SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
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|_| Definitive Additional Materials
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Cytogen Corporation
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(Name of Registrant as Specified in Its Charter)
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
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CYTOGEN CORPORATION
600 College Road East
Princeton, New Jersey 08540
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held June 19, 2001
The Annual Meeting of Stockholders (the "Meeting") of CYTOGEN
CORPORATION, a Delaware corporation (the "Company"), will be held at the Holiday
Inn, Route One at Ridge Road, Princeton, New Jersey, on Tuesday June 19, 2001,
at 11:00 A.M., local time, for the following purposes:
(1) To elect seven directors to serve until the next Annual Meeting of
Stockholders and until their respective successors shall have been duly
elected and qualified;
(2) To amend the Company's 1999 Non-Employee Director Stock Option Plan (the
"Director Plan") to: (A) increase the number of shares of Common Stock
underlying automatic initial option grants under the Director Plan to new
non-employee Directors from 10,000 to 20,000 shares; and (B) provide, in
certain circumstances, at the discretion of and after formal action by
the Board of Directors, for the issuance of Common Stock under the
Director Plan to Directors, in lieu of the cash component of Director
compensation;
(3) To amend the Company's Employee Stock Purchase Plan (the "ESPP") to: (A)
decrease, from one year to six months, the term of service required to be
eligible to participate therein; and (B) delete the requirement for
stockholder approval of any modification of the ESPP with respect to
eligibility for participation in the ESPP; and
(4) To transact such other business as may properly come before the Meeting
or any adjournment or adjournments thereof.
Holders of Common Stock of record at the close of business on April 23,
2001 are entitled to notice of and to vote at the Meeting, or any adjournment or
adjournments thereof. A complete list of such stockholders will be open to the
examination of any stockholder at the Company's principal executive offices at
600 College Road East, Princeton, New Jersey 08540 for a period of 10 days prior
to the Meeting. The Meeting may be adjourned from time to time without notice
other than by announcement at the Meeting.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED REGARDLESS OF THE
NUMBER OF SHARES YOU MAY HOLD. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN
PERSON, PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND MAIL IT
PROMPTLY IN THE ENCLOSED RETURN ENVELOPE. THE PROMPT RETURN OF PROXIES WILL
ENSURE A QUORUM AND SAVE THE COMPANY THE EXPENSE OF FURTHER SOLICITATION. EACH
PROXY GRANTED MAY BE REVOKED BY THE STOCKHOLDER APPOINTING SUCH PROXY AT ANY
TIME BEFORE IT IS VOTED. IF YOU RECEIVE MORE THAN ONE PROXY CARD BECAUSE YOUR
SHARES ARE REGISTERED IN DIFFERENT NAMES OR ADDRESSES, EACH SUCH PROXY CARD
SHOULD BE SIGNED AND RETURNED TO ASSURE THAT ALL OF YOUR SHARES WILL BE VOTED.
By Order of the Board of Directors
Princeton, New Jersey Catherine M. Verna, Secretary
May 9, 2001
The Company's 2000 Annual Report accompanies the Proxy Statement.
CYTOGEN CORPORATION
600 College Road East
Princeton, New Jersey 08540
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PROXY STATEMENT
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This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of Cytogen Corporation (the "Company") of proxies to
be voted at the Annual Meeting of Stockholders of the Company to be held on
Tuesday, June 19, 2001 (the "Meeting") at the Holiday Inn, Route One at Ridge
Road, Princeton, New Jersey at 11:00 a.m., local time, and at any adjournment or
adjournments thereof. Holders of record of Common Stock, $.01 par value (the
"Common Stock"), as of the close of business on April 23, 2001, will be entitled
to notice of and to vote at the Meeting and any adjournment or adjournments
thereof. As of that date, there were 77,489,276 shares of Common Stock issued
and outstanding and entitled to vote. Each share of Common Stock is entitled to
one vote on any matter presented at the Meeting. The aggregate number of Common
Stock votes entitled to be cast at the Meeting is 77,489,276. The holders of
Common Stock will vote as a single class for all proposals.
If proxies in the accompanying form are properly executed and returned,
the shares of Common Stock represented thereby will be voted in the manner
specified therein. If not otherwise specified, the shares of Common Stock
represented by the proxies will be voted: (i) FOR, the election of the seven
nominees named below as Directors; (ii) FOR a proposal to amend the Company's
1999 Non-Employee Director Stock Option Plan (the "Director Plan") to: (A)
increase the number of shares of Common Stock underlying automatic initial
option grants under the Director Plan to new non-employee Directors from 10,000
to 20,000 shares; and (B) provide, in certain circumstances, at the discretion
of and after formal action by the Board of Directors, for the issuance of Common
Stock under the Director Plan to Directors, in lieu of the cash component of
Director compensation; (iii) FOR a proposal to amend the Company's Employee
Stock Purchase Plan (the "ESPP") to: (A) decrease, from one year to six months,
the term of service required to be eligible to participate therein; and (B)
delete the requirement for stockholder approval of any modification of the ESPP
with respect to eligibility for participation in the ESPP; and (iv) in the
discretion of the persons named in the enclosed form of proxy, on any other
proposals which may properly come before the Meeting or any adjournment or
adjournments thereof. Any stockholder who has submitted a proxy may revoke it at
any time before it is voted, by written notice addressed to and received by the
Secretary of the Company, by submitting a duly executed proxy bearing a later
date or by electing to vote in person at the Meeting. The mere presence at the
Meeting of the person appointing a proxy does not, however, revoke the
appointment.
The presence, in person or by proxy, of holders of shares of Common
Stock in the aggregate having a majority of the votes entitled to be cast by the
holders of Common Stock at the Meeting, shall constitute a quorum with respect
to all matters presented. The affirmative vote by the holders of a plurality of
the shares of Common Stock represented at the Meeting is required for the
election of directors, provided a quorum of such stockholders is present in
person or by proxy. All actions proposed herein other than the election of
directors may be taken upon the affirmative vote of stockholders possessing a
majority of the requisite voting power represented at the Meeting, provided a
quorum is present in person or by proxy.
Abstentions are included in the shares present at the Meeting for
purposes of determining whether a quorum is present, and are counted as a vote
against for purposes of determining whether a proposal is approved. Broker
non-votes (when shares are represented at the Meeting by a proxy specifically
conferring only limited authority to vote on certain matters and no authority to
vote on other matters) are included in the determination of the number of shares
represented at the Meeting for purposes of determining whether a quorum is
present but are not counted for purposes of determining whether a proposal has
been approved and thus have no effect on the outcome.
This Proxy Statement, together with the related proxy card, is being
mailed to the stockholders of the Company on or about May 9, 2001. The Annual
Report to Stockholders of the Company for the year ended December 31, 2000,
including financial statements (the "Annual Report"), is being mailed together
with this Proxy Statement to all stockholders of record as of April 23, 2001. In
addition, the Company has provided brokers, dealers, banks, voting trustees and
their nominees, at the Company's expense, with additional copies of the Annual
Report so that such record holders could supply such materials to beneficial
owners as of April 23, 2001.
ELECTION OF DIRECTORS
At the Meeting, seven directors are to be elected (which number shall
constitute the entire Board of Directors of the Company) to hold office until
the next Annual Meeting of Stockholders and until their successors shall have
been elected and qualified. The holders of Common Stock, voting as a class, will
elect each such director.
It is the intention of the persons named in the enclosed form of proxy
to vote the stock represented thereby, unless otherwise specified in the proxy,
for the election as directors of the persons whose names and biographies appear
below. All such persons are at present directors of the Company. In the event
any of the nominees should become unavailable or unable to serve as a director,
it is intended that votes will be cast for a substitute nominee designated by
the Board of Directors. The Board of Directors has no reason to believe that the
nominees named will be unable to serve if elected. Each of the nominees has
consented to being named in this Proxy Statement and to serve if elected.
The current members of the Board of Directors who are also nominees for
election to the Board of Directors are as follows:
Served as a Positions with
Name Age Director Since the Company
------------------------------------- --- -------------- ----------------------------------
James A. Grigsby..................... 58 1996 Chairman of the Board
H. Joseph Reiser..................... 54 1998 President, Chief Executive Officer
and Director
John E. Bagalay, Jr.................. 67 1995 Director
Stephen K. Carter.................... 63 1998 Director
Robert F. Hendrickson................ 68 1995 Director
Kevin G. Lokay....................... 44 2001 Director
S. Leslie Misrock.................... 73 1999 Director
The principal occupations and business experience, for at least the
past five years, of each nominee are as follows:
James A. Grigsby has been a director of the Company since May 1996 and
Chairman of the Board since June 1998. Mr. Grigsby serves as a strategic
consultant to companies in various industries. Since April 1999, Mr. Grigsby has
been affiliated with the consulting firm of Nachman, Hays & Associates, from
which he accepts occasional consulting engagements. Prior to that time, 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 he 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 Bachelor of
Arts degree in Mathematics from Baylor University and is a Fellow of the Society
of Actuaries.
H. Joseph Reiser joined the Company 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
2
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
Masters and Bachelor of Science degrees.
John E. Bagalay, Jr. has been a director of the Company since October
1995. Dr. Bagalay was a director of Cellcor, Inc. prior to the Company's
acquisition of Cellcor in October 1995. He was interim President, Chief
Executive Officer and Chief Financial Officer of the Company from January 1998
to 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 International, Ltd. 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
the Lower Colorado River Authority, a regulated electric utility. Dr. Bagalay
currently also serves on the boards of directors of Wave Systems Corporation and
UAE, Inc. Dr. Bagalay holds a Bachelor of Arts in Politics, Philosophy and
Economics and a Ph.D. in Political Philosophy from Yale University, and a Juris
Doctor from the University of Texas.
