SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Cytogen
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[LOGO OF CYTOGEN APPEARS HERE] 600 COLLEGE ROAD EAST--CN 5308
PRINCETON, NEW JERSEY 08540-5308
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
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Dear Stockholder:
It is our pleasure to invite you to Cytogen Corporation's 1997 Annual
Meeting on Wednesday, May 21, 1997 at 9:00 a.m. at the Holiday Inn, Route 1
North at Ridge Road, Princeton, New Jersey, at which we will report to you on
Cytogen's past year and our plans for the future.
At this important meeting, you will be asked to consider and vote upon:
1. The election of eight (8) directors to serve until the next annual
meeting of stockholders;
2. A proposal to adopt the Cytogen Corporation Employee Stock Purchase
Plan, a stock purchase plan totaling 500,000 shares that will make Company
common stock, par value $.01 per share, available to employees for purchase
at a discount from market value (the "Employee Stock Purchase Plan");
3. The ratification of the appointment of Arthur Andersen LLP as
independent public accountants for fiscal year 1997; and
4. Such other matters as may properly come before the meeting.
The Board of Directors is asking for your support in approving the Employee
Stock Purchase Plan which we feel will assist in furthering our goal of
aligning the interests of you, the stockholders, and participants in this plan
by encouraging stock ownership.
Only stockholders of record at the close of business on April 1, 1997 will
be entitled to notice of and to vote at the 1997 Annual Meeting or any
adjournments thereof. A list of stockholders entitled to vote will be
available for examination by interested stockholders at the corporate
headquarters of the Company, Office of the Corporate Secretary, 600 College
Road East, Princeton, New Jersey during ordinary business hours from May 10,
1997 to the date of the meeting.
Your vote is important. We urge you to consider the issues and to vote your
shares as promptly as possible.
By Order of the Board of Directors
T. JEROME MADISON
Secretary
Princeton, New Jersey
April 9, 1997
CYTOGEN CORPORATION
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PROXY STATEMENT
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GENERAL
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Cytogen Corporation (the "Company" or "Cytogen") of
proxies to be voted at the 1997 Annual Meeting of Stockholders to be held on
May 21, 1997. This Proxy Statement and accompanying proxy card are scheduled
to be mailed beginning on or about April 14, 1997 to holders of record of the
Common Stock, par value $.01 per share (the "Common Stock").
PROXIES
You can ensure that your shares are voted at the Annual Meeting by
completing, signing, dating and returning the enclosed proxy card in the
envelope provided. Sending a signed proxy will not affect your right to attend
the Annual Meeting and vote. A stockholder who gives a proxy may revoke it at
any time before it is exercised by voting in person at the Annual Meeting, by
submitting another proxy bearing a later date or by notifying the Inspectors
of Election, at Chase Mellon Shareholder Services, 450 West 33rd Street, 15th
Floor, New York, New York 10001, in writing of such revocation.
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 $3,500 plus certain expenses, for any
proxy solicitation that may be necessary.
Each properly executed proxy will be voted in accordance with the
instructions marked on it. Unless revoked, or unless contrary instructions are
given, each proxy will be voted FOR the election of the nominees as set forth
under "Election of Directors," FOR approval of the adoption of the Employee
Stock Purchase Plan and FOR ratification of the appointment of Arthur Andersen
LLP as independent public accountants.
VOTING
Holders of record of the Common Stock at the close of business on April 1,
1997 will be entitled to one vote per share so held of record on all business
of the Annual Meeting. On the record date, there were 51,081,608 shares of
Common Stock outstanding. Votes cast in person or by proxy at the Annual
Meeting will be tabulated by the Inspectors 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 presence at the Annual Meeting, in person or by proxy, of the holders of
a majority of the shares of Common Stock outstanding on the record date and
entitled to vote thereat will constitute a quorum. The Inspectors of Election
will treat abstentions and broker non-votes as shares that are present and
entitled to vote for the purposes of determining the presence of a quorum.
The election of directors is decided by a plurality of the votes cast.
Accordingly, votes that are withheld and broker non-votes will have no effect
on the outcome of the vote. Matters such as stockholder approval of adoption
of the proposed Employee Stock Purchase Plan will require the affirmative vote
of the holders of a majority of the shares of Common Stock present in person
or by proxy and entitled to vote at the Annual Meeting. Abstentions will be
treated as votes cast with respect to the particular proposal and therefore,
will have the same effect as a vote against the proposal. Broker non-votes
will not be counted as votes cast with respect to the particular proposal and
therefore, will have no effect on the outcome of the vote.
PROPOSAL ONE. ELECTION OF DIRECTORS
At the 1997 Annual Meeting, eight directors are to be elected to hold office
until the 1998 Annual Meeting of Stockholders and until their successors have
been elected and have qualified. The persons named in the accompanying proxy
intend to vote for the election of the nominees identified below unless
authority to vote for one or more of such nominees is specifically withheld in
the proxy. All of the nominees are currently directors of the Company and were
elected directors at the 1996 Annual Meeting of Stockholders. The Board knows
of no reason why any nominee may be unable to serve as a director. If any
nominee is unable to serve, the shares represented by all valid proxies will
be voted for the election of such other person as the Board may recommend,
unless the Board reduces the number of directors accordingly.
During 1996, the Board of Directors met eight (8) times. Each of the
incumbent directors, except for James A. Grigsby, 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.
NOMINEES FOR DIRECTORS
Charles E. Austin, 69, has been a director of the Company since July 1994.
Mr. Austin previously served on the Company's Board of Directors from 1983 to
1986. Now retired, Mr. Austin was Corporate Vice President of American
Cyanamid Company, with responsibility for all aspects of its global
agricultural business, from 1978 until 1988. Mr. Austin also currently serves
as a director of MGI Pharma, Inc. and Hyal Pharmaceutical Corp. and is
Chairman of the Board of Embrex, Inc. He graduated from the University of
Illinois, where he received a B.S. in Agronomy and an M.S. in Soil Chemistry.
John E. Bagalay, Jr., 63, 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 has served as the
Managing Director of Community Technology Fund, the venture capital affiliate
of Boston University, since September 1989. 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 Seragen, Inc., Wave Systems Corporation and several
privately-held companies in the biotechnology industry. 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, 63, 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 is a director of Aronex
Pharmaceuticals, Inc. and several privately-held healthcare and environmental
companies. He 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.
James A. Grigsby, 54, has been a director of the Company since May 1996.
Since 1994, Mr. Grigsby has been president of Cancer Care Management LLC, a
consulting firm providing consulting services to managed care companies
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.
Robert F. Hendrickson, 64, 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
2
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.
Thomas J. McKearn, 48, joined the Company in July 1981 as Vice President,
Research and Development. He has served as the Company's Chairman since May
1996, Chief Executive Officer since January 1994 and President since September
1991. Dr. McKearn previously served as Executive Vice President of the Company
from June 1990 to August 1991 and Senior Vice President, Scientific Affairs of
the Company through June 1990. He has been a director of the Company since
1981. Dr. McKearn has also served as a director of Targon Corporation since
1996 and as President and a director of Cellcor since 1995. From 1978 until he
joined the Company, Dr. McKearn was an Assistant Professor in the Department
of Pathology at the University of Pennsylvania and Head of the Immunoprotein
Laboratory at the Hospital of the University of Pennsylvania. He retains a
position as Adjunct Associate Professor in the Department of Pathology at the
University of Pennsylvania. Dr. McKearn is a member of the Scientific Advisory
Board for Rider College. Dr. McKearn holds a B.A. degree from Indiana
University, a Ph.D. degree in Immunology from the University of Chicago and an
M.D. degree from the Pritzker School of Medicine at the University of Chicago.
