------- ----------- ------------ ---- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Domenic N. Golato 625 * 8.00 11/05/08 3,100 8,000
3,125 1% 7.04 11/24/08 13,800 35,100
20,000 8% 4.63 07/30/09 58,200 147,600
William Lederman 12,500 5% 7.04 11/24/08 55,300 140,200
Michael Durso 12,500 5% 11.52 10/01/08 90,600 229,500
625 * 8.00 11/05/08 3,100 8,000
6,250 3% 7.52 03/10/09 29,600 74,900
6,250 3% 5.52 07/01/09 21,700 55,000
Jesus Febus 625 * 8.00 11/15/08 3,100 8,000
6,250 3% 7.04 11/24/08 27,700 70,100
12,000 5% 4.63 07/30/09 34,900 88,500
</TABLE>
- ----------
* Less than 1%.
Fiscal Year-End Option Values
The following table sets forth information with respect to the
number of shares of IVC Common Stock underlying unexercised stock options held
by the Named Executive Officers at July 31, 1999. The fair market value of the
IVC Common Stock on July 30, 1999 ($4.63 per share) was less than the exercise
prices of said options. No stock options were exercised in fiscal 1999.
Number of Securities
Underlying Unexercised
Options At Fiscal Year-End
--------------------------
Name Exercisable Unexercisable
---- ----------- -------------
Domenic N. Golato 2,187 21,563
William Lederman -- 12,500
Michael Durso 625 25,000
Jesus Febus 4,000 15,125
I. Alan Hirschfeld 6,250 --
9
<PAGE>
Employment Agreements
E. Joseph Edell is employed as the Chairman, Chief Executive Officer
and President of IVC pursuant to an employment agreement dated as of April 28,
1996 and amended as of February 1, 1998. Mr. Edell's employment agreement
provides for a base salary of $343,750. The employment agreement also provides
that on each January 31 during Mr. Edell's term of employment, he shall be
entitled to performance-based bonus compensation in an amount equal to the sum
of (i) Mr. Edell'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. No
bonus compensation was paid to Mr. Edell for the 12-month period ended January
31, 1999. The employment agreement also provides that the Company may, in its
discretion, grant Mr. Edell options to purchase shares of IVC Common Stock
pursuant to the 1995 Plan. Mr. Edell was not awarded stock options during the
year ended July 31, 1999. The term of his employment agreement was extended to
January 31, 2001 and is automatically extended for successive one-year periods
unless the Company or Mr. Edell 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, Mr. Edell shall receive a
severance payment equal to his base annual salary, provided that no severance
payment shall be required in the event that Mr. Edell retires. The Board of
Directors, at its discretion, may increase Mr. Edell's base annual salary if the
term is extended. In the event the Company terminates the employment of Mr.
Edell without cause, he 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 agreement contains confidentiality and non-disclosure provisions.
Jesus Febus is employed as Chief Information Officer and Senior Vice
President of Information Technologies of IVC pursuant to an employment agreement
dated as of November 30, 1998 and amended as of July 26, 1999. Mr. Febus'
employment agreement provides for a base salary of $125,000 for the year ending
November 29, 1999. Thereafter, Mr. Febus shall receive $147,500 per annum. The
employment agreement also provides that Mr. Febus will be entitled to receive
options to purchase shares of IVC Common Stock pursuant to the 1995 Plan. Mr.
Febus was awarded options to purchase 18,875 shares of Common Stock during the
year ended July 31, 1999. The term of his employment agreement ends on November
30, 2000 and is automatically extended for successive two-year periods unless
sooner terminated by the Company or Mr. Febus. In the event the Company
terminates the employment of Mr. Febus without cause, he shall receive a
severance payment equal to one year's base salary. The agreement contains
confidentiality and non-disclosure provisions.
Under the terms of the employment agreement between the Company and
Andrew M. Pinkowski dated April 30, 1996, as amended as of February 1, 1998, Mr.
