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INFORMATION REQUIRED IN PROXY STATEMENT
----------------------
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement
( ) Confidential, For Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
NEORX CORPORATION
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
(X) No fee required.
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
CALCULATION OF FILING FEE
Title of each class of securities to which transaction applies:
Aggregate number of securities to which transaction applies:
Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11:
Proposed maximum aggregate value of transaction:
Total fee paid:
( ) Fee paid previously with preliminary materials:
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
Amount previously paid:
--------------------------
Form, Schedule or
Registration Statement no.:
-----------------------
Filing Party:
-------------------------------------
Date Filed:
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<PAGE>
NEORX CORPORATION
Notice of 1998 Annual Meeting of Shareholders
TO THE SHAREHOLDERS:
The 1998 Annual Meeting of Shareholders (the "Annual Meeting") of NeoRx
Corporation (the "Company") will be held at The Mountaineers Club, 300 Third
Avenue West, Seattle, Washington 98119, on Wednesday, May 13, 1998, at 9 a.m.,
for the following purposes:
1. To elect six members to the Company's Board of Directors;
2. To transact such other business as may properly come before
the Annual Meeting and any adjournments or postponements
thereof.
Your attention is directed to the accompanying Proxy Statement for
further information with respect to the matters to be acted upon at the Annual
Meeting. To constitute a quorum for the conduct of business at the Annual
Meeting, it is necessary that holders of a majority of all outstanding shares of
the Company's Common Stock be present in person or be represented by proxy. To
ensure representation at the Annual Meeting, you are urged to complete, sign and
date the enclosed proxy card and return it promptly in the enclosed
postage-prepaid envelope.
The record date for determining shareholders entitled to notice of, and
to vote at, the Annual Meeting is the close of business on March 16, 1998.
BY ORDER OF THE BOARD OF DIRECTORS
RICHARD L. ANDERSON
Senior Vice President, Finance and Operations
Chief Financial Officer, Secretary
March 24, 1998
Seattle, Washington
YOUR VOTE IS IMPORTANT. ACCORDINGLY, YOU ARE ASKED TO COMPLETE, SIGN,
DATE AND RETURN THE ACCOMPANYING PROXY CARD REGARDLESS OF WHETHER OR NOT YOU
PLAN TO ATTEND THE ANNUAL MEETING.
<PAGE>
NEORX CORPORATION
PROXY STATEMENT
General
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors (the "Board of Directors") of NeoRx Corporation
("NeoRx" or the "Company") of proxies in the accompanying form for use at the
Annual Meeting of Shareholders to be held on Wednesday, May 13, 1998, and any
adjournments or postponements thereof (the "Annual Meeting"). The Annual Meeting
will be held at 9 a.m. at The Mountaineers Club, 300 Third Avenue West, Seattle,
Washington 98119.
The Company's principal office is located at 410 West Harrison Street,
Seattle, Washington 98119. The approximate date of mailing this Proxy Statement
and the accompanying proxy card is March 27, 1998.
Voting Securities
Only shares of the Company's Common Stock, $.02 par value per share
(the "Common Stock"), outstanding at the close of business on March 16, 1998,
the record date for determining shareholders (the "Record Date"), are entitled
to receive notice of and to vote at the Annual Meeting. At the Record Date,
there were 20,720,414 shares of Common Stock outstanding. The presence, in
person or by proxy of holders of record of a majority, of all outstanding shares
of Common Stock is required to constitute a quorum for the transaction of
business at the Annual Meeting. Each holder of Common Stock is generally
entitled to one vote per share held on the Record Date on each item to be voted
on at the Annual Meeting. In voting for the election of Directors, however, each
shareholder has the right to cumulate his or her votes and cast as many votes as
are equal to the number of Directors to be elected multiplied by the number of
such shareholder's shares. These votes may be cast for one candidate or
distributed among as many candidates as the shareholder desires. If a
shareholder wishes to cumulate his or her votes, he or she should multiply his
or her shares by the number of Directors to be elected (deriving a cumulative
total) and then write the number of votes for each Director next to each
Director's name on the proxy card. The total votes cast in this manner may not
exceed the cumulative total. If a shareholder does not wish to cumulate votes
for Directors, he or she should indicate the vote for or against each nominee,
as provided on the proxy card. On all other matters, each share of Common Stock
entitles its holder to one vote on each matter to be acted upon at the Annual
Meeting.
Under Washington law and the Company's Articles of Incorporation, if a
quorum is present at the Annual Meeting, the six nominees for election as
Directors who receive the greatest number of votes cast for the election of
Directors by the shares present in person or represented by proxy at the Annual
Meeting and entitled to vote, will be elected Directors. Abstention from voting
on the election of Directors will have no impact on the outcome of this proposal
since no vote has been cast in favor of any nominee. There can be no broker
nonvotes on the election of Directors since brokers who hold shares for their
clients have discretionary authority to vote such shares with respect to this
matter.
