<PAGE> 1
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 [X]
Filed by party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [Information Statement]
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2)
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule s 14a-11(c)
or s 240.14a-12
VIRAGEN, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11 (1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transactions applies:
NOT APPLICABLE
- --------------------------------------------------------------------------------
(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):
NOT APPLICABLE
- --------------------------------------------------------------------------------
*6(4)Proposed maximum aggregate value of transaction:
NOT APPLICABLE
- --------------------------------------------------------------------------------
<PAGE> 2
VIRAGEN, INC.
2343 WEST 76TH STREET
HIALEAH, FLORIDA 33016
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 28, 1997
TO THE STOCKHOLDERS OF VIRAGEN, INC.
PLEASE TAKE NOTICE that the 1996 Annual Meeting of Stockholders of Viragen,
Inc., a Delaware corporation (the "Company"), will be held at Signature Grand,
6900 State Road 84, Davie FL 33317 on Friday, February 28, 1997 at 3:00 P.M.,
Eastern Standard Time, or at any and all adjournments thereof, for the following
purposes:
1. To elect nine directors to the Board of Directors until the next
annual meeting of stockholders of the Company and until their successors
have been elected and qualified;
2. To adopt the Company's 1997 Stock Option Plan, as adopted by the
Board of Directors on January 21, 1997;
3. To amend the Company's Certificate of Incorporation to increase the
authorized capital stock of the Company.
4. To ratify the appointment of independent auditors; and
5. To transact such other business as may properly come before the
meeting or any adjournment thereof.
THE PROXY STATEMENT DATED FEBRUARY 6, 1997 IS ATTACHED.
The Board of Directors has fixed the close of business on January 31, 1997
as the record date for the determination of stockholders entitled to notice of,
and to vote at, the meeting. The financial statements of the Company for the
fiscal year ended June 30, 1996 are contained in the accompanying Annual Report
on Form 10-K/A1. The Annual Report does not form any part of the material for
the solicitation of proxies. Stockholders who do not expect to be present at the
meeting are urged to complete, date, sign and return the enclosed proxy. No
postage is required if the enclosed envelope is used and mailed in the United
States.
BY ORDER OF THE BOARD OF DIRECTORS,
Dennis W. Healey, Secretary
Hialeah, Florida
February 6, 1997
THIS IS AN IMPORTANT MEETING, AND ALL STOCKHOLDERS ARE INVITED TO ATTEND
THE MEETING IN PERSON. THOSE STOCKHOLDERS WHO ARE UNABLE TO ATTEND IN PERSON ARE
RESPECTFULLY URGED TO EXECUTE AND RETURN THE ENCLOSED PROXY CARD AT THEIR
EARLIEST CONVENIENCE. PROMPTNESS IN RETURNING THE EXECUTED PROXY CARD WILL BE
APPRECIATED. STOCKHOLDERS WHO EXECUTE A PROXY CARD MAY NEVERTHELESS ATTEND THE
MEETING, REVOKE THEIR PROXY AND VOTE THEIR SHARES IN PERSON.
<PAGE> 3
VIRAGEN, INC.
2343 WEST 76TH STREET
HIALEAH, FLORIDA 33016
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Viragen, Inc., a Delaware corporation (the "Company"),
of proxies for use at the 1996 Annual Meeting of Stockholders ("Annual Meeting")
to be held at Signature Grand, 6900 State Road 84, Davie FL 33317 on Friday,
February 28, 1997 at 3:00 P.M., Eastern Standard Time, or at any and all
adjournments thereof. The cost of this solicitation will be borne by the
Company. Directors, officers and employees of the Company may solicit proxies by
telephone, telegraph or personal interview. The Annual Report on Form 10-K/A1 of
the Company for the fiscal year ended June 30, 1996, is being mailed together
with this Proxy Statement and form of Proxy. The date of mailing of this Proxy
Statement and form of Proxy is approximately February 6, 1997.
OUTSTANDING STOCK AND VOTING RIGHTS
In accordance with the By-Laws of the Company, the Board of Directors has
fixed the close of business on January 31, 1997, as the record date for
determining the stockholders entitled to notice of, and to vote at, the Annual
Meeting. Only stockholders of record on that date will be entitled to vote. A
stockholder who submits a proxy on the accompanying form has the power to revoke
it by notice of revocation directed to the proxy holders of the Company at any
time before it is voted. Unless authority is withheld in writing, proxies which
are properly executed will be voted for the proposals thereon. Although a
stockholder may have given a proxy, such stockholder may nevertheless attend the
meeting, revoke the proxy and vote in person. The election of the directors
nominated, the appointment of the Company's auditors, the approval of the
amendments to the Company's Certificate of Incorporation to increase the
Company's authorized common stock from 50,000,000 shares to 75,000,000 shares,
and the approval of the newly established 1997 Stock Option Plan will require
the affirmative vote of a majority of the shares of the Company's Common Stock
voting at the Annual Meeting in person or by proxy.
As of January 31, 1997, the record date for determining the stockholders of
the Company entitled to vote at the Annual Meeting, approximately 38,653,002
shares of the Common Stock of the Company, $.01 par value ("Common Stock"), were
issued and outstanding. Each share of Common Stock entitles the holder to one
vote on all matters brought before the Annual Meeting. The quorum necessary to
conduct business at the Annual Meeting consists of a majority of the outstanding
shares of Common Stock as of the record date. Abstentions and broker non-votes
are counted for purposes of determining the presence or absence of a quorum and
have the effect of a negative vote on the approval of the amendment to the
Company's Certificate of Incorporation to increase the Company's authorized
common stock. Abstentions and broker non-votes have no effect for the election
of directors, on the adoption of the 1997 Stock Option Plan or the ratification
of the Company's auditors.
<PAGE> 4
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the Company's
Common Stock beneficially owned at January 31, 1997 (i) by each person who is
known by the Company to own beneficially or exercise voting or dispositive
control over 5% or more the Company's Common Stock on the record date based upon
certain reports regarding ownership filed with the Securities and Exchange
Commission (the "SEC") in accordance with Sections 13(d) or 13(g) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), (ii) by each
of the Company's directors, and (iii) by all officers and directors as a group.
A person is also deemed to be a beneficial owner of any securities of which the
person has the right to acquire beneficial ownership within 60 days. Except as
otherwise indicated the business address for the persons set forth below is 2343
West 76th Street, Hialeah, Florida 33016. At January 31, 1997 there were
38,653,002 shares of Common Stock of the Company outstanding.
<TABLE>
<CAPTION>
AMOUNT
NATURE OF
NAME AND ADDRESS BENEFICIAL PERCENT
OF BENEFICIAL OWNER OWNERSHIP(1) OF CLASS(2)
------------------- ------------ -----------
<S> <C> <C>
Gerald Smith................................................ 2,000,000 5.2%
Robert H. Zeiger............................................ 1,000,000 2.6%
Dennis W. Healey............................................ 675,000 1.7%
Charles F. Fistel........................................... 626,255 1.6%
Peter D. Fischbein.......................................... 400,000 1.0%
Sidney Dworkin, Ph.D........................................ 325,244 0.8%
Jay M. Haft................................................. 197,744 0.5%
William B. Saeger........................................... 1,883,855 4.9%
Fred D. Hirt................................................ 25,000 0.1%
Officers & Directors (as a Group 9 persons)................. 7,483,098 19.4%
</TABLE>
- ---------------
(1) Based upon information furnished to the Company by the principal security
holders or obtained from the stock transfer books of the Company. Other
than indicated in the notes, the Company has been informed that such
persons have sole voting and dispositive power with respect to their
shares.
