<PAGE> 1
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 a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy 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 Section 240.14a-11(c) or Section 240.14a-2.
</TABLE>
ORTEC INTERNATIONAL, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than 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)(4) and 0-12.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
ORTEC INTERNATIONAL, INC.
- - 3960 BROADWAY
NEW YORK, NY 10032
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MONDAY, SEPTEMBER 8, 1997
The 1997 Annual Meeting of Stockholders of Ortec International, Inc.
(the "Company") will be held at the Audubon Biomedical Science and Technology
Park, 3960 Broadway, New York, New York, on Monday, September 8, 1997, at 4:00
p.m. local time, to consider and act upon the following matters:
1. To elect five directors to serve for the ensuing year.
2. To ratify the selection by the Board of Directors of
Grant Thornton LLP as the Company's independent
auditors for the current fiscal year.
3. To transact such other business as may properly come
before the meeting or any adjournment thereof.
Stockholders of record as of the close of business on July 28, 1997
will be entitled to notice of and to vote at the meeting or any adjournment
thereof. The stock transfer books of the Company will remain open.
By Order of the Board of Directors
Ron Lipstein
Secretary
New York, New York
August 4, 1997
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE
AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED
ENVELOPE IN ORDER TO ASSURE REPRESENTATION OF YOUR SHARES. YOU MAY
REVOKE THE PROXY AT ANY TIME BEFORE THE AUTHORITY GRANTED THEREIN IS
EXERCISED.
<PAGE> 3
ORTEC INTERNATIONAL, INC.
3960 BROADWAY
NEW YORK, NY 10032
PROXY STATEMENT FOR THE 1997 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MONDAY, SEPTEMBER 8, 1997
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Ortec International, Inc. (the
"Company") for use at the 1997 Annual Meeting of Stockholders to be held on
Monday, September 8, 1997, and at any adjournment of that meeting (the "Annual
Meeting"). All proxies will be voted in accordance with a stockholder's
instructions and, if no choice is specified, the proxies will be voted in favor
of the matters set forth in the accompanying Notice of Meeting. Any proxy may be
revoked by a stockholder at any time before it is exercised by delivery of
written revocation or a subsequently dated proxy to the Secretary of the Company
or by voting in person at the Annual Meeting.
The Company's Annual Report for the fiscal year ended December 31, 1996
was mailed to all stockholders of the Company on or about June 25, 1997, except
approximately 80 stockholders of the Company, to whom such Annual Report is
being mailed together with this Proxy Statement.
VOTING SECURITIES AND VOTES REQUIRED
At the close of business on July 28, 1997, the record date for the
determination of stockholders entitled to vote at the Annual Meeting, there were
outstanding and entitled to vote an aggregate of 4,644,510 shares of Common
Stock of the Company. Stockholders are entitled to one vote per share.
The affirmative vote of the holders of a plurality of the shares of
Common Stock present or represented at the Annual Meeting is required for the
election of directors. The affirmative vote of the holders of a majority of the
shares of Common Stock present or represented at the Annual Meeting is required
for the ratification of the selection by the Board of Directors of Grant
Thornton LLP as the Company's independent auditors for the current fiscal year.
Shares of Common Stock represented in person or by proxy (including shares which
abstain or do not vote for any reason with respect to one or more of the matters
presented for stockholder approval) will be counted for purposes of determining
whether a quorum is present at the Annual Meeting. Abstentions will be treated
as shares that are present and entitled to vote for purposes of determining the
number of shares present and entitled to vote with respect to any particular
matter, but will not be counted as a vote in favor of such matter. Accordingly,
an abstention from voting on a matter has
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<PAGE> 4
the same legal effect as a vote against the matter. If a broker or nominee
holding stock in "street name" indicates on the proxy that it does not have
discretionary authority to vote as to a particular matter ("broker non-votes"),
those shares will not be considered as present and entitled to vote with respect
to such matter. Accordingly, a broker non-vote on a matter has no effect on the
voting on such matter.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of July 28, 1997,
with respect to the beneficial ownership of the Company's Common Stock by (i)
each current director and nominee for director of the Company, (ii) each
executive officer of the Company named in the Summary Compensation Table set
forth under the caption "Compensation of Executive Officers" below, (iii) all
directors and executive officers of the Company as a group and (iv) each person
known by the Company to own beneficially more than five per cent (5%) of the
outstanding shares of Common Stock of the Company.