1
<PAGE>
The proxy cards also confer discretionary authority to vote the shares
authorized to be voted thereby on any matter that was not known on the date of
this Proxy Statement but may properly be presented for action at the Annual
Meeting.
YOUR VOTE IS IMPORTANT. ACCORDINGLY, YOU ARE ASKED TO COMPLETE, SIGN,
DATE AND RETURN THE ACCOMPANYING PROXY CARD REGARDLESS OF WHETHER OR NOT YOU
PLAN TO ATTEND THE ANNUAL MEETING.
Revocation
Any shareholder returning a proxy has the power to revoke it at any
time before shares represented thereby are voted at the Annual Meeting. Any
shares represented by an unrevoked proxy will be voted unless the shareholder
attends the Annual Meeting and votes in person. A shareholder's right to revoke
a proxy is not limited by or subject to compliance with a specified formal
procedure, but written notice of such revocation should be given to the
Company's Corporate Secretary at or before the Annual Meeting.
Expenses of Solicitation
The Company will bear the expense of printing and mailing proxy
solicitation material. In addition to the solicitation of proxies by mail,
solicitation may be made by certain Directors, officers and other employees of
the Company in person, by telephone or by facsimile transmission. No
compensation will be paid for such solicitation.
Arrangements also will be made with brokerage firms and other
custodians, nominees and fiduciaries to forward proxy solicitation material to
certain beneficial owners of the Company's Common Stock, and the Company will
reimburse such brokerage firms, custodians, nominees and fiduciaries for
reasonable out-of-pocket expenses incurred by them in connection therewith.
2
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership, as of March 3, 1998, of the Common Stock by (a) each person known by
the Board of Directors to beneficially own more than 5% of the outstanding
Common Stock, (b) each Director and nominee for Director, (c) each of the
executive officers included in the Summary Compensation Table, and (d) all
executive officers and Directors as a group. Except as otherwise indicated, the
Company believes that the beneficial owners of the shares listed below have sole
investment and voting power with respect to the shares.
<TABLE>
<CAPTION>
Shares Percentage
Beneficially of Common
Name Owned Stock
---- ------------- -----------
<S> <C> <C>
Merrill Lynch Asset Management....................................... 1,889,375 9.1%
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Ross Financial Corporation........................................... 1,196,000 5.8%
Micro Commerce Center
Cayman Islands B.W.I.
Paul G. Abrams (1)................................................... 584,672 2.8%
Richard L. Anderson (2).............................................. 56,250 *
James G. Andress (3)................................................. 20,000 *
Jack L. Bowman (4)................................................... 24,000 *
Fred B. Craves (5)................................................... 1,182,500 5.7%
E. Rolland Dickson................................................... 0 *
Mary C. Foerster..................................................... 0 *
Lawrence H.N. Kinet (3).............................................. 17,500 *
Carl-Heinz Pommer (6)................................................ 17,500 *
John M. Reno (7)..................................................... 174,012 *
Robert W. Schroff (8)................................................ 167,336 *
Alan Steigrod........................................................ 0 *
Bruce H. Walters (9)................................................. 119,175 *
All executive officers and Directors as a group (14 persons) (10).... 2,439,138 11.1%
- ------------------
<FN>
* Less than 1%.
(1) Includes 450,500 shares subject to options exercisable within 60 days.
(2) Represents 56,250 shares subject to options exercisable within 60 days.
(3) Includes 15,000 shares subject to options exercisable within 60 days.
(4) Includes 22,500 shares subject to options exercisable within 60 days.
(5) Represents 172,500 shares subject to options exercisable within 60 days,
and includes 1,010,000 shares held by Bay City Capital Management, LLC.
Mr. Craves is the Chairman, Manager and Managing Director of Bay City
Capital Management, LLC and disclaims beneficial ownership.
3
<PAGE>
(6) Represents 17,500 shares subject to options exercisable within 60 days,
but does not include 731,534 shares owned by Boehringer Ingelheim
International GmbH for which Mr. Pommer serves as a representative on the
Board of Directors; Mr. Pommer disclaims beneficial ownership of the
shares held by Boehringer Ingelheim International GmbH.
(7) Includes 155,125 shares subject to options exercisable within 60 days.
(8) Includes 147,625 shares subject to options exercisable within 60 days.
(9) Includes 110,500 shares subject to options exercisable within 60 days.
(10)Includes 1,236,688 shares subject to options exercisable within 60 days.
</FN>
</TABLE>
ELECTION OF DIRECTORS
Nominees for Director
Pursuant to the Company's Articles of Incorporation, six Directors are
to be elected by the holders of Common Stock at the Annual Meeting. These
Directors will serve one-year terms that will expire at the 1999 Annual Meeting
of Shareholders, or until their successors have been elected and qualified.