Pinkowski's employment with the Company ended April 30, 1999. The agreement
provides that following the expiration of the term of employment, Mr. Pinkowski
shall serve as a consultant to the Company for a term of five years at $80,000
per annum. The agreement further provides that the Company may, in its
discretion, grant Mr. Pinkowski options to purchase shares of IVC Common Stock
pursuant to the 1995 Plan. Mr. Pinkowski was not awarded stock options during
the year ended July 31, 1999. The agreement contains confidentiality and
non-disclosure provisions.
The Company entered into a severance agreement with I. Alan
Hirschfeld, effective as of March 1, 1999. Under the agreement Mr. Hirschfeld
resigned as an officer and director of the Company. The agreement provides for a
severance payment of $90,000 payable over one year commencing March 1, 2001. The
agreement also provides that Mr. Hirschfeld remain a consultant to the Company
for a term of three years beginning March 1, 1999 at $96,000 per annum for the
first and second year and $9,000 for the third year. Under the agreement, Mr.
Hirschfeld covenants not to compete with the Company during such consulting
period. In consideration for such covenant not to compete, the Company agreed to
pay Mr. Hirschfeld $75,000 for the first and second year of the consulting
period and $9,000 for the third year
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of the consulting period. The agreement further provides that the options
granted to Mr. Hirschfeld under the 1995 Plan will remain exercisable during the
three year consulting period. The agreement provides for certain medical
benefits and for the reimbursement of certain expenses, and contains mutual
releases and confidentiality and non-disclosure provisions.
Compensation Committee Interlocks and Insider Participation
The members of the Compensation Committee for the fiscal year ended
July 31, 1999 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 1995 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 success. Based on this belief, during 1998
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. 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.
The compensation paid to the Company's Chief Executive Officer, E.
Joseph Edell, for the year ended July 31, 1999 consisted solely of base salary
and was established pursuant to his employment agreement with the Company. The
terms of the agreement are described on page 10 of this proxy statement.
Long-Term Incentives
Under the 1995 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 who own more than 10% of the IVC Common Stock, 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 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.
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Compensation Committee
The members of the Compensation Committee for the fiscal year ended
July 31, 1999 were Dr. Mark S. Gold, Dennis E. Groat (Chairman) and 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, 1995 through
1999.
[The following points appeared as a line chart in the printed material.]
Jul-94 Jul-95 Jul-96 Jul-97 Jul-98 Jul-99
------ ------ ------ ------ ------ ------
IVC Industries, Inc. 100 75 81 56 54 17
NASDAQ Composite Index 100 139 150 221 259 365
S&P Health Care-Drugs Index 100 163 214 355 505 511
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PROPOSAL TWO - AMENDMENT TO CERTIFICATE OF INCORPORATION
The Board of Directors believes that, in keeping with modern
corporate legal practices, the Company should adopt a provision in its
Certificate of Incorporation limiting the liability of the Company's directors
to the fullest extent permissible under the Delaware General Corporation Law
(the "DGCL"). The Board of Directors believes that such a provision is important
to attract and retain qualified directors.
If this Proposal is approved by the shareholders of the Company, a
new Article NINTH will be added to the Certificate of Incorporation limiting the
liability of the Company's directors to the fullest extent permissible under the
DGCL. Such provision would eliminate the personal liability of the Company's
directors to the Company or its shareholders for monetary damages resulting from
breaches of their fiduciary duty of care as a director. Such provision would not
eliminate liability for breaches of the duty of loyalty to the Company, acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, violations of Section 174 of the DGCL (i.e., unlawful payment
of dividends or unlawful stock purchases or redemptions) or for any transaction
from which a director derived an improper personal benefit. This provision would
neither limit nor eliminate the liability of a director for any act or omission
occurring prior to the date such provision becomes effective nor limit or
eliminate the right of the Company or any shareholder to seek non-monetary
relief such as an injunction or rescission in the event of a breach of a
director's duty of care.
If Proposal Two is adopted by IVC's shareholders, the amendment to
the Certificate of Incorporation will become effective on the date a Certificate
of Amendment is filed to amend IVC's Certificate of Incorporation, which IVC
will endeavor to do as soon as practicable after the Meeting.