Stephen K. Carter has been a director of the Company since September
1998. Since 1997, Dr. Carter has been a consultant to the pharmaceutical
industry. 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 is a director of Allos Therapeutics and Alfacell Corporation. Dr. Carter
received an A.B. in History from Columbia College and an M.D. from New York
Medical College. He completed a medical internship and residency at Lenox Hill
Hospital.
Robert F. Hendrickson has been a director of the Company since 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 a director of Envirogen, Inc. and
Unigene, Inc., and a trustee of the Carrier Foundation, Inc. Mr. Hendrickson
received an A.B. degree from Harvard College and an Masters of Business
Administration from the Harvard Graduate School of Business Administration.
Kevin G. Lokay has been a director of the Company since January 2001.
Mr. Lokay is currently Vice President, Oncology Business Unit at GlaxoSmithKline
Pharmaceuticals. Prior to joining GlaxoSmithKline in 1997, Mr. Lokay spent 16
years with Merck & Co., where his most recent assignment was Vice President,
Worldwide Sales, Marketing and Development in the Merck Vaccine Division. Mr.
Lokay joined Merck in 1981 as a sales representative, and progressed through
numerous positions of increasing responsibilities in sales, market research,
advertising, product management, and business development, while gaining
experience in a wide variety of therapeutic areas, including antihypertensives,
antiarrythmics, antibiotics, analgesic/anti-inflammatories, psychotherapeutics,
vaccines, and gastro-intestinal products. Mr. Lokay holds a Masters of Business
Administration with a concentration in Marketing from Krannert School of
Management at Purdue University, and a Bachelor of Arts in Economics from
Lafayette College.
S. Leslie Misrock has been a director of the Company since August 1999.
Mr. Misrock has been a Partner of the law firm of Pennie & Edmonds, a New York
based intellectual property firm since 1964 and a Senior Partner since 1971. Mr.
Misrock holds an SB degree in Chemistry from the Massachusetts Institute of
Technology, an A.M. degree in Chemistry from Columbia University and an LLB
degree from Fordham University. Mr. Misrock is a member of the Visiting
Committees of the Departments of Biology and Chemistry at MIT, The Association
for the Cure of Prostate Cancer (CaP CURE), the Board of Visitors at Fordham Law
School, the Health Sciences Board of Columbia University's College of Physicians
and Surgeons, and the National Prostate Cancer Coalition.
3
All directors will hold office until the next annual meeting of
stockholders and until their successors shall have been duly elected and
qualified. None of the Company's directors are related to any other director or
to any executive officer of the Company.
The Board of Directors recommends that stockholders vote FOR each of
the nominees for the Board of Directors.
Committees and Meetings of the Board
The Board of Directors currently consists of James A. Grigsby, who
serves as Chairman of the Board, H. Joseph Reiser, John E. Bagalay, Stephan K.
Carter, Robert F. Hendrickson, Kevin G. Lokay and S. Leslie Misrock. There were
ten (10) meetings of the Board of Directors during 2000. Each incumbent director
attended at least 75% of the aggregate of all meetings of the Board of Directors
held during the period in which he served as a director and the total number of
meetings held by the committee on which he served during the period, if
applicable.
There are currently three committees of the Board of Directors: the
Compensation Committee, the Nominating Committee and the Audit and Finance
Committee.
The Compensation Committee of the Board of Directors (the "Compensation
Committee")
The Compensation Committee currently consists of Robert F. Hendrickson,
who serves as Chairman, Kevin G. Lokay and S. Leslie Misrock. The Compensation
Committee was established in 1986 and held three (3) meetings in 2000. The
primary responsibilities of the Compensation Committee include overseeing the
administration of the Company's stock option plans, recommending compensation
for executive officers and other key employees of the Company to the Board of
Directors, and generally reviewing the Company's compensation policy.
The Nominating Committee of the Board of Directors (the "Nominating Committee")
The Nominating Committee currently consists of James A. Grigsby, who
serves as Chairman, and H. Joseph Reiser. The Nominating Committee was
established in 1994 and held six (6) meetings in 2000. The primary
responsibility of the Nominating Committee is investigating, recruiting and
interviewing potential candidates for election to the Board of Directors. 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 Audit and Finance Committee of the Board of Directors (the "Audit
Committee")
The Audit Committee currently consists of John E. Bagalay, Jr., who
serves as Chairman, Robert F. Hendrickson and Stephen K. Carter. The Audit
Committee was established in 1986 and held six (6) meetings in 2000. The primary
responsibilities of the Audit Committee, as more fully set forth in the Audit
Committee Charter adopted by the Company's Board of Directors on May 16, 2000
and attached hereto as Appendix A, include: (i) evaluating and recommending to
the Board of Directors the engagement of the Company's independent auditors;
(ii) reviewing the results and scope of the audit and other services provided by
the Company's independent auditors; and (iii) monitoring and consulting with the
auditors and management regarding risk management, the adequacy of financial and
accounting procedures and internal controls on a periodic basis. The Audit
Committee also reviews and monitors the financial planning and financial
structure of the Company to accommodate the operating requirements and strategic
objectives.
Recently, the Nasdaq Stock Market has adopted requirements relating to
the independence of members of the audit committees of companies traded on that
market. The audit committee members meet the requirements of that rule, except
that members may not have been employees of the Company within the three prior
years. Dr. Bagalay served at the request of the Board of Directors as interim
Chief Executive Officer from January 1998 through August 1998, pending the
recruitment of a permanent Chief Executive Officer, and was deemed to be an
employee during this period. The new rules permit one member of an audit
committee to remain on the committee even if the independence criteria are not
met in certain circumstances. In accordance with these rules, the Board of
4
Directors determined that, given his financial expertise and judgment, and the
brief period of time which he served as an employee upon the Board of Director's
request, Dr. Bagalay's continued service on the Audit Committee is in the best
interest of the Company and its stockholders.
Except as noted above, each Audit Committee member is an independent
member of the Board of Directors as defined in Rule 4200(a)(14) of the National
Association of Securities Dealers' listing standards. As an independent director
of the Board of Directors of the Company, each Audit Committee Member is not an
officer or employee of the Company or its subsidiaries and does not have a
relationship which, in the opinion of the Company's Board of Directors, would
interfere with the exercise of independent judgement in carrying out the
responsibilities of a director.
Report of the Audit Committee
March 15, 2001
To the Board of Directors of Cytogen Corporation:
We have reviewed and discussed with management the Company's audited
financial statements as of and for the year ended December 31, 2000.
We have discussed with the independent public accountants the matters
required to be discussed by Statement on Auditing Standards No. 61,
Communication with Audit Committees, as amended, by the Auditing Standards Board
of the American Institute of Certified Public Accountants.
We have received and reviewed the written disclosures and the letter
from the independent public accountants required by Independence Standard No. 1,
Independence Discussions with Audit Committees, as amended, by the Independence
Standards Board, and have discussed with the auditors the auditors'
independence.
We have considered whether the non audit services provided by the
independent public accountants are compatible with maintaining the public
accountants' independence.
Based on the reviews and discussions referred to above, we recommend to
the Board of Directors that the financial statements referred to above be
included in the Company's Annual Report on Form 10-K for the year ended December
31, 2000.
John E. Bagalay, Jr.
Audit Committee Chairman
Stephen K. Carter
Audit Committee Member
Robert F. Hendrickson
Audit Committee Member
Independent Public Accountants Fees and Other Matters
Audit Fees
Arthur Andersen LLP billed the Company an aggregate of $95,500 in fees
for professional services rendered in connection with the audit of the Company's
financial statements for the most recent fiscal year and the reviews of the
financial statements included in each of the Company's Quarterly Reports on Form
10-Q during the fiscal year ended December 31, 2000.
5
Financial Information Systems Design and Implementation Fees
Arthur Andersen LLP did not perform any professional services for the
Company and its affiliates for the fiscal year ended December 31, 2000 in
connection with financial information systems design or implementation, the
operation of the Company's information system or the management of its local
area network.
All Other Fees
Arthur Andersen LLP billed the Company $128,425 for other services
rendered for the most recent fiscal year.
Directors' Compensation
Each non-employee Director of the Company is paid an annual retainer of
$8,000, plus $1,000 for each Board meeting attended ($500 if participation is by
telephone). Any non-employee Director who also chairs a Board committee receives
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. 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.
During 2000, the Chairman was paid his base annual retainer of $50,000 under
this arrangement.
Pursuant to the Director Plan, each non-employee Director receives an
initial grant of options on the date of appointment equal to a pro-rata portion
of 10,000 shares of the Company's 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, on the day following each Cytogen
Corporation Annual Meeting of Stockholders, each individual who is elected as a
non-employee Director shall automatically be granted options to purchase 10,000
shares of the Company's Common Stock. The Chairman of the Board, unless the
Compensation Committee determines otherwise, receives an additional grant of
15,000 options to purchase shares of the Company's Common Stock on the date of
each annual meeting. Options granted under the Director 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 Stock Market on the date of grant, and vest in full
(i.e., first become exercisable) at the first anniversary of the option grant
date. Each director's outstanding options also 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 55.
Options granted under the Director Plan are granted automatically and without
the need for further action by the Company, the Board of Directors or the
Company's stockholders.
The Company has prepared an amendment to the Director Plan that: (A)
increases the number of shares of Common Stock underlying automatic initial
option grants under the Director Plan to new non-employee Directors from 10,000
to 20,000 shares; and (B) amends the Director Plan to provide, in certain
circumstances, at the discretion of and after formal action by the Board of
Directors, for the issuance of shares of Common Stock thereunder to Directors,
in lieu of the cash component of Director compensation. See "Proposed Amendment
to the 1999 Non-Employee Director Stock Option Plan."