<TABLE>
<CAPTION>
Amount and
Nature of Percentage of
Name and Address Beneficial Outstanding
of Beneficial Owner Ownership** Shares Owned**
- ------------------- ----------- --------------
<S> <C> <C>
Steven Katz* 298,507(1) 6.2%
Mark Eisenberg* 598,000 12.9
Ron Lipstein* 323,606(2) 6.9
Alain Klapholz* 308,607(3) 6.6
Joseph Stechler 684,166(4) 13.9
15 Engle Street
Englewood, NJ 07631
Home Insurance Company 288,818(5) 6.1
59 Maiden Lane
New York, NY 10038
Strong Capital
Management, Inc. 305,000(6) 6.6
100 Heritage Reserve
P.O. Box 2936
Milwaukee, WI 53201
Dawson-Samberg Capital
Management, Inc. 342,679(7) 7.4
354 Pequot Avenue
</TABLE>
3
<PAGE> 5
<TABLE>
<S> <C> <C>
Southport, CT 06490
The Travelers Indemnity
Company 307,692(8) 6.6
One Tower Square
Hartford, CT 06183
Judah Wernick 252,500(9) 5.2
Patterson Travis, Inc.
One Battery Park Plaza
New York, NY 10004
All officers and
directors as a
group (five persons) 2,212,886(1)(2)(3)(4) 56.6
</TABLE>
- ------------
* The address of these persons is at the Company's offices, 3960
Broadway, New York, NY 10032.
** The number of Shares of Common Stock beneficially owned by each person
or entity is determined under rules promulgated by the Securities and
Exchange Commission (the "Commission"). Under such rules, beneficial
ownership includes any shares as to which the person or entity has sole
or shared voting power or investment power. Included among the shares
owned by such person or entity are any shares which such person or
entity has the right to acquire within 60 days after July 28, 1997.
Unless otherwise indicated, each person or entity referred to above has
sole voting and investment power with respect to the shares listed.
The inclusion herein of any shares deemed beneficially owned does not
constitute an admission of beneficial ownership of such shares.
(1) Does not include 59,000 shares owned by Dr. Katz's children,
their spouses and his grandchildren. Dr. Katz disclaims any
beneficial interest in such 59,000 shares. Includes 50,000
shares issuable to Dr. Katz upon his exercise of outstanding
options.
(2) Includes 30,000 shares owned by Mr. Lipstein's minor
children. Mr. Lipstein disclaims any beneficial interest in
such 30,000 shares. Also includes 25,000 shares issuable to
Mr. Lipstein upon his exercise of outstanding options.
(3) Includes 36,000 shares owned by Mr. Klapholz' minor
children. Mr. Klapholz disclaims any beneficial interest in
such 36,000 shares. Also includes 10,000 shares issuable to
Mr. Klapholz upon his exercise of outstanding options.
(4) Includes shares owned by Stechler & Company. Also includes
269,536 shares to be issued by the Company to Mr. Stechler
4
<PAGE> 6
or Stechler & Company upon their exercise of outstanding warrants,
79,206 of which are exercisable at $1.00 per share and expire January
19, 2000, 86,930 of which are exercisable at $9.425 per share and
expire on December 31, 1997, 36,450 of which underly the Company's
publicly held Class A Warrants, exercisable at $10.00 per share and
expire November 3, 1997 (the "Class A Warrants"), 36,450 of which
underly the Company's publicly held Class B Warrants (the "Class B
Warrants"), exercisable at $15.00 per share and expire January 19,
1999, and 30,500 of which are exercisable at $7.87 per share and expire
on October 17, 2001.
(5) Includes 127,707 shares to be issued by the Company to Home Insurance
Company upon Home Insurance Company's exercise of an outstanding
warrant, exercisable at $1.00 per share and
expiring January 19, 2000.
(6) Shares held by four investment funds. The Company believes
that Strong Capital Management, Inc. has sole or shared
investment and/or voting power for these shares.
(7) Shares held by two investment funds. The Company believes
that Dawson-Samberg Capital Management, Inc. has sole or
shared investment and/or voting power for these shares.
Includes 31,153 shares issuable upon exercise of outstanding
warrants which are not included among the shares registered
for sale.
(8) Does not include 53 shares of Common Stock held in the trading account
of a stock brokerage house which is an affiliate of Travelers Insurance
Company.