(2) Based on 38,653,002 shares of Common Stock outstanding as of January 31,
1997. Exclusive of 11,289 shares of Common Stock reserved for issuance
pursuant to conversion of 2,650 outstanding shares of Preferred Stock each
convertible into 4.26 shares of Common Stock; and (ii) 13,486,703 shares of
Common Stock reserved for issuance pursuant to the conversion of
convertible preferred stock and the exercise of options and warrants of the
Company.
(3) Mr. Smith is Chairman of the Board of Directors and President of the
Company. Includes (i) 350,000 shares owned directly by Mr. Smith; (ii)
50,000 options exercisable at $1.00 per share granted to all Directors in
August 1994; and (iii) 1,600,000 options exercisable at $.50 per share
pursuant to the provisions of the Company's 1995 Amended Stock Option Plan
(the "1995 Plan").
(4) Mr. Zeiger is Chief Executive Officer, Chief Operating Officer and a
Director of the Company. Includes 1,000,000 options exercisable at $.96 per
share pursuant to Mr. Zeiger's employment agreement with the Company.
(5) Mr. Healey is Executive Vice President, Treasurer, Chief Financial Officer,
Secretary and a Director of the Company. Includes (i) 125,000 shares held
in Mr. Healey's name; (ii) 50,000 options exercisable at $1.00 per share
granted to all Directors in August 1994; and (iii) 500,000 options
exercisable at $.50 per share granted pursuant to the provisions of the
1995 Plan.
(6) Mr. Fistel is an Executive Vice President and was elected a Director of the
Company in June 1996. Includes (i) 215,455 owned directly by Mr. Fistel;
(ii) 300,000 options exercisable at $.30 per share; and (iii) 110,000
options exercisable at $.50 per share pursuant to the 1995 Plan.
2
<PAGE> 5
(7) Mr. Fischbein is a Director of the Company. Includes (i) 125,000 shares
held in Mr. Fischbein's name; (ii) 50,000 options exercisable at $1.00 per
share granted to all Directors in August 1994; and (iii) 225,000 options
exercisable at $.50 per share granted pursuant to the provisions of the
1995 Plan.
(8) Mr. Dworkin is a Director of the Company. Includes (i) 175,244 shares owned
directly by Mr. Dworkin and his wife; (ii) 50,000 options exercisable at
$1.00 per share granted to all Directors in August 1994; and (iii) 100,000
options exercisable at $.50 per share granted pursuant to the provisions of
the 1995 Plan.
(9) Mr. Haft is a Director of the Company. Includes (i) 47,744 shares owned
directly by Mr. Haft; (ii) 50,000 options exercisable at $1.00 per share
granted to all Directors in August 1994; and (iii) 100,000 options
exercisable at $.50 per share granted pursuant to the provisions of the
1995 Plan.
(10) Mr. Saeger is a Director of the Company. Includes (i) 89,500 shares owned
directly by Mr. Saeger; (ii) 1,644,355 shares held by Fundamental
Management Corp. and Hedge Fund Management. Mr. Saeger holds a controlling
position as Fund Manager of the Fundamental Fund Group, holder of these
shares and is considered a beneficial owner; (iii) 50,000 options
exercisable at $1.00 per share granted to all Directors in August 1994; and
(iii) 100,000 options exercisable at $.50 per share granted pursuant to the
provisions of the 1995 Plan.
(11) Mr. Hirt is a Director of the Company. Includes 25,000 options exercisable
at $3.96 per share granted in June, 1996 pursuant to the provisions of the
1995 Plan.
Section 16(a) of the Securities and Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's directors and executive officers, and
persons who own more than ten percent (10%) of a registered class of the
Company's equity securities, to file with the Securities and Exchange Commission
(the "Commission") initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Officers,
directors and greater than ten (10%) stockholders are required by Commission
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representation that no other
reports were required, during the fiscal year ended June 30, 1996, all Section
16(a) filing requirements applicable to its officers, directors and greater than
ten percent (10%) beneficial owners were completed except that Mr. Robert
Zeiger, the Company's Chief Executive Officer, Chief Operating Officer and a
Director of the Company, did not file one report, covering one transaction, in a
timely manner.
3
<PAGE> 6
ELECTION OF DIRECTORS
The Board of Directors is responsible for the overall affairs of the
Company. The names of the nominees, their principal occupations and the year in
which they became Directors, are set forth below. Each Director is elected for a
period of one year at the Company's annual meeting of stockholders. Executive
officers are elected annually and, except to the extent governed by employment
contracts, serve at the discretion of the Board of Directors.
NOMINEES FOR ELECTION
<TABLE>
<CAPTION>
SERVED AS
POSITION WITH OFFICER AND/OR
NAME AGE THE COMPANY DIRECTOR SINCE
- ---- --- ------------- ----------------
<S> <C> <C> <C>
Gerald Smith................................... 66 Chairman of the Board and 1994
President 1993
Robert H. Zeiger............................... 52 Chief Executive Officer and 1995
Director
Dennis W. Healey............................... 48 Executive Vice President, 1993
Treasurer, Chief Financial 1980
Officer, Secretary and 1994
Director 1984
Charles F. Fistel.............................. 36 Executive Vice President and 1994
Director 1996
Peter D. Fischbein............................. 56 Director 1981
Sidney Dworkin, Ph.D........................... 74 Director 1994
Jay M. Haft.................................... 60 Director 1994
William B. Saeger.............................. 44 Director 1994
Fred D. Hirt................................... 53 Director 1996
</TABLE>
GERALD SMITH, in accordance with the February 1993 Stock Agreement, became
a Director on February 5, 1993, the date of the Initial Purchase by Cytoferon
Corp. ("Cytoferon"). On May 12, 1993, Mr. Smith became President of the Company.
In June 1994, Mr. Healey relinquished his position as Chairman of the Board of
Directors in favor of Mr. Smith. Since 1982, he was a principal stockholder,
President, Chief Executive Officer and director of Business Development Corp
("BDC"), which has served as a managing entity and consultant to several high
technology ventures including Compupix Technology Joint Venture. From August
1991 to December 1991, Mr. Smith was the Chief Executive Officer of Electronic
Imagery, Inc., a company engaged in the development of imaging software. Mr.
Smith is also the President, Chief Executive Officer and a director of
Cinescopic Corporation and International Database Service, Inc.,
computer-oriented companies which developed database technology using the
personal computer for audio, video, animation and real time communication. Mr.
