<PAGE>
================================================================================
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(aspermitted
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.
<TABLE>
<CAPTION>
CALCULATION OF FILING FEE
====================================================================================================================================
<S> <C> <C> <C> <C>
TITLE OF EACH CLASS OF AGGREGATE NUMBER OF PER UNIT PRICE OR OTHER UNDERLYING VALUE OF PROPOSED MAXIMUM
SECURITIES TO WHICH SECURITIES TO WHICH TRANSACTION COMPUTED PURSUANT TO EXCHANGE AGGREGATE VALUE OF TOTAL FEE
TRANSACTION APPLIES TRANSACTION APPLIES ACT RULE 0-11 TRANSACTION PAID
====================================================================================================================================
====================================================================================================================================
</TABLE>
- -- 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:
------------------------------------
================================================================================
<PAGE>
NEORX CORPORATION
NOTICE OF 2000 ANNUAL MEETING OF SHAREHOLDERS
TO THE SHAREHOLDERS:
The 2000 Annual Meeting of Shareholders of NeoRx Corporation will be
held at The Mountaineers Club, 300 Third Avenue West, Seattle, Washington 98119,
on Thursday, May 25, 2000, at 9:00 a.m., for the following purposes:
1. To elect six members to the Company's Board of Directors, and
2. To consider and approve an increase in the number of shares
issuable under the Company's Restated 1994 Stock Option Plan
from 4,000,000 to 4,500,000, and
3. To transact such other business as may properly come before
the annual meeting and any adjournment or postponement
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, holders of a majority of all outstanding shares of a common stock must
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 17, 2000.
BY ORDER OF THE BOARD OF DIRECTORS
RICHARD L. ANDERSON
President and Chief Operating
Officer, Secretary
April 12, 2000
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.
1
<PAGE>
NEORX CORPORATION
PROXY STATEMENT
GENERAL
This proxy statement is furnished in connection with the solicitation
by the Board of Directors of NeoRx Corporation of proxies in the accompanying
form for use at the annual meeting of shareholders to be held on Thursday, May
25, 2000, and any adjournment or postponement thereof. The annual meeting will
be held at 9:00 a.m. at The Mountaineers Club, 300 Third Avenue West, Seattle,
Washington 98119.
Our 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 April 12, 2000.
VOTING SECURITIES
Only shares of our common stock outstanding at the close of business on
March 17, 2000, the record date for determining shareholders, are entitled to
receive notice of and to vote at the annual meeting. At the record date, there
were 21,787,633 shares of common stock outstanding. The presence, in person or
by proxy, of holders of record of a majority of the 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: (a) 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; and (b) Proposal 2
listed in the accompanying Notice of 2000 Annual Meeting of Shareholders will be
approved if the number of votes cast in favor of the proposal exceeds the number
cast against it. 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. Abstention from voting will have no effect on the approval of
Proposal 2 since an abstention will not
1
<PAGE>
represent votes cast at the annual meeting for the purposes of approval of such
proposal. There can be no broker nonvotes on the election of Directors or
approval of Proposal 2 since brokers who hold shares for their clients have
discretionary authority to vote such shares with respect to these matters.
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
NeoRx has retained Mackenzie Partners, Inc., 156 Fifth Avenue, New
York, NY 10010, to help solicit proxies. NeoRx will pay the cost of their
services, which is estimated at approximately $8,000.00 plus expenses. Proxies
will be solicited by personal interview, mail and telephone. In addition, NeoRx
may reimburse brokerage firms and other persons who represent beneficial owners
of common stock for their expenses in forwarding solicitation materials to
beneficial owners. Certain of NeoRx's directors, officers and regular employees,
may also solicit proxies, personally or by telephone or facsimile, without
additional compensation.
2
<PAGE>
ELECTION OF DIRECTORS (PROPOSAL 1)
NOMINEES FOR DIRECTOR
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 2001 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 nominees:
PAUL G. ABRAMS, M.D., J.D., age 52, is a co-founder of the Company and
has been a Director since January 1985. He has been the Company's 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.
JACK L. BOWMAN, age 67, 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., Celgene Corp., Targeted Genetics
Corporation, Osiris Therapeutics, Inc., and Cellegy Pharmaceuticals, Inc., each
of which is a biotechnology company. He holds a B.Ed. degree from Western
Washington University.
