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 (Amendment No. )
Filed by the Registrant Filed by a Party other than the Registrant Check the
appropriate box:
Preliminary Proxy Statement
x Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Confidential, for the use of the Commission Only (as permitted by
Rule 14a-6(e)(2)
INTERFERON SCIENCES, INC.
(Name of Registrant as Specified In Its Charter)
Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
x No fee required
Fee computed on table below per Exchange Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
Fee paid previously with preliminary materials.
Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
INTERFERON SCIENCES, INC.
783 JERSEY AVENUE
NEW BRUNSWICK, NEW JERSEY 08901
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS To Be Held June
19, 1997
TO THE STOCKHOLDERS:
The Annual Meeting of Stockholders of Interferon Sciences, Inc. (the
"Company") will be held at the Brunswick Hilton and Towers, 3 Tower Center
Boulevard, East Brunswick, New Jersey on the 19th day of June, 1997 at 1:30
p.m., local time, for the following purposes:
1. To elect nine Directors to serve until the next Annual Meeting
and until their respective successors are elected and qualify.
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only stockholders of record as of the close of business on
April 25, 1997 are entitled to receive notice of and to vote at the
meeting. A list of such stockholders shall be open to the examination
of any stockholder during ordinary business hours, for a period of ten
days prior to the meeting, at the principal executive offices of the
Company, 783 Jersey Avenue, New Brunswick, New Jersey.
By Order of the Board of Directors
DONALD W. ANDERSON
Secretary
New Brunswick, New Jersey
April 30, 1997
If you do not expect to be present at the meeting, please fill in, date
and sign the enclosed Proxy and return it promptly in the enclosed return
envelope.
<PAGE>
INTERFERON SCIENCES, INC.
783 JERSEY AVENUE
NEW BRUNSWICK, NEW JERSEY 08901
New Brunswick, New Jersey
April 30, 1997
PROXY STATEMENT
The accompanying Proxy is solicited by and on behalf of the Board of
Directors of Interferon Sciences, Inc., a Delaware corporation (the "Company"),
for use only at the Annual Meeting of Stockholders to be held at the Brunswick
Hilton and Towers, 3 Tower Center Boulevard, East Brunswick, New Jersey on the
19th day of June, 1997, at 1:30 p.m., local time, and at any adjournments
thereof. The approximate date on which this Proxy Statement and the accompanying
Proxy were first given or sent to security holders was May 1, 1997.
Each Proxy executed and returned by a stockholder may be revoked at any
time thereafter, by written notice to that effect to the Company, attention of
the Secretary, prior to the Annual Meeting, or to the Chairman, or the
Inspectors of Election, at the Annual Meeting, or by the execution and return of
a later-dated Proxy, except as to any matter voted upon prior to such
revocation.
The Proxies in the accompanying form will be voted in accordance with
the specifications made and where no specifications are given, such Proxies will
be voted FOR the nominees for election as directors named herein. In the
discretion of the proxy holders, the Proxies will also be voted FOR or AGAINST
such other matters as may properly come before the meeting. The management of
the Company is not aware that any other matters are to be presented for action
at the meeting. The election of directors will be determined by a plurality of
the votes of the shares of common stock, par value $.01 per share (the "Common
Stock"), present in person or represented by proxy at the Annual Meeting and
entitled to vote on the election of directors. Accordingly, in the case of
shares that are present or represented at the Meeting for quorum purposes, not
voting such shares for a particular nominee for director, including by
withholding authority on the Proxy, will not operate to prevent the election of
such nominee if he or she otherwise receives a plurality of the votes.
VOTING SECURITIES
The Board of Directors has fixed the close of business on April 25,
1997 as the record date for the determination of stockholders entitled to
receive notice of and to vote at the Annual Meeting. The issued and outstanding
stock of the Company on April 25, 1997 consisted of 12,285,105 shares of Common
Stock, each entitled to one vote. A quorum of the stockholders is constituted by
the presence, in person or by proxy, of holders of record of Common Stock,
representing a majority of the number of votes entitled to be cast. National
Patent Development Corporation ("NPDC"), which beneficially owned 1,854,286
shares of the outstanding Common Stock as of March 3, 1997 (representing
approximately 15.1% of the votes entitled to be cast at the meeting), has
advised the Company that it currently intends to vote all of the shares of
Common Stock it beneficially owns for the election of the directors named
herein.
All per share amounts have been adjusted for a one-for-four reverse
stock split that became effective as of 5:00 p.m. New York City time on March
21, 1997.
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth the number of shares of Common Stock
beneficially owned as of March 3, 1997, by each person who is known by the
Company to own beneficially more than 5% of the Company's outstanding Common
Stock.