(9) Shares beneficially owned include shares issuable upon
exercise of the following options and warrants at the
following prices: 120,000 shares at $8.25 per share,
expiring December 15, 2005, 120,000 shares at $24.75 per
share, expiring January 19, 1999 and 12,500 shares at $6.00
per share, expiring June 20, 1999. Does not include
approximately 5,000 shares of Common Stock held in the
trading account of Patterson Travis, Inc., with whom Mr.
Wernick is affiliated. Mr. Wernick disclaims any beneficial
interest in such shares.
ELECTION OF DIRECTORS
The persons named in the enclosed proxy will vote to elect as directors
the five nominees named below, unless authority to vote for the election of any
or all of the nominees is withheld by marking the proxy to that effect. All of
the nominees have
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<PAGE> 7
indicated their willingness to serve, if elected, but if any nominee should be
unable to serve, the proxies may be voted for a substitute nominee designated by
management. Each director will be elected to hold office until the next annual
meeting of stockholders or until his or her successor is elected and qualified.
There are no family relationships between or among any officers or directors of
the Company.
NOMINEES
Set forth below for each nominee as a director of the Company is his
name and age, position with the Company, principal occupation and business
experience during the past five years and the date of the commencement of each
director's term as a director.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Dr. Steven Katz 52 President, Chief Executive Officer and
Chairman of the Board of Directors
Dr. Mark Eisenberg 59 Senior Vice President, Research and
Development and Director
Ron Lipstein 41 Secretary, Treasurer, Chief Financial
Officer and Director
Alain M. Klapholz 40 Vice President, Operations and Director
Joseph Stechler 45 Director
</TABLE>
Dr. Steven Katz, a founder of the Company, has been a director of
the Company since its inception in 1991 and was elected chairman of
its Board of Directors in September, 1994. He has been employed part
time by the Company and a predecessor since 1991. Dr. Katz has also
been a professor of Economics and Finance at Bernard Baruch College in
New York City since 1972. Dr. Katz devotes approximately 75% of his
time to the Company. He has a Ph.D. in Finance and Statistics as well
as an MBA and MS in Operations Research, both from New York
University.
Dr. Mark Eisenberg, a founder of the Company, has been a director
and senior vice president of the Company since 1991. Dr. Eisenberg
has also been a consultant to the Company since June 1991. See "Eisenberg
Consulting Agreement". He has been a physician in private practice in
Sydney, Australia, since 1967. He is a member and co-founder of the
Dystrophic Epidermolysis Bullosa clinic at the Prince of Wales Hospital
for children in Sydney, Australia. He has done
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<PAGE> 8
extensive research on the disease Epidermolysis Bullosa ("EB") and has
published widely on this subject in medical journals.
Ron Lipstein, a founder of the Company, has been the secretary and
treasurer and a director of the Company since 1991. He has been employed part
time by the Company and a predecessor since 1991. Mr. Lipstein has been
president and chief executive officer of Dollspart Supply Co., Inc., a mail
order supply company, since 1987. He devotes approximately 75% of his time to
the Company. Mr. Lipstein, who is a certified public accountant, was employed as
an accountant by Touche Ross & Company, a national public accounting firm, from
1979 to 1987.
Alain M. Klapholz, a founder of the Company, has been a vice
president and a director of the Company since 1991. He has been
employed full time by the Company since September, 1991. From 1989 to
1990, Mr. Klapholz was the president of Klapholz & Associates, a
consulting firm that serviced and assisted medical device and
biotechnology firms in developing business plans and raising capital.
In 1990, and until August 1991, he was chief financial officer of
Applied DNA Systems, a publicly held biotechnology company. Mr.
Klapholz has an M.B.A. from New York University. Until December 14,
1998, Patterson Travis, Inc. ("Patterson Travis"), the underwriter of
the initial public offering of the Company's securities, has the right
to designate a director who will replace Mr. Klapholz. Patterson
Travis has not yet made such designation.
Joseph Stechler has been a director of the Company since 1992. He has
been president and CEO of Stechler & Company, an investment management firm,
since 1986, and from 1990 to January 1997, he was the general partner of Old
Ironsides Capital, L.P., an investment fund. Prior to 1986, he was a securities
analyst with several investment firms. Mr. Stechler has a J.D. degree from
Columbia University and an LLM degree in corporate law from New York University.
