UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
/X/ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the Fiscal Year Ended December 31, 1997
/ / Transition Report Pursuant to Section 13 or 15(d)of the Securities Exchange
Act of 1934
For the transition Period from ________to________
Commission File Number 0-10379
INTERFERON SCIENCES, INC.
(Exact name of registrant as specified in its charter)
Delaware 22-2313648
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
783 Jersey Avenue, New Brunswick, New Jersey 08901
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (732) 249-3250
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $0.01 Per Share
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter Period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No ----
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. / /
As of April 9, 1998, the aggregate market value of the outstanding
shares of the registrant's Common Stock, par value $.01 per share, held by
non-affiliates (assuming for this calculation only that all officers and
directors are affiliates) was approximately $26,500,000 based on the last
reported sale price of such stock on the NASDAQ National Market System on April
9, 1998.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
Class Outstanding at March 12 , 1998
----- ------------------------------
Common Stock, par value $.01 per share 15,234,774 shares
DOCUMENTS INCORPORATED BY REFERENCE
None.
<PAGE>
The Company's 10K for the year ended December 31, 1997 is hereby amended
by including Part III as follows:
PART III
Item 10. Directors and Executive Officers of the Registrant
Set forth below are the officers and directors of the Company as of
April 30, 1998.
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 1996. He is a founder of G.P. STRATEGIES, Inc. (formerly National
Patent Development corporation) ("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 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 70.
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 been Chairman of the
Executive Committee of GPC since 1988 and a director of GPC since 1987; 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 69.
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 Association
of Biotechnology Companies, an international organization representing United
States and foreign biotechnology firms, from 1986 to 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 61.
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 44.
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 52.
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. Age 51.
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 41.
Roald Hoffmann, Ph.D. has been a director of the Company since 1991
and a director of NPFC 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 59.
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 65.
<PAGE>
Item 11. 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 1997.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long-Term
Compensation
Awards
Annual Compensation -----------------------------
------------------- Stock All Other
Year Salary Bonus Options Compensation
Name and Principal Position ($) ($) ($) (#) ($)
- --------------------------- ---- ------ ------ -------- ------------
<S> <C> <C> <C> <C> <C>
Lawrence M. Gordon (1) 1997 135,000(1) - 0 - 42,525 4,718(4)
Chief Executive Officer 1996 135,000(1) 150,000 25,000 168,000(2)
1995 75,000(1) - 0 - 27,000 - 0 -
Samuel H. Ronel, Ph.D. 1997 205,154 - 0 - 51,200 5,083(4)
Chairman of the Board 1996 145,905(3) 52,000 41,375 5,298(4)
1995 146,563(3) - 0 - 18,750 6,110(4)
Stanley G. Schutzbank, Ph.D. 1997 231,302 - 0 - 51,750 4,860(4)
President 1996 197,341(5) 97,500 41,375 5,298(4)
1995 188,818(5) - 0 - 31,250 4,998(4)
Drew Stoudt 1997 130,646 - 0 - 15,400 3,582(4)
Vice President, Regulatory 1996 119,452(6) 21,250 11,250 3,431(4)
Affairs and Quality 1995 114,018(6) - 0 - 6,250 2,974(4)
Mei-June Liao, Ph.D. 1997 122,380 - 0 - 7,325 3,744(4)
Vice President, Research 1996 115,568 21,250 125 3,324(4)
and Development 1995 108,546 - 0 - 1,250 2,944(4)
- ------------
<FN>
(1) Consists of $135,000 for 1997 and 1996 and $75,000 for 1995, paid to Mr.
Gordon by NPDC. The Company reimbursed NPDC for such amount in
consideration of NPDC's permitting Mr. Gordon to devote 60%, 60% and 33%
of his working time to the Company for 1997, 1996 and 1995, respectively.
Does not include additional salary paid to Mr. Gordon by NPDC for
services rendered solely to NPDC for 1997, 1996 and 1995.
