CYTOGEN CORPORATION
600 COLLEGE ROAD EAST - CN 5308
PRINCETON, NEW JERSEY 08540-5308
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 16, 1999
To the Stockholders of
Cytogen Corporation:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
CYTOGEN CORPORATION (the "Company") will be held on Wednesday, June 16, 1999 at
9:00 a.m. at The Holiday Inn Princeton, Route One at Ridge Road, Princeton, New
Jersey 08540 for the following purposes:
1. The election of six (6) directors to serve until the next annual
meeting of stockholders;
2. To consider and vote on approval of the 1999 Cytogen Non-Employee
Director Stock Option Plan; and
3. To transact such other business as may properly be brought before
the meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on April 23,
1999, as the record date for determination of the stockholders entitled to
notice of and to vote at the Annual Meeting, and only holders of record of the
Company's Common Stock on said date will be entitled to receive notice of and to
vote at the meeting.
Stockholders are cordially invited to attend the meeting. Whether or
not you plan to attend the meeting, please mark, sign, date and return the
enclosed Proxy. The giving of your Proxy will not affect your right to vote in
person in the event you find it convenient to attend the meeting. You may revoke
the Proxy at any time before the closing of the polls at the meeting.
ATTENDANCE AT THE ANNUAL MEETING WILL BE LIMITED TO STOCKHOLDERS AND
INVITED GUESTS OF THE COMPANY.
By Order of the Board of Directors
Donald F. Crane, Jr.
Princeton, New Jersey Corporate Secretary
May 13, 1999
PLEASE SIGN, DATE AND RETURN YOUR PROXY CARD PROMPTLY IN THE ENCLOSED ENVELOPE.
CYTOGEN CORPORATION
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PROXY STATEMENT
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GENERAL
This Proxy Statement is being mailed to stockholders beginning May 13,
1999 in connection with the solicitation by the Board of Directors of Cytogen
Corporation, a Delaware Corporation (the "Company" or "Cytogen") of proxies to
be voted at the 1999 Annual Meeting of Stockholders to be held at The Holiday
Inn Princeton, Princeton, New Jersey, on June 16, 1999 at 9:00 A.M. (local
time), and at any adjournment thereof, for the purposes set forth in the
attached Notice of Annual Meeting of Stockholders.
When proxies in the enclosed form are returned properly executed, the
shares represented thereby will be voted at the meeting and, where instructions
have been given by the stockholder, will be voted in accordance therewith. If
the stockholder does not otherwise specify, the stockholder's shares will be
voted for the election of the listed nominees and in accordance with the
directors' recommendations on the other subject listed on the proxy card. If any
other matter is properly presented for action at the meeting, the persons named
in the enclosed form of proxy will vote on such matter in their discretion. Any
proxy may be revoked by the stockholder, either by attending the meeting and
voting in person or by submitting a revocation in writing to the Company
(including a subsequent signed proxy) at any time prior to the closing of the
polls at the meeting.
STOCKHOLDER VOTE REQUIRED
To be elected a director, a nominee must receive the affirmative vote
of a plurality of shares present in person or represented by proxy at the
meeting and entitled to vote in the election of directors. A plurality vote
means that the six individuals who receive the largest number of votes cast will
be elected as directors. Withheld votes will not affect the outcome of the
election of directors. Other than the election of directors, each matter to be
submitted to the stockholders requires the affirmative vote of a majority of the
votes cast at the meeting. For purposes of determining the number of votes cast
with respect to a particular matter, only those cast "For" or "Against" are
included. Properly returned proxies which withhold authority to vote for
directors or abstain (broker non-votes) will be counted for purposes of
determining if a quorum is present for the annual meeting.
The Company's auditors are Arthur Andersen LLP. A representative of
Arthur Andersen LLP will be present at the meeting, will have an opportunity to
make a statement if the representative desires to do so, and will be available
to respond to appropriate questions.
A COPY OF THE COMPANY'S ANNUAL REPORT TO THE SECURITIES AND EXCHANGE
COMMISSION ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1998 WILL BE PROVIDED
WITHOUT CHARGE TO ANY STOCKHOLDER UPON WRITTEN REQUEST. REQUESTS SHOULD BE
DIRECTED TO CORPORATE COMMUNICATIONS, CYTOGEN CORPORATION, 600 COLLEGE ROAD
EAST-CN 5308, PRINCETON, NJ 08540-5308.
OUTSTANDING SHARES, VOTING RIGHTS AND PRINCIPAL STOCKHOLDERS
Holders of record of outstanding shares of the Company's Common Stock
$.01 par value ("Common Stock") at the close of business on April 23, 1999 will
be entitled to notice of and to one vote per share so held of record on all
business at the Annual Meeting. On the record date, there were 65,105,097 shares
of Common Stock outstanding. Votes cast in person or by proxy at the Annual
Meeting will be tabulated by the Inspector(s) of Election appointed for the
annual meeting who will determine whether or not a quorum is present and the
results of the votes with respect to each matter.
The following table sets forth certain information as of March 31, 1999
(unless noted), with respect to the beneficial ownership of the Company's Common
Stock by each person known by the Company to be the beneficial owner of more
than 5% of its outstanding Common Stock, by each director and nominee for
election as a director, by each executive officer named in the Summary
Compensation Table, and by all executive officers and directors as a group.
Except as indicated in the footnotes to the table, the persons named in the
table have sole voting and investment power with respect to all shares of Common
Stock beneficially owned by them.
NUMBER OF SHARES
OF COMMON STOCK PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER(1) BENEFICIALLY OWNED OF CLASS
- --------------------------------------- ------------------ --------
Henry L. Hillman,
Elsie Hilliard Hillman and
C.G. Grefenstette, Trustees
2000 Grant Building
Pittsburgh, PA 15219 (2).................................... 8,218,191 12.62%
State of Wisconsin Investment Board
121 E. Wilson Street
Madison, WI 53702........................................... 5,462,834 8.40%
Ronald J. Brenner
One Tower Bridge
Suite 1350
100 Front Street
West Conshohocken, PA 19428 (4)(5).......................... 3,812,909 5.85%
Hillman Medical Ventures Partnerships
824 Market Street, Suite 900
Wilmington, DE 19801 (3).................................... 3,713,909 5.70%
Hal S. Broderson
One Tower Bridge
Suite 1350
100 Front Street
West Conshohocken, PA 19428 (4)............................. 3,715,009 5.70%
Charles G. Hadley
One Tower Bridge
Suite 1350
100 Front Street
West Conshohocken, PA 19428 (4)............................. 3,714,159 5.67%
Directors and Executive Officers
Thomas J. McKearn (5)........................................ 710,463 1.08%
John D. Rodwell (5)(6)....................................... 325,300 *
H. Joseph Reiser (7)......................................... 352,000 *
Graham S. May (5)............................................ 121,743 *
Donald F. Crane, Jr. (5) .................................... 115,753 *
Robert J. Broeze (5)......................................... 104,309 *
James A. Grigsby............................................. 61,200 *
John E. Bagalay, Jr. (5)..................................... 60,134 *
Robert F. Hendrickson (5) ................................... 28,800 *
Stephen K. Carter (7)........................................ 3,000 *
2
All executive officers
and directors as a group (14 persons) (5).................. 5,853,534 8.99%
- -----------------
*Indicates amount is less than 1%.
(1) All information with respect to beneficial ownership of shares is based
upon filings made by the respective beneficial owners with the Securities and
Exchange Commission or information provided by such beneficial owners to the
Company. Percent of class for each person and all executive officers and
directors as a group is based on shares of Common Stock outstanding on March 31,
1999 and includes shares subject to options held by the individual or the group,
as applicable, which are exercisable or as become exercisable within 60 days
following such date.
(2) Includes 116,325 shares of Common Stock held by the Henry L. Hillman Trust
U/A dated November 18, 1985 (the "HLH Trust"), 20,625 shares of Common Stock
held by Hillman 1984 Limited Partnership ("Hillman 1984"), 4,125 shares of
Common Stock held by HCC Investments, Inc. ("HCC"), 4,363,207 shares of Common
Stock held by Juliet Challenger, Inc. ("JCI"), 367,445 shares of Common Stock
held by Hillman Medical Ventures 1989 L.P. ("HMV 1989"), 176,470 shares of
Common Stock held by Hillman Medical Ventures 1990 L.P. ("HMV 1990"), 486,622
shares of Common Stock held by Hillman Medical Ventures 1991 L.P. ("HMV 1991"),
110,522 shares of Common Stock held by Hillman Medical Ventures 1992 L.P. ("HMV
1992"), 1,094,700 shares of Common Stock held by Hillman Medical Ventures 1994
L.P. ("HMV 1994"), and 1,478,150 shares of Common Stock held by Hillman Medical
Ventures 1995 L.P. ("HMV 1995"). JCI, HCC, and Wilmington Securities, Inc.
