DEF 14A
Definitive Proxy Statement
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. [_])
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Check the appropriate box:
[_] Preliminary Proxy Statement
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(2)
[x] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
(ALFACELL CORPORATION)
(Name of Registrant as Specified In Its Charter)
N/A
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1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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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):
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[_] 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.
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ALFACELL CORPORATION
225 Belleville Avenue
Bloomfield, New Jersey 07003
(973) 748-8082
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JANUARY 21, 1999
To our Stockholders:
You are hereby notified that the annual meeting of stockholders (the
"Annual Meeting") of Alfacell Corporation, a Delaware corporation ("Alfacell" or
the "Company") will be held at the Radisson Suite Hotel Meadowlands, 350 Route 3
West, Mill Creek Drive, Secaucus, New Jersey 07094 on Thursday, January 21, 1999
at 10:00 a.m. local time, for the following purposes:
1. To elect six directors (Proposal No. 1);
2) To ratify the selection of KPMG Peat Marwick LLP, independent
certified public accountants, to audit the financial statements of the
Company for the fiscal year ending July 31, 1999 (Proposal No.2); and
3. To transact such other matters as may properly come before the Annual
Meeting or any adjournment thereof.
Only holders of record of the Company's Common Stock, par value $.001 per
share, at the close of business on December 22, 1998 are entitled to notice of
and to vote at the Annual Meeting.
Alfacell hopes that as many stockholders as possible will personally attend
the Annual Meeting. Whether or not you plan to attend the Annual Meeting, please
complete the enclosed proxy card and sign, date and return it promptly so that
your shares will be represented. Sending in your proxy will not prevent you from
voting in person at the Annual Meeting.
By order of the board of directors,
Gail E. Fraser, Secretary
Bloomfield, New Jersey
November 30, 1998
ALFACELL CORPORATION
----------
PROXY STATEMENT
----------
This Proxy Statement is furnished in connection with the solicitation of
proxies for use at the annual meeting of stockholders (the "Annual Meeting") of
Alfacell Corporation ("Alfacell" or the "Company") to be held on Thursday,
January 21, 1999 and at any adjournment thereof. The accompanying proxy is
solicited by the board of directors of the Company and is revocable by the
stockholder any time before it is voted. For more information concerning the
procedure for revoking the proxy, see "General." This Proxy Statement was first
mailed to stockholders of the Company on or about December 23, 1998, accompanied
by the Company's Annual Report to Stockholders for the fiscal year ended July
31, 1998. The principal executive offices of the Company are located at 225
Belleville Avenue, Bloomfield, New Jersey 07003, telephone (973) 748-8082.
OUTSTANDING SHARES AND VOTING RIGHTS
Only holders of the Company's common stock, par value $.001 per share (the
"Common Stock" or "Common Shares"), at the close of business on December 22,
1998 (the "Record Date") are entitled to receive notice of and to vote at the
Annual Meeting. As of the Record Date, 17,253,610 Common Shares, were
outstanding and will be entitled to vote at the Annual Meeting. Each Common
Share is entitled to one vote on all matters. There are no cumulative voting
rights.
To be elected, a director must receive a plurality of the votes of the
Common Shares present in person or represented by proxy at the Annual Meeting
and entitled to vote on the election of directors. The affirmative vote of at
least a majority of the Common Shares present in person or represented by proxy
at the Annual Meeting and entitled to vote thereon, whether or not a quorum is
present when the vote is taken, is necessary for approval of Proposal No. 2. A
quorum is representation in person or by proxy at the Annual Meeting of at least
a majority of the Common Shares outstanding as of the Record Date.
Pursuant to the Delaware General Corporation Law, votes cast "For" a matter
constitute affirmative votes. Proxy cards which are voted by marking "Withheld"
or "Abstain" on a particular matter are counted as present for quorum purposes
and for purposes of determining the outcome of such matter, but since they are
not cast "For" a particular matter, they will have the same effect as negative
votes or votes "Against" a particular matter. If a validly executed proxy card
is not marked to indicate a vote on a particular matter and the proxy granted
thereby is not revoked before it is voted, it will be voted "For" such matter.
Where brokers are prohibited from exercising discretionary authority for
beneficial owners who have not provided voting instructions (commonly referred
to as "broker non-votes"), such broker non-votes will be treated as shares that
are present for purposes of determining the presence of a quorum. With respect
to proposals which require the affirmative vote of a percentage of votes present
at the Annual Meeting for approval, however, such broker non-votes will be
treated as not present for purposes of determining the outcome of any such
matters. With respect to proposals which require the affirmative vote of a
percentage of the outstanding shares for approval, since such broker non-votes
are not cast "For" a particular matter, they will have the same effect as a
negative vote or votes "Against" such matter.
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PROPOSAL NO. 1 - ELECTION OF DIRECTORS
The Company By-Laws provide that the full Board of Directors shall not be
less than one, nor more than ten Directors, as may be fixed from time to time by
resolution of the Board of Directors. The Board of Directors is currently fixed
at six Directors. Proxies cannot be voted for a greater number of persons than
the number of nominees named. Directors are elected to serve until the next
annual meeting of stockholders and until their successors are elected and
qualified.
