UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

 

SCHEDULE 14A

(RULE 14a-101)

 

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

 

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934

 

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o  Preliminary Proxy Statement

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þ  Definitive Proxy Statement

o  Definitive Additional Materials

o  Soliciting Material Pursuant to §240.14a-12

 

IMARX THERAPEUTICS, INC.

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

 

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1730 East River Road, Suite 200

Tucson, Arizona 85718

 

 

NOTICE OF 2008 ANNUAL MEETING OF STOCKHOLDERS

 

May 29, 2008 at 3:00 p.m. (local time)

at

Tucson Marriott University Park

800 E. Second St.

Tucson, AZ 85719

 

TO THE STOCKHOLDERS OF IMARX THERAPEUTICS, INC.:

 

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of ImaRx Therapeutics, Inc., a Delaware corporation, will be held on Thursday, May 29, 2008, at 3:00 p.m., local time, at Tucson Marriott University Park, 880 E. Second St., Tucson, Arizona, for the purpose of considering and acting on the following:

 

1. To elect six members to the Board of Directors to serve for the ensuing year and until their successors are elected.

 

2. To ratify the selection of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2008.

 

3. To transact such other business as may properly come before the meeting or any adjournment thereof.

 

The foregoing items of business are more fully described in the proxy statement accompanying this Notice.

 

The Board of Directors has fixed the close of business on April 25, 2008, as the record date for the determination of stockholders entitled to notice of and to vote at this Annual Meeting of Stockholders and at any adjournment thereof. This proxy statement is being mailed on or about May 2, 2008.

 

By Order of the Board of Directors

 

/s/ Kevin J. Ontiveros

 

Kevin J. Ontiveros

Corporate Secretary

 

Tucson, Arizona

April 29, 2008

TABLE OF CONTENTS

 

PROXY STATEMENT

 

 

QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND THE ANNUAL MEETING

 

 

We will also consider any other business that properly comes before the annual meeting. See “What happens if additional matters are presented at the annual meeting?” below.

 

 

10 Commerce Drive

Cranford, New Jersey 07016-3572

(800) 866-1340

 

 

Our Board of Directors currently consists of six members. Each member of the Board is a nominee for re-election at the annual meeting. As such, there are six nominees for director this year. Proxies may not be voted for a greater number of persons than the number of named nominees. Each nominee has agreed to serve if elected at the annual meeting. If elected at the annual meeting, each of the nominees is expected to serve until the 2009 Annual

Meeting of Stockholders and until such elected nominee’s successor is duly elected and qualified, or until such elected nominee’s earlier death, resignation, or removal. The Board has no reason to believe that any nominee will be unable to serve.

 

Pursuant to our Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws, the number of directors is to be fixed by one or more resolutions adopted by the Board of Directors. Our Fifth Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws provide that directors are to be elected at the annual meeting to serve for a term of one year. Vacancies on the Board resulting from death, resignation, disqualification, removal, or other causes and any newly created directorships resulting from any increase in the number of directors may be filled by the affirmative vote of a majority of the directors then in office, unless the Board of Directors determines by resolution that any such vacancy shall be filled by the stockholders. A director elected by the Board to fill a vacancy (including a vacancy created by an increase in the Board of Directors) will serve for the remainder of the full term of the director for which the vacancy was created or occurred and until such director’s successor is elected and qualified.

 

Directors are elected by a plurality of the votes of the shares present in person or represented by proxy at the annual meeting and entitled to vote on the election of directors. This means that the six nominees receiving the most “For” votes will be elected. Shares represented by executed proxies will be voted, if authority to do so is not withheld, “For” the election of the six nominees below. In the event that any nominee should be unavailable for election as a result of an unexpected occurrence, such shares will be voted for the election of such substitute nominee as the Board may propose.

 

Set forth below, in alphabetical order, is biographical information for each person nominated to serve on ImaRx’s Board of Directors.

 

OUR BOARD RECOMMENDS A VOTE FOR THE ELECTION TO THE

 

BOARD OF EACH OF THE FOLLOWING NOMINEES

 

 

Our Board of Directors is elected by the stockholders to oversee the stockholders’ interest in the Company and the overall success of our business. Among other things, the Board, directly and through its committees, establishes corporate policies; oversees compliance and ethics; reviews the performance of the Chief Executive Officer and other executives; establishes our executive compensation policies and objectives; reviews and approves total compensation paid to our named executive officers; reviews and approves significant transactions or transactions involving related persons; and reviews our long-term strategic plans.

 

In accordance with general corporate legal principles applicable to corporations organized under the laws of Delaware, the Board of Directors does not control the day-to-day management of ImaRx. Members of the Board keep informed about our business by participating in Board and committee meetings, by reviewing analyses and reports and through discussions with the Chief Executive Officer and other officers.

 

The Board meets throughout the year on a set schedule and also holds special meetings and acts by written consent from time to time as needed. Directors are expected to attend Board meetings and meetings of committees on which they serve, and to devote the time needed and meet as frequently as necessary to discharge their responsibilities properly. During the fiscal year ended December 31, 2007, the Board of Directors held 14 meetings. At certain meetings for limited periods of time and for limited considerations, the Board met in executive session where only the independent directors were present. Each Board member standing for re-election attended 75% or more of the aggregate of the meetings held by the Board and by the respective committees on which such Board member served during the period for which he or she was a director or a member of such committee. Directors are invited to attend the Annual Meeting of Stockholders. Four members of the Board were present at the 2007 Annual Meeting of Stockholders.