William C. Mills III, 41, has been a director of the Company since July 1983
and served as Chairman of the Board of the Company from January 1995 through
May 1996. Since April 1, 1988, he has been a General Partner of The Venture
Capital Fund of New England, Boston, Massachusetts, a series of private
venture capital partnerships. Prior to that, Mr. Mills was a General Partner
of PaineWebber Ventures, and certain of its predecessor partnerships since
April 1981. Mr. Mills holds an A.B. degree from Princeton University, an S.M.
degree in Chemistry from The Massachusetts Institute of Technology, and an
S.M. degree in Management from M.I.T.'s Sloan School of Management.
Donald E. O'Neill, 71, became a director of the Company in May 1995. From
1986 until his retirement in March 1991, Mr. O'Neill served as Executive Vice
President and Chairman, International Operations, and a director of Warner-
Lambert Company, an international healthcare and consumer company. He joined
Warner-Lambert in March 1971 as President, Warner-Chilcott Division, the
pharmaceutical division of Warner-Lambert. He held numerous key management
positions at Warner-Lambert and Parke-Davis and Company, a division of Warner-
Lambert, which includes pharmaceutical and medical devices. Mr. O'Neill
currently serves as a director for several companies, including Alliance
Pharmaceutical Corp., Fujisawa USA, Immunogen, Inc., MDL Info Systems,
Targeted Genetics Corp. and Fuisz Technologies. Mr. O'Neill holds a B.S.
degree from the University of Washington.
COMMITTEES OF THE BOARD OF DIRECTORS
The standing committees of the Board of Directors are the Audit Committee,
the Compensation Committee and the Nominating Committee.
The Audit Committee recommends 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 the adequacy of financial and accounting procedures and
controls. The Audit Committee met twice during 1996. Its current members are
Robert F. Hendrickson (Chairman), John E. Bagalay, Jr., and James A. Grigsby.
The Compensation Committee evaluates the performance of the Company's
Chairman and 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 the 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 1996. Its current members are Charles E. Austin (Chairman), Donald E.
O'Neill and Ronald J. Brenner.
3
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 did not hold any separate formal
meetings during 1996. Its current members are Thomas J. McKearn and William C.
Mills III. 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.
DIRECTOR COMPENSATION
In 1996, each director who is not also an officer of the Company was paid an
annual retainer of $7,500, plus $800 for each Board meeting attended ($400 if
participation was by telephone). Any director who also served on a Board
committee received an additional annual fee of $500 for serving on the
committee and $1,000 for serving as chairman of any Board committee, plus $250
for each committee meeting attended, except that the members of the Nominating
Committee did not receive any compensation for serving on that committee. Upon
his appointment as Chairman of the Board, the Board of Directors determined
that Dr. McKearn should receive an increase in base salary of $18,375 and a
one-time only stock option to purchase 30,000 shares of Common Stock under the
Cytogen Corporation 1995 Stock Option Plan, as amended (the "1995 Stock Option
Plan").
Also, 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 is 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 is
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.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
Notwithstanding anything to the contrary set forth in any of the Company's
filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, including previous filings that might
incorporate future filings, including this Proxy Statement, in whole or in
part, this report and the Performance Graph contained in this Proxy Statement
shall not be incorporated by reference into any such filings.
The Company's compensation program, both for its executive officers as well
as for all employees, is based on the belief that the interests of the
employees should be closely aligned with those of the Company's stockholders.
To support this philosophy, the following principles provide a framework for
the compensation program:
. offer compensation opportunities that 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;
. maintain a portion of total compensation at risk, tied to both meeting
strategic objectives of the Company, as well as to meeting individual
performance objectives; and
. encourage individuals to manage from the perspective of owners with an
equity stake in the Company.
4
For 1996, the Company's compensation program was benchmarked by the use of
(a) an independent outside consultant, (b) external surveys of both the high-
tech and biotechnology industry, and (c) a comparison to companies with
similar market capitalization. These companies, which are representative of
the firms with which the Company competes for employee talent and which employ
individuals in jobs similar in magnitude, complexity and scope of
responsibility to those at the Company, form the basis for the survey group
used by the Committee.
COMPONENTS OF EXECUTIVE COMPENSATION
The Compensation Committee implements the principles described above through
a combination of competitive base salary and benefits, cash bonuses and stock
option awards. Effective at the beginning of each year, each executive officer
is assigned numerous objectives to meet, which objectives are consistent with
the Company's achieving its Strategic Plan. The Committee gauges individual
performance in several areas, including the development and execution of
objectives, leadership, and development of and contributions to programs that
affect the Company's overall Strategic Plan. All of the Committee's judgments
during 1996, as in prior years, regarding the appropriate form and level of
executive compensation payments and awards were ultimately based upon the
executive officer's level of responsibility and individual performance, and
the performance of the Company within its sector of the healthcare industry.
At the beginning of 1996, base salaries and annual incentives for the
executive officers were favorably impacted by a number of events that occurred
in 1995, including the completion of two filings with the FDA, FDA approval of
repeat administration for OncoScint CR/OV, several successful financing
transactions, the completion of the merger with CytoRad Incorporated and the
acquisition of Cellcor. As a result, the executive officers received both an
increase in base salary for 1996 as well as an annual incentive based upon
1995 performance.
In the fourth quarter of 1996, the Compensation Committee met to determine
base salaries for 1997 and annual incentives and stock option awards for 1996.
At that time, the Committee reviewed overall corporate performance during
1996. The Company's performance was favorably impacted in general by
individuals' meeting their objectives for the year, and in particular by the
following achievements: FDA approval of ProstaScint (the Company's prostate
cancer imaging agent); the signing of a research and license agreement with
Elan Corporation, plc (together with its affiliates, "Elan"); the signing of
several manufacturing contracts to increase contract revenues; and the
completion of several financing transactions raising an aggregate of
approximately $20 million (exclusive of the Targon transaction described in
another section of this Proxy Statement). Achievements also included the
formation of two new subsidiaries, AxCell Biosciences Corporation ("AxCell")
(which will utilize the Company's Genetic Diversity Library technology for
rapid target discovery) and Targon Corporation ("Targon") (which will focus
exclusively on the rapid development, registration, manufacturing and
commercialization of differentiated oncology products), formed by the Company
in collaboration with Elan.
LONG-TERM INCENTIVES
The Compensation Committee believes that stock options are presently an
appropriate vehicle to link its employees' interest in the Company with those
of its 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
generally have a life of ten years, vest over five years, and have an exercise
price equal to the fair market value of the Common Stock on the date of grant.
Also, the exercisability of stock options is conditioned upon the executive
officer's continued employment with the Company; thus, unexercised stock
options are forfeited within a designated period of time following the
executive officer's leaving the Company.
5
The stock option awards received by executive officers for 1996 were set
taking into account the comparison of practices at peer groups (in the surveys
already mentioned), an individual's level of responsibility and achievement of
Strategic Plan objectives, and the amount and terms of past stock option
awards. When compared to available surveys, stock option awards made in the
past to the executive officers as well as to the Chief Executive Officer have
lagged behind the marketplace. Therefore, the Company increased slightly its
stock option awards to executive officers for 1996.
BROAD-BASED EMPLOYEE STOCK OPTION PLAN
In addition to granting stock options to the Company's current executive
officers under the programs described above, the Committee also granted
approximately 533,520 stock options to approximately 157 other employees under
the Company's broad-based employee stock option program in 1996. This broad-
based program was initiated in 1992 and is a vital element of the Company's
drive to empower and motivate long-term contributions by outstanding employees
who will lead the Company into the 21st century. It is designed to create in
the Company an entrepreneurial spirit and to provide broad incentives for the
day-to-day achievements of these employees, which, in turn, will build the
Company's long-term performance. The Committee believes that the outstanding
performance of these individuals has contributed significantly to the
achievements that led to the Company's continuing as a viable biotechnology
entity during 1996.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
In determining the compensation of Dr. McKearn for 1996, the Compensation
Committee considered the same factors that it considered when determining
compensation for the Company's other executive officers, including the
Company's performance as a whole. Due to the improved overall performance of
the Company in 1996, Dr. McKearn was granted options to purchase 125,000
shares of Common Stock under the 1995 Stock Option Plan and was awarded an
annual incentive of $49,150 in recognition of 1996 performance. Also, in
recognition of his increased responsibilities associated with his appointment
to Chairman of the Board in May 1996, Dr. McKearn was granted a one-time only
stock option to purchase 30,000 shares of Common Stock under the 1995 Stock
Option Plan and an increase in base salary of $18,375.
