<PAGE>
CYTOGEN CORPORATION
600 College Road East - CN 5308
Princeton, New Jersey 08540-5308
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 17, 1998
To the Stockholders of
Cytogen Corporation:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of CYTOGEN
CORPORATION (the "Company") will be held on Wednesday, June 17, 1998 at 9:00 am.
at the Brunswick Hilton and Towers, East Brunswick, New Jersey, for the
following purposes:
1. The election of four (4) directors to serve until the next annual
meeting of stockholders;
2. To transact such other business as may properly be brought before the
meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on May 11, 1998, as
the record date for determination of the stockholders entitled to notice of and
to vote at the Annual Meeting, and only holders of record of the Company's
Common Stock on said date will be entitled to receive notice of and to vote at
the meeting.
Stockholders are cordially invited to attend the meeting. Whether or not
you plan to attend the meeting, please mark, sign, date and return the enclosed
Proxy. The giving of your Proxy will not affect your right to vote in person in
the event you find it convenient to attend the meeting. You may revoke the Proxy
at any time before the closing of the polls at the meeting.
ATTENDANCE AT THE ANNUAL MEETING WILL BE LIMITED TO STOCKHOLDERS AND
INVITED GUESTS OF THE COMPANY.
By Order of the Board of
Directors
Donald F. Crane, Jr.
Princeton, New Jersey Corporate Secretary
May 25, 1998
PLEASE SIGN, DATE AND RETURN YOUR PROXY CARD PROMPTLY IN THE ENCLOSED
ENVELOPE.
<PAGE>
CYTOGEN CORPORATION
_______________
PROXY STATEMENT
_______________
General
This Proxy Statement is being mailed to stockholders beginning May 28,
1998 in connection with the solicitation by the Board of Directors of Cytogen
Corporation, a Delaware Corporation (the "Company" or "Cytogen") of proxies to
be voted at the 1998 Annual Meeting of Stockholders to be held at the Brunswick
Hilton & Towers, Three Tower Center Boulevard at Town Center, East Brunswick,
New Jersey, on June 17, 1998 at 9:00 A.M. (local time), and at any adjournment
thereof, for the purposes set forth in the attached Notice of Annual Meeting of
Stockholders.
When proxies in the enclosed form are returned properly executed, the
shares represented thereby will be voted at the meeting and, where instructions
have been given by the stockholder, will be voted in accordance therewith. If
the stockholder does not otherwise specify, the stockholder's shares will be
voted for the election of the listed nominees and in accordance with the
directors' recommendations on the other subjects listed on the proxy card. If
any other matter is properly presented for action at the meeting, the persons
named in the enclosed form of proxy will vote on such matter in their
discretion. Any proxy may be revoked by the stockholder, either by attending
the meeting and voting in person or by submitting a revocation in writing to the
Company (including a subsequent signed proxy) at any time prior to the closing
of the polls at the meeting.
Stockholder Vote Required
To be elected a director, a nominee must receive the affirmative vote of
a plurality of shares present in person or represented by proxy at the meeting
and entitled to vote in the election of directors. A plurality vote means that
the five individuals who receive the largest number of votes cast will be
elected as directors. Withheld votes will not affect the outcome of the
election of directors. Properly returned proxies which withhold authority to
vote for directors or abstain will be counted for purposes of determining if a
quorum is present for the annual meeting.
The Company's auditors are Arthur Andersen LLP. A representative of
Arthur Andersen LLP will be present at the meeting, will have an opportunity to
make a statement if the representative desires to do so, and will be available
to respond to appropriate questions.
A COPY OF THE COMPANY'S ANNUAL REPORT TO THE SECURITIES AND EXCHANGE
COMMISSION ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997 WILL BE PROVIDED
WITHOUT CHARGE, TO ANY STOCKHOLDER UPON WRITTEN REQUEST. REQUESTS SHOULD BE
DIRECTED TO CORPORATE COMMUNICATIONS, CYTOGEN CORPORATION, 600 COLLEGE ROAD
EAST-CN 5308, PRINCETON, NJ 08540-5308.
OUTSTANDING SHARES, VOTING RIGHTS AND PRINCIPAL STOCKHOLDERS
Holders of record of outstanding shares of the Company's Common Stock $.01
par value ("Common Stock") at the close of business on May 11, 1998 will be
entitled to notice of and to one vote per share so held of record on all
business at the Annual Meeting. On the record date, there were 54,580,684
shares of Common Stock outstanding. Votes cast in person or by proxy at the
Annual Meeting will be tabulated by the Inspector(s) of Election appointed for
the Annual Meeting who will determine whether or not a quorum is present and
the results of the votes with respect to each matter.
The following table sets forth certain information as of April 30, 1998, with
respect to the beneficial ownership of the Company's Common Stock by each person
known by the Company to be the beneficial owner of more than 5% of its
outstanding Common Stock, by each director and nominee for election as a
director, by each executive officer named in the Summary Compensation Table, and
by all executive officers and directors as a group. Except as indicated in the
footnotes to the table, the persons named in the table have sole voting and
investment power with respect to all shares of Common Stock beneficially owned
by them.