 

The NASDAQ listing standards require that a majority of the members of our Board of Directors qualify as “independent,” as affirmatively determined by the Board. The NASDAQ listing standards also generally require that members of the Company’s audit committee, compensation committee and nominating committee be “independent.” Our Board of Directors, with the assistance of the Nominating and Corporate Governance Committee, determines, on a regular basis, the independence of each Board member and committee member. The Board primarily utilizes NASDAQ’s categorical independence standards for determining whether members of the Board and the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee are independent. The Board also evaluates director independence by utilizing the definition of “non-employee directors” under applicable federal securities laws and “outside directors” under Section 162(m) of the U.S. Internal Revenue Code. The Board has also adopted Corporate Governance Guidelines which, among other things, are intended to ensure that the Board and its committees are composed of independent directors. Our Corporate Governance Guidelines indicate that “an independent director is one who has no relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.” The Corporate Governance Guidelines are available at our website, www.imarx.com. The Board and the Nominating and Corporate Governance Committee also regularly consult with our legal counsel to ensure that the Board’s independence determinations are consistent with the foregoing criteria. This consultation includes an analysis of each director’s response to a questionnaire inquiring about, among other things, his or her relationship, and those of his or her immediate family members, with us, our senior management, our independent registered public accounting firm and other companies with whom ImaRx does business.

 

Consistent with these considerations, after a review of all relevant transactions and relationships involving our directors, our Board has affirmatively determined that all of our directors are “independent” within the meaning of the NASDAQ listing standards:

 

The Board has elected to use Board committees in furtherance of the discharge of its duties and for the conduct of its work. All major decisions of such committees are reviewed and, where appropriate, ratified by the Board. In furtherance of its decision to employ committees and consistent with applicable laws, regulations and Nasdaq listing requirements, the Board has established three separately designated, standing committees: Audit, Compensation, and Nominating and Corporate Governance. Information regarding each committee is provided below.

 

Audit Committee

 

The Board has a separately-designated standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Exchange Act of 1934, as amended (the “Exchange Act”), the purpose of which includes: overseeing ImaRx’s accounting and financial reporting processes and audits of ImaRx’s financial statements; reviewing evaluations of ImaRx’s system of internal controls; engaging and monitoring the independence and performance of ImaRx’s independent registered public accounting firm; providing a forum for communication among the independent registered public accounting firm, management, and the Board; and providing such additional information and materials the Audit Committee may deem necessary to make the Board aware of significant financial matters that require the Board’s attention. The Audit Committee also submits the Audit Committee Report included in this proxy statement. The Audit Committee met five times during the fiscal year ended December 31, 2007.

 

The Audit Committee is presently composed of three directors, Philip Ranker, Richard Otto and James Strickland.

 

Our Board has determined that each member of the Audit Committee is independent under our independence criteria described above. Our Board has also determined that Mr. Ranker qualifies as an Audit Committee Financial Expert as defined in the applicable SEC rules. Our Board also believes that the Audit Committee meets the Nasdaq composition requirements, including the requirements regarding financial literacy and financial sophistication. The Board has adopted a written charter for the Audit Committee and this charter is available on the corporate governance section of our web site at www.imarx.com.

Compensation Committee

 

The Board has delegated to the Compensation Committee the responsibility for implementing, reviewing and monitoring adherence with ImaRx’s compensation policies and objectives. The Compensation Committee is responsible for establishing, approving and recommending to the Board for final approval ImaRx’s compensation programs. The Compensation Committee’s functions include: (i) establishing, reviewing, and overseeing base salaries, incentive compensation, equity compensation, retention compensation and other forms of compensation paid to our executive officers; (ii) administering our incentive compensation and equity plans; and (iii) performing such other functions regarding compensation as the Board may delegate. In connection with annual adjustments to named executive officer compensation, the Compensation Committee traditionally reviews and discusses over several meetings the compensation recommendations of the CEO and the compensation studies and data it has available to it and then renders a final compensation recommendation for each of our named executive officers to the Board for approval. The Compensation Committee has the final authority to hire and terminate any compensation consultant engaged by ImaRx.

 

The Compensation Committee is currently composed of three directors, James Strickland, Richard Love and Thomas Pew. The Compensation Committee met nine times during the fiscal year ended December 31, 2007.

 

Our Board has determined that each member of the Compensation Committee is independent under our independence criteria described above. In addition, all members of the Compensation Committee are outside directors as defined by Rule 162(m) of the Internal Revenue Code and are nonemployee directors as defined by Rule 16b-3 promulgated by the SEC under the Securities Exchange Act of 1934. The Board has adopted a written charter for the Compensation Committee and the charter is available on the corporate governance section of our web site at www.imarx.com.

 

Nominating and Corporate Governance Committee

 

The Nominating and Corporate Governance Committee’s functions include: evaluating director performance on at least an annual basis; providing advice, information and materials relating to the nomination of directors; interviewing, nominating, and recommending individuals for membership on the Board and its committees; developing and overseeing the Board’s Corporate Governance Principles and a Code of Business Conduct and Ethics applicable to members of the Board, officers and employees of ImaRx; and assessing and monitoring the independence of the Board. The Committee will, at least on an annual basis, consider the mix of skills and experience that the then-current directors bring to the Board to assess whether the Board has the necessary membership and resources to perform its oversight function effectively. The qualifications of any non-incumbent director candidates brought to the attention of the Committee by directors, management, stockholders or third parties will be evaluated from time to time in light of the Committee’s determination of the Board’s needs, and under the same criteria as set forth below. The Committee will consider nominees for directors nominated by stockholders upon submission in writing to the Secretary of ImaRx of the names of such nominees, together with their qualifications for service as a director of ImaRx. Our bylaws set forth the procedures a stockholder must follow to nominate candidates for director. Certain elements of these procedures are described above in this proxy statement under the caption “— What is the deadline to propose actions for consideration at next year’s annual meeting of stockholders.” The Committee does not distinguish between nominees suggested by stockholders and other nominees. To date, the committee has not received a director nominee from a stockholder or stockholders holding more than five percent of our common stock.