(which (i) owns Hillman Properties West, Inc., the sole general partner of
Hillman 1984, and (ii) is the sole general partner of Hillman/Dover L.P., one of
the general partners of HMV 1989, HMV 1990, HMV 1991, HMV 1992, HMV 1994 and HMV
1995 (collectively, "Hillman Medical Ventures")) are private investment
companies owned by Wilmington Investments, Inc., which, in turn, is owned by The
Hillman Company. The Hillman Company is a private firm engaged in diversified
investments and operations, which is controlled by the HLH Trust. The trustees
of the HLH Trust are Henry L. Hillman, Elsie Hilliard Hillman and C.G.
Grefenstette (the "HLH Trustees"). Consequently, the HLH Trustees share voting
and investment power with respect to the shares held of record by the HLH Trust,
JCI, HCC, Hillman 1984, and Hillman Medical Ventures and may be deemed to be the
beneficial owners of such shares. Does not include an aggregate of 155,100
shares of Common Stock held by four irrevocable trusts for the benefit of
members of the Hillman family (collectively, the "Family Trusts"), as to which
shares the HLH Trustees (other than Mr. Grefenstette) disclaim beneficial
interest. C.G. Grefenstette and Thomas G. Bigley are trustees of the Family
Trusts and, as such, share voting and investment power over the shares held by
the Family Trusts.
(3) Includes 367,445 shares of Common Stock held by HMV 1989, 176,470 shares of
Common Stock held by HMV 1990, 486,622 shares of Common Stock held by HMV 1991,
110,522 shares of Common Stock held by HMV 1992, 1,094,700 shares of Common
Stock held by HMV 1994 and 1,478,150 shares of Common Stock held by HMV 1995.
(4) Includes 3,713,909 shares held by Hillman Medical Ventures. Each of Drs.
Broderson and Brenner and Mr. Hadley is a general partner of Cashon Biomedical
Associates, L.P., which is a general partner of the Hillman Medical Ventures
Partnerships and, therefore, may be deemed to be the beneficial owner of such
shares. Drs. Broderson and Brenner and Mr. Hadley share voting and investment
power with respect to the shares held by Hillman Medical Ventures and disclaim
beneficial ownership of the 1,992,715 shares beneficially owned by the HLH
Trustees, Hillman 1984, HCC, JCI and the Family Trusts referred to in note 2
above.
(5) Includes shares of Common Stock which the named persons have the right to
acquire upon the exercise of stock options, within sixty days of March 31, 1999,
as follows: Dr. Reiser: 350,000; Dr. McKearn: 363,000; Dr. Rodwell: 260,300; Dr.
May 121,743; Dr. Brenner: 10,800; Dr. Bagalay: 49,134; Mr. Grigsby: 7,200; Mr.
Hendrickson: 14,800; Mr. Crane: 109,429; and Dr. Broeze: 99,000. The group
number includes the shares of Common Stock which the named persons and other
executive officer have the right to acquire upon the exercise of stock options,
within sixty days of March 31, 1999. Dr. McKearn and Dr. Broeze are no longer
employed by the Company.
(6) Includes 5,000 shares held by Dr. Rodwell's wife as custodian for two
children under the Pennsylvania Uniform Gift to Minors Act. Dr. Rodwell
disclaims beneficial ownership of the 5,000 shares held by his wife.
(7) Dr. Reiser was elected President and Chief Executive Officer and as a
director on August 24, 1998; Dr. Carter was elected as a director on September
14, 1998. Dr. Carter purchased shares in May, 1999.
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PROPOSAL ONE. ELECTION OF DIRECTORS
NOMINEES FOR DIRECTORS
The persons named in the accompanying form of proxy intend, except as
otherwise directed, to vote for the election as directors of the six nominees
listed below, each for a term expiring at the next Annual Meeting or until his
or her successor is duly elected and qualified. All nominees are now serving as
directors of the Company, and all have informed management that they are willing
to serve as directors of the Company. If any of the nominees should decline or
be unable to act as a director, the persons named as proxies in the form of
proxy will vote in accordance with their best judgment and shall have
discretionary authority to vote for a substitute nominee. The Board of Directors
has fixed its present size at, and for the purposes of this meeting authorized
the election of, six directors.
The following sets forth certain information as to the nominees for
directors of the Company.
James A. Grigsby, 56, Chairman of the Board of Directors, has been a
director of the Company since May 1996 and Chairman since June 1998. Since
April, 1999, Mr. Grigsby has been affiliated with the consulting firm of
Nachman, Hays & Associates. Previously, since 1994, Mr. Grigsby was president of
Cancer Care Management LLC, a consulting firm providing consulting services
regarding cancer disease management issues. From 1989 to 1994, Mr. Grigsby was
President of CIGNA Corporation's International Life and Employee Benefits
Division, which operated in over 20 countries worldwide, and during that period
also served as the head of CIGNA's national health care sales force. Prior to
that time, since 1978, he held a number of executive positions with CIGNA
Corporation. Mr. Grigsby received a B.A. degree in Mathematics from Baylor
University and is a Fellow of the Society of Actuaries.
John E. Bagalay, Jr., 65, has been a director of the Company since October
1995. Dr. Bagalay was a director of Cellcor, Inc. ("Cellcor") prior to the
Company's acquisition of Cellcor in October 1995. He was interim President, CEO
and Chief Financial Officer of the Company from January - August, 1998. He has
been Senior Advisor to the Chancellor, Boston University since January, 1998. He
has been a director, Chief Operating Officer and Chief Financial Officer of
Eurus Technologies, Inc. since January, 1999. He served as the Managing Director
of Community Technology Fund, the venture capital affiliate of Boston
University, from September 1989 until January 1998.
Dr. Bagalay has also served as General Counsel for Texas Commerce
Bancshares and for Lower Colorado River Authority, a regulated electric utility.
Dr. Bagalay currently also serves on the boards of directors of Wave Systems
Corporation and AES, Inc. Dr. Bagalay holds a B.A. in Politics, Philosophy and
Economics and a Ph.D. in Political Philosophy from Yale University, and a J.D.
from the University of Texas.
Ronald J. Brenner, 65, has been a director of the Company since October
1995. Dr. Brenner was President and Chief Executive Officer of Cellcor from July
1995 until the Company's acquisition of Cellcor in October 1995. Dr. Brenner has
been a Vice President of Hillman Medical Ventures, Inc., a venture capital firm,
and a general partner of the managing general partner of the Hillman Medical
Ventures partnerships since 1989. From 1984 to 1988, Dr. Brenner was President
and Chief Executive Officer of Cytogen. Prior to 1984, he was Vice President,
Corporate External Research, at Johnson & Johnson, a major pharmaceutical
company, and also served as Chairman of McNeil Pharmaceutical, Ortho
Pharmaceutical Corp. and the Cilag Companies, all subsidiaries of Johnson &
Johnson. Dr. Brenner received a B.S. in Pharmacy from the University of
Cincinnati, and an M.S. and Ph.D., both in Pharmaceutical Chemistry, from the
University of Florida.
Stephen K. Carter, 61, has been a director of the Company since September,
1998. Dr. Carter was Senior Vice President of Research and Development at
Boehringer Ingelheim Pharmaceuticals, Inc. from 1995 to 1997. Prior to joining
Boehringer, Dr. Carter was Senior Vice President of Worldwide Clinical Research
and Development at Bristol-Myers Squibb Company. From 1976 to 1982, Dr. Carter
served as Director of the Northern California Cancer Institute. Dr. Carter was
also appointed to President Clinton's panel for AIDS drug development. Dr.
Carter also is a director of Allos Therapeutics and Alfacell Corporation. Dr.
Carter received an AB in History from Columbia College and an MD from New York
Medical College. He completed a medical internship and residency at Lenox Hill
Hospital.
4
Robert F. Hendrickson, 66, became a director of the Company in March 1995.
Since 1990, Mr. Hendrickson has been a consultant to the pharmaceutical and
biotechnology industries on strategic management and manufacturing issues with a
number of leading biotechnology companies among his clients. Prior to his
retirement in 1990, Mr. Hendrickson was Senior Vice President, Manufacturing and
Technology for Merck & Co., Inc. He is the Chairman of the Board of Envirogen,
Inc., a director of The Liposome Company, Inc. and Unigene, Inc., and a trustee
of the Carrier Foundation, Inc. Mr. Hendrickson received an A.B. degree from
Harvard College and an M.B.A. from the Harvard Graduate School of Business
Administration.
H. Joseph Reiser, 52, joined CYTOGEN in August 1998 as President and Chief
Executive Officer and as a member of the Board of Directors. Most recently, Dr.
Reiser was Corporate Vice President and General Manager, Pharmaceuticals, for
Berlex Laboratories Inc., the U.S. subsidiary of Schering AG. During his 17 year
tenure at Berlex, Dr. Reiser held positions of increasing responsibility,
serving as the first President of Schering Berlin's Venture Corporation, Vice
President, Technology and Industry Relations, and Vice President, Drug
Development and Technology. Dr. Reiser received his Ph.D. in Physiology from
Indiana University School of Medicine, where he also earned his Master and
Bachelor of Science degrees.
MEETINGS AND COMMITTEES
During 1998, the Board of Directors met twenty-four (24) times. Each of
the incumbent directors attended at least 75% of the aggregate of all meetings
of the Board of Directors and committees of which he was a member held during
the period he served on the Board of Directors or such committee.
