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 (Amendment No. )
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Cytogen Corporation
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CYTOGEN CORPORATION
600 College Road East
Princeton, New Jersey 08540
May 9, 2002
To Our Stockholders:
You are cordially invited to attend the 2002 Annual Meeting of
Stockholders of Cytogen Corporation at 11:00 A.M., local time, on Tuesday, June
18, 2002, at the Radisson Hotel, Route One at Ridge Road, Princeton, New Jersey
08540.
The Notice of Meeting and Proxy Statement on the following pages
describe the matters to be presented at the meeting.
It is important that your shares be represented at this meeting to
assure the presence of a quorum. Whether or not you plan to attend the meeting,
we hope that you will have your stock represented by signing, dating and
returning your proxy in the enclosed envelope, as soon as possible. Your stock
will be voted in accordance with the instructions you have given in your proxy.
Thank you for your continued support.
Sincerely,
/s/ H. Joseph Reiser
H. Joseph Reiser
President and Chief Executive Officer
CYTOGEN CORPORATION
600 College Road East
Princeton, New Jersey 08540
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held June 18, 2002
The Annual Meeting of Stockholders (the "Meeting") of Cytogen
Corporation, a Delaware corporation (the "Company"), will be held at the
Radisson Hotel, Route One at Ridge Road, Princeton, New Jersey, on Tuesday June
18, 2002, at 11:00 A.M., local time, for the following purposes:
(1) To elect six 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, as required, the Company's 1995 Stock Option Plan, 1999
Non-Employee Director Stock Option Plan and By-Laws, as applicable, to
provide that without the approval of a majority of the Company's
stockholders, the Company shall not:
(a) grant stock appreciation rights with an exercise price that is
less than the fair market value of the underlying common
stock; or
(b) effectively amend or replace certain outstanding equity-based
awards in a manner that would result in lower exercise prices,
accelerated vesting schedules or the issuance of restricted
stock; and
(3) 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 22,
2002 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,
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
/s/ H. Joseph Reiser
Princeton, New Jersey H. Joseph Reiser, President and Chief Executive Officer
May 9, 2002
The Company's 2001 Annual Report accompanies the Proxy Statement.
CYTOGEN CORPORATION
600 College Road East
Princeton, New Jersey 08540
-----------------------------------
PROXY STATEMENT
-----------------------------------
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of Cytogen Corporation (also referred to in this Proxy
Statement as the "Company", "Cytogen", "we" or "us") of proxies to be voted at
our Annual Meeting of Stockholders to be held on Tuesday, June 18, 2002 at the
Radisson Hotel, 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
our common stock, $.01 par value per share, as of the close of business on April
22, 2002, will be entitled to notice of and to vote at the Annual Meeting and
any adjournment or adjournments thereof. As of that date, there were [ ] 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 Annual
Meeting. The aggregate number of common stock votes entitled to be cast at the
Annual Meeting is [ ]. 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 six nominees named below as directors;
(ii) FOR, a proposal to amend, as required, our 1995 Stock Option Plan,
the "1995 Plan", our 1999 Non-Employee Director Stock Option Plan, the
"Director Plan", and our By-Laws, the "By-Laws", as applicable, to
provide that without the approval of a majority of our stockholders, we
shall not:
(a) grant stock appreciation rights with an exercise price that is
less than the fair market value of the underlying common
stock; or
(b) effectively amend or replace certain outstanding equity-based
awards in a manner that would result in lower exercise prices,
accelerated vesting schedules or the issuance of restricted
stock (as further described below); and
(iii) in the discretion of the persons named in the enclosed form of
proxy, on any other proposals which may properly come before the Annual
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 our Corporate
Secretary, by submitting a duly executed proxy bearing a later date or by
electing to vote in person at the Annual Meeting. The mere presence at the
Annual 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 our common
stock in the aggregate having a majority of the votes entitled to be cast by the
holders of common stock at the Annual 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 Annual 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 Annual
Meeting, provided a quorum is present in person or by proxy.
Abstentions are included in the shares present at the Annual 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 Annual 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 Annual 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 our stockholders on or about May 9, 2002. The Annual Report to
Stockholders of the Company for the year ended December 31, 2001, including
financial statements, is being mailed together with this Proxy Statement to all
stockholders of record as of April 22, 2002. In addition, we have provided
brokers, dealers, banks, voting trustees and their nominees, at our expense,
with additional copies of the Annual Report so that such record holders could
supply such materials to beneficial owners as of April 22, 2002.
2
ELECTION OF DIRECTORS
At the Annual Meeting, six directors are to be elected (which number
shall constitute our entire Board of Directors) to hold office until the 2003
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, members of our Board of Directors. 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 our Board of Directors. Our 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 our Board of Directors who are also nominees for
election to our Board of Directors are as follows:
Served as a Positions with
Name Age Director Since the Company
------------------------------------- --- -------------- ----------------------------------
James A. Grigsby..................... 59 1996 Chairman of the Board
H. Joseph Reiser..................... 55 1998 President, Chief Executive Officer
and Director
John E. Bagalay, Jr.................. 68 1995 Director
Stephen K. Carter.................... 64 1998 Director
Robert F. Hendrickson................ 69 1995 Director
Kevin G. Lokay....................... 45 2001 Director
The principal occupations and business experience, for at least the
past five years, of each nominee are as follows:
James A. Grigsby has served on our Board of Directors since May 1996
and has served as Chairman of the Board since June 1998. Mr. Grigsby is
President and principal owner of Grigsby & Smith, a financial planning and
investment management firm located in Pittsfield, MA. Previously, 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 Cytogen in August 1998 as President, Chief
Executive Officer and as a member of our Board of Directors. Most recently, Dr.
Reiser was Corporate Vice President and General Manager, Pharmaceuticals and a
member of the board of directors, for Berlex Laboratories Inc., the U.S.
subsidiary of Schering AG. During his 17 year tenure at Berlex, Dr. Reiser held
positions of increasing responsibility, serving as the first President of
Schering Berlin's Venture Corporation, Vice President, Technology and Industry
Relations, and Vice President, Drug Development and Technology. Dr. Reiser
received his Ph.D. in Physiology from Indiana University School of Medicine,
where he also earned his Masters and Bachelor of Science degrees.
John E. Bagalay, Jr. has served on our Board of Directors since
October 1995. Dr. Bagalay was a director of Cellcor, Inc. prior to our
acquisition of Cellcor in October 1995. He was our interim President and CEO
from January 1998 to August 1998, and our Chief Financial Officer from October
1987 to August 1988. He has been Senior Advisor to the Chancellor, Boston
University since January 1998. He was a director, Chief Operating Officer and
3
Chief Financial Officer of Eurus Technologies, Inc. from January 1999 until
August 2001 and Chief Executive Officer from October 2000 until August 2001. He
was also a Director of Eurus International Limited, a company organized under
the laws of England and Wales, since January 2000. He served as the Managing
Director of the 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, Houston First Financial
Group and Lower Colorado River Authority, a regulated electric utility. Dr.
Bagalay currently also serves on the boards of directors of Wave Systems
Corporation and several privately held companies. Dr. Bagalay holds a B.A. in
Politics, Philosophy and Economics, a Ph.D. in Political Philosophy from Yale
University, and a J.D. from the University of Texas.
Stephen K. Carter has served on our Board of Directors 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 served on our Board of Directors 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 trustee of the Carrier Foundation, Inc.
He previously served on the Board of Directors of Unigene Laboratories, Inc.
from 1997 until June 2001, and Envirogen, Inc. from March 1992 until June 2001.
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 served on our Board of Directors since January 2001.
Mr. Lokay is currently Vice President, Oncology 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 is a director of the
University of Sciences, Philadelphia, Pennsylvania. He holds a Masters of
Business Administration with a concentration in Marketing from the Krannert
School of Management at Purdue University, and a Bachelor of Arts in Economics
from Lafayette College.
All directors will hold office until our next annual meeting of
stockholders and until their successors shall have been duly elected and
qualified. None of our directors are related to any other director or to any of
our executive officers.
The Board of Directors recommends that stockholders vote FOR each of
the nominees for the Board of Directors.
Committees and Meetings of the Board
Our Board of Directors currently consists of James A. Grigsby, who
serves as Chairman of the Board, H. Joseph Reiser, John E. Bagalay, Stephen K.
Carter, Robert F. Hendrickson and Kevin G. Lokay. There were nine (9) meetings
of the Board of Directors during 2001. Each incumbent director, except for Mr.
Lokay and Mr. Hendrickson, 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.
4
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
The Compensation Committee currently consists of Robert F. Hendrickson,
who serves as Chairman, and Kevin G. Lokay. The Compensation Committee was
established in 1986 and held five (5) meetings in 2001. The primary
responsibilities of the Compensation Committee include overseeing the
administration of our stock option plans, recommending compensation for our
executive officers and other key employees to the Board of Directors and
generally reviewing our compensation policy. In addition to Messrs. Hendrickson
and Lokay, Mr. Misrock was also served as a member of the Compensation Committee
until his resignation on July 18, 2001.
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 did not hold any meetings in 2001. 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 our Corporate Secretary.
The Audit and Finance 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 five (5) meetings in 2001. The
primary responsibilities of the Audit Committee include: (i) evaluating and
recommending to our Board of Directors the engagement of our independent public
accountants; (ii) reviewing the results and scope of the audit and other
services provided by our independent public accountants; and (iii) monitoring
and consulting with the independent public accountants 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 our financial planning and financial structure to accommodate our
operating requirements and strategic objectives. The responsibilities of the
Audit Committee are more fully set forth in the Audit Committee Charter adopted
by the Audit Committee May 16, 2000, a copy of which was filed as an Appendix to
our Proxy Statement filed with the Securities and Exchange Commission on April
30, 2001.
The Nasdaq National Market has adopted requirements relating to the
independence of members of the audit committees of companies traded on the
market. Our 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 CEO, 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, our Board of 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 our best interest and
in the best interests of our stockholders.
Except as noted above, each Audit Committee member is an independent
member of our Board of Directors as defined in Rule 4200(a)(14) of the National
Association of Securities Dealers' listing standards. As an independent director
of our Board of Directors, each Audit Committee member is not an officer or
employee of the Company or our subsidiaries and does not have a relationship
which, in the opinion of our Board of Directors, would interfere with that
person's exercise of independent judgement in carrying out the responsibilities
of a director.
5
Report of the Audit Committee
March 28, 2002
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, 2001.
Management is responsible for the Company's internal controls and
financial reporting process. The Company's independent public accountants,
Arthur Andersen, LLP ("Andersen") are responsible for performing an independent
audit of the Company's financial statements in accordance with generally
accepted accounting principles and to issue a report on those financial
statements. As appropriate, the Audit Committee reviews, evaluates and discusses
with the Company's management, internal accounting, financial and auditing
personnel and Andersen, the following:
- the plan for, and Andersen's report on, each audit of the Company's
financial statements;
- the Company's financial disclosure documents, including all financial
statements and reports filed with the Securities and Exchange Commission or
sent to stockholders;
- management's selection, application and disclosure of critical accounting
policies;
- changes in the Company's accounting practices, principles, controls or
methodologies;
- significant developments or changes in accounting rules applicable to the
Company; and
- the adequacy of the Company's internal controls and accounting, financial
and auditing personnel.
We have discussed with Andersen 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 ("SAS 61"). SAS 61 requires Andersen to discuss with the
Audit Committee, among other things, the following:
- methods to account for significant unusual transactions;
- the effect of significant accounting policies in controversial or emerging
areas for which there is a lack of authoritative guidance or consensus;
- the process used by management in formulating particularly sensitive
accounting estimates and the basis for Andersen's conclusions regarding the
reasonableness of those estimates; and
- disagreements with management over the application of accounting
principles, the basis for management's accounting estimates and the
disclosures in the financial statements.
We have received, reviewed and discussed the written disclosures and
the letter from Andersen required by Independence Standard No. 1, Independence
Discussions with Audit Committees, as amended, by the Independence Standards
Board ("Independence Standards Board Standard No. 1"), and have discussed with
Andersen their independence.
We have considered whether the non audit services provided by Andersen,
as set forth in the section of our Proxy Statement entitled, "Independent Public
Accountant Fees and Other Matters", are compatible with maintaining Andersen's
independence. Independence Standards Board Standard No. 1 requires auditors
annually to disclose in writing all relationships that in the auditor's
professional opinion may be reasonably thought to bear on independence, confirm
their perceived independence and engage in a discussion of independence.
Furthermore, we have received representations from Andersen that: (i)
the audit conducted by Andersen was subject to Anderson's quality system for the
U.S. accounting and auditing practice to provide reasonable assurance that the
engagement was in compliance with professional standards; and (ii) there was
appropriate continuity of Andersen personnel working on the audit and the
availability of national office consultation to conduct the relevant portions of
the audit.
6
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, 2001.
/s/ John E. Bagalay, Jr.
John E. Bagalay, Jr.
Audit Committee Chairman
/s/ Stephen K. Carter
Stephen K. Carter
Audit Committee Member
/s/ Robert F. Hendrickson
Robert F. Hendrickson
Audit Committee Member
Independent Public Accountants Fees and Other Matters
Audit Fees
Andersen billed us an aggregate of $96,250 in fees for professional
services rendered in connection with the audit of our financial statements for
the most recent fiscal year and the reviews of the financial statements included
in each of our Quarterly Reports on Form 10-Q during the fiscal year ended
December 31, 2001.
Financial Information Systems Design and Implementation Fees
Andersen did not perform any professional services for us or our
affiliates for the fiscal year ended December 31, 2001 in connection with
financial information systems design or implementation, the operation of our
information system or the management of our local area network.
All Other Fees
Andersen billed us $83,575 for other services rendered for the most
recent fiscal year.
Directors' Compensation
Each of our non-employee directors receives an annual retainer of
$12,000, plus $1,500 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 $2,000. Non-employee directors receive $500
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 2001, the Chairman received $50,000 under this
arrangement. In addition, the Chairman was paid $12,500 in fees during 2001
relating to services to be performed in 2002.
7
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 20,000 shares of our 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 annual meeting of the
stockholders, each individual who is elected as a non-employee director shall
automatically be granted options to purchase 10,000 shares of our 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
our 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 National 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.
In addition, at the 2001 Annual Meeting of Stockholders, our
stockholders adopted a proposal to amend the Director Plan to provide that
non-employee directors shall receive, at the sole discretion of and after formal
action by our Board of Directors, such number of shares of common stock that is
equal to each such director's cash compensation (including, but not limited to,
annual service fees, fees payable for board and committee meetings attended and
fees for committees chaired), (the "Cash Component"), divided by the fair market
value of our common stock as of the date of issuance of such shares, (the
"Compensation Shares"), which date shall be no earlier than the date on which
the applicable Cash Component compensation becomes due and payable by us.
Compensation Shares shall not be issued for services not yet rendered by such
directors to the Company. Such amendments to the Director Plan further provide
that in the event the board elects to issue Compensation Shares, such eligible
directors shall receive Compensation Shares until, absent additional board
action, at least such time as: (i) such director owns twenty thousand (20,000)
shares of our common stock, excluding options or other rights to acquire shares
of our common stock, whether exercisable or unexercisable; or (ii) if fewer than
20,000 shares are so owned, such smaller number of shares has 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 rights to acquire our common stock. Upon achieving
either of such milestones (i) or (ii) above, each such director may, at his or
her option, elect to cease receiving his or her Cash Component to which he or
she is entitled in shares of our common stock under the Director Plan; provided,
however, that such director must make such election by providing notice of such
election to us in a timely manner. In October 2001, our Board of Directors took
appropriate actions to implement the payment of director compensation in
Compensation Shares.
Each option provided for in the Director Plan shall be granted
automatically and without further action by us, our Board of Directors or our
stockholders. Promptly after the date of grant of each option provided for in
the Director Plan, we shall cause an option agreement to be executed and
delivered to the holder of the option. No other options may be granted at any
time under the Director Plan.
We have prepared an amendment to the Director Plan that restricts our
ability, without the approval of a majority of our stockholders, to (a) grant
stock appreciation rights with an exercise price that is less than the fair
market value of the underlying common stock; or (b) effectively amend or replace
certain outstanding equity-based awards in a manner that would result in lower
exercise prices, accelerated vesting schedules or the issuance of restricted
stock, as more fully set forth under the heading "PROPOSED AMENDMENT TO THE 1999
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN, THE 1995 STOCK OPTION PLAN AND
BY-LAWS."