Unless a shareholder withholds his or her vote, each proxy will be voted for the
election of the following Directors:
PAUL G. ABRAMS, M.D., J.D., age 50, is a co-founder of the Company and
has been a Director since January 1985. He has been the Company's President and
Chief Executive Officer since May 1990 and was Vice President, Medical Affairs
from January 1985 to April 1990. Dr. Abrams holds J.D., M.D. and B.A. degrees
from Yale University. He is a board-certified internist and medical oncologist
and is an Affiliate Associate Professor in the Department of Radiology at the
University of Washington. Dr. Abrams serves on the Board of Directors of the
Biotechnology Industry Organization and is a member of its Emerging Companies
Section Board.
JACK L. BOWMAN, age 66, has been a Director since January 1994. Mr. Bowman
was Company Group Chairman of Johnson & Johnson, a multinational pharmaceutical
company, from 1987 until his retirement in 1993. Mr. Bowman is a director of
Cell Therapeutics, Inc., CytRx, Inc., Vaxcel, Inc., Targeted Genetics
Corporation, Osiris Therapeutics, Inc., and Cellegy Pharmaceuticals, each of
which is a biotechnology company. He holds a B.Ed. degree from Western
Washington University.
FREDERICK B. CRAVES, Ph.D., age 52, has been the Company's Chairman of the
Board of Directors since July 1993. In June 1997, Dr. Craves founded Bay City
Capital Management LLC, a merchant bank providing advisory services and
investing in life science companies, and has served as chairman and managing
director since that company's inception. In November 1996, Dr. Craves founded
The Craves Group LLC; and in January 1994, Dr. Craves co-founded Burrill &
Craves. Both of these entities are investment companies. From January 1991 to
April 1993, he was Chief Executive Officer and President of Berlex Biosciences,
a research, development and manufacturing organization and a wholly owned
subsidiary of Schering AG, a multinational pharmaceutical company. Berlex
Biosciences was created by merging Codon, a biotechnology company which Dr.
Craves co-founded, and the pharmaceutical business of Triton Biosciences. Dr.
Craves is Chairman of the Board and Acting Chief Executive Officer of Epoch
Pharmaceuticals, and is a director of Incyte Pharmaceuticals, Inc., both
biotechnology companies. Dr. Craves holds a Ph.D. degree in Pharmacology and
Experimental Toxicology from the University of California San Francisco Medical
Center.
4
<PAGE>
E.ROLLAND DICKSON, M.D.,age 64, has been the Mary Lowell Leary Professor
of Medicine at Mayo Medical School and Director of Development at the Mayo
Foundation for Medical Education and Research since 1993. Dr. Dickson received
his M.D. degree from Ohio State University.
MARY C. FOERSTER, age 51, is Director of Public Relations and
Advertising for Boeing Commercial Airplane Group worldwide. Prior to joining
Boeing, she was employed in the public relations industry with the global
communications agencies Burson-Marsteller, where she served on the Board of
Directors, and Hill & Knowlton, where she was Senior Vice President, Public
Affairs Worldwide. She graduated from Smith College and obtained a masters
degree from the University of Pennsylvania.
ALAN A. STEIGROD, age 60, has been Chief Executive Officer of Newport
HealthCare Ventures, which provides consulting and investment service to the
biopharmaceutical industry, since 1996. From March 1993 to November 1995, he
served as President and Chief Executive Officer of Cortex Pharmaceuticals Inc.,
a development stage neuroscience company.
It is intended that votes will be cast pursuant to the enclosed proxy
card for the election as Directors of the foregoing nominees. Executing the
proxy card will give the proxies the authority to vote the shares in the
election of Directors as the proxies shall determine. If any nominee shall not
be a candidate for election as a Director at the Annual Meeting, it is intended
that votes will be cast pursuant to the enclosed proxy for such substitute
nominee as may be nominated by the existing Directors. No circumstances are
presently known that would render any nominee named above unavailable.
Pursuant to the Company's Bylaws, shareholders seeking to nominate
other candidates for election to the Board of Directors at the Annual Meeting
must give written notice to the Company's Corporate Secretary not less than 60
days nor more than 90 days before the Annual Meeting. Such notice must contain
certain information as to the shareholder giving the notice and each proposed
nominee, including information similar to that required under the federal proxy
rules. If less than 70 days' notice or prior public disclosure of the date of
the scheduled Annual Meeting is given, notice by the shareholder must be given
not later than the tenth day following the earlier of the mailing of notice of
the Annual Meeting or the date public disclosure of the Annual Meeting was made.