The nominees for election to the office of Director, and certain
information with respect to their ages and backgrounds, are set forth below. It
is the intention of the persons named in the accompanying proxy card, unless
otherwise instructed, to vote to elect the nominees named herein as directors.
If any nominee declines to serve or becomes unavailable for any reason, or if a
vacancy should occur before the election (although management knows of no reason
to anticipate that this will occur), the proxies may be voted for such
substitute nominees as management may designate.
Nominees for Election to the Office of Director
at the Annual Meeting
Nominee Age Director Since Position with the Company
- ------- --- -------------- -------------------------
Kuslima Shogen 53 1981 Chief Executive Officer, Chairman of the
Board
Gail E. Fraser 40 1995 Vice President, Finance, Chief Financial
Officer and Director
Stanislaw M. Mikulski, M.D. 54 1986 Executive Vice President, Medical Director
and Director
Stephen K. Carter, M.D.(1) 60 1997 Director and Chairman of the Scientific
Advisory Board
Donald R. Conklin (1)(2) 62 1997 Director
Martin F. Stadler(1)(2) 56 1997 Director
================================================================================
(1) Member of Compensation Committee
(2) Member of Audit Committee
The Board of Directors recommends a vote FOR Ms. Shogen, Ms. Fraser, Dr.
Mikulski, Dr. Carter, Mr. Conklin and Mr. Stadler as Directors (Proposal No. 1
on the Proxy Card).
- 5 -
BUSINESS EXPERIENCE OF NOMINEES
Kuslima Shogen has served as the Company's Chief Executive Officer since
September 1986, Chairman of the Board since August 1996, and as a Director since
the inception of the Company. She also served as the Company's Chief Financial
Officer from September 1986 through July 1994 and as its President from
September 1986 through July 1996. Ms. Shogen formed the Company in 1981 to
pursue research that she had initiated while a biology student in the University
Honors Program at Fairleigh Dickenson University. Prior to founding Alfacell,
from 1976 to 1981 she was founder and president of a biomedical research
consortium specializing in Good Laboratory Practices and animal toxicology.
During that time, she also served as a consultant for the Lever Brothers
Research Group. Ms. Shogen has received numerous awards for achievements in
biology, including the Sigma Xi first prize from the Scientific Research Society
of North America in 1974 and first prize for the most outstanding research paper
in biology at the Eastern College Science Conferences competitions in 1972,
1973, and 1974. She earned a B.S. degree in 1974 and an M.S. degree in 1976 in
biology from Fairleigh Dickenson University ("FDU"), and also completed graduate
studies in 1978 in embryology. She is a Phi Beta Kappa graduate. In April 1998,
Ms. Shogen received the Pinnacle Award from FDU, the highest honor the
University bestows on its graduates.
Gail E. Fraser joined the Company as its Chief Financial Officer in July
1994 and subsequently became a Director in April 1995. From August 1993 to July
1994, she served as a consultant to the Company and was the Company's business,
financial and accounting advisor. From April 1989 to February 1993, Ms. Fraser
served as the Chief Financial Officer of Enzon, Inc., a biopharmaceutical
company located in Piscataway, New Jersey. From 1982 to 1989, she served as the
Vice President of Finance and Controller for Sidmak Laboratories, Inc., a
generic drug manufacturer located in East Hanover, New Jersey. Ms. Fraser earned
a B.S. degree in accounting from Kean University ("KU") of New Jersey in 1985
and an M.B.A. from the Wharton School of the University of Pennsylvania in 1993.
Ms. Fraser is a member of the KU Foundation Board of Directors and in 1997
received an award for Outstanding Alumnus in Business and Government. She is
also a Certified Public Accountant in the state of New Jersey.
Stanislaw M. Mikulski, M.D., F.A.C.P. has served the Company as Executive
Vice President and Medical Director since 1987 and as a Director since 1986.
Prior to his affiliation with Alfacell, Dr. Mikulski was Special Assistant to
the Chief of the Investigational Drug Branch of the National Cancer Institute
("NCI") and the Coordinator for Immunotherapy Trials in Cancer for the Division
of Cancer Treatment. Prior to joining the Company, he maintained a private
practice in medical oncology for over eight years. He is a diplomate of the
American Board of Internal Medicine and Medical Oncology as well as a fellow of
the American College of Physicians and a member of the American Society of
Clinical Oncology. Dr. Mikulski is currently a clinical assistant Professor of
Medicine at the University of Medicine and Dentistry of New Jersey. He received
his M.D. in 1967 from the Medical School of Warsaw, Poland and subsequently
performed post-doctoral studies in human tumor immunology at the University of
California in Los Angeles.
Stephen K. Carter, M.D. joined the Board of Directors in May 1997 and
serves as Chairman of the Company's Scientific Advisory Board. In addition to
his positions with Alfacell, Dr. Carter also serves as a senior clinical
consultant to Sugen, Inc. From 1995 through 1997, he served as Senior Vice
President of Research and Development for Boehringer-Ingelheim Pharmaceuticals.