8
EXECUTIVE OFFICERS AND KEY EMPLOYEES
Our current executive officers and their respective ages and positions
with us are as follows:
Capacities In In Current
Name Age Which Served Position Since
----------------------------- --- ----------------------------------- ----------------------------
H. Joseph Reiser, Ph.D(1).... 55 Director, President and Chief August 1998
Executive Officer
Michael D. Becker............ 33 Vice President and Investor April 2001
Relations Officer of Cytogen (Interim Chief Executive
Corporation; Interim Chief Executive Officer of AxCell
Officer of AxCell BioSciences Biosciences Corporation
Corporation since January 2002)
William F. Goeckeler......... 47 Vice President of Research and June 2001
Development (Director, Pharmaceutical
Development since
June 1997)
Lawrence R. Hoffman.......... 47 Vice President, Chief Financial July 2000
Officer
Deborah A. Kaminsky.......... 47 Vice President of Sales and Marketing June 2001
(Director of Marketing
since December 2000)
(1) Mr. Reiser's biographical information appears above, see "ELECTION OF
DIRECTORS".
Michael D. Becker joined Cytogen as Vice President and Investor
Relations Officer in April 2001. He has served as Interim Chief Executive
Officer and a Director of our subsidiary, AxCell BioSciences Corporation, since
January 2002. Mr. Becker has spent more than a decade as an analyst and
commentator for the biotechnology industry. From July 1996 to April 2001, he was
with Wayne Hummer Investments LLC, a Chicago-based regional brokerage firm,
where he held senior positions as a biotechnology analyst, investment executive
and portfolio manager. From October 1998 to April 2001, Mr. Becker also served
on the Board of Directors for the Chicago Biotech Network, a nonprofit trade
association for the biotechnology industry in Illinois. In addition, he was the
founder and editor of "Beck on Biotech", a monthly biotechnology investment
newsletter. Mr. Becker is currently a member of the National Investor Relations
Institute (NIRI). Mr. Becker attended DePaul University in Chicago, Illinois.
William F. Goeckeler was promoted to Vice President of Research and
Development in June 2001. He joined Cytogen in March of 1994 as the Assistant
Director, Pharmaceutical Development. In 1995 he was promoted to Associate
Director, Technical Support Operations and in June 1997 became our Director,
Pharmaceutical Development, a position he held until June 2001. Before joining
us, Dr. Goeckeler spent nine years as a scientist in the Bioproducts Laboratory
of Central Research and Development at The Dow Chemical Company. Dr. Goeckeler
did his undergraduate and graduate work at the University of Missouri where he
received his Ph.D. in Radiochemistry for research that involved the discovery of
Quadramet.
Lawrence R. Hoffman joined Cytogen as Vice President and Chief
Financial Officer in July 2000. He is responsible for all of our financial
reporting and controls. 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
9
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.
Deborah A. Kaminsky, D.Ph. was promoted to Vice President of Sales
and Marketing in June 2001. She joined Cytogen in December 2000 as Director of
Marketing. Prior to joining Cytogen, Dr. Kaminsky spent two years with Imagyn
Medical Technologies as Vice President of Clinical Development, having
previously spent more than a decade at Syncor International Corporation where
she held positions of increasing responsibility ranging from pharmacy management
to business development and president of a Syncor subsidiary. She received
academic degrees from the University of Oklahoma Health Sciences Center College
of Pharmacy and the Kellogg Graduate School of Management at Northwestern
University, is licensed as a Doctor of Pharmacy in Oklahoma, and received the
designation of Authorized Nuclear Pharmacist (ANP) by the United States Nuclear
Regulatory Commission.
The current key employees of our subsidiary, AxCell BioSciences
Corporation, are as follows:
Capacities In In Current
Name Age Which Served Position Since
----------------------------- --- ------------------------------- ------------------
John D. Rodwell, Ph.D........ 55 President and Chief Technical June 1999
Officer
Michael D. Becker(1)......... 33 Interim Chief Executive Officer January 2002
(1) Mr. Becker's biographical information appears above, see "EXECUTIVE OFFICERS
AND KEY EMPLOYEES".
John D. Rodwell, Ph.D., President and Chief Technical Officer of
AxCell, joined Cytogen 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. 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.
None of our or AxCell's executive officers or key employees is related
to any other of our or AxCell's executive officers, key employees, or directors.
Our executive officers are elected annually by the Board of Directors and serve
until their successors are duly elected and qualified. AxCell's key employees
are elected annually by AxCell's board 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,
requires our directors, officers and stockholders, who beneficially own more
than 10% of any class of our equity securities registered pursuant to Section 12
of the Exchange Act, to file initial reports of ownership and reports of changes
in ownership with respect to our equity securities with the Securities and
Exchange Commission. All reporting persons are required by SEC regulation to
furnish us with copies of all reports that such reporting persons file with the
SEC pursuant to Section 16(a).
Based solely on our review of the copies of such forms received by us
and upon written representations of the reporting persons received by us, except
as described below, each such reporting person has filed all of their respective
reports pursuant to Section 16(a) on a timely basis.
10
Robert F. Hendrickson failed to timely file a Form 4 relating to his
exercise and subsequent acquisition of 10,000 shares of our common stock on
November 9, 2001. Mr. Hendrickson filed such Form 4 with the SEC on January 4,
2002.
11
EXECUTIVE COMPENSATION
Summary of Compensation in Fiscal 2001, 2000 and 1999
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 our Chief Executive Officer at any time during
2001, and our or AxCell's four most highly compensated executive officers other
than the Chief Executive Officer who were serving at the end of 2001 and whose
aggregate cash compensation exceeded $100,000 at the end of 2001 (collectively
referred to as the "Named Executives") during the years ended December 31, 2001,
2000 and 1999.
SUMMARY COMPENSATION TABLE
------------------------------------------------------------------------------------------------------------------------------------
Long-Term
Annual Compensation (1) Compensation
--------------------------------------------- Awards
Other Securities
Name and Principal Position Annual Underlying All Other
Year Salary Bonus(2) Compensation(3) Options Compensation(4)
($) ($) ($) (#) ($)
(a) (b) (c) (d) (e) (g) (i)
------------------------------------------------------------------------------------------------------------------------------------
H. Joseph Reiser ............. 2001 314,423 100,000 169,663 100,000 6,412
President and Chief 2000 299,038 84,000 216,927 100,000 5,959
Executive Officer 1999 275,000 80,000 -- -- 7,005
John D. Rodwell(5)............ 2001 194,631 26,907 -- -- 5,802
President and Chief 2000 185,192 37,038 -- -- 5,471
Technical Officer of AxCell 1999 182,654 14,400 -- -- 8,610
William F. Goeckeler(6)....... 2001 157,450 26,755 -- 66,390 5,282
Vice President of
Research and Development
Lawrence R. Hoffman........... 2001 219,423 45,311 -- 45,500 5,393
Vice President and Chief 2000 90,673 40,000 -- 550,000 129
Financial Officer
Catherine M. Verna(7)......... 2001 144,808 27,474 -- 27,300 4,989
Vice President, General 2000 91,000 18,200 -- 80,000 2,794
Counsel and Corporate
Secretary
(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.
(2) The amounts disclosed in this column include bonus payments made to each of
the Named Executives both in cash and in shares of our common stock. Such
payments made in shares of common stock were based upon a fair market value
of $3.01 per share of such common stock on December 31, 2001. In fiscal
year 2001, the dollar value of such bonus amounts paid in shares of our
common stock were as follows: Dr. Rodwell, $12,046; Dr. Goeckeler, $11,978;
Mr. Hoffman, $20,286; and Ms. Verna, $12,300.
12
(3) The amounts disclosed in this column consist of relocation expenses.
(4) The amounts disclosed in this column include amounts contributed or accrued
by us in the respective fiscal years under our Savings Plan, a defined
contribution plan which consists of a 401(K) portion and a discretionary
contribution portion. In fiscal year 2001, these amounts were as follows:
on behalf of Dr. Reiser, $5,100; Dr. Rodwell, $5,100; Dr. Goeckeler,
$5,100; Mr. Hoffman, $5,100; and Ms. Verna, $4,891. The amounts disclosed
also include insurance premiums paid by the Company with respect to group
term life insurance and with respect to fiscal year 2001. They were as
follows: on behalf of Dr. Reiser, $1,312; Dr. Rodwell, $702; Dr. Goeckeler,
$182; Mr. Hoffman, $293; and Ms. Verna, $98.
(5) Dr. Rodwell also received options to purchase 150,000 shares of the common
stock of our subsidiary company, AxCell Biosciences Corporation, during
2001.
(6) Dr. Goeckeler received 40,000 options to purchase shares of our common
stock upon his promotion to Vice President, Research and Development in
June 2001.
(7) Ms. Verna resigned from her positions with us effective February 28, 2002.
13
Option Grants in 2001
The following table sets forth information concerning individual grants
of stock options made during 2001 to each of the Named Executives.
OPTION GRANTS IN LAST FISCAL YEAR
----------------------------------------------------------------------------------------------------------------------
Individual Grants
----------------------------------------------------------------------------------------------------------------------
Potential Realizable
Percent of Value at
Number of Total Assumed Annual Rates
Securities Options of Stock
Underlying Granted to Price Appreciation for
Options Employees Exercise or Option Term (3)
Granted in Fiscal Base Price Expiration --------------------------
Name (#) Year(1) ($/share)(2) Date
(a) (b) (c) (d) (e) 5% ($) 10%($)
(f) (g)
----------------------------------------------------------------------------------------------------------------------
H. Joseph Reiser............. 100,000 13.38 3.49 12/18/11 219,484 556,216
John D. Rodwell(4)........... -- -- -- -- -- --
William F. Goeckeler......... 40,000 5.35 4.96 06/04/11 124,773 316,199
26,390 3.53 3.49 12/18/11 57,922 146,785
Lawrence R. Hoffman.......... 45,500 6.09 3.49 12/18/11 99,865 253,078
Catherine M. Verna(5)........ 27,300 3.65 3.49 05/29/02 -- --
-----------
(1) Based on an aggregate of 747,360 options granted to employees in 2001,
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 our 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 our common stock and overall stock
market conditions. There is no assurance that the amounts reflected will be
realized.
(4) Mr. Rodwell received options to purchase 150,000 shares of common stock of
our subsidiary company, AxCell Biosciences Corporation, during 2001, with
an exercise price ranging from $1.25 to $4.63 per share. Such options
represent 34% of the total number of options granted to purchase shares of
AxCell's common stock in 2001 and will expire beginning in September 2010
to December 2011.
(5) Ms. Verna resigned from her positions with us effective February 28, 2002.
The options granted to Ms. Verna during 2001 will expire within 90 days of
the date of her termination of employment with us, or May 28, 2002, and
were not, nor will such options be, vested as of such date.
14
Aggregated Option Exercises in 2001 and Year End Option Values
The following table sets forth information concerning each exercise of
options during 2001 by each of the Named Executives and the year end value of
unexercised in-the-money options.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
-------------------------------------------------------------------------------------------------------------------------
Number of Value of
Securities Underlying Unexercised
Unexercised In-the-Money
Options at Options at
Shares Fiscal Fiscal
Acquired Year-End Year-End(1)
on Value (#) ($)
Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
(a) (b) (c) (d) (e)
-------------------------------------------------------------------------------------------------------------------------
H. Joseph Reiser................ 15,000 47,332 1,393,334 / 991,666 2,609,618 / 1,587,847
John D. Rodwell................. 15,000 30,255 379,500 / 0 122,066 / 0
William F. Goeckeler............ - - 43,465 / 77,790 30,526 / 1,743
Lawrence R. Hoffman............. - - 183,334 / 412,166 1,725 / 3,450
Catherine M. Verna(2)........... - - 26,667 / 80,633 1,035 / 2,070
----------
(1) The dollar values in this column were calculated by determining the
difference between the fair market value of our common stock underlying the
options at fiscal year end of $3.01 per share, and the exercise price of
the options.
(2) Ms. Verna resigned from her positions with us effective February 28, 2002.
15
Equity Compensation Plans
The following table provides information about the securities
authorized for issuance under our equity compensation plans as of December 31,
2001.
-------------------------------------------------------------------------------------------------------------------
Number of Number of securities
securities to be remaining available for
issued upon Weighted-average future issuance under
exercise of exercise price of equity compensation
outstanding outstanding plans (excluding
options, warrants options, warrants securities reflected in
Plan Category(1)(2) and rights and rights column (a))
(a) (b) (c)(3)
-------------------------------------------------------------------------------------------------------------------
(i) Equity compensation plans
approved by security holders:
Option Plans(4).................. 2,582,481 $3.94 1,136,407
Employee Stock Purchase
Plan(5).......................... -- -- 355,497
(ii) Equity compensation plans not
approved by
security holders................. 2,423,630 $2.27 70,000
Total................................. 5,006,111 $3.13 1,561,904
----------
(1) Does not include information related to the stock option plan of our
subsidiary, AxCell Biosciences Corporation, pursuant to which AxCell may
issue options to purchase shares of AxCell's common stock to employees and
consultants of AxCell. Additional information regarding the AxCell
Biosciences Corporation Stock Option Plan is contained in Footnote (12) to
the Notes to Consolidated Financial Statements of Cytogen Corporation and
Subsidiaries in our Annual Report on Form 10-K for the period ended
December 31, 2001, as filed with the Securities and Exchange Commission on
March 28, 2002.
(2) This table excludes an aggregate of 472,157 shares of our common stock
issuable under our Cytogen Retirement Savings Plan and Cytogen Corporation
Performance Bonus Plan with Stock Payment Program.
(3) In addition to being available for future issuance upon the exercise of
options that may be granted after December 31, 2001, all shares available
for issuance under our 1999 Non-Employee Director Plan may instead be
issued outright to eligible directors thereunder in payment for services
rendered to us.
(4) Includes information regarding the following stockholder-approved equity
compensation plans: (i) 1988 Non-Employee Director Plan; (ii) 1989 Employee
Stock Option Plan; (iii) 1989 Outside Consultant Plan; (iv) 1992 Stock
Option Plan; (v) 1995 Stock Option Plan; and (vi) 1999 Non-Employee
Director Plan.
16
(5) Includes 355,497 shares of common stock issuable under our Employee Stock
Purchase Plan, under which up to 2,826 shares of our common stock were
issuable in connection with the offering period which ended on December 31,
2001.
Equity Compensation Plans Not Approved by Security Holders:
The following describes the material features of our equity
compensation plans that have not been approved by our security holders, as set
forth in the above table.
We have issued options to purchase 2,050,000 shares of our common
stock issued outside of any of our equity compensation plans to H. Joseph
Reiser, our President and Chief Executive Officer, upon his commencement of his
employment with us in August 1998. Such options: (i) vest from time to time and
pursuant to the achievement of certain milestones within the discretion of our
Board of Directors; (ii) have an exercise price of $1.0937 per share; (iii)
terminate on August 18, 2008; and (iv) are subject to equitable adjustment upon
the occurrence of certain reorganizations, recapitalizations or similar events.
We have also issued options to purchase 300,000 shares of our common stock
outside of any of our equity compensation plans to Lawrence R. Hoffman, our Vice
President and Chief Financial Officer, upon the commencement of his employment
with us in July 2000. Such options were granted on July 10, 2000 and vest at the
rate of 33.3% per year beginning on the first anniversary of the date of grant.
Such options have an exercise price of $10.141 per share, terminate on July 10,
2010 and are subject to equitable adjustment upon the occurrence of certain
reorganizations, recapitalizations or similar events.
Additionally we have issued options to purchase 10,000 shares of our
common stock issued outside any of our equity compensation plans to Kevin G.
Lokay, upon his appointment to our Board of Directors in January 2001. Such
options have an exercise price of $6.126 per share, expire on January 17, 2011
and vested in full on January 17, 2002. Such options are subject to the same
equitable adjustment as are our outstanding shares of common stock and are not
afforded anti-dilution protection.
We have also issued an aggregate of 63,630 warrants to purchase shares
of our common stock to various persons and entities in consideration for
services rendered by such persons or entities. Such warrants have a weighted
average exercise price of $2.27 per share and expire from time to time over the
next three years. All such warrants are immediately exercisable.
We are contractually obligated to issue warrants to purchase an
additional 70,000 shares of our common stock to the SCO Group over the next 10
months, which warrants are in consideration for certain services provided by SCO
to us and in addition to warrants to purchase 14,000 shares of our common stock
previously so issued to SCO and which are included in the above referenced
warrants. Such warrants shall be issued at the beginning of each month, have an
exercise price equal to 50% above our closing stock price on the last business
day of the preceeding month and will expire three years from the date of grant.