The standing committees of the Board of Directors are the Audit
Committee, the Compensation Committee, the Finance Committee, and the Nominating
Committee.
The Audit Committee recommends the selection of a firm of independent
auditors to the Board of Directors for purposes of auditing the Company's
financial statements; reviews the audit with the auditors and management; and
consults with the auditors and management regarding risk management and the
adequacy of financial and accounting procedures and controls. The Audit
Committee met five (5) times during 1998. Its current members are Robert F.
Hendrickson (Chairman), John E. Bagalay, Jr., and Stephen K. Carter.
The Compensation Committee evaluates the performance of the Company's
Chief Executive Officer and recommends his compensation to the Board annually;
oversees the administration of the Company's stock option plans; recommends to
the Board of Directors compensation for executive officers and other key
employees of the Company; and reviews the Company's compensation policy
generally. The Compensation Committee met three (3) times during 1998. Its
current members are Ronald J. Brenner (Chairman), and Robert F. Hendrickson.
The Finance Committee (chartered as a standing committee during 1998)
reviews and monitors the financial planning and financial structure of the
Company to accommodate the operating requirements and strategic objectives. The
Finance Committee met one (1) time during 1998. Its current members are John E.
Bagalay, Jr. (Chairman), James A. Grigsby, and H. Joseph Reiser.
The Nominating Committee is responsible for investigating, recruiting
and interviewing potential candidates for election to the Board of Directors and
for formally nominating for consideration by the full Board of Directors those
individuals deemed worthy by the Nominating Committee of election to the Board
of Directors. The Nominating Committee met in connection with approval of the
slate of nominees for election as directors at the 1998 Annual Meeting of
Stockholders and in connection with the elections of Dr. Reiser and Dr. Carter
to the Board of Directors. Its current members are James A. Grigsby (Chairman)
and H. Joseph Reiser. The Nominating Committee will consider nominees for the
Board of Directors suggested by stockholders whose names are submitted in
writing to the Nominating Committee in care of the Office of the Corporate
Secretary of the Company.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR EACH
OF THE NOMINEES LISTED ABOVE
5
DIRECTORS' COMPENSATION
Each director who is not also an officer of the Company is paid an
annual retainer of $8,000, plus $1,000 for each Board meeting attended ($500 if
participation was by telephone). Any non-employee director who also chaired a
Board committee received an additional annual fee of $1,000. Non-employee
directors receive $250 for each committee meeting attended, but receive no
additional retainer for committee membership. Members of the Nominating
Committee do not receive any compensation for serving on that committee. The
Chairman of the Board (who is not an employee of the Company) currently
receives, based upon significant time spent on Company business, an additional
annual retainer of $50,000 and an annual option grant for the purchase of 15,000
shares of the Company's common stock.. The additional retainer contemplates four
days per month substantially given to Company business by the Chairman; an
amount of $1,500 per day is paid to the Chairman for additional days in which
the significant part of the day is devoted to Company matters.
Pursuant to the 1988 Stock Option Plan for Non-Employee Directors (the
"Directors Plan"), upon initial appointment to the Board, each non-employee
director of the Company was granted an option to purchase 8,000 shares of Common
Stock. Following each annual stockholders' meeting of the Company, each
non-employee director who was re-elected at that stockholders' meeting was under
that Plan granted an option to purchase 6,000 shares of Common Stock. Options
granted under the Directors Plan are exercisable at a price equal to the average
of the high and low sale prices of the Common Stock as reported on the Nasdaq
National Market on the date of grant, and vest (i.e., first become exercisable)
over five years at a rate of 20% for each year of service completed after the
option grant. Each director's outstanding options become immediately exercisable
in full (i) upon the occurrence of a change of control of the Company, (ii) upon
death or disability or (iii) upon resignation or retirement after age 65.
Options granted under the Directors Plan are granted automatically and without
the need for further action by the Company, the Board of Directors or the
Company's stockholders. This Plan expires at this Annual Meeting and no further
grants will be made; however, options previously granted under this Plan will
remain outstanding. The Shareholders are being asked at this meeting to vote on
a replacement plan, the Cytogen Corporation 1999 Non-employee Director Stock
Option Plan (see Proposal Two below).
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee during 1998 were Ronald J.
Brenner (Chairman), and Robert F. Hendrickson. Neither of these gentlemen were
officers or employees of the Company while serving on the Compensation
Committee. Dr. Brenner served as the Company's President and Chief Executive
Officer from 1984 to 1988.
PROPOSAL TWO. APPROVAL OF THE CYTOGEN CORPORATION 1999 NON-EMPLOYEE DIRECTOR
STOCK OPTION PLAN.
The Board of Directors adopted the Cytogen Corporation Non-Employee
Director Stock Option Plan (the "Director Option Plan") at its regular meeting
on April 1, 1999, subject to the approval of the shareholders of the Company. At
the Annual Meeting shareholders will be asked to approve the Director Option
Plan, and the Board recommends that it be approved. The Director Option Plan
will, if approved, replace the 1988 Non-employee Director Stock Option Plan,
which by its terms expires at the 1999 Annual Meeting of Shareholders.
The Board of Directors and management believe that the Director Option
Plan will help attract and retain superior directors and promote long-term
growth and profitability by further aligning director and shareholder interests.
The affirmative vote of a majority of the Shares cast on this Proposal is
required for its adoption.
A summary of the essential features of the Director Option Plan is
provided below, but is qualified in its entirety by reference to the full text
of the Director Option Plan, which was filed electronically with this Proxy
Statement with the Securities and Exchange Commission. The full text of the
Director Option Plan is not included in the printed version of this Proxy
Statement. All defined terms used below have the meaning set forth in the
Director Option Plan, unless otherwise indicated.
6
PURPOSE
The Director Option Plan is intended to promote the interest of Cytogen
by affording Non-Employee Directors an opportunity to acquire a proprietary
interest in the Company, in order to attract and retain Non-Employee Directors,
to provide them with long term financial incentives to increase the value of the
Company, and to provide them with a stake in the future of the Company which
corresponds to the stake of each of the Company's shareholders.
SHARES SUBJECT TO PLAN
The aggregate number of shares of Cytogen common stock ("Shares") with
respect to which the grant ("Grants") of Stock Options may be made is 500,000.
Any Shares subject to a Grant shall again become available for use after the
exchange, cancellation, forfeiture or expiration of such Grant as if such Shares
had never been subject to a Grant.
EFFECTIVE DATE AND DURATION
The effective date of the Director Option Plan shall be June 16, 1999.
The Plan shall terminate on June 16, 2009, unless earlier terminated by the
Board of Directors. No Stock Options shall be granted after the date on which
this Plan terminates. The terms of this Plan, and any terms and conditions
applicable to the Stock Options granted prior to such date, shall survive the
termination of the Plan and continue to apply to such Stock Options.
ADMINISTRATION
The Plan is to be administered by the Compensation Committee (the
"Committee") of the Board of Directors. The Committee shall consist of two more
non-employee directors of the Company, who shall be appointed by the Board. The
members shall also be qualified as outside directors as contemplated by Section
162(m) of the Internal Revenue Code, as amended.
The Committee shall, subject to the provisions of the Director Option
Plan, (a) effect all Grants, (b) determine or provide for the terms and
conditions of Grant agreements and other forms, (c) interpret the Plan, and (d)
make all other material decisions relating to the operation of the Plan. The
Committee may adopt such rules or guidelines as it deems appropriate to
implement the Plan.
STOCK OPTIONS
As of April 1, 1999, the closing price for Cytogen Common Stock on the
Nasdaq National Market was $1.00
On the date of the 1999 annual meeting of shareholders, each individual
who is at that time serving as a Non-Employee Director shall automatically be
granted a Stock Option to purchase 21,000 Shares of Cytogen common stock, at a
price equal to two times the market price (the "Initial Grant"). On the day
following each Cytogen Corporation annual meeting of shareholders following the
1999 Annual Meeting, beginning with and including the meeting in the year 2000,
each individual who is elected or re-elected as a Non-Employee Director shall
automatically be granted a Stock Option to purchase 10,000 Shares of Cytogen
common stock. Each Non-Employee Director appointed other than at an annual
meeting, following approval of the Director Option Plan, will receive an initial
grant, on the date of appointment, equal to a pro rata portion of 10,000 shares
of Cytogen common stock, based upon the number of months remaining from the date
of election until the one year anniversary of the preceding annual meeting. In
addition, the Chairman of the Board, unless the Committee determines otherwise,
will receive an additional grant of 15,000 shares of Cytogen Common Stock on the
date of each annual meeting.
Other than the Initial Grant, which is priced at a premium, the
exercise price of Options under the Plan will equal the Fair Market Value of a
Share for the date of Grant, which is defined in the Directors Option Plan as
the average of the high and low daily sales prices of a Share on the Nasdaq
National Market for that day or, if there are no sales on such day, for the most
recent prior day on which a Share was sold on the Nasdaq National Market.
7
Each grant of a Stock Option shall be evidenced by an agreement which
shall reflect the terms and conditions of the Stock Options and such additional
terms and conditions as are determined by the Committee. Upon exercise of an
Option, the option holder must make payment of the exercise price to the Company
in cash.