Vote Required
The affirmative vote of the holders of at least a majority of the
shares of the IVC Common Stock entitled to vote at the Annual Meeting is
required to approve the amendment to the Company's Certificate of Incorporation.
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.
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PROPOSAL THREE - AMENDMENTS 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 IVC shareholders at the Annual
Meeting of Shareholders on March 15, 1996.
Amendment Increasing Number of Shares Available under the 1995 Plan
The 1995 Plan currently authorizes the Company to grant options to
purchase an aggregate of 250,000 shares of IVC Common Stock to employees,
officers and key employees of the Company and its subsidiaries, including
members of the Board of Directors who are also employees, and any other person
who, in the opinion of the Compensation Committee, has rendered valuable
services to the Company or its subsidiaries (each, an "Optionee"). The 1995 Plan
currently does not have shares remaining available for grant or to honor
exercises of outstanding options.
On November 11, 1999, the Board of Directors unanimously adopted and
recommended that the IVC shareholders approve an increase of 250,000 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 250,000 shares to 500,000 shares.
Amendment of Provision relating to Exercisablity of Options
upon Termination of Employment
The 1995 Plan currently provides that options granted under the 1995
Plan will be exercisable as determined in the sole discretion of the Company's
Compensation Committee which administers the 1995 Plan; provided, however, that
upon (a) the death or disability of an Optionee while in the employ of the
Company or a subsidiary, (b) the voluntary resignation of an Optionee or (c) the
termination of an Optionee's employment other than for cause (each such event,
an "Employee Termination"), the Optionee (or his estate or his legal guardian,
as the case may be) will be entitled to exercise his options, to the extent then
exercisable or vested, for a period of 90 days following the Employee
Termination.
On November 11, 1999, the Board of Directors unanimously adopted and
recommended that the IVC shareholders approve an amendment to provide that the
Compensation Committee's discretion with respect to the exercisability of
options granted under the 1995 Plan shall include, but not be limited to, the
discretion to provide at the time of grant of such options that in the event of
an Employee Termination, such options, to the extent then exercisable or vested,
shall remain exercisable until the options otherwise expire.
Amendment of Provision relating to Exercisability of Options
upon a Change in Control
The 1995 Plan provides that 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 (each such event, a "Change of Control"), the 1995 Plan
shall terminate and any outstanding options shall terminate and be forfeited,
unless the Compensation Committee provides in writing in connection with, or in
contemplation of, any such transaction for an alternative to such termination
and forfeiture.
On November 11, 1999, the Board of Directors unanimously adopted and
recommended that the IVC shareholders approve an amendment to provide that in
the event of a Change in Control, an option which has not otherwise expired
shall become immediately exercisable in full.
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Purpose of Proposed Amendments
The principal purpose of the proposed amendments to the 1995 Plan is
to enable the Company to continue to attract and retain the services of
employees, officers and consultants for the benefit of the Company, thereby
providing increased incentive for such persons to render services to the Company
in the future and to exert maximum effort for the success of the Company.
If the proposed amendments to the 1995 Plan are not approved, the
1995 Plan will continue to remain in effect in its present form. On August 2,
1999, Messrs. E. Joseph Edell, Arthur Edell and Andrew Pinkowski, holders of a
majority of the outstanding shares of IVC Common Stock, entered into an
agreement to vote all of the shares of IVC Common Stock held by each of them to
approve the amendment to the 1995 Plan to increase the number of shares of IVC
Common Stock available under the 1995 Plan and the amendment relating to the
exercisability of options upon an Employee Termination.
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 November 29, 1999, approximately 70 persons were eligible to receive options
and options had been granted to approximately 61 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 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 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
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<PAGE>
no Optionee is entitled to a grant of options with respect to more than 250,000
shares of Common Stock, and provided further that the aggregate fair market
value (determined as of the date of grant) of the Common Stock for which ISOs
may first become exercisable during any calendar year, together with 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.
Under the 1995 Plan as currently in effect, 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 Common Stock on the date of grant (not less than
110% in the case of an ISO granted to an Optionee who owns more than 10% of the
total combined voting power of all classes of the Company's stock). For purposes
of the 1995 Plan, "fair market value" means the closing price per share of
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.