17
Employment Contracts, Termination of Employment and Change-in-Control
Arrangements
We have executed indemnification agreements with each of our executive
officers and directors pursuant to which we have 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, our employees
are covered by confidentiality agreements.
We entered into an employment agreement with H. Joseph Reiser, Ph.D.,
our President and Chief Executive Officer, which provides for bonuses and
vesting of options for the purchase of shares of our common stock based on
continued employment and on the achievement of performance objectives defined by
our 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.
We have also entered into Executive Change of Control Severance
Agreements with each of Messrs. Becker, Goeckeler and Hoffman and Ms. Kaminsky,
which provide, generally, for the payment of twelve months' base salary, a
pro-rata portion of such officer's bonus compensation, the continuation of all
benefits, reasonable Company-paid outplacement assistance and certain other
accrued rights, in the event such officer's employment with us is terminated in
connection with a change in control as set forth therein.
Compensation Committee Interlocks And Insider Participation
During 2001, our Compensation Committee consisted of Robert F.
Hendrickson, who served as Chairman, Kevin G. Lokay and S. Leslie Misrock (until
Mr. Misrock resigned July 18, 2001). There are no, and during 2001 there were
no, Compensation Committee interlocks. In June 1999, we entered into an
agreement with S. Leslie Misrock, and others, to reacquire rights for
immunotherapy to our PSMA technology by acquiring Prostagen, Inc., of which Mr.
Misrock was a principal holder. Mr. Misrock was elected to our Board of
Directors in August 1999. In connection with the acquisition, Mr. Misrock and
other shareholders of Prostagen received shares of our common stock. We may also
issue additional shares upon completion of certain milestones, including up to
450,000 shares of our 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 our common stock
(calculated at the time of issuance) if certain milestones are achieved in our
dendritic cell therapy and PSMA development programs. We are currently
determining whether the initial $2.0 million milestone has been met in the first
quarter of 2002 based on the progress of the dendritic cell prostate cancer
clinical trials being conducted by Northwest Biotherapeutics Inc. (NWBT,
NASDAQ).
In addition, Mr. Misrock, until his death, was a senior partner at
Pennie and Edmonds, a New York based intellectual property law firm that
represents us in certain intellectual property matters.
18
Performance Graph
The following graph compares the cumulative total stockholder return on
our 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, 1997 through December 31, 2001).
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, 1997 1997 1998 1999 2000 2001
--------------------- --------- -------- -------- -------- -------- --------
CYTO................. $100 $29.55 $15.35 $47.16 $42.62 $54.73
NASDAQ............... $100 $122.48 $172.70 $320.82 $193.00 $153.15
NASDAQ PHAR.......... $100 $103.05 $130.81 $246.64 $307.65 $262.19
-----------
(1) Graph assumes $100 invested on January 1, 1997 in our 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.
19
Report of the Compensation Committee of the Board of Directors
Policy
The Compensation Committee of the Board of Directors is responsible for
oversight of our 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.
Our compensation program, both for our 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 our stockholders. Our 2001
executive compensation program was based on the following principles:
- compensation opportunities should attract the best talent to us, 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.
Our 2001 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. We target our overall compensation program at the median level of the
biotechnology industry. In addition, compensation for the Named Executives (and
other executives), including our CEO, 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 2001 executive compensation program and a specific discussion as to the
compensation of the CEO are set out below.
Annual Compensation for 2001
Generally, annual compensation of executive officers under the
executive compensation program for 2001 consisted of salary and bonus
components.
Base Salary
In December 2000, the Compensation Committee determined for
recommendation to the full Board of Directors, base salaries and annual
incentive opportunities for 2001 for our executives, including the CEO and the
other Named Executives.
Bonus
A portion of 2001 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 2001 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 our financial and corporate objectives had been achieved and applied the
appropriate bonus percentage to the respective base salary of each of the Named
Executives. The amounts approved on the Compensation Committee's recommendations
were less than target amounts. We issued to each of Mr. Rodwell, Mr. Goeckeler,
Mr. Hoffman and Ms. Verna, 4,937, 4,909, 8,314 and 5,041 registered shares of
our common stock, respectively, as part of each such individual's 2001 bonus
compensation.
20
Long Term Compensation - Stock Options
The Compensation Committee believes that stock options are an
appropriate means to link our employees' interests with those of our
stockholders. Stock option awards are designed primarily to provide strong
incentives for superior longer-term performance and continued retention. Because
the Compensation Committee believes that corporate performance is one of the
principal factors influencing the market value of our common stock, the granting
of stock options to our executive officers encourages them to work to achieve
consistent improvements in corporate performance. Options only have value to the
recipient when the price of our common stock exceeds the exercise price, which
is not less than the fair market value of our 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 we have 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 2001 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 our continuing accomplishments under his
leadership during the year. The year end bonus in the amount of $100,000 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. During 2001, Dr. Reiser's salary was $315,000. The
Committee has approved an increase of $10,000 to $325,000 for 2002.
Federal Income Tax Considerations
Section 162(m) of the Internal Revenue Code of 1986, as amended, or 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 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 our executive compensation
program is consistent with the requirements of Section 162(m). Our regular stock
option plans under which options may be granted to executive officers have been
approved by our stockholders and we believe 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 our incentive compensation plans to the
greatest extent practical while maintaining flexibility to take actions which it
deems in our best interests and in the best interests of our 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 the compensation we pay to meet these criteria.
The foregoing report on compensation is provided by the following
outside directors, who constituted the Compensation Committee as of December 31,
2001.
Robert F. Hendrickson, Chairman
Kevin G. Lokay, Member
21
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
There were, as of March 31, 2002, approximately 4,352 holders of record
and approximately 51,223 beneficial holders of our common stock. The following
table sets forth certain information, as of March 31, 2002, with respect to
holdings of our common stock by: (i) each person known by us to be the
beneficial owner of more than 5% of the total number of shares of our common
stock outstanding as of such date, based upon currently available Schedules 13D
and 13G filed with the SEC, (ii) each of our directors (which includes all
nominees) and Named Executives, and (iii) all directors and executive officers
as a group.
Amount and Nature of Beneficial
Name and Address of Beneficial Owner(1) Ownership(1) Percent of Class(2)
------------------------------------------------------- -------------------- -------------------
(i) Certain beneficial owners:
The State of Wisconsin Investment Board
121 East Wilson Street
Madison, Wisconsin 53707......................... 4,790,665 6%
(ii) Directors (which includes all nominees) and Named
Executives:
H. Joseph Reiser.................................. 1,853,008(3) 2%
John E. Bagalay, Jr............................... 160,000(3) *
Stephen K. Carter................................. 31,800(3) *
James A. Grigsby.................................. 176,050(3) *
Robert F. Hendrickson............................. 60,600(3) *
Kevin G. Lokay.................................... 16,794(3) *
William F. Goeckeler.............................. 50,759(3) *
Lawrence R. Hoffman............................... 200,195(3) *
John D. Rodwell................................... 444,437(3) *
Catherine M. Verna................................ 35,597(3) *
(iii)All directors and executive officers as a
group (12 persons)................................ 3,104,598(3) 4%
----------
* 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 this
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 82,514,676 shares of our common stock outstanding on
March 31, 2002 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 our common stock which the following persons have the
right to acquire upon the exercise of stock options, within 60 days of
March 31, 2002, as follows: Dr. Reiser: 1,843,334; Dr. Bagalay: 140,956;
Dr. Carter: 19,674; Mr. Grigsby: 121,600; Mr. Hendrickson: 40,600; Mr.
Lokay: 13,333; Dr. Goeckeler: 43,465; Mr. Hoffman: 183,334; Ms. Verna:
26,667; and Mr. Rodwell: 379,500.
22
Certain Relationships and Related Transactions
The members of our Compensation Committee during 2001 were Robert F.
Hendrickson (Chairman), Kevin G. Lokay and S. Leslie Misrock (until July 18,
2001). None 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 AMENDMENTS TO THE 1995 STOCK OPTION PLAN, THE 1999 NON-EMPLOYEE
DIRECTOR STOCK OPTION PLAN, AND BY-LAWS
The 1995 Stock Option Plan
General
On March 28, 1995, the Board of Directors approved and, on May 23,
1995, our stockholders adopted, the 1995 Stock Option Plan, the "1995 Plan". The
1995 Plan currently provides for the grant of options to purchase a maximum of
4,502,635 shares of our common stock to eligible employees and consultants.
The following is a summary description of the 1995 Plan as it currently
exists without giving effect to the proposed amendment, and is qualified in its
entirety by the full text of the 1995 Plan. The full text of the 1995 Plan may
be obtained by our stockholders upon request to the office of our Corporate
Secretary.
A Committee, designated by our Board of Directors, the "Committee", is
authorized to, among other things, interpret and administer the 1995 Plan, to
select employees or eligible consultants to whom options will be granted, to
determine the time when options will be granted and the terms and provisions of
the options (which may differ from one another), and to adopt and make changes
in the rules and regulations for carrying out the 1995 Plan. The Committee shall
be composed of not less than two outside directors who are also non-employee
directors and who are not eligible to participate in the 1995 Plan.
Our Board of Directors may amend the 1995 Plan, except that stockholder
approval is required to: (i) increase the maximum number of shares of common
stock that may be issued on exercise of options granted under the 1995 Plan,
with certain exceptions; (ii) change the categories of persons eligible to
receive options; (iii) increase the limit on the number of shares that may be
granted per optionee; or (iv) modify the provisions of Section 7(a)(i) as it
relates to the prohibition of granting options with an exercise price that is
less than the fair market value of the underlying common stock on the date of
grant.
Options may be granted under the 1995 Plan only to persons who at the
date of grant either (i) are employees or eligible consultants or (ii) have
agreed to become employees or eligible consultants, and, in either case, are
determined by the Committee to be of substantial importance to us or any of our
subsidiaries. Options granted to persons who are not yet employees or eligible
consultants at the date of grant may not be exercised until the optionee has
become an employee or eligible consultant, and shall expire if the optionee
fails to commence service as an employee or eligible consultant within six
months (or such other period as the Committee may determine) after the date of
grant.
The mere grant of an option does not require any consideration from the
optionee. The Committee may, in its discretion, provide that payment of the
exercise price of an option may be made in cash or check. Options will be
exercisable over a period to be designated by the Committee, but not prior to
six months or more than ten years (or five years for certain incentive stock
options) after the date of grant. Except as otherwise determined by the
Committee, options granted under the 1995 Plan will be exercisable only while
the optionee is employed by us and within three months after termination of
employment generally or within 12 months after termination of employment by
reason of death or disability.
23
No eligible employee may be granted options to purchase more than
200,000 shares in any one calendar year. Under the 1995 Plan, eligible Optionees
may be granted either ISOs or NQSOs. ISOs are intended to be "incentive stock
options" under Section 422 of the Code and NQSOs are those options which do not
qualify under Section 422 of the Code. Under the Code, the exercise price of an
ISO must be at least equal to 100% of the fair market value of the shares of
common stock on the date of grant, although the exercise price of a NQSO may be
less than such fair market value. The aggregate fair market value (determined at
the time an option is granted) of the common stock with respect to which ISOs
are first exercisable by an optionee during any calendar year may not exceed
$100,000.
Options granted under the 1995 Plan are not transferable other than by
will or by operation of 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. In the event of the death of an optionee, the option may be
exercisable by his estate. If an option expires or is cancelled or surrendered
without being exercised in full, the number of shares as to which the option is
not exercised will once again become shares as to which new options may be
granted. The 1995 Plan became effective as of March 28, 1995, and will remain in
effect for ten years thereafter (March 28, 2005), or until sooner terminated by
our Board of Directors.
Unless otherwise determined by our Board of Directors, our issuance of
shares of stock of any class, or securities convertible into shares of stock of
any class, for cash or property, or for labor or services either upon direct
sale or upon the exercise of rights or warrants to subscribe therefor, or on
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to, the number, class or price of shares of common stock
then subject to outstanding options.
If as a result of (i) our reorganization or liquidation or (ii)
reclassification of our capital stock, or (iii) our consolidation or merger with
or into another corporation, or sale of all or substantially all the assets of
ours (such reorganization or liquidation or reclassification of our capital
stock, or a merger, consolidation or sale of the type described in this
subsection being a "Corporate Transaction") while an option is outstanding, the
holders of the common stock become entitled to receive, with respect to their
common stock, securities or assets other than, or in addition to, their common
stock, upon exercise of that option, the holder will receive what the holder
would have owned if the holder had exercised the option immediately before the
Corporate Transaction which occurred while the option was outstanding and had
not disposed of anything the holder would have received as a result of that and
all subsequent Corporate Transactions.
24
Previously Granted Options Under the 1995 Plan
As of March 31, 2002, we had granted options to purchase an aggregate
of 3,518,334 shares of common stock (net of cancellations) under the 1995 Plan
at a weighted average exercise price of $3.18 per share. As of March 31, 2002,
1,008,008 options to purchase shares were vested and 1,575,442 options to
purchase shares have been exercised under the 1995 Plan. The following table
sets forth information as of March 31, 2002 concerning options granted under the
1995 Plan to (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(1); (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
(Net of Cancellation)
through Weighted Average
Name(1) March 31, 2002 Exercise Price Expiration Date
--------------------------------------- -------------------- ---------------- ---------------
(i) The Named Executives:
H. Joseph Reiser.............. 400,000 $2.15 8/2008 - 12/2011
John D. Rodwell............... 322,000 $3.81 7/2005 - 1/2008
William F. Goeckeler.......... 174,960 $2.76 12/2007 - 12/2011
Lawrence R. Hoffman........... 295,500 $7.89 7/2010 - 12/2011
Catherine M. Verna(2)......... 26,667 $4.92 5/2002
(ii) All current executive officers as
a group (7 persons)............ 1,405,517 $4.01 5/2002 - 12/2011
(iii) All employees, including all
current officers who are not
executive officers, as a group.. 3,518,334 $3.18 5/2002 - 12/2011
----------
(1) Participation in the 1995 Plan is limited to our employees and eligible
consultants, therefore directors (other than H. Joseph Reiser) are not
eligible to participate.
(2) Ms. Verna resigned from her positions with us effective February 28, 2002.
As of March 31, 2002, the market value of our common stock underlying
the 1995 Plan was $2.14 per share.
The 1999 Non-Employee Director Plan
General
The following is a summary description of the 1999 Non-Employee
Director Plan, (the "Director Plan"), as it currently exists without giving
effect to the proposed amendment, and is qualified in its entirety by the full
text of the Director Plan. The full text of the Director Plan may be obtained by
our stockholders upon request to the office of our Corporate Secretary.
On April 1, 1999, the Board of Directors approved and, on June 16,
1999, the stockholders adopted, the Director Plan. The Director Plan currently
provides for the grant of options to purchase a maximum of 500,000 shares of our
common stock to non-employee directors, of whom there are five.
25
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 20,000 shares of our 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 annual meeting of the
stockholders, each individual who is elected as a non-employee director shall
automatically be granted options to purchase 10,000 shares of our 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
our 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 National 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.
In addition, at our 2001 Annual Meeting of Stockholders, our
stockholders adopted a proposal to amend the Director Plan to provide that
non-employee directors shall receive, at the sole discretion of and after formal
action by our Board of Directors, such number of shares of common stock that is
equal to each such director's cash compensation (including, but not limited to,
annual service fees, fees payable for Board and committee meetings attended and
fees for committees chaired), (the "Cash Component") divided by the fair market
value of our common stock as of the date of issuance of such shares, (the
"Compensation Shares"), which date shall be no earlier than the date on which
the applicable Cash Component compensation becomes due and payable by us.
Compensation Shares shall not be issued for services not yet rendered by such
directors to us. Such amendments to the Director Plan further provide that in
the event the Board of Directors elects to issue Compensation Shares, such
eligible Directors shall receive Compensation Shares until, absent additional
board action, at least such time as: (i) such director owns twenty thousand
(20,000) shares of our common stock, excluding options or other rights to
acquire shares of our common stock, whether exercisable or unexercisable; or
(ii) if fewer than 20,000 shares are so owned, such smaller number of shares has
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 rights to acquire our common stock. Upon
achieving either of such milestones (i) or (ii) above, each such director may,
at his or her option, elect to cease receiving his or her Cash Component to
which he or she is entitled in shares of our common stock under the Plan;
provided, however, that such director must make such election by providing
notice of such election to us in a timely manner. In October 2001, our Board of
Directors took appropriate actions to implement the payment of director
compensation in Compensation Shares.