 

In evaluating the suitability of candidates for Board membership, the Committee takes into account many factors, including whether the persons is independent; the individual’s personal qualities and characteristics, accomplishments and reputation in the business community; the person’s current knowledge and contacts in the communities in which ImaRx does business and in ImaRx’s industry or other industries relevant to ImaRx’s business; the person’s ability and willingness to commit adequate time to Board and committee matters; the fit of the individual’s skills and personality with those of other directors and potential directors in building a Board that is effective and responsive to the needs of ImaRx; and the need for the Board to have a diversity of viewpoints, background, experience and other factors. The Committee has not established any specific minimum qualification standards for nominees to the Board.

The Nominating and Corporate Governance Committee is currently composed of four directors, Mr. Love, Mr. Otto, Mr. Pew and Mr. Ranker.

 

Our Board has determined that each member of the Nominating and Corporate Governance Committee is independent under our independence criteria described above. The Board has adopted a written charter for the Nominating and Corporate Governance Committee and the charter is available on the corporate governance section of our web site at www.imarx.com. The Nominating and Corporate Governance Committee met three times during the fiscal year-ended December 31, 2007.

 

We have adopted a corporate Code of Business Conduct and Ethics that applies to all of our directors, officers (including our chief executive officer and chief financial and accounting officers) and employees. We require that all of our directors, officers, employees and agents certify on an annual basis that they are in compliance with the code. A copy of the Code of Business Conduct and Ethics is available on the corporate governance section of our web site at www.imarx.com.

 

Written communications to the Board may be submitted by electronic mail at imarx@imarx.com, by accessing ImaRx’s web site at www.imarx.com and clicking on the “Contact” link at the top of the page, or by writing to the General Counsel of ImaRx at the address listed on page 3 of this proxy statement. Under procedures approved by a majority of the independent directors, the General Counsel will review such communications and will forward them to the Board if they relate to important substantive matters and include suggestions or comments considered to be important for the directors to know. In general, the General Counsel will forward communications to the Board so long as they are relevant to ImaRx’s business, governance, ethics and policies and are not frivolous, slanderous, or pertaining to a personal grievance. At each Board meeting, the General Counsel presents a summary of all communications received since the last meeting that were not forwarded to the Board, if any, and makes those communications available to the Directors upon request.

 

The Audit Committee of our Board of Directors has selected Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2008, and has further directed that the selection of Ernst & Young LLP as our independent registered public accounting firm be submitted for ratification by the stockholders at the annual meeting. Ernst & Young has audited ImaRx’s financial statements since 1999. Representatives of Ernst & Young are expected to 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.

 

OUR BOARD RECOMMENDS A VOTE FOR THE RATIFICATION OF THE SELECTION OF
ERNST & YOUNG AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2008.  

 

Principal Accountant Fees and Services

 

For the last two fiscal years, ImaRx was billed fees in the following amounts for services by Ernst & Young:

 

Audit fees consist of Ernst & Young’s fees for services related to their audits of ImaRx’s annual financial statements and their review of financial statements included in ImaRx’s quarterly reports on SEC Form 10-Q. Audit-related fees consist primarily of fees rendered for services in connection with Ernst &Young’s review of the Company’s SEC filed registration statements and the related issuance of consents and comfort letters. Tax fees consist of fees rendered for services on tax compliance matters, including tax return preparation, claims for refund and assistance with tax audits of previously filed tax returns, tax consulting and advisory services consisting primarily of tax advice rendered by Ernst & Young in connection with the formulation of ImaRx’s tax strategy and assistance in minimizing custom, duty and import taxes.

 

All audit, audit-related, tax, and any other services performed for ImaRx by its independent registered public accounting firm are subject to pre-approval by the Audit Committee of our Board of Directors and were pre-approved by the Audit Committee prior to such services being rendered. The Audit Committee determined that the services provided by and fees paid to Ernst & Young were compatible with maintaining the independent registered public accounting firm’s independence.

 

Stockholder ratification of the selection of Ernst & Young as ImaRx’s independent registered public accounting firm is not required by ImaRx’s Bylaws or otherwise. However, the Audit Committee is submitting the selection of Ernst & Young to the stockholders for ratification as a matter of good corporate practice. If the appointment is not approved by stockholders, the adverse vote will be considered a direction to the Audit Committee to consider other auditors for next year. However, because of the difficulty in making any substitution so long after the beginning of the current year, the appointment in 2008 will stand, unless the Audit Committee finds good reason for making a change. Even if the selection is ratified, the Audit Committee in its discretion may direct the appointment of a different independent registered public accounting firm at any time if the Audit Committee determines that such a change would be in the best interests of ImaRx and its stockholders.

 

This Audit Committee Report does not constitute soliciting material and shall not be deemed to be “filed” with the Securities and Exchange Commission or deemed to be incorporated by reference in previous or future documents filed by ImaRx with the Securities and Exchange Commission under the Securities Act of 1933 or under the Securities Exchange Act of 1934, except to the extent ImaRx specifically incorporates this Report by reference in any such document.

 

The Audit Committee of the Board of Directors has reviewed and discussed with management ImaRx’s audited consolidated financial statements as of and for the year ended December 31, 2007.

 

The Audit Committee discussed with Ernst & Young the matters required to be discussed by the statement on Auditing Standards No. 61. The Audit Committee has received, reviewed, and discussed with Ernst & Young the written disclosures and the letter from Ernst & Young required by Independence Standards Board Standard No. 1 and discussed with Ernst & Young their independence.