Smith has discontinued BDC's operations in order to devote all of his time to
the Company. See Transactions with Management. Mr. Smith is also Chairman of the
Board and President of Viragen Europe, Ltd. ("VEL"), a majority owned publicly
traded subsidiary of the Company (NASDAQ; VERP) of which the Company holds
approximately 72% of the outstanding common stock of VEL and Viragen U.S.A.,
Inc. ("VUSA"), a subsidiary of the Company.
ROBERT H. ZEIGER was appointed Chief Executive Officer and Chief Operating
Officer and was elected as a Director in May 1995. Mr. Zeiger is a
pharmaceutical executive. From 1985 to 1994, Mr. Zeiger was employed by GLAXO,
Inc., Research Triangle Park, North Carolina, serving as Vice President and
General Manager of their Dermatological Division from 1985 to 1988, Vice
President and General Manager of Alan & Hansburgs from 1988 to 1991, and Vice
President and General Manager of Glaxo Pharmaceuticals from 1991 to 1994. Mr.
Zeiger also served as Vice President, Marketing and Sales with Stiefel
Laboratories, Inc., Coral Gables, Florida, from 1979 to 1985, as National Sales
Manager to Knoll Pharmaceutical Company, Whipping, New Jersey from 1971 to 1979.
Mr. Zeiger is also Chief Executive Officer and a Director of VEL.
4
<PAGE> 7
DENNIS W. HEALEY is a Certified Public Accountant and was appointed
Chairman of the Board and Chief Executive Officer on April 13, 1993. In June
1994, Mr. Healey relinquished his position as Chairman of the Board to Mr. Smith
and in July 1994, relinquished the position of Chief Executive Officer upon the
employment of Mr. Fistel. Upon Gerald Smith becoming President on May 12, 1993,
Mr. Healey became Executive Vice President and has served as Chief Financial
Officer and Treasurer of the Company since 1980. Mr. Healey was appointed
Secretary in 1994. Until his resignation in July 1996, Mr. Healey served as
Senior Vice President, Principal Financial Officer and Treasurer of Medicore,
Inc. ("Medicore") and Executive Vice President of its Techdyne affiliate
("Techdyne"). He also served as Treasurer of most of Medicore's subsidiaries and
as a Vice President of Dialysis Corporation of America ("DCA"), a subsidiary of
Medicore and Secretary, Treasurer and director of other DCA subsidiaries. Mr.
Healey is also Executive Vice President, Treasurer, Secretary and a Director of
VEL and VUSA.
CHARLES F. FISTEL was appointed Chief Executive Officer of the Company upon
his employment in July 1994, which position he relinquished to Mr. Robert H.
Zeiger in May 1995, becoming an Executive Vice President of the Company. Mr.
Fistel was elected a Director of the Company in June 1996. Mr. Fistel, prior to
joining the Company, served for two years as an independent financial advisor to
publicly-traded and privately-held emerging growth companies. Prior thereto,
between 1986 and 1992, he served as Executive Vice President, Chief Financial
Officer and a director of Tiger Direct, Inc. (formerly BLOC Development
Corporation), a Miami, Florida-based publicly-traded computer technology
development, marketing and distribution company. From 1981 to 1986, Mr. Fistel,
who is also a Certified Public Accountant, actively practiced public accounting.
Mr. Fistel is also Executive Vice President and a Director of VUSA.
PETER D. FISCHBEIN is an attorney who has been practicing law for
approximately 30 years. Mr. Fischbein served as the Company's Secretary between
May and December 1994. His former firm on occasion represented the Company,
Medicore and the Viragen Research Associates Limited Partnership ("Limited
Partnership") which has certain contracts with the Company. Mr. Fischbein is
also a director of Medicore (since 1984) and Techdyne (since 1985). Mr.
Fischbein has been a general partner of several limited partnerships engaged in
oil exploration and real estate development.
SIDNEY DWORKIN, PH.D., elected a Director in August 1994, was a founder,
former President, Chief Executive Officer and Chairman of Revco, Inc. Between
1987 and the present, Dr. Dworkin has also served as Chief Executive Officer of
Stonegate Trading, Inc., an importer and exporter of various health, beauty
aids, groceries and sundries. Between 1988 and the present, Dr. Dworkin has
served as Chairman of the Board of Advanced Modular Systems, which is engaged in
the sale of modular buildings. Between June 1993 and the present, Dr. Dworkin
has also served as Chairman of Global International, Inc., which is involved in
the sale and leasing of modular buildings to hospitals and radiology groups.
Between 1993 and the present, Dr. Dworkin has also served as Chairman of the
Board of Comtrex Systems, which is engaged in the development and sale of
programmable cash registers. Dr. Dworkin also serves on the Board of Directors
of CCA Industries, Inc., Interactive Technologies, Inc. and Northern
Technologies International Corporation, all of which are publicly-traded
companies.
JAY M. HAFT, elected a Director in August 1994, is an attorney and of
counsel to Parker Duryee Rosoff & Haft, New York, NY and has been a practicing
lawyer since 1959. Mr. Haft has specialized in the representation of emerging
growth companies, and has participated in fund raising for a number of leading
edge medical technology companies and is Managing General Partner of Venture
Capital Associates, Ltd. and GenAm "1" Venture Fund, a domestic and
international venture capital fund, respectively.
WILLIAM B. SAEGER, elected a Director in August 1994, is a Certified Public
Accountant with experience in corporate strategic planning, financial and tax
planning, acquisitions, corporate capitalizations, analysis and management of
financial assets. Mr. Saeger has served as a portfolio manager and analyst for a
number of funds and is currently Vice President of Fundamental Management and
serves as a director of Telemac Cellular Corp. Mr. Saeger has also written for
financial publications on federal taxation and investment portfolio management.
5
<PAGE> 8
FRED D. HIRT, elected a Director in June 1996, is a health care executive
and serves as the President and Chief Executive Officer of Mount Sinai Medical
Center in Miami Beach, Florida. Mr. Hirt is active in numerous community
healthcare and charitable organizations and serves on many of their Board of
Directors.
There is no family relationship between any of the officers and directors.
The term of office for the Company's Directors is one year and they serve
until the next annual meeting of stockholders. During fiscal 1996, the Company's
Board of Directors met four times during fiscal 1996.
On August 15, 1994, the Company appointed an Executive Committee, which
consists of Messrs. Smith, Zeiger, Healey and Fistel. The Executive Committee is
empowered to act for the full Board in intervals between Board of Director
meetings, with the exception of certain matters which by law may not be
delegated. The Executive Committee meets, as necessary, and all actions by the
Company are to be reported at the next Board of Directors meeting. The Executive
Committee met ten times during fiscal 1996 with all members attended the
meetings.