6
EXECUTIVE OFFICERS AND KEY EMPLOYEES
The current executive officers of the Company and their respective ages
and positions with the Company are as follows:
Capacities In In Current
Name Age Which Served Position Since
------------------------------- --- -------------------------------------- ---------------
H. Joseph Reiser, Ph.D......... 54 Director, President and Chief August 1998
Executive Officer
Lawrence R. Hoffman............ 46 Vice President and Chief Financial July 2000
Officer
Terry Novak.................... 44 Vice President of Sales and Marketing May 2000
Catherine M. Verna, Esq........ 36 Vice President, General Counsel and April 2000
Corporate Secretary
Michael J. Titus, Ph.D......... 45 Vice President of Operations January 2001
Lawrence R. Hoffman joined the Company as Vice President and Chief
Financial Officer in July 2000. He is responsible for all financial reporting
and controls for the Company. Mr. Hoffman was previously Vice President and
Chief Financial Officer of The Liposome Company from April 1998 to June 2000,
which was acquired by Elan Corporation plc in May 2000. Prior to joining The
Liposome Company, Mr. Hoffman was Vice President and Chief Financial Officer of
IGI, Inc. From April 1988 through July 1997, Mr. Hoffman held various positions
including Treasurer, Secretary and Acting Principal Financial Officer for Sybron
Chemicals, Inc. Mr. Hoffman received a Bachelor of Science in Accounting from
LaSalle University, a Juris Doctor from Temple University School of Law and an
L.L.M. in Taxation from Villanova University.
Terry Novak joined the Company as Vice President of Sales and
Marketing, a newly created position, in May 2000. Mr. Novak was formerly
employed with Boron LePore & Associates, a provider of marketing and sales
services, from June 1999 to May 2000, where he was Senior Vice President and
General Manager. Previously, he was Executive Vice President at Algos
Pharmaceutical Corporation from March 1998 to June 1999, where he was
responsible for all commercial operations. Additionally, Mr. Novak was Vice
President of Sales and Marketing for Innovex, Inc., a division of Quintiles
Transnational Corporation from October 1995 to March 1998 and spent 15 years in
various sales and marketing positions at Bristol-Myers Squibb. He holds a
Bachelor of Science in Biology from Muhlenberg College.
Catherine M. Verna, Esq., joined the Company as Vice President,
General Counsel and Secretary in April 2000. Previously, Ms. Verna was General
Counsel and Chief Financial Officer of ONQuality.com from December 1999 to March
2000. From March 1998 to January 2000, she was Legal Counsel at Amersham
Pharmacia Biotech, Inc., and from September 1997 to January 1998 she was a
Consulting Attorney to SmithKline Beecham Pharmaceuticals. Additionally, Ms.
Verna was a Senior Associate at Buchanan Ingersoll Professional Corporation from
1993 to 1997, a law firm, where she did work in mergers and acquisitions,
corporate finance, and securities law with an emphasis on biotechnology
companies. She holds a Bachelor of Business Administration, summa cum laude,
from Temple University and Juris Doctor from the University of California
Hastings College of Law. She is a member of American Bar Association and the
Pennsylvania and New Jersey Bar Associations.
Michael J. Titus, Ph.D., joined the Company in November 1999 as the
Director of Regulatory Affairs and Quality Assurance and was promoted to Vice
President of Operations in January 2001. Dr. Titus comes from Berwind
Pharmaceutical Services, where he was Director of Quality Assurance for a
contract manufacturing facility since November 1996. Dr. Titus has approximately
15 years experience in the industry, managing quality, regulatory and
manufacturing functions for biotech and pharmaceutical firms and has extensive
knowledge of monoclonal antibodies and recombinant protein development. Dr.
Titus holds a Bachelor of Science in Biology from Muhlenberg College and a Ph.D.
in Medical Microbiology from The Pennsylvania State University.
7
The current key employees of AxCell BioSciences Corporation ("AxCell"),
a subsidiary of the Company are as follows:
Capacities In In Current
Name Age Which Served Position Since
------------------------------- --- ------------------------------------ ----------------------
John D. Rodwell, Ph.D.......... 54 President and Chief Technical June 1999
Officer
Brian R. Bullard............... 37 Vice President and Chief Information January 1999
Officer
John D. Rodwell, Ph.D., President and Chief Technical Officer of
AxCell, originally joined Cytogen Corporation in September 1981. He served as
Director, Chemical Research, then as Vice President, Discovery Research from
1984 to 1989, as Vice President, Research and Development from 1989 to July
1996, and as Senior Vice President and Chief Scientific Officer from July 1996
through June 1999, at which time he assumed full time duties as Acting President
and Chief Technical Officer of AxCell and subsequently became President of
AxCell BioSciences. From 1980 to 1981, Dr. Rodwell was a Research Assistant
Professor and, from 1976 to 1980, he was a postdoctoral fellow, both in the
Department of Microbiology at the University of Pennsylvania School of Medicine,
where he currently is an Adjunct Associate Professor in the Department of
Microbiology. He holds a Bachelor of Arts in Chemistry from the University of
Massachusetts, a Masters of Science in Organic Chemistry from Lowell
Technological Institute and a Ph.D. in Biochemistry from the University of
California at Los Angeles.
Brian R. Bullard joined AxCell in January 1999 as Vice President and
Chief Information Officer. Previously, since 1997, he was with Perkin-Elmer's
life sciences divisions, PE Biosystems, where as Manager, Data Products, he was
in charge of scientific and market evaluation of data in conjunction with
Perkin-Elmer's bioinformatics software platform. Prior to that, from 1996 to
1997, Mr. Bullard was Director of Bioinformatics, Development at Gene Logic in
Maryland, responsible for the biotechnology firm's information technology. Mr.
Bullard has sixteen years of information technology experience and has held a
number of other information technology positions with firms including Science
and Technology Corporation, OptiMetrics, Inc. and The Physical Sciences
Laboratory.
None of the Company's or AxCell's executive officers or key employees
is related to any other executive officer, key employee, or Director of the
Company or AxCell. Executive officers of the Company are elected annually by the
Board of Directors and serve until their successors are duly elected and
qualified. Key employees of AxCell are elected annually by the Board of
Directors of such subsidiary and serve until their successors are duly elected
and qualified.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors, officers and stockholders who
beneficially own more than 10% of any class of equity securities of the Company
registered pursuant to Section 12 of the Exchange Act to file initial reports of
ownership and reports of changes in ownership with respect to the Company's
equity securities with the Securities and Exchange Commission (the "SEC"). All
reporting persons are required by SEC regulation to furnish the Company with
copies of all reports that such reporting persons file with the SEC pursuant to
Section 16(a).
Based solely on the Company's review of the copies of such forms
received by the Company and upon written representations of the Company's
reporting persons received by the Company, except as described as follows, each
such reporting person has filed all of their respective reports pursuant to
Section 16(a) on a timely basis.
During the year ended December 31, 2000, Terry Novak, the Company's
Vice President, Sales and Marketing, failed to timely file a Form 4 relating to
his purchase of 2,000 shares of the Company's Common Stock on November 17, 2000,
for which he filed a Form 4 on December 12, 2000. Additionally, Mr. Novak failed
to timely file a Form 3 relating to his commencement of employment with the
8
Company on May 15, 2000, for which he filed a Form 3 on June 8, 2000. During the
year ended December 31, 2000, Catherine M. Verna, Esq., the Company's Vice
President, General Counsel and Secretary, failed to timely file a Form 3
relating to Ms. Verna's commencement of employment with the Company on April 25,
2000, for which she filed a Form 3 on June 8, 2000.
9
EXECUTIVE COMPENSATION
Summary of Compensation in Fiscal 2000, 1999 and 1998
The following Summary Compensation Table sets forth information
concerning compensation for services in all capacities awarded to, earned by or
paid to each person who served as the Company's Chief Executive Officer at any
time during 2000 and the four most highly compensated executive officers of the
Company or AxCell other than the Chief Executive Officer who were serving at the
end of 2000 and whose aggregate cash compensation exceeded $100,000 at the end
of 2000 and one additional executive officer who would have been a named
executive officer but for the fact that such person was not serving as an
executive officer at the end of 2000 (collectively, the "Named Executives")
during the years ended December 31, 2000, 1999 and 1998.
SUMMARY COMPENSATION TABLE
------------------------------------------------------------------------------------------------------------------------------------
Long-Term
Annual Compensation(1) Compensation
-------------------------------------------- Awards
Other Securities
Name and Principal Annual Underlying All Other
Position Year Salary Bonus Compensation(2) Options Compensation(3)
($) ($) ($) (#) ($)
(a) (b) (c) (d) (e) (g) (i)
------------------------------------------------------------------------------------------------------------------------------------
H. Joseph Reiser .......... 2000 299,038 84,000 216,927 100,000 5,959
President and Chief 1999 275,000 80,000 -- -- 7,005
Executive Officer 1998 89,903 150,000 -- 2,500,000(4) 399
------------------------------------------------------------------------------------------------------------------------------------
John D. Rodwell............ 2000 185,192 37,038 -- -- 5,471
President and Chief 1999 182,654 14,400 -- -- 8,610
Technical Officer of 1998 203,000 -- -- 150,000 8,881
AxCell
------------------------------------------------------------------------------------------------------------------------------------
Terry Novak(5)............. 2000 113,269 42,654 -- 175,000 110
Vice President, Sales
and Marketing
------------------------------------------------------------------------------------------------------------------------------------
Richard Krawiec(6)......... 2000 134,616 -- 179,870 50,000 14,807
Vice President,
Investor Relations and
Corporate Communications
------------------------------------------------------------------------------------------------------------------------------------
Lawrence R. Hoffman(7)..... 2000 90,673 40,000 -- 550,000 129
Vice President and
Chief Financial Officer
------------------------------------------------------------------------------------------------------------------------------------
Nicholas Borys(8).......... 2000 165,000 -- -- 50,000 3,072
Vice President, Medical
Affairs
(1) Certain perquisites or personal benefits are not included herein because
they did not exceed, in the case of each Named Executive, the lesser of
either $50,000 or 10% of total annual salary and bonus reported for the
Named Executives.