 

Based upon these reviews and discussions, the Audit Committee recommended to the Board of Directors, and the Board of Directors approved, that ImaRx’s audited financial statements be included in ImaRx’s Annual Report on Form 10-K for the fiscal year ended December 31, 2007.

 

The Audit Committee

 

Philip Ranker, Chairman

Richard Otto

James

Strickland

 

Our compensation policy is set by the Board of Directors, with the advice and recommendation of the Compensation Committee. The Board has delegated to the Compensation Committee the responsibility for implementing, reviewing and continually monitoring adherence with our compensation policy. The Compensation Committee is responsible for establishing, reviewing, approving and recommending to the Board for final approval each of our compensation programs. In addition, the Compensation Committee is responsible to ensure that total compensation paid to our executive officers is consistent with our compensation policy and objectives.

 

Our executive compensation policy has three fundamental objectives: (1) to reward executives for our success in meeting our long-term corporate objectives; (2) to reward executives for their individual performance and achievement of the goals for those functional organizations that they manage; and (3) enable the Company to attract and retain highly qualified executives with significant experience in the biopharmaceutical industry by providing a competitive compensation package that includes long-term incentives that we believe provides significant retentive value. To accomplish our fundamental objectives, in 2007 the Compensation Committee worked together with the Chief Executive Officer and Chief Financial Officer to establish key strategic corporate goals, as we discuss further below. We discuss the objectives of each element of compensation in more detail below.

 

Bradford A. Zakes, our President and Chief Executive Officer and Kevin J. Ontiveros, our General Counsel, generally attend all meetings of the Compensation Committee. Generally, all Compensation Committee meetings include an executive session at which no company executives are present. Mr. Zakes works together with our Compensation Committee to develop total compensation recommendations for our named executive officers other than himself. Mr. Zakes does not participate with the Compensation Committee in the determination of his total compensation. After review and discussion as to the appropriate level of compensation for our employees and executives, the Compensation Committee makes a final recommendation for total compensation and then submits its recommendation to our Board of Directors for consideration and approval.

 

 

In 2007, the Compensation Committee established a number of practices to assist it in setting executive compensation in accordance with our compensation policy and objectives. Among the procedures:

 

 

 

 

 

For 2007, the principal elements of compensation for named executive officers were:

 

 

Base Salary.

 

Base salary represents the fixed component of executive compensation. Base salaries for 2007 were reviewed at the beginning of the year as part of the Company’s and Compensation Committee’s performance review process. In the first quarter of 2007, base salaries for our named executive officers were established and adjusted to align salaries with market levels after taking into account individual responsibilities, performance and experience, compensation paid by our 2007 peer group and compensation paid in our geographic region for similar positions. Our Compensation Committee set 2007 base salaries for our named executive officers at levels at or below the median of our peer group. Based on the data available to our Compensation Committee in 2007, in general, our named executive officers’ base salaries are below market rates (see “Benchmarking” above for a general discussion on this data). The base salary received in 2007 by each named executive officer is set forth in the “Summary Compensation Table” in this Proxy Statement.

 

Short-Term Cash Incentive Compensation.  

 

Incentive Plan.  In August 2006, our Board of Directors adopted an incentive plan that allowed our executive officers and other senior officers designated by our independent directors to earn quarterly and annual performance-based cash awards in addition to their annual base salary. The quarterly and annual performance goals included achievement of clinical trial milestones, completion of financing transactions, and product development milestones. The maximum annual cash award amount that could have been earned by each individual under the incentive plan

was equal to 10% of the individual’s base salary as of the end of each calendar quarter with respect to which a cash award was being determined, and an additional 10% of the individual’s base salary as of the end of the fiscal year, for an aggregate possible annual cash award of up to 50% of the individual’s base salary. The incentive plan terminated on March 31, 2007.

 

Quarterly Cash Bonuses.  In April 2007, we adopted a quarterly cash incentive bonus plan for all of our employees, including our named executive officers. The quarterly cash incentive bonuses are intended to compensate employees for the achievement of both company-wide and departmental quarterly goals. Amounts payable under the quarterly cash incentive bonus plan are calculated as a percentage of the applicable employee’s base salary with the attainable bonus ranging from 5% up to a maximum of 12.5% of the employee’s base salary per quarter, with more senior employees being eligible for bonuses based on higher percentages of their base salaries. The company-wide targets and the departmental objectives are given roughly equal weight in the bonus analysis. The company-wide targets generally include achievement of clinical trial milestones, completion of strategic or partnering transactions, completion of financing transactions, achieving sales targets and advancing in our research programs. Departmental objectives are necessarily tied to the particular area of responsibility of the department and the department’s performance in attaining those objectives relative to external forces, internal resources utilized and overall departmental group effort. The compensation committee determines whether the quarterly cash incentive awards, if any, for all employees were earned for a particular quarter.

 

Long-Term Incentive Compensation.

 

Our long-term incentive compensation program, or LTI, is an integral part of our compensation policy that we believe encourages participants to focus on long-term Company performance. Given the time periods involved in pharmaceutical development, the Company believes that these long-term incentives are critical to the Company’s success. LTI compensation is equity-based and is awarded through stock option grants. The Compensation Committee believes that options vesting over a period of years link executive compensation to individual and Company performance thereby aligning the interests of the Company’s executive officers with the Company’s long-term vision to successfully develop and commercialize pharmaceutical products and increase stockholder value. Equity grants to named executive officers are intended to be sufficient to enable executives to meaningfully participate in the expected value creation of their efforts.