Name and Address Number of shares Percentage
of Beneficial Owner Beneficially Owned of Class(1)
National Patent Development Corporation 1,854,286(2) 15.1%
Martin M. Pollak 1,994,911(2)(3) 16.1%
Jerome I. Feldman 1,998,398(2)(4) 16.1%
Chancellor LGT Asset Management, Inc. 1,393,550(5) 11.3%
Forstmann-Leff Associates Inc. 628,525(6)(7) 5.1%
(1) The percentage of class calculation assumes for each beneficial owner
that all of the options or warrants are exercised in full only by the
named beneficial owner and that no other options or warrants are deemed
to be exercised by any other stockholders.
(2) Includes (i) 1,310,537 shares of Common Stock owned by NPDC, (ii)
339,843 shares of Common Stock owned by Five Star Group, Inc. ("FSGI"),
and (iii) 203,906 shares of Common Stock owned by MXL Industries, Inc.
("MXL"). FSGI and MXL each is a wholly-owned subsidiary of NPDC. Based
upon the common stock and Class B Stock of NPDC outstanding at March 3,
1997, Martin M. Pollak and Jerome I. Feldman, officers and directors of
NPDC and directors of the Company, controlled in the aggregate
approximately 6.7% of the voting power of all voting securities of
NPDC. This percentage for Mr. Pollak and Mr. Feldman would increase to
approximately 39.4% if they exercised all of the presently outstanding
and currently exercisable stock options to purchase shares of the
common stock and Class B Stock of NPDC held by them. Accordingly,
Messrs. Pollak and Feldman, through their ownership of common stock and
Class B Stock of NPDC, may be deemed to beneficially own the shares of
Common Stock beneficially owned by NPDC, FSGI and MXL. However, Messrs.
Pollak and Feldman disclaim beneficial ownership of such 1,854,286
shares. 339,843 of the shares of Common Stock owned by FSGI have been
pledged to a bank by NPDC as collateral to secure indebtedness owed to
such bank. The address of NPDC and Messrs. Pollak and Feldman is 9 West
57th Street, Suite 4170, New York, New York, 10019.
(3) Includes (i) 1,854,286 shares of Common Stock beneficially owned by
NPDC, (ii)12,875 shares beneficially owned by Mr. Pollak, (iii) 250
shares of Common Stock held by Mr. Pollak's wife, and (iv) 127,500
shares of Common Stock issuable upon exercise of currently exercisable
stock options held by Mr. Pollak. Mr. Pollak disclaims beneficial
ownership of the shares of Common Stock owned by NPDC and his wife.
(4) Includes (i) 1,854,286 shares of Common Stock beneficially owned by
NPDC, (ii) 15,875 shares beneficially owned by Mr. Feldman, (iii) 737
shares of Common Stock held by certain members of Mr. Feldman's family,
and (iv) 127,500 shares of Common Stock issuable upon exercise of
currently exercisable stock options held by Mr. Feldman. Mr. Feldman
disclaims beneficial ownership of the shares of Common Stock owned by
NPDC and his family.
(5) Shares owned by funds managed by Chancellor LGT Asset Management,
Inc., which has voting and dispositive power with respect to such
shares of Common Stock. The address of Chancellor LGT Asset Management,
Inc. is 50 California Street, San Francisco, California 94111.
(6) Forstmann-Leff Associates Inc., a registered investment adviser,
has sole voting and disposition power with respect to such shares of
Common Stock. The address of Forstman-Leff Associates Inc. is 55 East
52nd Street, New York, New York 10055.
(7) Based on a Schedule 13G filed with the Securities and Exchange
Commission.
SECURITY OWNERSHIP OF DIRECTORS AND NAMED EXECUTIVE OFFICERS
The following table sets forth, as of March 3, 1997, beneficial
ownership of shares of Common Stock of the Company by each director, each of the
named executive officers and all directors and executive officers as a group.
Of Total Number
of Shares
Beneficially
Total Number Percent of Owned
of Shares Common Shares Which
Beneficially Stock May Be Acquired
Name Owned Owned(1) Within 60 Days
- ---- ----- -------- --------------
Martin M. Pollak(2)(5)(7) 1,994,911 16.1% 127,500
Jerome I. Feldman(3)(5)(7) 1,998,398 16.1% 127,500
Samuel H. Ronel, Ph.D.(4) 90,250 * 83,875
Lawrence M. Gordon 67,875 * 61,625
Stanley G. Schutzbank, Ph.D. 96,500 * 88,875
Drew Stoudt 29,500 * 27,250
Mei-June Liao 8,125 * 6,250
Scott N. Greenberg 54,875 * 47,250
Leon Botstein, Ph.D. 5,000 * 5,000
Roald Hoffmann, Ph.D.(6) 1,250 * 1,250
Sheldon L. Glashow(6) 1,250 * 1,250
Directors and Executive Officers
as a Group (15 persons) 2,515,325 19.5% 599,000
*The number of shares owned is less than one percent of the outstanding shares
of Common Stock.