TERMS AND CONDITIONS OF STOCK OPTIONS
The Initial Grant will vest and become exercisable in equal one-third
increments at the first, second, and third anniversaries of the Grant Date.
Otherwise, Stock Options become exercisable on the first anniversary of the
Grant Date. However, in the event that prior to the vesting date (A) the
Non-Employee Director terminates his service on the Board by reason of death,
disability or retirement, or (B) the Company is merged, or other parties seek to
acquire or acquire ownership of greater than fifty percent of the Company's
stock, then a Stock Option shall become immediately exercisable upon the
occurrence of such events. Subject to the foregoing, a Stock Option shall be
exercisable at any time in whole or in part on any business day of the Company
before the date such Stock Option expires as outlined below. A Stock Option
shall expire on the first date on or after the Grant Date and prior to a Change
in Control on which the Non-Employee Director resigns from or is not re-elected
to the Board prior to being eligible for retirement. A Stock Option shall also
expire on the date the Stock Option has been exercised in full. Furthermore, the
Stock Option shall expire one day after the expiration of the 10-year period
which begins on the Grant Date or, in the case of a Non-Employee Director who
dies or becomes disabled, the last day of the one year period which begins on
the date of the Non-Employee Director's death or disability.
TRANSFERABILITY DURING LIFETIME
During the lifetime of a Non-Employee Director, only the Non-Employee
Director, or his or her legal representative, may exercise a Stock Option. No
Stock Option may be sold, assigned, transferred, exchanged, or otherwise
encumbered or made subject to any creditor's process, whether voluntary,
involuntary or by operation of law.
ADJUSTMENTS
In the event that there is any change in the Cytogen common stock by
reason of any dividend or other distribution, recapitalization, forward or
reverse split, reorganization, merger, consolidation, spin-off, combination,
share exchange, or other similar corporate transaction or events, the number and
kind of Shares which may be delivered, the Exercise Price or purchase price
relating to any Stock Option may be appropriately adjusted by the Committee at
the time of such event on a proportionate basis.
AMENDMENTS
The Board of Directors shall have the right to amend, modify, suspend
or terminate the Directors Option Plan at any time for any purpose; provided
that following the approval of the Directors Option Plan by Cytogen
shareholders, the Director Stock Plan may not be amended in a manner which would
disqualify the Directors Option Plan from the exemption provided by Rule 16b-3
under the Exchange Act or from qualification for deduction by the Company under
Section 162(m).
FEDERAL INCOME TAX CONSEQUENCES
The rules governing the tax treatment of Stock Options are technical.
Therefore, the description of the Federal income tax consequences set forth
below is necessarily general in nature and does not purport to be complete.
Moreover, statutory provisions are subject to change, as are their
interpretations, and their applications may vary in individual circumstances.
Finally, the tax consequences under applicable state and local income tax laws
may not be the same as under the Federal income tax laws.
STOCK OPTIONS
The Stock Options granted under the Director Stock Plan will be
non-qualified stock options ("NQSOs"). The Non-Employee Director recognizes no
taxable income at the time of grant. Upon exercise of an NQSO, the Non-Employee
Director recognizes ordinary income and the Company receives a deduction equal
to the difference between the exercise price and the fair market value of the
Shares on the date of exercise. The Non-Employee Director recognizes as a
capital gain or loss any subsequent profit or loss realized on the sale or
exchange of any shares disposed of or sold.
8
The Non-Employee Directors listed on the following table are expected
to receive in 1999 under the Directors Option Plan grants of the number of Stock
Options shown on the table.
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
STOCK
DIRECTOR OPTIONS*
-------- --------
James A. Grigsby 36,000
John E. Bagalay, Jr. 21,000
Ronald J. Brenner 21,000
Stephen K. Carter 21,000
Robert F. Hendrickson 21,000
*No dollar value is assigned to the Stock Options because their exercise price
will be dependent upon the market value of the underlying Cytogen Corporation
common stock on the date of grant.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL TWO
9
EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term compensation awarded
to, earned by or paid to (i) the Company's Chief Executive Officer(s), and (ii)
the other four most highly compensated executive officers of the Company, for
services rendered to the Company during the Company's fiscal years ended
December 31, 1998, 1997 and 1996.
SUMMARY COMPENSATION TABLE
ANNUAL LONG-TERM
COMPENSATION (1) COMPENSATION
---------------- ------------
OTHER RESTRICTED SECURITIES
ANNUAL STOCK UNDERLYING ALL OTHER
FISCAL SALARY BONUS COMPEN- AWARD OPTIONS COMPENSATION(2)
NAME AND PRINCIPAL POSITION YEAR ($) ($) SATION ($) ($) (#) ($)
- --------------------------- ------- -------- --------- ----------- ---------- ------------ ---------------
H. Joseph Reiser (3) 1998 89,903 150,000 0 0 2,250,000 399
President and Chief
Executive Officer
John E. Bagalay, Jr. (5) 1998 183,321 0 0 0 110,000 838
President and Chief
Executive Officer
Thomas J. McKearn (6) 1998 298,012 0 0 0 200,000 5,016
Chairman, President and Chief 1997 298,012 0 0 0 0(8) 10,613
Executive Officer 1996 284,181 49,150 0 0(7) 155,000(8) 10,650
Graham May (10) 1998 226,270 10,000 0 0 203,743 7,674
Vice President, Medical 1997 206,446 31,100 0 0 45,000 6,515
Affairs and Corporate
Development
Robert J. Broeze (11) 1998 169,384 50,000 0 0 150,000 6,387
Vice President, 1997 159,794 27,300 0 0 15,000 6,241
Operations
John D. Rodwell 1998 203,000 0 0 0 150,000 8,881
Senior Vice President 1997 202,999 22,800 0 0 0 8,631
and Chief Scientific 1996 187,198 35,150 0 0 82,000 8,499
Officer
Donald F. Crane, Jr. (12) 1998 188,308 12,500 0 0 181,763 3,484
Vice President, 1997 93,462 30,375 0 0 55,000 374
General Counsel
and Corporate Secretary
- ---------------------
(1) Perquisites or personal benefits did not exceed the lesser of either $50,000
or 10% of total annual salary and bonus reported for the named
executive officers.
(2) The amounts disclosed in this column include amounts contributed or accrued
by the Company in the respective fiscal years under the Company's Savings
Plan, a defined contribution plan which consists of a 401(k) portion and a
discretionary contribution portion. In fiscal year 1998, these amounts were
as follows: on behalf of Dr. Reiser, $0; Dr. Bagalay, $0; Dr. McKearn,
$3,977; Dr. May, $6,706; Dr. Broeze, $5,969; Dr. Rodwell, $8,000; and Mr.
Crane, $3,000. The amounts disclosed also include insurance premiums paid
by the Company with respect to group term life insurance and with respect
to fiscal year 1998, these amounts were as follows: on behalf of; Dr.
Reiser $399; Dr. Bagalay, 838; Dr. McKearn, $1,039; Dr. May, $968; Dr.
Broeze, $418; Dr. Rodwell, $881; and Mr. Crane, $484.
10
(3) Dr. Reiser joined the Company as President and Chief Executive Officer
effective August 24, 1998.
(4) Pursuant to Dr. Reiser's Employment Agreement, the Company granted to Dr.
Reiser an option to purchase up to 2,250,000 shares of Common Stock at an
exercise price of $1.0937, vesting 33.3% annually. The vesting schedule
begins as follows: (a) 900,000 shares begin vesting upon commencing
employment; (b) 450,000 shares begin vesting upon completion of certain
performance objectives, to the satisfaction of the Board of Directors; (c)
450,000 shares begin vesting upon the completion of additional performance
objectives to the satisfaction of the Board of Directors; (d) 450,000
shares begin vesting upon the achievement of the Company's profitability.
(5) Dr. Bagalay served as interim President and Chief Executive Officer from
January 1998, following Dr. McKearn's resignation, until August 1998 when
Dr. Reiser assumed these positions.
(6) Dr. McKearn resigned from the Company during September, 1998.
(7) On December 8, 1994, Dr. McKearn and the Company entered into a Stock
Compensation and Performance Option Agreement (the "Compensation
Agreement"), which provided for the issuance to Dr. McKearn of 30,000
shares of Common Stock in three installments of 10,000 shares in each of
1994, 1995 and 1996. On December 8, 1994, Dr. McKearn received the first
installment of 10,000 shares upon payment made equal to the aggregate par
value of the shares. On January 3, 1995, Dr. McKearn received the second
installment of 10,000 shares upon payment made equal to the aggregate par
value of the shares. On January 3, 1996, Dr. McKearn received the third
installment of 10,000 shares upon payment made equal to the aggregate par
value of the shares.
(8) Pursuant to the Compensation Agreement, the Company granted to Dr. McKearn,
effective as of January 3, 1994, an option to purchase up to 100,000 shares
of Common Stock at an exercise price of approximately $6.188 per share
(subject to adjustment under certain circumstances). Vesting of this option
is at the discretion of the Compensation Committee of the Board of
Directors. Any shares not vested were irrevocably canceled and ineligible
for future vesting under the grant. In December 1995, the Compensation
Committee considered the vesting of the second installment of 20,000 shares
and determined that 15,000 shares should vest. In March 1997, the
Compensation Committee considered the vesting of the third installment of
20,000 shares and determined that 17,000 shares should vest. See
"Employment and Severance Arrangements". Pursuant to Dr. McKearn's
resignation, there will be no further vesting of shares under this
Agreement.