<PAGE>
<TABLE>
<CAPTION>
Number of Shares
of Common Stock Percent
Name and Address of Beneficial Owner(1) Beneficially Owned of Class
- --------------------------------------- ------------------ --------
<S> <C> <C>
Henry L. Hillman,
Elsie Hilliard Hillman and
C.G. Grefenstette, Trustees
2000 Grant Building
Pittsburgh, PA 15219 (2). . . . . . . . . . . . . . . . 5,551,524 10.21%
Ronald J. Brenner
One Tower Bridge
Suite 1350
100 Front Street
West Conshohocken, PA 19428 (4)(5). . . . . . . . . . . 3,808,909 7.00%
Hillman Medical Ventures Partnerships
824 Market Street, Suite 900
Wilmington, DE 19801 (3). . . . . . . . . . . . . . . . 3,713,909 6.83%
Hal S. Broderson
One Tower Bridge
Suite 1350
100 Front Street
West Conshohocken, PA 19428 (4) . . . . . . . . . . . . 3,715,009 6.83%
Charles G. Hadley
One Tower Bridge
Suite 1350
100 Front Street
West Conshohocken, PA 19428 (4) . . . . . . . . . . . . 3,714,159 6.83%
Directors and Executive Officers
- --------------------------------
Thomas J. McKearn (5). . . . . . . . . . . . . . . . . . 714,421 1.31%
Frederick M. Miesowicz (5) . . . . . . . . . . . . . . . 181,000 *
John D. Rodwell (5)(6) . . . . . . . . . . . . . . . . . 221,400 *
Richard J. Walsh (5) . . . . . . . . . . . . . . . . . . 92,000 *
John E. Bagalay, Jr. (5) . . . . . . . . . . . . . . . . 6,800 *
William C. Mills III (5) . . . . . . . . . . . . . . . . 24,710 *
Charles E. Austin (5) . . . . . . . . . . . . . . . . . 10,700 *
James A. Grigsby . . . . . . . . . . . . . . . . . . . . 8,400 *
Robert F. Hendrickson (5) . . . . . . . . . . . . . . . 14,200 *
Donald E. O'Neill (5). . . . . . . . . . . . . . . . . . 13,400 *
Graham S. May (5). . . . . . . . . . . . . . . . . . . . 9,000 *
All executive officers
and directors as a group (16 persons) (5). . . . . . . 5,164,814 9.50%
</TABLE>
_________________
*Indicates amount is less than 1%.
2
<PAGE>
(1) All information with respect to beneficial ownership of shares is
based upon filings made by the respective beneficial owners with the Securities
and Exchange Commission or information provided by such beneficial owners to the
Company. Percent of class for each person and all executive officers and
directors as a group is based on shares of Common Stock outstanding on April 30,
1998 and includes shares subject to options held by the individual or the group,
as applicable which are exercisable or as become exercisable within 60 days
following such date.
(2) Includes 116,325 shares of Common Stock held by the Henry L. Hillman
Trust U/A dated November 18, 1985 (the "HLH Trust"), 20,625 shares of Common
Stock held by Hillman 1984 Limited Partnership ("Hillman 1984"), 4,125 shares of
Common Stock held by HCC Investments, Inc. ("HCC"), 1,696,540 shares of Common
Stock held by Juliet Challenger, Inc. ("JCI"), 367,445 shares of Common Stock
held by Hillman Medical Ventures 1989 L.P. ("HMV 1989"), 176,470 shares of
Common Stock held by Hillman Medical Ventures 1990 L.P. ("HMV 1990"), 486,622
shares of Common Stock held by Hillman Medical Ventures 1991 L.P. ("HMV 1991"),
110,522 shares of Common Stock held by Hillman Medical Ventures 1992 L.P.
("HMV 1992"), 1,094,700 shares of Common Stock held by Hillman Medical Ventures
1994 L.P. ("HMV 1994"), and 1,478,150 shares of Common Stock held by Hillman
Medical Ventures 1995 L.P. ("HMV 1995"). JCI, HCC, and Wilmington Securities,
Inc. (which (i) owns Hillman Properties West, Inc., the sole general partner of
Hillman 1984, and (ii) is the sole general partner of Hillman/Dover L.P., one of
the general partners of HMV 1989, HMV 1990, HMV 1991, HMV 1992, HMV 1994 and HMV
1995 (collectively, "Hillman Medical Ventures")) are private investment
companies owned by Wilmington Investments, Inc., which, in turn, is owned by
The Hillman Company. The Hillman Company is a private firm engaged in
diversified investments and operations, which is controlled by the HLH Trust.
The trustees of the HLH Trust are Henry L. Hillman, Elsie Hilliard Hillman and
C.G. Grefenstette (the "HLH Trustees"). Consequently, the HLH Trustees share
voting and investment power with respect to the shares held of record by the HLH
Trust, JCI, HCC, Hillman 1984, and Hillman Medical Ventures and may be deemed to
be the beneficial owners of such shares. Does not include an aggregate of
155,100 shares of Common Stock held by four irrevocable trusts for the benefit
of members of the Hillman family (collectively, the "Family Trusts"), as to
which shares the HLH Trustees (other than Mr. Grefenstette) disclaim beneficial
interest. C.G. Grefenstette and Thomas G. Bigley are trustees of the Family
Trusts and, as such, share voting and investment power over the shares held by
the Family Trusts.
(3) Includes 367,445 shares of Common Stock held by HMV 1989, 176,470
shares of Common Stock held by HMV 1990, 486,622 shares of Common Stock held by
HMV 1991, 110,522 shares of Common Stock held by HMV 1992, 1,094,700 shares of
Common Stock held by HMV 1994 and 1,478,150 shares of Common Stock held by HMV
1995.
(4) Includes 3,713,909 shares held by Hillman Medical Ventures. Each of
Drs. Broderson and Brenner and Mr. Hadley is a general partner of Cashon
Biomedical Associates, L.P., which is a general partner of the Hillman Medical
Ventures Partnerships and, therefore, may be deemed to be the beneficial owner
of such shares. Drs. Broderson and Brenner and Mr. Hadley share voting and
investment power with respect to the shares held by Hillman Medical Ventures and
disclaim beneficial ownership of the 1,992,715 shares beneficially owned by the
HLH Trustees, Hillman 1984, HCC, JCI and the Family Trusts referred to in note 2
above.