The Committee believes the Chief Executive Officer's role has a greater
individual significance for the Company than that of the other members of
executive management. It is due to this belief that the Company executed the
Stock Compensation and Performance Option Agreement with Dr. McKearn in 1994.
Under the terms of this agreement, Dr. McKearn received 10,000 shares of
restricted stock in each of 1994, 1995 and 1996. Under this agreement, Dr.
McKearn also received a grant of stock options to purchase up to an aggregate
of 100,000 shares of Common Stock under the Cytogen Corporation 1989 Employee
Stock Option Plan. The incremental vesting of this award is based upon the
Committee's review of Dr. McKearn's performance measured against a written set
of objectives for the year, which the Committee approves at the beginning of
each such year. In March 1997, the Committee decided that 17,000 shares of the
20,000 shares allowable under the third installment of the grant should vest.
In addition, effective March 15, 1995, the Company and Dr. McKearn entered
into a Split Dollar Collateral Assignment Agreement. Under this agreement, the
Company will be 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. Dr. McKearn has assigned to the Company certain specific rights
in the policies, including, among other things, the right to receive any
insurance proceeds in excess of $2,000,000, and upon surrender of the policies
by Dr. McKearn, the right to receive 100% of the cash surrender value up to an
amount equal to the total premiums paid by the Company. Dr. McKearn remains
the owner of these policies only until the termination of his employment with
the Company, unless he then repays to the Company the total amount of the
premiums paid by the Company in respect of those policies.
* * * * *
6
The Committee believes that performance should be rewarded, that the
financial interests of the executive officers should be aligned with the
stockholders, and that compensation should be competitive. We have structured
compensation at the Company to meet these criteria.
The foregoing report on compensation is provided by the following outside
directors, who constituted the Compensation Committee during 1996:
Charles E. Austin (Chairman)
Donald E. O'Neill
Ronald J. Brenner
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee during 1996 were Charles E. Austin
(Chairman), Donald E. O'Neill and Ronald J. Brenner. None of these gentlemen
were officers or employees of the Company while serving on the Compensation
Committee. Mr. Brenner served as the Company's President and Chief Executive
Officer from 1984 to 1988.
7
EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term compensation awarded
to, earned by or paid to (i) the Company's Chief Executive Officer, and (ii)
the other four most highly compensated executive officers of the Company, for
services rendered to the Company during the Company's fiscal years ended
December 31, 1996, December 31, 1995 and December 31, 1994.
SUMMARY COMPENSATION TABLE
ANNUAL LONG-TERM
COMPENSATION(1) COMPENSATION
------------------------------------ ----------------------
OTHER RESTRICTED SECURITIES
ANNUAL STOCK UNDERLYING ALL OTHER
FISCAL SALARY(2) BONUS(3) COMPEN- AWARD OPTIONS COMPENSATION(4)
NAME AND PRINCIPAL POSITION YEAR ($) ($) SATION ($) ($) (#) ($)
- --------------------------- ------ --------- -------- ---------- ---------- ---------- ---------------
Thomas J. McKearn............ 1996 $284,181 $49,150 $ 0 $ 0(5) 155,000(6) $10,650(7)
Chairman, President and 1995 250,000 38,500 0 0(5) 135,000(6) 10,876
Chief Executive Officer 1994 254,247 0 0 72,825(5) 140,000(6) 8,262
Frederick M. Miesowicz(8).... 1996 207,985 26,950 0 0 40,000 4,191
Vice President 1995 189,496 29,000 0 0 98,000 480
Robert T. Maguire(9)......... 1996 190,733 23,750 0 0 55,000 8,229
Vice President, Medical 1995 175,100 39,865 0 0 52,000 8,055
Affairs 1994 169,887 0 0 0 5,500 7,928
John D. Rodwell.............. 1996 187,198 35,150 0 0 82,000 8,499
Senior Vice President 1995 170,000 29,000 0 0 90,000 8,038
and Chief Scientific 1994 173,289 0 0 0 60,000 8,085
Officer
Richard J. Walsh(10)......... 1996 176,443 43,375 0 0 70,000 8,470
Vice President, Marketing 1995 170,735 22,000 20,263(11) 0 55,000 8,137
and Commercial Development 1994 90,813 0 0 0 85,000 302
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(1) The value of certain perquisites or personal benefits is not included in
the amounts disclosed because it did not exceed for any named individual
the lesser of either $50,000 or 10% of total annual salary and bonus
reported for such individual in the Summary Compensation Table.
(2) The amounts disclosed in this column for fiscal year 1994 include amounts
that were actually earned in fiscal year 1993, but were not paid until
fiscal year 1994, as follows: Dr. McKearn, $4,230; and Dr. Rodwell,
$3,092.
(3) The amounts disclosed in this column reflect bonus amounts that were
earned in the respective fiscal years, although they may have been paid
in succeeding years.
(4) 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 1996,
these amounts were as follows: on behalf of Dr. McKearn, $7,750; Dr.
Miesowicz, $3,697; Dr. Maguire, $7,750; Dr. Rodwell, $7,750; and Mr.
Walsh, $7,750. The amounts disclosed also include insurance premiums paid
by the Company with respect to group term life insurance and with respect
to fiscal year 1996, these amounts were as follows: on behalf of Dr.
McKearn, $740; Dr. Miesowicz, $494; Dr. Maguire, $479; Dr. Rodwell, $749;
and Mr. Walsh, $720.
(5) 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
8
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.
(6) 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
cancelled and ineligible for future vesting under the grant. In December
1994, the Compensation Committee considered the vesting of the first
installment of 20,000 shares and determined that 10,000 shares should
vest. 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".
(7) Effective March 15, 1995, the Company and Dr. McKearn entered into a
Split Dollar Collateral Assignment Agreement. Under this agreement, the
Company will be 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 portion of the total premiums ($43,710) paid by the
Company under these insurance policies in fiscal year 1996 that is
attributable to term life insurance coverage (a total of $2,160). The
current dollar value of the benefit to Dr. McKearn of the remainder of
the premiums paid by the Company during fiscal year 1996 is $0. The
benefit was calculated based upon the difference between the payment of
the premium and its refund at the earliest possible time to the Company.
For a description of the Split Dollar Collateral Assignment Agreement,
see "Employment and Severance Arrangements".
(8) Dr. Miesowicz was elected as a Vice President of the Company, effective
October 20, 1995. Dr. Miesowicz also serves as Vice President and General
Manager of Cellcor. A portion of the amount included in the Summary
Compensation Table for 1995 reflects salary paid to Dr. Miesowicz by
Cellcor in fiscal year 1995, prior to the merger, for services rendered
in his capacity as Cellcor's Senior Vice President of Scientific Affairs.
(9) Dr. Maguire was elected an executive officer of the Company, effective
September 26, 1995, and serves as the Company's Vice President, Medical
Affairs. Prior to that date, Dr. Maguire was employed by the Company as
Vice President, Clinical Investigations. Effective April 1, 1997, Dr.
Maguire will be a full-time employee of Targon Corporation, serving as
its Executive Vice President and Chief Scientific Officer.
(10) Mr. Walsh joined the Company as Vice President, Corporate Development,
effective June 20, 1994.
(11) Under the terms of his offer of employment, Mr. Walsh was awarded 5,000
shares of Common Stock. The amount included in the Summary Compensation
Table for 1995 reflects the aggregate value of those shares on the date
they were purchased by Mr. Walsh, which value is based upon the closing
market price of the Company's unrestricted stock on that date ($20,313),
less the price paid for the shares by Mr. Walsh ($50).