Under the 1995 Plan as currently in effect, upon an Employee
Termination, 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.
If Proposal Three is approved by the IVC shareholders, the Compensation
Committee's discretion with respect to the exercisability of options granted
under the 1995 Plan shall include, but not be limited to, the discretion to
provide at the time of grant of such options that in the event of an Employee
Termination, such options, to the extent then exercisable or vested, shall
remain exercisable until the options otherwise expire. 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 partners.
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, combination of shares, sale of assets, merger or consolidation in
which the Company is the surviving corporation. Under the 1995 Plan as currently
in effect, in the event of a Change in Control, each option will terminate. If
Proposal Three is approved by the IVC shareholders, in the event of a Change in
Control, an option which has not otherwise expired shall become immediately
exercisable in full.
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Securities Subject to the Plan; Market Price
250,000 shares of 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 approved, such amount will
be increased to 500,000 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.
During the fiscal year ended July 31, 1999, options were granted for
238,250 shares of IVC Common Stock, of which options for 10,208 shares of IVC
Common Stock were granted subject to shareholder approval of the amendment to
the 1995 Plan increasing the number of shares that may be issued pursuant to the
1995 Plan.
The market value of Common Stock, as of November 29, 1999, was
$4.8125 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 holding period of the shares
will be measured from the date of exercise. Depending on whether the shares are
held 12 months or less or longer than 12 months, capital gain or loss will be
either short-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.
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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.
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.
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 amendments to the 1995 Plan.
The Board of Directors recommends a vote FOR approval of the
amendments to IVC's 1995 Plan and it is intended that proxies not voted to the
contrary will be so voted.
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PROPOSAL FOUR - RATIFICATION OF OPTIONS GRANTED TO NON-EMPLOYEE
DIRECTORS AND APPROVAL OF AMENDMENTS TO IVC'S NON-EMPLOYEE
DIRECTORS' STOCK OPTION PLAN
In March, 1998, the Board of Directors adopted IVC's Non-Employee
Directors' Stock Option Plan (the "Directors' Plan"), which was approved by IVC
shareholders at the Annual Meeting of Shareholders on April 16, 1998.
Amendments to the Directors' Plan
The Directors' Plan currently provides for the grant to each
non-employee director of an option to purchase 1,250 shares of IVC Common Stock
as of September 1 of each year. On March 10, 1999, the Board of Directors
unanimously adopted and recommended that the IVC shareholders approve an
amendment to the Directors' Plan to provide that as of September 1 of each year
commencing in 1999, each non-employee director be granted an option to purchase
3,125 shares of IVC Common Stock.
On November 11, 1999, the Board of Directors unanimously adopted and
recommended that the IVC shareholders approve an increase of 62,500 in the
number of shares with respect to which options may be granted pursuant to the
Directors' Plan, thus increasing the shares of IVC Common Stock subject to the
Directors' Plan from 62,500 shares to 125,000.
On October 21, 1999, the Board of Directors unanimously adopted and
recommended that the IVC shareholders approve an additional amendment to provide
that, notwithstanding any other vesting provisions in the Directors' Plan, an
option granted to a non-employee director will, to the extent not already
exercisable, become exercisable in full upon the retirement or death of the
non-employee director and continue until it otherwise expires in accordance with
its terms.
Purpose of Proposed Amendments
The purpose of the proposed amendments to the Directors' Plan is to
enable the Company to continue to attract and retain the services of
non-employee directors for the benefit of the Company and to provide them an
incentive to remain as directors of the Company and contribute to the Company's
success.
If the proposed amendments to the Directors' Plan are not approved,
the Directors' Plan will continue to remain in effect in its present form. On
March 10, 1999, Messrs. E. Joseph Edell, Arthur Edell and Andrew Pinkowski,
holders of a majority of the outstanding shares of IVC Common Stock, entered
into an agreement to vote all of the shares of IVC Common Stock held by each of
them to approve the amendment to the Directors' Plan to increase the number of
stock options granted annually to each non-employee director and to ratify the
additional grant of stock options to each of the non-employee directors as
described below.