10
(2) The amounts disclosed in this column consist of relocation expenses.
(3) 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 2000, these amounts were
as follows: on behalf of Dr. Reiser, $5,250; Dr. Rodwell, $5,100; Dr.
Krawiec, $4,038; and Dr. Borys, $2,925. The amounts disclosed also include
insurance premiums paid by the Company with respect to group term life
insurance and with respect to fiscal year 2000, these amounts were as
follows: on behalf of Dr. Reiser, $709; Dr. Rodwell, $371; Mr. Novak, $110;
Dr. Krawiec, $239; Mr. Hoffman, $129; and Dr. Borys, $147. The amounts
disclosed also include a severance payment made to Dr. Krawiec in 2001 of
$10,769.
(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 per share. The remaining vesting schedule of such
options as of March 31, 2001 is as follows: (a) 900,000 options began to
vest upon commencement of employment; (b) 1,125,000 options began to vest
upon completion of certain performance objectives, to the satisfaction of
the Board of Directors; and (c) 225,000 options will begin to vest upon the
completion of additional performance objectives to the satisfaction of the
Board of Directors.
(5) Mr. Novak joined the Company as Vice President, Sales and Marketing in May
2000. Amount of bonus includes: (a) a $20,000 sign-on bonus; and (b) a
$22,654 year-end bonus, half of which was paid through the grant of 4,841
shares of Common Stock valued at $2.34 per share, the fair market value of
the Common Stock as of December 29, 2000.
(6) Dr. Krawiec joined the Company as Vice President, Investor Relations and
Corporate Communications in January 2000. Dr. Krawiec left the Company in
January 2001.
(7) Mr. Hoffman joined the Company as Vice President and Chief Financial
Officer in July 2000. Amount of bonus includes: a $40,000 year-end bonus,
half of which was paid through the grant of 8,547 shares of Common Stock
valued at $2.34 per share, the fair market value of the Common Stock as of
December 29, 2000.
(8) Dr. Borys joined the Company as Vice President, Medical Affairs in January
2000. Dr. Borys left the Company in November 2000.
11
Option Grants in 2000
The following table sets forth information concerning individual grants
of stock options made during 2000 to each of the Named Executives.
OPTION GRANTS IN LAST FISCAL YEAR
-----------------------------------------------------------------------------------------------------------------------
Individual Grant
-----------------------------------------------------------------------------------------------------------------------
Potential Realizable
Percent of Value at
Number of Total Assumed Annual Rates
Securities Options of Stock
Underlying Granted to Price Appreciation for
Options Employees Exercise or Option Term (3)
Granted in Fiscal Base Price Expiration --------------------------
Name (#) Year(1) ($/share)(2) Date 5%($) 10%($)
(a) (b) (c) (d) (e) (f) (g)
-----------------------------------------------------------------------------------------------------------------------
H. Joseph Reiser............. 100,000 6.7 2.91 12/19/10 182,788 463,221
John D. Rodwell.............. -- -- -- -- -- --
Terry Novak.................. 95,000 6.3 5.81 05/15/10 347,298 880,120
80,000 5.3 2.91 12/19/10 146,231 370,577
Richard Krawiec(4)........... 50,000 3.3 2.84 04/03/01 7,110 14,220
Lawrence R. Hoffman.......... 500,000 33.3 10.14 07/10/10 3,188,810 8,081,071
50,000 3.3 2.91 12/19/10 91,394 231,611
Nicholas Borys(5)............ 50,000 3.3 5.27 02/01/01 13,165 26,330
-----------
(1) Based on an aggregate of 1,500,500 options granted to employees in 2000,
including options granted to Named Executives.
(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. Options granted to executive officers generally 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 ten years from the
date of grant.
(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) Dr. Krawiec left the Company in January 2001.
(5) Dr. Borys left the Company in November 2000.
12
Aggregated Option Exercises in 2000 and Year End Option Values
The following table sets forth information concerning each exercise of
options during 2000 by each of the Named Executives and the year end value of
unexercised in-the-money options.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
-------------------------------------------------------------------------------------------------------------------------
Number of Value of
Securities Underlying Unexercised
Unexercised In-the-Money
Options at Options at
Shares Fiscal Fiscal
Acquired Year-End Year-End(1)
on Value (#) ($)
Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
(a) (b) (c) (d) (e)
-------------------------------------------------------------------------------------------------------------------------
H. Joseph Reiser................ 50,000 1,007,815 775,000 / 1,300,000 968,983 / 1,500,360
John D. Rodwell................. 25,000 407,425 343,100 / 66,400 29,325 / 19,550
Terry Novak..................... -- -- -- / 175,000 -- / --
Richard Krawiec(2).............. -- -- -- / 50,000 -- / --
Lawrence R. Hoffman............. -- -- -- / 550,000 -- / --
Nicholas Borys(3)............... -- -- -- / -- -- / --
----------
(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 of $2.344 per share, and the exercise price of
the options.
(2) Dr. Krawiec left the Company in January 2001.
(3) Dr. Borys left the Company in November 2000.
Employment Contracts, Termination of Employment and Change-in-Control
Arrangements
The Company has executed indemnification agreements with each of its
executive officers and directors pursuant to which the Company has agreed to
indemnify such parties to the full extent permitted by law, subject to certain
exceptions, if any such party becomes subject to an action because such party is
a director, officer, employee, agent or fiduciary of the Company. In general,
the Company's employees are covered by confidentiality agreements.
13
The Company entered into an employment agreement with H. Joseph Reiser,
Ph.D., the Company's President and Chief Executive Officer, 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 equal to his base salary, along with medical and insurance benefits for the
same period, if he is dismissed for reasons other than cause.
Compensation Committee Interlocks And Insider Participation
During 2000, the Company's Compensation Committee consisted of Robert
F. Hendrickson, who served as Chairman, and S. Leslie Misrock. Kevin G. Lokay
joined the Compensation Committee in 2001. There are no, and during 2000 there
were no, Compensation Committee interlocks. In June 1999, the Company entered
into an agreement with S. Leslie Misrock, and others, to reacquire rights for
immunotherapy to its PSMA technology by acquiring Prostagen, Inc., of which Mr.
Misrock was a principal holder. Mr. Misrock was elected to the Board of
Directors of the Company in August 1999. In connection with the acquisition, Mr.
Misrock received shares of the Company's Common Stock. The Company may also
issue additional shares upon completion of certain objectives, including up to
450,000 shares of the Company's Common Stock upon the satisfactory termination
of lease obligations assumed in the acquisition; up to 500,000 shares of Common
Stock upon beneficial resolution of other contractual arrangements entered into
by Prostagen; and up to an additional $4.0 million in shares of the Company's
Common Stock (calculated at the time of issuance) if certain milestones are
achieved in development of the PSMA technology. Mr. Misrock would receive a
portion of these shares.
In addition, Mr. Misrock is a senior partner at Pennie and Edmonds, a
New York based intellectual property law firm that represents the Company on
certain intellectual property matters.
14
Performance Graph
The following graph compares the cumulative total stockholder return on
the Company's Common Stock with the cumulative total return on the Nasdaq
Composite Index and the Nasdaq Pharmaceutical Index (capitalization weighted)
for a five year period (January 1, 1996 through December 31, 2000).
COMPARISON OF CUMULATIVE TOTAL RETURN(1)(2)(3)
Among the Company, the Nasdaq Composite Index and the
Nasdaq Pharmaceutical Index
(Capitalization Weighted)
[LINE GRAPH APPEARS HERE]
Base
Period
Company/ January December December December December December
Index Name 1, 1996 1996 1997 1998 1999 2000
----------- ------- -------- ------- ------- ------- -------
CYTO $100 $104.76 $ 30.95 $ 16.07 $ 33.33 $ 30.12
NASDAQ $100 $123.05 $150.70 $212.52 $394.94 $237.63
NASDAQ PHAR $100 $100.31 $103.66 $131.96 $248.03 $308.51
-----------
(1) Graph assumes $100 invested on January 1, 1996 in the Company's Common
Stock, the Nasdaq Composite Index and the Nasdaq Pharmaceutical Index
(capitalization weighted).
(2) Total return assumes reinvestment of dividends.
(3) Year ended December 31.
15
Report of the Compensation Committee of the Board of Directors
Policy
The Compensation Committee of the Board of Directors (the "Compensation
Committee") is responsible for oversight of the Company's executive compensation
program. The Compensation Committee is composed entirely of independent,
non-employee directors. The Compensation Committee makes recommendations to the
full Board of Directors on compensation policy and as to specific compensation
actions, except where independent action by the Compensation 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 2000 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 2000 compensation program reflected the Compensation
Committee's assessment as to appropriate treatment on an individual basis for
the Chief Executive Officer and the other Named Executives compared to the prior
year levels. The Company targets its overall compensation program at the median
level of the biotechnology industry. In addition, compensation for the Named
Executives (and other executives), including the Chief Executive Officer, took
into account individual responsibility and performance as assessed by the
Compensation Committee.