EMPLOYMENT AND SEVERANCE ARRANGEMENTS
Dr. Thomas J. McKearn, who has served as the Company's President since
September 1991, was appointed to serve as the Company's Chief Executive
Officer effective January 1, 1994. Dr. McKearn has entered into agreements
with the Company pursuant to which he earned or received (i) base salary of
$284,181 in fiscal year 1996, (ii) a restricted stock grant of 10,000 shares
in each of 1994, 1995, and 1996, (iii) a stock option granted effective
January 3, 1994 to purchase up to an aggregate of 100,000 shares of Common
Stock at an exercise price of approximately $6.188 per share, with vesting
determined by the Compensation Committee based upon the meeting of certain
performance criteria established by the Compensation Committee, and (iv) a
$2.3 million split-dollar life insurance policy (described below) effective
fiscal year 1995. Vesting of the shares subject to the options described in
(iii) above as to which no determination has been made by the Compensation
Committee, may be accelerated under certain circumstances involving a change
in control of the Company. A change in control of the Company is defined as
(a) the Company enters into an agreement to merge or consolidate the Company
with or into another corporation, or to dispose of all or substantially all of
the Company's assets;
9
(b) any person other than the Company makes a tender or exchange offer for
more than 50% of the Common Stock of the Company; (c) stock representing more
than 50% of the voting power of the Company is acquired by any person other
than the Company during any 24-month period; or (d) a change in the majority
of the Board of Directors during any 24-month period. Dr. McKearn is also
entitled to one year's severance pay if he is dismissed for reasons other than
just cause.
Effective March 15, 1995, the Company and Dr. McKearn entered into a Split
Dollar Collateral Assignment Agreement. Under this agreement, the Company will
be 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. Dr. McKearn has assigned to the Company certain specific rights in
the policies, including, among other things, the right to receive any
insurance proceeds in excess of $2,000,000, and upon surrender of the policies
by Dr. McKearn, the right to receive 100% of the cash surrender value up to an
amount equal to the total premiums paid by the Company. Dr. McKearn remains
the owner of these policies only until the termination of his employment with
the Company, unless he repays to the Company the total amount of the premiums
paid by the Company in respect of those policies.
T. Jerome Madison is Vice President, Chief Financial Officer, Secretary and
a director of the Company, although he will not stand for reelection to the
Board of Directors at the 1997 Annual Meeting. Mr. Madison's services are
provided to the Company pursuant to an Employee Leasing Agreement dated
September 26, 1996 between the Company and Somerset Central Corporation, a New
Jersey corporation of which Mr. Madison is the sole stockholder and an officer
and director. Mr. Madison began providing such services to the Company in
October 1993. The agreement calls for monthly payments of $16,014 plus
expenses. The agreement also provides for a grant of (i) an aggregate of
30,000 shares of the Company's Common Stock (at a purchase price of $.01 per
share), with 10,000 shares to be issued upon execution of the agreement and
upon each of the first and second anniversary dates of the agreement, and (ii)
an option to purchase up to 40,000 shares of the common stock of AxCell. Under
the terms of the agreement, Mr. Madison may also be entitled to receive
discretionary grants of options to purchase shares of Common Stock of both the
Company and AxCell from time to time as approved by the Boards of Directors of
the respective companies for service both in his capacity as Vice President
and Chief Financial Officer of the Company and as a director of Axcell. For
the year ended December 31, 1996, the Company recorded approximately $230,318
for services rendered and expenses reimbursed under the agreement. The amount
recorded in respect of fiscal year 1996 includes a one-time, $35,566 special
fee earned for effecting certain specified events during 1996. As an executive
officer of the Company, Mr. Madison was also granted options for the purchase
of 65,000 shares of Common Stock at an exercise price of $5.00 per share.
Under the terms of his offer of employment, Mr. Walsh will be entitled to
receive as severance pay six months of salary (increased by an additional
month for each year of service, up to a maximum of twelve months) if his
employment with the Company is terminated without cause.
Under the terms of a severance agreement dated March 26, 1996, Dr. Rodwell
will be entitled to receive twelve months of salary if his employment with the
Company is terminated without cause.
10
The following table sets forth information regarding individual grants of
stock options to the named executive officers during fiscal year 1996:
OPTION GRANTS IN FISCAL YEAR 1996
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM (3)
------------------------------------------------ -------------------------------
PERCENT OF
NUMBER OF TOTAL
SECURITIES OPTIONS EXERCISE OR
UNDERLYING GRANTED TO BASE PRICE
OPTIONS EMPLOYEES IN (PER EXPIRATION
NAME GRANTED(1) FISCAL YEAR(1) SHARE)(2) DATE 0% 5%($) 10%($)
---- ---------- -------------- ----------- ---------- ------- ----------- -----------
Thomas J. McKearn....... 125,000 11.72 $5.0000 11/26/06 0 393,056 996,087
30,000 2.81 7.7813 07/23/06 0 146,807 372,040
Frederick M. Miesowicz.. 40,000 3.75 5.0000 11/26/06 0 125,777 318,747
Robert T. Maguire....... 55,000 5.16 5.0000 11/26/06 0 172,944 438,277
John D. Rodwell......... 62,000 5.81 5.0000 11/26/06 0 194,956 494,059
20,000 1.88 7.7813 07/23/06 0 97,871 248,027
Richard J. Walsh........ 70,000 6.56 5.0000 11/26/06 0 220,111 557,808
- --------
(1) All options granted in fiscal year 1996 to the named executive officers
were granted pursuant to the 1995 Stock Option Plan. All options granted
in fiscal year 1996 to employees of the Company (1,066,520) were granted
pursuant to the 1995 Stock Option Plan and the 1992 Employee Stock Option
Plan II, as amended. All of the options granted to the named executive
officers vest over five years at the rate of 20% 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.
(2) The exercise price of all stock options granted during the last fiscal
year is equal to the mean 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.
11
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information regarding aggregated exercises of
stock options by the named executive officers during fiscal year 1996 and
fiscal year-end values of unexercised options:
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE-
UNEXERCISED MONEY OPTIONS AT
OPTIONS AT FY-END FY-END(1)(2)
-------------------- --------------------
(#) ($)
SHARES ACQUIRED VALUE REALIZED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(#) ($)(1) UNEXERCISABLE UNEXERCISABLE
---- --------------- -------------- -------------------- --------------------
Thomas J. McKearn....... 0 0 282,800/ 154,893/
378,200 318,910
Frederick M. Miesowicz.. 15,000 89,650 129,532/ 102,082/
142,268 142,078
Robert T. Maguire....... 0 0 65,760/ 27,830/
110,540 96,011
John D. Rodwell......... 0 0 118,200/ 79,602/
207,400 191,165
Richard J. Walsh........ 0 0 45,000/ 56,242/
165,000 180,919
- --------
(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, 1996 was $5.266.
12
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,
1991 to December 31, 1996) 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]
- -----------------------------------------------------------------------------------------------------
1991 1992 1993 1994 1995 1996
- -----------------------------------------------------------------------------------------------------
Cytogen Corporation $100.00 $118.92 $32.43 $21.96 $28.38 $29.73
- -----------------------------------------------------------------------------------------------------
NASDAQ U.S. Stocks Index $100.00 $116.38 $133.60 $130.59 $184.68 $227.17
- -----------------------------------------------------------------------------------------------------
NASDAQ Pharmaceutical Index $100.00 $83.22 $14.18 $55.83 $102.14 $102.25
- -----------------------------------------------------------------------------------------------------
Assumes $100 invested on December 28, 1991 in Cytogen Common Stock,
NASDAQ U.S. Stocks Index and NASDAQ Pharmaceutical Index
*Total return assumes reinvestment of dividends
13
SECURITY OWNERSHIP OF MANAGEMENT
AND PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as of February 28, 1997,
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. The number of shares set forth below includes those shares of
Common Stock issuable pursuant to options which are exercisable or shares
which are convertible within 60 days of February 28, 1997.