During fiscal 1996, the Company did not have a standing Nominating
Committee, Audit Committee or Compensation Committee. The Company's Board of
Directors has acted as a whole to (i) oversee the Company's audit activities to
protect against unsound and improper practices and to furnish adequate
protection to all assets and records of the Company; and (ii) determine officer
compensation programs include salaries and other forms of compensation. The
Company has since appointed an Audit Committee, which consists of Sidney
Dworkin, Ph.D., Dennis Healey, and William Saeger, of which Messrs. Dworkin and
Saeger are outside directors and a Compensation Committee which consists of Jay
Haft and Sidney Dworkin, both of whom are outside directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
The Company's Board of Directors meet as a whole to make decisions
concerning the compensation of its executive officers and directors. Currently,
there are nine members of the Company's Board of Director, five of whom are
outside directors and four who are inside Directors. The four inside Directors
include Gerald Smith, the Company's Chairman of the Board and President, Robert
H. Zeiger, the Company's Chief Executive Officer, Dennis W. Healey, an Executive
Vice President, Treasurer, Chief Financial Officer, and Secretary of the
Company, and Charles F. Fistel, an Executive Vice President of the Company. Each
of these individuals also serves in similar capacities for one or more of the
Company's subsidiaries. Each of the individuals abstain from any discussions or
votes concerning their respective salaries and other forms of compensation
received by each of them from the Company. Discussions concerning the
compensation received by each of these persons, along with a related
transactions are set forth elsewhere in this Notice and Annual Meeting and Proxy
Statement.
EXECUTIVE COMPENSATION AND EMPLOYMENT AGREEMENTS
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION. Under the rules
established by the Securities and Exchange Commission, the Company is required
to provide certain data and information in regard to the compensation and
benefits provided to the Company's Chief Executive Officer (CEO) and other
executive officers. The disclosure requirements for the CEO and executive
officers include the use of tables and a report explaining the rationale and
considerations that led to the fundamental compensation decision affecting those
individuals.
COMPENSATION REPORT. The Board of Directors are responsible for
establishing compensation levels and benefits for the executive officers of the
Company. The Board of Directors are also responsible for reviewing
recommendations made by management regarding compensation, including stock
options, and benefits for other employees.
6
<PAGE> 9
EXECUTIVE COMPENSATION POLICY. For the last fiscal year, the goals
established by the Board for executive compensation are as follows:
- to provide a compensation package which would attract and retain
scientific experienced pharmaceutical and administrative personnel;
- to maintain reasonable yet competitive based salaries while conserving
the liquid assets of the Company;
- provide an environment where innovation, dedication and success are
rewarded; and
- provide participation in stock appreciation as part of an incentive based
compensation package.
The performance of executive officers is evaluated routinely by the Board
of Directors as a whole. The Board of Directors considers each employee's total
compensation package, including base salary, stock options and other benefits as
provided in their respective employment agreements.
CHIEF EXECUTIVE OFFICER. The Chief Executive Officer entered into a
two-year employment agreement in May 1995, the terms of which provided for the
bulk of his compensation to be derived from appreciation in the Company stock
and market value. His compensation consists of a base annual salary of $120,000
and 1,000,000 stock options at the then current market value of $.96 per share,
vesting over the term of his employment agreement. The Board of Directors felt
that this structure, heavily weighted towards performance compensation, would
provide the motivational structure necessary for the competitive environment in
which the Company operates.
OTHER EXECUTIVE OFFICERS. As with the compensation of the CEO, the Board
of Directors evaluates and establishes the compensation packages for other
executive officers of the Company. These executives are evaluated routinely
based on the effectiveness of their efforts in their respective areas of
responsibility as well as their contribution to achieving the overall goals of
the Company. The Board of Directors has structured compensation packages so that
the base salaries are conservative by pharmaceutical industry standards. The
emphasis is on compensation through the issuance of stock options. As a
consequence, the executive officers may maximize their total compensation
through the attainment of corporate goals as reflected in appreciated stock
values.
Submitted by the Company's Board of Directors:
<TABLE>
<S> <C> <C> <C>
Gerald Smith Dennis W. Healey Robert H. Zeiger Charles F. Fistel
Peter D. Fischbein Sidney Dworkin, Ph.D. Jay M. Haft William B. Saeger
Fred D. Hirt
</TABLE>
7
<PAGE> 10
SUMMARY COMPENSATION
The following table sets forth information concerning the compensation and
employment agreements of the Chief Executive Officers of the Company and two
other most highly compensated executive officers as of June 30, 1996.
<TABLE>
<CAPTION>
ALL OTHER
OTHER ANNUAL RESTRICTED ---------------------
NAME AND --------------------- STOCK OPTIONS/ LTIP OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARDS SARS(#) PAYOUTS COMPENSATION
------------------ ---- -------- ------ ------------ ---------- --------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gerald Smith............. 1996 $154,615 $7,500 $14,000 -0- 1,600,000 -0- -0-
Chairman and 1995 70,000 -0- 9,317 -0- 50,000(5) -0- -0-
President(1) 1994 -0- $7,500 -0- -0- -0- -0- -0-
Robert H. Zeiger......... 1996 $ 66,653 -0- $ 5,000 -0- 100,000 -0- -0-
CEO and Director(2) 1995 11,538 -0- -0- -0- 1,000,000 -0- -0-
Dennis W. Healey......... 1996 $ 78,653 $1,250 $ 8,500 -0- 500,000 -0- -0-
Exec. V.P., Treasurer, 1995 75,000 -0- 10,167 -0- 50,000(5) -0- -0-
CFO and Director(3) 1994 7,200 1,250 -0- -0- -0- -0- -0-
Charles F. Fistel........ 1996 $110,000 -0- $ 6,000 -0- 110,000 -0- -0-
Exec. V.P. and 1995 106,615 -0- 19,208 -0- -0- -0- -0-
Director(4)
</TABLE>
- ---------------
(1) The Company entered into a two-year employment agreement with Mr. Smith,
effective October 6, 1995, under terms similar to his previous employment
agreement, modified to increase his salary by $20,000 and $10,000 for the
first and second years, respectively. In January 1996 Mr. Smith exercised
options to purchase 750,000 shares of common stock through the issuance of
a note in the principal amount of $217,500 with the shares being issued
into escrow pending cash payments with the shares to be released from
escrow in increments of no less than $3,000. Mr. Smith received a bonus
equal to the par value ($7,500) of the shares purchased. On June 6, 1996,
the Company forgave Mr. Smith's note in lieu of bonus for the 1996 fiscal
year, following unanimous approval of the independent members of the Board
of Directors. See Item 13, Certain Relationships and Related Transactions.
(2) On May 9, 1995, the Company entered into a two-year employment agreement
expiring May 1, 1997, with Robert H. Zeiger to serve as Chief Executive
Officer and Chief Operating Officer of the Company at an annual salary of
$120,000. The agreement provides for health, life and similar employee
benefits generally made available to other employees of the Company, use of
an automobile and related maintenance expenses and reimbursement for
expenses incurred in fulfilling his normal responsibilities to the Company.
The agreement provides for the issuance of options to purchase the
aggregate of 1,000,000 shares of Common Stock of the Company at an exercise
price of $.96 per share, exercisable with respect to 500,000 shares
commencing May 8, 1996 through May 8, 2000 and exercisable for the
remaining 500,000 shares commencing May 8, 1997 through May 8, 2001. The
right to exercise such options may be accelerated upon the occurrence of
certain material corporate transactions. The options are terminable prior
to the lapse of their respective terms only if Mr. Zeiger's employment
should be terminated for cause, and, in that event, the options must be
exercised to the extent that they have vested within 90 days of such
termination.