Before this, Dr. Carter spent over 13 years with Bristol-Myers Squibb, an
international leader in the development of innovative anti-cancer and anti-viral
therapies. He held a variety of senior executive research and development
positions while at Bristol-Myers, including serving for five years as Senior
Vice President of worldwide clinical research and development of its
Pharmaceutical Research Institute. From 1976 to 1982, he established and
directed the
- 6 -
Northern California Cancer Program. Prior to this, he held a number of positions
during a nine-year tenure at the NCI, including the position of Deputy Director
at the National Institutes of Health. He has also been a member of the faculties
of the medical schools of Stanford University, the University of California at
San Francisco and New York University. Dr. Carter has published extensively on
the development of anti-cancer drugs, was the co-founding editor of journals
devoted to cancer therapeutics or immunology, and has served on the editorial
boards of a number of additional journals dedicated to cancer treatment. He is a
member of the American Society of Clinical Oncology, the American Association
for Cancer Research, and the Society of Surgical Oncology, as well as several
other medical societies. Dr. Carter earned his B.A. from Columbia University and
his M.D. from New York Medical College. He currently serves on the Board of
Directors of Allos Therapeutics.
Donald R. Conklin joined the Board of Directors in May 1997. Prior to his
retirement in May 1997, Mr. Conklin was a senior executive with Schering-Plough,
a major worldwide pharmaceutical firm. During his more than 35 years with
Schering-Plough, he held a variety of key management positions within the firm.
From 1986 to 1994, he served as President of Schering-Plough Pharmaceuticals and
Executive Vice- President of Schering-Plough Corporation. In this position, he
was responsible for worldwide pharmaceutical operations, including the launch of
INTRON A(R) (interferon alfa-2b). Prior to this, Mr. Conklin had served as
President of Schering USA and had held a variety of executive marketing
positions in the United States, Europe, and Latin America. Immediately preceding
his retirement, he was Chairman of Schering-Plough Health Care Products and an
Executive Vice President of Schering-Plough Corporation. Mr. Conklin received
his B.A. with highest honors from Williams College and his M.B.A. degree from
the Rutgers University School of Business. He currently serves on the Board of
Directors of Vertex Pharmaceuticals, Inc. and BioTransplant, Inc.
Martin F. Stadler joined the Board of Directors in November 1997. At the
end of 1996, Mr. Stadler retired from Hoffmann La-Roche, Inc. after 32 years of
pharmaceutical, chemical and diagnostic experience. Mr. Stadler served as senior
vice president and chief financial officer, and was a member of the Hoffmann
La-Roche, Inc. Board of Directors from 1985 through 1996. His responsibilities
included finance, information technology, human resources, quality control and
technical services. Prior to 1985, Mr. Stadler served as vice-president of
strategic planning and business development. Mr. Stadler received his B.S.
degree from Rutgers University and his M.B.A. from Fairleigh Dickenson
University. He is a member of the Finance Council of the American Management
Association, a trustee of Fairleigh Dickenson University and a member of the
Advisory Board for Horton International.
In March 1998 the SEC approved the settlement previously disclosed in the
Company's November 1997 Proxy Statement of allegations by the SEC (the "SEC
Investigation") of violations of Sections 13 and 16 of the Securities Exchange
Act of 1934 (the "Exchange Act") by Kuslima Shogen, Chairman and Chief Executive
Officer, Stanislaw Mikulski, Executive Vice President and a former director. Ms.
Shogen, Dr. Mikulski and the former director agreed to the entry of a cease and
desist order and the payment of monetary penalties totaling $40,000 (payable by
the Company under its indemnity agreements with these individuals) without
admitting or denying any of the SEC's allegations concerning certain allegedly
late filings required to be made by them pursuant to Sections 13 and 16 of the
Exchange Act with respect to changes in beneficial ownership of the Company's
securities. With the exception of one late filing by Ms. Shogen in 1996, each of
the allegedly unreported transactions occurred during the years 1983 to 1994.
The alleged reporting violations relate solely to the filings of required forms.
There was no allegation by the SEC of any fraudulent or willful misconduct. No
action was brought against the Company. Since mid-1994, when the Company and its
officers and directors, with the assistance of its securities counsel, fully
implemented a
- 7 -
comprehensive Section 16(a) compliance program, all changes of beneficial
ownership which have occurred for these individuals have been reported under
Section 16(a) on a timely basis, except for one Form 4 reporting changes in
beneficial ownership occurring in 1996 which Ms. Shogen filed one month late, as
disclosed in the Company's November 1997 Proxy Statement.
INFORMATION CONCERNING BOARD AND COMMITTEE MEETINGS
AND COMMITTEES OF THE BOARD
Five meetings of the Company's board of directors were held during the
fiscal year ended July 31, 1998. As of July 31, 1998 there were two standing
committees of the Board, a Compensation Committee and an Audit Committee. During
fiscal 1998, the Compensation Committee was comprised of Stephen K. Carter,
Donald R. Conklin and Martin F. Stadler. The primary functions of the
Compensation Committee are to administer the 1993 Stock Option Plan and the 1997
Stock Option Plan, determine the compensation of the Company's officers and
senior management and review compensation policy for all of the Company's
employees. The Compensation Committee met once during the fiscal year ended July
31, 1998. All of the decisions regarding executive compensation were made by the
Compensation Committee during the fiscal year ended July 31, 1998.
