ERBA Diagnostics, Inc. DEF 14A 2008
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
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:
IVAX Diagnostics, 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):
IVAX DIAGNOSTICS, INC.
2140 North Miami Avenue
Miami, Florida 33127
July 3, 2008
You are cordially invited to attend the 2008 Annual Meeting of Stockholders of IVAX Diagnostics, Inc., which will be held on August 6, 2008 at 10:00 a.m., local time, at Museum Tower, 150 West Flagler Street, 22nd Floor, Miami, Florida 33130.
At the Annual Meeting, holders of our Common Stock will elect three directors to our Board of Directors and consider any other business that may be properly brought before the Annual Meeting.
The Notice of Annual Meeting and Proxy Statement, which are contained in the following pages, more fully describe the actions to be considered by stockholders at the Annual Meeting.
Our Board of Directors recommends that you vote your shares FOR the election of each of the three nominees to the Board of Directors named in the following pages. Teva Pharmaceutical Industries Limited, indirectly through its wholly-owned subsidiary, IVAX Corporation, holds approximately 72% of our issued and outstanding Common Stock and has advised us that it intends to vote all shares of Common Stock owned by it FOR the election of the three nominees to the Board of Directors named in the Proxy Statement. Accordingly, the election of each of these nominees is assured.
Whether or not you plan to attend the Annual Meeting and regardless of the size of your holdings, you are encouraged to promptly sign, date and mail the enclosed proxy in the pre-stamped envelope provided. Your participation is valued. The prompt return of your proxy will save additional solicitation expense and will not affect your right to vote in person in the event that you attend the Annual Meeting. Please vote today.
On behalf of our Board of Directors and our employees, I would like to express our appreciation for your continued support.
IVAX DIAGNOSTICS, INC.
2140 North Miami Avenue
Miami, Florida 33127
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on August 6, 2008
Notice is hereby given that the 2008 Annual Meeting of Stockholders of IVAX Diagnostics, Inc. (the Company) will be held at Museum Tower, 150 West Flagler Street, 22nd Floor, Miami, Florida 33130 on August 6, 2008 commencing at 10:00 a.m., local time, for the following purposes:
The foregoing matters are more fully described in the Proxy Statement which forms a part of this Notice of Annual Meeting.
Only stockholders of record at the close of business on June 25, 2008 are entitled to notice of and to vote at the Annual Meeting.
July 3, 2008
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF FURTHER REQUESTS FOR PROXIES; THEREFORE, EVEN IF YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE AND SIGN THE ENCLOSED PROXY AND RETURN IT IN THE ENVELOPE PROVIDED. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
IVAX DIAGNOSTICS, INC.
2140 North Miami Avenue
Miami, Florida 33127
This Proxy Statement is furnished in connection with the solicitation by the Board of Directors of IVAX Diagnostics, Inc. (the Company) of proxies for use at the 2008 Annual Meeting of Stockholders of the Company (the Annual Meeting) to be held at Museum Tower, 150 West Flagler Street, 22nd Floor, Miami, Florida 33130 on August 6, 2008 at 10:00 a.m., local time, and at any and all postponements or adjournments thereof, for the purposes set forth in the accompanying Notice of Annual Meeting.
This Proxy Statement and the accompanying Notice of Annual Meeting and proxy card are first being mailed to stockholders on or about July 3, 2008.
Each proxy solicited, if properly completed and received by the Company prior to the Annual Meeting and not revoked prior to its use, will be voted in accordance with the instructions contained therein. To vote by proxy, you must complete, sign and date the enclosed proxy card and return it in the prepaid envelope. Proxies received with no instructions will be voted FOR the election of each nominee to the Board of Directors. Although the Board of Directors is unaware of any other matter to be presented at the Annual Meeting upon which stockholders are entitled to vote, if any other matters are properly brought before the Annual Meeting, then the persons named in the proxy will vote as proxies in accordance with their own best judgment on those matters.
Any stockholder signing and returning a proxy on the enclosed form has the power to revoke it at any time before it is exercised by (i) notifying the Secretary of the Company in writing at the address set forth above, (ii) submitting a proxy bearing a later date or (iii) attending the Annual Meeting and voting in person.
The Company will bear the expense of soliciting proxies and may reimburse brokers, banks and nominees for the out-of-pocket and clerical expenses of transmitting copies of the proxy materials to the beneficial owners of shares held of record by such brokers, banks and nominees. The Company does not intend to solicit proxies other than by the use of the mail.
Record Date; Stockholders Entitled to Vote
Only holders of record of the Companys Common Stock at the close of business on June 25, 2008 (the Record Date) are entitled to notice of and to vote at the Annual Meeting. If you hold your shares beneficially through a brokerage account or through a bank or other nominee, then you are considered the beneficial owner of the shares but not the record holder of the shares, and your shares are held in street name. If you hold your shares in street name, then to vote your shares, you must follow the voting instructions that you receive from your broker, bank or other nominee. If you hold your shares in street name, then you will not be entitled to vote in person at the Annual Meeting (although you will be permitted to attend) unless you have obtained a signed proxy from your broker, bank or other nominee giving you the right to vote the shares.