 

Our 2007 Performance Incentive Plan authorizes us to grant incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock awards, restricted stock units, performance shares and units, deferred compensation awards, other cash-based or stock-based awards and non-employee director awards. Our Board of Directors administers the plan. Similar to our 2000 Stock Plan, we expect that stock option awards will be made at the commencement of employment and, occasionally, following a significant change in job responsibilities or to meet other special retention or performance objectives. The Compensation Committee reviews and recommends to the Board of Directors for approval stock option awards to named executive officers based upon a review of competitive compensation data, its assessment of individual performance, a review of each executive’s existing long-term incentives, and retention considerations. Periodic stock option awards are made at the discretion of the Board of Directors to eligible employees and, in appropriate circumstances, the Compensation Committee and the Board of Directors considers the recommendations of members of management, as discussed above.

 

Other Compensation.

 

Consistent with our compensation philosophy, we intend to continue to maintain our current benefits and perquisites for our executive officers; however, the Compensation Committee in its discretion may revise, amend or add to the officers’ executive benefits and perquisites if it deems it advisable. For 2007, we believe these benefits and perquisites were lower than median competitive levels for 2007 peer group. We currently have no plans to change levels of benefits and perquisites provided to our named executive officers.

 

Deductibility of Compensation.  Section 162(m) of the Internal Revenue Code limits the deductibility for federal income tax purposes of certain compensation paid in any year by a publicly held corporation to its chief

executive officer and its four other most highly compensated officers to $1 million per executive. The $1 million cap does not apply to “performance-based” compensation as defined under Section 162(m) or to compensation paid pursuant to certain plans that existed prior to a corporation becoming publicly held. We believe that awards made in connection with our initial public offering under our 2000 Stock Plan and 2007 Performance Incentive Plan are not be subject to the $1 million cap because we were not a public company until the offering closed. Now that the private-to-public transition rule is not available, we intend that awards made under our 2007 Performance Incentive Plan will qualify as “performance-based” compensation for purposes of Section 162(m). We believe we can continue to preserve related federal income tax deductions, although individual exceptions may occur.

 

Accounting for Share-Based Compensation.  On January 1, 2006, we adopted the fair value recognition provisions of Statement of Financial Accounting Standards No. 123(R) “Share-Based Payment,” or SFAS 123(R), to account for all stock grants under all of our plans. Prior to adoption of SFAS 123(R), we accounted for share-based compensation pursuant to Accounting Principles Board Opinion No. 25, or APB 25, “Accounting for Stock Issued to Employees.” Due to our prior accounting practices and transition provisions of SFAS 123(R), options granted prior to adopting of SFAS 123(R) retain their prior accounting treatment and previously deferred share-based compensation continues to be recognized on pre-adoption grants.

 

In October 2007, after our July 2007 initial public offering, the Compensation Committee retained the services of an external compensation consultant, Presidio Pay Advisors, Inc., or Presidio, for purposes of reviewing and setting 2008 compensation. The mandate of Presidio was to assist the Compensation Committee and the Chief Executive Officer in gathering competitive compensation data. Specifically, the Compensation Committee engaged Presidio to assist it in performing its annual review of the CEO’s compensation and also to assist the CEO in assessing the competitiveness of pay for his management team. Presidio’s stated project objectives included, but were not limited to (i) a competitive assessment of the CEO’s compensation, including an analysis of his base salary, annual cash incentives, and long-term incentives, and (ii) a competitive assessment of base salary, annual cash incentives, and long-term incentives for the designated management team. Prior to beginning its work, Presidio presented its proposed steps and methodology it anticipated utilizing in connection with the reports to be produced. The Compensation Committee did not direct Presidio to perform the above services in any particular manner or under any particular method, although it did have the opportunity to comment on Presidio’s proposed steps and methodology. Our CEO assisted the Compensation Committee by utilizing information provided by Presidio to develop total compensation recommendations for our named executive officers (other than himself).

 

Presidio prepared two reports for the Company. The first pertaining to senior management compensation and the second pertaining to the Chief Executive Officer compensation. Presidio’s reports analyzed, the Company’s compensation programs, including, among other things, base salary levels, cash incentive compensation, equity awards, and pay mix, including what amount of pay is considered “at risk” such that it is contingent upon company and/or individual performance (for example, the break-out of total compensation among base salary, benefits, perquisites, bonuses and long-term incentives).

 

Based on benchmarking studies and other analysis performed by Presidio, Presidio found that on average, the base salaries and cash incentive compensation of our executive officers were below competitive levels. Presidio also found that the Company’s long term incentive program (for example stock options) was significantly below competitive market levels. Presidio also suggested that the Company’s overall compensation philosophy should be further developed and clarified and that its option granting program should be more formalized to align awards with the Company’s compensation philosophy, which should provide more clarity and incentive to senior management.

 

Based on the results of Presidio’s reports, management recommended to the Compensation Committee in December 2007 a comprehensive executive compensation program. The Compensation Committee and Board of Directors approved the recommendations substantially as recommended.

 

The Company has put into place a compensation program that is comprised of four primary elements: base salary, cash bonus, merit pay and equity awards. The Company’s new compensation program clarifies its existing philosophy and is based on the following objectives:

 

 

 

Base Salary.  As indicated above, Presidio found that the Company’s base salaries were below competitive levels. The Company’s philosophy is that it should offer base salaries that are competitive so as to attract and retain talented and experienced executives. As a result of the Presidio studies and the adoption of its formal compensation program, the Company raised the base salaries of certain executives towards the median range of peer companies. Effective for 2008, the Company increased base salaries for the following individuals as follows:

 

 

Cash Bonus.  Prior to 2008, the Company’s bonus program was designed to reward the achievement of near-term quarterly Company and department goals that management and the Compensation Committee considered critical to the achievement of the Company’s long term vision. Under this program, the Chief Medical Officer, Vice President Legal Affairs and General Counsel, and all Vice Presidents were eligible for a bonus of up to 40% of their base salary (10% per quarter) and the Chief Executive Officer and Chief Financial Officer were eligible for a bonus of up to 50% of their base salary (12.5% per quarter).