(5) Includes shares of Common Stock which the named persons have the right
to acquire upon the exercise of stock options, within sixty days of April 30,
1998, as follows: Dr. McKearn: 373,000; Dr. Miesowicz: 181,000; Dr. Rodwell:
156,400; Mr. Walsh: 87,000; Dr. May 9,000, Mr. Mills: 14,000; Mr. Austin:
10,200; Dr. Brenner: 6,800; Dr. Bagalay: 6,800; Mr. Hendrickson: 10,200; and Mr.
O'Neill: 8,400. The group number includes the shares of Common Stock which the
named persons and other executive officer have the right to acquire upon the
exercise of stock options, within sixty days of April 30, 1998. Mr. Walsh
resigned from employment with the Company during February, 1998.
(6) Includes 5,000 shares held by Dr. Rodwell's wife as custodian for two
children under the Pennsylvania Uniform Gift to Minors Act. Dr. Rodwell
disclaims beneficial ownership of the 5,000 shares held by his wife.
PROPOSAL ONE. ELECTION OF DIRECTORS
Nominees for Directors
The persons named in the accompanying form of proxy intend, except as
otherwise directed, to vote for the election as directors of the five nominees
listed below, each for a term expiring at the next Annual Meeting or until his
or her successor is duly elected and qualified. All nominees are now serving as
directors of the Company, and all have informed management that they are willing
to serve as directors of the Company. If any of the nominees should decline or
be unable to act as a director, the persons named as proxies in the form of
proxy will vote in accordance with their best judgment and shall have
discretionary authority to vote for a substitute nominee. The Board of
Directors has fixed its present size at, and for the purposes of this meeting
authorized the election of, four directors.
The following sets forth certain information as to the nominees for
directors of the Company.
3
<PAGE>
John E. Bagalay, Jr., 64, has been interim President and Chief Executive
Officer since January, 1998 and interim Chief Financial Officer since October,
1997. Dr. Bagalay is serving in these capacities on an interim basis pending
recruitment of candidates to succeed to these positions on a permanent basis.
Dr. Bagalay was a director of Cellcor, Inc. ("Cellcor") prior to the Company's
acquisition of Cellcor in October 1995. He has served as the Managing Director
of Community Technology Fund, the venture capital affiliate of Boston
University, since September 1989 and as Senior Advisor to the Chancellor since
January 1, 1998. Dr. Bagalay has also served as General Counsel for Texas
Commerce Bancshares, for Houston First Financial Group, and for Lower Colorado
River Authority, a regulated electric utility. Dr. Bagalay currently also
serves on the boards of directors of Wave Systems Corporation and several
privately-held companies in the biotechnology industry. Dr. Bagalay holds a
B.A. in Politics, Philosophy and Economics and a Ph.D. in Political Philosophy
from Yale University, and a J.D. from the University of Texas.
Ronald J. Brenner, 64, has been a director of the Company since October
1995. Dr. Brenner was President and Chief Executive Officer of Cellcor, Inc.
from July 1995 until the Company's acquisition of Cellcor in October 1995. Dr.
Brenner has been a general partner of the managing general partner of the
Hillman Medical Ventures partnerships since 1989. From 1984 to 1988, Dr.
Brenner was President and Chief Executive Officer of Cytogen. Prior to 1984,
he was Vice President, Corporate External Research, at Johnson & Johnson, a
major pharmaceutical company, and also served as Chairman of McNeil
Pharmaceutical, Ortho Pharmaceutical Corp. and the Cilag Companies, all
subsidiaries of Johnson & Johnson. Dr. Brenner is a director of Aronex
Pharmaceuticals, Inc. He received a B.S. in Pharmacy from the University of
Cincinnati, and an M.S. and Ph.D., both in Pharmaceutical Chemistry, from the
University of Florida.
James A. Grigsby, 55, has been a director of the Company since May 1996.
Since 1994, Mr. Grigsby has been president of Cancer Care Management LLC, a
consulting firm providing consulting services to managed care companies
regarding cancer disease management issues. From 1989 to 1994, Mr. Grigsby was
President of CIGNA Corporation's International Life and Employee Benefits
Division, which operated in over 20 countries worldwide, and prior to that
period also served as the head of CIGNA's national health care sales force.
Prior to that time, since 1978, he held a number of executive positions with
CIGNA Corporation. Mr. Grigsby received a B.A. degree in Mathematics from Baylor
University and is a Fellow of the Society of Actuaries.
Robert F. Hendrickson, 65, became a director of the Company in March 1995.
Since 1990, Mr. Hendrickson has been a consultant to the pharmaceutical and
biotechnology industries on strategic management and manufacturing issues with a
number of leading biotechnology companies among his clients. Prior to his
retirement in 1990, Mr. Hendrickson was Senior Vice President, Manufacturing and
Technology for Merck & Co., Inc. He is a director of Envirogen, Inc., Unigene,
Inc., The Liposome Company, Inc., and a trustee of the Carrier Foundation, Inc.
Mr. Hendrickson received an A.B. degree from Harvard College and an M.B.A. from
the Harvard Graduate School of Business Administration.
Meetings and Committees
During 1997, the Board of Directors met twelve (12) times. Each of the
incumbent directors attended at least 75% of the aggregate of all meetings of
the Board of Directors and committees of which he was a member held during the
period he served on the Board of Directors or such committee.
The standing committees of the Board of Directors are the Audit Committee,
the Compensation Committee and the Nominating Committee.
The Audit Committee recommends the selection of a firm of independent
auditors to the Board of Directors for purposes of auditing the Company's
financial statements; reviews the audit with the auditors and management; and
consults with the auditors and management regarding risk management and the
adequacy of financial and accounting procedures and controls. The Audit
Committee met twice during 1997. Its current members are Robert F. Hendrickson
(Chairman), John E. Bagalay, Jr., and James A. Grigsby.