FREDERICK B. CRAVES, Ph.D., age 54, 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, he co-founded Burrill & Craves. Both
of these entities are investment companies. 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.
E. ROLLAND DICKSON, M.D., age 66, has been a Director since May 1998.
Dr. Dickson 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. In 1999, Dr. Dickson was appointed to the Board of
Trustees of the Mayo Foundation. Dr. Dickson received his M.D. degree from Ohio
State University.
CARL S. GOLDFISCHER, M.D., age 41. has been a Director since March 2000.
Dr. Goldfischer has been the Vice President, Finance and Chief Financial Officer
of ImClone Systems, Inc., since May 1996. From June 1994 until May 1996, Dr.
Goldfischer served as a healthcare analyst with Reliance Insurance Company. Dr.
Goldfischer is a director of
3
<PAGE>
Immulogic Pharmaceutical Corporation. Dr. Goldfischer received a doctorate of
medicine from Albert Einstein College of Medicine in 1988, and served as a
resident in radiation oncology at Montefiore Hospital of the Albert Einstein
College of Medicine until 1991.
ALAN A. STEIGROD, age 62, has been a Director since May 1998. Mr.
Steigrod has been Managing Director of Newport HealthCare Ventures, which
provides consulting 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. Mr.
Steigrod is a director of Cellegy Pharmaceuticals, Inc., and Sepracor, Inc.,
both biotechnology companies.
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 seven times during the year ended December
31, 1999. Each Board member attended at least 75% of the aggregate number of the
meetings of the Board and the committees on which he served.
BOARD OF DIRECTORS RECOMMENDATION
The Board of Directors recommends a vote for each of the nominees.
COMMITTEES OF THE BOARD
The Board of Directors has two committees: an Audit Committee and a
Compensation Committee.
4
<PAGE>
The Audit Committee is comprised of Drs. Dickson and 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
three times during the year ended December 31, 1999.
The Compensation Committee is comprised of Messrs. Steigrod and Bowman. 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 Restated 1994 Stock Option Plan and the grants of options thereunder.
The Compensation Committee met five times during the year ended December 31,
1999.
COMPENSATION OF DIRECTORS
The Company pays Directors who are not employees of the Company a
semi-annual fee of $4,000 for service on the Board of Directors, together with a
fee of $1,500 for each Board meeting. Dr. Craves, however, does not receive
payments as a Director because he serves as the Chairman and Managing Director
of Bay City Capital, which has contracted to provide consulting services to the
Company. Non-employee Directors also receive stock option grants under the
Company's 1991 Stock Option Plan for Non-Employee Directors (the "Directors
Plan") or the Restated 1994 Stock Option Plan. Each new non-employee Director,
upon election or appointment to the Board of Directors, receives an initial
option to purchase 20,000 shares of Common Stock at an exercise price equal to
the fair market value per share of Common Stock on the grant date. In addition,
each non-employee Director automatically receives an annual option grant to
purchase 10,000 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 option grant for 20,000 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. The options granted as of each annual
meeting of shareholders become exercisable in two equal installments over the
next two years.
On May 14, 1999, each non-employee Director received an option for
10,000 shares following his election to the Board of Directors. In addition to
the automatic grant, the non-employee Directors were granted options under the
Restated 1994 Stock Option Plan for their services during the past three years
in the following amounts: Dr. Fred B. Craves - 30,000 shares; Jack L. Bowman -
40,000 shares; Dr. E. Rolland Dickson - 10,000 shares; and Alan A. Steigrod -
10,000 shares. These options become exercisable in one year.
On February 21, 1997, the Board of Directors granted to Dr. Fred B.
Craves an option to purchase 60,000 shares of common stock under the Restated
1994 Stock Option Plan for his services as Chairman of the Board of Directors.
In addition, Dr. Craves serves as the Chairman and Managing Director of Bay City
Capital, which has contracted to provide consulting services to the Company.
(See "Certain Relationships and Related Transactions.")
5
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership, as of February 24, 2000, 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>
Bay City Capital Management LLC ..................................... 2,365,200 11.05%
750 Battery Street, Suite 600
San Francisco, California 94111
Washington Mutual Advisor Fund ...................................... 1,194,700 5.58%
Suite 1400, 1201 Third Avenue
Seattle, Washington 98101.