NUMBER PERCENTAGE
NAME AND ADDRESS(1) OF SHARES OF CLASS
- ------------------- --------- ----------
Henry L. Hillman, Elsie Hilliard Hillman and C.G.
Grefenstette, Trustees
2000 Grant Building
Pittsburgh, PA 15219 (2)................................. 5,551,524 10.87%
Ronald J. Brenner
One Tower Bridge
Suite 1350
100 Front Street
West Conshohocken, PA 19428 (4)(6)....................... 3,803,709 7.45%
Hillman Medical Ventures partnerships
824 Market Street, Suite 900
Wilmington, DE 19801 (3)................................. 3,713,909 7.27%
Hal S. Broderson
One Tower Bridge
Suite 1350
100 Front Street
West Conshohocken, PA 19428 (4).......................... 3,715,009 7.27%
Charles G. Hadley
One Tower Bridge
Suite 1350
100 Front Street
West Conshohocken, PA 19428 (4).......................... 3,714,159 7.27%
Elan International Services, Ltd. and affiliates
102 Saint James Court
Flatts Smiths FL 04, Bermuda (5)......................... 2,718,250 5.14%
Thomas J. McKearn (6)..................................... 637,800 1.24%
Frederick M. Miesowicz (6)................................ 136,199 *
T. Jerome Madison (6)..................................... 168,844 *
Robert T. Maguire (6)..................................... 65,760 *
John D. Rodwell (6)(7).................................... 189,200 *
Richard J. Walsh (6)...................................... 50,000 *
John E. Bagalay, Jr. (6)(8)............................... 200,152 *
William C. Mills III (6).................................. 17,710 *
Charles E. Austin (6)..................................... 3,700 *
James A. Grigsby.......................................... 4,000 *
Robert F. Hendrickson (6)................................. 7,200 *
Donald E. O'Neill (6)..................................... 6,600 *
All executive officers and directors as a group (16 per-
sons) (6)................................................ 5,316,744 10.25%
- --------
* Indicates amount is less than 1%.
14
(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.
(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"), 1,696,540
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 1,785,715 shares of Common Stock issuable upon conversion of
1,000 shares of the Company's Series A Convertible Preferred Stock.
(6) Includes shares of Common Stock which the named persons have the right to
acquire upon the exercise of stock options, within sixty days of February
28, 1997, as follows: Dr. McKearn: 302,800; Dr. Miesowicz: 136,199; Mr.
Madison: 75,000; Dr. Maguire: 65,760; Dr. Rodwell: 124,200; Mr. Walsh:
45,000; Mr. Mills: 7,000; Mr. Austin: 3,200; Dr. Brenner: 1,600; Dr.
Bagalay: 1,600; Mr. Hendrickson: 3,200; and Mr. O'Neill: 1,600. Group
number includes the shares of Common Stock which the named persons and the
following executive officer have the right to acquire upon the exercise of
stock options, within sixty days of February 28, 1997: Robert J. Broeze,
25,720 shares. Group number also includes the 150 shares of Common Stock
owned by Dr. Broeze.
(7) 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.
(8) Includes 198,552 shares of Common Stock held by B.U.N.P., a partnership
acting as nominee for Boston University. Dr. Bagalay, a partner of
B.U.N.P., shares voting and investment power over the shares held by
B.U.N.P., but disclaims beneficial ownership of such shares.
15
CERTAIN TRANSACTIONS
Elan. Targon Corporation was established in September 1996 pursuant to
agreements between the Company and Elan. Targon is a majority-owned (99.75%)
subsidiary of the Company. Elan (the beneficial owner of more than 5% of the
Company's Common Stock) purchased 932,535 shares of the Company's Common Stock
for $5 million and 1,000 shares of the Company's newly created Series A
Convertible Preferred Stock for $15 million, which proceeds are being used to
fund Targon. Targon used $10 million of these proceeds to acquire certain
technology from Advanced Therapeutics Systems Ltd., an affiliate of Elan. The
Series A Convertible Preferred Stock of the Company held by Elan may, at
Elan's option, be either (i) exchanged for a portion of the Company's interest
in Targon which declines from 50% to 35%, depending on the time of exchange,
but no later than September 30, 2001 or (ii) converted into shares of Common
Stock of the Company. If Elan elects to exchange the Series A Convertible
Preferred Stock for a portion of the Company's interest in Targon, then Elan
will be entitled through March 31, 2003 to exercise a warrant to purchase up
to 1 million shares of the Company's Common Stock, at an exercise price per
share which escalates from $8.40 to $14 over the life of the warrant. If Elan
elects to convert the Series A Convertible Preferred Stock into the Company's
Common Stock, it will receive a number of shares which declines from 1,785,715
shares to 1,071,429 shares depending on the time of conversion. If Elan
exercises its conversion right, then the Company will retain its ownership of
interest in Targon. Elan must elect to exchange its Series A Convertible
Preferred Stock no later than March 31, 2001. Any shares of Series A
Convertible Preferred Stock not exchanged or converted by March 31, 2003 will
be automatically converted into the Company's Common Stock on that date. In
connection with the formation of Targon, the Company contributed certain
technology to Targon.
In December 1995, the Company entered into a Research and Development and
Option agreement with Elan (the "Elan Agreement") under which both parties
implemented a research program that combines the Company's GDL technology with
Elan's drug delivery system technology to collaboratively develop products
that can be administered orally. Elan provides the funding necessary for the
Company to fulfill its obligations under the research program with aggregate
payments for work performed by the Company not to exceed $1.5 million during
the first 16 months of the research program. During 1996, the Company recorded
$1.3 million in contract revenues from Elan. In January 1997, Elan and the
Company entered into a license agreement granting Elan exclusive worldwide
rights to certain oral drug delivery and other products derived from the
collaboration.
Somerset Central Corporation. T. Jerome Madison is Vice President, Chief
Financial Officer, Secretary and a director of the Company, although he will
not stand for reelection to the Board of Directors at the 1997 Annual Meeting.
Mr. Madison's services are provided to the Company pursuant to an Employee
Leasing Agreement dated September 26, 1996 between the Company and Somerset
Central Corporation, a New Jersey corporation of which Mr. Madison is the sole
stockholder and an officer and director. Mr. Madison began providing such
services to the Company in October 1993. The agreement calls for monthly
payments of $16,014 plus expenses. The agreement also provides for a grant of
(i) an aggregate of 30,000 shares of the Company's Common Stock (at a purchase
price of $.01 per share), with 10,000 shares to be issued upon execution of
the agreement and upon each of the first and second anniversary dates of the
agreement, and (ii) an option to purchase up to 40,000 shares of the common
stock of AxCell. Under the terms of the agreement, Mr. Madison may also be
entitled to receive discretionary grants of options to purchase shares of
Common Stock of both the Company and AxCell from time to time as approved by
the Boards of Directors of the respective companies for service both in his
capacity as Vice President and Chief Financial Officer of the Company and as a
director of Axcell. For the year ended December 31, 1996, the Company recorded
approximately $230,318 for services rendered and expenses reimbursed under the
agreement. The amount recorded in respect of fiscal year 1996 includes a one-
time, $35,566 special fee earned for effecting certain specified events during
1996. As an executive officer of the Company, Mr. Madison was also granted
options for the purchase of 65,000 shares of Common Stock at an exercise price
of $5.00 per share.
16
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 1996 were timely filed with the
Securities and Exchange Commission as required by Section 16(a) of the
Exchange Act of 1934.