The Compensation Committee evaluates the performance of the Company's Chief
Executive Officer and recommends his compensation to the Board annually;
oversees the administration of the Company's stock option plans; recommends to
the Board of Directors compensation for executive officers and other key
employees of the Company; and reviews the Company's compensation policy
generally. The Compensation Committee met three (3) times during 1997. Its
current members are Charles E. Austin (Chairman), Donald E. O'Neill and
Ronald J. Brenner.
The Nominating Committee is responsible for investigating, recruiting and
interviewing potential candidates for election to the Board of Directors and for
formally nominating for consideration by the full Board of Directors those
individuals deemed worthy by the Nominating Committee of election to the Board
of Directors. The Nominating Committee met in connection with approval of the
slate of nominees for election as directors at the 1997 Annual Meeting of
4
<PAGE>
Stockholders. Its current members are Thomas J. McKearn and William C.
Mills III. The Nominating Committee will consider nominees for the Board of
Directors suggested by stockholders whose names are submitted in writing to the
Nominating Committee in care of the Office of the Corporate Secretary of the
Company.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR EACH
OF THE NOMINEES LISTED ABOVE
Directors' Compensation
In 1997, each director who is not also an officer of the Company was paid
an annual retainer of $7,500, plus $800 for each Board meeting attended ($400 if
participation was by telephone). Any director who also served on a Board
committee received an additional annual fee of $500 for serving on the
committee, and $1,000 for serving as chairman of any Board committee, plus $250
for each committee meeting attended, except that the members of the Nominating
Committee did not receive any compensation for serving on that committee. The
Chairman of the Board, if not an employee of the Company, receives an additional
annual retainer of $35,000.
Also, pursuant to the 1988 Stock Option Plan for Non-Employee Directors
(the "Directors Plan"), upon initial appointment to the Board, each non-employee
director of the Company is granted an option to purchase 8,000 shares of Common
Stock. Following each annual stockholders' meeting of the Company, each
non-employee director who was re-elected at that stockholders' meeting is
granted an option to purchase 6,000 shares of Common Stock. Options granted
under the Directors Plan are exercisable at a price equal to the average of the
high and low sale prices of the Common Stock as reported on the Nasdaq National
Market on the date of grant, and vest (i.e., first become exercisable) over five
years at a rate of 20% for each year of service completed after the option
grant. Each director's outstanding options become immediately exercisable in
full (i) upon the occurrence of a change of control of the Company, (ii) upon
death or disability or (iii) upon resignation or retirement after age 65.
Options granted under the Directors Plan are granted automatically and without
the need for further action by the Company, the Board of Directors or the
Company's stockholders.
Compensation Committee Interlocks And Insider Participation
The members of the Compensation Committee during 1997 were Charles E. Austin
(Chairman), Donald E. O'Neill and Ronald J. Brenner. None of these gentlemen
were officers or employees of the Company while serving on the Compensation
Committee. Dr. Brenner served as the Company's President and Chief Executive
Officer from 1984 to 1988.
5
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term compensation awarded
to, earned by or paid to (i) the Company's Chief Executive Officer, and (ii) the
other four most highly compensated executive officers of the Company, for
services rendered to the Company during the Company's fiscal years ended
December 31, 1997, 1996 and 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION(1) COMPENSATION
-------------------- -------------------
Other Restricted Securities
Annual Stock Underlying All Other
Fiscal Salary Bonus Compen- Award Options Compensation(2)
Name and Principal Position Year ($) ($) sation ($) ($) (#) ($)
- --------------------------- ------ ------- ------- ---------- --------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Thomas J. McKearn (5) 1997 298,012 0 0 0 0 10,613 (6)
Chairman, President and Chief 1996 284,181 49,150 0 0 (3) 155,000 (4) 10,650
Executive Officer 1995 250,000 38,500 0 0 (3) 135,000 (4) 10,876
John D. Rodwell 1997 202,999 22,800 0 0 0 8,631
Senior Vice President 1996 187,198 35,150 0 0 82,000 8,499
and Chief Scientific 1995 170,000 29,000 0 0 90,000 8,038
Officer
Graham May (7) 1997 206,446 31,100 0 0 45,000 6,515
Vice President, Medical
Affairs
Frederick M. Miesowicz (8) 1997 201,554 20,400 0 0 0 6,178
Vice President 1996 207,985 26,950 0 0 40,000 4,191
1995 189,496 29,000 0 0 98,000 480
Richard J. Walsh (9) 1997 186,000 27,200 0 0 0 8,533
Vice President, 1996 176,443 43,375 0 0 70,000 8,470
Marketing and Commercial 1995 170,735 22,000 20,263 (10) 0 55,000 8,137
Development
</TABLE>
____________________
(1) Perquisites or personal benefits did not exceed the lesser of either
$50,000 or 10% of total annual salary and bonus reported for the named
executive officers.
(2) The amounts disclosed in this column include amounts contributed or
accrued by the Company in the respective fiscal years under the Company's
Savings Plan, a defined contribution plan which consists of a 401(k) portion
and a discretionary contribution portion. In fiscal year 1997, these amounts
were as follows: on behalf of Dr. McKearn, $7,750; Dr. Rodwell, $7,750;
Dr. May, $5,948, Dr. Miesowicz, $5,640; and Mr. Walsh, $7,750. The amounts
disclosed also include insurance premiums paid by the Company with respect to
group term life insurance and with respect to fiscal year 1997, these amounts
were as follows: on behalf of Dr. McKearn, $863; Dr. Rodwell, $881; Dr. May,
$567, Dr. Miesowicz, $538; and Mr. Walsh, $783.