If the number of directors is increased to more than five, any person
selected to fill any such additionally created position in the period ending
December 14, 1997 is subject to the prior written approval of Patterson Travis
to serve in such position, which approval may not be unreasonably withheld. The
Company's management has no present intention to increase the number of
directors to more than five.
SIGNIFICANT EMPLOYEES
Dr. Melvin Silberklang supervises the Company's laboratory
facility at the Audubon Biomedical Service and Technology Park.
From 1993 to 1995, Dr. Silberklang was employed by Enzon, Inc. of
Piscataway, New Jersey, as Senior Director of Process Research
and Development, supervising a multi-disciplinary staff of 18.
From 1981 to 1993, Dr. Silberklang was employed by Merck Research
Laboratories of Rahway, New Jersey, where, from 1988 to 1993 he
was Associate Director of Cellular and Molecular Biology. In
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<PAGE> 9
that capacity, Dr. Silberklang directed research and development for five major
protein products and managed transfers of research results to large scale
production. From 1985 to 1988, Dr. Silberklang was a research fellow in Merck's
Department of Cellular and Molecular Biology where he developed and executed a
capital expenditure plan to fully equip both molecular biology and production
facility laboratories.
Dr. Suzanne Schwartz has been employed full-time by the Company since
July 1, 1996, as its medical director. She is responsible for the Company's
relationships with hospitals at which operations using the Company's Composite
Cultured Skin as part of the human clinical tests have been and are to be
performed, with respect to such operations and other matters and securing
additional hospitals to perform such operations. She also participates in
directing the Company's research and development for possible use of its
technology for other medical applications. Dr. Schwartz received her M.D. degree
from Albert Einstein College of Medicine in New York City in 1988 and trained as
a resident in general surgery at Montefiore Hospital and Medical Center in New
York City from July 1988 to June 1991. From July 1991 to June 1996, she held
various positions for advanced study at the Cornell University Medical College,
including a fellowship in its Burn Center, advanced study in the Wound Healing
Laboratory in the Department of Surgery, and in the Graduate Program in Cell
Biology and Genetics.
CONSULTANTS
The Company retains Dr. Richard L. Kronenthal, the Chairman of its
Scientific Advisory Board, as a consultant at a minimum annual fee of $36,000.
As part of his consulting services, Dr. Kronenthal has taken the major
responsibility in directing the Company's research and development efforts.
Prior to 1989, Dr. Kronenthal was employed by Ethicon, Inc. ("Ethicon"), a
division of Johnson and Johnson, for more than 30 years, the last four years as
Ethicon's director of research and development. Prior to his retirement in 1989,
Dr. Kronenthal was responsible for Ethicon's development of a variety of
successful surgical products. During his more than thirty years with Ethicon,
Dr. Kronenthal held increasingly responsible positions involving the worldwide
commercialization of products derived from collagen, as well as synthetic
absorbable and other materials. Since 1989, Dr. Kronenthal has been president of
Kronenthal Associates, Inc., which provides technical and business consulting
services for investors and companies in the health care field.
The Company also retains Dr. Lisa Staiano-Coico, Associate Dean of
Cornell University Medical School, as a consultant, to assist and advise in the
further development and production of the Company's Composite Cultured Skin. In
addition to the compensation of $4,166 per month paid by the Company to Dr.
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<PAGE> 10
Staiano-Coico, the Company has granted to Dr. Staiano-Coico warrants to purchase
up to 6,700 shares of the Company's Common Stock, at an exercise price of $12
per share. The warrants granted Dr. Staiano-Coico expire May 31, 1998.
EISENBERG CONSULTING AGREEMENT
Pursuant to a consulting agreement (the "Consulting Agreement") dated
June 7, 1991, as amended on September 1, 1992, between the Company and Dr.
Eisenberg, the Company has retained the services of Dr. Eisenberg as a
consultant until August 31, 2005.
Under the Consulting Agreement, Dr. Eisenberg devotes 20 hours per week
to the Company. The Company pays Dr. Eisenberg an annual fee at the rate of
$73,000 and $58 per hour for each hour in excess of twenty hours per week spent
by Dr. Eisenberg on the Company's affairs. Dr. Eisenberg's fee is subject to
annual increases based on certain formulas.