(1) The percentage of class calculation assumes for each beneficial owner
that all of the options or warrants are exercised in full only by the
named beneficial owner and that no other options or warrants are deemed
to be exercised by any other stockholders.
(2) See footnotes (2) and (3) to Principal Stockholders table.
(3) See footnotes (2) and (4) to Principal Stockholders table.
(4) Includes 3,875 shares beneficially held by Dr. Ronel and 2,500 shares
of Common Stock held by Dr. Ronel's wife. Dr. Ronel disclaims
beneficial ownership of the shares of Common Stock owned by his wife.
(5) Member of the Executive Committee.
(6) Member of the Audit Committee.
(7) Member of the Compensation Committee.
ELECTION OF DIRECTORS
Nine directors will be elected at the meeting to hold office until the
next Annual Meeting of Stockholders and until their respective successors are
elected and qualify. The Proxies solicited by this proxy statement may not be
voted for a greater number of persons than the number of nominees named. It is
intended that these Proxies will be voted for the following nominees, but the
holders of these Proxies reserve discretion to cast votes for individuals other
than the nominees for director named below in the event of the unavailability of
any such nominee. The Company has no reason to believe that any of the nominees
will become unavailable for election. Set forth below are the names of the
nominees, the principal occupation of each, the year in which first elected a
director of the Company and certain other information concerning each of the
nominees.
Martin M. Pollak has been a Director of the Company and a member of the
Executive Committee since 1981 and Chairman of the Board from 1981 until
September l996. He is a founder of NPDC, which is primarily a holding company,
and has been Executive Vice President, Treasurer, and a director of NPDC since
1959. Mr. Pollak is Chief Executive Officer, President and a director of
American Drug Company ("ADC"), which provides consulting services to Western
companies doing business in Russia and Eastern Europe. He has been Chairman of
the Board of General Physics Corporation ("GPC"), and a director from 1987;
Chairman of the Executive Committee of GTS Duratek, Inc. ("Duratek") from 1985
to 1995 and a director from 1982 until November 1996; Chairman of the Board and
director of SGLG, since 1991; and a director of GSE Systems, Inc. ("GSE") since
1994. Mr. Pollak is the former Chairman of the Czech and Slovak United States
Economic Council, a trustee of the Board of Trustees of the Worcester Foundation
for Experimental Biology and was a director of Brandon Systems Corporation from
1986 to 1996. Age 69.
Jerome I. Feldman has been a Director of the Company and a member of
the Executive Committee since 1981, Chairman of the Executive Committee of the
Company from 1981 until September 1996 and Treasurer from 1984 until September
1996. Mr. Feldman is founder of, and since 1959 has been President, Chief
Executive Officer, and a director of NPDC. He has been Chairman of the Executive
Committee of GPC since 1988 and a director of GPC since 1987; Chairman of the
Board of Duratek from 1985 to 1995 and a director from 1982 until November 1996;
Chairman of the Executive Committee and a Director of SGLG since 1991; and a
director of GSE since 1994 and Chairman of the Board of GSE since April 1997. He
is a trustee of the New England Colleges Fund and of Bard College. Age 68.
Samuel H. Ronel, Ph.D. has been a Director of the Company since 1981
and Chairman of the Board since February 1997. He was Vice Chairman from January
1996 until February 1997 and was President and Chief Executive Officer, from
1981 to January 1996. He was responsible for the interferon research and
development program since its inception in 1979. Dr. Ronel joined NPDC in 1970
and served as the Vice President of Research and Development of NPDC from 1976
to September 1996 and as the President of Hydro Med Sciences, a division of
NPDC, from 1976 to September 1996. Dr. Ronel served as President of the
Association of Biotechnology Companies, an international organization
representing United States and foreign biotechnology firms, from 1986-1988 and
has served as a member of the Board of Directors until 1993. Dr. Ronel was
elected to the Board of Directors of the Biotechnology Industry Organization in
1993. Age 60.
Lawrence M. Gordon has been Chief Executive Officer and a director of
the Company since January 1996, Vice President of the Company from 1991 to
January 1996, General Counsel of the Company since 1984, General Counsel of NPDC
since 1986, and Vice President of NPDC from 1991 to September 1996. Mr. Gordon
has been a director of GPC since 1994. Age 43.