Each option provided for in the Director Plan shall be granted
automatically and without further action by us, our Board of Directors or our
stockholders. Promptly after the date of grant of each option provided for in
the Director Plan, we shall cause an option agreement to be executed and
delivered to the holder of the option. No other options may be granted at any
time under 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 our common stock
currently or hereafter reserved for issuance shall have been issued, unless
sooner terminated by the Board of Directors.
In the event that our common stock shall be subdivided or combined into
a greater or smaller number of shares or if we shall issue any shares of common
stock as a stock dividend on our 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 we are to be
consolidated with or acquired by another entity in a merger, sale of all or
substantially all of our 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.
Our Board of Directors may, at any time and from time to time, modify
or amend the Director Plan in any respect effective at any date the Board of
Directors determines; provided, that without the approval of our stockholders,
the Board of Directors may not: (i) except as provided in Section 8 of the
Director Plan, increase the maximum number of shares of our common stock which
26
may be issued on exercise of Options or the payment of Compensation Shares
granted under the Director Plan; (ii) change the provisions of Section 6 or
Section 7 of the Director Plan; or (iii) change the categories of persons
eligible to receive options or Compensation Shares under the Director Plan. No
modification or amendment of the Director Plan will, without the consent of the
holder of an outstanding Option or Compensation Shares, adversely affect the
holder's rights under that Option or with respect to such Compensation Shares.
Previously Granted Options Under the Director Plan
As of March 31, 2002, we had granted options to purchase an aggregate
of 271,666 shares of common stock (net of cancellations) under the Director Plan
at a weighted average exercise price of $3.60 per share. As of March 31, 2002,
167,940 options to purchase shares were vested and 10,726 options to purchase
shares had been exercised under the Director Plan. The following table sets
forth information as of March 31, 2002 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
(Net of Cancellation)
through Weighted Average
Name(1) March 31, 2002 Exercise Price Expiration Date
--------------------------------- --------------------- ---------------- ---------------
(iii)All current directors who
are not executive officers
as a group (5 persons)...... 222,333 $3.68 6/2009 - 6/2011
(iv)All current nominees for
election as a director:
James A. Grigsby............ 86,000 $3.67 6/2009 - 6/2011
John E. Bagalay............. 41,000 $3.54 6/2009 - 6/2011
Stephen K. Carter........... 41,000 $3.54 6/2009 - 6/2011
Robert F. Hendrickson....... 41,000 $3.54 6/2009 - 6/2011
Kevin G. Lokay.............. 13,333 $4.94 1/2011 - 6/2011
H. Joseph Reiser, Ph.D(2)... -- -- --
----------
(1) Participation in the Director Plan is limited to our non-employee
directors, therefore the Named Executives, executive officers and our
employees are not eligible to participate.
(2) As an executive officer, Mr. Reiser is not eligible to participate in the
Director Plan.
As of March 31, 2002, the market value of our common stock underlying
the Director Plan was $2.14 per share.
Background Regarding By-Laws
General
The By-Laws were last amended by our Board of Directors on June 19,
2001. The By-Laws generally provide that our property, business and affairs
shall be managed and controlled by our Board of Directors. The Board of
Directors shall exercise all of the powers and duties conferred by law except as
27
provided by the Certificate of Incorporation or the By-Laws. Copies of the
By-Laws may be obtained by our stockholders upon request to the office of our
Corporate Secretary.
Federal Income Tax Treatment of the 1995 Plan and Director Plan
The following is a summary of the United States federal income tax
consequences that generally will arise with respect to awards granted under the
1995 Plan and/or the Director Plan and with respect to the sale of our common
stock acquired under such plans. This summary is based on the federal tax laws
in effect as of the date of this Proxy Statement. Changes to these laws could
alter the tax consequences described below.
The options issued or to be issued under the 1995 Plan may be
designated as either incentive stock options (ISOs) or non-qualified stock
options (NQSOs), and options under the Director Plan may only be designated as
NQSOs.
In general, a participant will not recognize taxable income upon the
grant or exercise of an ISO. Instead, a participant will recognize taxable
income with respect to an ISO only upon the sale of common stock acquired
through the exercise of the option, or "ISO Stock". The exercise of an ISO,
however, may subject the participant to the alternative minimum tax.
Generally, the tax consequences of selling ISO Stock will vary
depending on the date on which it is sold. If the participant sells ISO Stock
more than two years from the date the option was granted and more than one year
from the date the option was exercised, then the participant will recognize
long-term capital gain in an amount equal to the excess of the sale price of the
ISO Stock over the exercise price.
If the participant sells ISO Stock prior to satisfying the above
waiting periods, then all or a portion of the gain recognized by the participant
will be ordinary compensation income and the remaining gain, if any, will be a
capital gain. This capital gain will be a long-term capital gain if the
participant has held the ISO Stock for more than one year prior to the date of
sale.
If a participant sells ISO Stock for less than the exercise price, then
the participant will recognize capital loss in an amount equal to the excess of
the exercise price over the sale price of the ISO Stock. This capital loss will
be a long-term capital loss if the participant has held the ISO Stock for more
than one year prior to the date of sale.
NQSOs are taxed pursuant to Section 83 of the Code. If a NQSO 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 (generally
zero) of such excess shares. We are generally entitled to a tax deduction with
respect to any ordinary compensation income recognized by a participant under
the 1995 Plan. Any such deduction will be subject to the limitations of Section
162(m) of the Code.
28
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
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.
Reasons for and General Effect of Proposed Amendments to the 1995 Plan, the
Director Plan and By-Laws
Our Board of Directors has approved certain amendments to the 1995
Plan, the Director Plan and By-Laws which further restrict our ability, without
the approval of a majority of our stockholders, to: (a) grant stock appreciation
rights with an exercise price that is less than the fair market value of the
underlying common stock; or (b) effectively amend or replace certain outstanding
equity-based awards in a manner that would result in lower exercise prices,
accelerated vesting schedules or the issuance of restricted stock.
On January 18, 2002, we entered into a common stock purchase agreement
with the State of Wisconsin Investment Board, pursuant to which we issued and
sold, 2,970,665 shares of our common stock for aggregate proceeds to us of
approximately $8.0 million.
Under the terms of the share purchase agreement, we were required to
adopt, subject to stockholder approval, amendments to the Director Plan, the
1995 Plan and the By-Laws, (the "Amendments"), to provide that, unless approved
by the holders of a majority of the shares present and entitled to vote at a
duly convened meeting of stockholders, we shall not:
(a) grant any stock option, including stock appreciation right, with an
exercise price that is less than 100% of the fair market value of the underlying
stock on the date of grant;
(b) reduce the exercise price of any stock option, including stock
appreciation right, outstanding or to be granted in the future; cancel and
re-grant options at a lower exercise price (including entering into any "6 month
and 1 day" cancellation and re-grant scheme), whether or not the cancelled
options are put back into the available pool for grant; replace underwater
options with restricted stock in an exchange, buy-back or other scheme; or
replace any options with new options having a lower exercise price or
accelerated vesting schedule in an exchange, buy-back or other scheme; or
(c) amend or repeal such Amendments or the requirement for such
Amendments.
29
Our Board of Directors approved amended versions of the 1995 Plan, the
Director Plan and the By-Laws incorporating provisions of such Amendments that
were not already set forth under the 1995 Plan, the Director Plan or the By-Laws
on June 19, 2001. Accordingly, the proposed amendments to the 1995 Plan, the
Director Plan and the By-Laws provide that without the approval of a majority of
our stockholders, we shall not: (a) grant stock appreciation rights with an
exercise price that is less than the fair market value of the underlying common
stock; or (b) effectively amend or replace certain outstanding equity-based
awards in a manner that would result in lower exercise prices, accelerated
vesting schedules or the issuance of restricted stock.
We agreed to submit such proposed amendments to the 1995 Plan, the
Director Plan and the By-Laws to our stockholders for approval at our 2002
Annual Meeting of Stockholders.
The Board of Directors recommends a vote FOR the approval of the
Amendments to the 1995 Plan, the Director Plan and the By-Laws.
INFORMATION CONCERNING INDEPENDENT AUDITORS
Arthur Andersen LLP has served as our independent public accountants
since 1982. Our Board of Directors has no reason to question the quality or
integrity of the audit and other assurance services provided by Andersen during
this time. However, during the past several months our Board has been
monitoring, and will continue to monitor, ongoing developments relating to the
investigation of Andersen and criminal allegations that have been brought
against the firm. In consideration of these developments, our Board has asked
management to hold discussions with other auditing firms, and these discussions
are ongoing as of the date hereof. Following these discussions, our Board may
engage another firm for auditing services beginning in 2002. We have requested
that a representative from Andersen attend our 2002 Annual Meeting of
Stockholders. Such representative will have an opportunity to make a statement,
if he or she desires, and will be available to respond to appropriate questions
from stockholders.
STOCKHOLDERS' PROPOSALS
Stockholders who intend to have a proposal considered for inclusion in
our proxy materials for presentation at our 2003 Annual Meeting of Stockholders
pursuant to Rule 14a-8 under the Exchange Act must submit their proposal to us
at our offices at 600 College Road East, CN 5308, Princeton, New Jersey, 08540,
attention H. Joseph Reiser not later than January 9, 2003.
Stockholders who intend to present a proposal at such meeting without
inclusion of such proposal in our proxy materials pursuant to Rule 14a-8 under
the Exchange Act are required to provide advanced notice of such proposal to us
at the aforementioned address not later than March 25, 2003.
If we do not receive notice of a stockholder proposal within this
timeframe, our management will use its discretionary authority to vote the
shares they represent, as our Board of Directors may recommend. We reserve 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.
HOUSEHOLDING OF ANNUAL MEETING MATERIALS
The SEC has also recently adopted a "householding" rule which we intend
to implement for future stockholder communications. This rule permits us to
deliver a single proxy or information statement to a household, even though two
or more stockholders live under the same roof or a stockholder has shares
registered in multiple accounts. This rule enables us to reduce the expense of
printing and mailing associated with proxy statements and reduces the amount of
duplicative information you may currently receive. If this rule applies to you
and you wish to continue receiving separate proxy materials without
participating in the "householding" rule, please check the designated box on the
enclosed proxy card. If we do not hear from you within 60 days, we will assume
that we have your implied consent to deliver one set of proxy materials under
the new rule. This implied consent will continue for as long as you remain a
stockholder of the company, unless you inform us in writing otherwise. If you
revoke your consent, we will begin sending separate copies within 30 days of the
receipt of your revocation.
30
Some banks, brokers and other nominee record holders are already
"householding" proxy statements and annual reports. This means that only one
copy of our proxy statement or annual report may have been sent to multiple
stockholders in your household. We will promptly deliver a separate copy of
either document to you if you write us at 600 College Road East CN-5308,
Princeton, New Jersey 08540, or call us at (609) 750-8200. If you want to
receive separate copies of the annual report and proxy statement in the future,
or if you are receiving multiple copies and would like to receive only one copy
for your household, you should contact your bank, broker, or other nominee
record holder, or you may contact us at the above address and phone number.
OTHER MATTERS
Our Board of Directors is not aware of any matter to be presented for
action at the Annual Meeting other than the matters referred to above, and does
not intend to bring any other matters before the Annual Meeting. However, if
other matters should come before the Annual Meeting, we intend that holders of
the proxies will vote thereon in their discretion.
GENERAL
The accompanying proxy is solicited by and on behalf of our Board of
Directors, whose notice of meeting is attached to this Proxy Statement, and the
entire cost of such solicitation will be borne by us.
In addition to the use of the mails, proxies may be solicited by
personal interview, telephone and telegram by our directors, officers and other
employees who will not be specially compensated for these services. We 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. We 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 our directors and officers is based upon
information received from the individual directors and officers.
WE WILL FURNISH, WITHOUT CHARGE, A COPY OF OUR REPORT ON FORM 10-K FOR
THE YEAR ENDED DECEMBER 31, 2001, INCLUDING CONSOLIDATED FINANCIAL STATEMENTS
BUT NOT INCLUDING EXHIBITS, TO EACH OF OUR STOCKHOLDERS OF RECORD ON APRIL 22,
2002, AND TO EACH BENEFICIAL STOCKHOLDER ON THAT DATE UPON WRITTEN REQUEST MADE
TO MR. H. JOSEPH REISER, PRESIDENT & CHIEF EXECUTIVE OFFICER, 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
/s/ H. Joseph Reiser
Princeton, New Jersey H. Joseph Reiser
May 9, 2002 President and Chief Executive Officer
31
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
Lawrence R. Hoffman, 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 Radisson Hotel, Route One at Ridge
Road, Princeton, New Jersey at 11:00 a.m., local time, on Tuesday, June 18,
2002, 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 and 2.
(continued and to be signed on reverse side)
Please Detach and Mail In the Envelope Provided
A [X] Please mark your votes as in this example.
FOR WITHHELD
1. ELECTION OF Nominees:
DIRECTORS. [ ] [ ] James A. Grigsby Stephen K. Carter
H. Joseph Reiser Robert F. Hendrickson
John E. Bagalay, Jr. Kevin G. Lokay
VOTE FOR all the nominees listed at right;
except vote withheld from the following
nominee(s) (if any).
-----------------------------------------------------
2. APPROVAL OF PROPOSAL TO AMEND, AS REQUIRED, THE COMPANY'S 1995 STOCK OPTION
PLAN, 1999 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN AND BY-LAWS, AS
APPLICABLE, TO PROVIDE THAT WITHOUT THE APPROVAL OF A MAJORITY OF THE
COMPANY'S STOCKHOLDERS, THE COMPANY SHALL NOT:
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
(i) GRANT STOCK APPRECIATION RIGHTS WITH AN EXERCISE PRICE THAT IS LESS
THAN THE FAIR MARKET VALUE OF THE UNDERLYING COMMON STOCK; OR
(ii) EFFECTIVELY AMEND OR REPLACE CERTAIN OUTSTANDING EQUITY-BASED AWARDS
IN A MANNER THAT WOULD RESULT IN LOWER EXERCISE PRICES, ACCELEREATED
VESTING SCHEDULES OR THE ISSUANCE OF RESTRICTED STOCK. 3 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.
3. 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.
[ ] [ ]
*** HOUSEHOLDING ***
If you wish to continue receiving separate proxy materials without participating
in the "householding" rule, as described on page 30 of our accompanying proxy
statement, please check the box below. If we do not hear from you within 60
days, we will assume that we have your implied consent to deliver one set of
proxy materials under the new rule. This implied consent will continue for as
long as you remain a shareholder of the Company, unless you inform us in writing
otherwise. If you revoke your consent, we will begin sending separate copies
within 30 days of the receipt of your revocation.
[ ] I do not wish to participate in "householding".
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.
APPENDIX A
AMENDED AND RESTATED
1999 NON-EMPLOYEE DIRECTOR PLAN
CYTOGEN CORPORATION
AMENDED AND RESTATED 1999 STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
1. Purpose; Effective Date.
(a) The purposes of this Plan are to further the interests of Cytogen
Corporation (the "Company") by retaining the services of persons now serving as
non-employee Directors of the Company, attracting and retaining the services of
persons capable of serving on the Board of Directors of the Company, and by
providing such persons with an incentive that aligns their interests with the
interests of the Company's shareholders.
(b) This Plan will become effective on approval of the Plan by the
affirmative vote of the majority of shares present in person or represented by
proxy at a meeting of the shareholders of the Company and cast on the proposal
for approval of the Plan.
2. Definitions.
Whenever used in this Plan, the following terms will have the meanings set
forth in this Section:
"Board of Directors" means the Board of Directors of the Company.
"Cash Component" means director cash compensation, including but not
limited to annual services fees, fees payable for board and committee meetings
attended and fees for committees chaired.
"Code" means the United States Internal Revenue Code of 1986, as amended.
"Common Stock" means the common stock, par value $.0l per share, of the
Company.
"Compensation Shares" means any shares of Common Stock issued to Eligible
Directors hereunder in payment of such Eligible Director's Cash Component of
compensation.
"Date of Grant" means with respect to any Option the date the Option will
become effective under the provisions of this Plan.
"Disability" means inability of a Director to engage in any substantial
gainful activity by reason of a medically determinable physical or mental
impairment which reasonably can be expected to last for a continuous period of
not less than six months.
"Eligible Director" means, as of any time, a person who is a director of
the Company but is not then an Employee.