(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 and $59,864 for 1996 and 1995, 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 and $20,980 for 1996 and 1995, 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 and $6,001 for 1996 and 1995, respectively, paid by the
Company to Mr. Stoudt for which the Company was reimbursed by NPDC in
consideration of the Company's permitting Mr. Stoudt to devote a portion
of his working hours to NPDC.
</FN>
</TABLE>
<PAGE>
Option Grants in 1997
The following table sets forth certain information relating to options
granted in 1997 to purchase shares of Common Stock of the Company.
<TABLE>
Potential Realizable
Value at Assumed Annual
Rates of Stock Price
% of Total Appreciation for
Options Options Granted Exercise or Option Term(2)
Granted to Employees Base Price Expiration ------------------------
(#) (1) in 1997 ($/Sh) Date 5% 10%
------- --------------- ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Lawrence M. Gordon 6,250 1.1% $ 8.00 02/20/2002 $13,813 $30,500
6,250 1.1% $ 9.18 06/12/2002 $15,875 $35,000
16,900 2.9% $ 5.00 05/02/2002 $23,322 $51,545
6,250 1.1% $ 8.00 09/22/2000 $ 7,875 $16,563
6,875 1.2% $ 8.69 12/31/2000 $ 9,419 $19,800
Samuel H. Ronel, Ph.D. 10,000 1.2% $ 8.00 02/20/2002 $22,100 $48,800
16,200 2.8% $ 5.00 05/02/2002 $22,356 $49,410
12,500 2.1% $ 8.00 09/22/2000 $15,750 $33,125
12,500 2.1% $ 8.69 12/31/2000 $17,125 $36,000
Stanley G. Schutzbank, Ph.D. 10,000 1.2% $ 8.00 02/20/2002 $22,100 $48,800
16,750 2.8% $ 5.00 05/02/2002 $23,115 $51,088
12,500 2.1% $ 8.00 09/22/2000 $15,750 $33,125
12,500 2.1% $ 8.69 12/31/2000 $17,125 $36,000
Drew Stoudt 3,900 .7% $ 5.00 05/02/2002 $ 5,382 $11,895
6,250 1.1% $ 8.00 09/22/2000 $ 7,875 $16,563
5,000 .8% $ 8.00 11/28/2000 $ 6,300 $13,250
250 - $ 8.69 12/31/2000 $ 343 $ 720
Mei-June Liao, Ph.D. 3,700 .6% $ 5.00 05/02/2002 $ 5,106 $11,285
2,500 .4% $ 8.00 09/22/2000 $ 3,150 $ 6,625
1,125 .2% $ 8.00 11/28/2000 $ 1,418 $ 2,981
- --------------
<FN>
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 $8.00, $9.18, $5.00,
$8.00 and $8.69. The potential realizable values per option or per share
under such 5% and 10% rates of stock appreciation would be $2.21 and $4.88
per share for the $8.00 share price (five-year term); $2.54 and $5.60 for
the $9.18 share price; $1.38 and $3.05 for the $5.00 share price; $1.26 and
$2.65 for the $8.00 share price (three-year term); and $1.37 and $2.88 for
the $8.69 share price. These amounts represent assumed rates of
appreciations only. Actual gain, if any, on stock exercises and Common
Stock holdings will be dependent on overall market conditions and on the
future performance of the Company and its Common Stock. There can be no
assurance that the amount reflected in this table will be achieved.
</FN>
</TABLE>
<PAGE>
The following table sets forth information for the named executive officers
regarding the unexercised options held at the end of 1997. No options were
exercised by the named executive officers in 1997.
<TABLE>
AGGREGATED DECEMBER 31, 1997 OPTION VALUES
<CAPTION>
Number of Unexercised Value of Unexercised
Options at In-the-Money Options at
December 31, 1997(#) December 31, 1997($)(1)
Exercisable/Unexercisable Exercisable/Unexercisable
------------------------- -------------------------
<S> <C> <C> <C> <C>
Lawrence M. Gordon 70,505 24,520 $101,089 $55,168
Samuel H. Ronel, Ph.D. 90,865 20,460 $158,643 $55,321
Stanley G. Schutzbank, Ph.D. 98,475 25,900 $161,205 $58,381
Drew Stoudt 29,280 5,620 $ 54,523 $12,224
Mei-June Liao, Ph.D. 8,240 5,460 $ 6,479 $11,634
- -------------------
<FN>
(1) Calculated based on the closing price of the Common Stock ($8.6875) as
reported by NASDAQ on December 31, 1997.