Stanley G. Schutzbank, Ph.D. has been President of the Company since
January 1996, Executive Vice President of the Company from 1981 to January 1996,
and a director of the Company since 1981 and has been associated with the
interferon research and development program since its inception in 1979. He is
involved with all facets of administration and planning of the Company and has
coordinated compliance with FDA regulations governing manufacturing and clinical
testing of interferon, leading to the approval of ALFERON N Injection in 1989.
Dr. Schutzbank joined NPDC in 1972 and served as the Corporate Director of
Regulatory and Clinical Affairs of NPDC from 1976 until September 1996, and as
Executive Vice President of Hydro Med Sciences from 1982 until September 1996.
Dr. Schutzbank is a member of the Regulatory Affairs Professionals Society and
has served as Chairman of the Regulatory Affairs Certification Board from
inception until 1994. Dr. Schutzbank received the 1991 Richard E. Greco
Regulatory Affairs Professional of the Year Award for his leadership in
developing the United States Regulatory Affairs Certification Program. In 1995,
Dr. Schutzbank was elected to serve as President-elect in 1996, President in
1997, and Chairman of the Board in 1998 of the Regulatory Affairs Professionals
Society. Age 51.
Leon Botstein, Ph.D. has been a Director of the Company since 1981 and
has been President of Bard College, Annandale-on-Hudson, New York since 1975.
Dr. Botstein was a Director of Intelogic Trace, Inc. from 1985 to 1995. Age 50.
Scott N. Greenberg has been a director of the Company since January
1996, Vice President, Chief Financial Officer, and a director of NPDC since
1989, a director of GPC since 1987, a director of SGLG since 1991, and Chief
Financial Officer of ADC since 1994. Age 40.
Roald Hoffmann, Ph.D. has been a director of the Company since 1991 and
a director of NPDC since 1988. Dr. Hoffmann is a John A. Newman Professor of
Physical Science at Cornell University since 1974 and is a member of the
National Academy of Sciences and the American Academy of Arts and Sciences. In
1981 he shared the Nobel Prize in Chemistry with Dr. Kenichi Fukui. Age 58.
Sheldon L. Glashow, Ph.D. has been a director of the Company since
1991. He has been a director of GPC since 1987, a director of GSE since 1995, a
director of CalCol, Inc. since 1994, and was a director of Duratek from 1985 to
1995. Dr. Glashow is the Higgins Professor of Physics and the Mellon Professor
of the Sciences at Harvard University. He was a Distinguished Professor and
Visiting Professor of Physics at Boston University. In 1971, he received the
Nobel Prize in Physics. Age 64.
Section 16 (a) Beneficial Ownership Reporting Compliance
The Company believes that during the most recent fiscal year, all
filing requirements applicable to its officers, directors, and greater than 10%
beneficial owners were complied with, except that James Knill and Magnus Precht
filed untimely reports on Form 3.
Board of Directors
The Board of Directors has the responsibility for establishing broad
corporate policies and for the overall performance of the Company, although it
is not involved in day-to-day operating details. Members of the Board are kept
informed of the Company's business by various reports and documents sent to them
as well as by operating and financial reports made at Board and Committee
meetings. The Board held two meetings in 1996. All of the directors attended at
least 75% of the meetings of the Board and Committees on which they served,
except for Dr. Leon Botstein.
<PAGE>
Directors' Fees and Other Compensation
Directors who are not employees of the Company received a fee of $1,000
for each meeting of the Board of Directors attended, but did not receive any
additional compensation for service on committees of the Board of Directors.
Officers of the Company do not receive additional compensation for serving as
directors.
Executive Committee
The Executive Committee, consisting of Martin M. Pollak and Jerome I.
Feldman, meets on call and has authority to act on most matters during the
intervals between Board meetings. The committee formally acted seven times in
1996 through unanimous written consent.
Audit Committee
The Audit Committee reviews the internal controls of the Company and
the objectivity of its financial reporting. It meets with appropriate Company
financial personnel and the Company's independent certified public accountants
in connection with these reviews. This committee recommends to the Board the
appointment of the independent certified public accountants to serve as auditors
for the following year in examining the books and records of the Company. The
Audit Committee currently consists of Roald Hoffmann and Sheldon L. Glashow and
met once in l997 to review the Company's financial condition and results of
operations for the year ended December 31, l996.
Compensation Committee
The Compensation Committee, consisting of Martin M. Pollak and Jerome
I. Feldman, meets on call and has the authority to act with respect to the
compensation of officers and employees of the Company. The Committee met once in
1996.