"Employee" means any person employed by the Company (including, without
limitation, a person employed by the Company who is also an officer or director
of the Company).
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
rules and regulations promulgated thereunder.
"Exercise Price" means with respect to any Option the price per share which
must be paid upon exercise of the Option.
"Fair Market Value" means (i) if the Common Stock is traded in a market in
which actual transactions are reported, the average of the high and low prices
at which the Common Stock is reported to have traded on the relevant date in all
markets on which trading in the Common Stock is reported, or if there is no
reported sale of the Common Stock on the relevant date, the mean of the highest
reported bid price and lowest reported asked price for the Common Stock on the
relevant date, (ii) if the Common Stock is Publicly Traded but only in markets
in which there is no reporting of actual transactions, the mean of the highest
reported bid price and the lowest reported asked price for the Common Stock on
the relevant date, or (iii) if the Common Stock is not Publicly Traded, the
value of a share of Common Stock as determined by the most recent annual
valuation prepared by an independent expert at the request of the Board of
Directors.
"Major Event" means when (i) the Company enters into one or more definitive
agreements to merge or consolidate the Company with or into another corporation,
or to sell or otherwise dispose of all or substantially all of the Company's
assets, or to effect any other transaction, consolidation or reorganization
having similar results or effect; (ii) any person other than the Company makes a
tender or exchange offer for more than 50% of Common Stock pursuant to which
purchases of any amount of Common Stock are made; or (iii) stock representing
more than 50% of the voting power of the Company is acquired by any person other
than the Company in any one or more transactions occurring in any 24-month
period.
"Option" means any option granted under this Plan.
"Option Agreement" means an agreement, in such form as may be determined by
the Board of Directors or the Committee, executed and delivered by the Company
to the holder of any Option with respect to that option.
"Option Shares" means, with respect to any Option, the maximum number of
shares of Common Stock which may be acquired under the option prior to its
expiration.
"Plan" means the Cytogen Corporation 1999 Directors Stock Option Plan, as
amended.
"Publicly Traded" means, with respect to any class of stock, that the class
of stock is required to be registered under Section 12 of the Securities
Exchange Act of 1934, as amended, or that stock of that class has been sold
within the preceding 12 months in an underwritten public offering.
A-2
"Termination of Service" means the time when a Director ceases to serve as
a Director for any reason, including without limitation by reason of
resignation, retirement, removal, death or Disability.
3. Administration of the Plan.
(a) The Compensation Committee of the Board of Directors will be
responsible for the administration of this Plan. The Committee shall consist of
two or more non-employee directors of the Company who meet the definition of
"outside director" under the provisions of Section 162(m) of the Code and the
definition of "non-employee director" under the provisions of the Exchange Act.
No member of the Committee shall have been within one year prior to appointment
to, or while serving on, the Committee granted or awarded equity securities of
the Company pursuant to this or any other plan of the Company except to the
extent that participation in any such plan or receipt of any such grant or award
would not adversely affect the Committee member's status as a "non-employee
director" or as an "outside director".
(b) The Committee shall (i) determine or provide for the terms and
conditions of the issuance of Compensation Shares, if so authorized by the Board
of Directors, or grant Agreements, and all election and other forms, which terms
and conditions shall not be inconsistent with this Plan, (ii) interpret the Plan
and (iii) make all other decisions relating to the operation of the Plan. The
Committee may adopt such rules or guidelines as it deems appropriate to
implement the Plan. The Committee's determinations under the Plan shall be final
and binding on all persons.
(c) No member of the Board of Directors or of any committee of the Board of
Directors shall be liable for any act or omission of the Board or any committee,
or of any other member of the Board or any committee, or for any act or omission
on his own part, in connection with the administration of this Plan unless it
resulted from the member's own willful misconduct.
4. Persons Eligible to Receive Options and Compensation Shares.
Options and Compensation Shares shall be granted only to Eligible
Directors.
5. Stock Subject to the Plan.
The maximum number of shares of Common Stock as to which Options or
Compensation Shares may be granted or issued under this Plan is 500,000 shares,
subject to adjustment as provided in Section 8. If any Option or Compensation
Share expires or is cancelled, surrendered or forfeited without being exercised
in full (with respect to Options), the number of shares as to which the Option
is not exercised, or Options or Compensation Shares are canceled, surrendered or
forfeited, will once again become shares as to which new Options or Compensation
Shares may be granted. The Common Stock which is issued upon the exercise of
Options or issued as Compensation Shares may be authorized but unissued shares
or shares which have been issued and reacquired by the Company.
A-3
6. Grants of Options or Compensation Shares.
(a) Each person who is newly-elected a director of the Company at an annual
meeting of the stockholders of the Company, such person having not previously
served as a director of the Company and such person then being an Eligible
Director, shall, as of the date of such annual meeting, be granted an Option to
purchase twenty thousand (20,000) shares of Common Stock. In addition, each
person who is appointed a director of the Company after the date of the most
recent annual meeting of the stockholders of the Company, and is an Eligible
Director as of such date, shall be granted on such date an Option to purchase a
pro rata portion of twenty thousand (20,000) shares of Common Stock, based upon
the number of full months remaining from the date of appointment until the one
year anniversary month of such preceding annual meeting.
(b) Effective on approval of the Plan by the shareholders, each person who
is on that date an Eligible Director shall be granted an Option to purchase
twenty one thousand (21,000) shares of Common Stock (the "Initial Option").
(c) Each person who is appointed a director of the Company after the date
of approval of the Plan by the Shareholders and is an Eligible Director as of
such date shall be granted an Option to purchase a pro rata portion of ten
thousand (10,000) shares of Common Stock, based upon the number of full months
remaining from the date of election until the one year anniversary month of the
preceding annual meeting, as of the effective date of their appointment.
(d) On the day following each annual meeting of the stockholders of the
Company, commencing with the 2000 annual meeting, each person who is on that
date an Eligible Director and was re-elected at that meeting shall be granted an
Option to purchase 10,000 shares of Common Stock. In addition, a Chairman of the
Board of Directors, unless the Compensation Committee of the Board determines
otherwise, shall receive an additional grant of fifteen thousand (15,000) shares
of Common Stock.
(e) Eligible Directors shall receive, at the sole discretion of and after
formal action by the Board of Directors, Compensation Shares in such number of
shares of Common Stock that is equal to each respective Eligible Director's Cash
Component compensation divided by the Fair Market Value of the Company's Common
Stock as of the date of issuance of such Compensation Shares, which shall be no
earlier than the date on which the applicable Cash Component compensation
becomes due and payable by the Company, subject to the terms and conditions set
forth herein. Compensation Shares shall not be issued for services not yet
rendered by an Eligible Director to the Company.
(f) Subject to Section 6(e) hereof, Eligible Directors shall receive
Compensation Shares in lieu of the Cash Component of such Eligible Director's
compensation until at least such time as: (i) such Eligible Director owns twenty
thousand (20,000) shares of the Company's Common Stock, excluding options or
other rights to acquire shares of the Company's Common Stock, whether
exercisable or unexercisable; or (ii) if fewer than 20,000 shares are so owned,
such smaller number of shares having 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 rights to
acquire Common Stock of the Company.
A-4
(g) Upon achieving either of the milestones (i) or (ii) set forth in
Section 6(f) hereof, each such Eligible Director may, at his or her option,
elect to cease receiving his or her Cash Component to which he or she is
entitled in shares of Common Stock under the Plan; provided, however, that such
Eligible Director must make such election by providing notice of such election
to the Company.
(h) Each Option provided for in this Section 6 shall be granted
automatically and without further action by the Company, the Board of Directors
or the Company's stockholders. Promptly after the Date of Grant of each Option
provided for in this Section 6, the Company shall cause an Option Agreement to
be executed and delivered to the holder of the Option. No other Options may be
granted at any time under this Plan.
7. Option and Compensation Shares Provisions.
(a) Exercise Price. The Exercise Price of the Initial Option will be 200%
of the Fair Market Value of the Common Stock on the Date of Grant of the Option.
The Exercise Price of each Option other than the Initial Option will be 100% of
the Fair Market Value of the Common Stock on the Date of Grant of the Option.
The Committee may not reduce the Exercise Price of any Option granted under the
Plan.
(b) Term; Vesting.
(i) No Option granted under this Plan may be exercised more than 10 years
after the Date of Grant of the option.
(ii) Except as provided in Sections 7(b)(iii), 7(f), 7(g) and 7(h), the
Initial Option shall become exercisable in one-third increments
annually on the first, second, and third anniversaries of the Date of
Grant, and Options other than the Initial Option shall become
exercisable in full on the first anniversary of the Date of Grant.
(iii)Upon the occurrence of a Major Event, all of the Option Shares
covered by an Option shall become immediately available for purchase
upon exercise of the option, without regard to the vesting provisions
of Section 7(b)(ii).
(c) Exercise of Options. An Option may be exercised in whole or in part at
any time, or from time to time, during its term. To exercise an Option, the
person exercising the Option must deliver to the Company, at its principal
office:
(i) a notice of exercise of the Option, which states the extent to which
the option is being exercised; and
(ii) payment in full in cash, which may be satisfied by a check, in an
amount equal to the Exercise Price of the option times the number of
shares as to which it is being exercised.
A-5
(d) Delivery of Stock Certificates. As promptly as practicable after an
option is exercised or Compensation Shares become payable to an Eligible
Director, the Company will deliver to the person who exercises the Option or is
owed such Compensation Shares, certificates registered in that person's name
representing the number of shares of Common Stock which were purchased by the
exercise of the option or grant of Compensation Shares in payment for services
rendered. Each certificate may bear a legend to indicate, if applicable, that
the Common Stock represented by the certificate was issued in a transaction
which was not registered under the Securities Act of 1933, as amended, and may
only be sold or transferred in a transaction which is registered under that Act
or is exempt from the registration requirements of that Act.
(e) Nontransferability
(i) Options. During the lifetime of a person to whom an option is issued,
the Option may be exercised only by that person or his or her guardian
or legal representative. An Option may not be assigned, pledged or
hypothecated in any way, will not be subject to execution, and will
not be transferable otherwise than by will or the laws of descent and
distribution. The Company will not recognize any attempt to assign,
transfer, pledge, hypothecate or otherwise dispose of an option
contrary to the provisions of this Plan, or any levy of any attachment
or similar process upon any Option, and, except as expressly stated in
this Plan, the Company will not be required to, and will not, issue
Common Stock on exercise of an option to anyone who claims to have
acquired that option from the person to whom it was granted.
(ii) Compensation Shares. For one year after the date of issuance of
Compensation Shares to any Eligible Director, such Compensation Shares
shall not be transferable by such Eligible Director. During this one
year period, Compensation Shares may not be assigned, pledged or
hypothecated in any way, and will not be transferable otherwise than
by will or the laws of descent and distribution. The Company will not
recognize any attempt to assign, transfer, pledge, hypothecate or
otherwise dispose of Compensation Shares contrary to the provisions of
this Plan, or any levy of any attachment or similar process upon any
Compensation Shares, and, except as expressly stated in this Plan, the
Company will not be required to, and will not, remove any related
restrictive legend from the Compensation Shares until such one year
period has expired. The Compensation Shares shall bear a restrictive
legend evidencing such lock-up (the "Lock-up Legend"). Upon the
expiration of such one year lock-up period, Compensation Share s shall
become fully transferable by the holder, subject to the terms of the
Securities Act of 1933, as amended and state securities laws. The
Company shall take reasonable steps to remove the Lock-up Legend from
the Compensation Shares within a reasonable time after the expiration
of such period upon the request of an Eligible Director.
Notwithstanding such lock-up provision, upon the occurrence of a Major
Event, all of the Compensation Shares issued hereunder to Eligible
Directors shall be treated in a like manner as are the outstanding
shares of the Company's Common Stock upon the occurrence of such Major
Event.
A-6
(f) Termination of Service of Director Holding an Option Other Than Because
of Death or Disability. Subject to the provisions of Sections 7(b) and 7(h), if
there is a Termination of Service of a director to whom an Option has been
granted, other than by reason of the director's death or disability, or
retirement, each Option held by the director may be exercised until the earlier
of (x) the end of the three-month period immediately following the date of
Termination of service, or (y) the expiration of the term of the option.
(g) Death or Disability of Director Holding an Option. Notwithstanding the
provisions of Section 7(b), if there is a Termination of Service of a director
to whom an option has been granted by reason of the director's death or
disability, or a former director dies within three months following the date of
his or her Termination of Service, each option held by the Director on the date
of the Director's Termination of Service may be exercised in full (i.e., in
respect of up to 100% of the Option shares, regardless of the time elapsed since
the Date of Grant) until the earlier of (x) the end of the one-year period
immediately following the date of Termination of service or (y) the expiration
of the term of the option. In the event of an Eligible Director's death, all of
such person's outstanding Options will transfer to the maximum extent permitted
by law to such person's designated Beneficiary. Each Eligible Director may name,
from time to time, any beneficiary or beneficiaries (which may be named
contingent ly or successively) as his or her Beneficiary for purposes of this
Plan. Each designation shall be on a form prescribed by the Company, will be
effective only when delivered to the Company and when effective will revoke all
prior designations by the Eligible Director. If an Eligible Director dies with
no such beneficiary designation in effect, such person's Options will be
transferable by will or pursuant to the laws of descent and distribution
applicable to such person.
(h) Retirement or Resignation. If there is a Termination of Service of a
Director by reason of the Director's retirement or resignation at any time after
the Director has reached age 55 with a minimum of three years' service as a
non-employee director, each Option held by the Director on the date of the
Director's Termination of Service may be exercised in full (i.e., in respect of
up to 100% of the Option Shares, regardless of the time elapsed since the Date
of Grant) until the earlier of (x) the end of the five year period immediately
following the date of Termination of Service or (y) the expiration of the term
of the option.
8. Recapitalization, reorganizations, stock splits and the like.
(a) The existence of outstanding Options or Compensation Shares shall not
affect in any way the right or power of the Company or its stockholders to make
or authorize any or all adjustments, recapitalizations, reorganizations or other
changes in the Company's capital structure or its business, or any merger or
consolidation of the Company, or any issue of bonds, debentures, preferred or
prior preference stock ahead of or affecting the Common Stock or the rights
thereof, or the dissolution or liquidation of the Company, or any sale or
transfer of all or any part of its assets or business or any other corporate act
or proceeding, whether of a similar character or otherwise. Except as
hereinafter expressly provided, the issue by the Company of shares of stock of
any class, or securities convertible into shares of stock of any class, for cash
or property, or for labor or services either upon direct sale or upon the
A-7
exercise of rights or warrants to subscribe therefor, or on conversion of shares
or obligations o f the Company convertible into such shares or other securities,
shall not affect, and no adjustment by reason thereof shall be made with respect
to, the number, class or price of shares of Common Stock then subject to
outstanding options.
(b) If as a result of any (i) reorganization or liquidation of the Company
or (ii) reclassification of the Company's capital stock, stock splits, stock
splits in the form of dividends, reverse stock splits, or similar
recapitalizations of the Company, or (iii) consolidation or merger of the
Company with or into another corporation, or sale of all or substantially all
the assets of the Company (a reorganization or liquidation of the Company or
reclassification of the Company's capital stock, or a merger, consolidation or
sale of the type described in this subsection being a "Corporate Transaction")
while an Option is outstanding, the holders of the Common Stock become entitled
to receive with respect to their Common Stock, securities or assets other than,
or in addition to, their Common Stock, upon exercise of that Option the holder
will receive what the holder would have owned if the holder had exercised the
Option immediately before the first Corporate Transaction which occurred while
the option was outstan ding and had not disposed of anything the holder would
have received as a result of that and all subsequent Corporate Transactions.
Compensation Shares shall be adjusted in the same manner as the Company's Common
Stock in all events.
9. Rights of Option Holder.
The holder of an Option will not have any rights as a stockholder by reason
of holding that Option. Upon exercise of an Option, the holder will be deemed to
acquire the rights of a stockholder when, but not before, the issuance of Common
Stock as a result of the exercise is recorded in the stock records of the
Company.
10. Laws and Regulations.
The obligation of the Company to sell and deliver shares of Common Stock on
exercise of options or upon the issuance of Compensation Shares will be subject
to the condition that legal counsel for the Company be satisfied that the sale
and delivery will not violate the Securities Act of 1933, as amended, or any
other applicable laws, rules or regulations.