PROPOSAL TWO. APPROVAL OF PROPOSED CYTOGEN CORPORATION EMPLOYEE STOCK PURCHASE
PLAN
INTRODUCTION
The Board of Directors has adopted and recommends that the stockholders
approve the Employee Stock Purchase Plan. The purpose of the Employee Stock
Purchase Plan is to assist the Company in attracting and retaining employees
by offering them a greater stake in the Company's success and a closer
identity with it, and to encourage ownership of the Company's stock by
employees. The Employee Stock Purchase Plan will accomplish these goals by
allowing eligible employees of the Company and its subsidiaries an ongoing
opportunity to purchase the Company's Common Stock through payroll deduction
at a discounted price. The maximum number of shares of the Company's Common
Stock available for purchase under the Employee Stock Purchase Plan is
500,000, subject to adjustments for stock splits, stock dividends and the
like.
The following summary description of the Employee Stock Purchase Plan is
qualified in its entirety by the full text of the Employee Stock Purchase
Plan, copies of which may be obtained by the Company's stockholders upon
request to the Office of the Corporate Secretary of the Company.
THE EMPLOYEE STOCK PURCHASE PLAN
Eligibility. Employees of the Company and its subsidiaries whose customary
employment is at least twenty (20) hours per week or at least five (5) months
per year are eligible to participate in the Employee Stock Purchase Plan after
they have completed 12 consecutive months of employment. There are
approximately 160 employees eligible for participation in the Employee Stock
Purchase Plan. Participation in the Employee Stock Purchase Plan automatically
terminates upon an employee's ceasing to be an employee of the Company or one
of its subsidiaries.
Participant Contributions. An eligible employee participates in the Employee
Stock Purchase Plan by electing to make after-tax payroll contributions in an
amount equal to not less than one percent (1%) and not more than ten percent
(10%) of his or her base compensation. A participant's payroll contributions
to the Employee Stock Purchase Plan are allocated to a bookkeeping account
("Account") and used to purchase Common Stock on a quarterly basis.
Because the number of shares of Common Stock purchased by an eligible
employee is dependent upon the amount such employee contributes to the
Employee Stock Purchase Plan, it is not possible at this time to determine the
number of shares of Common Stock that will be acquired under the Employee
Stock Purchase Plan by any one employee or group of employees.
Purchase of Common Stock. The Employee Stock Purchase Plan permits
participants to purchase Common Stock at a 15 percent (15%) discount from the
applicable closing price of the Common Stock (as described below). The
Employee Stock Purchase Plan operates on a quarterly basis ("Offering
Periods"). Contributions allocated to a participant's Account during an
Offering Period are used to buy shares of Common Stock on the last day of such
Offering Period. The purchase price of a share of Common Stock under the
Employee Stock Purchase Plan will be the lesser of:
17
Eighty-five percent (85%) of the closing price of the Common Stock on the
Nasdaq National Market on the last day of the Offering Period; or
Eighty-five percent (85%) of the closing price of the Common Stock on the
Nasdaq National Market on the first day of the Offering Period.
Each participant is deemed to legally own all shares of Common Stock
allocated to his or her Account and is entitled to exercise all of the rights
associated with ownership of the shares, including voting, tendering and
receiving dividends on, such Common Stock.
The Company may acquire Common Stock for use under the Employee Stock
Purchase Plan from authorized but unissued shares, treasury shares, in the
open market or in privately negotiated transactions. The Company will pay all
expenses incident to the operation of the Employee Stock Purchase Plan,
including the costs of recordkeeping, accounting and legal fees and the cost
of delivery of stock certificates to participants.
Administration. An individual or committee, designated by the Board of
Directors (the "Administrator"), has exclusive authority to administer the
Employee Stock Purchase Plan. The Administrator will interpret the provisions
of the Employee Stock Purchase Plan and make all determinations necessary for
the administration of the Employee Stock Purchase Plan.
Amendment and Termination. The Board of Directors has authority to amend the
Employee Stock Purchase Plan at any time. However, the approval of the
Company's stockholders is required to: (i) increase the maximum number of
shares available for purchase under the Employee Stock Purchase Plan; (ii)
modify the Employee Stock Purchase Plan's eligibility requirements; or (iii)
cause the Employee Stock Purchase Plan to fail the requirements of Section 423
of the Internal Revenue Code of 1986, as amended (the "Code").
The Board of Directors also has authority to terminate the Employee Stock
Purchase Plan at any time. In any event, if not earlier terminated by the
Board of Directors, the Employee Stock Purchase Plan will automatically
terminate when the participants have purchased all of the shares of Common
Stock available under the Employee Stock Purchase Plan.
Federal Tax Treatment. The Employee Stock Purchase Plan is an "employee
stock purchase plan" under Section 423 of the Code. Therefore, a participant
who purchases shares of Common Stock under the Employee Stock Purchase Plan
will not be subject to Federal income tax on the difference between the fair
market value of the shares and the price actually paid for such shares at the
time of purchase. The Company is not entitled to a deduction for the
difference between the fair market value of the shares and the price paid for
such shares.
If a participant disposes of Common Stock purchased under the Employee Stock
Purchase Plan after owning the shares for at least two years, the participant
will be treated as having ordinary compensation income equal to the lesser of
(i) the excess of the fair market value of the Common Stock on the date it was
purchased over the actual purchase price, or (ii) the excess of the fair
market value of the Common Stock at the time of disposition over the actual
purchase price. The amount of the compensation income is then added to the
participant's basis in the Common Stock. The difference between the amount
realized on the sale of the Common Stock and the participant's adjusted basis
will be treated as a capital gain or loss.
If a participant disposes of Common Stock purchased under the Employee Stock
Purchase Plan before owning it for at least two years, the participant will be
treated as having ordinary compensation income equal to the excess of the fair
market value of the Common Stock on the date it was purchased over the actual
purchase price. Any additional appreciation in the Common Stock is treated as
a capital gain. In addition, if a participant disposes of Common Stock before
owning it for at least two years, the Company is entitled to a tax deduction
equal to the amount of income treated as compensation by the participant.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE IN FAVOR OF THE ADOPTION
OF THE CYTOGEN CORPORATION EMPLOYEE STOCK PURCHASE PLAN.
18
PROPOSAL THREE. RATIFICATION OF APPOINTMENT OF AUDITORS
Subject to stockholder ratification, the Board of Directors has reappointed
the firm of Arthur Andersen LLP as independent public accountants to audit the
Company's books and accounts for fiscal year 1997. If the stockholders do not
ratify this appointment, the appointment may be reconsidered by the Board of
Directors.
Arthur Andersen LLP has audited the Company's books since 1982. Audit
services provided by the firm for the year ended December 31, 1996 included
the audit of the Company's financial statements and consultation with respect
to filings with the Securities and Exchange Commission and other matters
related to accounting and financial reporting. Representatives of Arthur
Andersen LLP are expected to be present at the 1997 Annual Meeting of
Stockholders with the opportunity to make a statement if they desire to do so
and to be available to respond to appropriate questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR SUCH RATIFICATION.
PROPOSAL FOUR. 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.
FUTURE STOCKHOLDER PROPOSALS
The Company must receive at the Office of the Corporate Secretary any
proposal which a stockholder wishes to submit to the 1998 Annual Meeting of
Stockholders before December 15, 1997, 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
T. Jerome Madison
Secretary
April 14, 1997
19
[LOGO OF CYTOGEN APPEARS HERE]
Notice of 1997 Annual Meeting
and Proxy Statement
CYTOGEN CORPORATION
PROXY
SOLICITED BY THE BOARD OF DIRECTORS
THOMAS J. McKEARN and T. JEROME MADISON, 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 1, 1997
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
May 21, 1997 and at any adjournment thereof as if the undersigned were present
and voting at the meeting.
Whether 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
stockholder. 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 vote as indicated
in this example [x]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL ITEMS.
1. Election of directors duly nominated:
Nominees: Charles E. Austin, John E. Bagalay, Jr., Ronald J.