<PAGE>
EXECUTIVE COMPENSATION
The following table presents the compensation paid by the Company to
its Chief Executive Officer and the Company's four most highly compensated
executive officers for 1996.
<TABLE>
SUMMARY COMPENSATION TABLE
Annual Compensation
<CAPTION>
Long Term
Compensation
Awards
Stock All Other
Salary Bonus Options Compensation
Name and Principal Position Year ($) ($) (#) ($)
- --------------------------- ---- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C>
Lawrence M. Gordon (1) 1996 135,000(1) 150,000 25,000 168,000(2)
Chief Executive Officer 1995 75,000(1) -0- 27,500 -0-
1994 75,000(1) 50,000 -0- -0-
Samuel H. Ronel, Ph.D. 1996 145,905(3) 52,500 41,375 8,363(4)
Chairman of the Board 1995 146,563(3) -0- 18,750 6,110(4)
1994 133,710(3) 30,000 57,625 6,306(4)
Stanley G. Schutzbank, 1996 197,341(5) 97,500 41,375 5,298(4)
Ph.D. 1995 188,818(5) -0- 31,250 4,998(4)
President 1994 143,250(5) 50,000 57,625 4,601(4)
Drew Stoudt 1996 119,452(6) 21,250 11,250 3,431(4)
Vice President, Regulatory 1995 114,018(6) -0- 6,250 2,974(4)
Affairs and Quality 1994 88,354(6) 20,359 24,500 2,886(4)
Mei-June Liao, Ph.D. 1996 115,568 21,250 125 3,324(4)
Vice President, Research 1995 108,546 -0- 1,250 2,944(4)
and Development 1994 92,061 -0- 3,875 2,491(4)
</TABLE>
(1) Consists of $135,000 paid to Mr. Gordon by NPDC for 1996, 1995 and
1994, respectively. The Company reimbursed NPDC for such amount in
consideration of NPDC's permitting Mr. Gordon to devote 60%, 33% and
33%, respectively, of his working time to the Company for 1996, 1995
and 1994, respectively. Does not include additional salary paid to Mr.
Gordon by NPDC for services rendered solely to NPDC for 1996, 1995 and
1994, respectively.
(2) The Company forgave a $150,000 loan to Mr. Gordon and also forgave
$18,000 of accrued interest on such loan. Such loan had been due July
9, 1997 and bore interest at a rate of 6% per annum.
(3) Dr. Ronel has been Chairman of the Board of the Company since February
1997, was Vice Chairman from January 1996 to February 1997, and was
President and Chief Executive Officer until January 1996. Excludes
$59,595, $59,864 and $54,290 for 1996, 1995 and 1994, respectively,
paid by the Company to Dr. Ronel for which the Company was reimbursed
by NPDC in consideration of the Company's permitting Dr. Ronel to
devote a portion of his working hours to NPDC.
(4) Matching contribution by the Company to the 401(k) Savings Plan
and payments by the Company for Group Term Life.
(5) Dr. Schutzbank has been President of the Company since January 1996 and
was Executive Vice President of the Company until January 1996.
Excludes $21,927, $20,980 and $47,750 for 1996,1995, and 1994,
respectively, paid by the Company to Dr. Schutzbank for which the
Company was reimbursed by NPDC in consideration of the Company's
permitting Dr. Schutzbank to devote a portion of his working hours to
NPDC.
(6) Excludes $6,286, $6,001 and $22,088 for 1996, 1995 and 1994,
respectively, paid by the Company to Mr. Stoudt for which the Company
was reimbursed by NPDC in consideration of the Company's permitting Mr.
Stoudt to devote a portion of his working hours to NPDC.
<PAGE>
Option Grants in 1996
The following table sets forth certain information relating to options
granted in 1996 to purchase shares of Common Stock of the Company.
<TABLE>
Potential
Realizable
<CAPTION>
Value at
% of Total Assumed
Options Annual Rates of
Granted to Exercise Stock Price
Options Employees or Base Appreciation for
Granted in Price Expiration Option Term(2)
(#)(1) 1996 ($/Sh) Date 5% 10%
------ ---- ------ ---- -- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Lawrence M. Gordon 12,500 3.4% $7.248 01/19/1999 $14,281 $29,989
12,500 3.4% $4.36 10/30/1999 $ 8,591 $18,040
Samuel H. Ronel, Ph.D. 6,375 1.7% $7.248 01/19/1999 $ 7,283 $15,294
3,750 1.0% $8.00 03/09/2001 $ 8,288 $18,315
6,250 1.7% $9.00 06/19/1999 $ 8,866 $18,619
25,000 6.9% $4.36 10/30/1999 $17,181 $36,079
Stanley G.