On the Record Date, there were 27,649,887 shares of Common Stock issued and outstanding. Holders of Common Stock are entitled to one vote per share on all matters to be considered at the Annual Meeting. Teva Pharmaceutical Industries Limited (Teva), which indirectly through its wholly-owned subsidiary, IVAX Corporation (IVAX), holds approximately 72% of the issued and outstanding shares of the Companys Common Stock, has advised the Company that it will vote all of its shares in favor of the election of each of the three nominees to the Board of Directors named in this Proxy Statement. Accordingly, the election of each of these nominees is assured.
The presence, in person or by proxy, of at least a majority of the issued and outstanding shares of the Companys Common Stock is necessary to transact business at the Annual Meeting. Both abstentions and broker non-votes, as described below, are counted as present for purposes of establishing a quorum. In the event that there are not sufficient shares represented for a quorum, the Annual Meeting may be adjourned from time to time until a quorum is established.
Vote Required for Approval
To elect the three nominees to the Board of Directors, the affirmative vote of a plurality of the votes cast in person or by proxy at the Annual Meeting is required. There is no right to cumulative voting in the election of directors.
Voting of Proxies by Brokers
Broker non-votes occur when a broker, bank or other nominee who holds shares in street name for a beneficial owner does not have discretionary authority to vote on a matter and has not received instructions on how to vote from the beneficial owner of the shares. Broker non-votes and abstentions will have no effect on the election of directors.
Board of Directors. The Board of Directors met twenty-one times during the 2007 fiscal year. Except Richard Egosi, each member of the Board of Directors during the 2007 fiscal year attended at least 75% of the meetings of the Board of Directors and committees on which he served. Six of the eight then-serving members of the Board of Directors attended the Companys 2007 annual meeting of stockholders, although the Company has no formal policy requiring them to do so. As more fully described elsewhere in this Proxy Statement, effective January 10, 2008, Giorgio DUrso resigned as a member of the Board of Directors in connection with his resignation, effective as of that date, as President and Chief Executive Officer of the Company.
Under the applicable rules of the American Stock Exchange, the Company is considered a controlled company because Teva, indirectly through its wholly-owned IVAX subsidiary, owns approximately 72% of the issued and outstanding shares of the Companys Common Stock. As a controlled company, the Company is not subject to certain corporate governance requirements of the American Stock Exchange, including the requirements to (i) maintain a majority of independent directors on the Board of Directors, (ii) have a nominating committee or (iii) have a compensation committee comprised solely of independent directors.
The Board of Directors has determined that four of its membersFernando L. Fernandez, Glenn L. Halpryn, John B. Harley, M.D., and Jose J. Valdes-Fauliare independent, as such term is defined in the applicable rules of the American Stock Exchange relating to the independence of directors. In determining that Dr. Harley is independent, the Board of Directors considered the oral consulting agreement between Dr. Harley and ImmunoVision, Inc., the Companys subsidiary located in Arkansas (ImmunoVision), pursuant to which Dr. Harley is paid $2,000 per month to provide ImmunoVision with technical guidance and business assistance on an as-needed basis. The Board of Directors also considered the license agreement between the Company and JK Autoimmunity, Inc., a corporation of which Dr. Harley is the controlling shareholder (JK Autoimmunity), pursuant to which JK Autoimmunity has granted an exclusive worldwide license to the Company for certain patents, rights and technology relating to monoclonal antibodies against autoimmune RNA proteins developed by Dr. Harley in exchange for specified royalty payments, including an annual minimum royalty of $10,000 for each licensed product utilized by the Company.
The Board of Directors has established an Audit Committee and a Compensation Committee.
Audit Committee. During the 2007 fiscal year, the Audit Committee consisted of Jose J. Valdes-Fauli, Chairman, Fernando L. Fernandez and Glenn L. Halpryn. The Audit Committee met six times during the 2007 fiscal year. The primary responsibility of the Audit Committee is to oversee the Companys financial reporting process on behalf of the Board of Directors and the stockholders and to report the results of its activities to the Board of Directors. The Audit Committee engages the independent auditors, approves all audit services and permitted non-audit services to be provided by the independent auditor, considers the fee arrangement and scope of the audit, reviews the financial statements and the independent auditors report and reviews internal accounting procedures and controls with the Companys financial and accounting staff. The Board of Directors has determined that all of the members of the Audit Committee are independent, as such term is defined in the applicable regulations of the Securities and Exchange Commission and rules of the American Stock Exchange relating to directors serving on audit committees. The Board of Directors determined that each of Messrs. Fernandez and Valdes-Fauli has the attributes, education and experience of an audit committee financial expert, as such term is defined in Item 407(d)(5) of Regulation S-K. The Audit Committee operates under a written charter adopted and approved by the Board of Directors. The Audit Committee charter is posted in the Investor Relations section of the Companys Internet web site at www.ivaxdiagnostics.com.