The compensation program includes a combination of competitive base
salary and benefits, annual cash bonus opportunities and stock option awards.
The 2000 executive compensation program and a specific discussion as to the
compensation of the Chief Executive Officer are set out below.
Annual Compensation for 2000
Generally, annual compensation of executive officers under the
executive compensation program for 2000 consisted of salary and bonus
components.
Base Salary
In December 1999, the Compensation Committee determined for
recommendation to the full Board of Directors, base salaries and annual
incentive opportunities for 2000 for its executives, including the Chief
Executive Officer and the other Named Executives.
Bonus
A portion of 2000 executive officer annual compensation opportunity was
based on corporate performance. The Compensation Committee believes that
incentive compensation should be linked to corporate financial results and
corporate goals. Bonus opportunity levels for 2000 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 corporate objectives were
achieved and the amount of cash available as determined by the Compensation
Committee. At year-end, the Compensation Committee determined the extent to
which the financial and corporate objectives of the Company had been achieved
and applied the appropriate bonus percentage to the respective base salary of
16
each of the Named Executives. The amounts approved on the Compensation
Committee's recommendations were less than target amounts. The Company issued to
each of Mr. Novak and Mr. Hoffman, 4,841 and 8,547 registered shares of Common
Stock, respectively, as part of each such individual's 2000 bonus compensation.
Long Term Compensation - Stock Options
The Compensation Committee believes that stock options are an
appropriate means to link its employees' interests 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 the Compensation Committee believes 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 recipient 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.
Option grants are set taking into account the comparison of practices
at peer groups, an individual's level of responsibility and furtherance of
corporate objectives, and the amount and terms of past stock option awards. The
Compensation 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.
Compensation of the Chief Executive Officer
Dr. Reiser's salary for 2000 was set on the recommendation of the
Compensation Committee and was believed 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 continuing accomplishments of the
Company under his leadership during the year. The year end bonus in the amount
of $84,000 was based on the Compensation Committee's judgment as to achievement
of his objectives compared to a target amount set by the Compensation Committee
in advance of the year.
Federal Income Tax Considerations
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code") generally disallows a federal income tax deduction to public companies
for certain compensation over $1 million paid to its chief executive officer and
four other most highly compensated executive officers. 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 Compensation Committee must certify that the performance
goals were achieved before payments can be awarded.
The Compensation Committee believes that its executive compensation
program is consistent with the requirements of Section 162(m) of the Code. The
Company's regular stock option plans under which options may be granted to
executive officers have been approved by the stockholders and the Company
believes such plans should qualify 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 Compensation 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 Compensation 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.
* * * * *
17
The foregoing report on compensation is provided by the following
outside directors, who constituted the Compensation Committee during 2000. Kevin
G. Lokay joined the Compensation Committee in 2001 and therefore, did not
participate in the preparation of this report.
Robert F. Hendrickson, Chairman
S. Leslie Misrock, Member
18
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
There were, as of April 2, 2001, approximately 4,319 holders of record
and approximately 54,054 beneficial holders of the Company's Common Stock. The
following table sets forth certain information, as of April 2, 2001, with
respect to holdings of the Company's Common Stock by (i) each person known by
the Company to be the beneficial owner of more than 5% of the total number of
shares of the Common Stock outstanding as of such date, based upon currently
available Schedules 13D and 13G filed with the SEC, (ii) each of the Company's
directors (which includes all nominees) and Named Executives, and (iii) all
directors and executive officers as a group.
Amount and Nature of
Name and Address of Beneficial Owner(1) Beneficial Ownership(1) Percent of Class(2)
------------------------------------------------------ ------------------------ -------------------
(ii) Directors (which includes all nominees) and Named
Executives:
John E. Bagalay, Jr............................... 151,800(3) *
Stephen K. Carter................................. 23,200(3) *
James A. Grigsby.................................. 174,983(3) *
Robert F. Hendrickson............................. 51,200(3) *
Kevin G. Lokay.................................... 0(3) *
S. Leslie Misrock................................. 748,333(3) *
H. Joseph Reiser.................................. 1,084,674(3) 1.4%
Nicholas Borys.................................... 0(3) *
Lawrence R. Hoffman............................... 8,547(3)(4) *
Richard Krawiec................................... 0(3) *
Terry Novak....................................... 38,509(3)(4) *
John D. Rodwell................................... 461,014(3)(4) *
(iii)All directors and executive officers as a
group (14 persons)................................ 2,774,337(3)(4) 3.5%
----------
* Indicates amount is less than 1%.
(1) Except as set forth in the footnotes to this table and subject to
applicable community property law, the persons and entities named in the
table have sole voting and investment power with respect to all shares.
(2) Percent of class for each person and all executive officers and directors
as a group is based on 77,406,032 shares of Common Stock outstanding on
April 2, 2001 and includes shares subject to options held by the individual
or the group, as applicable, which are exercisable or become exercisable
within 60 days following such date.
(3) Includes shares of Common Stock which the following persons have the right
to acquire upon the exercise of stock options, within 60 days of April 2,
2001, as follows: Dr. Bagalay: 140,800; Dr. Carter: 20,200; Mr. Grigsby:
95,533; Mr. Hendrickson: 41,200; Mr. Misrock: 28,333; Dr. Reiser:
1,075,000; Mr. Hoffman: 0; Mr. Novak: 31,668; and Dr. Rodwell: 393,100.
(4) Includes shares of Common Stock awarded under the 2000 Bonus Program which
were issued April 6, 2001.
19
Certain Relationships and Related Transactions
The members of the Compensation Committee during 2000 were Robert F.
Hendrickson (Chairman) and S. Leslie Misrock. Neither of these gentlemen were
officers or employees of the Company while serving on the Compensation
Committee. For Related Transactions information relating to Mr. Misrock, please
see "Executive Compensation - Compensation Committee Interlocks and Insider
Participation."
PROPOSED AMENDMENT TO THE 1999 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
General
On April 1, 1999, the Board of Directors approved and, on June 16,
1999, the stockholders adopted, the 1999 Non-Employee Director Stock Option Plan
(the "Director Plan"). The Director Plan currently provides for the grant of
options to purchase a maximum of 500,000 shares of the Company's Common Stock to
non-employee directors of the Company, of whom there are six.
The following is a summary description of the Director Plan as it
currently exists without giving effect to the proposed amendment. The full text
of the Director Plan may be obtained by the Company's stockholders upon request
to the Office of the Corporate Secretary of the Company.
Currently, each person who first becomes a Director of the Company and
who is not also an employee or officer of the Company, has been or shall be
granted, on the date on which he or she became or will become a Director,
whichever is later, an option to purchase 10,000 shares of Common Stock, or a
pro-rata portion thereof, based upon the number of full months remaining from
the date of election until the one year anniversary month of the preceding
annual meeting. In addition, each eligible director who is re-elected, shall be
granted an option to purchase 10,000 shares of Common Stock, and the Chairman of
the Board of Directors, unless the Compensation Committee determines otherwise,
shall be granted options to purchase 15,000 shares of Common Stock. All such
options shall have an exercise price per share equal to the then fair market
value of the shares. The term of each option will be for a period of ten years
from the date of grant, unless sooner terminated in accordance with the Director
Plan.
Options may not be transferred except by will or by the laws of descent
and distribution and are exercisable to the extent vested at any time prior to
the scheduled expiration date of the option. The Director Plan terminates on the
earlier of June 16, 2009 or at such time as all shares of Common Stock currently
or hereafter reserved for issuance shall have been issued, unless sooner
terminated by the Board of Directors.
In the event that the Company's Common Stock shall be subdivided or
combined into a greater or smaller number of shares or if the Company shall
issue any shares of Common Stock as a stock dividend on its outstanding Common
Stock, the number of shares of Common Stock deliverable upon the exercise of
options granted under the Director Plan shall be appropriately increased or
decreased proportionately, and appropriate adjustments shall be made in the
purchase price per share to reflect such subdivision, combination or stock
dividend. In the event that the Company is to be consolidated with or acquired
by another entity in a merger, sale of all or substantially all of the Company's
assets or otherwise, each option granted under the Director Plan which is
outstanding but unvested as of the effective date of such event shall become
fully exercisable.
The Director Plan may be amended or discontinued at any time by the
Board of Directors without stockholder approval, but no amendment may be made
without stockholder approval which would, among other things, (i) increase the
maximum number of shares for which options may be granted under the Director
Plan, (ii) materially modify the requirements as to eligibility to participate
in the Director Plan, or (iii) materially increase benefits accruing to option
holders under the Director Plan. No amendment will affect any option previously
granted without the consent of the grantee.
20
Federal Income Tax Treatment
The following discussion is based upon federal tax laws and regulations
in effect on the date of this Proxy Statement, which are subject to change, and
upon an interpretation of the relevant sections of the Code, their legislative
histories and the income tax regulations which interpret similar provisions of
the Code. Furthermore, the foregoing is only a general discussion of the federal
income tax aspects of the Director Plan and does not purport to be a complete
description of all federal income tax aspects of the Director Plan. Optionees
may also be subject to state and local taxes in connection with the grant or
exercise of options granted under the Director Plan and the sale or other
disposition of shares acquired upon exercise of the options. Each optionee
receiving a grant of options should consult with his or her personal tax advisor
regarding federal, state and local and foreign tax consequences of participating
in the Director Plan.