(3) The Company entered into a two-year employment agreement with Mr. Healey,
effective October 6, 1995, under terms similar to his previous employment
agreement, modified to increase his salary by $5,000 and $5,000 for the
first and second years, respectively. In July 1996, Mr. Healey resigned all
positions he held with Medicore and its subsidiaries and entered into an
employment agreement with Viragen (Europe) Ltd. This agreement provides for
a salary of $85,000 per year and expires in October 1997 concurrent with
the expiration of his employment agreement with the Company. In January
1996 Mr. Healey exercised options to purchase 125,000 shares of common
stock through the issuance of a note in the principal amount of $36,250
with the shares being issued into escrow pending cash payments with the
shares to be released from escrow in increments of no less than $3,000. Mr.
Healey received a bonus equal to the par value ($1,250) of the shares
purchased. On June 6, 1996, the Company forgave
8
<PAGE> 11
Mr. Healey's note in lieu of bonus for the 1996 fiscal year following
unanimous approval of the independent members of the Board of Directors.
(4) On July 1, 1994, as modified on December 15, 1994, the Company entered into
a two-year employment agreement expiring July 1, 1996, with Charles Fistel
to serve as Chief Executive Officer (which position he relinquished to Mr.
Zeiger in May 1995, assuming the position of Executive Vice President) at
an annual salary of $110,000. The agreement provides for health, life, and
similar employee benefits generally made available to other employees of
the Company, use of an automobile and related expenses. The agreement
provides for the issuance of options to purchase the aggregate of 300,000
shares of common stock at an exercise price of $.30 per share, exercisable
with respect to 150,000 shares commencing June 30, 1995, through July 1,
1999, and exercisable for the remaining 150,000 shares commencing June 30,
1996, through July 1, 2000. The right to exercise such options have
accelerated based on the Company having raised certain minimums in capital.
On July 1, 1996, upon the expiration of Mr. Fistel's 1994 employment
agreement, Mr. Fistel entered into a two year employment under terms
similar to his previous employment agreement modified to increase his
salary $30,000 and $10,000 in the first and second years, respectively.
In November 1995, VSL, a wholly-owned subsidiary of VEL issued an aggregate
of 7.144 shares of VSL common stock at $56.00 per share to individuals serving
as officers and directors of VEL and one employee of the Company. Pursuant to
the Agreement and Plan of Reorganization, these shares were exchangeable into an
aggregate of 400,000 shares of VEL. Of these options 100,000 were granted each
to (i) Mr. Gerald Smith, (ii) Mr. Robert H. Zeiger, and (iii) Mr. Dennis W.
Healey, all serving as officers and directors of VEL and (iv) one employee of
the Company. All options in VSL were exercised and the related shares exchanged
for VEL common stock. The Company recognized $243,000 in compensation expense as
a result of the issuance of these shares.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information with respect to the grant of
options to purchase shares of Common Stock during the fiscal year ended June 30,
1996 to each person named in the Summary Compensation Table.
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED(#) FISCAL YEAR ($/SHARES) DATE
- ---- ------------ ------------- ----------- ----------
<S> <C> <C> <C> <C>
Gerald Smith..................................... 1,600,000 52.2% $.50 10-05-00
Robert H. Zeiger................................. 100,000 3.3% $.50 10-05-00
Dennis W. Healey................................. 500,000 16.3% $.50 10-05-00
Charles F. Fistel................................ 110,000 3.6% $.50 10-05-00
</TABLE>
9
<PAGE> 12
OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to the exercise of
options to purchase shares of Common Stock during the fiscal year ended June 30,
1996 to each person named in the Summary Compensation Table and the unexercised
options held as of the end of the 1996 fiscal year.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
VALUE REALIZED IN THE MONEY OPTIONS AT
MARKET PRICE NUMBER OF UNEXERCISED FY-END (BASED ON FY-END
SHARES AT EXERCISE OPTIONS AT FY-END PRICE OF $5.44/SHARE)
ACQUIRED LESS PRICE --------------------------- ---------------------------
NAME ON EXERCISE EXERCISABLE EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gerald Smith............. 750,000 $348,750 1,650,000 -0- $8,126,000 -0-
Robert H. Zeiger......... 75,000 $494,470 525,000 500,000 $2,363,000 $2,240,000
Dennis W. Healey......... 125,000 $ 58,125 550,000 -0- $2,692,000 -0-
Charles F. Fistel........ -0- -0- 410,000 -0- -0- -0-
</TABLE>
1995 AMENDED STOCK OPTION PLAN
On May 15, 1995 the Board of Directors adopted, subject to approval by the
stockholders, a stock option plan called the "1995 Amended Stock Option Plan."
On September 22, 1995, the Board of Directors amended the 1995 Stock Option Plan
(collectively the "Plan") to define certain terms and clarify the minimum
exercise price of the Non-Qualified Options, described herein, as not less than
55% of the fair market value. The Plan was submitted to the stockholders of the
Company at the Annual Meeting of Stockholders held on December 15, 1995, and the
Stockholders ratified the Plan at that time.
Under the Plan, the Company has reserved an aggregate of 4,000,000 shares
of Common Stock for issuance pursuant to options granted under the Plan ("Plan
Options"). The full Board of Directors or the Compensation Committee of the
Board of Directors (the "Committee") administers the Plan including, without
limitation, the selection of the persons who will be granted Plan Options under
the Plan, the type of Plan Options to be granted, the number of shares subject
to each Plan Option and the Plan Option price.
Plan Options granted under the Plan may either be options qualifying as
incentive stock options ("Incentive Options") under Section 422 of the Internal
Revenue Code of 1986, as amended, or options that do not so qualify
("Non-Qualified Options"). In addition, the Plan also allows for the inclusion
of a reload option provision ("Reload Option"), which permits an eligible person
to pay the exercise price of the Plan Option with shares of Common Stock owned
by the eligible person and receive a new Plan Option to purchase shares of
Common Stock equal in number to the tendered shares. Any Incentive Option
granted under the Plan must provide for an exercise price of not less than 100%
of the fair market value of the underlying shares on the date of such grant, but
the exercise price of any Incentive Option granted to an eligible employee
owning more than 10% of the Company's Common Stock must be at least 110% of such
fair market value as determined on the date of the grant. The term of each Plan
Option and the manner in which it may be exercised is determined by the Board of
the Directors or the Committee, provided that no Plan Option may be exercisable
more than 10 years after the date of its grant and, in the case of an Incentive
Option granted to an eligible employee owning more than 10% of the Company's
Common Stock, no more than five years after the date of the grant.
The exercise price of Non-Qualified Options shall be determined by the
Board of Directors or the Compensation Committee.
The per share purchase price of shares subject to Plan Options granted
under the Plan may be adjusted in the event of certain changes in the Company's
capitalization, but any such adjustment shall not change the total purchase
price payable upon the exercise in full of Plan Options granted under the Plan.