Schutzbank, Ph.D. 6,375 1.7% $7.248 01/19/1999 $ 7,283 $15,294
3,750 1.0% $8.00 03/08/2001 $ 8,288 $18,315
6,250 1.7% $9.00 06/19/1999 $ 8,866 $18,619
25,000 6.9% $4.36 10/30/1999 $17,181 $36,079
Drew Stoudt 2,500 .7% $7.248 01/19/1999 $ 2,856 $ 5,998
8,750 6.1% $4.36 10/30/1999 $ 6,013 $12,628
Mei-June Liao, Ph.D. 125 .1% $7.248 01/19/1999 $ 143 $ 300
</TABLE>
The 5% and 10% assumed rates of stock appreciation used to calculate
potential gains to optionees are mandated by the rules of the
Commission.
(1) Options were granted at 100% of fair market value on the date of the
grant.
(2) Represents gain that would be realized assuming the options were held
for the entire three and five year terms and the stock price increased
at compounded rates of 5% and 10% from a base price of $7.248, $8.00,
$9.00 and $4.36. The potential realizable values per option or per
share under such 5% and 10% rates of stock appreciation would be $1.14
and $2.40 per share for the $7.248 share price; $2.21 and $4.88 for the
$8.00 share price; $1.42 and $2.98 for the $9.00 share price; and $.69
and $1.44 for the $4.36 share price. These amounts represent assumed
rates of appreciations only. Actual gain, if any, on stock exercises
and Common Stock holdings will be dependent on overall market
conditions and on the future performance of the Company and its Common
Stock. There can be no assurance that the amount reflected in this
table will be achieved.
<PAGE>
The following table sets forth information for the named executive
officers regarding unexercised options held at the end of 1996. No options were
exercised by the named executive officers in 1996.
AGGREGATE DECEMBER 31, 1996 OPTION VALUES
<TABLE>
Value of Unexercised
<CAPTION>
Number of Unexercised In-the-Money
Options at Options at
December 31, 1996(#) December 31, 1996($)(1)
Exercisable/Unexercisable Exercisable/Unexercisable
<S> <C> <C> <C> <C>
Lawrence M. Gordon 61,625 16,500 $28,688 $ 563
Samuel H. Ronel, Ph.D. 83,875 11,250 $57,563 $1,406
Stanley G. Schutzbank, Ph.D. 88,875 18,750 $57,563 $1,406
Drew Stoudt 27,250 3,750 $19,819 -0-
Mei-June Liao, Ph.D. 6,250 3,750 -0- -0-
</TABLE>
(1) Calculated based on the closing price of the Common Stock ($6.625) as
reported by NASDAQ on December 31, 1996.
Compensation Committee Report on Executive Compensation
The Compensation Committee is responsible for administering the
compensation program for the executive officers of the Company, including the
named executive officers. The Compensation Committee is currently comprised of
Messrs. Feldman and Pollak.
The Compensation Committee's executive compensation policies are
designed to enhance the financial performance of the Company and thus
stockholder value, by significantly aligning the financial interest of the key
executives with those of stockholders. An executive's salary is determined by an
assessment of the significance of the executive's contribution to the operations
of the Company.
The executive compensation program is reviewed in total considering all
of the component parts: base salary, annual bonus, and long-term compensation in
the form of stock options. The compensation components consist generally of
relatively lower base salaries together with relatively higher performance
compensation through bonuses and stock options.
In evaluating the reasonableness of compensation paid to the Company's
executive officers, the Committee takes into account how compensation compares
to compensation paid by competing companies as well as the Company's performance
and the individual contribution of each executive officer.
The Compensation Committee has from time to time recommended to the
Stock Option Committee the grant of stock options to the Company's senior
management, including the named executive officers, whose performance had a
significant effect on the success of the Company. These option grants to
management reinforce the Compensation Committee's philosophy that management
compensation should be closely linked with stockholder value.
The Company has certain broad-based employee benefit plans in which all
employees, including the named executive officers, are permitted to participate
on the same terms and conditions relating to eligibility and subject to the same
limitations on amounts that may be contributed. In 1996, the Company also made a
matching contribution to the 401(k) Savings Plan for those participants.
Mr. Gordon's 1996 Compensation
In l996, Mr. Gordon earned a base salary of $135,000 for services
rendered to the Company as Chief Executive Officer. In addition, the
Compensation Committee awarded Mr. Gordon a cash bonus of $150,000 and granted
him options to purchase 25,000 shares of common stock. The Committee also
forgave a loan of $150,000 plus accrued interest of $18,000.