During fiscal 1998, the Audit Committee was comprised of Donald R. Conklin
and Martin F. Stadler. The primary functions of the Audit Committee are to meet
with the Company's independent auditors to discuss and review audit procedures
and issues, meet with management on matters concerning the Company's financial
condition, internal controls and year-end audit, and report to the Board on such
matters. The Audit Committee met one time during the fiscal year ended July 31,
1998. During fiscal 1998, no incumbent director attended fewer than 75 % of the
aggregate of the total number of meetings of the board of directors and the
total number of meetings held by all committees of the board on which such
director served.
EXECUTIVE COMPENSATION
Directors' Compensation
Directors receive no cash compensation in consideration for their serving
on the Board of Directors.
In May 1997 and December 1997, the Board of Directors and the stockholders,
respectively, approved the Company's 1997 Stock Option Plan (the "1997 Plan")
which, among other things, provides for automatic grants of options ("Automatic
Grants") under a formula (the "Formula") to non-employee directors ("Independent
Directors" ) on an annual basis.
The Formula provides that (i) on each December 31st each Independent
Director receives automatically an option to purchase 15,000 shares of the
Company's Common Stock (the "Regular Grant"); and (ii) on the date of each
Independent Director's initial election to the Board of Directors, such newly
elected Independent Director automatically receives an option to purchase such
Independent Director's pro rata share of the Regular Grant which equals the
product of 1,250 multiplied by the number of whole months remaining in the
calendar year (the "Pro Rata Grant"). Each option granted pursuant to a Regular
Grant and a Pro Rata Grant vests and becomes exercisable on December 30th
following the date of grant.
- 8 -
Notwithstanding the foregoing, an option will not become exercisable as to any
shares unless such Independent Director has served continuously on the Board
during the year preceding the date on which such options are scheduled to vest
and become exercisable, or from the date such Independent Director joined the
Board until the date on which such options are scheduled to vest and become
exercisable; provided, however, that if an Independent Director does not fulfill
such continuous service requirement due to such Independent Director's death or
disability all options held by such Independent Director nonetheless vest and
become exercisable as described herein. An option granted pursuant to the
Formula remains exercisable for a period of five years after the date the option
first becomes exercisable. The per share exercise price of an option granted
under the Formula is required to be equal to the fair market value of a share of
Common Stock on the date of grant.
During the fiscal year ended July 31, 1998, the following Independent
Directors were granted the options listed below pursuant to the Formula under
the 1997 Plan. The exercise prices of the options are equal to the fair market
value of the Common Stock on the date of grant.
Name Number of Options Exercise Price Expiration
- ---- ----------------- -------------- ----------
Martin F. Stadler 1,250 $ 3.39 12/30/02
Martin F. Stadler 15,000 $ 3.04 12/30/03
Stephen K. Carter 15,000 $ 3.04 12/30/03
Donald R. Conklin 15,000 $ 3.04 12/30/03
Compensation Committee Interlocks and Insider Participation
During the fiscal year ended July 31, 1998, the members of the Board of
Directors who served on the Compensation Committee of the Board of Directors
were Stephen K. Carter, Donald R. Conklin and Martin F. Stadler.
Summary Compensation Table
The following table provides a summary of cash and non-cash compensation
for each of the last three fiscal years ended July 31, 1998, 1997 and 1996
earned by the Chief Executive Officer and the only two other executive officers
of the Company during the last fiscal year (the "Named Executive Officers").
- 9 -
Long Term
Annual Compensation Compensation
--------------------------------------------------------- ------------
Securities
Other Annual Underlying All Other
Name and Compensation Options/ Compensation
Principal Position Year Salary($) Bonus($) ($)(1) SARs(#) ($)
- ------------------ ---- --------- -------- ------------ ------------ ------------
Kuslima Shogen 1998 $150,000 - 0 - - 0 - - 0 - - 0 -
Chief Executive 1997 150,000 - 0 - - 0 - - 0 - - 0 -
Officer and 1996 150,000 - 0 - - 0 - 500,000(3) - 0 -
Chairman of the
Board of
Directors(2)
Gail E. Fraser(4) 1998 $130,000 - 0 - - 0 - - 0 - - 0 -
Vice President, 1997 130,000 - 0 - - 0 - - 0 - - 0 -
Finance and Chief 1996 130,000 - 0 - - 0 - - 0 - - 0 -
Financial Officer
Stanislaw M 1998 $130,000 - 0 - - 0 - - 0 - - 0 -
Mikulski(5) 1997 130,000 - 0 - - 0 - - 0 - - 0 -
Executive Vice 1996 130,000 - 0 - - 0 - 250,000(3) - 0 -
President and
Medical Director
(1) Excludes perquisites and other personal benefits which in the aggregate do
not exceed 10% of the Named Executive Officers' total annual salary and
bonus.
(2) During fiscal 1996, Ms. Shogen was paid $150,000 representing payment in
full of accrued back salary. Ms. Shogen was paid her salary in full for
fiscal 1996, 1997 and 1998.
(3) These options were originally granted during the fiscal year ended July 31,
1992, and were due to expire by their terms in September 1995. In September
1995, the exercise period for these options was extended until September
1996 and the per share exercise price was increased to $3.87 per share, the
fair market value of the Common Stock on the date of such extension. These
options were exercised at an exercise price of $3.87 per share during
fiscal 1996 and 1997.
(4) During fiscal 1996, Ms. Fraser was paid $25,000 representing payment in
full of accrued back salary. Ms. Fraser was paid her salary in full for
fiscal 1996, 1997 and 1998.