Paul G. Abrams (1) .................................................. 656,470 3.00%
Richard L. Anderson (2) ............................................. 245,000 1.13%
Karen Auditore-Hargreaves (3) ....................................... 0 *
Jack L. Bowman (4)................................................... 41,500 *
Becky J. Bottino (5)................................................. 137,444 *
Robert F. Caspari (6) ............................................... 0 *
Fred B. Craves (7) .................................................. 2,585,200 11.96%
E. Rolland Dickson (8) .............................................. 18,000 *
Carl S. Goldfischer ................................................. 0 *
Robert W. Schroff (9) .............................................. 19,711 *
Alan A. Steigrod (10) ............................................... 12,000 *
All executive officers and Directors as a group (11 persons) (11).... 3,715,325 16.48%
</TABLE>
- -----------------
* Less than 1%.
(1) Includes 505,110 shares subject to options exercisable within 60 days.
(2) Includes 215,000 shares subject to options exercisable within 60 days.
(3) Includes 0 shares subject to options exercisable within 60 days.
(4) Includes 40,000 shares subject to options exercisable within 60 days.
(5) Includes 135,439 shares subject to options exercisable within 60 days.
(6) Includes 0 shares subject to options exercisable within 60 days.
6
<PAGE>
(7) Represents 220,000 shares subject to options exercisable within 60 days,
and 2,365,200 shares held by Bay City Capital Management Fund I, LP, 750
Battery St, Suite 600, San Francisco, CA 94111. Mr. Craves is the Chairman
and Managing Director of "Bay City" and disclaims beneficial ownership of
these shares held by Bay City.
(8) Includes 10,000 shares subject to options exercisable within 60 days.
(9) Includes 10,000 shares subject to options exercisable within 60 days.
(10) Includes 10,000 shares subject to options exercisable within 60 days.
(11) Includes 1,145,549 shares subject to options exercisable within 60 days.
7
<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
other five most highly compensated officers in 1999 (the "named executive
officers").
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
Awards
----------------------------------------------------------
Bonus and Restricted Securities All Other
Achievement Stock Underlying Compensation
Name and Year Salary ($) Award ($) Awards ($) Options (#) ($) (2)
Principal Position (1)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Paul G. Abrams 1999 $286,486 $41,544 -- 133,000 $852
Chief Executive Officer 1998 286,653 -- -- -- 1,200
1997 274,149 $69,000 -- -- 696
Dick L. Anderson 1999 226,000 33,592 -- -- 2,196
President and Chief 1998 209,000 13,560 -- 150,000 1,800
Operating Officer
1997 184,141 64,663 -- 242,500 1,500
Karen Auditore-Hargreaves 1999 120,369 26,825 -- 100,000 325
Vice President, Research 1998 -- -- -- -- --
and Development
1997 -- -- -- -- --
Becky J. Bottino 1999 151,133 23,345 -- -- 747
Vice President, Operations 1998 143,798 9,059 -- -- 947
1997 123,152 35,000 -- -- 492
Robert F. Caspari 1999 153,462 34,800 -- 150,000 468
Vice President, Medical 1998 -- -- -- -- --
and Regulatory Affairs
1997 -- -- -- -- --
Robert W. Schroff (3) 1999 179,799 -- -- -- 525
Vice President and General 1998 177,659 10,863 -- -- 367
Manager, Cardiovascular
Products 1997 169,718 77,345 -- 30,000 1,152
</TABLE>
- ----------------
(1) Includes accrued bonus and achievement awards.
(2) Consists of premiums paid under group term life insurance policies.
(3) Robert W. Schroff resigned as Vice President and General Manager,
Cardiovascular Products on January 3, 2000.
9
<PAGE>
STOCK OPTIONS
The following table provides details regarding stock options granted to
the named executive officers in 1999. In addition, in accordance with Securities
and Exchange Commission (the "SEC") rules, the hypothetical gains or "option
spreads" that would exist for the respective options are shown. These gains are
based on assumed rates of annual compounded stock price appreciation of 5% and
10% from the date the options were granted over their 10-year term.