The Company's Bylaws provide that no person shall be elected a Director of the
Company unless nominated in accordance with the Bylaws. As of the date of this
Proxy Statement, the Company has not received any Director nominations by
shareholders.
The Board of Directors met 11 times during the year ended December 31,
1997. Each of the present Directors, except Mr. Pommer, attended at least 75% of
the total number of meetings held by the Board of Directors and by all of the
committees of the Board of Directors on which they served.
5
<PAGE>
Committees of the Board
The Board of Directors has two committees: an Audit Committee and a
Compensation Committee. It does not have a nominating committee.
The Audit Committee currently consists of three non-employee Directors:
Messrs. Kinet and Pommer, and Dr. Craves. The Audit Committee reviews the
preparation and audit of the Company's accounts, considers the engagement of
independent public accountants for the ensuing year and the terms of such
engagement, reviews the scope of the audit proposed by such accountants, and
receives and reviews the audit reports. The Audit Committee met twice during the
year ended December 31, 1997.
The Compensation Committee currently consists of three non-employee
Directors: Messrs. Andress, Bowman and Kinet. The Compensation Committee
recommends to the Board of Directors the salary and certain terms of employment
of the Company's officers and administers the Company's 1994 Stock Option Plan
and the grants of options thereunder. The Compensation Committee met ten times
during the year ended December 31, 1997.
Compensation of Directors
Directors of the Company receive no cash compensation for their
services to the Company in such capacity. Non-employee Directors receive stock
option grants under the Company's 1991 Stock Option Plan for Non-Employee
Directors (the "Directors Plan"). Each new non-employee Director, upon election
or appointment to the Board of Directors, receives an initial option to purchase
10,000 shares of Common Stock at an exercise price equal to the fair market
value per share of Common Stock on the grant date. Each non-employee Director
automatically receives an annual option grant to purchase 5,000 shares of Common
Stock following each annual meeting of shareholders at an exercise price equal
to the fair market value per share of Common Stock on the grant date, provided
that a non-employee Director who has received the initial grant for 10,000
shares of Common Stock within five months prior to any such annual meeting of
shareholders, does not receive the annual grant for such annual meeting. In
February 1998, the Board of Directors voted to increase the grant of options to
Directors to 20,000 for the initial option and 10,000 shares at each annual
meeting date. Options granted to non-employee Directors upon their initial
appointment or election become exercisable in two equal installments beginning
with the first anniversary of the grant date. The options granted as of each
annual meeting of shareholders (including the Annual Meeting) become exercisable
in two equal installments on the dates of the next two succeeding annual
meetings of shareholders.
On February 21, 1997, the Board of Directors granted to Dr. Frederick
B. Craves an option to purchase 60,000 shares of the Company's Common Stock from
the Restated 1994 Stock Option Plan for his services as Chairman of the Board of
Directors. In addition, Dr. Craves receives compensation under a consulting
agreement with the Company. See "Certain Relationships and Related
Transactions."
6
<PAGE>
EXECUTIVE COMPENSATION
Compensation Summary
The following table sets forth all compensation for services rendered
in each of the last three years to the Company's Chief Executive Officer and the
four current most highly compensated officers in 1997 (the "named executive
officers").
<TABLE>
<CAPTION>
Summary Compensation Table
Long-Term
Annual Compensation Compensation Awards
-------------------------------- -----------------------
Bonus and Restricted Securities All Other
Achievement Stock Underlying Compensation
Name and Principal Position Year Salary($) Award($)(2) Awards($) Options(#) ($)(3)
- ---------------------------- ---- --------- ----------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Paul G. Abrams 1997 $274,149 $ 69,000 -- -- $ 696
President and Chief Executive 1996 258,457 1,700 -- 125,000 696
Officer 1995 234,149 -- -- -- 696
Richard L. Anderson (1) 1997 184,141 64,663 -- 242,500 1,500
Senior Vice President, 1996 -- -- -- -- --
Finance and Operations, and 1995 -- -- -- -- --
Chief Financial Officer
John M. Reno 1997 169,718 75,262 -- 30,000 1,152
Vice President, Research and 1996 169,718 1,700 -- 25,000 1,152
Development 1995 163,746 -- -- -- 680
Robert W. Schroff 1997 169,718 77,345 -- 30,000 1,152
Vice President and General 1996 157,925 1,700 -- 25,000 336
Manager, Cardiovascular 1995 152,498 -- -- -- 321
Products
Bruce H. Walters 1997 137,551 35,000 -- -- 908
Vice President, Human 1996 137,551 1,700 -- 25,000 908
Resources 1995 135,917 1,389 -- -- 894
<FN>
(1) Mr. Anderson joined the Company on January 24, 1997.
(2) Includes accrued bonus and achievement awards.
(3) Consists of premiums paid under group term life insurance policies.