Brenner, James A. Grigsby, Robert F. Hendrickson, Thomas
J. McKearn, William C. Mills III, and Donald E. O'Neill.
FOR WITHHELD
[_] [_]
(To withhold authority to vote for any individual nominees
write such nominee's name in the space provided below).
---------------------------------------------------------
2. To consider and act upon a proposal to adopt the Cytogen Corporation
Employee Stock Purchase Plan.
FOR AGAINST ABSTAIN
[_] [_] [_]
3. To ratify the appointment of Arthur Andersen LLP as independent public
accountants for fiscal year 1997.
FOR AGAINST ABSTAIN
[_] [_] [_]
4. To transact such other business as may properly come before the
meeting.
Dated:____________________________, 1997
-----------------------------------------
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
CYTOGEN CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
The CYTOGEN Corporation Employee Stock Purchase Plan (the "Plan") is
intended to provide the eligible employees of CYTOGEN Corporation (the
"Company") and its qualifying subsidiaries a convenient means of purchasing
shares of the Company's common stock, par value $ .01 per share (the "Stock").
The Plan is intended to qualify as an "employee stock purchase plan" under
section 423 of the Internal Revenue Code of 1986, as amended (the "Code"), and
shall be administered, interpreted and construed in a manner consistent with the
requirements of that section of the Code.
ARTICLE I
DEFINITIONS
1.1 "Account" means the bookkeeping account established on behalf of each
Participant by the Administrator to record payroll deduction contributions made
by such Participant and shares of Stock purchased on his behalf.
1.2 "Administrator" means the individual or committee appointed pursuant to
Article VIII to administer the Plan.
1.3 "Board" means the Board of Directors of the Company.
1.4 "Business Day" means each day on which the Exchange (as defined in
Section 4.3) is open for business.
1.5 "Compensation" means all regular salary, wages or earnings but
excluding overtime, commissions, bonuses, amounts realized from the exercise of
a qualified or non-qualified stock option and other special incentive payments,
fees or allowances.
1.6 "Employee" means any person who is employed by the Company except an
employee whose customary employment is:
1.6.1 less than 20 hours per week; or
1.6.2 less than 5 months a year.
For the purpose of determining whether an individual is an Employee, the
definition of Company shall also include the Company's subsidiaries, if any, as
defined under Code section 424(f).
1.7 "Effective Date" means July 1, 1997, subject to the provisions of
Section 9.8 of the Plan.
1.8 "Entry Date" means January 1 and July 1 of each Plan Year.
1.9 "Offering Commencement Date" means the first Business Day of each
Offering Period.
1.10 "Offering Period" means each three month period.
1.11 "Offering Termination Date" means the last Business Day of each
Offering Period.
1.12 "Participant" means an Employee who has met the eligibility
requirements of Article II and who has elected to participate pursuant to an
election under Section 3.1.
1.13 "Plan Year" means the 12-month period ending December 31.
1.14 "Shares" means shares of Stock that have been allocated to a
Participant's Account.
1.15 "Year of Service" means a consecutive 12-month period during which an
individual was an Employee.
ARTICLE II
ELIGIBILITY
2.1 Eligibility. Except as provided in Section 3.6, an Employee who has
-----------
completed one Year of Service prior to the Effective Date and who continues to
be employed by the Company shall be eligible to participate in the Plan as of
the Effective Date. All other Employees, except as provided in Section 3.6,
shall be eligible to participate in the Plan as of the Entry Date coinciding
with or next following the completion of one Year of Service.
2.2 Eligibility Restrictions. A Participant who elects to terminate
------------------------
participation in the Plan in accordance with Section 3.5 shall be prohibited
from participating in the Plan until the Entry Date next following the date of
such termination.
ARTICLE III
PARTICIPATION
3.1 Commencement of Participation. An eligible Employee may become a
-----------------------------
Participant in the Plan on any Entry Date by completing an enrollment and
payroll deduction form and delivering it to the Company in accordance with
procedures established by the Administrator.
3.2 Payroll Deduction. At the time a Participant files his enrollment and
-----------------
payroll deduction form, he shall elect to have after-tax deductions made from
his Compensation by a whole percentage that is not less than 1% nor more than
10% of his Compensation.
3.3 Participants' Accounts. All payroll deductions made from a
----------------------
Participant's Compensation shall be credited to his Account and used to purchase
shares of Stock in
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accordance with Article V. Contributions credited to a
Participant's Account shall not accrue interest or earnings during the period
---
prior to being used to purchase shares of Stock in accordance with Article V.
3.4 Changes in Payroll Deductions. The percentage designated by a
-----------------------------
Participant as his rate of contribution under Section 3.2 shall automatically
apply to increases and decreases in his Compensation. Except as provided in
Section 3.5, a Participant may elect to change the rate of his contributions to
any other permissible rate effective as of the first day of the first payroll
period of any Offering Period provided the Participant files written notice with
the Administrator of an election to change his contribution rate at least ten
(10) Business Days before the effective date of the election.
3.5 Suspension and Resumption of Payroll Deductions. A Participant may
-----------------------------------------------
terminate contributions under the Plan as of the first day of any payroll period
by filing written notice thereof with the Administrator at least ten (10)
Business Days before the effective date of the termination. A Participant who
has terminated his participation in the Plan in accordance with the preceding
provisions, shall be prohibited from resuming contributions under the Plan until
the following Entry Date. A Participant whose contributions have been terminated
in accordance with the preceding provisions, may resume contributions under the
Plan in accordance with Section 2.2.
3.6 Restrictions on Participation. Notwithstanding any provisions of the
-----------------------------
Plan to the contrary, no Employee shall be granted an option to participate in
the Plan under the following conditions:
3.6.1 No Employee shall be granted an option if, immediately after the
grant, such Employee would own stock, and/or hold outstanding
options to purchase stock, possessing 5% or more of the total
combined voting power or value of all classes of stock of the
Company (for purposes of this paragraph, the rules of (S)424(d)
of the Code shall apply in determining stock ownership of any
Employee); or
3.6.2 No Employee shall be granted an option which permits his rights
to purchase Stock under the Plan and all other employee stock
purchase plans (as described in section 423 of the Code) of the
Company to accrue at a rate which exceeds $25,000 of fair market
value of such Stock (determined at the time such option is
granted) for each calendar year in which such option is
outstanding at any time. For purposes of this Section 3.6.2:
3.6.2.1 the right to purchase stock under an option accrues when
the option (or any portion thereof) first becomes
exercisable during the calendar year;
-3-
3.6.2.2 the right to purchase stock under an option accrues at
the rate provided in the option, but in no case may such
rate exceed $25,000 of fair market value of such stock
(determined at the time such option is granted) for any
one calendar year; and
3.6.2.3 a right to purchase stock which has accrued under one
option granted pursuant a plan may not be carried over to
any other option.
ARTICLE IV
OFFERINGS
4.1 Quarterly Offerings. The Plan shall be implemented through quarterly
-------------------
offerings of the Company's Stock. Each Offering Period shall begin on the
Offering Commencement Date and shall end on the Offering Termination Date.
4.2 Purchase Price. The "Purchase Price" per share of Stock with respect
--------------
to each Offering Period shall be the lesser of:
4.2.1 Eighty-five (85) percent of the official closing price of the
Stock on the Offering Termination Date on the National
Association of Securities Dealers Automated Quotations (or on
such other national securities exchange upon which the Stock may
then be listed, hereinafter referred to as the "Exchange") or if
no sale of Stock occurred on such date, the official closing
price on the preceding Business Day; or
4.2.2 Eighty-five (85) percent of the official closing price of the
Stock on the Offering Commencement Date on the Exchange (or if
no sale of Stock occurred on such date, the closing price on the
preceding business day).
4.3 Maximum Offering. The maximum number of shares of Stock which shall be
----------------
issued under the Plan, subject to adjustment upon changes in capitalization of
the Company as provided in Section 9.3, shall be 500,000 shares. If the total
number of shares which would be purchased during any Offering Period exceeds the
maximum number of available shares, the Administrator shall make a pro rata
allocation of the available shares in a manner that it determines to be
equitable and the balance of payroll deductions credited to the Accounts of
Participants shall be returned to such Participants as soon as administratively
practicable.