(9) In 1995, the Company and Dr. McKearn entered into a Split Dollar Collateral
Assignment Agreement. Under this agreement, the Company was responsible for
the payment of all premiums due for two life insurance policies on the life
of Dr. McKearn, having a total face value of $2.3 million. The amount
disclosed in the Summary Compensation Table reflects the $2,000 in value of
the premiums paid by the Company under these insurance policies in fiscal
year 1998, prior to Dr. McKearn's resignation, that was attributable to
term life insurance coverage. However, pursuant to Dr. McKearn's
resignation, both policies were surrendered by the Company in exchange for
the amount of premiums paid by the Company over the lives of each policy.
(10) Dr. May joined the Company as Vice President, Medical Affairs, effective
January 2, 1997. He assumed additional responsibilities for Corporate
Development in January 1998.
(11) Dr. Broeze was elected Vice President of Operations in February, 1997. He
resigned from the Company in January, 1999, to accept a position with the
purchaser of the Company's manufacturing facilities.
(12) Mr. Crane joined the Company as Vice President, General Counsel and
Corporate Secretary effective June 16, 1997.
11
The following table sets forth information regarding individual grants of
stock options to the named executive officers during fiscal year 1998:
OPTION GRANTS IN FISCAL YEAR 1998
POTENTIAL REALIZABLE VALUE AT ASSUMED ANNUAL
RATES OF STOCK PRICE APPRECIATION FOR OPTION
INDIVIDUAL GRANTS TERM (3)
--------------------------------------------------------- -------------------------------------------
PERCENT OF
NUMBER OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED FISCAL YEAR (PER SHARE)(2) DATE 5%($) 10%($)
---- ---------- ------------ -------------- ---------- --------- ----------
H. Joseph Reiser 2,250,000 (1) 50.03 1.097 8/18/08 1,552,269 3,933,755
John E. Bagalay, Jr. 100,000 (1) 2.22 1.953 1/20/08 122,823 311,258
10,000 (4) .22 .812 10/15/08 5,110 12,949
Thomas J. McKearn 200,000 (5) 4.45 1.953 9/18/01 245,646 622,516
Graham S. May 150,000 (5) 3.34 1.953 1/20/08 184,235 466,887
41,666 (4) .93 1.050 8/26/08 27,514 69,725
12,077 (4) .27 .828 12/28/08 6,289 15,937
Robert J. Broeze 150,000 (5) 3.34 1.953 1/20/08 184,235 466,887
John D. Rodwell 150,000 (5) 3.34 1.953 1/20/08 184,235 466,887
Donald F. Crane, Jr. 125,000 (5) 2.78 1.953 1/20/08 153,529 389,072
41,666 (4) .93 1.050 8/26/08 27,514 69,725
15,097 (4) .34 .828 12/28/08 7,861 19,222
- -----------------------
(1) Pursuant to Dr. Reiser's Employment Agreement, the Company granted to Dr.
Reiser an option to purchase up to 2,250,000 shares of Common Stock at an
exercise price of $1.0937, vesting 33.3% annually. The vesting schedule begins
as follows: (a) 900,000 shares begin vesting upon commencing employment; (b)
450,000 shares begin vesting upon completion of certain performance objectives,
to the satisfaction of the Board of Directors; (c) 450,000 shares begin vesting
upon the completion of additional performance objectives to the satisfaction of
the Board of Directors; (d) 450,000 shares begin vesting upon the achievement of
the Company's profitability.
(2) The exercise price of all stock options granted during the last fiscal year
is equal to the average of the high and low sale prices of the Common Stock as
reported on the Nasdaq National Market on the respective dates the options were
granted.
(3) These amounts represent certain assumed rates of appreciation only. Actual
gains, if any, on stock option exercises and Common Stock holdings are dependent
on the future performance of the Common Stock and overall stock market
conditions. There is no assurance that the amounts reflected will be realized.
(4) These options were fully vested at the date of grant.
(5) Options vest over three years at the rate of 33.3% per year beginning on the
first anniversary of the date of grant, subject to acceleration under certain
conditions. The maximum term of each option granted is 10 years from the date of
grant.
12
The following table sets forth information regarding aggregated exercises
of stock options by the named executive officers during fiscal year 1998 and
fiscal year-end values of unexercised options:
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT FY-END FY-END(1)(2)
---------------------- -----------------------
(#) ($)
NAME SHARES ACQUIRED VALUE REALIZED EXERCISABLE/ EXERCISABLE/
---- ON EXERCISE(#) ($)(1) UNEXERCISABLE UNEXERCISABLE
-------------- ------------- ------------- -------------
H. Joseph Reiser 0 0 350,000/1,900,000 0/0
John E. Bagalay, Jr. 0 0 18,400/111,600 0/0
Thomas J. McKearn 0 0 363,000/0 0/0
Graham S. May 0 0 62,743/186,000 0/0
Robert J. Broeze 0 0 46,000/175,200 0/0
John D. Rodwell 0 0 204,300/247,200 0/0
Donald F. Crane, Jr. 0 0 67,763/169,000 0/0
- ------------------------
(1) The dollar values in this column were calculated by determining the
difference between the fair market value of the Common Stock underlying the
options at fiscal year-end or the date of exercise, as the case may be, and
the exercise price of the options.
(2) The fair market value of a share of Common Stock (calculated as the
average of the high and low sale prices as reported on the Nasdaq National
Market) on December 31, 1998 was $.828.
13
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
This report and the Performance Graph contained in this Proxy Statement shall
not be deemed incorporated by reference into any of the Company's filings under
the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934,
as amended.
POLICY
The Compensation Committee of the Board of Directors (the "Committee") is
responsible for oversight of the Company's executive compensation program. The
Committee is composed entirely of independent, non-employee directors. The
Committee makes recommendations to the full Board of Directors on compensation
policy and as to specific compensation actions, except where independent action
by the Committee is appropriate.
The Company's compensation program, both for its executive officers as well
as for all employees, is based on the philosophy that the interests of the
employees should be closely aligned with those of the Company's stockholders.
The 1998 executive compensation program was based on the following principles:
- compensation opportunities should attract the best talent to the Company;
motivate individuals to perform at their highest levels; reward outstanding
achievement; and retain the leadership and skills necessary for building
long-term stockholder value;
- a portion of total compensation should be at risk of performance; and
- individual executives should be encouraged to manage from the perspective
of owners of the Company.
The Company's 1998 compensation program reflected the Committee's assessment
as to appropriate treatment on an individual basis for the named executives and
the former Chief Executive Officer compared to the prior year levels. 1997
compensation was generally benchmarked by a 1996 compensation study conducted by
an independent compensation consultant, including a survey of companies
representative of the firms with which the Company competes for employee talent.
The comparative companies included, but were not identical to, the companies
included in the peer group with respect to the stock performance graph set out
below. The Company targets its overall compensation program at the median level
of the biotechnology industry. In addition, compensation for the named (and
other) executives, including the Chief Executive Officer(s), took into account
individual responsibility and performance as assessed by the Committee.
The compensation program includes a combination of competitive base salary
and benefits, annual cash bonus opportunities, and stock option awards. The 1998
executive compensation program and a specific discussion as to the compensation
of the Chief Executive Officer are set out below.
ANNUAL COMPENSATION FOR 1998
Generally, annual compensation of executive officers under the executive
compensation program for 1998 consisted of salary and bonus components.
BASE SALARY
In December 1997, the Compensation Committee determined for recommendation
to the full Board base salaries and annual incentive opportunities for 1998 for
its executives, including the named executives and Dr. Thomas McKearn, who was
then serving as the Company's Chief Executive Officer. The base salaries for Dr.
Reiser and Dr. Bagalay were set at the time of their election to office.
BONUS
A portion of 1998 executive officer annual compensation opportunity was
based on corporate and individual performance. The Committee believes that
incentive compensation should be linked to corporate financial results,
particularly as the Company commercializes its products. The Committee also
believes that, while performance goals should include corporate financial
14
results, executives should also be held accountable for their individual areas
of responsibility. Bonus opportunity levels for 1998 performance were set in
advance of the year at a percentage of base salary, with the total amount of the
bonus opportunity dependent on the extent to which individual and corporate
objectives were achieved and the amount of cash available as determined by the
Committee. At year-end, the Committee reviewed the extent to which the
objectives have been achieved. The Committee believed that, despite severe
difficulties faced by the Company during 1998, bonuses of some level were
important, in recognition of perseverance by the named executives under
difficult circumstances and for achievement of significant corporate objectives
related to a turnaround of the Company during the year. The amounts approved on
the Committee's recommendations were less than target amounts; in addition, the
Company paid a portion of the awards by an additional year-end stock option
grant to certain of the named executives.
LONG TERM COMPENSATION - STOCK OPTIONS
The Compensation Committee believes that stock options are an appropriate
means to link its employees' interest with those of the Company's stockholders.