 

The Company believes that its prior program was effective at motivating senior management to achieve quarterly Company and departmental goals, which goals were designed to be aggressive and difficult to achieve. Because the Company is a young growth-oriented business with a lack of historically profitable operations, this bonus program has historically included a requirement that the Company have a sufficient cash balance as a condition to the payment of bonuses. Based in part on the findings of the Presidio reports, the Compensation Committee and Board of Directors elected to leave this program in place substantially as it operated before, except that the Chief Medical Officer and Vice President Legal Affairs and General Counsel officers are now eligible for bonuses of up to 50% of their base salaries (compared to the previous 40% level).

 

Merit Pay.  Previously, executive officers (other than the Chief Executive Officer and Chief Financial Officer) were eligible for the Company’s Merit Pay program. The Merit Pay program is designed to reward the achievement of individual goals and the results of an annual performance assessment of the executive officer by management. The Compensation Committee and Board of Directors has eliminated the Merit Pay program in 2008 for the executive officers named in this proxy statement; although it remains in place for other officers and employees.

 

Equity.  As indicated above, Presidio’s reports found that the value of outstanding equity awards held by our executive officers was significantly below competitive levels. And, prior to 2008, the Company did not have an established stock option granting philosophy. Rather, equity awards were generally made at the time of hire and future grants were made from time to time as determined by the Compensation Committee. Based on these findings, the Company has adopted a long term incentive equity program that is designed to align the interests of its executive officers with the achievement of the Company’s long term vision to successfully develop and commercialize pharmaceutical products. This program is designed to provide for annual grants based on historical individual and Company performance, which the Company believes will provide for exceptional future performance through the alignment of management and shareholder interests in stock price appreciation. Under this new program, in December 2007, the Company granted options to the executive officers named in this proxy statement. These option grants are detailed in the Grants of Plan-Based Awards table included later in this proxy statement. The Compensation Committee and Board of Directors considers these option grants to be part of its 2008 equity grant program, even though the grants formally occurred in late 2007. The amount of compensation expense (calculated pursuant to SFAS No. 123(R)) is also reflected in the Summary Compensation Table in the 2007 amounts.

 

The table below summarizes the total compensation paid to or earned by each of our named executive officers for the fiscal years ended December 31, 2007 and 2006.

 

 

 

 

On January 1, 2008, we entered into employment agreements with our President and Chief Executive Officer, Bradford A. Zakes, our Chief Financial Officer, Greg Cobb, and our Vice President, Legal Affairs and General Counsel, Kevin J. Ontiveros.

 

Bradford A. Zakes.  We have entered into an employment agreement with Bradford A. Zakes, our President and Chief Executive officer. Under this agreement, Mr. Zakes is entitled to an annual base salary of $275,000 which, although reviewed annually, may not be decreased without Mr. Zakes’ consent. Mr. Zakes is also eligible for an annual bonus of up to 50% of his base salary based upon the achievement of pre-determined milestones set by our board of directors (or its Compensation Committee). In addition, Mr. Zakes may participate, to the extent eligible, in our medical, dental, vision, short and long term disability insurance, life insurance, 401(k) plan, sick days, vacation and holidays.

 

In the event we terminate Mr. Zakes’ employment without “Cause,” or if he resigns for “Good Reason,” we will be obligated to pay (a) his full base salary for a one year period following the date of termination, which we may pay in a lump sum or on regular paydays, any other salary that has accrued but is unpaid prior to his termination, as well as any amounts required to be paid under any employee benefit plan; (b) all premiums for a period of one year for medical, dental and vision insurance coverage that were in place at the time of Mr. Zakes’ termination; and (c) all of Mr. Zakes’ unvested options will be accelerated and the option exercise period shall be extended for one year beyond the period originally set forth in the option agreements (but in any case not beyond the date on which they would have terminated had Mr. Zakes continued to be employed).

 

“Cause” is defined to mean:

 

 

 

“Good Reason” is defined to mean any of the following:

 

 

In the event of a “Change in Control” and, if in the twelve-month period preceding or following the change in control, we terminate Mr. Zakes’ employment without cause, or if he resigns for good reason, we will be obligated to pay (a) a lump sum amount equal to his then current base salary; (b) all premiums for medical, dental and vision insurance for a period of twelve months; and (c) one hundred percent of Mr. Zakes’ unvested options shall automatically vest and the exercise period for all such stock options shall be extended an additional twelve months (but in any case not beyond the date on which they would have terminated had Mr. Zakes continued to be employed).

 

“Change in Control” includes (while we are a public company):

 

 

In the event Mr. Zakes’ is terminated for cause or due to death, disability or his resignation (other than for Good Reason), we will be obligated to pay Mr. Zakes’ then current base salary through the date his employment is terminated and such other amounts that may be due under any employee benefit plan and/or by law.

 

Receipt of any severance payment is contingent on Mr. Zakes signing a full general release of all claims. The agreement, including the continued receipt of any severance payments, requires Mr. Zakes to abide by restrictive covenants relating to non-competition and non-solicitation of customers and employees for twelve months following termination of employment.