Compensation Committee. The Compensation Committee consists of Glenn L. Halpryn, Chairman, Mark Durand, Jose Valdes-Fauli, Fernando Fernandez and John B. Harley, M.D. Each of Messrs. Halpryn, Durand and Fernandez and Dr. Harley served as members of the Compensation Committee throughout the 2007 fiscal year. Mr. Valdes-Fauli was appointed to the Compensation Committee on August 16, 2007. The Compensation Committee met seven times during the 2007 fiscal year. The Compensation Committee establishes and implements compensation policies and programs for executives of the Company, including the Named Executive Officers (as defined in the introductory paragraph to the Summary Compensation Table below), and recommends the compensation arrangements for executive management and directors. It also serves as the Stock Option Committee for the purpose of making grants of options under both of the Companys stock option plans. As permitted by the rules of the American Stock Exchange, the Compensation Committee does not operate under a written charter.
Director Nominations. As a controlled company, the Board of Directors is not required to, and does not, have a nominating committee. The Board of Directors believes that it is appropriate for the Company to not have a nominating committee because Teva, indirectly through its wholly-owned IVAX subsidiary, owns approximately 72% of the issued and outstanding shares of the Companys Common Stock and is in a position to control the election of the Companys directors. The Board of Directors of the Company, together with the executive management and board of directors of Teva, performs the function of identifying and evaluating director nominees for the Company. The Board of Directors does not consider director nominees recommended by stockholders of the Company, other than those identified by Teva. While the Board of Directors has not established specific, minimum qualifications, qualities or skills that a director nominee is required to have, the Board of Directors generally considers: (i) the size of the Board of Directors best suited to fulfill its responsibilities, (ii) the overall composition of the membership of the Board of Directors to ensure that the Board of Directors has the requisite expertise and consists of persons with sufficiently diverse backgrounds and (iii) the reputation, independence, integrity, education, and business, strategic and financial skills of director nominees. Each of the nominees for election as a director named in this Proxy Statement was unanimously recommended by the full Board of Directors for submission to the stockholders of the Company as the Board of Directors nominees.
Stockholder Communications with the Board of Directors. The Board of Directors has provided a process for stockholders of the Company to send communications to the Board of Directors or to a particular director. Any stockholder who wishes to communicate with the Board of Directors or any particular director may do so by sending all such communications in writing, via United States mail, postage prepaid, to: Secretary, IVAX Diagnostics, Inc., 2140 North Miami Avenue, Miami, Florida 33127. Each stockholder writing should include a statement indicating that the sender is a stockholder of the Company and should specify whether the communication is directed to the entire Board of Directors or to a particular director. Company personnel will
review all properly sent stockholder communications and will forward the communication to the director or directors to whom it is intended, attempt to handle the inquiry directly if it relates to a routine or ministerial matter or not forward the communication if it is primarily commercial in nature or if it is determined to relate to an improper or irrelevant topic.
Code of Conduct and Ethics. The Board of Directors has adopted a Code of Conduct and Ethics, which applies to all of the Companys directors, officers and employees, and a code of ethics, also known as a Senior Financial Officer Code of Ethics, which applies to the Companys principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. The Code of Conduct and Ethics and the Senior Financial Officer Code of Ethics are posted in the Investor Relations section of the Companys Internet web site at www.ivaxdiagnostics.com. If the Company makes an amendment to, or grants a waiver with respect to, any provision of the Senior Financial Officer Code of Ethics, then the Company intends to disclose the nature of such amendment or waiver by posting it in the Investor Relations section of the Companys Internet web site at www.ivaxdiagnostics.com or by other appropriate means as required or permitted under the applicable regulations of the Securities and Exchange Commission and rules of the American Stock Exchange.
Section 16(a) Beneficial Ownership Reporting Compliance. Section 16(a) of the Securities Exchange Act of 1934 requires the Companys directors, executive officers and 10% stockholders to file initial reports of ownership and reports of changes in ownership of the Companys Common Stock and other equity securities with the Securities and Exchange Commission and the American Stock Exchange. The Companys directors, executive officers and 10% stockholders are required to furnish the Company with copies of all Section 16(a) reports they file. Based on a review of the copies of such reports furnished to the Company and written representations from the Companys directors and executive officers that no other reports were required, the Company believes that its directors, executive officers and 10% stockholders complied with all Section 16(a) filing requirements applicable to them for the year ended December 31, 2007.
PROPOSAL FOR ELECTION OF DIRECTORS
Nominees for Election as Director
The Companys Bylaws provide that the Board of Directors shall consist of no less than one director. The Board of Directors currently consists of seven directors divided into three classes, each of which has a three year term, which terms expire in annual succession. A total of three directors will be elected at the Annual Meeting, each of whom will be elected for a term expiring in 2011. Teva has advised the Company that it will vote all shares of the Companys Common Stock owned by it in favor of all of the nominees. If any nominee is unable to serve, which the Board of Directors has no reason to expect, Teva has advised the Company that it will vote all shares of the Companys Common Stock owned by it for the other named nominees and for the person, if any, who is designated by the Board of Directors to replace such nominee. Accordingly, election of the nominees nominated by the Board of Directors is assured.