In addition, Dr. Eisenberg will receive a bonus in the event that the
Company files for the registration of any patent based on a significant advance
that has been developed under his supervision or direction and which the
Company's Board of Directors determines to have significant commercial
application. The amount of any such bonus shall be determined by the Board of
Directors of the Company, but shall not be less than $30,000 per patent
registration, provided that bonuses may not aggregate more than $60,000 during
any twelve-month period.
Dr. Eisenberg has agreed not to compete with the Company until one year
after termination of the Consulting Agreement.
SCIENTIFIC ADVISORY BOARD
The Company has secured medical doctors expert in dermatology and
surgery and an expert in the field of development of biomedical and other health
care products, to serve on the Company's Scientific Advisory Board to advise the
Company in the further development of its technology and to provide guidance for
the Company's research strategy. The following persons are serving on the
Company's Scientific Advisory Board:
Dr. Richard L. Kronenthal - Chairman of the Company's
Scientific Advisory Board. See "Consultants".
Dr. Eugene Bauer - Chairman of Dermatology at, and Dean
of the Stanford University School of Medicine.
Dr. Joseph McGuire - Professor of Dermatology and
Pediatrics at Stanford University School of Medicine.
9
<PAGE> 11
Dr. Andrew Salzberg - of the Westchester Medical Center
and Co-Director of its burn unit. Dr. Salzberg is a
plastic surgeon with extensive experience in skin
grafts.
The Company compensates the members of its Scientific Advisory Board
other than Dr. Kronenthal for their time and expenses only, with minimum
payments of $5,000 per year to each member. The Company has granted to the
following members of its Scientific Advisory Board warrants to purchase shares
of the Company's Common Stock at exercise prices ranging from $9.425 to $10 per
share: (i) to Dr. Salzberg, warrants expiring in August 1999 to purchase 2,660
shares, (ii) to Dr. Bauer, warrants expiring in September 1999 to purchase 2,000
shares, (iii) to Dr. McGuire, warrants expiring in April 2000 to purchase 2,000
shares and (iv) to Dr. Kronenthal, warrants expiring in March 2000 to purchase
2,000 shares. The Company also has agreed to grant to an academic, charitable,
or research institution designated by a former Scientific Advisory Board member
warrants which expire in April 1998 to purchase 2,000 shares of Common Stock at
$9.425 per share. In addition, on April 1, 1996, the Company granted
non-incentive stock options to Dr. Salzberg to purchase 10,000 shares, and to
Dr. Kronenthal to purchase 7,500 shares, at an exercise price of $6.00 per
share. Such options expire on April 1, 2001 and were granted for consulting
services rendered by Drs. Salzberg and Kronenthal to the Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Placement Agents
In November 1996, the Company completed a private placement of its
securities (the "1996 Private Placement"). The offer and sale of the shares in
the 1996 Private Placement was made by the Company, acting through its officers
and directors, and certain placement agents, one of which was Joseph Stechler.
Mr. Stechler is a director of the Company. The Company paid each placement
agent, including Mr. Stechler, cash commissions of 7% of the purchase price for
each share sold in the 1996 Private Placement by such person and, in addition to
such cash commissions, granted five-year warrants to such placement agent to
purchase such number of shares of Common Stock equal to 10% of the number of
shares of Common Stock sold by such Placement Agent, exercisable at prices equal
to 120% of the prices paid for such shares (the "1996 Private Placement
Warrants"). As compensation for his services as a placement agent in connection
with the 1996 Private Placement, Mr. Stechler received approximately $140,000 as
cash compensation and 30,500 1996 Private Placement Warrants. None of the
Company's other directors received any compensation in connection with the 1996
Private Placement.
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<PAGE> 12
License and Consulting Agreements
Pursuant to a license agreement (the "License Agreement") dated June 7,
1991, by and between the Company and Dr. Eisenberg, as modified in August,
1995, Dr. Eisenberg has granted the Company an exclusive worldwide license to
use the technology used to produce the Company's Composite Cultured Skin,
subject to certain limitations. The agreement has a term of ten years, which
may be automatically renewed by the Company for two additional ten year periods.
Dr. Eisenberg has retained the exclusive right to use the technology in
Australia solely for nonprofit applications that are not competitive with the
Company's business. The Company has agreed to make its Composite Cultured Skin
available for treatment of EB patients in Australia on a cost basis.