(5) During fiscal 1996, Dr. Mikulski was paid $125,000 representing payment in
full of accrued back salary. Dr. Mikulski was paid his salary in full for
fiscal 1996, 1997 and 1998.
Option Grants in Last Fiscal Year
The following table contains information concerning the grant of stock
options to the Named Executive Officers during the fiscal year ended July 31,
1998:
- 10 -
====================================================================================================================================
Potential Realizable Value at
Individual Grants Assumed Annual Rates of Stock
Price Appreciation for Option
Term
- ------------------------------------------------------------------------------------------------------------------------------------
Number of
Securities % of Total
Underlying Options Granted Exercise or
Options to Employees in Base Price Expiration
Name Granted (#) Fiscal Year ($/Share) Date -----------------------------------------
0%($) 5%($) 10%($)
- ------------------------------------------------------------------------------------------------------------------------------------
Kuslima Shogen 0 -- -- -- -- -- --
Gail E. Fraser 0 -- -- -- -- -- --
Stanislaw M. 0 -- -- -- -- -- --
Mikulski
====================================================================================================================================
Option Exercises and Fiscal Year-End Values
The following table sets forth the information with respect to the Named
Executive Officers concerning the exercise of options during the fiscal year
ended July 31, 1998 and unexercised options held as of July 31, 1998.
==================================================================================================================
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money Options
- ----------------------------------------------- Options at Fiscal Year-End at Fiscal Year-End($)(2)
Shares Value (#)
Name Acquired on Realized ----------------------------- -----------------------------
Exercise (#) ($)(1) Exercisable Unexercisable Exercisable Unexercisable
- ------------------------------------------------------------------------------------------------------------------
Kuslima Shogen None None 1,583,207 93,000 - 0 - - 0 -
Gail E. Fraser None None 355,000 70,000 - 0 - - 0 -
Stanislaw M. None None 411,409 20,000 - 0 - - 0 -
Mikulski
==================================================================================================================
(1) Based upon the fair market value of the purchased shares on the option
exercise date less the exercise price paid for the shares.
(2) The fair market value of the Common Stock at the fiscal year end was based
on the average of the high and low trade prices ($0.82) for the Common
Stock as reported by the NASDAQ SmallCap Market on the last day of the
fiscal year July 31, 1998.
- 11 -
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
Decisions on compensation of the Company's executive officers are made by
the Compensation Committee of the Board of Directors. During the fiscal year
ended July 31, 1998, the Compensation Committee consisted of three non-employee
directors.
As with many other biotechnology companies, Alfacell's current level of
development and the highly volatile nature of biotechnology stocks in general
makes executive compensation which is based on sales and earnings goals, or
strictly based on stock performance, impracticable. In determining compensation,
the Compensation Committee generally reviews the progress made by the individual
officer in attaining his or her individual goals and the progress made by the
Company in its drug development programs. In addition, the Compensation
Committee keeps the Company's stock performance in mind when making compensation
decisions. Finally, the Compensation Committee generally reviews and takes into
account, competitive factors regarding compensation. The compensation of the
Company's executive officers consists of three principal components: (i) base
salary and benefits, (ii) a bonus based on individual contributions evaluated
against annual goals and (iii) long-term incentives in the form of stock option
grants.
Kuslima Shogen, Gail E. Fraser and Dr. Stanislaw M. Mikulski did not
receive any salary increases, bonuses or option grants for fiscal 1998.
Considering the fact that the Company's stock had not performed in a manner
which they considered to be satisfactory given general market conditions, the
outcome of the Phase III clinical trials for ONCONASE in pancreatic cancer
patients and in an attempt to limit increases in cash expenditures, the
Compensation Committee did not award these executive officers additional
compensation.
THE COMPENSATION COMMITTEE
Donald R. Conklin, Chairman
Stephen K. Carter
Martin F. Stadler
- 12 -
Stockholder Return Performance Graph
The graph below summarizes the total cumulative return experienced by the
Company's stockholders from July 31, 1993 to July 31, 1998, compared to the
NASDAQ Stock Market Index and the NASDAQ Pharmaceutical Index.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG ALFACELL CORPORATION,
THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE NASDAQ PHARMACEUTICAL INDEX
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
Cumulative Total Return
-------------------------------------------------------
7/93 7/94 7/95 7/96 7/97 7/98
ALFACELL CORPORATION 100.00 52.08 41.67 77.08 70.83 12.50
NASDAQ STOCK MARKET (U.S.) 100.00 102.91 144.50 157.43 232.31 274.20
NASDAQ PHARMACEUTICAL 100.00 88.72 124.15 150.06 176.13 177.28
*$100 INVESTED ON 7/31/93 IN STOCK OR INDEX - INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING JULY 31.
- 13 -
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Ownership of and transactions in the Company's stock by executive officers
and directors of the Company and owners of 10% or more of the Company's
outstanding Common Stock are required to be reported to the Securities and
Exchange Commission pursuant to Section 16(a) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"). During the fiscal year ended July 31,
1998, all reports required to be filed pursuant to Section 16(a) of the Exchange
Act were filed in a timely manner.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning stock
ownership of each person who is the beneficial owner of five percent or more of
the Company's outstanding Common Stock, each of the current directors, each of
the Named Executive Officers and all directors and executive officers as a group
as of November 17, 1998. Except as otherwise noted, each person has sole voting
and investment power with respect to the shares shown as beneficially owned.