The options to be issued under the Director Plan will be designated as
non-qualified stock options ("NQSOs") which receive no special tax treatment,
but are taxed pursuant to Section 83 of the Code. Under the provisions of that
Section, if an option is granted in connection with the performance of services
and has a "readily ascertainable fair market value" at the time of the grant,
the optionee will be deemed to have received compensation income in the year of
grant in an amount equal to the excess of the fair market value of the option at
the time of grant over the amount, if any, paid by the optionee for the option.
However, a NQSO generally has "readily ascertainable fair market value" only
when the option is actively traded on an established market and when certain
stringent Code requirements are met.
If the option does not have a readily ascertainable fair market value
at the time of the grant, the option is not included as compensation income at
that time. Rather, the optionee realizes ordinary compensation income only when
the option is exercised and the optionee has become substantially vested in the
shares transferred. The shares are considered to be substantially vested when
they are either transferable or not subject to a substantial risk of forfeiture.
The amount of ordinary compensation income realized is equal to the excess of
the fair market value of the shares at the time the shares become substantially
vested over the sum of the exercise price plus the amount, if any, paid by the
optionee for the option.
If a NQSO is exercised through payment of the exercise price by the
delivery of Common Stock, to the extent that the number of shares received by
the optionee exceeds the number of shares surrendered, ordinary compensation
income will be realized by the optionee at that time equal to the difference
between the fair market value of such excess shares and the tax basis of such
excess shares. The Company is generally entitled to a tax deduction with respect
to any ordinary compensation income recognized by a participant under the
Director Plan. Any such deduction will be subject to the limitations of Section
162(m) of the Code.
Once a NQSO is subject to tax as ordinary compensation income, it is
treated as an investment option or investment shares and becomes subject to the
investment property rules. No gain or loss arises from the exercise of an option
that was taxed at the time of grant. When the optionee disposes of the shares
acquired pursuant to a NQSO, whether taxed at the time of grant or exercise, or
some other terms, the optionee will recognize capital gain or loss equal to the
difference between the amount received for the shares and the optionee's basis
in the shares.
Generally, the optionee's basis in the shares will be the exercise
price plus the optionee's basis in the option. The optionee's basis in the
option is equal to the sum of the compensation income realized at the time of
grant or exercise, whichever is applicable, and the amount, if any, paid by the
optionee for the option. In the compensatory option context, optionees normally
pay nothing for the grant of the option so the basis in the option will usually
be the amount of ordinary compensation income realized at the time of grant or
exercise. Thus, the optionee's basis in the shares will generally be equal to
the exercise price of the option plus the amount of ordinary compensation income
realized by the optionee. The capital gain or loss will be short-term if the
shares are disposed of within one year after the option is exercised, and
long-term if the shares are disposed of more than one year after the option is
exercised.
If a NQSO is taxed at the time of grant and expires or lapses without
being exercised, it is treated in the same manner as the lapse of an investment
option. The lapse is deemed to be a sale or exchange of the option on the day
the option expires or lapses and the amount of income realized by the optionee
is zero. The optionee recognizes a capital loss in the amount of the optionee's
21
basis (ordinary compensation income realized at the time of the grant plus the
amount, if any, paid by the optionee for the option) in the option at the time
of the lapse. This capital loss is short-term or long-term, depending on the
optionee's holding period in the option.
If a NQSO is not taxed at the time of grant and expires or lapses
without being exercised, the optionee will have no federal income tax
consequences unless the optionee paid for the option. In such case, the optionee
would recognize a capital loss in the amount of the price paid by the optionee
for the option. This capital loss is short-term or long-term, depending on the
optionees holding period in the option.
Previously Granted Options
As of April 2, 2001, the Company had granted options to purchase an
aggregate of 175,666 shares of Common Stock (net of cancellations) under the
Director Plan at a weighted average exercise price of $3.38 per share. As of
April 2, 2001, 116,333 options to purchase shares were vested and no options to
purchase shares had been exercised under the Director Plan. The following table
sets forth information as of April 2, 2001 concerning options granted under the
Director Plan to (i) the Named Executives(1); (ii) all current executive
officers as a group(1); (iii) all current Directors who are not executive
officers as a group; (iv) each nominee for election as a Director; (v) each
associate of any of such Directors, executive officers or nominees; (vi) each
person who has received or is to receive 5% of such options or rights; and (vii)
all employees, including all current officers who are not executive officers, as
a group(1):
Options Granted
through Weighted Average
Name April 2, 2001 Exercise Price Expiration Date
--------------------------------- --------------- ---------------- ---------------
James A. Grigsby................. 61,000 $3.31 6/16/09
John E. Bagalay.................. 31,000 $3.21 6/16/09
Stephen K. Carter................ 31,000 $3.21 6/16/09
Robert F. Hendrickson............ 31,000 $3.21 6/16/09
S. Leslie Misrock................ 18,333 $3.97 8/11/09
Kevin G. Lokay................... 3,333 $6.12 1/17/11
H. Joseph Reiser, Ph.D........... 0 0 --
All current directors who are
not executive officers as a
group (6 persons)............. 175,666 $3.38 6/16/09
----------
(1) Participation in the Director Plan is limited to non-employee Directors of
the Company, therefore Named Executives, executive officers and employees
of the Company are not eligible to participate.
(2) As an executive officer, Mr. Reiser is not eligible to participate in the
Director Plan.
As of April 2, 2001, the market value of the Common Stock underlying
the Director Plan was $2.98 per share.
Proposed Amendment
Stockholders are being asked to consider and vote upon the amendment of
the Director Plan: (A) to increase, from 10,000 to 20,000, the number of options
awarded to a new eligible director upon his or her election to the Board of
Directors; and (B) to provide, in certain circumstances at the discretion of and
after formal action by the Board of Directors, for the issuance of shares of
Common Stock to the Directors in lieu of the cash component of Director
compensation.
22
Under the proposal, the number of shares of Common Stock underlying
automatic initial option grants to new non-employee Directors under the Director
Plan is increased from 10,000 to 20,000 shares.
Also under the proposal, Director's cash compensation, including but
not limited to a Director's service fee, Board attendance fees, committee
attendance fees and fees payable for committees chaired, which fees are
currently paid in cash, may be paid in shares of Common Stock, in whole or in
part, at the discretion of and after formal action by the Board of Directors.
Such shares of Common Stock, if any, would be issued under the Director Plan.
The number of shares so issued would be based upon the fair market value of the
Common Stock at the time of each such issuance. All issued shares would bear a
lock-up legend prohibiting transfer for a one year period of time beginning from
the date of issuance. In the event the Board of Directors elects to exercise its
discretion to grant Common Stock in lieu of cash fees as provided for by the
proposed amendment, and takes formal action related thereto, the payment of
shares in lieu of such cash fees would cease, at an individual Director's
option, if either (i) such Director owns 20,000 shares of the Company's Common
Stock, excluding all options or other rights to acquire shares of the Company's
Common Stock; or (ii) if fewer than 20,000 shares of Common Stock are owned by a
Director, such smaller number of shares shall have a fair market value of in
excess of one hundred thousand dollars ($100,000), excluding the value, if any,
of options to purchase Common Stock, whether exercisable or unexercisable, or
other right to acquire Common Stock of the Company.
The Board of Directors believes that the Director Plan, as amended,
would provide important inducements to recruit and retain the best available
Board members. The Board of Directors believes that providing directors with an
opportunity to invest in the Company rewards them appropriately for their
efforts on behalf of the Company.
The Board of Directors recommends a vote FOR the approval of the
Director Plan Amendment.
PROPOSED AMENDMENT TO THE EMPLOYEE STOCK PURCHASE PLAN
General
The Board of Directors adopted the Employee Stock Purchase Plan (the
"ESPP") in April 1997 and the stockholders of the Company approved the ESPP at
the Company's 1997 Annual Meeting of Stockholders. The purpose of the ESPP 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 ESPP accomplishes
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 ESPP is 500,000, which may be
subject to adjustment for stock splits, stock dividends and the like.
The following is a summary description of the ESPP as it exists
currently without giving effect to the proposed amendment. The full text of the
ESPP may be obtained by the Company's stockholders upon request to the Office of
the Corporate Secretary of the Company.
Eligibility
Currently, 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 currently eligible to participate in the ESPP after they
have completed 12 consecutive months of employment. Currently, there are
approximately 33 employees currently eligible for participation in the ESPP.
Participation in the ESPP 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 ESPP 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 ESPP are allocated to a bookkeeping
account ("Account") and used to purchase Common Stock on a quarterly basis.
23
Because the number of shares of Common Stock purchased by an eligible
employee is dependent upon the amount such employee contributes to the ESPP, it
is not possible to determine the number of shares of Common Stock that will be
acquired under the ESPP by any one employee or group of employees.
Purchase of Common Stock
The ESPP permits participants to purchase Common Stock at a fifteen
percent (15%) discount from the applicable closing price of the Common Stock (as
described below). The ESPP 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 ESPP will be the lesser of:
Eighty-five percent (85%) of the closing price of the Common Stock on
the Nasdaq National Market on the last business 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 business 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 ESPP from
authorized but unissued shares, treasury shares, in the open market or in
privately negotiated transactions. The Company pays all expenses incident to the
operation of the ESPP, 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 ESPP. The
Administrator is responsible for interpreting the provisions of the ESPP and
making all determinations necessary for the administration of the ESPP.
Amendment and Termination
The Board of Directors has authority to amend the ESPP at any time.
However, the approval of the Company's stockholders currently is required to:
(i) increase the maximum number of shares available for purchase under the ESPP;
(ii) cause the ESPP to fail the requirements of Section 423 of the Code; or
(iii) modify the ESPP's eligibility.
The Board of Directors also has authority to terminate the ESPP at any
time. In any event, if not earlier terminated by the Board of Directors, the
ESPP will automatically terminate when the participants have purchased all of
the shares of Common Stock available under the ESPP.