(3) On December 8, 1994, Dr. McKearn and the Company entered into a Stock
Compensation and Performance Option Agreement (the "Compensation Agreement"),
which provided for the issuance to Dr. McKearn of 30,000 shares of Common
Stock in three installments of 10,000 shares in each of 1994, 1995 and 1996.
On December 8, 1994, Dr. McKearn received the first installment of 10,000
shares upon payment made equal to the aggregate par value of the shares. On
January 3, 1995, Dr. McKearn received the second installment of 10,000 shares
6
<PAGE>
upon payment made equal to the aggregate par value of the shares. On
January 3, 1996, Dr. McKearn received the third installment of 10,000 shares
upon payment made equal to the aggregate par value of the shares.
(4) Pursuant to the Compensation Agreement, the Company granted to
Dr. McKearn, effective as of January 3, 1994, an option to purchase up to
100,000 shares of Common Stock at an exercise price of approximately $6.188
per share (subject to adjustment under certain circumstances). Vesting of
this option is at the discretion of the Compensation Committee of the Board of
Directors. Any shares not vested were irrevocably canceled and ineligible for
future vesting under the grant. In December 1995, the Compensation Committee
considered the vesting of the second installment of 20,000 shares and
determined that 15,000 shares should vest. In March 1997, the Compensation
Committee considered the vesting of the third installment of 20,000 shares and
determined that 17,000 shares should vest. See "Employment and Severance
Arrangements".
(5) Dr. McKearn resigned as Chairman, President and Chief Executive Officer
and returned to a scientific role in the Company, effective January, 1998. He
currently serves as President of Cellcor, a wholly-owned subsidiary of the
Company.
(6) Effective March 15, 1995, the Company and Dr. McKearn entered into a Split
Dollar Collateral Assignment Agreement. Under this agreement, the Company
will be responsible for the payment of all premiums due for two life insurance
policies on the life of Dr. McKearn, having a total face value of $2.3
million. The amount disclosed in the Summary Compensation Table reflects the
portion of the total premiums ($43,710) paid by the Company under these
insurance policies in fiscal year 1997 that is attributable to term life
insurance coverage (a total of $2,000). The current dollar value of the
benefit to Dr. McKearn of the remainder of the premiums paid by the Company
during fiscal year 1997 is $0. The benefit was calculated based upon the
difference between the payment of the premium and its refund at the earliest
possible time to the Company. For a description of the Split Dollar
Collateral Assignment Agreement, see "Employment and Severance Arrangements".
(7) Dr. May joined the Company as Vice President, Medical Affairs, effective
January 2, 1997.
(8) Dr. Miesowicz was elected as a Vice President of the Company, effective
October 20, 1995. Dr. Miesowicz also serves as Vice President and General
Manager of Cellcor. A portion of the amount included in the Summary
Compensation Table for 1995 reflects salary paid to Dr. Miesowicz by Cellcor
in fiscal year 1995, prior to the merger, for services rendered in his
capacity as Cellcor's Senior Vice President of Scientific Affairs.
(9) Mr. Walsh resigned from the Company during February 1998.
(10) Under the terms of his offer of employment, Mr. Walsh was awarded 5,000
shares of Common Stock. The amount included in the Summary Compensation Table
for 1995 reflects the aggregate value of those shares on the date they were
purchased by Mr. Walsh, which value is based upon the closing market price of
the Company's unrestricted stock on that date ($20,313), less the price paid
for the shares by Mr. Walsh ($50).
7
<PAGE>
The following table sets forth information regarding individual grants of
stock options to the named executive officers during fiscal year 1997:
OPTION GRANTS IN FISCAL YEAR 1997
<TABLE>
<CAPTION>
Potential Realizable Value at Assumed Annual
Rates of Stock Price Appreciation for Option
Individual Grants Term (3)
----------------------------------------------------- --------------------------------------------
Percent of
Number of Total
Securities Options
Underlying Granted to Exercise or
Options Employees in Base Price Expiration
Name Granted(1) Fiscal Year(1) (per share)(2) Date 5%($) 10%($)
---- ---------- -------------- -------------- ---------- ---------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Thomas J. McKearn 0 0 0 0 0
Frederick M. Miesowicz 0 0 0 0 0
Graham S. May 45,000 5.43 5.4063 01/02/07 153,000 387,731
John D. Rodwell 0 0 0 0 0
Richard J. Walsh 0 0 0 0 0
</TABLE>
_______________________
(1) All of the options granted to the named executive officers vest over five
years at the rate of 20% per year beginning on the first anniversary of the
date of grant, subject to acceleration under certain conditions. The maximum
term of each option granted is 10 years from the date of grant. Annual option
grants for the named and other executive officers were deferred until January
1998. See Report of Compensation Committee below.
(2) The exercise price of all stock options granted during the last fiscal year
is equal to the average of the high and low sale prices of the Common Stock as
reported on the Nasdaq National Market on the respective dates the options
were granted.
(3) These amounts represent certain assumed rates of appreciation only. Actual
gains, if any, on stock option exercises and Common Stock holdings are
dependent on the future performance of the Common Stock and overall stock
market conditions. There is no assurance that the amounts reflected will be
realized.
8
<PAGE>
The following table sets forth information regarding aggregated exercises of
stock options by the named executive officers during fiscal year 1997 and fiscal
year-end values of unexercised options:
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Options at FY-End FY-End(1)(2)
----------------------- -----------------------
(#) ($)
Name Shares Acquired Value Realized Exercisable/ Exercisable/
---- on Exercise(#) ($)(1) Unexercisable Unexercisable
--------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Thomas J. McKearn 0 0 353,000/285,000 0/0
Frederick M. Miesowicz 0 0 181,000/90,8000 0/0
Graham S. May 0 0 0/45,000 0/0
John D. Rodwell 19,100 43,894 150,400/151,000 0/0
Richard J. Walsh 0 0 87,000/123,000 0/0
</TABLE>
________________________
(1) The dollar values in this column were calculated by determining the
difference between the fair market value of the Common Stock underlying the
options at fiscal year-end or the date of exercise, as the case may be, and
the exercise price of the options.