Percentage of Common
Directors, Officers or 5% Stockholders(1) Number of Shares(2) Stock Outstanding(3)
- ----------------------------------------- ------------------- --------------------
Kuslima Shogen 2,836,828 (4) 15.1%
Stanislaw M. Mikulski 736,990 (5) 4.2%
Gail E. Fraser 296,500 (6) 1.7%
Stephen K. Carter 43,750 (7) *
Donald R. Conklin 59,250 (8) *
Martin F. Stadler 101,250 (9) *
All executive officers and directors as a group
(six persons) 4,074,568 (10) 20.8%
* Less than one percent.
(1) The address of all officers and directors listed above is in the care of
the Company.
(2) All shares listed are Common Stock. Except as discussed below, none of
these shares are subject to rights to acquire beneficial ownership, as
specified in Rule 13d-3(d)(1) under the Exchange Act, and the beneficial
owner has sole voting and investment power, subject to community property
laws where applicable.
(3) The percentage of stock outstanding for each stockholder is calculated by
dividing (i) the number of shares of Common Stock deemed to be beneficially
held by such stockholder as of November 17, 1998 by (ii) the sum of (A) the
number of shares of Common Stock outstanding as of November 17, 1998 plus
(B) the number of shares issuable upon exercise of options or warrants held
by such stockholder which were exercisable as of November 17, 1998 or which
will become exercisable within 60 days after November 17, 1998.
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(4) Includes 1,538,208 shares underlying options which were exercisable as of
November 17, 1998 or which will become exercisable within 60 days after
November 17, 1998.
(5) Includes 375,740 shares underlying options which were exercisable as of
November 17, 1998 or which will become exercisable within 60 days after
November 17, 1998.
(6) Includes 280,000 shares underlying options which were exercisable as of
November 17, 1998 or which will become exercisable within 60 days after
November 17, 1998 owned by Ms. Fraser and 16,500 shares owned by her
husband. Ms. Fraser disclaims beneficial ownership as to the shares owned
by her husband.
(7) Includes 43,750 shares underlying options which were exercisable as of
November 17, 1998 or which will become exercisable within 60 days after
November 17, 1998.
(8) Includes 43,750 shares underlying options which were exercisable as of
November 17, 1998 or which will become exercisable within 60 days after
November 17, 1998.
(9) Includes 26,250 shares underlying options which were exercisable as of
November 17, 1998 or which will become exercisable within 60 days after
November 17, 1998 and 25,000 shares underlying warrants which were
exercisable as of November 17, 1998 or which will become exercisable within
60 days after November 17, 1998.
(10) Includes all shares owned beneficially by the directors and the executive
officers named in the table.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Effective May 31, 1993, the Company restructured a pre-existing bank note
(the "Note") to include the principal balance of $1,300,000, accrued interest of
$349,072, and legal fees of $50,000 into a new term loan of $1,699,072 (the
"Term Loan"). Interest was to be computed at a rate of seven and one-half
percent (7.5%) per annum. The Term Loan was secured by substantially all of the
assets of the Company. Ms. Shogen had personally guaranteed the Note and had
pledged certain collateral, including a majority of the shares of Common Stock
of the Company owned by her and certain options, as additional collateral,
pursuant to a pledge agreement (the "Pledge Agreement") dated May 31, 1993
between Ms. Shogen, the Company and the bank. The Pledge Agreement secured the
obligations of the Company to the bank pursuant to the Term Loan as well as a
personal loan Ms. Shogen had with the same bank (the "Shogen Loan").
Substantially all of the obligations owed by the Company to Ms. Shogen were
subordinated to the Note. In order to satisfy the Company's obligations to the
bank pursuant to the Term Loan, from time to time, as contemplated by the Pledge
Agreement, portions of the shares of Common Stock pledged by Ms. Shogen have
been sold. During fiscal 1994, shares pledged by Ms. Shogen were sold in payment
of such obligation, in the amount of $48,673 during the quarter ended October
31, 1993, $15,945 during November 1993, $15,957 during December 1993 and $15,704
during January 1994. Through January 31, 1994, the monthly payments of interest
and principal under the Term Loan were paid primarily pursuant to this
procedure, and subsequent to such time, have been paid directly by the Company.
The Term Loan agreement prohibited the issuance of any shares, or right to
purchase any shares of the Company's stock if the result of such issuance would
be to decrease the ratio of the market value of Ms. Shogen's pledged stock to
the aggregate outstanding debt under the Term Loan and the Shogen Loan, below
1:1. In June 1994, the Shogen Loan and
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the related Pledge Agreement were amended to provide for, among other things,
the issuance to Ms. Shogen, and subsequent pledge to the bank, of certain
options to purchase Common Stock issued to Ms. Shogen in connection with the
conversion to options of advances and interest thereon made by Ms. Shogen to the
Company and accrued salary owed to Ms. Shogen by the Company. Based upon the
average of the closing bid and asked prices on July 31, 1997, the shares of the
Company's Common Stock pledged by Ms. Shogen to secure the Term Loan and the
Shogen Loan were valued at $6,052,520 (excluding the value of shares of Common
Stock underlying certain options pledged to the bank) and the aggregate
outstanding debt of the Company pursuant to the Term Loan and the aggregate
outstanding debt of Ms. Shogen pursuant to the Shogen Loan as of July 31, 1997
was $1,373,090 and $700,402, respectively. In connection with the Term Loan, Ms.