In reviewing Mr. Gordon's performance in 1996 and determining
appropriate compensation, the Committee took the following major accomplishments
of the Company into consideration:
the strengthening of the Company's financial position by raising
needed capital in 1996 of approximately $25,000,000 (less fees and
expenses).
the reacquisition of the United States and Canadian marketing rights
to ALFERON N Injection(R) from Purdue.
the significant progress in the Company's clinical programs through
the launch of two Phase 3 clinical studies in major indications (HIV
infection and chronic hepatitis C) using ALFERON N Injection.
the development of international marketing and distribution
opportunities through obtaining regulatory approvals in Germany, Hong
Kong and Singapore and entering into a marketing agreement with Cell
Pharm GmbH in Germany for ALFERON N Injection(R).
Mr. Gordon led the Company's efforts with respect to the successful
consummation of the financing transaction in May 1996 of a public offering
underwritten by Sunrise Securities Corp., pursuant to which the Company sold
2,000,000 shares of common stock and realized gross proceeds of $16,000,000. A
portion of these funds ($3,760,000) was utilized by the Company to reacquire the
United States and Canadian marketing rights from Purdue, which enabled the
Company to make significant progress in achieving its goal of controlling the
distribution of ALFERON N Injection(R), which the Company believes will provide
it with greater financial flexibility. In April 1996, Mr. Gordon led the
Company's efforts in negotiating a marketing agreement with Cell Pharm GmbH, a
privately-owned pharmaceutical company headquartered in Germany. The Cell Pharm
Agreement, as well as the foreign regulatory approvals, further enhances the
Company's efforts to distribute and market ALFERON N Injection(R)
internationally. In addition, in December l996, Mr. Gordon, along with other
members of senior management, performed an integral role in raising an
additional $9,124,375 of proceeds in a private placement transaction which
increased the Company's institutional shareholder base.
MARTIN M. POLLAK JEROME I. FELDMAN
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions
Jerome I. Feldman and Martin M. Pollak served as members of the
Compensation Committee of the Company's Board of Directors. Mr. Feldman had
served as Chairman of the Executive Committee of the Company from 1981 until
September 1996 and Treasurer of the Company from 1984 until September 1996. Mr.
Pollak had served as Chairman of the Board from 1981 until September 1996. See
"Certain Transactions - Other Transactions". In addition, Mr. Gordon, the Chief
Executive Officer and a director of the Company, is a director of General
Physics Corporation. Mr. Feldman is Chief Executive Officer of General Physics
Corporation.
PERFORMANCE GRAPH
The following graph compares the performance of the Company for the
period 1991 through 1996 with the performance of the Nasdaq Market Index and the
Dow Jones Industry Group BTC--Biotechnology. The graph illustrates and compares
the 5 year cumulative total return of a $100 investment on December 31, 1991 in
Interferon Common Stock, NASDAQ Market Index and Dow Jones Industry Group
BTC-Biotechnology. The values are as of December 31 of specified year assuming
that dividends are reinvested.
Comparison of 5-Year Cumulative Total Return
MEASUREMENT PERIOD
NASDAQ
(FISCAL YEAR COVERED) INTERFERON SCIENCES, INC. DOW JONES BIOTECH MARKET INDEX
1991 100.00 100.00 100.00
1992 36.11 84.23 100.98
1993 52.09 79.08 121.13
1994 14.93 70.69 127.17
1995 20.83 120.64 164.96
1996 18.40 124.71 204.98
CERTAIN TRANSACTIONS
Agreements with NPDC
Transfer Agreement. As of January 1, 1981, NPDC entered into an
agreement (the "Transfer Agreement") with the Company pursuant to which NPDC (i)
licensed to the Company in perpetuity all of its right, title, and interest in
and to certain intellectual property and technology rights (the "Intangible
Assets") relating to its programs in human leukocyte interferon and recombinant
DNA and hybridoma technology, and (ii) transferred to the Company its rights
under certain consulting, supply, and research agreements (the "Agreements"). In
consideration of the license and transfer of the Intangible Assets and the
Agreements, the Transfer Agreement provides that the Company will pay to NPDC a
royalty of $1,000,000. Such amount is payable if and when the Company generates
net income before income taxes, and is limited to 25% of such net income before
taxes per year until the amount is paid in full.