(2) The fair market value of a share of Common Stock (calculated as the
average of the high and low sale prices as reported on the Nasdaq National
Market) on December 31, 1997 was $1.6094.
9
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
This report and the Performance Graph contained in this Proxy Statement shall
not be deemed incorporated by reference into any of the Company's filings under
the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934,
as amended.
Policy
The Compensation Committee of the Board of Directors (the "Committee") is
responsible for oversight of the Company's executive compensation program. The
Committee is composed entirely of independent, non-employee directors.
The Company's compensation program, both for its executive officers as well
as for all employees, is based on the philosophy that the interests of the
employees should be closely aligned with those of the Company's stockholders.
The 1997 executive compensation program was based on the following principles:
- compensation opportunities should attract the best talent to the Company;
motivate individuals to perform at their highest levels; reward outstanding
achievement; and retain the leadership and skills necessary for building
long-term stockholder value;
- a portion of total compensation should be at risk of performance; and
- individual executives should be encouraged to manage from the perspective
of owners of the Company.
The Company's 1997 compensation program was benchmarked by a 1996
compensation study conducted by an independent compensation consultant,
including a survey of companies representative of the firms with which the
Company competes for employee talent. The comparative companies included, but
were not identical to, the companies included in the peer group with respect to
the stock performance graph set out below. The Company targets its overall
compensation program at the median level of the biotechnology industry. In
addition, compensation for the named (and other) executives, including the Chief
Executive Officer, took into account individual responsibility and performance
as assessed by the Committee.
The compensation program includes a combination of competitive base salary
and benefits, annual cash bonus opportunities, and stock option awards. The 1997
executive compensation program and a specific discussion as to the compensation
of the Chief Executive Officer are set out below.
Annual Compensation for 1997
Generally, annual compensation of executive officers under the executive
compensation program for 1997 consisted of salary and bonus components.
Base Salary
In November 1996, the Compensation Committee determined base salaries and
annual incentive opportunities for 1997 for its executives, including the named
executives and the Chief Executive Officer. Dr. May's salary and bonus
opportunity were approved upon his hiring. At that time, the Committee reviewed
overall corporate performance during 1996. The Company's performance was
favorably affected in general by individuals' meeting their objectives for the
year, and by the following achievements: FDA approval of ProstaScint (the
Company's prostate cancer imaging agent); the signing of a research and license
agreement with Elan Corporation, plc (together with its affiliates, "Elan"); the
signing of several manufacturing contracts to increase contract revenues; and
the completion of several financing transactions raising an aggregate of
approximately $20 million. The Committee established a market-competitive
salary for each of the named executive officers based upon their job
responsibilities and individual performance.
Bonus
A portion of 1997 executive officer annual compensation opportunity was
based on corporate and individual performance. Annual bonus opportunities were
based upon achievement of individual performance objectives established by the
Committee prior to the beginning of the 1997 performance period and which the
Committee believed to be consistent with the Company's strategies. Bonus
opportunity levels are set at a percentage of base salary, with the total amount
of the bonus opportunity dependent on the extent to which the objectives were
achieved and the amount of cash available as determined by the Committee. At
year-end, the Committee reviewed the extent to which the objectives have been
achieved, and approved the awards reported in the Summary Compensation Table for
the named executive officers for 1997.
For 1998, the Committee set achievement of specific objectives for revenues
and cash burn as the benchmarks for 50% of all executives' performance
objectives with respect to the annual bonus opportunity, to be weighted equally
with individual performance objectives. The Committee believes that incentive
compensation should be linked to corporate financial results, particularly as
10
<PAGE>
the Company commercializes its products. The Committee also believes that,
while performance goals should include corporate financial results, executives
should also be held accountable for their individual areas of responsibility.
Long Term Compensation - Stock Options
The Compensation Committee believes that stock options are an appropriate
means to link its employees' interest with those of the Company's stockholders.
Stock option awards are designed primarily to provide strong incentives for
superior longer-term performance and continued retention by the Company.
Because it is believed that corporate performance is one of the principal
factors influencing the market value of the Company's Common Stock, the granting
of stock options to executive officers encourages them to work to achieve
consistent improvements in corporate performance. Options only have value to
the executive when the price of the Company's common stock exceeds the exercise
price, which is not less than the fair market value of the common stock at the
date of grant.
The Committee made no stock option grants to the named executive officers in
1997 other than the grant to Dr. May, which was made upon his hiring. Grants
ordinarily made at year end were deferred until January, 1998, at which time
options were granted to each of the named executive officers, who continue to be
employed by the Company, as follows: Dr. McKearn, 250,000; Dr. Miesowicz,
125,000; Dr. May, 150,000; and Dr. Rodwell, 150,000. These option grants were
set taking into account the comparison of practices at peer groups (in the
survey noted above), an individual's level of responsibility and furtherance of
corporate objectives, and the amount and terms of past stock option awards. The
Committee believes that retention of key executives is critical to the Company's
success during its period of transition. The Committee also took into account
the fact that the Company has no other long term incentive program, and believes
that options are important to retain executives and promote steps to build long
term value.
Compensation of the Chief Executive Officer
In determining the compensation of Dr. McKearn for 1997, the Compensation
Committee considered the same factors that it considered when determining
compensation for the Company's other executive officers, including the Company's
performance as a whole.