The following table sets forth the names and ages of the director nominees and the year during which their terms of office will expire. Each director nominee is a current director of the Company who has been nominated for re-election at the Annual Meeting.
The following list contains certain information with respect to the director nominees, including the principal occupation or employment for at least the previous five years and his positions or offices at the Company or its subsidiariesDelta Biologicals, S.r.l. (Delta), Diamedix Corporation (Diamedix) and ImmunoVision.
Mark W. Durand, age 49, has served as a director of the Company since April 2006. Since November 2007, Mr. Durand has served as Senior Vice President and Chief Financial Officer of Watson Pharmaceuticals, Inc. From 2004 until November 2007, Mr. Durand served as Chief Financial Officer and Senior Vice PresidentFinance and Business Development of Teva North America. Prior to joining Teva North America, Mr. Durand served in various executive management roles in finance, business development and general management at Bristol-Myers Squibb Company, including in 2002 as Vice PresidentFinance and Business Development and, in 2004, he was also appointed Vice PresidentSpecialty Pharmaceuticals. Mr. Durand also currently serves as a member of the Board of Directors of the Dartmouth College Graduate Studies Program. Mr. Durand received a B.S. from Duke University, an M.S. from Dartmouth College and an M.B.A. from the University of Chicago.
Richard S. Egosi, age 46, has served as a director of the Company since April 2006. Since 1999, Mr. Egosi has served as Senior Vice President and General Counsel of Teva North America and Latin America, overseeing the legal function for the Teva group of companies in the Americas. From 1995 to 1999, Mr. Egosi served as Associate General Counsel of Teva. From 1988 to 1995, Mr. Egosi was an attorney in private practice. Mr. Egosi received a J.D. and an M.B.A. from Emory University, and a B.S. in economics from Clemson University.
John B. Harley, M.D., age 58, has served as a director of the Company since the merger of the pre-merger IVAX Diagnostics, Inc. (the pre-merger IVAX Diagnostics) with b2bstores.com Inc. (b2bstores.com) in 2001. He has held various positions at the University of Oklahoma Health Sciences Center since 1982. In the Department of Medicine, his positions include Chief of Rheumatology, Allergy and Immunology Section and Vice Chair for Research, George Lynn Cross Research Professor (1999 to present), James R. McEldowney Chair in Immunology and Professor of Medicine (1992 to present), Associate Professor (1986 to 1992) and Assistant Professor (1982 to 1986). Since 1996, Dr. Harley has been an Adjunct Professor in the Department of Pathology. In the Department of Microbiology, Dr. Harley has served as Adjunct Professor (1992 to present), Adjunct
Associate Professor (1988 to 1992) and Adjunct Assistant Professor (1983 to 1988). Since 1982, Dr. Harley has also been associated with the Oklahoma Medical Research Foundations Arthritis and Immunology Program as Program Head (1999 to present), Member (1998 to present), Associate Member (1989 to present), Affiliated Associate Member (1986 to 1989) and Affiliated Assistant Member (1982 to 1986). Dr. Harley has also served as a Staff Physician (1982, 1984 to 1987 and 1992 to present) and a Clinical Investigator (1987 to 1992), Immunology Section, Medical Service at the Veterans Affairs Medical Center, Oklahoma City, Oklahoma. In 1981 and 1982, Dr. Harley was a Postdoctoral Fellow in Rheumatology with the Arthritis Branch of the National Institute of Arthritis, Diabetes and Digestive and Kidney Diseases, National Institute of Health, Bethesda, Maryland. He was also a Clinical Associate at the Laboratory of Immunoregulation, National Institute of Allergy and Infectious Diseases, National Institutes of Health, Bethesda, Maryland from 1979 to 1982. Dr. Harley is also the Secretary and a member of the Board of Directors of JK Autoimmunity, as well as the Secretary and Treasurer and a member of the Boards of Directors of Dynamic Ventures, Inc. and VRB Associates, Inc.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU
VOTE FOR ALL OF THE NOMINEES FOR DIRECTOR
Directors Continuing in Office
The following list contains certain information with respect to the directors continuing in office, including the principal occupation or employment for at least the previous five years and his positions or offices at the Company or its subsidiaries.
Itzhak Krinsky, Ph.D., age 56, has served as the Chairman of the Companys Board of Directors since April 2006. He has served as Corporate Vice President for Business Development of Teva since May 2005. Dr. Krinsky was a managing director with The Silverfern Group, Inc. from January 2003 until February 2005 and, until joining Teva, a managing director with Trenwith Securities, LLC, both investment banking boutiques in New York City. From July 2001 until December 2002, Dr. Krinsky was a managing director of Krinsky, Financial & Investment Consulting in New York City and, from January 1998 until June 2001, a senior strategist with the Investment Banking Research and Strategy Group of Bankers Trust (the predecessor of Deutsche Bank Securities) and later a managing director in the Acquisition and Corporate Advisory Group of Deutsche Bank Securities in New York City. Dr. Krinskys academic career includes a position as Professor of Finance & Business Economics, Michael G. DeGroote School of Business, McMaster University, Canada and as a visiting professor in Institute for International Studies and Training of Japan, Kamiide, Japan, Nankai University, Tianjin The Peoples Republic of China and the Leonard N. Stern School of Business at New York University, as well as extensive publications in leading academic journals. Dr. Krinsky is currently a member of the Board of Directors of Can-fite Biopharma Ltd. From 2005 through 2007, Dr. Krinsky served as a member of the Board of Directors of Advanced Vision Technology (A.V.T.) Ltd. and, from July 2007 through December 2007, he served as a member of the Board of Directors of Eldav Investment Ltd. Dr. Krinsky received his B.A. and M.A. in economics from Tel Aviv University in 1976 and 1978, respectively, and his Ph.D. in economics from McMaster University in 1983.