</FN>
</TABLE>
7
<PAGE>
Stock Options
The following table provides details regarding stock options granted to
the named executive officers in 1997. In addition, in accordance with Securities
and Exchange Commission (the "SEC") rules, the hypothetical gains or "option
spreads" that would exist for the respective options are shown. These gains are
based on assumed rates of annual compounded stock price appreciation of 5% and
10% from the date the options were granted over their 10-year term.
<TABLE>
<CAPTION>
OPTIONS GRANTED IN 1997
Potential Realizable Value At
Assumed Annual Rates of Stock Price
Individual Grants Appreciation for Option Term
------------------------------------------------------- ------------------------------------
Number of Percent of
Securities All Options
Underlying Granted to Exercise
Options Employees Price Expiration
Name Granted(#)(1) in 1997 Per Share($) Date 5%($)(3) 10%($)(3)
- ------------------- ------------ ----------- ------------ ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Paul G. Abrams -- -- -- -- -- --
Richard L. Anderson 202,500(2) 35.2% $4.625 1/24/2007 $588,999 $1,492,640
10,000 1.7 4.4375 8/11/2007 27,907 70,721
30,000 5.2 5.75 12/2/2007 108,484 274,921
------- ---- -------- ----------
242,500 42.2 725,390 1,838,282
John M. Reno 30,000 5.2 4.4375 8/11/2007 83,722 212,167
Robert W. Schroff 30,000 5.2 3.563 5/27/2007 67,198 170,316
Bruce H. Walters -- -- -- -- -- --
<FN>
(1) The Options granted will be exercisable in four equal annual installments
beginning on the first anniversary date of the option and expire 10 years
from the date of grant. All options were granted with an exercise price
equal to the fair market value of the Common Stock on the date of the
grant based on the closing price of the Common Stock as quoted on the
Nasdaq National Market. The options are also subject to accelerated
vesting upon the occurrence of certain events. See "Employment and Change
of Control Agreements and Severance Agreement."
(2) Of the 202,500 options granted to Mr. Anderson, 22,500 become exercisable
on the sixth anniversary of the grant date and expire 10 years from the
grant date. Exercisability may be accelerated by the Compensation
Committee of the Board of Directors based on the Committee's assessment
of the corporate performance against goals established annually.
(3) The amounts result from the assumed rates of stock price appreciation
required by the SEC and are not intended to forecast actual stock price
appreciation. Option holders will experience no gain unless the stock
price increases during the option term. Such an increase would benefit
all shareholders.
</FN>
</TABLE>
8
<PAGE>
Option Exercises in 1997 and Year-End Value Table
The following table sets forth information on option exercises in the
year ended December 31, 1997 by the named executive officers and the value of
such officers' unexercised options at the end of 1997.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN 1997
AND YEAR-END OPTION VALUES
Number of Securities Value of Unexercised In-
Underlying Unexercised Options The Money Options at
at December 31, 1997(#) December 31, 1997($)(1)
Acquired on Value ------------------------------ ---------------------------
Name Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
- ----------------------- ----------- ----------- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Paul G. Abrams -- -- 450,500 240,000 $1,032,789 $392,974
Richard L. Anderson (2) -- -- 11,250 231,250 11,250 203,125
John M. Reno -- -- 155,125 88,625 208,578 136,052
Robert W. Schroff -- -- 147,625 86,125 208,578 162,287
Bruce H. Walters -- -- 110,500 37,000 184,370 49,038
- --------------
<FN>
(1) The value of unexercised in-the-money options is calculated based on the
market price per share on December 31, 1997 of $5.625 as reported by the
Nasdaq National Market, less the exercise price.
(2) Mr. Anderson joined the Company on January 24, 1997.
</FN>
</TABLE>
Report of the Compensation Committee on Executive Compensation
Statement of Compensation Philosophy
The Company's executive compensation program primarily consists of
three parts: base salary, annual bonus, and stock options. The Company's overall
philosophy is to hire individuals who possess the requisite professional
managerial skills with demonstrated success in positions of comparable scope and
responsibility in healthcare and other research and industrial settings, who
will help achieve the Company's mission of developing innovative pharmaceuticals
to provide solutions for critical, unmet needs in cancer and cardiovascular
diseases. The Company is committed to recruiting, motivating and retaining
senior executives with demonstrated talent and managerial leadership skills.
The Company's goal for total compensation is to be competitive with
other biotechnology enterprises. The program places significant emphasis on
equity participation by granting stock options to align the interests of senior
management with those of the Company's shareholders. The Company's cash
compensation is designed to be competitive while also recognizing the need to
conserve cash for product development.