<TABLE>
<CAPTION>
OPTIONS GRANTED IN 1999
Potential Realizable Value At
Assumed Annual Rates of Stock
Individual Grants Price Appreciation for Option
Term
- ------------------------------------------------------------------------------- ------------------------------
Number of Percent of
Securities All Options
Underlying Granted to Exercise
Options Employees in Price Expiration
Name Granted (#)(1) 1999 Per Share ($) Date 5% ($)(2) 10% ($)(2)
- ------------------ -------------- ------------ ------------- ------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Paul G. Abrams 133,000 26.3 1.69 07/07/2009 $141,148 $357,696
Richard L. Anderson -- -- -- -- -- --
Auditore-Hargreaves 100,000 19.8 1.38 05/13/2009 $86,473 $219,140
Becky Bottino -- -- -- -- -- --
Robert F. Caspari 150,000 29.7 1.38 05/13/2009 $129,710 $328,709
Robert W. Schroff -- -- -- -- -- --
</TABLE>
- ------------------
(1) The options granted to Drs. Auditore-Hargreaves and Caspari will be
exercisable in four equal annual installments beginning on the first
anniversary date of the option and expire ten years from the date of
grant. The options granted to Dr. Abrams will become exercisable in six
years or earlier in part if certain corporate goals are achieved and
expire ten years from the date of grant. All options were granted with
an exercise price equal to the fair market value of the common stock on
the date of the grant based on the closing price of the common stock as
quoted on the Nasdaq National Market. The options are also subject to
accelerated vesting upon the occurrence of certain events. See
"Employment and Change of Control Agreements and Severance Agreement."
(2) The amounts result from the assumed rates of stock price appreciation
required by the SEC and are not intended to forecast actual stock price
appreciation.
10
<PAGE>
OPTION EXERCISES IN 1999 AND YEAR-END VALUE TABLE
The following table sets forth information on option exercises in the
year ended December 31, 1999 by the named executive officers and the value of
such officers' unexercised options at the end of 1999.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN 1999
AND YEAR-END OPTION VALUES
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-The-Money Options at
December 31, 1999 (#) December 31, 1999 ($)(1)
Shares ------------------------- ----------------------------
Acquired on Value
Name Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
- ------------------------ ------------- ------------- ------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Paul G. Abrams -- -- 493,625 316,750 $1,041,316 $768,359
Richard L. Anderson -- -- 164,375 228,125 $417,898 $601,133
Auditore-Hargreaves -- -- -- 100,000 -- $268,750
Becky Bottino -- -- 129,501 53,750 $318,896 $132,359
Robert F. Caspari -- -- -- 150,000 -- $403,125
Robert W. Schroff -- --- 233,750 46,312 $349,347 $114,043
</TABLE>
- --------------
(1) The value of unexercised in-the-money options is calculated based on the
market price per share on December 31, 1999, of $4.0625 as reported by
the Nasdaq National Market, less the exercise price.
11
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
STATEMENT OF COMPENSATION PHILOSOPHY
The Compensation Committee of the Board of Directors is responsible for
establishing compensation levels for the Company's executive officers,
establishing and administering performance-based compensation plans, evaluating
the performance of the Company's executive officers, and considering management
succession and related matters.
The Company's executive compensation program primarily consists of
three parts: base salary, annual bonus, and stock options. The Company's
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, and
who will help the Company achieve its 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
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 1999 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 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
12
<PAGE>
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
1999 executive compensation include salary information provided by 140
biotechnology enterprises having between 51 and 149 employees (the "Comparison
Group"), of which 104 are publicly traded companies. Approximately 54% 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 elect to 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 1999, 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
assigns relative weights to these goals in formulating the amount of the awards.
In February 2000, the Compensation Committee determined that a portion of the
1999 goals were met. Based on the overall performance of the company, bonuses
equaling 12.5% percent of their respective base salaries were paid to Dr.
Abrams, Mr. Anderson, Ms. Bottino, Dr. Caspari, and Dr. Auditore-Hargreaves for
1999.
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
recognize an individual for outstanding contributions to the Company.
STOCK OPTIONS
Stock options are viewed as a basic element of the total compensation
program and emphasize long-term Company performance, 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
13
<PAGE>
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 are granted with exercise prices at
least equal to the 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
82,600 stock options to approximately 22 other employees under the Company's
Restated 1994 Stock Option Plan. This broad-based program is designed to create
an entrepreneurial spirit in the Company 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 1999, 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. Because of the
Company's performance and the substantial decline in the market value of its
common stock during 1998, the Compensation Committee and Dr. Abrams agreed that
no salary increase was appropriate in 1999. Based on the Company's 1999
performance, Dr. Abrams received a bonus equivalent to 12.5% of salary. Dr
Abrams' base salary compensation received in 1999 was $286,486, which placed him
at about the average of chief executive officers in the Radford Associates
Biotechnology Survey. During 1999, Dr. Abrams received stock options for an
aggregate of 133,000 shares that will become exercisable in six years or earlier
if certain corporate goals are achieved.