10
<PAGE> 13
Officers, directors, key employees and consultants of the Company and its
subsidiaries are eligible to receive Non-Qualified Options under the Plan. Only
officers, directors and employees of the Company who are employed by the Company
or by any subsidiary thereof are eligible to receive Incentive Options.
All Plan Options are nonassignable and nontransferable, except by will or
by the laws of descent and distribution, and during the lifetime of the
optionee, may be exercised only by such optionee. If an optionee's employment is
terminated for any reason, other than his death or disability or termination for
cause, or if an optionee is not an employee of the Company but is a member of
the Company's Board of Directors and his service as a director is terminated for
any reason, other than death or disability, the Plan Option granted to him shall
lapse to the extent unexercised on the earlier of the expiration date or 30 days
following the date of termination. If the optionee dies during the term of his
employment, the Plan Option granted to him shall lapse to the extent unexercised
on the earlier of the expiration date of the Plan Option or the date one year
following the date of the optionee's death. If the optionee is permanently and
totally disabled within the meaning of Section 22(c)(3) of the Internal Revenue
Code of 1986, the Plan Option granted to him lapses to the extent unexercised on
the earlier of the expiration date of the option or one year following the date
of such disability.
The Board of Directors or Committee may amend, suspend or terminate the
Plan at any time, except that no amendment shall be made which (i) increases the
total number of shares subject to the Plan or changes the minimum purchase price
therefor (except in either case in the event of adjustments due to changes in
the Company's capitalization), (ii) affects outstanding Plan Options or any
exercise right thereunder, (iii) extends the term of any Plan Option beyond ten
years, or (iv) extends the termination date of the Plan. Unless the Plan shall
theretofore have been suspended or terminated by the Board of Directors, the
Plan shall terminate on May 15, 2005. Any such termination of the Plan shall not
affect the validity of any Plan Options previously granted thereunder.
As of January 21, 1997, 3,746,500 options has been issued under the 1995
Amended Stock Option Plan.
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS
UNDER
PERFORMANCE NON-STOCK PRICE-BASED PLANS
OR OTHER -----------------------------
NUMBER OF SHARES, PERIOD UNTIL TARGET
UNITS OR OTHER MATURATION THRESHOLD ($ OR MAXIMUM
NAME RIGHTS(#) OR PAYOUT ($ OR #) #) ($ OR #)
- ---- ----------------- -------------- --------- ------ --------
<S> <C> <C> <C> <C> <C>
Gerald Smith............................ -0- -0- -0- -0- -0-
Robert H. Zeiger........................ -0- -0- -0- -0- -0-
Dennis W. Healey........................ -0- -0- -0- -0- -0-
Charles F. Fistel....................... -0- -0- -0- -0- -0-
</TABLE>
ADDITIONAL STOCK OPTIONS
On October 6, 1995, the Board of Directors awarded options to purchase
2,935,000 shares of Common Stock to the officers, directors and key employees of
the Company exercisable of $0.50 per share at any time on or prior to October 6,
2000. The options were granted to the following individuals: Gerald Smith
(1,600,000), Robert H. Zeiger (100,000), Dennis W. Healey (500,000), Charles F.
Fistel (110,000), Peter D. Fischbein (225,000), Sidney Dworkin (100,000), Jay W.
Haft (100,000), William B. Saeger (100,000) and to key employees (100,000). In
addition, between October 1995 and June 1996, the Company awarded options to
purchase up to 500,500 shares of Common Stock to other employees of the Company,
which options are exercisable at prices ranging from $0.50 to $5.90 per share
during the five-year term of the options.
In June 1995, the Company issued 33,000 Incentive Stock Options to
non-executive employees under the Plan. The options granted vest over different
periods not exceeding two years.
In May 1995, the Company issued 1,000,000 Common Stock purchase options to
Mr. Robert H. Zeiger, Chief Executive Officer, Chief Operating Officer and a
director, pursuant to an Employment Agreement.
11
<PAGE> 14
Under the terms of the Agreement, 500,000 options became exercisable in May 1996
and 500,000 options became exercisable in May 1997. The options carry a five
year term and are exercisable at $.96 per share.
In August 1994, the Company issued five-year options to purchase an
aggregate of 350,000 shares exercisable at $1.00 per share which were divided
equally among the seven directors of the Company (one of whom subsequently
resigned). In addition, between May 1994 and March 1995, the Company issued
five-year options to purchase an aggregate of 570,000 shares of Common Stock at
exercise prices ranging from $.62 to $1.00 per share to six key employees.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On December 8, 1995, the Company consummated an Agreement and Plan of
Reorganization with Sector Associates, Ltd. (the former name for Viragen
(Europe), Ltd.) pursuant to which VEL acquired 100% of the outstanding capital
stock of Viragen (Scotland) Ltd. and in exchange for which Viragen received
newly issued shares of convertible securities of VEL which represented
approximately 94% of the then issued and outstanding capital stock of VEL. Prior
thereto, on July 12, 1995, Viragen Technology, Inc., a wholly-owned subsidiary
of the Company, entered into a License Agreement with VSL pursuant to which VSL
obtained certain exclusive rights applicable to the EU countries and
non-exclusive rights throughout the world (except within the United States and
its territories) to engage in the research, development and manufacture of
certain proprietary products and technologies relating to the therapeutic
application of human leukocyte interferon. The term of the license ia for 15
years, which is automatically renewed for successive 15-year periods. At the
present time, the Company maintains a 72% capital stock interest in VEL, which
in turn owns all of the capital stock of VSL.
Messrs. Gerald Smith, Robert Zeiger and Dennis W. Healey, who are principal
executive officers with the Company, also serve as the principal executive
officers of VEL. Commencing in July 1996, following his resignation from
Medicore and subsidiaries, Mr. Healey who is serving as VEL's Executive Vice
President, Treasurer and Secretary, began receiving an annual salary of $85,000
per year. In November 1995, VSL issued options to purchase 100,000 shares of
each of its Common Stock to Messrs. Smith, Zeiger and Healey, which following
the consummation of the Sector reorganization agreement were converted into
options to purchase and aggregate of 300,000 shares of Common Stock of VEL
exercisable at $.001 per share. All of such options were exercised at January,
1996.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE ELECTION
OF THE NOMINEES FOR DIRECTORS SET FORTH ABOVE.
PROPOSAL RELATING TO THE 1997 STOCK OPTION PLAN
On January 27, 1997, the Board of Directors adopted, subject to approval by
the stockholders, a stock option plan called the "1997 Stock Option Plan." The
following summary describes features of the Plan. This summary is qualified in
its entirety by reference to the specific provisions of the Plan, the full text
of which is set forth as Appendix A.
The Board of Directors have determined that the Plan will work to increase
the employees', consultants' and non-employee directors' proprietary interest in
the Company and to align more closely their interests with the interests of the
Company's stockholders. The Plan will also maintain the Company's ability to
attract and retain the services of experienced and highly qualified employees
and non-employee directors. The Board of Directors believes that the Plan is in
the Company's best interests and therefore recommends adoption of the Plan on
essentially the terms and conditions as are set forth below.