Compensation payments in excess of $1 million to each of the named
executive officers are subject to a limitation on deductibility for the Company
under Section 162(m) of the Internal Revenue Code of 1986, as amended. Certain
performance-based compensation is not subject to the limitation on
9
<PAGE>
deductibility. Cash compensation to the Chief Executive Officer or any other
executive officer has never exceeded $1 million and the Compensation Committee
does not expect cash compensation in 1998 to the Chief Executive Officer or any
other executive officer to exceed $1 million. The Board of Directors intends to
qualify option awards for the performance-based exception to the $1 million
limitation on deductibility of compensation payments.
Base Salary
The Company's philosophy is to maintain executive cash compensation at
a competitive level sufficient to recruit and retain individuals possessing the
above-mentioned skills. Determinations of appropriate cash compensation levels
are generally made through regular participation in a variety of industry and
industry-related surveys, as well as by monitoring developments in key
industries such as biotechnology and pharmaceuticals. The Company's cash
compensation levels are designed to be approximately equal to cash compensation
paid by other biotechnology enterprises. For the last several years, executive
officer base salaries have only been adjusted to be consistent with the
Company's overall compensation targets based on survey data.
The survey data considered by the Compensation Committee in determining
1997 executive compensation include salary information provided by 103
biotechnology enterprises having between 51 and 149 employees (the "Comparison
Group"), of which 82 are publicly traded companies. Approximately 65% of these
publicly traded companies are included in the Nasdaq Pharmaceutical Stock Index
referred to in the Stock Price Performance Graph that appears elsewhere in this
Proxy Statement.
Annual Bonus
An annual bonus plan has been established to reward participants for
their contributions to the achievement of Company-wide performance goals. All
executive officers of the Company participate in the program, and the
Compensation Committee may expand it to cover other employees. This incentive
plan is designed to ensure that when such payments are added to a participant's
base salary, the resultant compensation for above average performance will
approximate the average total cash compensation level of comparable companies.
In 1997, executive officers were eligible to earn a bonus up to 25% of
salary, upon attainment of specific Company performance goals set by the Board
of Directors. These goals included forming strategic alliances, achieving
product milestones, and increasing cash reserves. The Compensation Committee
does not assign relative weights to these goals in formulating the amount of the
awards. In February 1998, the Compensation Committee determined that the goals
for 1997 were met by the executive officers. Bonuses for 1997 were paid in 1998
and were approximately 25% of base executive compensation.
In addition to the bonus plan, the Compensation Committee has the
discretion to grant achievement awards of cash and/or stock options to
individual executive officers. These achievement awards are intended to
10
<PAGE>
recognize an individual for outstanding contributions to the Company. During
1997, Mr. Anderson, Dr. Reno and Dr. Schroff received achievement awards.
Stock Options
Stock options are viewed as a basic element of the total compensation
program and emphasize long-term Company performance as measured by the creation
of shareholder value. Options under the Company's existing stock option plan are
granted to all employees. In determining the size of the grants, the
Compensation Committee considers the amount and value of options currently held,
but focuses primarily on the executive's past and likely continued contribution
to the Company, as well as the executive's relative position within the Company.
Although the Compensation Committee does not have a target ownership level for
Common Stock holdings by executives and key employees, the Compensation
Committee's objectives are to enable such persons to develop and maintain a
significant long-term ownership position in the Common Stock.
Stock options to executive officers have been granted at 100% of fair
market value on the date of grant. The Company has generally awarded options to
executives at the time of employment and promotion, and at discretionary
intervals thereafter. The Compensation Committee seeks to keep its executive
stock option compensation competitive with other biotechnology companies. Stock
option exercisability is determined by the Compensation Committee. Options
become exercisable in periods generally ranging from one to nine years after
date of grant. In certain cases, exercisability may be accelerated based on
achievement of corporate and individual objectives.
In addition to granting stock options to the Company's current
executive officers under the programs described above, the Company also granted
152,500 stock options to approximately 32 other employees under the Company's
Restated 1994 Stock Option Plan. This broad-based program is designed to create
in the Company an entrepreneurial spirit and to provide broad incentives for the
day-to-day achievements of these employees, which, in turn, is expected to
improve the Company's long-term performance.
Compensation of the Chief Executive Officer
In determining the base salary compensation of Dr. Abrams for 1997, the
Compensation Committee considered the same factors that it considered when
determining compensation for all employees and for the Company's other executive
officers, including the Company's performance as a whole. Dr. Abrams' base
salary compensation received in 1997 was $274,149, which placed him at the
average of chief executive officers in the Radford Associates Biotechnology
Survey.
Submitted by the Compensation Committee of the Board of Directors
James G. Andress
Jack L. Bowman
Lawrence H.N. Kinet
11
<PAGE>
Stock Price Performance Graph
The graph below compares the cumulative total shareholder return on the
Company's Common Stock with the cumulative total shareholder return of the
Nasdaq Stock Market Index (US) and the Nasdaq Pharmaceutical Stocks Index.