Submitted by the Compensation Committee of the Board of Directors
Jack L. Bowman
Alan Steigrod
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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)
[GRAPHIC]
- -----------------------------------------------------------------------------------------------------
1994 1995 1996 1997 1998 1999
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NeoRx Corporation $100 $131 $ 85 $115 $ 28 $ 83
- -----------------------------------------------------------------------------------------------------
Nasdaq Stock Market Index (US) $100 $141 $174 $213 $300 $542
- -----------------------------------------------------------------------------------------------------
Nasdaq Pharmaceutical Index $100 $183 $184 $190 $242 $452
- -----------------------------------------------------------------------------------------------------
</TABLE>
(1) Assumes $100 invested on December 31, 1994, in NeoRx Corporation Common
Stock, the Nasdaq Stock Market Index and the Nasdaq Pharmaceutical Stocks
Index, an index of approximately 217 companies, whose common stock is
quoted on the Nasdaq National Market. The Primary Standard Industrial
Classification Code Number (SIC) of these companies 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.
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<PAGE>
EMPLOYMENT AND CHANGE OF CONTROL AGREEMENTS AND SEVERANCE AGREEMENTS
Each of the executive officers of the Company has an agreement that
defines their terms of employment and change of control of the Company (as
defined in the agreement). A change of control occurs through certain mergers,
consolidations, certain purchases of a significant minority interest in the
Company's common stock, liquidations, reorganizations, and sales of
substantially all the assets of the Company. Upon a change of control of the
Company, the executive officers may receive 12 months' salary and a proportional
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
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.
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<PAGE>
Dr. Craves is also chairman of Bay City Capital, Ltd., ("BCC") a
merchant bank focused on the life sciences industry. Mr. Jack Bowman, a NeoRx
Director, is on the business advisory board of BCC. In December 1998, the other
NeoRx Directors unanimously approved retaining BCC to act as financial advisor
to the Company and to help establish strategic alliances for several of its
programs. Dr. Craves and Mr. Bowman removed themselves from discussion and the
decision to hire BCC and the terms of their engagement was made by the remaining
Directors. NeoRx paid BCC a $50,000 engagement fee, and BCC may earn a
percentage of the value of any transaction in which it plays an active role.
In November 1995, April 1996, and August 1999, the Company loaned Dr.
Paul G. Abrams, the Company's President and Chief Executive Officer, a total of
$190,000, bearing interest at the applicable federal rate. The balance of loans
due from Dr. Abrams to the Company at December 31, 1999, is $82,338 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 1999 all filing
requirements required by Section 16(a) applicable to Directors, executive
officers and greater-than-10% shareholders were complied with by such persons.
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
KPMG LLP examined the financial statements of the Company for the
fiscal year ended December 31, 1999. The Board of Directors has selected KPMG
LLP as the Company's auditors for 2000. Representatives from KPMG 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.
17
<PAGE>
PROPOSAL TO INCREASE THE NUMBER OF SHARES UNDER THE COMPANY'S RESTATED 1994
STOCK OPTION PLAN (PROPOSAL 2)
The Board of Directors has unanimously adopted, subject to shareholder
approval, an amendment to increase the number of shares authorized for issuance
under the 1994 Stock Option Plan (the "1994 Plan"). As amended, the number of
shares of Common Stock available for issuance under the 1994 Plan would be
increased from 4,000,000 to 4,500,000 shares. As of February 29, 2000,
approximately 590,000 shares remained available for issuance under the 1994
Plan. The Board believes that this number will be insufficient to achieve the
purpose of the 1994 Plan over the term of the plan unless the additional shares
are authorized. Therefore, the shareholders will be requested at the annual
meeting to approve an amendment to the 1994 Plan which increases by 500,000 the
number of shares that may be issued under the 1994 Plan. The text of the 1994
Plan, as proposed to be amended subject to shareholder approval, is attached as
Exhibit A to this proxy statement. The following summary of the 1994 Plan does
not purport to be a complete description of the 1994 Plan and is qualified by
reference to Exhibit A.