Stock option awards are designed primarily to provide strong incentives for
superior longer-term performance and continued retention by the Company. Because
it is believed that corporate performance is one of the principal factors
influencing the market value of the Company's Common Stock, the granting of
stock options to executive officers encourages them to work to achieve
consistent improvements in corporate performance. Options only have value to the
executive when the price of the Company's common stock exceeds the exercise
price, which is not less than the fair market value of the common stock at the
date of grant.
Stock option grants were made to the named executive officers in 1998, as
follows: Dr. McKearn, 200,000;. Dr. May, 150,000; Dr. Rodwell, 150,000, Dr.
Broeze, 150,000, and Mr. Crane, 125,000. These option grants were set taking
into account the comparison of practices at peer groups (in the survey noted
above), an individual's level of responsibility and furtherance of corporate
objectives, and the amount and terms of past stock option awards. The Committee
believes that retention of key executives is critical to the Company's success
during its period of transition. The Committee also took into account in its
review of option grants the fact that the Company has no other long term
incentive program, and believes that options are important to retain executives
and promote steps to build long term value. Additionally, further option grants
were made to Dr. May and Mr. Crane in August, 1999, in recognition of their
serving on a committee of management related to planning and implementation of
the Company's turnaround plan. Finally, option grants were made in December,
1998, to the named executive officers, as disclosed, as payment of bonus awards
deemed appropriate for these individuals for performance during the year in
furthering the restructuring of the Company.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Dr. Reiser's salary for 1998 was set by agreement between the Company and
Dr. Reiser in advance of his employment by the Company. The amount was
determined on the recommendation of the Committee to be an appropriate level of
base compensation in view of compensation levels paid by the industry, in view
of Dr. Reiser's experience, and considering the significant challenges facing
the Company. The bonuses paid Dr. Reiser for 1998 performance reflected the
extraordinary accomplishments of the Company under his leadership following his
joining the Company in the latter half of the year. The total amount includes a
bonus in the amount of $50,000 paid as a sign-on bonus concurrent with his
acceptance of employment, and a year end bonus in the amount of $100,000. This
latter amount was based on the Committee's judgment as to the value of his
leadership to the Company during a critical period.
Dr. Bagalay's salary was set on the Committee's recommendation upon his
agreeing to assume the interim responsibility as Chief Executive Officer pending
the recruitment of a new Chief Executive Officer. The amount was not based on
comparability studies, but on the Committee's judgment as to the appropriate
level of compensation, given Dr. Bagalay's experience and his personal
commitment to the Company in a difficult period. Dr. Bagalay received no cash
bonus for his efforts, however, part of his compensation included a grant of
options as disclosed above.
15
Dr. McKearn received no increase in base compensation during 1998 over his
prior year salary, and received no bonus for 1998 performance. The Committee
recommended, and the full Board determined, that it would be appropriate to
maintain his salary at 1997 levels for the period in which he remained employed
by the Company.
TAX CONSIDERATIONS
Federal tax laws impose a limit on deductions for each of the executives
named in the summary compensation table to $1 million. Certain compensation,
including compensation based on performance, is not subject to this limit if
certain conditions are met, primarily, that the compensation is based on
objective performance criteria approved by the stockholders. The Compensation
payments must also be made pursuant to a plan administered by a committee of
outside directors. The Committee must certify that the performance goals were
achieved before payments can be awarded.
The Committee believes that its executive compensation program is consistent
with the intent of this legislation. The Company's stock option plans under
which options may be granted to executive officers has been approved by the
stockholders and qualifies for the exclusion from the deduction limits. Base
salary, annual bonuses, and certain other compensation amounts disclosed in the
summary compensation table do not qualify for the exclusion from the $1 million
limit but such amounts of compensation are not expected to exceed the deduction
limits. The Committee will consider appropriate steps in the future, including
stockholder approval, to maintain deductions for its incentive compensation
plans to the greatest extent practical while maintaining flexibility to take
actions which it deems in the best interests of the Company and its stockholders
but which may result in certain compensation not qualifying for tax deductions.
The Committee believes that performance should be rewarded, that the financial
interests of the executive officers should be aligned with the stockholders, and
that compensation should be competitive. We have structured compensation at the
Company to meet these criteria.
* * * * *
The foregoing report on compensation is provided by the following outside
directors, who constituted the Compensation Committee during 1998:
Ronald J. Brenner, Chairman
Robert F. Hendrickson
16
PERFORMANCE GRAPH
The following Performance Graph compares the Company's cumulative total
stockholder return on the Common Stock for a five-year period (December 31, 1993
to December 31, 1998) with the cumulative total return of the Nasdaq U.S. Stocks
Index and the Nasdaq Pharmaceutical Index, a broad index of biopharmaceutical
and pharmaceutical companies similar in capitalization and stage of corporate
development to the Company.*
[LINE GRAPH APPEARS HERE]
- ------------------------------------------------------------------------------------------------
1993 1994 1995 1996 1997 1998
- ------------------------------------------------------------------------------------------------
Cytogen Corporation $100.00 $67.71 $87.50 $91.67 $27.08 $14.06
- ------------------------------------------------------------------------------------------------
NASDAQ U.S. Stocks Index $100.00 $97.75 $138.26 $171.01 $208.58 $293.21
- ------------------------------------------------------------------------------------------------
NASDAQ Pharmaceutical Index $100.00 $75.26 $138.04 $138.47 $142.98 $183.02
- ------------------------------------------------------------------------------------------------
17
EMPLOYMENT AND SEVERANCE ARRANGEMENTS
The Company entered an employment agreement with the President and Chief
Executive Officer, H. Joseph Reiser, Ph.D., which provides for bonuses and
vesting of options for the purchase of shares of common stock based on continued
employment and on the achievement of performance objectives defined by the Board
of Directors. Dr. Reiser is also entitled to one year's severance pay, along
with medical and insurance benefits for the same period, if he is dismissed for
reasons other than cause.
Under the terms of an employment agreement, Dr. Thomas J. McKearn was
entitled to one year's severance pay if he was dismissed for reasons other than
for cause. Pursuant to that agreement, Dr. McKearn's base salary is being
continued for a period of one year from the date of his termination of
employment in September, 1998.
Under the terms of severance agreements, Drs. Rodwell, May and. Mr. Crane
will also be entitled to receive twelve months of salary if their employment
with the Company is terminated without cause.
GENERAL INFORMATION
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
On the basis of reports and representations submitted by or on behalf of the
directors, executive officers and ten percent stockholders of the Corporation,
all Forms 3, 4 and 5 showing ownership of and change of ownership in the
Corporation's equity securities during 1998 were timely filed with the
Securities and Exchange Commission as required by Section 16(a) of the Exchange
Act of 1934, except that an initial Form 3 Report by Dr. Carter was
inadvertently filed several days late due to travel exigencies.
OTHER BUSINESS
The Board of Directors does not intend to present any business other
than the matters described in this Proxy Statement at the Annual Meeting. If any
other matter is presented at the Annual Meeting which under applicable proxy
regulations need not be included in this Proxy Statement or which the Board of
Directors did not know a reasonable time before this solicitation would be
presented, the persons named in the accompanying proxy have discretionary
authority to vote proxies with respect to such matter in accordance with their
best judgment.
18
EXPENSES OF SOLICITATION
The expense of this proxy solicitation will be paid by the Company.
Some of the officers and regular employees of the Company may solicit proxies
personally and by telephone. Management may also request banks, brokerage
houses, custodians, nominees and fiduciaries to obtain authorization for the
execution of proxies and may reimburse them for expenses incurred by them in
connection therewith. The Company plans to use Corporate Investor
Communications, Inc., which will receive $4,000 plus certain expenses, for any
proxy solicitation that may be necessary.
OTHER MATTERS
The persons named in the enclosed form of proxy have no present
intention of bringing before the meeting for action any matters other than those
specifically referred to above, nor has management or the Board of Directors any
such intention, and none of such persons, management or the Board of Directors
is aware of any matters which may be presented by others. If any such business
should properly come before the meeting, the persons named in the form of proxy
intend to vote thereon in accordance with their best judgment.
FUTURE STOCKHOLDER PROPOSALS
The Company must receive at the Office of the Corporate Secretary any
proposal which a stockholder wishes to submit to the 2000 Annual Meeting of
Stockholders before January 13, 2000, if the proposal is to be considered by the
Board of Directors for inclusion in the proxy material for that meeting.
By Order of the Board of Directors
May 13, 1999
Donald F. Crane, Jr.
Corporate Secretary
19
APPENDIX
--------
CYTOGEN CORPORATION
1999 STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
1. Purpose; Effective Date.
(a) The purposes of this Plan are to further the interests of Cytogen
Corporation (the "Company") by retaining the services of persons now serving as
non-employee Directors of the Company, attracting and retaining the services of
persons capable of serving on the Board of Directors of the Company, and by
providing such persons with an incentive that aligns their interests with the
interests of the Company's shareholders.
(b) This Plan will become effective on approval of the Plan by the affirmative
vote of the majority of shares present in person or represented by proxy at a
meeting of the shareholders of the Company and cast on the proposal for approval
of the Plan.