Under the Plan, the Company has reserved an aggregate of 3,000,000 shares
of Common Stock for issuance pursuant to options granted under the Plan ("Plan
Options"). The Compensation Committee of the Board of Directors (the
"Committee") of the Company administers the Plan including, without limitation,
the selection of the persons who will be granted Plan Options under the Plan,
the type of Plan Options to be granted, the number of shares subject to each
Plan Option and the Plan Option price.
12
<PAGE> 15
Plan Options granted under the Plan may either be options qualifying as
incentive stock options ("Incentive Options") under Section 422 of the Internal
Revenue Code of 1986, as amended, or options that do not so qualify
("Non-Qualified Options"). In addition, the Plan also allows for the inclusion
of a reload option provision ("Reload Option"), which permits an eligible person
to pay the exercise price of the Plan Option with shares of Common Stock owned
by the eligible person and receive a new Plan Option to purchase shares of
Common Stock equal in number to the tendered shares. Any Incentive Option
granted under the Plan must provide for an exercise price of not less than 100%
of the fair market value of the underlying shares on the date of such grant, but
the exercise price of any Incentive Option granted to an eligible employee
owning more than 10% of the Company's Common Stock must be at least 110% of such
fair market value as determined on the date of the grant. The term of each Plan
Option and the manner in which it may be exercised is determined by the Board of
the Directors or the Committee, provided that no Plan Option may be exercisable
more than 10 years after the date of its grant and, in the case of an Incentive
Option granted to an eligible employee owning more than 10% of the Company's
Common Stock, no more than five years after the date of the grant.
The exercise price of Non-Qualified Options shall be determined by the
Board of Directors or the Committee.
The per share purchase price of shares subject to Plan Options granted
under the Plan may be adjusted in the event of certain changes in the Company's
capitalization, but any such adjustment shall not change the total purchase
price payable upon the exercise in full of Plan Options granted under the Plan.
Officers, directors, key employees and consultants of the Company and its
subsidiaries are eligible to receive Non-Qualified Options under the Plan. Only
officers, directors and employees of the Company who are employed by the Company
or by any subsidiary thereof are eligible to receive Incentive Options.
All Plan Options are nonassignable and nontransferable, except by will or
by the laws of descent and distribution, and during the lifetime of the
optionee, may be exercised only by such optionee. If an optionee's employment is
terminated for any reason, other than his death or disability or termination for
cause, or if an optionee is not an employee of the Company but is a member of
the Company's Board of Directors and his service as a director is terminated for
any reason, other than death or disability, the Plan Option granted to him shall
lapse to the extent unexercised on the earlier of the expiration date or 30 days
following the date of termination. If the optionee dies during the term of his
employment, the Plan Option granted to him shall lapse to the extent unexercised
on the earlier of the expiration date of the Plan Option or the date one year
following the date of the optionee's death. If the optionee is permanently and
totally disabled within the meaning of Section 22(c)(3) of the Internal Revenue
Code of 1986, the Plan Option granted to him lapses to the extent unexercised on
the earlier of the expiration date of the option or one year following the date
of such disability.
The Board of Directors or Committee may amend, suspend or terminate the
Plan at any time, except that no amendment shall be made which (i) increases the
total number of shares subject to the Plan or changes the minimum purchase price
therefor (except in either case in the event of adjustments due to changes in
the Company's capitalization), (ii) affects outstanding Plan Options or any
exercise right thereunder, (iii) extends the term of any Plan Option beyond ten
years, or (iv) extends the termination date of the Plan. Unless the Plan shall
theretofore have been suspended or terminated by the Board of Directors, the
Plan shall terminate on January 26, 2007. Any such termination of the Plan shall
not affect the validity of any Plan Options previously granted thereunder.
The following discussion is based on federal income tax laws and
regulations in effect on March 31, 1995. It does not purport to be a complete
description of the federal income tax consequences of the Plan, nor does it
describe the consequences of state, local or foreign tax laws which may be
applicable. Accordingly, any person receiving a grant under the Plan should
consult with his own tax adviser.
An employee granted an Incentive Stock Option does not recognize taxable
income either at the date of grant or at the date of its timely exercise.
However, the excess of the fair market value of Common Stock received upon
exercise of the Incentive Stock Option over the Option exercise price is an item
of tax
13
<PAGE> 16
preference under Section 57(a)(3) of the Code and may be subject to the
alternative minimum tax imposed by Section 55 of the Code. Upon disposition of
stock acquired on exercise of an Incentive Stock Option, long-term capital gain
or loss is recognized in an amount equal to the difference between the sales
price and the Incentive Stock Option exercise price, provided that the option
holder has not disposed of the stock within two years from the date of grant and
within one year from the date of exercise. If the Incentive Stock Option holder
disposes of the acquired stock (including the transfer of acquired stock in
payment of the exercise price of an Incentive Stock Option) without complying
with both of these holding period requirements ("Disqualifying Disposition"),
the option holder will recognize ordinary income at the time of such
Disqualifying Disposition to the extent of the difference between the exercise
price and the lesser of the fair market value of the stock on the date the
Incentive Stock Option is exercised (the value six months after the date of
exercise may govern in the case of an employee whose sale of stock at a profit
could subject him to suit under Section 16(b) of the Securities Exchange Act of
1934) or the amount realized on such Disqualifying Disposition. Any remaining
gain or loss is treated as a short-term or long-term capital gain or loss,
depending on how long the shares are held. In the event of a Disqualifying
Disposition, the Incentive Stock Option tax preference described above may not
apply (although, where the Disqualifying Disposition occurs subsequent to the
year the Incentive Stock Option is exercised, it may be necessary for the
employee to amend his return to eliminate the tax preference item previously
reported). The Company and its subsidiaries are not entitled to a tax deduction
upon either exercise of an Incentive Stock Option or disposition of stock
acquired pursuant to such an exercise, except to the extent that the Option
holder recognized ordinary income in a Disqualifying Disposition.
In respect to the holder of Non-Qualified Options, the option holder does
not recognize taxable income on the date of the grant of the Non-Qualified
Option, but recognizes ordinary income generally at the date of exercise in the
amount of the difference between the option exercise price and the fair market
value of the Common Stock on the date of exercise. However, if the holder of
Non-Qualified Options is subject to the restrictions on resale of Common Stock
under Section 16 of the Securities Exchange Act of 1944, such person generally
recognizes ordinary income at the end of the six-month period following the date
of exercise in the amount of the difference between the option exercise price
and the fair market value of the Common Stock at the end of the six-month
period. Nevertheless, such holder may elect within 30 days after the date of
exercise to recognize ordinary income as of the date of exercise. The amount of
ordinary income recognized by the option holder is deductible by the Company in
the year that income is recognized.