Fernando L. Fernandez, age 47, has served as a director of the Company since April 2005. Mr. Fernandez serves as Senior Vice PresidentFinance, Chief Financial Officer, Treasurer and Secretary of Continucare Corporation. Mr. Fernandez, a certified public accountant, served as Senior Vice PresidentFinance, Chief Financial Officer, Treasurer and Secretary of Whitman Education Group, Inc. from 1996 until 2003. From August 1991 through February 1996 and from August 2003 through June 2004, Mr. Fernandez served as Chief Financial Officer of several private investment entities owned by Phillip Frost, M.D. Prior to 1991, Mr. Fernandez served as Audit Manager for PricewaterhouseCoopers LLP (formerly Coopers & Lybrand) in Miami, Florida.
Glenn L. Halpryn, age 47, has served as a director of the Company since December 2002. Mr. Halpryn has been Chief Executive Officer of Transworld Investment Corporation since June 2001 and the President of Chelsea Management Corporation since September 2004. Mr. Halpryn has been President and Chief Executive
Officer and a member of the Boards of Directors of Getting Ready Corporation and ClickNSettle.com, Inc., public acquisition companies, since December 2006 and September 2007, respectively. From April 2001 through December 2006, Mr. Halpryn served as Chairman of the Board of Directors and President of Orthodontix, Inc., a public acquisition company whose business combination was effected in December 2006 with Protalix, Ltd. Since January 1987, Mr. Halpryn has been a portfolio manager of International Venture Capital, Ltd. Since February 1987, Mr. Halpryn has been the President of United Security Corporation, a broker-dealer registered with the NASD. Since 1984, Mr. Halpryn has been engaged in real estate investment and development activities, including the management, finance and leasing of commercial real estate. From November 1984 through June 2001, Mr. Halpryn served as Vice President of Transworld Investment Corporation. From April 1988 through June 1998, Mr. Halpryn was Vice Chairman of Central Bank, a Florida state-chartered bank. From November 1995 through April 1998, Mr. Halpryn served as Chairman and President of Embassy Acquisition Corp. From June 1992 through May 1994, Mr. Halpryn served as the Vice President, Secretary and Treasurer and as a director of Frost Hanna Halpryn Capital Group, Inc., a blank check company whose business combination was effected in May 1994 with Sterling Healthcare Group, Inc.
Jose J. Valdes-Fauli, age 56, has served as a director of the Company since December 2002. Since January 2008, Mr. Valdes-Fauli has served as the President and Chief Executive Officer of The International Bank of Miami. From 2004 through December 2006, Mr. Valdes-Fauli served as the President and Chief Executive Officer of Beach Bank. From 1998 to 2003, Mr. Valdes-Fauli was the President and Chief Executive Officer of Colonial BankSouth Florida Region, an affiliate of Colonial BancGroup. Mr. Valdes-Fauli has been involved in the banking industry for over 30 years. He is a member of the Florida International University Foundation Board of Directors and Director Emeritus of the Florida Grand Opera. Mr. Valdes-Fauli is also a former director of the Bass Museum of Art, the Concert Association of Florida and the Mercy Hospital Foundation and a former member of the Advisory Board of New Hope Charities, Inc. and the Miami-Dade County Cultural Affairs Council.
Identification of Executive Officers
The following individuals are executive officers of the Company.
All officers serve until they resign or are replaced or removed at the pleasure of the Board of Directors. The following additional information is provided for the executive officers of the Company.
Kevin D. Clark, age 45, was appointed as the Companys acting Chief Executive Officer in January 2008. Mr. Clark has served as the Companys Chief Operating Officer since September 2007 and as Chief Operating Officer of ImmunoVision since 1987. He also served as President of ImmunoVision from 1987 through 1995. Mr. Clark was a founding member of the Arkansas Biotech Association and, from 1995 through 2004, served as its Executive Vice President, and in 2002, served as its President. Since 2003, Mr. Clark has served as a member of the Executive Committee of the University of Arkansas Technology Development Foundation, a non-profit foundation for the commercialization of technology developed at the University of Arkansas in Fayetteville. From 2000 to 2003, Mr. Clark was a member of the Advisory Board of Arkansas BioVentures, a state and federally funded incubator program for biotechnology.