Federal Income Tax Treatment
The following is a summary of the United States federal income tax
consequences that generally will arise with respect to purchases made under the
ESPP and with respect to the sale of Common Stock acquired under the ESPP.
In general, a participant will not recognize taxable income upon
enrolling in the ESPP or upon purchasing shares of Common Stock at the end of an
offering. Instead, if a participant sells Common Stock acquired under the ESPP
at a sale price that exceeds the price at which the participant purchased the
Common Stock, then the participant will recognize taxable income in an amount
24
equal to the excess of the sale price of the Common Stock over the price at
which the participant purchased the Common Stock. A portion of that taxable
income will be ordinary income, and a portion may be capital gain.
If the participant sells the Common Stock more than one year after
acquiring it and more than two years after the date on which the offering
commenced, then the participant will be taxed as follows. If the sale price of
the Common Stock is higher than the price at which the participant purchased the
Common Stock, then the participant will recognize ordinary compensation income
in an amount equal to the lesser of:
(i) fifteen percent of the fair market value of the Common Stock on
the date the offering commenced; and
(ii) the excess of the sale price of the Common Stock over the price at
which the participant purchased the Common Stock.
Any further income will be long-term capital gain. If the sale price of the
Common Stock is less than the price at which the participant purchased the
Common Stock, then the participant will recognize long-term capital loss in an
amount equal to the excess of the price at which the participant purchased the
Common Stock over the sale price of the Common Stock.
If the participant sells the Common Stock within one year after
acquiring it or within two years after the date the offering commenced (a
"Disqualifying Disposition"), then the participant will recognize ordinary
compensation income in an amount equal to the excess of the fair market value of
the Common Stock on the date that it was purchased over the price at which the
participant purchased the Common Stock. The participant will also recognize
capital gain in an amount equal to the excess of the sale price of the Common
Stock over the fair market value of the Common Stock on the date that it was
purchased, or capital loss in an amount equal to the excess of the fair market
value of the Common Stock on the date that it was purchased over the sale price
of the Common Stock. This capital gain or loss will be a long-term capital gain
or loss if the participant has held the Common Stock for more than one year
prior to the date of the sale and will be a short-term capital gain or loss if
the participant has held the Common Stock for a shorter period.
The offering of Common Stock under the ESPP has no tax consequences to
the Company. Moreover, in general, neither the purchase nor the sale of Common
Stock acquired under the ESPP will have any tax consequences to the Company
except that the Company will be entitled to a business-expense deduction with
respect to any ordinary compensation income recognized by a participant upon
making a Disqualifying Disposition. Any such deduction will be subject to the
limitations of Section 162(m) of the Code.
ESPP Participation
As of April 2, 2001, the employees of the Company have purchased an
aggregate of 131,634 shares of Common Stock under the ESPP at an average price
of $1.38 per share. As of April 2, 2001, 368,366 shares of Common Stock remained
available for purchase under the terms of the ESPP. The following table sets
forth the shares of Common Stock purchased under the ESPP by (i) the Named
Executives; (ii) all current executive officers as a group; (iii) all current
Directors who are not executive officers as a group(1); (iv) each nominee for
election as a Director(2); (v) each associate of any of such Directors,
executive officers or nominees; (vi) each person who has received or is to
receive 5% of such options or rights; and (vii) all employees, including all
current officers who are not executive officers, as a group:
25
Shares Purchased
through Weighted Average
Name April 2, 2001 Purchase Price
--------------------------------------------- ---------------- ----------------
H. Joseph Reiser, Ph.D(2).................... 4,674 $2.20
John D. Rodwell.............................. 0 $0
Lawrence R. Hoffman(3)....................... 0 $0
Richard Krawiec.............................. 0 $0
Terry Novak(3)............................... 0 $0
Nicholas Borys............................... 0 $0
All current executive officers as a group
(6 persons)................................ 4,674 $2.20
All employees, including all current
officers who are not executive officers,
as a group (75 persons)................... 126,960 $1.35
As of April 2, 2001, the market value of the Common Stock available for
issuance under the ESPP was $2.98 per share.
-----------
(1) Participation in the ESPP is limited to employees of the Company, under
terms and conditions as set forth therein. Therefore, non-employee
Directors of the Company are not eligible to participate.
(2) Other than H. Joseph Reiser, the Company's nominees for election as
Directors are not eligible to participate in the ESPP.
(3) Not eligible to participate in the ESPP pursuant to its current terms and
conditions as set forth therein.
Proposed Amendment
Stockholders are being asked to consider and vote upon a proposed
amendment to the Company's ESPP to: (A) decrease, from one year to six months,
the term of service required to be eligible to participate therein; and (B) to
delete the current plan requirement for stockholder approval of any modification
of the ESPP with respect to eligibility for participation in the ESPP. Such
amendment would allow employees to begin benefiting from the ESPP after six
months of employment with the Company and would provide the Company with
additional flexibility in tailoring its benefit plans to attract and retain
employees.
Upon approval of the proposal to decrease, from one year to six months,
the term of service required to be eligible to participate in the ESPP, there
will be approximately 74 employees eligible to participate therein.
The Board of Directors believes that the ESPP, as amended, would
provide an important inducement to recruit and retain the best available
personnel. The Board of Directors believes that providing employees with an
opportunity to invest in the Company rewards them appropriately for their
efforts on behalf of the Company.
The Board of Directors recommends a vote FOR the approval of the ESPP
Amendment.
AVAILABILITY OF INDEPENDENT AUDITORS
The Company has selected Arthur Andersen LLP as its independent
auditors for the year ended December 31, 2001. Arthur Andersen LLP also served
as independent auditors for 2000. One or more representatives of Arthur Andersen
LLP is expected to attend the Meeting and have an opportunity to make a
statement and respond to appropriate questions from stockholders.
26
STOCKHOLDERS' PROPOSALS
Stockholders who intend to have a proposal considered for inclusion in
the Company's proxy materials for presentation at the Company's 2002 Annual
Meeting of Stockholders pursuant to Rule 14a-8 under the Exchange Act must
submit the proposal to the Company at its offices at 600 College Road East, CN
5308, Princeton, New Jersey, 08540, attention Catherine M. Verna, Esq., not
later than January 9, 2002.
Stockholders who intend to present a proposal at such meeting without
inclusion of such proposal in the Company's proxy materials pursuant to Rule
14a-8 under the Exchange Act are required to provide advanced notice of such
proposal to the Company at the aforementioned address not later than March 25,
2002.
If the Company does not receive notice of a stockholder proposal within
this timeframe, the Company's management will use its discretionary authority to
vote the shares it represents, as the Board of Directors of the Company may
recommend. The Company reserves the right to reject, rule out of order, or take
other appropriate action with respect to any proposal that does not comply with
these other applicable requirements.
OTHER MATTERS
The Board of Directors is not aware of any matter to be presented for
action at the Meeting other than the matters referred to above and does not
intend to bring any other matters before the Meeting. However, if other matters
should come before the Meeting, it is intended that holders of the proxies will
vote thereon in their discretion.
GENERAL
The accompanying proxy is solicited by and on behalf of the Board of
Directors of the Company, whose notice of meeting is attached to this Proxy
Statement, and the entire cost of such solicitation will be borne by the
Company.
In addition to the use of the mails, proxies may be solicited by
personal interview, telephone and telegram by directors, officers and other
employees of the Company who will not be specially compensated for these
services. The Company will also request that brokers, nominees, custodians and
other fiduciaries forward soliciting materials to the beneficial owners of
shares held of record by such brokers, nominees, custodians and other
fiduciaries. The Company will reimburse such persons for their reasonable
expenses in connection therewith.
Certain information contained in this Proxy Statement relating to the
occupations and security holdings of directors and officers of the Company is
based upon information received from the individual directors and officers.
CYTOGEN CORPORATION WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS REPORT
ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2000, INCLUDING CONSOLIDATED
FINANCIAL STATEMENTS BUT NOT INCLUDING EXHIBITS, TO EACH OF ITS STOCKHOLDERS OF
RECORD ON APRIL 23, 2001, AND TO EACH BENEFICIAL STOCKHOLDER ON THAT DATE UPON
WRITTEN REQUEST MADE TO MS. CATHERINE M. VERNA, ESQ., SECRETARY, CYTOGEN
CORPORATION, 600 COLLEGE ROAD EAST, CN 5308, PRINCETON, NEW JERSEY 08540. A
REASONABLE FEE WILL BE CHARGED FOR COPIES OF REQUESTED EXHIBITS.
PLEASE DATE, SIGN AND RETURN THE PROXY CARD AT YOUR EARLIEST
CONVENIENCE IN THE ENCLOSED RETURN ENVELOPE. A PROMPT RETURN OF YOUR PROXY CARD
WILL BE APPRECIATED AS IT WILL SAVE THE EXPENSE OF FURTHER MAILINGS.
By Order of the Board of Directors
Princeton, New Jersey Catherine M. Verna, Esq.,
May 9, 2001 Secretary
27
APPENDIX A
AUDIT COMMITTEE CHARTER
CYTOGEN Corporation
Board of Directors
Audit and Finance Committee Charter
Purpose
The Audit and Finance Committee's responsibility is, in connection with
the auditing function, to assist the full Board of Directors in the oversight
responsibilities related to the integrity of financial reporting and business
conduct and the adequacy and effectiveness of internal controls and accounting
practices, and to assure the independence of the Company's public accountants;
and, in connection with the finance function, to review and monitor the
financial planning and financial structure of the Company to accommodate the
operating requirements and strategic objectives.