Shogen also assigned to the bank her right to payment of up to $200,000 of
outstanding debt owed to her by the Company, which amount was paid to Ms. Shogen
by the Company, and paid to the bank by Ms. Shogen during fiscal 1995 and 1996.
In November 1995, the Note was amended and restated and the Term Loan agreement
was amended to provide for, effective as of October 1, 1995, among other things
(i) the extension of the Term Loan from May 31, 1996 to August 31, 1997, (ii) a
re-amortization of the payment of principal and interest based on a one hundred
fifty (150) month amortization schedule, (iii) an increase in the interest rate
from seven and one-half percent (7.5%) per annum to eight and three-eighths
percent (8.375%) per annum, and (iv) the issuance to the bank of a warrant to
purchase 10,000 shares of Common Stock through August 31, 1997 at an exercise
price of $4.19 per share. Such warrant expired unexercised. The Company had a
verbal agreement with the bank to extend the maturity date of the Term Loan
until December 1, 1997 provided the Company deposited a compensating balance in
the amount of the principal balance as of the date the extension was negotiated
with the bank. On October 2, 1997, the Company paid the entire Term Loan
balance, including accrued interest, in the amount of $1,376,646.
In October 1997, the Company issued 75,000 stock options to Mr. Conklin
with an exercise price of $3.66 per share as payment for non-board related
services to be rendered. These options will vest as follows provided he has been
serving continuously on the Company's Board of Directors at the time of vesting:
10,000 vested immediately; 10,000 after one full calendar year; 10,000 annually
for each of the following three years; and 25,000 on October 31, 2002. The
vesting and exercisability of the 25,000 options which vest in October 2002 may
be accelerated upon the good faith determination of the Company's Board of
Directors that a substantive collaborative agreement with a major
pharmaceutical/biotechnology company was a direct result of the Mr. Conklin's
efforts.
In March 1998, the Company issued 75,000 stock options to Mr. Stadler with
an exercise price of $2.80 per share as payment for non-board related services
to be rendered. These options will vest as follows provided he has been serving
continuously on the Company's Board of Directors at the time of vesting: 10,000
vested immediately; 10,000 after one full calendar year; 10,000 annually for
each of the following three years; and 25,000 on March 24, 2003. The vesting and
exercisability of the 25,000 options which vest in March 2003 may be accelerated
upon the good faith determination of the Company's Board of Directors that a
substantive collaborative agreement and licensing or financing arrangement with
a major pharmaceutical/biotechnology company was a direct result of Mr.
Stadler's efforts.
On July 23, 1991, the board of directors authorized the Company to pay
Kuslima Shogen an amount equal to 15% of any gross royalties which may be paid
to the Company from any license(s) with respect to the Company's principal
product, ONCONASE, or any other products derived from amphibian source extract,
produced either as a natural, synthesized, and/or genetically engineered drug
for which the Company owns or is co-owner of the patent, or acquires such rights
in the future, for a period not to exceed the life of the patents. If the
Company manufactures and markets the drugs by itself, then the Company will pay
an amount equal to 5% of gross sales from any products sold during the life of
the patents.
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In August 1998, Ms. Shogen and Dr. Mikulski settled, and the court approved
the settlement, of a claim brought against them in the United States District
Court, District of New Jersey at Newark, New Jersey, by a shareholder under
Section 16(b) of the Securities Exchange Act of 1934 for profits alleged to have
been realized by Ms. Shogen and Dr. Mikulski in transactions involving the
Company's securities in 1988 and 1989. Claims under section 16(b) are for
profits calculated under such statute to have been realized for sales and
purchases of the Company's securities made within a six month period. In this
case the purchases which formed the basis for this claim were issuances of
shares of stock to Ms. Shogen and Dr. Mikulski under employment agreements with
the Company based upon the Company's achievement of certain milestones. No
allegations of fraud were made. Ms. Shogen agreed to pay the Company $91,971.00
and Dr. Mikulski agreed to pay the Company $72,903.00. Such payments are to be
made in a form acceptable to the Company whether in cash, shares of the
Company's common stock or options to purchase the Company's common stock, with
25% of such payments having been made in August 1998 and the remainder of such
amounts payable in three equal installments in August 1999, 2000 and 2001. The
initial payments were made by the cancellation of options to purchase 44,999
shares of common stock owned by Ms. Shogen and the cancellation of options to
purchase 35,669 shares of common stock owned by Dr. Mikulski. The obligation to
make the remaining payments is secured by the pledge to the Company of options
to purchase 154,908 and 122,136 shares of common stock by Ms. Shogen and Dr.
Mikulski, respectively.