Duane M. Steele, age 57, has served as the Companys Vice PresidentBusiness Development since the merger of the pre-merger IVAX Diagnostics with b2bstores.com in 2001 and had served in the same capacity with the pre-merger IVAX Diagnostics since 1996. He joined Diamedix in 1995 and has over 30 years of
diagnostics industry experience. He has served as the Chief Operating Officer of Diamedix since 1997. From 1995 to 1997, he served as Vice PresidentBusiness Development of Diamedix. From 1990 to 1994, he served as President and Chief Executive Officer of LaserCharge, Inc. in Austin, Texas. From 1988 to 1989, Mr. Steele was the General Manager of Austin Biological Laboratories, Inc. From 1972 to 1987, Mr. Steele held a variety of positions with Kallestad Diagnostics, Inc., including Senior Vice President.
Mark S. Deutsch, age 45, has served as the Companys Chief Financial Officer and Vice PresidentFinance since the merger of the pre-merger IVAX Diagnostics with b2bstores.com in 2001 and had served in the same capacities with the pre-merger IVAX Diagnostics since 1996. He has served as the Vice PresidentFinance of Diamedix since 1993 and has 14 years of diagnostics industry experience. From 1988 to 1993, Mr. Deutsch held various positions including Accounting Manager of IVAX and Controller of certain subsidiaries of IVAX. From 1985 to 1988, Mr. Deutsch worked for Arthur Andersen & Co. as a Senior Accountant.
Certain Relationships and Related Transactions
Majority Stockholder (Parent Company). Teva, indirectly through its wholly-owned IVAX subsidiary, owns approximately 72% of the issued and outstanding shares of the Companys Common Stock.
Transactions with Related Persons. Upon completion of the merger of the pre-merger IVAX Diagnostics with b2bstores.com, the Company entered into a registration rights agreement with IVAX. The registration rights agreement required the Company to file a registration statement on Form S-3 (at any time after one year, and before the earlier of five years, following the completion of the merger or such time at which all the shares of the Companys Common Stock owned by IVAX can be sold in any three-month period without registration) to register not less than $1.0 million of the Companys Common Stock owned by IVAX. Additionally, IVAX was permitted to piggyback on registrations initiated by the Company or other holders exercising similar demand registration rights. The registration rights agreement expired on March 15, 2006.
In connection with the merger of the pre-merger IVAX Diagnostics with b2bstores.com, the Company entered into a shared services agreement with IVAX pursuant to which IVAX would continue to provide administrative and management services previously provided by IVAX to the pre-merger IVAX Diagnostics prior to the merger at IVAX cost plus 15% for a period of three months. These services may include payroll, including printing paychecks and making associated tax filings; treasury, including cash management services such as disbursements, receipts, banking and investing; insurance, including procuring and administering policies; human resources, including administering employee benefits and plans; financial reporting, including public reports; income taxes; and information systems, including network and website hosting, phone and data systems, software licenses and information systems support.
In connection with the merger of the pre-merger IVAX Diagnostics with b2bstores.com, the Company entered into a use of name license agreement with IVAX that grants the Company a non-exclusive, royalty free license to use the name IVAX. IVAX may terminate the license upon 90 days written notice. Upon termination of the license agreement, the Company must take all steps reasonably necessary to change its name as soon as practicable. If IVAX abandons its use of the name, IVAX must transfer all rights to the name to the Company. The termination of this license agreement by IVAX could have a material adverse affect on the Company and its ability to market its products.
Prior to, and for a short time after, Tevas acquisition of IVAX, the Company, as a subsidiary of IVAX, had directors and officers insurance, as well as property insurance coverage, that fell within the scope of IVAX directors and officers insurance and property insurance policies. In 2006, the Company purchased its own directors and officers insurance and property insurance policies and, accordingly, no longer falls within the scope of Tevas or IVAX directors and officers insurance or property insurance policies. The Company falls within the scope of Tevas insurance policies for certain other types of insurance coverage.
Giulio DUrso, the son of Giorgio DUrso, the Companys former Chief Executive Officer and President, was party to employment and consultant agreements with the Company and its subsidiaries, under which he received an aggregate of approximately $164,000 annually, subject to change based on currency exchange rate fluctuations. In October 2007, the Company notified Giulio DUrso of its election not to renew his consulting agreement, which expired in accordance with its terms in April 2008 and, in November 2007, the Company terminated Giulio DUrsos employment agreement, effective immediately.
Compensation of Named Executive Officers
Summary Compensation Table
The following table sets forth certain summary information concerning compensation which the Company paid or accrued to or on behalf of each of its executive officers during the fiscal years ended December 31, 2007 and 2006 (the Named Executive Officers) for each of such fiscal years.
Outstanding Equity Awards at Fiscal Year-End2007
The following table sets forth certain information regarding equity-based awards held by the Named Executive Officers as of December 31, 2007.