If the Plan is approved by the stockholders, the Company will have granted
250,000 Plan Options.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
ADOPTION OF THE 1997 STOCK OPTION PLAN
PROPOSAL TO AMEND THE COMPANY'S ARTICLES OF INCORPORATION
TO INCREASE THE AUTHORIZED CAPITAL STOCK OF THE COMPANY
The Board of Directors has voted to increase the authorized shares of
Common Stock, par value $.01 per share from 50,000,000 to 75,000,000, subject to
approval by the Shareholders of the Company. The Board of Directors determined
that such Amendment is advisable and directed that the proposed Amendment be
considered at the Annual Meeting of Stockholders to be held on February 28,
1997. The full text of the proposed Amendment to the Certificate of
Incorporation is set forth in Appendix B to this Proxy Statement. The Amendment
will not effect the number of shares of Preferred Stock authorized.
The Board of Directors believe that this increase is desirable for a number
of reasons, including but not limited to facilitating the ability of the Company
to effect growth through future acquisition and future financings, stock splits
or dividends for other corporate purposes.
At January 31, 1997, the Company had outstanding convertible preferred
stock and options and warrants to purchase approximately 13,489,353 shares of
Common Stock, and intends to issue additional securities in the future as part
of its financing program.
14
<PAGE> 17
Simultaneously with the filing of the Certificate of Amendment, the Company
will consummate a private placement of an additional 15,000 shares of
convertible preferred stock (stated value $1,000 per share) and warrants to
purchase 375,000 shares of Common Stock. The preferred stock (based on its
stated value) becomes convertible into Common Stock at 82% of the average
closing bid price of the Common Stock over the five trading days prior to
conversion, subject to a maximum conversion price of $7.00 per share and, if the
conversion price drops below $2.00 per share under certain circumstances, the
Company's option to cash-out the preferred sock at 110% of the original purchase
price. The warrants are exercisable until June 30, 1998 at a price of $6.00 per
share, subject to adjustment. If stockholder approval of this Amendment is not
obtained by March 7, 1997, the Company will be obligated to pay a $300,000
commitment fee to the investor.
The Company has provided registration rights with respect to substantially
all of these shares and likely will afford registration rights with regard to
subsequent issuances.
The affirmative vote of the holders of a majority of the outstanding shares
of the Company Common Stock is required for approval of the amendment to the
Articles of Incorporation. If the Amendment is approved by the Shareholders, the
Amendment will become effective upon the filing with the Secretary of State of
the State of Delaware.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE PROPOSED
AMENDMENT TO THE CERTIFICATE OF INCORPORATION.
APPOINTMENT OF THE COMPANY'S AUDITORS
The appointment of Ernst & Young LLP as independent auditors of the Company
for the fiscal year ended June 30, 1997, will be ratified.
Although the Board of Directors of the Company is submitting the
appointment of Ernst & Young LLP for stockholder approval, it reserves the right
to change the selection of Ernst & Young LLP as auditors, at any time during the
fiscal year, if it deems such change to be in the best interest of the Company,
even after stockholder approval. Representatives of Ernst & Young LLP are
expected to be present at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
RATIFICATION OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS FOR THE COMPANY FOR
THE FISCAL YEAR ENDING JUNE 30, 1997.
INTEREST OF CERTAIN PERSONS IN
OPPOSITION TO MATTERS TO BE ACTED UPON
The Company is not aware of any substantial interest, direct or indirect,
by securities holdings or otherwise of any officer, director, or associate of
the foregoing persons in any matter to be acted on, as described herein, other
than elections to offices.
OTHER MATTERS
Management is not aware of any other business which may come before the
meeting. However, if additional matters properly come before the meeting,
proxies will be voted at the discretion of the proxy holders.
STOCKHOLDERS' PROPOSALS TO BE PRESENTED AT THE
COMPANY'S NEXT ANNUAL MEETING OF STOCKHOLDERS
Stockholder proposals intended to be presented at the 1997 Annual Meeting
of Stockholders of the Company must be received by the Company, at its principal
executive offices not later than 95 days from the proposed date of the 1997
meeting, for inclusion in the Proxy Statement and Proxy relating to the 1997
15
<PAGE> 18
Annual Meeting of Stockholders. Any such proposal will be subject to the
Company's Bylaws and 17 C.F.R sec. 240.142-8 of the Rules and Regulations under
the Securities Act of 1933, as amended.
AVAILABILITY OF FORM 10-K/A1 ANNUAL REPORT
A copy of the Company's Annual Report on Form 10-K/A1 for the year ended
June 30, 1996, has been included in this Proxy Statement, but is exclusive of
certain exhibits filed therewith, including related exhibits as filed with the
Securities and Exchange Commission. These exhibits are available without charge
to stockholders upon request to Gerald Smith, President, 2343 West 76th Street,
Hialeah, Florida 33016.
BY ORDER OF THE BOARD OF DIRECTORS
Dennis W. Healey, Secretary
Hialeah, Florida
February 6, 1997
16
<PAGE> 19
Appendix A
THIS PROXY IS SOLICITED BY AND ON BEHALF OF THE BOARD OF DIRECTORS
VIRAGEN, INC.
PROXY -- ANNUAL MEETING OF STOCKHOLDERS -- FEBRUARY 28, 1997
The undersigned, revoking all previous proxies, hereby appoint(s) Gerald Smith
as Proxy, with full power of substitution, to represent and to vote all Common
Stock of Viragen, Inc. owned by the undersigned at the Annual Meeting of
Stockholders to be held in Davie, Florida on Friday, February 28, 1997,
including any original or subsequent adjournment thereof, with respect to the
proposals set forth in the Notice of Annual Meeting and Proxy Statement. No
business other than matters described below is expected to come before the
meeting, but should any other matter requiring a vote of stockholders arise, the
person named herein will vote thereon in accordance with his best judgement. All
powers may be exercised by said Proxy. Receipt of the Notice of Annual Meeting
and Proxy Statement is hereby acknowledged.
The shares represented by this proxy will be voted as directed. IF NO SPECIFIC
DIRECTION IS GIVEN, THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED FOR THE
NOMINEE NAMED IN PROPOSAL 1 AND FOR PROPOSAL 2, PROPOSAL 3 AND PROPOSAL 4.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE FOLLOWING.
Place an "X" as indicated in box [x]
1. ELECTION OF DIRECTORS. Nominees:
<TABLE>
<S> <C> <C> <C>
Gerald Smith Robert H. Zeiger Dennis W. Healey Charles F. Fistel
Peter D. Fischbein Sidney Dworkin Jay M. Haft William B. Saeger
Fred D. Hirt
</TABLE>
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE PLEASE DRAW A LINE THROUGH THAT NOMINEE'S NAME.)
[ ] FOR ALL NOMINEES listed above
[ ] WITHHOLD AUTHORITY to vote for all nominees listed
2. Proposal to adopt the 1997 Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To increase the number of authorized shares from 50 million to
76 million.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To ratify the appointment of independent auditors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The undersigned stockholder hereby acknowledges receipt of the Notice of Annual
Meeting and Proxy Statement and hereby revokes any proxy or proxies heretofore
given. This proxy may be revoked at any time prior to the Annual Meeting. If you
received more than one proxy card, please date, sign and return all cards in the
accompanying envelope.
Please sign exactly as name appears to the left. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
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Signature
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Signature if held jointly
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(Please Print Name)
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Number of Shares Subject to Proxy
Dated: , 1997
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PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