2. Definitions.
Whenever used in this Plan, the following terms will have the meanings set forth
in this Section:
"Board of Directors" means the Board of Directors of the Company.
"Code" means the United States Internal Revenue Code of 1986, as amended.
"Common Stock" means the common stock, par value $.0l per share, of the Company.
"Date of Grant" means with respect to any Option the date the Option will become
effective under the provisions of this Plan.
"Disability" means inability of a Director to engage in any substantial gainful
activity by reason of a medically determinable physical or mental impairment
which reasonably can be expected to last for a continuous period of not less
than six months.
"Eligible Director" means, as of any time, a person who is a director of the
Company but is not then an Employee.
"Employee" means any person employed by the Company (including, without
limitation, a person employed by the Company who is also an officer or director
of the Company).
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and rules
and regulations promulgated thereunder.
"Exercise Price" means with respect to any Option the price per share which must
be paid upon exercise of the Option.
"Fair Market Value" means (i) if the Common Stock is traded in a market in which
actual transactions are reported, the average of the high and low prices at
which the Common Stock is reported to have traded on the relevant date in all
markets on which trading in the Common Stock is reported, or if there is no
reported sale of the Common Stock on the relevant date, the mean of the highest
reported bid price and lowest reported asked price for the Common Stock on the
relevant date, (ii) if the Common Stock is Publicly Traded but only in markets
in which there is no reporting of actual transactions, the mean of the highest
reported bid price and the lowest reported asked price for the Common Stock on
the relevant date, or (iii) if the Common Stock is not Publicly Traded, the
value of a share of Common Stock as determined by the most recent annual
valuation prepared by an independent expert at the request of the Board of
Directors.
"Major Event" means when (i) the Company enters into one or more definitive
agreements to merge or consolidate the Company with or into another corporation,
or to sell or otherwise dispose of all or substantially all of the Company's
assets, or to effect any other transaction, consolidation or reorganization
having similar results or effect; (ii) any person other than the Company makes a
tender or exchange offer for more than 50% of Common Stock pursuant to which
purchases of any amount of Common Stock are made; or (iii) stock representing
more than 50% of the voting power of the Company is acquired by any person other
than the Company in any one or more transactions occurring in any 24-month
period.
"Option" means any option granted under this Plan.
"Option Agreement" means an agreement, in such form as may be determined by the
Board of Directors or the Committee, executed and delivered by the Company to
the holder of any Option with respect to that option.
"Option Shares" means, with respect to any Option, the maximum number of shares
of Common Stock which may be acquired under the option prior to its expiration.
"Plan" means the Cytogen Corporation 1999 Directors Stock Option Plan.
"Publicly Traded" means, with respect to any class of stock, that the class of
stock is required to be registered under Section 12 of the Securities Exchange
Act of 1934, as amended, or that stock of that class has been sold within the
preceding 12 months in an underwritten public offering.
"Termination of Service" means the time when a Director ceases to serve as a
Director for any reason, including without limitation by reason of resignation,
retirement, removal, death or Disability.
3. Administration of the Plan.
(a) The Compensation Committee of the Board of Directors will be responsible for
the administration of this Plan. The Committee shall consist of two or more
non-employee directors of the Company who meet the definition of "outside
director" under the provisions of Section 162(m) of the Code and the definition
2
of "non-employee director" under the provisions of the Exchange Act. No member
of the Committee shall have been within one year prior to appointment to, or
while serving on, the Committee granted or awarded equity securities of the
Company pursuant to this or any other plan of the Company except to the extent
that participation in any such plan or receipt of any such grant or award would
not adversely affect the Committee member's status as a "non-employee director"
or as an "outside director".
(b) The Committee shall (i) determine or provide for the terms and conditions of
grant Agreements, and all election and other forms, which terms and conditions
shall not be inconsistent with this Plan, (ii) interpret the Plan and (iii) make
all other decisions relating to the operation of the Plan. The Committee may
adopt such rules or guidelines as it deems appropriate to implement the Plan.
The Committee's determinations under the Plan shall be final and binding on all
persons.
(c) No member of the Board of Directors or of any committee of the Board of
Directors shall be liable for any act or omission of the Board or any committee,
or of any other member of the Board or any committee, or for any act or omission
on his own part, in connection with the administration of this Plan unless it
resulted from the member's own willful misconduct.
4. Persons Eligible to Receive options.
Options shall be granted only to Eligible Directors.
5. Stock Subject to the Plan.
The maximum number of shares of Common Stock as to which Options may be granted
under this Plan is 500,000 shares, subject to adjustment as provided in Section
8. If any option expires or is cancelled, surrendered or forfeited without being
exercised in full, the number of shares as to which the option is not exercised
will once again become shares as to which new Options may be granted. The Common
Stock which is issued on exercise of Options may be authorized but unissued
shares or shares which have been issued and reacquired by the Company.
6. Grants of Options.
(a) The grants of options under this Plan shall be automatic and
non-discretionary. Each Option shall be exercisable on the terms and subject to
the conditions specified in Section 7. No Option granted under this Plan shall
be an "incentive stock option" within the meaning of Section 422A of the Code.
(b) Effective on approval of the Plan by the shareholders, each person who is on
that date an Eligible Director shall be granted an Option to purchase twenty one
thousand (21,000) shares of Common Stock (the "Initial Option").
(c) Each person who is appointed a director of the Company after the date of
approval of the Plan by the Shareholders and is an Eligible Director as of such
date shall be granted an Option to purchase a pro rata portion of ten thousand
3
(10,000) shares of Common Stock, based upon the number of full months remaining
from the date of election until the one year anniversary month of the preceding
annual meeting, as of the effective date of their appointment.
(d) On the day following each annual meeting of the stockholders of the Company,
commencing with the 2000 annual meeting, each person who is on that date an
Eligible Director and was re-elected at that meeting shall be granted an Option
to purchase 10,000 shares of Common Stock. In addition, a Chairman of the Board
of Directors, unless the Compensation Committee of the Board determines
otherwise, shall receive an additional grant of fifteen thousand (15,000) shares
of Common Stock.
(e) Each Option provided for in this Section 6 shall be granted automatically
and without further action by the Company, the Board of Directors or the
Company's stockholders. Promptly after the Date of Grant of each Option provided
for in this Section 6, the Company shall cause an Option Agreement to be
executed and delivered to the holder of the Option. No other Options may be
granted at any time under this Plan.
7. Option Provisions.
(a) Exercise Price. The Exercise Price of the Initial Option will be 200% of the
Fair Market Value of the Common Stock on the Date of Grant of the Option. The
Exercise Price of each Option other than the Initial Option will be 100% of the
Fair Market Value of the Common Stock on the Date of Grant of the Option.
(b) Term; Vesting.
(i) No Option granted under this Plan may be exercised more than 10 years after
the Date of Grant of the option.
(ii) Except as provided in Sections 7(b)(iii), 7(f), 7(g) and 7(h), the Initial
Option shall become exercisable in one-third increments annually on the first,
second, and third anniversaries of the Date of Grant, and Options other than the
Initial Option shall become exercisable in full on the first anniversary of the
Date of Grant.
(iii) Upon the occurrence of a Major Event, all of the Option Shares covered by
an Option shall become immediately available for purchase upon exercise of the
option, without regard to the vesting provisions of Section 7(b)(ii).
(c) Exercise of Options. An Option may be exercised in whole or in part at any
time, or from time to time, during its term. To exercise an Option, the person
exercising the Option must deliver to the Company, at its principal office:
(i) a notice of exercise of the Option, which states the extent to which the
option is being exercised; and
4
(ii) payment in full in cash, which may be satisfied by a check, in an amount
equal to the Exercise Price of the option times the number of shares as to which
it is being exercised.
(d) Delivery of Stock Certificates. As promptly as practicable after an option
is exercised, the Company will deliver to the person who exercises the Option,
certificates registered in that person's name representing the number of shares
of Common Stock which were purchased by the exercise of the option. Each
certificate may bear a legend to indicate, if applicable, that the Common Stock
represented by the certificate was issued in a transaction which was not
registered under the Securities Act of 1933, as amended, and may only be sold or
transferred in a transaction which is registered under that Act or is exempt
from the registration requirements of that Act.
(e) Nontransferability of Options. During the lifetime of a person to whom an
option is issued, the Option may be exercised only by that person or his or her
guardian or legal representative. An Option may not be assigned, pledged or
hypothecated in any way, will not be subject to execution, and will not be
transferable otherwise than by will or the laws of descent and distribution. The
Company will not recognize any attempt to assign, transfer, pledge, hypothecate
or otherwise dispose of an option contrary to the provisions of this Plan, or
any levy of any attachment or similar process upon any Option, and, except as
expressly stated in this Plan, the Company will not be required to, and will
not, issue Common Stock on exercise of an option to anyone who claims to have
acquired that option from the person to whom it was granted.
(f) Termination of Service of Director Holding an Option Other Than Because of
Death or Disability. Subject to the provisions of Sections 7(b) and 7(h), if
there is a Termination of Service of a director to whom an Option has been
granted, other than by reason of the director's death or disability, or
retirement, each Option held by the director may be exercised until the earlier
of (x) the end of the three-month period immediately following the date of
Termination of service, or (y) the expiration of the term of the option.