Ratification of Grant of Options to Non-Employee Directors
On March 10, 1999, the Board of Directors unanimously adopted and
recommended that the IVC shareholders approve the grant under the Directors'
Plan to each of IVC's non-employee directors of an option to purchase 1,875
shares of IVC Common Stock at an exercise price of $7.52.
Description of the Non-Employee Directors' Stock Option Plan
The Directors' Plan as currently in effect 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 1,250 shares of IVC
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Common Stock. The 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 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 Directors' Plan promotes
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 Directors' Plan is six.
Duration and Modification
The Directors' Plan will terminate not later than March 16, 2008.
The Board of Directors may at any time amend or terminate the Directors' Plan or
make such modifications of the 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 Directors' Plan, change the manner of
determining the option prices, or materially increase the benefits accruing to
Optionees under the Directors' Plan.
Administration
The Directors' Plan is administered by the Board of Directors.
Subject to the express provisions of the Directors' Plan, the Board of Directors
shall have the power and authority to interpret the Directors' Plan, the options
and the option agreements, to adopt such rules and regulations for the
administration, interpretation and application of the 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 Directors'
Plan.
Description of Options Under the Plan
Under the 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 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.
Under the Directors' Plan as currently in effect, 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. If Proposal Four is approved by the IVC shareholders, an option
granted to a non-employee director will, to the extent not already exercisable,
become exercisable in full upon the retirement or death of the non-employee
director and continue until it otherwise expires in accordance with its terms.
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.
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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.
The number of shares reserved for issuance under the Directors' Plan
and the number of shares covered by each option granted under the Directors'
Plan will be adjusted in the event of a stock dividend, reorganization,
recapitalization, stock split, 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
62,500 authorized but unissued shares of IVC Common Stock have been
reserved for issuance upon the exercise of options granted under the Directors'
Plan. If Proposal Four is approved by the IVC shareholders, such amount will be
increased to 125,000 shares. 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 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 Directors' Plan.
The market value of IVC Common Stock, as of November 29, 1999, was
$4.8125 per share.
Federal Income Tax Consequences of Issuance and Exercise of Options
The Federal income tax consequences of the granting and exercise of
options under the Directors' Plan, and the sale of IVC Common Stock acquired as
a result thereof, is the same as the description of Nonqualified Stock Options
under the 1995 Plan set forth on pages 17 and 18 of this proxy statement.
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 grant of stock options described above and to
approve the amendments to the Directors' Plan.
The Board of Directors recommends a vote FOR ratification of the
grant of stock options to non-employee directors and approval of the amendments
to the Directors' Plan and it is intended that proxies not voted to the contrary
will be so voted.
21
<PAGE>
NEW PLAN BENEFITS
The following table sets forth, with respect to each Named Executive
Officer, each nominee for election as a director, 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 both the 1995 Plan and the Directors' Plan as of
December 1, 1999.
<TABLE>
<CAPTION>
Name Position 1995 Plan Directors' Plan
----- -------- ---------- ---------------
<S> <C> <C> <C>
E. Joseph Edell Chairman, Chief Executive Officer and -- --
President
Domenic N. Golato Vice President, Chief Financial 23,750 --
Officer and Secretary
William Lederman Chief Operating Officer 12,500 --
Michael Durso Senior Vice President of Sales and 25,625 --
Marketing
Jesus Febus Chief Information Officer and Senior Vice 19,125 --
President of Information Technologies
I. Alan Hirschfeld Former Executive Vice President 6,250 --
and Chief Financial Officer
Andrew M. Pinkowski Former Vice Chairman, Director -- --
and Consultant to the Company
Arthur S. Edell(1) Director -- 6,250
Marc Z. Edell Director -- 8,750
Dr. Mark S. Gold Director -- 8,750
Dennis E. Groat Director -- 8,750
Erwin Lehr Director -- 5,625
David Popofsky Director -- 8,750
All current executive 120,341 --
officers as a group (6
persons)
All current non-employee -- 46,875
directors as a group
(6 persons)
All employees (except 133,118 --
executive officers) as a
group (56 persons)
</TABLE>
- ----------
(1) Arthur S. Edell was granted 25,000 options under IVC's 1993 Stock Option
Plan. See footnote 3 on page 3 of this proxy statement.