</FN>
</TABLE>
<PAGE>
Item 12. Security Ownership Of Directors And Named Executive Officers
Principal Stockholders
The following table sets forth the number of shares of Common Stock
beneficially owned as of April 30, 1998, by each person who is known by the
Company to own beneficially more than 5% of the Company's outstanding Common
Stock.
<TABLE>
Name and Address Number of Shares Percentage
of Beneficial Owner Beneficially Owned of Class(1)
- ------------------- ------------------ -----------
<S> <C> <C>
National Patent Development Corporation 1,854,287(2) 12.2%
Martin M. Pollak 2,007,412(2)(3) 13.1%
Jerome I. Feldman 2,010,899(2)(4) 13.1%
- ---------------
<FN>
(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) 1,514,444 shares of Common Stock owned by NPDC and (ii)
339,843 shares of Common Stock owned by Five Star Group, Inc. ("FSGI").
FSGI is a wholly-owned subsidiary of NPDC. Based upon the common stock
and Class B Stock of NPDC outstanding at March 31, 1998, Martin M. Pollak
and Jerome I. Feldman, officers and directors of NPDC and directors of the
Company, controlled in the aggregate approximately 6.8% of the voting
power of all voting securities of NPDC. This percentage for Mr. Pollak
and Mr. Feldman would increase to approximately 42.8% 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 and FSGI.
However, Messrs. Pollak and Feldman disclaim beneficial ownership of
such 1,854,287 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) 1,854,287 shares of Common Stock beneficially owned by NPDC,
(ii) 12,875 shares of Common Stock beneficially owned by Mr. Pollak, (iii)
250 shares of Common Stock held by Mr. Pollak's wife, and (iv) 140,000
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) 1,854,287 shares of Common Stock beneficially owned by NPDC,
(ii) 15,875 shares of Common Stock beneficially owned by Mr. Feldman,
(iii) 737 shares of Common Stock held by certain members of Mr. Feldman's
family, and (iv) 140,000 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.
</FN>
</TABLE>
<PAGE>
The following table sets forth, as of April 30, 1998, 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.
<TABLE>
Of Total Number
of Shares
Beneficially
Total Number Percent of Owned
of Shares Common Shares which
Beneficially Stock May be Acquuired
Name Owned Owned(1) Within 60 Days
- ---- ---------- ---------- ----------------------
<S> <C> <C> <C>
Martin M. Pollak(2)(5)(7) 2,007,412 13.1% 140,000
Jerome I. Feldman(3)(5)(7) 2,010,899 13.1% 140,000
Samuel H. Ronel, Ph.D.(4) 100,480 * 94,105
Lawrence M. Gordon 80,135 * 73,885
Stanley G. Schutzbank, Ph.D. 109,450 * 101,825
Drew Stoudt 32,310 * 30,060
Mei-June Liao 10,855 * 8,980
Scott N. Greenberg 60,875 * 53,250
Leon Botstein, Ph.D. 5,750 * 5,750
Roald Hoffmann, Ph.D.(6) 5,250 * 5,250
Sheldon L. Glashow(6) 5,250 * 5,250
Directors and Executive Officers
as a Group (15 persons) 2,601,836 16.3% 685,510
-------------
<FN>
* 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 (i) 3,875 shares beneficially held by Dr. Ronel and (ii) 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.
</FN>
</TABLE>
<PAGE>
Item 13. Certain Relationships and Related 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 trnasfer 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.
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 1997,
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
$234,996. The lease was terminated in March, 1998.
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 January 1998, Messrs. Feldman, Pollak and Greenberg, directors of the
Company, received cash bonuses for services rendered to the Company at $50,000,
$50,000 and $25,000, respectively.