(g) Death or Disability of Director Holding an Option. Notwithstanding the
provisions of Section 7(b), if there is a Termination of Service of a director
to whom an option has been granted by reason of the director's death or
disability, or a former director dies within three months following the date of
his or her Termination of Service, each option held by the Director on the date
of the Director's Termination of Service may be exercised in full (i.e., in
respect of up to 100% of the Option shares, regardless of the time elapsed since
the Date of Grant) until the earlier of (x) the end of the one-year period
immediately following the date of Termination of service or (y) the expiration
of the term of the option. In the event of an Eligible Director's death, all of
such person's outstanding Options will transfer to the maximum extent permitted
by law to such person's designated Beneficiary. Each Eligible Director may name,
from time to time, any beneficiary or beneficiaries (which may be named
contingently or successively) as his or her Beneficiary for purposes of this
Plan. Each designation shall be on a form prescribed by the Company, will be
effective only when delivered to the Company and when effective will revoke all
prior designations by the Eligible Director. If an Eligible Director dies with
5
no such beneficiary designation in effect, such person's Options will be
transferable by will or pursuant to the laws of descent and distribution
applicable to such person.
(h) Retirement or Resignation. If there is a Termination of Service of a
Director by reason of the Director's retirement or resignation at any time after
the Director has reached age 55 with a minimum of three years' service as a
non-employee director, each Option held by the Director on the date of the
Director's Termination of Service may be exercised in full (i.e., in respect of
up to 100% of the Option Shares, regardless of the time elapsed since the Date
of Grant) until the earlier of (x) the end of the five year period immediately
following the date of Termination of Service or (y) the expiration of the term
of the option.
8. Recapitalization, reorganizations, stock splits and the like.
(a) The existence of outstanding Options shall not affect in any way the right
or power of the Company or its stockholders to make or authorize any or all
adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business, or any merger or consolidation of
the Company, or any issue of bonds, debentures, preferred or prior preference
stock ahead of or affecting the Common Stock or the rights thereof, or the
dissolution or liquidation of the Company, or any sale or transfer of all or any
part of its assets or business or any other corporate act or proceeding, whether
of a similar character or otherwise. Except as hereinafter expressly provided,
the issue by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, for cash or property, or for
labor or services either upon direct sale or upon the exercise of rights or
warrants to subscribe therefor, or on conversion of shares or obligations of the
Company convertible into such shares or other securities, shall not affect, and
no adjustment by reason thereof shall be made with respect to, the number, class
or price of shares of Common Stock then subject to outstanding options.
(b) If as a result of any (i) reorganization or liquidation of the Company or
(ii) reclassification of the Company's capital stock, stock splits, stock splits
in the form of dividends, reverse stock splits, or similar recapitalizations of
the Company, or (iii) consolidation or merger of the Company with or into
another corporation, or sale of all or substantially all the assets of the
Company (a reorganization or liquidation of the Company or reclassification of
the Company's capital stock, or a merger, consolidation or sale of the type
described in this subsection being a "Corporate Transaction") while an Option is
outstanding, the holders of the Common Stock become entitled to receive with
respect to their Common Stock, securities or assets other than, or in addition
to, their Common Stock, upon exercise of that Option the holder will receive
what the holder would have owned if the holder had exercised the Option
immediately before the first Corporate Transaction which occurred while the
option was outstanding and had not disposed of anything the holder would have
received as a result of that and all subsequent Corporate Transactions.
6
9. Rights of Option Holder.
The holder of an Option will not have any rights as a stockholder by reason of
holding that Option. Upon exercise of an Option, the holder will be deemed to
acquire the rights of a stockholder when, but not before, the issuance of Common
Stock as a result of the exercise is recorded in the stock records of the
Company.
10. Laws and Regulations.
The obligation of the Company to sell and deliver shares of Common Stock on
exercise of options will be subject to the condition that legal counsel for the
Company be satisfied that the sale and delivery will not violate the Securities
Act of 1933, as amended, or any other applicable laws, rules or regulations.
11. Reservation of Shares.
The Company will at all times keep reserved for issuance on exercise of options
a number of authorized but unissued or reacquired shares of Common Stock equal
to the maximum number of shares the Company may be required to issue on exercise
of outstanding options (assuming no subsequent adjustments under Section 8).
12. Amendment of the Plan.
The Board of Directors may at any time and from time to time modify or amend
this Plan in any respect effective at any date the Board of Directors
determines; provided, that without the approval of the stockholders of the
Company the Board of Directors may not, (i) except as provided in Section 8,
increase the maximum number of shares of Common Stock which may be issued on
exercise of Options granted under this Plan; (ii) change the provisions of
Section 6 or Section 7; (iii) change the categories of persons eligible to
receive options under this Plan; or (iv) otherwise materially increase (within
the meaning of Rule 16b-3 of the Exchange Act) the benefits accruing under this
Plan. No modification or amendment of this Plan will, without the consent of the
holder of an outstanding Option, adversely affect the holder's rights under that
Option. Notwithstanding approval by shareholders, the Board may amend this Plan
without further shareholder approval to add provisions required or enabled by
changes to Rule 16b-3.
13. Termination of the Plan.
This Plan will terminate on June 16, 2008, unless sooner terminated. The Board
of Directors may suspend or terminate this Plan at any time or from time to
time, but no such action may adversely affect the rights of a person holding an
outstanding Option. The applicable terms of the Plan, and any terms and
conditions as applicable to Options granted prior to such date, shall survive
the termination of the Plan and continue to apply to such Options.
7
PROXY CARD
----------
CYTOGEN CORPORATION
PROXY
SOLICITED BY THE BOARD OF DIRECTORS
H. Joseph Reiser, and Donald F. Crane, Jr., and each of them, with full
power of substitution, are hereby appointed the Proxies of, and authorized to
represent, the undersigned and to vote all of the shares of Common Stock of
CYTOGEN CORPORATION entitled to be voted by the undersigned as of April 23, 1999
as directed on the reverse side and, in their discretion, on all other matters
which may properly come before the Annual Meeting of Stockholders to be held on
June 16, 1999, and at any adjournment therof as if the undersigned were present
and voting at the meeting.
Wherther or not you expect to attend the meeting, you are urged to execute
and return this proxy, which you may revoke at any time prior to its use.
The shares represented by this proxy will be voted as directed by the
stockholders. Where no direction is given when the duly executed proxy is
returned, such shares will be voted FOR all items.
TO BE VOTED, YOU MUST SIGN ON THE REVERSE SIDE
(CONTINUED ON THE REVERSE SIDE)
Please mark
your votes as
indicated in [ X ]
this example
The Board of Directors recommends a Vote FOR all items.
1. Election of directors duly nominated: Nominees: John E. Bagalay, Jr.,
Ronald J. Brenner,
Stephen K. Carter,
James A. Grigsby,
Robert F. Hendrickson and
H. Joseph Reiser
FOR WITHHELD
[ ] [ ] To withold authority to vote for any
individual nominees write such nominee's
name in the space provided below.)
-----------------------------------------
2. To approve the 1999 CYTOGEN 3. To transact such other business
Non-Employee Director Stock as may properly come before the
Option Plan before the meeting. meeting.
FOR WITHHELD ABSTAIN
[ ] [ ] [ ]
DATED: 1999
--------------------------,
---------------------------------------
(SIGNATURE(S) OF STOCKHOLDER(S)
---------------------------------------
(SIGNATURE(S) OF STOCKHOLDER(S)
NOTE: The signature(s) should appear
the same as it appears on the address
label on this proxy. When signing as
executor, administrator, trustee,
guardian, or attorney, please give full
title as such. For joint accounts or
co-fiduciaries, all joint owners or co-
fiduciaries, should sign.
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
FROM NORTHERN N.J.
Take the NJ Turnpike South to Exit 9. Follow Rt. 18 North approximately 1/2 mile
to Route 1 South. Stay on Route 1 South approximately 20 minutes to Princeton
Holiday Inn.
FROM PHILADELPHIA AREA
Take I-95 North until becomes I-295. Take Exit 67 (Rt. 1 North). Follow Route 1
North approximately 7 miles. Take the Ridge Road jug handle across Route 1 to
Princeton Holiday Inn.
HIGHTSTOWN AREA
Take 571 West (Princeton-Hightstown Road) to Route 1 North. Follow Route 1 North
approximately 3 miles. Take the Ridge Road jug handle across Route 1 to
Princeton Holiday Inn.
FROM ATLANTIC CITY AREA
Take the Garden State Parkway, North to Exit 98 (Route I-195 West). Follow I-195
West until it becomes I-295. Follow I-295 to Exit 67A (Route 1 North, New York).
Follow Route 1 North approximately 7 miles. Take the Ridge Road jug handle
across Route 1 to Princeton Holiday Inn.
Princeton Holiday Inn
4355 Rt. 1 & Ridge Road
Princeton, NJ 08540
(609)452-2400
(609)452-2494 Fax
[MAP TO HOLIDAY INN APPEARS HERE]