Upon the expiration or earlier termination of the License Agreement,
Dr. Eisenberg will be entitled to the exclusive rights to the technology
licensed under the License Agreement. However, the Company will retain the
exclusive rights to all improvements to the technology developed during the
license period. If the License Agreement is terminated due to a breach by the
Company, Dr. Eisenberg will also be entitled to the rights to such
improvements.
Loan Repayments
In January 1996, from the net proceeds received by the Company from the
initial public offering of its securities, $319,500 was used to repay
non-interest bearing loans made to the Company from June through November 1,
1995 by Dr. Steven Katz ($196,500), by Dollspart Supply Co., Inc., which is
wholly owned by Mr. Ron Lipstein ($50,000), and ($73,000) by Mr. Judah Wernick,
who is affiliated with the underwriter of such initial public offering. Mr.
Wernick was paid interest at the rate of 12% per annum on his loan. The loans
from Dr. Katz and Dollspart Supply were non interest bearing.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES ACT OF 1934
To the best of the Company's knowledge, Joseph Stechler, a director of
the Company, untimely filed two reports on Form 4 during the fiscal year ended
December 31, 1996, reporting ten late transactions. To the best of the Company's
knowledge, all other Forms 3, 4 and 5 required to be filed in the fiscal year
ended December 31, 1996 were timely filed.
BOARD AND COMMITTEE MEETINGS
There were three meetings of the Board of Directors held during 1996.
The Company does not have standing audit, nominating or compensation committees
for its Board of Directors or committees performing similar functions. All such
functions are performed by the Company's Board of Directors.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the Company's executive compensation
paid during the three fiscal years ended December 31, 1996, 1995 and 1994 for
the Chief Executive Officer and the Company's most highly compensated executive
officers of the Company (other than the Chief Executive Officer) whose cash
compensation exceeded $100,000 (the "Named Officers").
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<PAGE> 13
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
----------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------- ------ -------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
OTHER RESTRICTED ALL
ANNUAL STOCK PLAN OTHER
NAME AND SALARY BONUS COMPENSATION AWARDS OPTIONS PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($) ($)
- ------------------ ---- --- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dr. Steven Katz 1996 $162,451(1) $8,100* 50,000
President, Chief 1995 74,000(2) 6,000* --
Executive Officer 1994 75,980 6,000* --
and Chairman
Ron Lipstein 1996 $135,861(1) $8,100* 25,000
Secretary, 1995 53,848(2) 6,000* --
Treasurer and CFO 1994 71,684(3) 6,000* --
Alain Klapholz 1996 $112,249(1) $3,500* 10,000
Vice President 1995 86,871(2) 6,000* --
and Director 1994 87,218(3) 8,500* --
</TABLE>
- -----------------
* In lieu of health insurance.
(1) Includes $37,986, $26,923 and $16,265, paid to Dr. Katz and Messrs.
Lipstein and Klapholz, respectively, in 1996 for compensation payable
to such persons in 1995, but deferred for lack of funds at the
Company's disposal at such time.
(2) Includes amounts for compensation payable to such persons in 1995, but
deferred to 1996 for lack of funds at the Company's disposal at such
time. See Note (1), above. Also includes $16,154 and $3,113, paid to
Messrs. Lipstein and Klapholz, respectively, in 1995 for compensation
payable to such persons in 1994, but deferred for lack of funds at the
Company's disposal at such time.
(3) Includes amounts for compensation payable to such persons in 1994, but
deferred to 1995 for lack of funds at the Company's disposal at such
time. See Note (2), above.
BOARD COMPENSATION
Although Mr. Klapholz is employed on a full-time basis by the Company,
and Dr. Katz, Dr. Eisenberg and Mr. Lipstein on a part-time basis (Dr. Katz and
Mr. Lipstein devoting not less then 75% of their time to the Company), in 1996
no compensation was paid by the Company to any director for services rendered by
him as a director or for committee participation or for special assignments as a
director.