DESCRIPTION OF THE 1994 PLAN PURPOSE
The purpose of the 1994 Plan is to promote the interests of the Company
and its shareholders by strengthening the Company's ability to attract and
retain the services of selected employees, officers, directors, agents,
consultants, advisors and independent contractors and to provide added incentive
to them by encouraging stock ownership in the Company. The Company's policy is
to grant stock options to all permanent, full-time employees to help ensure that
the shareholders' long-term interests and goals are closely aligned with those
of the individuals responsible for the Company's day-to-day operations and
management. The Company's policy is to grant all employees stock options upon
commencement of employment. The number of shares granted to new employees is
based on the employee's level of responsibility and compensation.
STOCK SUBJECT TO THE 1994 PLAN. The 1994 Plan provides for the grant of
options to acquire up to a total of 4,500,000 shares of common stock to selected
employees, officers, directors, agents, consultants, advisors and independent
contractors of the Company, subject to certain restrictions, including an annual
maximum grant limit of 500,000 shares per individual. As of February 25, 2000,
the closing price per share of common stock on the Nasdaq National Market was
$19.18.
TERMS AND CONDITIONS OF STOCK OPTION GRANTS. The plan administrator of
the 1994 Plan is currently the Compensation Committee of the Board of Directors.
At the discretion of the plan administrator, options granted under the 1994 Plan
may be either nonqualified stock options ("NSOs") or incentive stock options
("ISOs") as defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"). Under the 1994 Plan, the plan administrator may grant ISOs
to any officer or employee of the Company and may grant NSOs to any employee,
officer, director, agent, consultant, advisor or independent contractor of the
Company. The option grants vest and are exercisable at a rate
18
<PAGE>
of 25% per year over a four-year period from the grant date, unless otherwise
determined by the plan administrator. All options are granted with an exercise
price at least equal to 100% of the fair market value of the Common Stock on the
grant date.
ISOs granted to persons who own more than 10% of the total combined
voting power of all classes of the Company's stock must have an option term that
does not exceed five years, and the exercise price may not be less than 110% of
the fair market value of the Common Stock on the date of grant.
The vested portion of options may be exercised at any time in whole or
in part in accordance with their terms. The unvested portion terminates upon
termination of an optionee's relationship with the Company for any reason.
Unless otherwise provided by the plan administrator, and to the extent required
by law for incentive stock options, the vested portion of options generally
expires on the earliest of:
- - ten years from the date of grant (five years for holders of over 10% of the
Company's voting stock);
- - one year after the optionee's death or total disability (as defined in the
1994 Plan);
- - notice to the optionee of termination for cause (as defined in the 1994
Plan); and
- - three months after other terminations.
The exercise price for options may be paid with cash, check and, if
permitted by the plan administrator, by delivery of previously held shares,
through a broker-assisted cashless exercise program or any other permitted form
of payment.
The optionee may not transfer the options except by will or by the
applicable laws of descent and distribution. To the extent permitted by the
Code, the plan administrator may permit an optionee to designate a beneficiary
or transfer the option.
CAPITAL ADJUSTMENTS. In the event of certain reorganizations, stock
dividends, stock split-ups, consolidations or similar changes in the common
stock, the number and price per share of shares covered by unexercised options
will be proportionately adjusted.
CORPORATE TRANSACTIONS. If certain corporate transactions occur, such
as certain mergers, consolidations, reorganizations or liquidations of the
Company, outstanding options will become fully vested and exercisable
immediately prior to the transaction. Options not exercised prior to the
corporate transaction will terminate, except that if the shareholders of the
Company receive capital stock of another corporation in exchange for their
shares of common stock, outstanding options will be assumed or an equivalent
option substituted by the successor corporation. Options will be assumed by a
successor corporation without any acceleration in vesting upon a
re-incorporation of the Company, the creation of a holding company or a merger
in which the shareholders of the Company immediately before the merger have the
same proportionate ownership in the surviving company after the merger.
19
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES. The following discussion summarizes
the material federal income tax consequences of participation in the 1994 Plan.
This discussion is general in nature and does not address issues related to the
tax circumstances of any particular individual. The discussion is based on
federal income tax laws in effect on the date hereof and is, therefore, subject
to possible future changes in law. This discussion does not address state, local
or foreign consequences.
There are no tax consequences to the Company or the optionee upon the
grant of an NSO under the 1994 Plan. Upon exercise of an NSO, an optionee
recognizes ordinary income equal to the difference between the exercise price
for the shares and the fair market value of the shares on the date of exercise.