Potential Payments upon Termination or Change-in-Control
On October 1, 1998, the pre-merger IVAX Diagnostics entered into a five-year employment agreement with Giorgio DUrso, the Companys former Chief Executive Officer and President, at a base annual salary of $348,519, with discretionary annual adjustments. The Company assumed this employment agreement in the merger of the pre-merger IVAX Diagnostics with b2bstores.com. The Company previously extended the term of Mr. DUrsos employment agreement until February 24, 2010. Pursuant to the terms and conditions of this employment agreement, the Company was permitted to terminate Mr. DUrsos employment with or without cause at any time upon written notice. For a termination without cause, the Company would have been required to pay Mr. DUrso his then current annual base salary in installments for the remainder of the employment term. This employment agreement further provided that, while employed by the Company and for a two-year period thereafter, Mr. DUrso would not be permitted to employ or contract with any of the Companys current or former employees, except former employees who have not been employed by the Company for more than one year.
In connection with Mr. DUrsos resignation as the Companys Chief Executive Officer and President, effective January 10, 2008, Mr. DUrsos employment agreement was terminated, and the Company and Mr. DUrso entered into a separation agreement and general release. Pursuant to the terms and conditions of this separation agreement and general release, the Company paid Mr. DUrso a one-time lump-sum payment of $495,000 and agreed to reimburse Mr. DUrso for his group health insurance under COBRA until the earlier of July 10, 2008 or such time as Mr. DUrso becomes covered under another group health plan. This separation agreement and general release also includes releases by and between the Company and Mr. DUrso, as well as non-competition, non-solicitation and non-disparagement covenants by Mr. DUrso.
Compensation of Directors
The Compensation Committee recommends director compensation to the Board of Directors based on factors it considers appropriate, market conditions and trends and the recommendations of management. In 2007, each of the Companys non-employee directors received a cash retainer of $15,000 for his service on the Board of Directors. Additionally, each member of the Audit Committee and each of the Companys non-employee directors who served on the Compensation Committee received cash retainers of $5,000 and $2,500, respectively, for his service on such committees during 2007. In addition to cash compensation, each of the Companys non-employee directors was awarded a grant of options to purchase 25,000 shares of the Companys Common Stock under the Companys 1999 Performance Equity Plan with an exercise price of $1.00 per share, which was the closing price of the Companys Common Stock on the American Stock Exchange on August 1, 2007, which was the date of grant, and which fully vested immediately upon grant. Directors who were employed by the Company, Teva or Teva North America during 2007 did not receive any compensation for their service on the Board of Directors or the committees of the Board of Directors during 2007.
The following table sets forth certain information regarding the compensation paid to the Companys non-employee directors for their service during the fiscal year ended December 31, 2007.
AUDIT COMMITTEE REPORT
During the 2007 fiscal year, the Audit Committee consisted of Jose J. Valdes-Fauli, Chairman, Fernando L. Fernandez and Glenn L. Halpryn.
The Audit Committee reviewed and discussed the audited consolidated financial statements for the fiscal year ended December 31, 2007 with management and the Companys independent auditors for the fiscal year ended December 31, 2007, PricewaterhouseCoopers LLP (PwC).
The Audit Committee also discussed with PwC matters required to be discussed with audit committees under generally accepted auditing standards, including, among other things, matters required to be discussed by the statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1. AU section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T.
The Audit Committee has received the written disclosures and the letter from PwC required by Independence Standards Board Standard No. 1 (Independence Standards Board Standard No. 1, Independence Discussions with Audit Committees), as adopted by the Public Company Accounting Oversight Board in Rule 3600T, and the Audit Committee discussed with PwC its independence from the Company. When considering PwCs independence, the Audit Committee considered whether PwCs provision of services to the Company was compatible with maintaining its independence. The Audit Committee also reviewed, among other things, the amount of fees paid to PwC for audit and non-audit services.
The Audit Committee also met with PwC, with and without management present, to discuss the results of its examinations, its evaluations of the Companys internal controls and the overall quality of the Companys financial reporting.
Based on the Audit Committees review and these meetings, discussions and reports, the Audit Committee recommended to the Board of Directors that the Companys audited consolidated financial statements for the fiscal year ended December 31, 2007 be included in the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2007.
Submitted by the Members of the Audit Committee:
Jose J. Valdes-Fauli, Chairman
Glenn L. Halpryn
Fernando L. Fernandez
Principal Accounting Fees and Services
The following table sets forth the aggregate fees billed to the Company by PwC, the Companys principal accountant for the fiscal years ended December 31, 2007 and 2006.
In the table above, pursuant to their definitions under the applicable regulations of the Securities and Exchange Commission, audit fees are fees for professional services rendered for the audit of the Companys annual financial statements and review of the Companys financial statements included in its Quarterly Reports on Form 10-Q and for services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements; audit-related fees are fees for assurance and related services that are reasonably related to the performance of the audit and review of the Companys financial statements, and primarily include accounting consultations and audits in connection with potential acquisitions; tax fees are fees for tax compliance, tax advice and tax planning; and all other fees are fees for any services not included in the first three categories.
The Audit Committee is responsible for pre-approving all audit services and permitted non-audit services to be performed by the Companys principal accountant, except in those instances which do not require such pre-approval pursuant to the applicable regulations of the Securities and Exchange Commission. The Audit Committee has established policies and procedures for its pre-approval of audit services and permitted non-audit services and, from time to time, the Audit Committee reviews and revises its policies and procedures for pre-approval.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table indicates, as of June 25, 2008, information about the beneficial ownership of the Companys Common Stock by (1) each director as of June 25, 2008, (2) each Named Executive Officer, (3) all directors and executive officers as of June 25, 2008 as a group and (4) each person who the Company knows beneficially owns more than 5% of the Companys Common Stock. All such shares were owned directly with sole voting and investment power unless otherwise indicated.