Employment Agreement
As of October 1, 1997, Lawrence M. Gordon and the Company entered into an
employment agreement pursuant to which Mr. Gordon is employed as the Chief
Executive Officer of the Company until December 31, 2001. On December 31, 1999,
and on each December 31 of each year thereafter, the employment period is
automatically extended for one additional year unless, not later than June 30
immediately preceding any such December 31, either party delivers to the other
written notice that the employment period is not further extended.
Commencing January 1, 1997, Mr. Gordon's base annual salary is $250,000,
subject to annual increases of 6%. The Company granted Mr. Gordon under the
Company's option plan options to purchase 150,000 shares of the Company's common
stock at an exercise price of $8.50. Such options vest 20% immediately and 20%
on each January 1 commencing January 1, 1998 and terminate on December 31, 2001.
The Company's Board of Directors may determine Mr. Gordon's bonus for each year,
and whether to grant Mr. Gordon additional options, based upon the Company's
revenues, profits or losses, financing activities, progress in clinical trials,
and such other factors deemed relevant by the Board.
The Company may terminate the employment agreement for Cause, which is
defined as (i) the willful and continued failure by Mr. Gordon to substantially
perform his duties or obligations or (ii) the willful engaging by Mr. Gordon in
misconduct which is materially monetarily injurious to the Company. If
employment agreement is terminated for Cause, the Company is required to pay Mr.
Gordon his full salary through the termination date.
Mr. Gordon can terminate the employment agreement for Good Reason, which
is defined as (i) a change in control of the Company or (ii) a failure by the
Company to comply with any material provision of the employment agreement which
has not been cured within ten days after notice. A "change in control" of the
Company is defined as (i) a change in control of a nature that would be required
to be reported in response to Item 1(a) of Current Report on Form 8-K pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange
Act"), (ii) any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing 20% or more of the combined voting power of the Company's then
outstanding securities, or (iii) at any time individuals who were either
nominated for election or elected by the Board of Directors of the Company cease
for any reason to constitute at least a majority of the Board.
If the Company wrongfully terminates the employment agreement or Mr.
Gordon terminates the employment agreement for Good Reason, then (i) the Company
is required to pay Mr. Gordon his full salary through the termination date; (ii)
the Company is required to pay as severance pay to Mr. Gordon an amount equal to
(a) Mr. Gordon's average annual cash compensation received from the Company or
GP Strategies Corporation during the three full calendar years immediately
preceding the termination date, multiplied by (b) the greater of (I) the number
of years (including partial years) that would have been remaining in the
employment period if the employment agreement had not so terminated and (II)
three, such payment to be made (c) if termination is based on a change of
control of the Company, in a lump sum on or before the fifth day following the
termination date or (d) if termination results from any other cause, in
substantially equal semimonthly installments payable over the number of years
(including partial years) that would have been remaining in the employment
period if the employment agreement had not so terminated; (iii) all options to
purchase the Company's common stock granted to Mr. Gordon under the Company's
option plan or otherwise immediately become fully vested and terminate on such
date as they would have terminated if Mr. Gordon's employment by the Company had
not terminated and, if Mr. Gordon's termination is based on a change of control
of the Company and Mr. Gordon elects to surrender any or all of such options to
the Company, the Company is required to pay Mr. Gordon a lump sum cash payment
equal to the excess of (a) the fair market value on the termination date of the
securities issuable upon exercise of the options surrendered over (b) the
aggregate exercise price of the options surrendered; and (iv) if termination of
the employment agreement arises out of a breach by the Company, the Company is
required to pay all other damages to which Mr. Gordon may be entitled as a
result of such breach. If the employment agreement is terminated for any reason
other than Cause, the Company is required to maintain in full force and effect,
for a number of years equal to the greater of (i) the number of years (including
partial years) that would have been remaining in the employment period if the
employment agreement had not so terminated and (ii) three, all employee benefit
plans and programs in which Mr. Gordon was entitled to participate immediately
prior to the termination date.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
INTERFERON SCIENCES, INC.
By: /s/ Lawrence M. Gordon
------------------------
Lawrence M. Gordon
Chief Executive Officer
Dated: April 30, 1998