The Company is entitled to a corresponding tax deduction equal to the amount of
income recognized by the optionee, provided that the deduction is not otherwise
disallowed by the Code, including the limitation on deductibility of certain
compensation payments in excess of $1 million under Section 162(m) of the Code.
Upon grant or exercise of an ISO, an optionee does not recognize
income, except that the excess of the fair market value of the shares at the
time of exercise over the option price will be income for purposes of
calculating the optionee's alternative minimum tax, if any. An option loses its
status as an ISO and becomes an NSO if the optionee exercises the ISO (a) more
than three months after the optionee terminates employment for reasons other
than death or disability, or (b) more than one year after the optionee
terminates employment because of disability. If an optionee does not make a
"disqualifying disposition" (defined below) of an ISO, the gain, if any, upon a
subsequent sale (i.e., the excess of the proceeds received over the option
price) will be long-term capital gain.
For shares acquired through exercise of an ISO, a "disqualifying
disposition" is a transfer of the shares (a) within two years after the grant of
the ISO, or (b) within one year after the transfer of the shares to the optionee
pursuant to the ISO's exercise. If the optionee makes a disqualifying
disposition, the optionee generally will recognize income in the year of the
disqualifying disposition equal to the excess of the amount received for the
shares over the option price. Of that income, the portion equal to the excess of
the fair market value of the shares at the time the ISO was exercised over the
option price will be ordinary income, and the balance, if any, will be long-term
or short-term capital gain, depending on whether the shares were sold more than
one year after the ISO was exercised. If, however, the optionee sells the shares
to an unrelated party at a price that is below the fair market value of the
shares at the time the ISO was exercised and the sale is a disqualifying
disposition, the amount of ordinary income will be limited to the amount
realized on the sale over the option price.
The Company is entitled to a deduction with respect to an ISO only in
the taxable year of the Company in which a disqualifying disposition occurs. In
that event, the deduction would be equal to the ordinary income, if any,
recognized by the optionee upon disposition of the shares, provided that the
deduction is not otherwise disallowed by the Code, including the limitation on
deductibility of certain compensation payments in excess of $1 million.
20
<PAGE>
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE
INCREASE IN THE NUMBER OF SHARES ISSUABLE UNDER THE COMPANY'S RESTATED 1994
STOCK OPTION PLAN.
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 our 2001 annual
meeting must give notice of the proposal to the Company no later than December
14, 2000, to be considered for inclusion in the proxy statement and form of
proxy relating to that meeting.
Pursuant to Rule 14a-4 under the Securities Exchange Act of 1934, as
amended, NeoRx intends to retain discretionary authority to vote proxies with
respect to shareholder proposals for which the proponent does not seek inclusion
of the proposed matter in NeoRx's proxy statement for our 2001 annual meeting,
except in circumstances where (i) NeoRx receive notice of the proposed matter no
later than February 26, 2001, and (ii) the proponent complies with the other
requirements set forth in Rule 14a-4.
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.
21
<PAGE>
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, 1999.
BY ORDER OF THE BOARD OF DIRECTORS
RICHARD L. ANDERSON
President and Chief Operating Officer,
Secretary
April 12, 2000
Seattle, Washington
22
<PAGE>
PROXY
NEORX CORPORATION
PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 25, 2000
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 17, 2000, at the Annual Meeting of Shareholders to be held
on May 25, 2000, or any adjournment or postponement thereof.
(Continued and to be signed on reverse side.)
FOLD AND DETACH HERE
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, E. Rolland
Dickson, Carl S. Goldfischer and Alan A. Steigrod.
/ / FOR all nominees (except as marked to the contrary) WITHHOLD AUTHORITY to
vote for all nominees listed below.
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.
2. TO APPROVE AN INCREASE IN THE NUMBER OF SHARES ISSUABLE UNDER THE COMPANY'S
RESTATED 1994 STOCK OPTION PLAN FROM 4,000,000 TO 4,500,000 SHARES
/ / For the Proposal / / Against the Proposal / / Abstain
Your vote is important. Prompt return of this proxy card will help save the
expense of additional solicitation efforts.
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned shareholder(s). Proxy cards properly executed and returned
without direction will be voted for the proposals. In their discretion, the
Proxy is authorized to vote upon such other business as may properly come before
the meeting and any adjournment or postponement thereof.
Signature(s) _________________________________________ Dated: ___________, 2000
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