-4-
ARTICLE V
PURCHASE OF STOCK
5.1 Automatic Exercise. On each Offering Termination Date, each
------------------
Participant shall automatically and without any act on his part be deemed to
have purchased Stock to the full extent of the payroll deductions credited to
his Account during the Offering Period ending on such Offering Termination Date.
5.2 Fractional Shares. Fractional shares of Stock may not be purchased
-----------------
under the Plan.
5.3 Acquisition of Stock. The Company may acquire Stock for use under the
--------------------
Plan from authorized but unissued shares, treasury shares, in the open market or
in privately negotiated transactions.
5.4 Accounting for Purchased Stock. All shares of Stock purchased pursuant
------------------------------
to Section 5.1 shall be allocated as Shares to the appropriate Participant's
Account as of the Offering Termination Date on which such shares are purchased.
ARTICLE VI
ACCOUNTING
6.1 General. The Administrator shall establish procedures to account for
-------
payroll deductions made by a Participant, the number of Shares of Stock
purchased on a Participant's behalf and the number of Shares allocated to a
Participant's Account.
6.2 Registration of Stock. Shares of Stock allocated to a Participant's
---------------------
Account shall be registered in the name of the Company or its nominee for the
benefit of the Participant on whose behalf such shares were purchased.
6.3 Accounting for Distributions. Shares of Stock distributed or sold from
----------------------------
a Participant's Account shall be debited from his Account on a first-in first-
out basis.
6.4 Account Statements. Each Participant shall receive at least semi-
------------------
annual statements of all payroll deductions and shares of Stock allocated to his
Account together with all other transactions affecting his Account.
ARTICLE VII
WITHDRAWALS AND DISTRIBUTIONS
7.1 Withdrawal of Shares. A Participant may elect to withdraw any number
--------------------
of Shares allocated to his Account by providing notification to the Company in
accordance with procedures established by the Administrator. As soon as
administratively practicable following notification of a Participant's election
to withdraw Shares, the Administrator shall cause a certificate representing the
number of Shares to be withdrawn to be delivered to the Participant.
-5-
7.2 Distribution Upon Termination. As soon as administratively practicable
-----------------------------
after a Participant's termination of employment with the Company or a
participating subsidiary for any reason, a certificate representing all of such
Participant's Shares shall be distributed to him (or his executor, in the event
of his death).
7.3 Distribution of Payroll Deductions. In the event a Participant
----------------------------------
terminates his employment with the Company or a participating subsidiary or his
participation in the Plan is terminated pursuant to Section 3.5, any payroll
deductions allocated to his Account and not yet applied to purchase Stock in
accordance with Section 5.1 shall be distributed to him in a cash lump sum as
soon as administratively practicable thereafter.
ARTICLE VIII
ADMINISTRATION
8.1 Appointment of Administrator. The Board shall appoint an individual or
----------------------------
committee comprised of so many members as the Board shall determine to
administer the Plan. The Board may from time to time, if the plan is
administered by a committee, appoint members to the committee in substitution
for or in addition to members previously appointed and may fill vacancies,
however caused, in the committee.
8.2 Authority of Administrator. The Administrator shall have the exclusive
--------------------------
power and authority to administer the Plan, including without limitation the
right and power to interpret the provisions of the Plan and make all
determinations deemed necessary or advisable for the administration of the Plan.
All such actions, interpretations and determinations which are done or made by
the Administrator in good faith shall be final, conclusive and binding on the
Company, the Participants and all other parties and shall not subject the
Administrator to any liability.
8.3 Administrator Procedures. The Administrator shall hold its meetings at
------------------------
such times and places as it shall deem advisable and may hold telephone
meetings. In the event that the Administrator is a committee, a majority of its
members shall constitute a quorum and all determinations shall be made by a
majority of its members. Any decision or determination reduced to writing and
signed by the Administrator shall be as fully effective as if it had been made
by a majority vote at a meeting duly called and held. The Administrator may
appoint a secretary and shall make such rules and regulations for the conduct of
its business as it shall deem advisable.
8.4 Expenses. The Company will pay all expenses incident to the operation
--------
of the Plan, including the costs of recordkeeping, accounting fees, legal fees
and the costs of delivery of stock certificates to Participants.
-6-
ARTICLE IX
MISCELLANEOUS
9.1 Transferability. Neither payroll deductions credited to a
---------------
Participant's Account nor any rights with regard to the purchase of Stock under
the Plan may be assigned, transferred, pledged or otherwise disposed of in any
way by the Participant other than by will or the laws of descent and
distribution.
9.2 Status as Owner. Each Participant shall be deemed to legally own all
---------------
shares of Stock allocated to his Account and shall be entitled to exercise all
rights associated with ownership of the shares, including, without limitation,
the right to vote such shares in all matters for which Stock is entitled to
vote, receive dividends, if any, and tender such shares in response to a tender
offer.
9.3 Adjustment Upon Changes in Capitalization. In the event of a
-----------------------------------------
reorganization, recapitalization, stock split, spin-off, split-off, split-up,
stock dividend, combination of shares, merger, consolidation or any other change
in the corporate structure of the Company, or a sale by the Company of all or
part of its assets, the Board may make appropriate adjustments in the number and
kind of shares which are subject to purchase under the Plan and in the exercise
price applicable to outstanding options.
9.4 Amendment and Termination. The Board shall have complete power and
-------------------------
authority to terminate or amend the Plan (including without limitation the power
and authority to make any amendment that may be deemed to affect the interests
of any Participant adversely); provided, however, that the Board shall not,
without the approval of the shareholders of the Company (i) increase the maximum
number of shares which may be offered under the Plan (except pursuant to Section
9.3); (ii) modify the requirements as to eligibility for participation in the
Plan; or (iii) in any other way cause the Plan to fail the requirements of
section 423 of the Code.
The Plan and all rights of Employees hereunder shall terminate: (i) at
any time, at the discretion of the Board, in which case any cash balance in
Participants' Accounts shall be refunded to such Participants as soon as
administratively possible; or (ii) on the Offering Termination Date on which
Participants become entitled to purchase a number of shares of Stock that
exceeds the maximum number of shares available under the Plan.
9.5 No Employment Rights. The Plan does not, directly or indirectly,
--------------------
create in any Employee any right with respect to continuation of employment by
the Company and it shall not be deemed to interfere in any way with the
Company's right to terminate, or otherwise modify, an Employee's terms of
employment at any time.
9.6 Withholding. To the extent any payments or distributions under this
-----------
Plan are subject to Federal, state or local taxes, the Company is authorized to
withhold all applicable taxes. The Company may satisfy its withholding
obligation by (i) withholding shares of Stock allocated to a
-7-
Participant's Account, (ii) deducting cash from a Participant's Account, or
(iii) deducting cash from a Participant's other compensation. A Participant's
election to participate in the Plan authorizes the Company to take any of the
actions described in the preceding sentence.
9.7 Use of Funds. All payroll deductions held by the Company under this
------------
Plan may be used by the Company for any corporate purpose and the Company shall
not be obligated to hold such payroll deductions in trust or otherwise segregate
such amounts.
9.8 Shareholder Approval. Notwithstanding the provision of Section 1.7 of
--------------------
the Plan, the Plan shall not take effect until approved by the shareholders of
the Company.
9.9 Choice of Law. Except to the extent superseded by Federal law, the
-------------
laws of the State of New Jersey will govern all matters relating to the Plan.
* * * *
To record the adoption of the Plan, CYTOGEN Corporation has caused its
authorized officers to affix its Corporate name and seal this _____ day of
___________, 1997.
[CORPORATE SEAL] CYTOGEN Corporation
Attest: ________________________ By:_________________________________
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