In 1994, the Company entered into a Stock Compensation and Performance
Option greement with Dr. McKearn. Under the terms of this agreement,
Dr. McKearn received 10,000 shares of restricted stock in each of 1994, 1995 and
1996. Under this agreement, Dr. McKearn also received a grant of stock options
to purchase up to an aggregate of 100,000 shares of Common Stock under the
Cytogen Corporation 1989 Employee Stock Option Plan. The incremental vesting of
this award is based upon the Committee's review of Dr. McKearn's performance
measured against a written set of objectives for the year, which the Committee
approves at the beginning of each such year. In March 1997, the Committee
decided that 17,000 shares of the 20,000 shares allowable under the third
installment of the grant should vest based upon achievement of 1996 objectives.
Since 1997 performance objectives were not adequately met by the Chief Executive
Officer, none of such options vested under the fourth installment of the grant,
and such options were forfeited.
In addition, effective March 15, 1995, the Company and Dr. McKearn entered
into a Split Dollar Collateral Assignment Agreement. Under this agreement, the
Company will be responsible for the payment of all premiums due for two life
insurance policies on the life of Dr. McKearn having a total face value of
$2.3 million. Dr. McKearn has assigned to the Company certain specific rights
in the policies, including, among other things, the right to receive any
insurance proceeds in excess of $2,000,000, and upon surrender of the policies
by Dr. McKearn, the right to receive 100% of the cash surrender value up to an
amount equal to the total premiums paid by the Company. Dr. McKearn remains the
owner of these policies only until the termination of his employment with the
Company, unless he then repays to the Company the total amount of the premiums
paid by the Company in respect of those policies. These amounts are reflected
in "Other Annual Compensation" in the Summary Compensation Table.
Tax Considerations
Federal tax laws impose a limit on deductions for each of the five
executives named in the summary compensation table to $1 million. Certain
compensation, including compensation based on performance, is not subject to
this limit if certain conditions are met, primarily, that the compensation is
based on objective performance criteria approved by the stockholders. The
Compensation payments must also be made pursuant to a plan administered by a
committee of outside directors. The Committee must certify that the performance
goals were achieved before payments can be awarded.
The Committee believes that its executive compensation program is consistent
with the intent of this legislation. The Company's stock option plans under
which options may be granted to executive officers has been approved by the
stockholders and qualifies for the exclusion from the deduction limits. Base
salary, annual bonuses, and certain other compensation amounts disclosed in the
summary compensation table do not qualify for the exclusion from the $1 million
limit but such amounts of compensation are not expected to exceed the deduction
limits. The Committee will consider appropriate steps in the future, including
stockholder approval, to maintain deductions for its incentive compensation
plans to the greatest extent practical while maintaining flexibility to take
actions which it deems in the best interests of the Company and its stockholders
but which may result in certain compensation not qualifying for tax deductions.
11
<PAGE>
The Committee believes that performance should be rewarded, that the
financial interests of the executive officers should be aligned with the
stockholders, and that compensation should be competitive. We have structured
compensation at the Company to meet these criteria.
* * * * *
The foregoing report on compensation is provided by the following outside
directors, who constituted the Compensation Committee during 1997:
Charles E. Austin, Chairman
Donald E. O'Neill
Ronald J. Brenner
12
<PAGE>
PERFORMANCE GRAPH
The following Performance Graph compares the Company's cumulative total
stockholder return on the Common Stock for a five-year period (December 31, 1992
to December 31, 1997) with the cumulative total return of the Nasdaq U.S.
Stocks Index and the Nasdaq Pharmaceutical Index, a broad index of
biopharmaceutical and pharmaceutical companies similar in capitalization and
stage of corporate development to the Company.*
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
1992 1993 1994 1995 1996 1997 1997
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cytogen Corporation $100.00 $27.27 $18.47 $23.86 $25.00 $7.39
- ---------------------------------------------------------------------------------------------------------
NASDAQ U.S. Stock Index $100.00 $114.79 $112.21 $158.68 $195.19 $239.63
- ---------------------------------------------------------------------------------------------------------
NASDAQ Pharmaceutical Index $100.00 $89.13 $67.08 $122.73 $122.86 $127.19
- ---------------------------------------------------------------------------------------------------------
</TABLE>
Assumes $100 invested on December 28, 1992 in Cytogen Common Stock,
NASDAQ U.S. Stocks Index and NASDAQ Pharmaceutical Index
*Total return assumes reinvestment of dividends
13
<PAGE>
Employment And Severance Arrangements
Dr. Thomas J. McKearn has served as the President of Cellcor on a full-time
basis since January 1998. Prior to this he served as the Company's Chairman,
Chief Executive Officer and President. Dr. McKearn has entered into agreements
with the Company pursuant to which he earned or received (i) base salary of
$298,012 in fiscal year 1997, (ii) a restricted stock grant of 10,000 shares in
each of 1994, 1995, and 1996, (iii) a stock option granted effective
January 3, 1994 to purchase up to an aggregate of 100,000 shares of Common Stock
at an exercise price of approximately $6.188 per share, with vesting determined
by the Compensation Committee based upon the meeting of certain performance
criteria established by the Compensation Committee, and (iv) a $2.3 million
split-dollar life insurance policy (described above) effective in 1995. Vesting
of the shares subject to the options described in (iii) above as to which no
determination has been made by the Compensation Committee, may be accelerated
under certain circumstances involving a change in control of the Company. A
change in control of the Company is defined as (a) the Company enters into an
agreement to merge or consolidate the Company with or into another corporation,
or to dispose of all or substantially all of the Company's assets; (b) any
person other than the Company makes a tender or exchange offer for more than 50%
of the Common Stock of the Company; (c) stock representing more than 50% of the
voting power of the Company is acquired by any person other than the Company
during any 24-month period; or (d) a change in the majority of the Board of
Directors during any 24-month period. Dr. McKearn is also entitled to one
year's severance pay if he is dismissed for reasons other than cause.