Note: Stock price performance shown below for the Company is
historical, and not necessarily indicative of future price performance.
<TABLE>
<CAPTION>
Comparison of Five-Year Cumulative Total Return Among NeoRx
Corporation, Nasdaq Stock Market Index (US) and
Nasdaq Pharmaceutical Stocks Index(1)
12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NeoRx Corporation $100 $ 62 $ 33 $ 43 $ 28 $ 38
Nasdaq Stock Market Index (US) 100 115 112 159 195 240
Nasdaq Pharmaceutical Stock Index 100 89 67 123 123 127
<FN>
(1) Assumes $100 invested on December 31, 1992 in NeoRx Corporation Common
Stock, the Nasdaq Stock Market Index and the Nasdaq Pharmaceutical Stocks
Index, an index of approximately 217 companies, the stocks of which are
quoted on the Nasdaq National Market, and the Primary Standard Industrial
Classification Code Number (SIC) of which is #283 - Pharmaceutical
Companies. Total return performance for the Nasdaq Stock Market Index and
the Nasdaq Pharmaceutical Stocks Index is weighted based on the market
capitalization of the firms included in each index and assumes that
dividends are reinvested. The Nasdaq Stock Market Index and the Nasdaq
Pharmaceutical Stocks Index are produced and published by the Center for
Research in Securities Pricing at the University of Chicago.
</FN>
</TABLE>
12
<PAGE>
Employment and Change of Control Agreements and Severance Agreements
Each of the executive officers of the Company has an agreement that
defines terms of employment and change of control of the Company (as defined in
the agreement). A change of control occurs through certain mergers,
consolidations, acquisitions of property or stock, liquidations, reorganizations
or sales of substantially all the assets of the Company. The executive officers
may receive 12 months' salary and a proportioned bonus if earned. Also, the
vesting of all options outstanding under the Company's 1984 Stock Option Plan
and Restated 1994 Stock Option Plan will be accelerated and optionees will have
the right to exercise all or a part of such options immediately prior to any
such transaction. Any unexercised options will terminate, except that, in the
event of a merger in which the shareholders of the Company receive capital stock
of another corporation, such unexercised options must be assumed or an
equivalent option is substituted by the successor corporation. A qualifying
termination under this agreement also is considered to occur when the executive
officers' responsibilities or authority are materially reduced on more than a
short-term basis. These agreements automatically renew biannually absent a
notice of nonrenewal by either party.
The Company also has severance agreements with each executive officer
that provides that the executive officer would receive up to 12 months' salary
if such executive officer is terminated "without cause" (as defined in each
agreement). The severance agreements allow the Company to reduce payments to the
former executive officers who undertake consulting or employment elsewhere. The
agreements define severance without cause to include a material reduction in the
executive officer's responsibility or authority. These agreements automatically
renew bi-annually absent a notice of nonrenewal by either party.
Certain Relationships and Related Transactions
On July 7, 1993, Dr. Frederick B. Craves, the Company's Chairman of the
Board of Directors, entered into a consulting agreement with the Company
providing that Dr. Craves shall be retained as a general advisor and consultant
to the Company's management on all matters pertaining to the Company's business.
In exchange for such services, Dr. Craves is compensated $30,000 for each
calendar quarter of services, plus reasonable travel and other expenses. On July
7, 1993, the Company also granted Dr. Craves an option to purchase a total of up
to 125,000 shares of Common Stock over four years. In 1996, the Board of
Directors accelerated vesting of Dr. Craves' remaining 40,000 shares of the
option grant for his assistance in NeoRx's 1996 financing. On February 21, 1997,
the Board of Directors granted to Dr. Craves an option to purchase 60,000 shares
of the Company's Common Stock from the Restated 1994 Stock Option Plan for his
services as Chairman of the Board of Directors. The option was granted at the
then current market price of the Common Stock and becomes exercisable in two
equal installments beginning one year after the date of grant. If Dr. Craves is
terminated "without cause" (as defined in the consulting agreement), he is
entitled to a pro rata portion of the quarterly fee for services up to the date
of termination, all expenses incurred up to such date, and a payment equal to
three months of service.
13
<PAGE>
In November 1995 and April 1996, the Company loaned Dr. Paul G. Abrams,
the Company's President and Chief Executive Officer, a total of $140,000,
bearing interest at the applicable federal rate. The balance of loans due from
Dr. Abrams to the Company at December 31, 1997 is $111,938 and is due on demand.
Dr.
Abrams is repaying the loans in monthly payments.