Management Agreement. As of January 1, 1981, NPDC entered into a
management agreement (the "Management Agreement") with the Company pursuant to
which certain legal, financial and administrative services have been provided by
employees of NPDC. The fee for such services is $120,000 per annum. In addition,
during 1996 NPDC charged the Company $349,758 for personnel and services, which
the Company used in its operations, provided by NPDC to the Company, which
charges represented NPDC's approximate cost. The Company also charged NPDC
$351,759 for certain services rendered by employees of the Company to NPDC,
which charges represented the Company's approximate cost.
Lease Agreement. The Company owns two free standing buildings
aggregating approximately 44,000 square feet located in New Brunswick, New
Jersey. The Company and NPDC have entered into an agreement for the sharing of
the office, warehouse and laboratory facility. The Company occupies
approximately 25,000 square feet, shares approximately 9,000 square feet with
NPDC, and leases approximately 10,000 square feet of space to NPDC at such
location. During 1996, NPDC paid the Company as rent NPDC's proportionate share
of such occupancy costs (based on both square feet occupied and number of
personnel), which amounted to $258,984.
While the above-described agreements were negotiated with a principal
stockholder of the Company which was then its parent, the Company nevertheless
believes that such agreements are equivalent economically to arms-length
transactions with a third party.
Other Transactions
In September l996, Messrs. Feldman, Pollak and Greenberg, officers
and/or directors of the Company, received bonuses for services rendered to the
Company valued at $85,950, $85,950 and $51,570, respectively.
STOCKHOLDER PROPOSALS
Stockholders may present proposals for inclusion in the Company's 1998
proxy statement provided they are received by the Company no later than January
13, 1998, and are otherwise in compliance with applicable Securities and
Exchange Commission regulations.
INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee has recommended, and the Board of Directors has
selected, the firm of KPMG Peat Marwick LLP to serve as independent auditors for
the Company for the year ending December 31, 1997. KPMG Peat Marwick LLP has
audited the Company's books since 1981. The Board considers KPMG Peat Marwick
LLP to be well qualified for the function of serving as the Company's auditors.
A representative of KPMG Peat Marwick LLP is expected to be present at
the Annual Meeting, will have the opportunity to make a statement if he so
desires, and is expected to be available to respond to appropriate questions
from stockholders.
GENERAL
So far as is now known, there is no business other than that described
above to be presented for action by the stockholders at the meeting, but it is
intended that the proxies will be voted upon any other matters and proposals
that may legally come before the meeting and any adjournments thereof in
accordance with the discretion of the persons named therein.
COST OF SOLICITATION
The cost of solicitation of proxies will be borne by the Company. It is
expected that the solicitations will be made primarily by mail, but regular
employees or representatives of the Company may also solicit proxies by
telephone or telegraph and in person, and arrange for brokerage houses and other
custodians, nominees and fiduciaries to send proxy material to their principals
at the expense of the Company.
DONALD W. ANDERSON
Secretary
<PAGE>
COMMON STOCK INTERFERON SCIENCES, INC. PROXY
Annual Meeting of Stockholders
To Be Held June 19, 1997
This proxy is solicited on behalf of the Board of Directors
Revoking any such prior appointment, the undersigned, a stockholder of
Interferon Sciences, Inc., hereby appoints Jerome I. Feldman and Martin M.
Pollak, and each of them, attorneys and agents of the undersigned, with full
power of substitution, to vote all shares of the Common Stock of the undersigned
in said Company at the Annual Meeting of Stockholders of said Company to be held
at the Brunswick Hilton and Towers, 3 Tower Center Boulevard, East Brunswick,
New Jersey on June 19, 1997, at 1:30 P.M. local time and at any adjournments
thereof, as fully and effectually as the undersigned could do if personally
present and voting, hereby approving, ratifying and confirming all that said
attorneys and agents or their substitutes may lawfully do in place of the
undersigned as indicated below.
This proxy when properly executed will be voted as directed. If no
direction is indicated, this proxy will be voted for proposal (1).
1. Election of Directors: Martin M. Pollak, Jerome I. Feldman, Samuel
H. Ronel, Lawrence M. Gordon, Stanley G. Schutzbank, Leon Botstein, Scott N.
Greenberg, Roald Hoffmann and Sheldon L. Glashow.
For All
(INSTRUCTION: To withhold For Withhold Except
authority to vote for any
individual nominee, write
that nominee's name in the
space provided below)
2. Upon any other matters which may properly come before the meeting
or any adjournments thereof.
<PAGE>
Please sign exactly as name appears below.
Dated , 1997
Signature
Signature if held jointly
Please mark, sign, date and
return the proxy card
promptly using the enclosed
envelope. When shares are
held by joint tenants both
should sign. When signing
as attorney, as 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.