11. Reservation of Shares.
The Company will at all times keep reserved for issuance on exercise of
options a number of authorized but unissued or reacquired shares of Common Stock
equal to the maximum number of shares the Company may be required to issue on
exercise of outstanding options (assuming no subsequent adjustments under
Section 8).
12. Amendment of the Plan.
The Board of Directors may at any time and from time to time modify or
amend this Plan in any respect effective at any date the Board of Directors
determines; provided, that without the approval of the stockholders of the
Company the Board of Directors may not, (i) except as provided in Section 8,
A-8
increase the maximum number of shares of Common Stock which may be issued on
exercise of Options or the payment of Compensation Shares granted under this
Plan; (ii) change the provisions of Section 6 or Section 7; (iii) change the
categories of persons eligible to receive options or Compensation Shares under
this Plan; or (iv) otherwise materially increase (within the meaning of Rule
16b-3 of the Exchange Act) the benefits accruing under this Plan. No
modification or amendment of this Plan will, without the consent of the holder
of an outstanding Option or Compensation Shares, adversely affect the holder's
rights under that Option or with respect to such Compensation Shares.
Notwithstanding approval by shareholde rs, the Board may amend this Plan without
further shareholder approval to add provisions required or enabled by changes to
Rule 16b-3.
13. Termination of the Plan.
This Plan will terminate on June 16, 2009, unless sooner terminated. The
Board of Directors may suspend or terminate this Plan at any time or from time
to time, but no such action may adversely affect the rights of a person holding
an outstanding Option or Compensation Share. The applicable terms of the Plan,
and any terms and conditions as applicable to Options or Compensation Shares
granted prior to such date, shall survive the termination of the Plan and
continue to apply to such Options or Compensation Shares.
A-9
APPENDIX B
AMENDED AND RESTATED
1995 STOCK OPTION PLAN
CYTOGEN CORPORATION
AMENDED AND RESTATED
1995 STOCK OPTION PLAN
(last amended as of June 19, 2001)
1. Purpose; Effective Date.
(a) The purposes of this Plan are to further the interests of Cytogen
Corporation (the "Company") and its Subsidiaries by retaining the services of
persons now serving as officers and other employees and consultants of the
Company and its Subsidiaries, attracting and retaining the services of persons
capable of serving as officers, employees and consultants of the Company and its
Subsidiaries and providing incentives for such employees and consultants to
exert maximum efforts to promote the success of the Company and its
Subsidiaries.
(b) The effective date of this Plan is March 28, 1995. This Plan will
become effective on that date, subject to approval of the Plan not later than
September 30, 1995 by a majority of the votes cast at a duly held stockholders
meeting at which a quorum representing a majority of all outstanding voting
stock is, either in person or by proxy, present and voting on the Plan. Nothing
in this Plan shall affect the rights or obligations of holders of options
granted under any other Company stock option plan.
2. Definitions.
Whenever used in this Plan, the following terms will have the meanings set
forth in this paragraph:
"Board of Directors" means the Board of Directors of the Company.
"Code" means the U.S. Internal Revenue Code of 1986, as amended.
"Committee" means the committee described in paragraph 3.
"Common Stock" means the common stock, par value $. 01 per share, of the
Company.
"Date of Grant" means with respect to any Option the date the Committee
approves the grant of the Option or such later date as may be specified by the
Committee as the date the option will become effective.
"Disinterested Director" means a member of the Board who is a
"disinterested person" within the meaning of Rule 16b-3(d)(3) under the
Securities Exchange Act of 1934, or any successor provision.
"Eligible Consultant" means a consultant providing services to, and who is
not an employee of, the Company or any of its Subsidiaries.
"Employee" means any person employed by the Company or any of its
Subsidiaries (including, without limitation, a person employed by the Company or
any of its Subsidiaries who is also an officer or director of the Company or any
of its Subsidiaries).
"Exercise Price" means with respect to any Option the price per share which
must be paid upon exercise of the Option.
"Fair Market Value" means (i) if the Common Stock is traded in a market in
which actual transactions are reported, the mean of the high and low prices at
which the Common Stock is reported to have traded on the relevant date in all
markets on which trading in the Common Stock is reported, or if there is no
reported sale of the Common Stock on the relevant date, the mean of the highest
reported bid price and lowest reported asked price for the Common Stock on the
relevant date, (ii) if the Common Stock is Publicly Traded but only in markets
in which there is no reporting of actual transactions, the mean of the highest
reported bid price and the lowest reported asked price for the Common Stock on
the relevant date, or (iii) if the Common Stock is not Publicly Traded, the
value of a share of Common Stock as determined by the most recent valuation
prepared by an independent expert at the request of the Committee.
"Incentive Stock Option" means any Option that at the time of the grant
qualifies and is designated as an incentive stock option within the meaning of
Section 422 of the Code.
"Non-Qualified Option" means any Option that is not an Incentive Stock
Option.
"Option" means any Incentive Stock Option or Non-Qualified Option granted
under this Plan.
"Option Agreement" means an agreement in such form as may be determined by
he Committee, executed and delivered by the Company to the holder of any Option
with respect to that Option.
"Outside Director" means a member of the Board who is not a current
employee of the Company (or a related entity), is not a former employee who is
receiving compensation for prior services (other than benefits under a
tax-qualified retirement plan), was not an officer of the Company at any time,
and is not currently receiving remuneration, either directly or indirectly, in
any capacity other than as a director.
"Plan" means the Cytogen Corporation 1995 Stock Option Plan, as amended.
"Publicly Traded" means, with respect to any class of stock, that the class
of stock is required to be registered under Section 12 of the Securities
Exchange Act of 1934, as amended, or that stock of that class has been sold
within the preceding 12 months in an underwritten public offering.
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"Subsidiary" means any corporation that, at the time in question is a
subsidiary corporation of the Company within the meaning of section 424(f) of
the Code.
"Ten Percent Shareholder" means, with respect to the grant of any Option, a
person who at the Date of Grant is the beneficial owner of stock possessing more
than 10% of the total combined voting power of all classes of stock of the
Company.
"Termination of Service" means (a) the time when the employee-employer
relationship between an Employee and the Company ceases to exist for any reason,
or (b) the time when an officer who is not also an Employee ceases to be an
officer of the Company for any reason or (c) the time when an Eligible
Consultant ceases to be such a consultant for any reason, including, but not
limited to, a termination by resignation, discharge, death, Total Disability or
retirement. Any leave of absence taken with the consent of the Company for a
period of not more than 90 days shall not be a Termination of Service, or if
longer, so long as the optionee's right to reemployment with the Company is
guaranteed by contract. If the period of leave exceeds 90 days and if the right
to reemployment is not guaranteed by contract, the Termination of Service will
be deemed to occur on the 91st day of the leave.
"Total Disability" means inability of an Employee or Eligible Consultant to
engage in any substantial gainful activity by reason of a medically determinable
physical or mental impairment which can be expected to result in death or which
has lasted or can be expected to last for a continuous period of not less than
12 months. All determinations as to the date and extent of disability of an
Employee or Eligible Consultant will be made by the Committee.
3. Administration.
(a) This Plan shall be administered by a Committee, which shall be composed
of not less than two Outside Directors who are also Disinterested Directors. The
Committee may, from time to time, adopt or rescind rules and regulations for
carrying out the provisions and purposes of this Plan. Subject to the express
provisions of this Plan, the Committee shall have sole authority, in its
absolute discretion, to determine which officers, Employees and Eligible
Consultants shall receive Options, the time when Options shall be granted, the
terms and provisions of the Options (which may differ from one another) and to
do everything necessary or appropriate to administer this Plan, including,
without limitation, interpreting the provisions of this Plan and the Options.
All determinations made by the Committee with respect to this Plan and the
Options shall be final, binding and conclusive.
(b) No member of the Committee shall be liable for any act or omission of
the Committee or any other member of the Committee, or for any act or omission
on his own part, in connection with the administration of this Plan, unless it
resulted from the member's own willful misconduct.
4. Persons Eligible to Receive Options.
(a) Options may be granted under this Plan only to persons who at the Date
of Grant either (i) are officers, Employees or Eligible Consultants of the
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Company or any of its Subsidiaries or (ii) have agreed to become officers,
Employees or Eligible Consultants of the Company or any of its Subsidiaries,
and, in either case, are determined by the Committee to be of substantial
importance to the Company or any of its Subsidiaries.
(b) Options granted to persons who are not yet officers, Employees or
Eligible Consultants at the Date of Grant may not be exercised until the
optionee has become an officer, Employee or Eligible Consultant, and shall
expire if the optionee fails to commence service as an officer, Employee or
Eligible Consultant within six months (or such other period as the Committee may
determine) after the Date of Grant.
(c) Incentive Stock Options may be granted only to persons who are
Employees at the Date of Grant, and only on such terms as are provided in
paragraphs 6, 7 and 8 hereof.
(d) No Employee or Eligible Consultant to whom Options may be granted under
this Plan may be granted Options to purchase more than 200,000 shares in any one
calendar year.
5. Stock Subject to the Plan.
(a) Subject to any adjustment as provided in paragraph 9, the maximum
number of shares of Common Stock as to which Options may be granted under this
Plan is 4,502,635 shares reduced by the number of outstanding options granted
under the Cytogen Corporation 1989 Employee Stock Option Plan (the "1989 Plan")
that are exercised after the effective date of this Plan. If any Option expires
or is cancelled or surrendered without being exercised in full, the number of
shares as to which the Option is not exercised will once again become shares as
to which new Options may be granted. The Common Stock which is issued on
exercise of Options may be authorized but unissued shares or shares which have
been issued and reacquired by the Company.
(b) For administrative purposes only, the Committee shall establish an
account indicating the number of shares of Common Stock as to which Options may
then be granted under this Plan (the "Current Account"), and the Committee may
issue Options only with respect to the shares of Common Stock available for
grant as set forth in the Current Account. The Current Account shall contain the
number of shares available for grant calculated as follows: (a) 4,502,635, minus
(b) the number of shares of Common Stock subject to options granted under the
1989 Plan that are exercised after the effective date of this Plan, minus (c)
the number of shares of Common Stock subject to outstanding options granted
under the 1989 Plan and this Plan, plus (d) the number of shares of Common Stock
subject to outstanding options granted under the 1989 Plan and/or this Plan that
expire, are cancelled or surrendered without being exercised in full.
6. Grants of Options.
(a) Subject to paragraph 4(d), the Committee will have complete discretion
to determine when, and to which officers or other Employees or Eligible
Consultants, Options are to be granted, the number of shares of Common Stock to
which Options granted to each officer or other Employee or Eligible Consultant,
will relate, whether and to what extent Options granted to an officer or other
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Employee or Eligible Consultant, will be Incentive Stock Options or
Non-Qualified Options and, subject to the provisions of paragraphs 7 and 8, the
Exercise Price and the term of each Option. The Committee may, in its discretion
at the time of granting the Option, provide that the Exercise Price may be paid
in cash, by the surrender of Common Stock, by an interest-bearing promissory
note, or by other means; subject, however, to any requirements of applicable law
which may limit the type or amount of such non-cash consideration. If payment by
promissory note is permitted: (i) the optionee shall be required to make a cash
payment upon exercise of the Option of not less than 20% of the Exercise Price;
(ii) the note shall provide for full recourse against the maker; and (iii) the
note shall be payable in full prior to its stated maturity upon the optionee's
Termination of Service for any reason other than death or Total Disability.
(b) Any Options which are not designated as Incentive Stock Options when
they are granted will be Non-Qualified Options.
(c) Promptly after the Date of Grant of each Option, the Company shall
cause an Option Agreement to be executed and delivered to the holder of the
Option. The Option Agreement shall clearly state whether the Option granted is
or is not an Incentive Stock Option. Separate Option Agreements shall be used
for Incentive Stock Options and Non-Qualified Stock Options.
(d) Except as otherwise determined by the Committee, and subject to the
requirements of applicable law, the entire Exercise Price received by the
Company upon the exercise of an option shall constitute stated capital to the
extent of the aggregate par value of the Common Stock issued upon exercise of
the Option.
(e) Any Option granted under this Plan prior to the date the Plan is
approved by the Company's stockholders shall not be exercisable unless and until
the Plan is so approved.
7. Option Provisions.
(a) Exercise Price. No consideration shall be payable by any optionee for
the grant of an Option. Subject to the provisions of paragraph 7(a)(i) and
paragraph 8, the Exercise Price of each Option will be as determined by the
Committee.
(i) The Committee shall not grant any Option with an exercise price
that is less than 100% of the Fair Market Value of the underlying stock on
the date of grant or reduce the exercise price of any Option granted under
the Plan.
(b) Term. The term of each Option will be as determined by the Committee,
but in no event will the term of an Option be longer than ten years from the
Date of Grant, or five years in the case of an Incentive Stock Option granted to
a Ten Percent Shareholder. Options may not be exercised before six months after
the Date of Grant. Options will cease to be exercisable prior to the expiration
of their term under certain circumstances as provided in paragraphs 7(f), (g),
and (h). Subject to the foregoing, and to any vesting or other conditions
imposed at the time it is granted, an Option may be exercised in whole or in
part at any time, or from time to time, during its term.
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(c) Manner of Exercise. To exercise an Option, the person exercising the
Option must deliver to the Company, at its principal office:
(i) a notice of exercise, which states the extent to which the Option
is being exercised;
(ii) a certified or bank cashier's check in an amount, or Common Stock
with a Fair Market Value, equal to the Exercise Price of the Option times
the number of shares as to which it is being exercised, or consideration in
such other form as may be permitted under the terms on which the Option is
granted; and
(iii) a certified or bank cashier's check equal to any withholding
taxes the Company is required to pay because of the exercise of the Option.
The Committee may permit an Employee, as an alternative to making the
payment described in clause (iii), to authorize the Company to withhold a
sum equal to the withholding taxes the Company is required to pay from the
Employee's salary and bonus payments over a period of not more than six
months (or such longer period as the Company may approve). The date on
which the Company receives all the items specified in this subsection will
be the date on which the Option is exercised to the extent described in the
notice of election.
(d) Delivery of Stock Certificates. As promptly as practicable after an
Option is exercised, the Company will deliver to the person who exercises the
Option certificates, registered in that person's name, representing the number
of shares of Common Stock which were purchased by the exercise of the Option.
Each certificate may bear a legend to indicate, if applicable, that (i) the
Common Stock represented by the certificate was issued in a transaction which
was not registered under the Securities Act of 1933, as amended, and may only be
sold or transferred in a transaction which is registered under that Act or is
exempt from the registration requirements of that Act, and (ii) the Common Stock
represented by the certificate is subject to the obligation of the holder to pay
any unpaid balance of the Exercise Price (whether pursuant to a promissory note
or otherwise), and/or that the Common Stock is pledged to secure such an
obligation.
(e) Nontransferability of Options. During the lifetime of the person to
whom an Option is issued, the Option may be exercised only by that person or his
or her guardian or legal representative. An Option may not be assigned, pledged
or hypothecated in any way, will not be subject to execution, and will not be
transferable otherwise than by will or the laws of descent and distribution. The
Company will not recognize any attempt to assign, transfer, pledge, hypothecate
or otherwise dispose of an Option contrary to the provisions of this Plan, or
any levy of any attachment or similar process upon any Option, and, except as
expressly stated in this Plan, the Company will not be required to, and will
not, issue Common Stock on exercise of an Option to anyone who claims to have
acquired that Option from the person to whom it was granted.
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(f) Termination of Service of Holder of Option Other Than Because of Total
Disability or Death. If there is a Termination of Service of a person to whom an
Option has been granted, other than by reason of the person's death or Total
Disability, each Option held by the person may be exercised (if otherwise
exercisable) until the earlier of (i) the end of the three-month period
immediately following the date of the Termination of Service, (ii) the
expiration of the term specified in the Option, or (iii) such earlier time as
may be determined by the Committee at the time of granting the Option.
(g) Total Disability of Holder of Option. If there is a Termination of
Service of a person to whom an Option has been granted by reason of his or her
Total Disability, each Option held by the person may be exercised (if otherwise
exercisable) until the earlier of (i) the end of the one-year period immediately
following the date of the Termination of Service, (ii) the expiration of the
term specified in the Option, or (iii) such earlier time as may be determined by
the Committee at the time of granting the Option.