22
<PAGE>
PROPOSAL FIVE - SELECTION OF AUDITORS
The Audit Committee 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, 2000.
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 reconsider the selection of auditors for the fiscal year
ending July 31, 2001, since it would be impractical to replace the Company's
auditors so late into the Company's current fiscal year.
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.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Loans, Guarantees and Advances
Prior to fiscal 1994, Arthur S. Edell loaned the Company $250,000.
The loan balance at July 31, 1998 was $80,000. This loan was paid in full during
the fiscal year 1999.
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,
1999, the aggregate net advances to E. Joseph Edell and I. Alan Hirschfeld were
$366,000 and $140,000, respectively. The balance due the Company by E. Joseph
Edell is payable by July 31, 2000 and the balance due the Company by I. Alan
Hirschfeld is payable in three successive annual installments commencing March
1, 2004.
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
year ended July 31, 1999 were $63,000.
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 former President of the Company's International
Division. The Company's sales to D.N.R. Inc. for the year ended July 31, 1999
were approximately $128,000.
The Company paid approximately $112,000 during the year ended July
31, 1999 for legal services provided to the Company by Edell & Associates. Marc
Z. Edell is a principal of Edell & Associates and also a director of the
Company.
The Company held a contract receivable from Agora Holding Company
("Agora"), a partnership consisting of Andrew M. Pinkowski and certain previous
shareholders of Hall Laboratories Inc., in the amount of $813,000 as at July 31,
1999. Interest income earned by the Company on this contract was $74,000 for the
year ended July 31, 1999. The amounts owed, including accrued interest, were
paid in full on November 3, 1999. In addition, as of November 1, 1999, the
Company has terminated its agreement with Agora pursuant to which the Company
leased its manufacturing and administration facility in Portland, Oregon. Rent
expense incurred by the Company for this property was
23
<PAGE>
$170,000 for the year ended July 31, 1999. The above sales and rentals were made
on terms no less favorable to the Company than could be obtained from
non-related parties.
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 9, 2000. The proxy or proxies designated by the Company
will have discretionary authority to vote on any matter properly presented by a
shareholder for consideration at the next Annual Meeting of Shareholders but not
submitted for inclusion in the proxy materials for such Meeting unless notice of
the matter is received by the Company not later than October 26, 2000 and
certain other conditions of the applicable rules of the Securities and Exchange
Commission are satisfied.
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 1999 Annual Report to Shareholders, which is the
Company's Annual Report to the Securities and Exchange Commission on Form 10-K,
are being mailed simultaneously with this proxy statement.
By order of the Board of Directors,
Domenic Golato
Secretary
Freehold, New Jersey
December __, 1999
24
<PAGE>
IVC INDUSTRIES, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
JANUARY 7, 2000
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. to be held on Friday, January
7, 2000 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
through 5.
1. ELECTION of Directors.
|_| FOR all nominees |_| WITHHOLD AUTHORITY to vote for all nominees
Arthur S. Edell, E. Jospeh Edell, Marc Z. Edell, Dr. Mark S. Gold, Dennis
E. Groat, Erwin Lehr, Andrew M. Pinkowski, David Popofsky
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. APPROVAL of amendments to IVC's 1995 Stock Option Plan.
|_| FOR |_| AGAINST |_| ABSTAIN
4. RATIFICATION of the grant of stock options to the non-employee directors
of IVC and APPROVAL of amendments to IVC's Non-Employee Directors' Stock
Option Plan.
|_| FOR |_| AGAINST |_| ABSTAIN
5. RATIFICATION of the appointment of Amper, Politziner & Mattia, P.A., as
independent auditors for the fiscal year ending July 31, 2000.
|_| FOR |_| AGAINST |_| ABSTAIN
6. The proxy is authorized to transact such other business as may properly
come before the meeting.
<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 proposals 1 through 5 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
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.