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<PAGE> 14
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information regarding options
granted during the fiscal year ended December 31, 1996 by the Company to the
Named Officers:
<TABLE>
<CAPTION>
Individual Grants
-----------------
Percent of
Total Options
Granted to Exercise Expira-
Options Employees in or Base tion
Name Granted Fiscal Year Price Date
---- ------- ----------- ----- ----
<S> <C> <C> <C> <C>
Dr. Steven Katz 30,000 30.4% $8.50 11/21/2001
20,000 20.3% $7.00 4/1/2001
Ron Lipstein 10,000 10.1% $8.50 11/21/2001
15,000 15.2% $7.00 4/1/2001
Alain Klapholz 10,000 10.1% $8.50 11/21/2001
</TABLE>
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected the firm of Grant Thornton LLP
("Grant Thornton"), as the principal independent auditors of the Company for the
fiscal year ending December 31, 1997, subject to ratification by the
stockholders. Grant Thornton has served as the Company's independent auditors
since 1994. If the appointment of the firm of Grant Thornton is not approved or
if that firm shall decline to act or their employment is otherwise discontinued,
the Board of Directors will appoint other independent auditors. Representatives
of Grant Thornton are expected to be present at the Annual Meeting, will have
the opportunity to make a brief statement at the Annual Meeting, if they so
desire, and will be available to answer appropriate questions from Stockholders.
BOARD RECOMMENDATION
The Board of Directors believes that the foregoing two proposals are in
the best interests of the Company and its stockholders and therefore recommends
that the stockholders vote FOR such proposals.
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<PAGE> 15
OTHER MATTERS
Management does not know of any other matters which may come before the
Annual Meeting. However, if any other matters are properly presented to the
Annual Meeting, it is the intention of the persons named in the accompanying
proxy to vote, or otherwise act, in accordance with their judgment on such
matters.
All costs of solicitation of proxies will be borne by the Company. In
addition to solicitations by mail, the Company's directors, officers and regular
employees, without additional remuneration, may solicit proxies by telephone,
telegraph, facsimile, mail and personal interviews, and the Company reserves the
right to compensate outside agencies for the purpose of soliciting proxies.
Brokers, custodians and fiduciaries will be requested to forward proxy
soliciting material to the owners of shares held in their names and the Company
will reimburse them for out-of-pocket expenses incurred on behalf of the
Company.
Proposals of stockholders intended to be presented at the 1998 Annual
Meeting of Stockholders must be received by the Company at its principal office
in New York, New York not later than March 1, 1998 for inclusion in the proxy
statement for that meeting.
By Order of the Board of Directors,
---------------------------
RON LIPSTEIN, Secretary
August 4, 1997
THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE ANNUAL
MEETING. WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE,
DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE.
STOCKHOLDERS WHO ATTEND THE ANNUAL MEETING MAY VOTE THEIR SHARES
PERSONALLY, EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.
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<PAGE> 16
Proxy for Annual Meeting of Stockholders to be held September 8, 1997
ORTEC INTERNATIONAL, INC.
Know all men by these presents, that the undersigned hereby constitutes and
appoints Dr. Steven Katz and Ron Lipstein and each of them, the true and lawful
attorneys, agents and proxies of the undersigned, with full power of
substitution, to represent and vote with respect to all of the shares of the
common stock of Ortec International, Inc., standing in the name of the
undersigned at the close of business on July 28, 1997, at the Annual Meeting of
Stockholders of the Company to be held on September 8, 1997 at the Audubon
Biomedical Science and Technology Park, 3960 Broadway, New York, New York, and
at any and all adjournments thereof, with all the powers that the undersigned
would possess if personally present, and especially (but without limiting the
general authorization and power hereby given) to vote as follows.
This proxy is solicited by the Board of Directors of the Company.
(Continued and to be signed on the reverse side.)
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<PAGE> 17
/X/ Please mark your
votes as this example
1. Election of Directors
For Against
/ / / /
Nominees are:
Dr. Steven Katz, Ron Lipstein,
Alain Klapholz, Dr. Mark
Eisenberg and Joseph Stechler
2. Approval of appointment of Grant Thornton LLP
as the Company's auditors.
For Against Abstain
/ / / / / /
4. In their discretion upon such other measures as may properly come before the
meeting, hereby ratifying and confirming all that said proxy may lawfully do
or cause to be done by virtue hereof and hereby revoking all proxies
heretofore given by the undersigned to vote at said meeting or any
adjournment thereof.
For Against Abstain
/ / / / / /
(Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
__________________________________________
The shares represented by this proxy will be voted in the manner indicated, and
if no instructions to the contrary are indicated, will be voted FOR all
proposals listed above. Number of shares owned by undersigned ___________.
Signature(s): ___________________________________ Date: _________________
Signature(s): ___________________________________ Date: _________________
IMPORTANT: Please sign exactly as your name or names are printed here.
Executors, administrators, trustees and other persons signing in a
representative capacity should give full title.
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