Greg Cobb.  We have entered into an employment agreement with Greg Cobb, our Chief Financial Officer. Under this agreement, Mr. Cobb is entitled to an annual base salary of $225,000 which, although reviewed annually, may not be decreased without Mr. Cobb’s consent. Mr. Cobb is also eligible for an annual bonus of up to 50% of his base salary based upon the achievement of pre-determined milestones set by our board of directors (or its Compensation Committee). In addition, Mr. Cobb may participate, to the extent eligible, in our medical, dental, vision, short and long term disability insurance, life insurance, 401(k) plan, sick days, vacation and holidays.

 

In the event we terminate Mr. Cobb’s employment without Cause, or if he resigns for Good Reason, we will be obligated to pay Mr. Cobb (a) his full base salary for a six-month period following the date of termination, which we may pay in a lump sum or on our regular paydays, and any other salary that has accrued but is unpaid prior to the termination date, as well as any amounts required to be paid under any employee benefit plan; (b) all premiums for a period of six months for medical, dental and vision insurance coverage that were in place at the time of Mr. Cobb’s termination; and (c) all of Mr. Cobb’s unvested options will be accelerated and the option exercise period shall be extended for one year beyond the period originally set forth in the option agreements (but in any case not beyond the date on which they would have terminated had Mr. Cobb continued to be employed). Cause has the same definition as described in Mr. Zakes’ employment agreement.

 

“Good Reason” is defined to mean any of the following:

 

 

In the event of a change in control and in the one year period preceding or following the Change in Control, we terminate Mr. Cobb’s employment without Cause, or if he resigns for Good Reason, we will be obligated to pay (a) a lump sum amount equal to fifty percent of his then current base salary; (b) all premiums for medical, dental and vision insurance for a period of six months; and (c) one hundred percent of Mr. Cobb’s unvested options shall automatically vest and the exercise period for all such stock options shall be extended an additional twelve months (but in any case not beyond the date on which they would have terminated had Mr. Cobb continued to be employed). A Change in Control event has the same meaning as described under Mr. Zakes’ employment agreement.

 

In the event Mr. Cobb is terminated for Cause or due to death, disability or his resignation (other than for Good Reason), we will be obligated to pay Mr. Cobb’s then current base salary through the date his employment is terminated and such other amounts that may be due under any employee benefit plan and/or by law.

 

Lastly, Mr. Cobb’s receipt of any severance payment is contingent upon him signing a full general release of all claims. The agreement, including the continued receipt of any severance payments, requires Mr. Cobb to abide by restrictive covenants relating to non-competition and non-solicitation of customers and employees for twelve months following termination of employment.

 

Kevin J. Ontiveros.  We have entered into an employment agreement with Kevin Ontiveros, our Vice President, Legal Affairs and General Counsel. Under this agreement, Mr. Ontiveros is entitled to an annual base salary of $206,250 which, although reviewed annually, may not be decreased without Mr. Ontiveros’ consent. Mr. Ontiveros is also eligible for an annual bonus of up to 50% of his base salary based upon the achievement of pre-determined milestones set by our board of directors (or its Compensation Committee). In addition, Mr. Ontiveros may participate, to the extent eligible, in our medical, dental, vision, short and long term disability insurance, life insurance, 401(k) plan, sick days, vacation and holidays.

Our obligation to Mr. Ontiveros under his employment agreement in the event we terminate his employment without Cause, or if he resigns for Good Reason, is the same as our obligation to Mr. Cobb. Cause has the same definition as described in Mr. Zakes’ employment agreement.

 

“Good Reason” is defined to mean any of the following:

 

 

In addition, in the event of a Change in Control and if Mr. Ontiveros is terminated for Cause, or he resigns for Good Reason, our obligation to Mr. Ontiveros is the same as our obligation to Mr. Cobb. A Change in Control event has the same meaning as described under Mr. Zakes’ employment agreement.

 

Lastly, Mr. Ontiveros’ receipt of any severance payment is contingent on his signing a full general release of all claims. The agreement, including the continued receipt of any severance payments, requires Mr. Ontiveros to abide by restrictive covenants relating to non-competition and non-solicitation of customers and employees for twelve months following termination of employment.

 

 

 

Stock options with expiration dates after July 31, 2007 were granted under the 2007 Performance Incentive Plan and vest and generally vest at the rate of 28% of the total option grant vests one year from the anniversary date of the grant and remainder vests at the rate of 2% per month thereafter.

 

None of our named executive officers participates in or has account balances in qualified or non-qualified defined benefit plans sponsored by us.

 

None of our named executive officers participates in or has account balances in non-qualified defined contribution plans or other deferred compensation plans maintained by us. The compensation committee, which will be comprised solely of “outside directors” as defined for purposes of Section 162(m) of the Internal Revenue Code, may elect to provide our officers and other employees with non-qualified defined contribution or deferred compensation benefits if the compensation committee determined that doing so is in our best interests.

 

Each non-employee member of our board of directors receives the following compensation:

 

 

In addition, the following additional compensation will be paid annually, generally, immediately following the annual meeting of stockholders:

 

 

The following table sets forth a summary of the compensation we paid to our non-employee directors for the fiscal year ended December 31, 2007:

 

 

The following table sets forth information regarding outstanding awards and shares reserved for future issuance under our equity compensation plans as of December 31, 2007.

 

 

The following table sets forth certain information regarding the ownership of our common stock as of (or options and warrants exercisable within 60 days of) March 31, 2008, by: (a) all those known by us to be beneficial owners of more than five percent of our common stock; (b) each current director and nominee for director; (c) each of the named executive officers referenced in the Summary Compensation Table; and (d) all of our executive officers and directors as a group. This table lists applicable percentage ownership based on 10,046,683 shares of common stock outstanding as of March 31, 2008.