Composition
The Audit and Finance Committee shall consist of at least three
directors who are free from relationships that might create a conflict of
interest, impair their independence, or violate the requirements of the
exchanges on which the Company's equity securities are traded. Each of the Audit
and Finance Committee members shall be independent. "Independent director" means
a person other than an officer or employee of the company or its subsidiaries or
any other individual having a relationship which, in the opinion of the
Company's board of directors, would interfere with the exercise of independent
judgment in carrying out the responsibilities of a director. The following
persons shall not be considered independent:
(a) a director who is employed by the corporation or any of its affiliates
for the current year or any of the past three years;
(b) a director who accepts any compensation from the corporation or any of
its affiliates in excess of $60,000 during the previous fiscal year,
other than compensation for board service, benefits under a
tax-qualified retirement plan, or non-discretionary compensation;
(c) a director who is a member of the immediate family of an individual
who is, or has been in any of the past three years, employed by the
corporation or any of its affiliates as an executive officer.
Immediate family includes a person's spouse, parents, children,
siblings, mother-in-law, father-in-law, brother-in-law, sister-in-law,
son-in-law, daughter-in-law, and anyone who resides in such person's
home;
(d) a director who is a partner in, or a controlling stockholder or an
executive officer of, any for-profit business organization to which
the corporation made, or from which the corporation received, payments
(other than those arising solely from investments in the corporation's
securities) that exceed 5% of the corporation's or business
organization's consolidated gross revenues for that year, or $200,000,
whichever is more, in any of the past three years;
(e) a director who is employed as an executive of another entity where any
of the company's executives serve on that entity's compensation
committee.
However, one director who is not independent, as defined above, and is
not a current employee or an immediate family member of such employee, may be
appointed to the Audit and Finance Committee if the Board, under exceptional and
limited circumstances, determines that membership on the Audit and Finance
Committee by the individual is required by the best interests of the Company and
its stockholders and the board discloses, in the next annual proxy statement
subsequent to such determination, the nature of the relationship and the reasons
for that determination.
Each of the Audit and Finance Committee members shall be able to read
and understand fundamental financial statements, including a company's balance
sheet, income statement, and cash flow statement or will become able to do so
within a reasonable period of time after his or her appointment to the Audit and
A-1
Finance Committee. At least one member of the Audit and Finance Committee shall
have past employment experience in finance or accounting, requisite professional
certification in accounting, or any other comparable experience or background
which results in the individual's financial sophistication, including being or
having been a chief executive officer, chief financial officer or other senior
officer with financial oversight responsibilities.
Duties
The duties of the Audit and Finance Committee shall be as follows:
With respect to the audit function
- To review and recommend to the full Board of Directors the appointment
of the Company's independent public accountants and to evaluate their
independence and effectiveness at least annually, including ensuring
its receipt from the outside auditors of a formal written statement
delineating all relationships between the auditor and the Company,
consistent with Independence Standards Board Standard 1. The Audit and
Finance Committee shall be responsible for actively engaging in a
dialogue with the independent public accountants with respect to any
disclosed relationships or services that may impact the objectivity
and independence of the independent public accountants and for taking,
or recommending that the full board take, appropriate action relative
to the independence of the independent public accountants.
- The independent public accountants have ultimate accountability to the
Board of Directors and the Audit and Finance Committee, as
representatives of stockholders, and the Audit and Finance Committee,
and the Board of Directors, as the case may be, act as the
stockholders' representatives with ultimate authority and
responsibility to select, evaluate, and, where appropriate, replace
the independent public accountants or, if deemed appropriate by the
Board of Directors, to nominate the independent public accountants to
be proposed for stockholder approval in any proxy statement.
- To review significant issues between management and the independent
public accountants and significant audit reports, and to review
management responses to audits and to changes, corrective actions, or
suggested improvements, in significant accounting and internal control
practices;
- To review the interim financial statements with management and the
Company's independent public accountants before filing;
- To meet periodically with the independent public accountants, without
management present, as to accounting practices and internal controls;
- To review and oversee the Company's policies for accounting and
internal controls, and to review changes in reporting practices or
requirements of professional or regulatory authorities as to
accounting and financial reporting;
- To review the annual audit plan and the terms of engagement of the
independent public accountants;
- To review audited financial reports filed by the Company and the
financial reporting process with respect to management's
responsibility for the integrity, accuracy and objectivity of
financial reporting and accounting;
- To oversee the program for compliance with the Company's Code of
Conduct and to make recommendations to the full Board of Directors,
with respect to the Code of Conduct and the Company's Legal Compliance
Plan;
- To review material transactions or relationships between the Company
and directors and officers of the Company;
A-2
- To review the Company's risk management programs to assure protection
of the Company's assets;
- To engage advisors or conduct such investigations as it deems
appropriate in carrying out its duties;
- To report to the Board of Directors on its activities;
- To report to the stockholders of the Company as may be required by the
federal securities laws and rules and regulations thereunder as to the
duties and activities of the Audit and Finance Committee.
With respect to financial activities:
- To review and make recommendations as to the Company's financial
planning and capital structure;
- To review commercial and investment banking relationships;
- To keep informed of the operating and financial condition of the
Company and its requirements for funds;
- To review and oversee financial arrangements of the Company with
commercial banks and other financial institutions;
- To review and recommend to the full Board of Directors the structure
and terms of external financing required to achieve Company
objectives;
- To review and recommend to the full Board of Directors financial
policies relating to corporate investments; and
- To report to the Board of Directors on its activities.
Adopted by the Board of Directors
May 16, 2000
A-3
COMMON STOCK
CYTOGEN CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF THE CORPORATION FOR THE ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby constitutes and appoints H. Joseph Reiser and
Catherine M. Verna, and each of them, his or her true and lawful agent and proxy
with full power of substitution in each, to represent and to vote on behalf of
the undersigned all of the shares of Cytogen Corporation (the "Company") which
the undersigned is entitled to vote at the Annual Meeting of Stockholders of the
Company to be held at the Holiday Inn, Route One at Ridge Road, Princeton, New
Jersey at 11:00 A.M., local time, on Tuesday, June 19, 2001, and at any
adjournment or adjournments thereof, upon the following proposals more fully
described in the Notice of Annual Meeting of Stockholders and Proxy Statement
for the Meeting (receipt of which is hereby acknowledged).
This proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, this proxy will
be voted FOR proposals 1, 2, and 3.
(continued and to be signed on reverse side)
Please Detach and Mail In the Envelope Provided
[X] Please mark your votes as in this example.
1. ELECTION OF FOR WITHHELD Nominees:
DIRECTORS. [ ] [ ] John E. Bagalay, Jr. Kevin G. Lokay
Stephen K. Carter S. Leslie Misrock
James A. Grigsby H. Joseph Reiser
Robert F. Hendrickson
VOTE FOR all the nominees listed at right;
except vote withheld from the following
nominee(s) (if any).
-----------------------------------------------------
2. APPROVAL OF PROPOSAL TO AMEND THE COMPANY'S 1999 NON-EMPLOYEE DIRECTOR
STOCK OPTION PLAN (THE "DIRECTOR PLAN") TO: (A) INCREASE THE NUMBER OF
SHARES OF COMMON STOCK UNDERLYING AUTOMATIC INITIAL OPTION GRANTS UNDER THE
DIRECTOR PLAN TO NEW NON-EMPLOYEE DIRECTORS FROM 10,000 TO 20,000 SHARES;
AND (B) PROVIDE, IN CERTAIN CIRCUMSTANCES, AT THE DISCRETION OF AND AFTER
FORMAL ACTION BY THE BOARD OF DIRECTORS, FOR THE ISSUANCE OF COMMON STOCK
UNDER THE DIRECTOR PLAN TO DIRECTORS, IN LIEU OF THE CASH COMPONENT OF
DIRECTOR COMPENSATION.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. APPROVAL OF PROPOSAL TO AMEND THE COMPANY'S EMPLOYEE FOR AGAINST ABSTAIN
STOCK PURCHASE PLAN (THE "ESPP") TO: (A) DECREASE, FROM ONE YEAR TO SIX
MONTHS, THE TERM OF SERVICE REQUIRED TO BE ELIGIBLE TO PARTICIPATE THEREIN;
AND (B) DELETE THE REQUIREMENT FOR STOCKHOLDER APPROVAL OF ANY MODIFICATION
OF THE ESPP WITH RESPECT TO ELIGIBILTY FOR PARTICIPATION IN THE ESPP.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. In his or her discretion, the proxy is authorized to vote upon other
matters as may properly come before the Meeting.
I will I will not
[ ] [ ] attend the Meeting.
Please disregard if you have previously provided your consent decision. [ ]
By checking the box to the right, I consent to future delivery of annual
reports, proxy statements, prospectuses and other materials and shareholder
communications electronically via the Internet at a webpage which will be
disclosed to me. I understand that the Company may no longer distribute printed
materials to me from any future shareholder meeting until such consent is
revoked. I understand that I may revoke my consent at any time by contacting the
Company's transfer agent, Mellon Investor Services LLC, Ridgefield Park, NJ and
that costs normally associated with electronic delivery, such as usage and
telephone charges as well as any costs I may incur in printing doucments, will
be my responsibility.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY, USING THE ENCLOSED
ENVELOPE.
Signature of Common Stockholder_______________________
Signature of Common Stockholder_______________________ Dated: ____________
IF HELD JOINTLY
Note: This proxy must be signed exactly as the name appears hereon. When
shares are held by joint tenants, both should sign. If the signer is a
corporation, please sign full corporate name by duly authorized
officer, giving full title as such. If the signer is a partnership,
please sign in partnership name by authorized person.