PROPOSAL NO. 2 - RATIFICATION OF AUDITORS
On November 23, 1998, the board of directors approved the retention of KPMG
Peat Marwick LLP ("KPMG"), independent certified public accountants, to audit
the consolidated financial statements of the Company for the fiscal year ending
July 31, 1999. KPMG has served as auditor of the financial statements of the
Company for each of the fiscal years since and including, the fiscal year ended
July 31, 1993. Representatives of KPMG are expected to be present at the Annual
Meeting and will have the opportunity to make a statement should they desire to
do so. Such representatives are also expected to be available to respond to
questions.
The Board of Directors recommends a vote FOR ratification of the selection
of KPMG Peat Marwick LLP, independent certified public accountants, to audit the
financial statements of the Company for the fiscal year ending July 31, 1999
(Proposal No. 2 on the Proxy Card).
ANNUAL REPORT TO STOCKHOLDERS
The Company's Annual Report to Stockholders for the fiscal year ended July
31, 1998 accompanies this Proxy Statement.
STOCKHOLDERS' PROPOSAL
It is anticipated that the Company's fiscal 1999 Annual Meeting of
Stockholders will be held on or about January 21, 2000. Stockholders who intend
to present proposals at such Annual Meeting of Stockholders must submit their
proposals to the Secretary of the Company on or before August 21, 1999.
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GENERAL
The cost of soliciting proxies will be borne by the Company. In addition to
the use of mails, proxies may be solicited by personal interview, telephone and
telegraph, and by directors, officers and regular employees of the Company,
without special compensation therefor. The Company expects to reimburse banks,
brokers and other persons for their reasonable out-of pocket expenses in
handling proxy materials for beneficial owners of the Company's Common Stock.
Unless contrary instructions are indicated on the proxy card, all Common
Shares represented by valid proxies received pursuant to this solicitation (and
not revoked before they are voted) will be voted FOR the election of the
nominees for directors named herein and FOR Proposal No. 2.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by filing with
the Secretary of the Company written notice of revocation bearing a later date
than the proxy, by duly executing a subsequent proxy relating to the same Common
Shares or by attending the Annual Meeting and voting in person. Attendance at
the Annual Meeting will not in and of itself constitute revocation of a proxy
unless the stockholder votes his or her Common Shares in person at the Annual
Meeting. Any notice revoking a proxy should be sent to the Company, at 225
Belleville Avenue, Bloomfield, New Jersey 07003 Attention: Gail E. Fraser,
Secretary.
The board of directors knows of no business other than that set forth above
to be transacted at the meeting, but if other matters requiring a vote of the
stockholders arise, the persons designated as proxies will vote the Common
Shares represented by the proxies in accordance with their judgment on such
matters. If a stockholder specifies a different choice on the proxy, his or her
Common Shares will be voted in accordance with the specification so made.
Please complete, sign and date the enclosed proxy card, which is revocable
as described herein, and mail it promptly in the enclosed postage-paid envelope.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. WE URGE YOU TO FILL IN,
SIGN AND RETURN THE ACCOMPANYING PROXY CARD, NO MATTER HOW LARGE OR SMALL YOUR
HOLDINGS MAY BE.
By order of the board of directors,
Gail E. Fraser, Secretary
Bloomfield, New Jersey
November 30, 1998
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Appendix
Proxy Card
Alfacell Corporation
Annual Meeting of Stockholders January 21, 1999
This Proxy Is Solicited on Behalf of the Board of Directors
Kuslima Shogen and Gail E. Fraser and each of them, as proxies, with full
power of substitution in each of them, are hereby authorized to represent and to
vote, as designated below and on the reverse side, on all proposals and in the
direction of the proxies on such other matters as may properly come before the
annual meeting of stockholders of Alfacell Corporation (the "Company") to be
held on January 21, 1999 or any adjournment(s), postponement(s), or other
delay(s) thereof (the "Annual Meeting"), all shares of stock of the Company to
which the undersigned is entitled to vote at the Annual Meeting.
UNLESS OTHERWISE DIRECTED, THIS PROXY WILL BE VOTED "FOR" PROPOSALS 1 and 2
AND WILL BE VOTED IN THE DISCRETION OF THE PROXIES ON SUCH OTHER MATTERS AS MAY
PROPERLY COME BEFORE THE ANNUAL MEETING. THE BOARD OF DIRECTORS RECOMMENDS THAT
STOCKHOLDERS VOTE "FOR" PROPOSALS 1 and 2.
(1) Election of the following nominees as Directors to serve in such capacities
until their successors are duly elected and qualified:
Kuslima Shogen Gail E. Fraser Stanislaw M. Mikulski, M.D.
Stephen K. Carter, M.D. Donald R. Conklin Martin F. Stadler
(Authority to vote for any nominee(s) may be withheld by lining through the
name(s) of any such nominee(s).)
/ / FOR all nominees / / WITHHOLD authority for all
(2) Ratification of the selection of KPMG Peat Marwick LLP to audit the
consolidated financial statements of the Company for the fiscal year ending
July 31, 1999.
/ / FOR / / AGAINST / / ABSTAIN
/ / Please check this box if you expect to attend the Annual Meeting in
person.
(Please sign exactly as name appears to the left, date and return. If
shares are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustees 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.)
Date: _________________________________________________
_______________________________________________________
Sign Here
_______________________________________________________
Signature (if held jointly)
_______________________________________________________
Capacity (Title or Authority, i.e. Executor, Trustee
PLEASE SIGN, DATE AND MAIL YOUR PROXY TODAY.