Under the terms of severance agreements, Drs. Rodwell, May and. Miesowicz
will also be entitled to receive twelve months of salary if their employment
with the Company is terminated without cause.
General Information
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
On the basis of reports and representations submitted by or on behalf of the
directors, executive officers and ten percent stockholders of the Corporation,
all Forms 3, 4 and 5 showing ownership of and change of ownership in the
Corporation's equity securities during 1997 were timely filed with the
Securities and Exchange Commission as required by Section 16(a) of the Exchange
Act of 1934, with the exception of one Form 4 reporting the sale of shares
acquired upon an exercise of options by Dr. Rodwell, which was inadvertently
filed late.
Other Business
The Board of Directors does not intend to present any business other than
the matters described in this Proxy Statement at the Annual Meeting. If any
other matter is presented at the Annual Meeting which under applicable proxy
regulations need not be included in this Proxy Statement or which the Board of
Directors did not know a reasonable time before this solicitation would be
presented, the persons named in the accompanying proxy have discretionary
authority to vote proxies with respect to such matter in accordance with their
best judgment.
Expenses Of Solicitation
The expense of this proxy solicitation will be paid by the Company.
Some of the officers and regular employees of the Company may solicit proxies
personally and by telephone. Management may also request banks, brokerage
houses, custodians, nominees and fiduciaries to obtain authorization for the
execution of proxies and may reimburse them for expenses incurred by them in
connection therewith. The Company plans to use Corporate Investor
Communications, Inc., which will receive $4,000 plus certain expenses, for any
proxy solicitation that may be necessary.
Other Matters
The persons named in the enclosed form of proxy have no present intention of
bringing before the meeting for action any matters other than those specifically
referred to above, nor has management or the Board of Directors any such
intention, and none of such persons, management or the Board of Directors is
aware of any matters which may be presented by others. If any such business
should properly come before the meeting, the persons named in the form of proxy
intend to vote thereon in accordance with their best judgment.
14
<PAGE>
FUTURE STOCKHOLDER PROPOSALS
The Company must receive at the Office of the Corporate Secretary any
proposal which a stockholder wishes to submit to the 1999 Annual Meeting of
Stockholders before December 18, 1998, if the proposal is to be considered by
the Board of Directors for inclusion in the proxy material for that meeting.
By Order of the Board of Directors
May 25, 1998
Donald F. Crane, Jr.
Corporate Secretary
15
<PAGE>
CYTOGEN CORPORATION
PROXY
SOLICITED BY THE BOARD OF DIRECTORS
John E. Bagalay, Jr., and Donald F. Crane, Jr., and each of them, with full
power of substitution, are hereby appointed the Proxies of, and authorized to
represent, the undersigned and to vote all of the shares of Common Stock of
CYTOGEN CORPORATION entitled to be voted by the undersigned as of May 11, 1998
as directed on the reverse side and, in their discretion, on all other matters
which may properly come before the Annual Meeting of Stockholders to be held on
June 17, 1998, and at any adjournment therof as if the undersigned were present
and voting at the meeting.
Wherther or not you expect to attend the meeting, you are urged to execute
and return this proxy, which you may revoke at any time prior to its use.
The shares represented by this proxy will be voted as directed by the
stockholders. Where no direction is given when the duly executed proxy is
returned, such shares will be voted FOR all items.
TO BE VOTED, YOU MUST SIGN ON THE REVERSE SIDE
(CONTINUED ON THE REVERSE SIDE)
<PAGE>
The Board of Directors recommends a Vote FOR all items.
1. Election of directors duly nominated: Nominees: John E. Bagalay, Jr.,
Ronald J. Brenner,
James A. Grigsby, and
Robert F. Hendrickson
FOR WITHHELD
[ ] [ ] To withold authority to vote for any
individual nominees write such nominee's
name in the space provided below.)
-----------------------------------------
2. To transact such other business as may properly come
before the meeting.
DATED: 1998
---------------------------
---------------------------------------
(SIGNATURE(S) OF STOCKHOLDER(S)
---------------------------------------
(SIGNATURE(S) OF STOCKHOLDER(S)
NOTE: The signature(s) should appear
the same as it appears on the address
label on this proxy. When signing as
executor, administrator, trustee,
guardian, or attorney, please give full
title as such. For joint accounts or
co-fiduciaries, all joint owners or co-
fiduciaries, should sign.
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
<PAGE>
BRUNSWICK HILTON AND TOWERS
Three Tower Center Boulevard at Tower Center
East Brunswick, NJ 08816
732-828-2000
732-828-6958 (fax)
From NJ Turnpike North or South
- -------------------------------
Take Exit 9 for New Brunswick. After toll, bear right. Approx. 50 yards after
overpass make first right onto an unmarked u-turn. Make right turn at stop
sign. Make left at first traffic light for entrance to hotel.
From Garden State Parkway
- -------------------------
Take Exit 129 for the NJ Turnpike. Take NJ Turnpike South. Follow above
directions from NJ Turnpike.
From Route 18 Northbound
- ------------------------
Turn right at the first light after the NJ Turnpike Entrance for entrance to the
hotel.
From Route 18 Southbound
- ------------------------
Pass the hotel at the intersection of Route 18 and NJ Turnpike. (Left turns are
not allowed at traffic light.) At second traffic light after passing hotel
(Eggers St.) make a right for u-turn. Follow signs for u-turn and get onto 18
Northbound. Make right at first traffic light for entrance to hotel.
From Route 1 Northbound or Southbound
- -------------------------------------
Take exit for 18 Southbound. Follow directions above for Route 18 Southbound.
From Route 287
- --------------
Take exit for NJ Turnpike Southbound. Follow directions above for NJ Turnpike.