(h) Death of Holder of Option. If there is a Termination of Service of a
person to whom an Option has been granted by reason of his or her death, or a
former officer or Employee or Eligible Consultant dies following the date of his
or her Termination of Service but at a time when an Option still would be
exercisable by that person but for the death of the person, each Option held by
the person at the time of his or her death may be exercised by the person or
persons to whom the Option passed by will or by the laws of descent and
distribution (but by no other persons) until the earlier of (i) the end of the
one-year period immediately following the date of death (or such other period as
may be determined by the Committee at the time of granting the Option), (ii) the
expiration of the term specified in the Option, or (iii) if the death occurs
after the Termination of Service, the end of the period in which the Option
could be exercised under paragraph 7(f) or (g).
8. Special Provisions Relating to Incentive Stock Options. No Incentive
Stock Option may be granted after March 27, 2005. The Exercise Price of an
Incentive Stock Option will be not less than 100% of the Fair Market Value of
the Common Stock on the Date of Grant of the Option. An Incentive Stock Option
may not be granted to a person who, at the time the Option is granted, is a Ten
Percent Shareholder, unless (i) the Exercise Price of the Option is at least
110% of the Fair Market Value of the Common Stock on the Date of Grant and (ii)
the Option by its terms is not exercisable after the expiration of five years
from the Date of Grant. To the extent that the aggregate Fair Market Value
(determined at the time an Incentive Stock Option is granted) of the Common
Stock with respect to which Incentive Stock Options are first exercisable by an
Employee during any calendar year (under this Plan and any other incentive stock
option plans of the Company) exceeds $100,000, such Options shall be treated as
Non-Qualified Options.
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9. Recapitalization.
(a) The existence of outstanding Options shall not affect in any way the
right or power of the Company or its stockholders to make or authorize any or
all adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business, or any merger or consolidation of
the Company, or any issue of bonds, debentures, preferred or prior preference
stock ahead of or affecting the Common Stock or the rights thereof, or the
dissolution or liquidation of the Company, or any sale or transfer of all or any
part of its assets or business or any other corporate act or proceeding, whether
of a similar character or otherwise. Unless otherwise determined by the Board,
the issue by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, for cash or property, or for
labor or services either upon direct sale or upon the exercise of rights or
warrants to subscribe therefor, or on conversion of shares or obligations of the
Company convertible into such shares or other securities, shall not affect, and
no adjustment by reason thereof shall be made with respect to, the number, class
or price of shares of Common Stock then subject to outstanding Options.
(b) If as a result of any (i) reorganization or liquidation of the Company
or (ii) reclassification of the Company's capital stock, or (iii) consolidation
or merger of the Company with or into another corporation, or sale of all or
substantially all the assets of the Company (a reorganization or liquidation of
the Company or reclassification of the Company's capital stock, or a merger,
consolidation or sale of the type described in this subsection being a
"Corporate Transaction") while an Option is outstanding, the holders of the
Common Stock become entitled to receive with respect to their Common Stock,
securities or assets other than, or in addition to, their Common Stock, upon
exercise of that Option the holder will receive what the holder would have owned
if the holder had exercised the Option immediately before the Corporate
Transaction which occurred while the Option was outstanding and had not disposed
of anything the holder would have received as a result of that and all
subsequent Corporate Transactions.
10. Rights of Option Holder.
(a) The holder of an Option will not have any rights as a stockholder by
reason of holding that Option. Upon exercise of an Option, the holder will be
deemed to acquire the rights of a stockholder when, but not before, the issuance
of Common Stock as a result of the exercise is recorded in the stock records of
the Company.
(b) Nothing in this Plan or in the grant of an Option will confer upon any
Employee the right to continue in the employment of the Company or will
interfere with or restrict in any way the rights of the Company to discharge any
Employee at any time for any reason whatsoever, with or without cause, nor will
it impose any obligation on the Employee to remain in the employ of the Company.
11. Laws and Regulations. The obligation of the Company to sell and deliver
shares of Common Stock on exercise of Options will be subject to the condition
that legal counsel for the Company be satisfied that the sale and delivery will
not violate the Securities Act of 1933, as amended, or any other applicable
laws, rules or regulations.
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12. Withholding of Taxes.
(a) In addition to the requirement in paragraph 7(c) that in order to
exercise an Option a person must make a payment to the Company or authorize
withholding in order to enable the Company to pay any withholding taxes due as a
result of the exercise, if a person who exercised an Incentive Stock Option
disposes of shares of Common Stock acquired through exercise of that Incentive
Stock Option either (i) within two years after the Date of Grant of the
Incentive Stock Option or (ii) within one year after the issuance of the shares
on exercise of the Incentive Stock Option, the person will notify the Company
promptly of the occurrence of the event and, if the event was a disposition of
Common Stock acquired on exercise of an Incentive Stock Option, the amount
realized upon the disposition.
(b) If, whether because of a disposition of Common Stock acquired on
exercise of an Incentive Stock Option, or otherwise, the Company is required to
pay withholding taxes to any Federal, state or other taxing authority and the
Employee fails to provide the Company with the funds with which to pay that
withholding tax, the Company may withhold up to 50% of each payment of salary or
bonus to the Employee (which will be in addition to any other required or
permitted withholding), until the Company has been reimbursed for the entire
withholding tax it was required to pay.
(c) The obligations contained in this paragraph 12 shall bind each
optionee, and each optionee, by accepting and/or exercising an Option, shall be
deemed to agree to observe and comply with them.
13. Reservation of Shares. The Company will at all times keep reserved for
issuance on exercise of Options a number of authorized but unissued or
reacquired shares of Common Stock equal to the maximum number of shares the
Company may be required to issue on exercise of outstanding Options (assuming no
subsequent adjustments under paragraph 9).
14. Amendment of the Plan. The Board of Directors may at any time and from
time to time modify or amend this Plan in any respect effective at any date the
Board of Directors determines; provided, that without the approval of the
stockholders of the Company the Board of Directors may not, (i) except as
provided in paragraph 9, increase the maximum number of shares of Common Stock
which may be issued on exercise of Options granted under this Plan; (ii) change
the categories of persons eligible to receive Options; (iii) increase the
per-optionee limit specified in paragraph 4(d), (iv) take any other action
requiring the approval of the stockholders of the Company in order to maintain
the exemption available under Rule 16b-3 (or any similar rule) of the Securities
and Exchange Commission, or (v) modify the provisions of paragraph 7(a)(i). No
modification or amendment of this Plan will, without the consent of the holder
of an outstanding Option, adversely affect the holder's rights under that
Option.
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15. Interpretation The Committee shall have the power to interpret the Plan
and to make and amend rules for putting it into effect and administering it. It
is intended that the Incentive Stock Options granted under the Plan shall
constitute incentive stock options within the meaning of section 422 of the
Code, that the Non-Qualified Options shall constitute property subject to
federal income tax pursuant to the provisions of section 83 of the Code and that
the Plan shall qualify for the exemption available under Rule 16b-3 (or any
similar rule) of the Securities and Exchange Commission. It is also intended
that all compensation income recognized by optionees as the result of the
exercise of Options or the disposition of Common Stock acquired on exercise of
Options shall be considered performance-based compensation excludable from such
optionee's "applicable employee remuneration" pursuant to section 162(m)(4)(C)
of the Code. The provisions of the Plan shall be interpreted and applied insofar
as possible to carry out such intent.
16. Termination of the Plan. This Plan shall terminate on March 27, 2005
unless sooner terminated. The Board of Directors may suspend or terminate this
Plan at any time or from time to time, but no such action may adversely affect
the rights of a person holding an outstanding Option.
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APPENDIX C
AMENDED AND RESTATED
BY-LAWS
B Y - L A W S
OF
CYTOGEN CORPORATION
(a Delaware corporation)
(amended as of June 19, 2001)
ARTICLE I
OFFICES
SECTION 1. OFFICES. The corporation shall maintain its registered office in
the State of Delaware at 100 West Tenth Street, City of Wilmington, County of
New Castle and its resident agent at such address is The Corporation Trust
Company. The Corporation may also have offices in such other places in the
United States or elsewhere as the Board of Directors may, from time to time,
appoint or as the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. ANNUAL MEETINGS. Annual meetings of stockholders for the
election of directors and for such other business as may properly be conducted
at such meeting shall be held at such place, either within or without the State
of Delaware, and at such time and date as the Board of Directors shall determine
by resolution and set forth in the notice of the meeting. In the event that the
Board of Directors fails to so determine the time, date and place for the annual
meeting, it shall be held, beginning in 1981, at the principal office of the
Corporation at 10 o'clock A.M. on the last Friday in February of each year.
SECTION 2. SPECIAL MEETINGS. Special meetings of stockholders, unless
otherwise prescribed by statute, may be called by the Chairman of the Board, the
President or by resolution of the Board of Directors and shall be called by the
President or Secretary upon the written request of not less than 50% in interest
of the stockholders entitled to vote thereat. Notice of each special meeting
shall be given in accordance with Section 3 of this Article II. Unless otherwise
permitted by law, business transacted at any special meeting of stockholders
shall be limited to the purpose stated in the notice.
SECTION 3. NOTICE OF MEETINGS. Whenever stockholders are required or
permitted to take any action at a meeting, a written notice of the meeting,
which shall state the place, date and time of the meeting, and, in the case of a
special meeting, the purposes for which the meeting is called, shall be mailed
to or delivered to each stockholder of record entitled to vote thereat. Such
notice shall be given not less than ten (10) days nor more than sixty (60) days
before the date of any such meeting.
SECTION 4. QUORUM. Unless otherwise required by law or the Certificate of
Incorporation, the holders of a majority of the issued and outstanding stock
entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum for the transaction of business at all meetings of
stockholders.
SECTION 5. VOTING. Unless otherwise provided in the Certificate of
Incorporation, each stockholder shall be entitled to one vote for each share of
capital stock held by such stockholder. Upon the request of not less than 10% in
interest of the stockholders entitled to vote at a meeting, voting shall be by
written ballot. All elections of directors shall be decided by plurality vote.
Unless otherwise required by law, these By-Laws or the Certificate of
Incorporation, all other corporate action shall be decided by majority vote of
the shares cast on the proposed action.
SECTION 6. INSPECTORS. The Board of Directors may, in advance of any
meeting of stockholders, appoint one or more inspectors to act at such meeting
or any adjournment thereof. If any of the inspectors so appointed shall fail to
appear or act, the chairman of the meeting shall, or if inspectors shall not
have been appointed, the chairman of the meeting may, appoint one or more
inspectors. Each inspector, before entering upon the discharge of his duties,
shall take and sign an oath faithfully to execute the duties of inspector at
such meeting with strict impartiality and according to the best of his ability.
The inspectors shall determine the number of shares of capital stock of the
Corporation outstanding and the voting power of each, the number of shares
represented at the meeting, the existence of a quorum, the validity and effect
of proxies, and shall receive votes, ballots or consents, hear and determine all
challenges and questions arising in connection with the right to vote, count and
tabulate all votes, ballots or consents, determine the results, and do such acts
as are proper to conduct the election or vote with fairness to all stockholders.
On request of the chairman of the meeting, the inspectors shall make a report in
writing of any challenge, request or matter determined by them and shall execute
a certificate of any fact found by them. No director or candidate for the office
of director shall act as an inspector of an election of directors.
SECTION 7. CHAIRMAN OF MEETINGS. The Chairman of the Board of Directors of
the Corporation, if one is elected, or, in his absence or disability, the
President of the Corporation, shall preside at all meetings of the stockholders.
SECTION 8. SECRETARY OF MEETING. The Secretary of the Corporation shall act
as Secretary at all meetings of the stockholders. In the absence or disability
of the Secretary, the Chairman of the Board of Directors or the President shall
appoint a person to act as Secretary at such meetings.
SECTION 9. LISTS OF STOCKHOLDERS. The officer who has charge of the stock
ledger of the Corporation shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, showing the address of each
stockholder and the number and class of shares held by each. Such list shall be
open to the examination of any stockholder, for any purpose germane to the
meeting, during ordinary business hours, for a period of at least ten days prior
C-2
to the meeting, at a place within the city where the meeting is to be held,
which shall be specified in the notice of the meeting, or, if not so specified,
at the place where the meeting is to be held. The list shall also be produced
and kept at the meeting and may be inspected by any stockholder who is present.
SECTION 10. ACTION WITHOUT MEETING. Unless otherwise provided by the
Certificate of Incorporation, any action required by law to be taken at any
annual or special meeting of stockholders, or any action which may be taken at
such meetings, may be taken without a meeting, without prior notice and without
a vote, if a consent in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote were present and voted. Prompt
notice of the taking of the corporate action without a meeting by less than
unanimous written consent shall be given to those stockholders who have not
consented in writing.
SECTION 11. ADJOURNMENT. At any meeting of stockholders of the Corporation,
if less than a quorum be present, a majority of the stockholders entitled to
vote thereat, present in person or by proxy, shall have the power to adjourn the
meeting from time to time without notice other than announcement at the meeting
until a quorum shall be present. Any business may be transacted at the adjourned
meeting which might have been transacted at the meeting originally noticed. If
the adjournment is for more than thirty days, or if after the adjournment a new
record date, as provided for in Section 5 of Article V of these By-Laws, is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. POWERS. The property, business and affairs of the Corporation
shall be managed and controlled by its Board of Directors. The Board shall
exercise all of the powers and duties conferred by law except as provided by the
Certificate of Incorporation or these By-Laws.
SECTION 2. NUMBER AND TERM. The number of directors shall be fixed at no
less than two nor more than seven. Within the limits specified above, the number
of directors shall be fixed from time to time by the Board. The Board of
Directors shall be elected by the stockholders at their annual meeting, and each
director shall be elected to serve for the term of one year and until his
successor shall be elected and qualify or until his earlier resignation or
removal. Directors need not be stockholders.
SECTION 3. RESIGNATIONS. Any director may resign at any time. Such
resignation shall be made in writing, and shall take effect at the time
specified therein, and if no time is specified, at the time of its receipt by
the President or Secretary. The acceptance of a resignation shall not be
necessary to make it effective.
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SECTION 4. REMOVAL. Any director or the entire Board of Directors may be
removed either for or without cause at any time by the affirmative vote of the
holders of a majority of the shares entitled to vote for the election of
directors at any annual or special meeting of the stockholders called for that
purpose. Vacancies thus created may be filled at such meeting by the affirmative
vote of a majority of the stockholders entitled to vote, or, if the vacancies
not so filled, by the directors as provided in Section 5 of this Article III.
SECTION 5. VACANCIES AND NEWLY CREATED DIRECTORSHIPS. Except as provided in
Section 4 of this Article III, vacancies occurring in any directorship and newly
created directorship may be filled by a majority vote of the remaining directors
then in office. Any director so chosen shall hold office for the unexpired term
of his predecessor and until his successor shall be elected and qualify or until
his earlier death, resignation or removal. The Board may not fill the vacancy
created by removal of a director by electing the director so removed.
SECTION 6. MEETINGS. The newly elected directors shall hold their first
meeting to organize the Corporation, elect officers and transact any other
business which may properly come before the meeting. An annual organizational
meeting of the Board of Directors shall be held immediately after each annual
meeting of the stockholders, or at such time and place as may be noticed for the
meeting. Regular meetings of the Board may be held without notice at such places
and times as shall be determined from time to time by resolution of the
directors. Special meetings of the Board shall be called by the President or by
the Secretary on the written request of any director with at least two days'
notice to each director and shall be held at such place as may be determined by
the directors or as shall be stated in the notice of the meeting.
SECTION 7. QUORUM, VOTING AND ADJOURNMENT. A majority of the total number
of directors or any committee thereof shall constitute a quorum for the
transaction of business. The vote of a majority of the directors present at a
meeting at which a quorum is present shall be the act of the Board. In the
absence of a quorum, a majority of the directors present thereat may adjourn
such meeting to another time and place. Notice of such adjourned meeting need
not be given if the time and place of such adjourned meeting are announced at
the meeting so adjourned.
SECTION 8. COMMITTEES. The Board of Directors may, by resolution passed by
a majority of the Board, designate one or more committees, including but not
limited to an Executive Committee and an Audit Committee, each such committee to
consist of one or more of the directors of the Corporation. The Board may
designate one or more directors as alternate members of any committee to replace
any absent or disqualified member at any meeting of the committee. Any such
committee, to the extent provided in the resolution of the Board, shall have and
may exercise all the powers and authority of the Board of Directors in the
management of the business and, affairs of the Corporation and may authorize the
seal of the Corporation to be affixed to all papers which may require it; but no
such committee shall have the power or authority to amend the Certificate of
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Incorporation, adopt an agreement of merger or consolidation, recommend to the
stockholders the sale, lease, or exchange of all or substantially all of the
Corporation's properties and assets, recommend to the stockholders a dissolution
of the Corporation or a revocation of a dissolution or to amend these By-Laws.