Compliance With Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's Directors and executive officers, and persons who own
more than 10% of a registered class of the Company's securities, to file with
the SEC the initial reports of ownership and reports of changes in ownership of
Common Stock and other equity securities of the Company. Directors, executive
officers and greater-than-10% shareholders are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms it received, or
written representations from certain reporting persons that no such forms were
required for those persons, the Company believes that during 1997 all filing
requirements required by Section 16(a) applicable to Directors, executive
officers and greater-than-10% shareholders were complied with by such persons,
other than a late Form 3 filed by Richard L. Anderson and a late Form 4 filed by
Frederick B. Craves.
Relationship with Auditor
On April 4, 1997, the Company's Board of Directors, at the
recommendation of its Audit Committee, terminated the engagement of Arthur
Andersen LLP and selected KPMG Peat Marwick LLP as the Company's auditor.
The report of Arthur Andersen LLP on the Company's Financial Statements
for either of the last two years did not contain an adverse opinion or a
disclaimer of opinion and was not qualified or modified as to uncertainty, audit
scope, or accounting principles. During the Company's two most recent years and
subsequent interim periods preceding the date of termination of the engagement
of Arthur Andersen LLP, the Company was not in disagreement on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreement, if not resolved to the satisfaction of
Arthur Andersen LLP, would have caused Arthur Andersen LLP to make reference to
the subject matter of the disagreement in connection with its report.
The Company has not consulted with KPMG Peat Marwick LLP during its two
most recent years nor during any subsequent interim period prior to its
engagement regarding the application of accounting principles to a specified
transaction, either completed or proposed, or the type of audit opinion that
might be rendered on the Company's financial statements.
The Board of Directors has selected KPMG Peat Marwick LLP as the
Company's auditors for 1998. Representatives from KPMG Peat Marwick LLP are
expected to be present at the Annual Meeting to make a statement if they so
desire and to respond to appropriate questions from shareholders.
14
<PAGE>
PROPOSALS OF SHAREHOLDERS
Under the Company's Bylaws, shareholders seeking to propose business to
be conducted at an annual meeting of shareholders must give written notice to
the Company no later than the date that shareholder nominations for Directors
must be received. The notice must contain certain information as to the proposal
and the shareholder, including the shareholder's share ownership and any
financial interest of the shareholder in the proposal. Any proposal not made in
compliance with the Bylaws may be rejected by the Board of Directors. No
shareholder proposals for the Annual Meeting had been received by the Company as
of the date of this Proxy Statement.
A shareholder who intends to present a proposal at the 1999 Annual
Meeting of Shareholders and desires that information regarding the proposal be
included in the 1999 proxy statement and form of proxy must ensure that such
information is received by the Company no later than November 27, 1998.
OTHER BUSINESS
The Company knows of no other business to be presented at the Annual
Meeting. If any other business properly comes before the Annual Meeting, it is
intended that the shares represented by proxies will be voted with respect
thereto in accordance with the best judgment of the persons named in the
accompanying form of proxy.
Upon written request from any person solicited herein addressed to the
Company's Corporate Secretary at the Company's principal offices, the Company
will provide, at no cost, a copy of the Company's Form 10-K Annual Report as
filed with the SEC for the year ended December 31, 1997.
BY ORDER OF THE BOARD OF DIRECTORS
RICHARD L. ANDERSON
Senior Vice President, Finance and Operations
Chief Financial Officer, Secretary
March 24, 1998
Seattle, Washington
15
<PAGE>
PROXY
NEORX CORPORATION
PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 13, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Richard L. Anderson as Proxy, with full power of
substitution, and hereby authorizes him to represent and to vote, as designated
below, all the shares of Common Stock of NeoRx Corporation held of record by the
undersigned on March 16, 1998, at the Annual Meeting of Shareholders to be held
on May 13, 1998, or any adjournment or postponement thereof. (Continued and to
be signed on reverse side.)
FOLD AND DETACH HERE
FOR all nominees (except as marked to the contrary) WITHHOLD AUTHORITY to vote
for all nominees.
1. ELECTION OF DIRECTORS
Election of the following six nominees to serve as
Directors for the ensuing year or until their successors
are elected and qualified:
Nominees: Paul G. Abrams, Jack L. Bowman,
Frederick B. Craves, Mary C. Foerster, Alan A. Steigrod and E. Rolland Dickson.
INSTRUCTIONS: To withhold authority to vote for any individual nominee, write
the name(s) of the nominee(s) below: Unless otherwise directed, all votes will
be apportioned equally among those persons for whom authority is given to vote.
Your vote is important. Prompt return of this proxy card will help save the
expense of additional solicitation efforts.
Signature(s) Dated: , 1998
Please sign above exactly as your name appears on your stock certificate. When
shares are held jointly, each person should sign. When signing as attorney,
executor, administrator, trustee or guardian, please give full title as such. An
authorized person should sign on behalf of corporations, partnerships and
associations and give his or her title.
FOLD AND DETACH HERE