 

Beneficial ownership is determined according to the rules of the SEC. Beneficial ownership means that a person has or shares voting or investment power of a security, and includes shares underlying options and warrants that are currently exercisable or exercisable within 60 days after the measurement date. This table is based on information supplied by officers, directors and principal stockholders. Except as otherwise indicated, we believe that the beneficial owners of the common stock listed below, based on the information each of them has given to us or that is otherwise publicly available, have sole investment and voting power with respect to their shares, except where community property laws may apply.

 

Options and warrants to purchase shares of our common stock that are exercisable within 60 days after March 17, 2008 are deemed to be beneficially owned by the persons holding these options and warrants for the purpose of computing percentage ownership of that person, but are not treated as outstanding for the purpose of computing any other person’s ownership percentage.

 

 

 

 

 

Section 16(a) of the Exchange Act requires ImaRx’s directors and executive officers, and persons who own more than 10% of ImaRx’s common stock, to file with the Commission reports of ownership and changes in ownership of ImaRx common stock. Officers, directors, and greater than 10% stockholders are required by the Commission to furnish ImaRx with copies of all Section 16(a) forms they file.

 

To our knowledge, based solely on a review of the copies of such reports furnished to ImaRx or written representations that no other reports were required, during the fiscal year ended December 31, 2007, we believe that all of these filing requirements were satisfied by our directors, officers and 10% holders, except that Dr. Manvelian was late in filing one Form 3.

 

We maintain various policies and procedures relating to the review, approval or ratification of transactions in which ImaRx is a participant and in which any of our directors, executive officers, 5% stockholders or their family members have a direct or indirect material interest. We refer to these individuals and entities in this proxy statement as related persons. Our Code of Business Conduct and Ethics, which is available on our website at www.imarx.com, prohibits our directors, executive officers, and employees and in some cases, their family members, from engaging in specified activities without prior written consent from the General Counsel. These activities typically relate to situations where an ImaRx employee, and in some cases, an immediate family member, may have significant financial or business interests in another company competing with or doing business with ImaRx, or who stands to benefit in some way from such a relationship or activity. Members of our Board of Directors are also required to disclose potential conflicts of interest to us for evaluation.

 

Each year, we require our directors and executive officers to complete a questionnaire, among other things, to identify any transactions or potential transactions with us in which a director or an executive officer or one of their family members or associated entities has an interest. We also require that directors and executive officers notify us of any changes during the course of the year to the information provided in the annual questionnaire as soon as possible. In addition, the Board annually determines the independence of directors based on a review by the Board and the Nominating and Governance Committee as described under “Independence of Board” above. The Audit Committee of our Board of Directors, pursuant to its charter, has responsibility for reviewing and approving in advance any related person transactions as defined under Securities and Exchange Commission regulations.

 

We believe that these policies and procedures collectively ensure that all related person transactions requiring disclosure under Securities and Exchange Commission rules are appropriately reviewed and approved.

 

Since January 1, 2007, we have engaged in the following transactions involving amounts exceeding $120,000 with our executive officers, directors and holders of 5% or more of our stock. We believe that all of these transactions were on terms as favorable as could have been obtained from related third parties.

 

Consulting Agreements

 

In October 2006, we entered into a consulting agreement with Dr. Evan Unger, who until that time was our CEO and was a member of our board of directors. Pursuant to this agreement, Dr. Unger served as the head of our Scientific Advisory Board and agreed to provide other services to us on an as-needed basis, up to a maximum of 35 hours per month. The consulting agreement had a 12-month term which expired in October 2007 and entitled Dr. Unger to receive an aggregate amount of up to $50,000 payable on a monthly basis upon submission of appropriate invoices. All of the stock options previously granted to Dr. Unger continued to vest in accordance with

their original terms during the term of the consulting agreement. We and Dr. Unger mutually agreed to terminate the consulting agreement in May 2007 upon Dr. Unger’s resignation from our board of directors and as chairman of our Scientific Advisory Board. In addition, we have entered into a separation agreement with Dr. Unger following his resignation as our CEO. The separation agreement contains Dr. Unger’s waiver and release of claims against us arising out of, or relating in any way to, Dr. Unger’s service as an employee, officer and/or director of ImaRx and any other matter, act, occurrence, or transaction with respect to us by or involving Dr. Unger and us in any way, including but not limited to, Dr. Unger’s ownership of shares of our capital stock, options or warrants to acquire our capital stock. Under the separation agreement, we agreed to pay Dr. Unger the aggregate amount of $250,000, half of which was payable in twelve equal installments in accordance with our regular payroll practices, and the remainder of which was paid in a lump sum on the next regular payroll date thereafter.

 

This proxy statement contains “forward-looking statements” as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements are based on management’s current expectations and involve substantial risks and uncertainties, which may cause results to differ materially from those set forth in the statements. The forward-looking statements may include, but are not limited to, statements made in the Executive Compensation section of this proxy statement executive compensation, incentives and the achievement of the performance targets relating thereto. ImaRx undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise. Forward-looking statements should be evaluated together with the many uncertainties that affect our business, particularly those mentioned under the heading “Risk Factors” in our annual report on Form 10-K/A, and in the periodic reports that we file with the SEC on Form 10-Q and Form 8-K.

 

The proxy materials for the Company’s annual meeting of stockholders, including the 2007 annual report and this proxy statement, are available over the Internet by accessing the Company’s website at www.imarx.com. Other information on the Company’s website does not constitute part of the Company’s proxy materials.

 

The Board of Directors knows of no other matters that will be presented for consideration at the annual meeting. If any other matters are properly brought before the annual meeting, it is the intention of the persons named in the accompanying proxy to vote on such matters in accordance with their best judgment.

 

By Order of the Board of Directors

/s/ Kevin J. Ontiveros

Kevin J. Ontiveros

Corporate Secretary

 

April 29, 2008