As of the date of this Proxy Statement, the Board of Directors is not aware of any matters, other than those referred to in the accompanying Notice of Meeting, to be brought before the Annual Meeting. However, if any other matters should properly come before the Annual Meeting, the persons named as proxy holders will have the discretion to vote any shares of the Companys Common Stock for which they hold proxies in accordance with their best judgment. If for any reason any of the nominees for election to the Board of Directors is not available as a candidate for director, the persons named proxy holders will vote any shares of the Companys Common Stock for which they hold proxies for such other candidate or candidates as may be nominated by the Board of Directors.
INDEPENDENT PUBLIC ACCOUNTANTS
PwC served as the Companys independent registered public accounting firm for the fiscal years ended December 31, 2007 and 2006 and has been selected by the Audit Committee to serve as the Companys independent registered public accounting firm for the fiscal year ending December 31, 2008. Ernst & Young LLP (E&Y) acted as the Companys independent registered public accounting firm for the fiscal year ended December 31, 2005. On April 19, 2006, the Company notified E&Y that the Company decided to discontinue its engagement of E&Y as the Companys independent registered public accounting firm, and the Company appointed PwC as its new independent registered public accounting firm for the fiscal year ended December 31, 2006, in each case effective immediately. The decisions to discontinue the Companys engagement of E&Y and to appoint PwC were made and approved by the Audit Committee.
The audit report of E&Y on the Companys financial statements for the fiscal year ended December 31, 2005 did not contain an adverse opinion or disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit scope or accounting principles.
During the fiscal year ended December 31, 2005 and the subsequent interim period through April 19, 2006, the Company had no disagreements with E&Y on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreement, if not resolved to E&Ys satisfaction, would have caused E&Y to make reference to the subject matter of the disagreement in connection with its reports. In addition, during that time, there were no reportable events (as defined in Item 304(a)(1)(v) of Regulation S-K).
During the fiscal year ended December 31, 2005 and the subsequent interim period through April 19, 2006, the Company did not consult with PwC regarding: (i) either the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Companys financial statements; or (ii) any matter that was either the subject of a disagreement, as that term is defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions to Item 304 of Regulation S-K, or a reportable event, as that term is defined in Item 304(a)(1)(v) of Regulation S-K.
Representatives of PwC are expected to be present at the Annual Meeting, will have the opportunity to make a statement if they desire and will be available to respond to appropriate questions from stockholders.
Proposals of stockholders intended to be presented at the next annual meeting of the Company, expected to be held in August 2009, and to be included in the Companys proxy statement and form of proxy for that meeting must be in writing and in compliance with applicable rules and regulations and received by the Secretary of the Company at its main offices at 2140 North Miami Avenue, Miami, Florida 33127 no later than March 5, 2009. In addition to any other applicable requirements, for a stockholder to properly present any proposal at the next annual meeting of the Company, but not to be included in the Companys proxy statement and form of proxy for that meeting, the proposal must be in writing and in compliance with the Companys Bylaws and received by the Secretary of the Company at its main offices, as listed above, no earlier than March 5, 2009 and no later than May 4, 2009.
July 3, 2008
IVAX DIAGNOSTICS, INC.
2140 North Miami Avenue
Miami, Florida 33127
This Proxy is solicited on behalf of the Board of Directors of IVAX Diagnostics, Inc.
I (whether one or more of us) appoint Duane M. Steele and Mark S. Deutsch, and each of them separately, as my proxies, each with the power to appoint his substitute, and authorize each of them to vote as designated on the reverse side, all of my shares of Common Stock of IVAX Diagnostics, Inc. held of record by me at the close of business on June 25, 2008, at the Annual Meeting of Stockholders to be held on August 6, 2008, and at any postponement or adjournment of the meeting.
When properly executed and returned, this Proxy will be voted in the manner directed by me. If no direction is indicated, this Proxy will be voted FOR the election of all director nominees and according to the discretion of the proxy holders on any other matters that may properly come before the meeting or any postponement or adjournment thereof.
Please complete, date and sign this Proxy on the reverse side, and mail it promptly in the enclosed envelope.
(continued and to be signed on the reverse side)
(continued from the reverse side)
The Board of Directors of IVAX Diagnostics, Inc. unanimously recommends a vote FOR all of the nominees for director:
I acknowledge receipt of the accompanying Notice of Annual Meeting of Stockholders and Proxy Statement for the August 6, 2008 meeting.
(Please date this Proxy and sign exactly as name or names appear on this Proxy. When shares are held by joint tenants, both should sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign in full corporate name by president or other authorized officer. If a partnership, please sign in partnership name by authorized person.)
Please complete, date, sign and mail this Proxy promptly in the enclosed envelope. Postage is not necessary if mailed in the United States.