Unless a resolution of the Board expressly provides, no such committee shall
have the power or authority to declare a dividend or to authorize the issuance
of stock of the Corporation. All committees of the Board shall report their
Proceedings to the Board when recruited.
SECTION 9. ACTION WITHOUT A MEETING. Unless otherwise restricted by the
Certificate of Incorporation or these By-Laws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting if all members of the Board or any committee
thereof consent thereto in writing.
SECTION 10. COMPENSATION. The Board of Directors shall have the authority
to fix the compensation of directors for their services. A director may also
serve the Corporation in other capacities and receive compensation therefor.
SECTION 11. TELEPHONIC MEETING. Unless otherwise restricted by the Certificate
of Incorporation, members of the Board, or any committee designated by the
Board, may participate in a meeting by means of conference telephone or similar
communications equipment in which all persons participating in the meeting can
hear each other. Participation in such telephonic meeting shall constitute the
presence in person at such meeting.
ARTICLE IV
OFFICERS
SECTION 1. The officers of the Corporation shall include a President, a
Secretary and one or more subordinate officers, all of whom shall be elected by
the Board of Directors and who shall hold office for a term of one year and
until their successors are elected and qualify or until their earlier
resignation or removal. In addition, the Board of Directors may elect a Chairman
of the Board, one or more Vice Presidents, including an Executive Vice
President, a Treasurer and one or more Assistant Treasurers and one or more
Assistant Secretaries, who shall hold their office for such terms and shall
exercise such powers and perform such duties as shall be determined from time to
time by the Board of Directors. The initial officers shall be elected at the
first meeting of the Board of Directors and, thereafter, at the annual
organizational meeting of the Board held after each annual meeting of the
stockholders. Any number of offices may be held by the same person.
SECTION 2. OTHER OFFICERS AND AGENTS. The Board of Directors may appoint
such other officers and agents as it deems advisable, who shall hold their
office for such terms and shall exercise and perform such powers and duties as
shall be determined from time to time by the Board of Directors.
SECTION 3. CHAIRMAN. The Chairman of the Board of Directors shall be a
member of the Board and shall preside at all meetings of the Board of Directors
and of the stockholders. In addition, the Chairman of the Board shall have such
powers and perform such other duties as from time to time may be assigned to him
by the Board of Directors.
SECTION 4. PRESIDENT. The President shall be the Chief Executive Officer of
the Corporation. He shall exercise such duties as customarily pertain to the
office of President and Chief Executive Officer, and shall have general and
active management of the property, business and affairs of the Corporation,
subject to the supervision and control of the Board. He shall perform such other
duties as prescribed from time to time by the Board or these By-Laws.
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In the absence, disability or refusal of the Chairman of the Board to act,
or the vacancy of such office, the President shall preside at all meetings of
the stockholders and of the Board of Directors. Except as the Board of Directors
shall otherwise authorize, the President shall execute bonds, mortgages and
other contracts on behalf of the Corporation, and shall cause the seal to be
affixed to any instrument requiring it and, when so affixed, the seal shall be
attested by the signature of the Secretary or the Treasurer or an Assistant
Secretary or an Assistant Treasurer.
SECTION 5. VICE PRESIDENTS. Each Vice President, if any are elected, of
whom one or more may be designated an Executive Vice President, shall have such
powers and shall perform such duties as shall be assigned to him by the
President or the Board of Directors.
SECTION 6. TREASURER. The Treasurer shall have custody of the corporate
funds, securities, evidences of indebtedness and other valuables of the
Corporation and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation. He shall deposit all moneys
and other valuables in the name and to the credit of the Corporation in such
depositories as may be designated by the Board of Directors. The Treasurer shall
disburse the funds of the Corporation, taking proper vouchers therefor. He shall
render to the President and Board of Directors, upon their request, a report of
the financial condition of the Corporation. If required by the Board of
Directors, he shall give the Corporation a bond for the faithful discharge of
his duties in such amount and with such surety as the Board shall prescribe.
The Treasurer shall have such further powers and perform such other duties
incident to the office of Treasurer as from time to time assigned to him by the
Board.
SECTION 7. SECRETARY. The Secretary shall be the Chief Administrative
Officer of the Corporation and shall: (a) cause minutes of all meetings of the
stockholders and directors to be recorded and kept; (b) cause all notices
required by these By-Laws or otherwise to be given properly; (c) see that the
minute books, stock books, and other nonfinancial books, records and papers of
the Corporation are kept properly; and (d) cause all reports, statements,
returns, certificates and other documents to be prepared and filed when and as
required. The Secretary shall have such further powers and perform such other
duties as prescribed from time to time by the Board.
SECTION 8. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. Each Assistant
Treasurer and each Assistant Secretary, if any are elected, shall be vested with
all the Powers and shall perform all the duties of the Treasurer and Secretary,
respectively, in the absence or disability of such officer, unless or until the
Board of' Directors shall otherwise determine. In addition, Assistant Treasurers
and Assistant Secretaries shall have such powers and shall perform such duties
as shall be assigned to them by the Board.
SECTION 9. CORPORATE FUNDS AND CHECKS. The funds of the Corporation shall
be kept in such depositories as shall from time to time be prescribed by the
Board of Directors. All checks or other orders for the payment of money shall be
signed by the President or the Treasurer or such other person or agent as may
from time to time be authorized and with such countersignature, if any, as may
be required by the Board of Directors.
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SECTION 10. CONTRACTS AND OTHER DOCUMENTS. The President or Treasurer, or
such other officer or officers as may from time to time be authorized by the
Board of Directors, shall have power to sign and execute on behalf of the
Corporation deeds, conveyances and contracts, and any and all other documents
requiring execution by the Corporation.
SECTION 11. OWNERSHIP OF STOCK OF ANOTHER CORPORATION. The President or the
Treasurer, or such other officer or agent as shall be authorized by the Board of
Directors, shall have the power and authority, on behalf of the Corporation, to
attend and to vote at any meeting of stockholders of any corporation in which
the Corporation holds stock and may exercise, on behalf of the corporation, any
and all of the rights and powers incident the ownership of such stock at any
such meeting, including authority to execute and deliver proxies and consents on
behalf of the corporation.
SECTION 12. DELEGATION OF DUTIES. In the absence, disability or refusal of
any officer to exercise and perform his duties, the Board of Directors may
delegate to another officer such powers or duties.
SECTION 13. RESIGNATION AND REMOVAL. Any officer of the Corporation may be
removed from office for or without cause at any time by the Board of Directors.
Any officer may resign at any time in the same manner prescribed under Section 3
of Article III of these By-laws.
SECTION 14. VACANCIES. The Board of Directors shall have power to fill
vacancies occurring in any office.
ARTICLE V
STOCK
SECTION 1. CERTIFICATES OF STOCK. Every holder of stock in the Corporation
shall be entitled to have a certificate signed by, or in the name of the
Corporation by, the Chairman of the Board or the President or a Vice President
and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary, certifying the number and class of shares of stock in the Corporation
owned by him. Any or all of the signatures on the certificate may be a
facsimile. The Board of Directors shall have the power to appoint one or more
transfer agents and/or registrars for the transfer or registration of
certificates of stock of any class, and may require stock certificates to be
countersigned or registered by one or more of such transfer agents and/or
registrars.
SECTION 2. TRANSFER OF SHARES. Shares of stock of the Corporation shall be
transferable upon its books by the holders thereof, in person or by their duly
authorized attorneys or legal representatives, upon surrender to the Corporation
by delivery thereof to the person in charge of the stock and transfer books and
ledgers. Such certificates shall be cancelled and new certificates shall
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thereupon be issued. A record shall be made of each transfer. Whenever any
transfer of shares shall be made for collateral security, and not absolutely, it
shall be so expressed in the entry of the transfer if, when the certificates are
presented, both the transferor and transferee request the Corporation to do so.
The Board shall have power and authority to make such rules and regulations as
it may deem necessary or proper concerning the issue, transfer and registration
of certificates for shares of stock of the corporation.
SECTION 3. LOST CERTIFICATES. A new certificate of stock may be issued in
the place of any certificate previously issued by the Corporation, alleged to
have been lost, stolen, destroyed or mutilated, and the Board of Directors may,
in their discretion, require the owner of such lost, stolen, destroyed or
mutilated certificate, or his legal representative, to give the Corporation a
bond, in such sum as the Board may direct, not exceeding double the value of the
stock, in order to indemnify the Corporation against any claims that may be made
against it in connection therewith.
SECTION 4. STOCKHOLDERS OF RECORD. The Corporation shall be entitled to
treat the holder of record of any share or shares of stock as the holder
thereof, in fact, and shall not be bound to recognize any equitable or other
claim to or interest in such shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise expressly
provided by law.
SECTION 5. STOCKHOLDERS RECORD DATE. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix a
record date, which shall not be more than sixty days nor less than ten days
before the date of such meeting. A determination of stockholders of record
entitled to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting, provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting.
SECTION 6. DIVIDENDS. Subject to the provisions of the Certificate of
Incorporation, the Board of Directors may at any regular or special meeting, out
of funds legally available therefor, declare dividends upon the stock of the
Corporation. Before the declaration of any dividend, the Board of Directors may
set apart, out of any funds of the Corporation available for dividends, such sum
or sums as from time to time in their discretion may be deemed proper for
working capital or as a reserve fund to meet contingencies or for such other
purposes as shall be deemed conducive to the interests of the Corporation.
ARTICLE VI
NOTICE AND WAIVER OF NOTICE
SECTION 1. NOTICE. Whenever any written notice is required to be given by
law, the Certificate of Incorporation or these By-Laws, such notice, if mailed,
shall be deemed to be given when deposited in the United States mail, postage
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prepaid, addressed to the person entitled to such notice at his address as it
appears on the books and records of the Corporation. Such notice may also be
sent by telegram.
SECTION 2. WAIVER OF NOTICE. Whenever notice is required to be given by
law, the Certificate of Incorporation or these By-laws, a written waiver thereof
signed by the person entitled to notice, whether before or after the time stated
therein, shall be deemed equivalent to notice. Attendance of a person at a
meeting shall constitute a waiver of notice of such meeting, except when the
person attends a meeting for the express purpose of objecting, at the beginning
of the meeting, to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any meeting of the stockholders, directors, or members of a
committee of the Board need be specified in any written waiver of notice.
ARTICLE VII
AMENDMENT OF BY-LAWS
SECTION 1. AMENDMENTS. These By-Laws may be amended or repealed or new
By-Laws may be adopted by the affirmative vote of a majority of the Board of
Directors at any regular or special meeting of the Board. If any By-Law
regulating an impending election of directors is adopted, amended or repealed by
the Board, there shall be set forth in the notice of the next meeting of
shareholders for the election of directors the By-Law(s) so adopted, amended, or
repealed, together with a precise statement of the changes made. By-Laws adopted
by Board of Directors may be amended or repealed by stockholders.
Notwithstanding the foregoing to the contrary, the provisions of Article X
hereof may not be further amended or repealed without the affirmative vote of
the holders of a majority of the shares of common stock of the Corporation
present and entitled to vote at a duly convened meeting of the stockholders of
the Corporation.
ARTICLE VIII
SECTION 1. The seal of the Corporation shall be circular in form and shall
have the name of the corporation on the circumference and the jurisdiction and
year of incorporation in the center.
SECTION 2. FISCAL YEAR. The fiscal year of the Corporation shall end on
September 30 of each year, or such other twelve consecutive months as the Board
of Directors may designate.
ARTICLE IX
INDEMNIFICATION
SECTION 1. A director of the Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
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omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit.
SECTION 2. Each person who has or is made a party or is threatened to be
made a party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a "proceeding"), by
reason of the fact that he or she, or a person of whom he or she is the legal
representative, is or was a director, officer, employee or agent of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to
employee benefit plans, whether the basis of such proceeding is alleged action
or inaction in an official capacity as a director, officer, employee or agent or
in any other capacity while serving as a director, officer, employee or agent,
shall be indemnified and held harmless by the Corporation to the fullest extent
permitted by the Delaware General Corporation Law, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Corporation to provide broader indemnification
rights than said law permitted the Corporation to provide prior to such
amendment), against all expense, liability and loss (including attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid
in settlement) reasonably incurred or suffered by such person in connection
therewith and such indemnification shall continue as to a person who has ceased
to be a director, officer, employee or agent and shall inure to the benefit of
his or her heirs, executors and administrators; provided, however, that, except
as provided in this Section 2, the Corporation shall indemnify any such person
seeking indemnification in connection with a proceeding (or part thereof)
initiated by such person only if such proceeding (or part thereof) was
authorized by the Board of Directors of the Corporation. The right to
indemnification conferred in this Section 2 shall be a contract right and shall
include the right to be paid by the Corporation the expenses incurred in
defending any such proceeding in advance of its final disposition as authorized
by the Board of Directors; provided, however, that if the Delaware General
Corporation Law so requires, the payment of such expenses incurred by a
director, officer, employee or agent of the Company in his or her capacity as
such in advance of the final disposition of a proceeding shall be made only upon
delivery to the Corporation of an undertaking, by or on behalf of such director,
officer, employee or agent of the Company, to repay all amounts so advanced if
it shall ultimately be determined that such director, officer, employee or agent
of the Company is not entitled to be indemnified under this Section 2 or
otherwise.
SECTION 3. If a claim under Section 2 of this Article IX is not paid in
full by the Corporation within 30 days after a written claim has been received
by the Corporation, the claimant may at any time thereafter bring suit against
the Corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any is required, has been tendered to the Corporation) that the claimant has
not met the standard of conduct which makes it permissible under the Delaware
General Corporation Law for the Corporation to indemnify the claimant for the
amount claimed, but the burden of proving such defense shall be on the
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Corporation. Neither the failure of the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) that the claimant has
not met such applicable standard of conduct, shall be a defense to the action or
create a presumption that the claimant has not met the applicable standard of
conduct.
SECTION 4. The right to indemnification and the payment of expenses
incurred in defending a proceeding in advance of its final disposition conferred
in this Article IX shall not be exclusive of any other right which any person
may have or hereafter acquire under any statute, provision of the Certificate of
Incorporation, these By-Laws, agreement, vote of stockholders or disinterested
directors or otherwise.
SECTION 5. The Corporation may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the Corporation
or another corporation, partnership, joint venture, trust or other enterprise
against any such expense, liability or loss, whether or not the corporation
would have the power to indemnify such person against such expense, liability or
loss under the Delaware General Corporation Law.
ARTICLE X
MISCELLANEOUS
SECTION 1. STOCK OPTIONS. The Corporation may not grant any stock options
having an exercise price that is less than 100% of the fair market value of the
underlying stock on the date of grant. Furthermore, the Corporation may not
reduce the exercise price of any stock option granted under any existing stock
option plan or under any stock option plan adopted after the date of these
amended By-Laws.
SECTION 2. CONVERTIBLE SECURITIES. The Corporation may not sell or issue
any security of the Corporation convertible, exercisable or exchangeable into
shares of common stock of the Corporation, having a conversion, exercise or
exchange price per share which is subject to downward adjustment based on the
market price of the common stock at the time of conversion, exercise or exchange
of such security into common stock (except for appropriate adjustments made to
give effect to any stock splits or stock dividends).
SECTION 3. SALE OF STOCK. The Corporation may not enter into: (a) any
equity line or similar agreement or arrangement; or (b) any agreement to sell
common stock of the Corporation (or any security convertible, exercisable or
exchangeable into shares of common stock ("Common Stock Equivalent")) at a per
share price (or, with respect to a Common Stock Equivalent, at a conversion,
exercise or exchange price, as the case may be ("Equivalent Price")) that is
fixed after the execution date of the agreement, whether or not based on any
predetermined price-setting formula or calculation method. Notwithstanding the
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foregoing, however, a price protection clause shall be permitted in an agreement
for sale of Common Stock or Common Stock Equivalent, if such clause provides for
an adjustment to the price per share of Common Stock or, with respect to a
Common Stock Equivalent, to the Equivalent Price (provided that such price or
Equivalent Price is fixed on or before the execution date of the agreement)(the
"Fixed Price") in the event that the Corporation, during the period beginning on
the date of the agreement and ending no later than 90 days after the closing
date of the transaction, sells shares of Common Stock or Common Stock Equivalent
to another investor at a price or Equivalent Price, as the case may be, below
the Fixed Price.
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