<PAGE>
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
CELL THERAPEUTICS, INC.
-----------------------------------------------------
(Name of Registrant as Specified in Its Charter)
-----------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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.
(1) Title of each class of securities to which transaction applies:
--------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
--------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange ActRule 0-11 (Set forth the amount on which the
filing fee was calculated and state how it was determined):
--------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------------------
(5) 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.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
March 30, 1999
[LOGO OF cti] T 206 . 282 . 7100 F 206 . 284 . 6206
Dear Shareholder:
You are cordially invited to attend the Cell Therapeutics, Inc. ("cti") Annual
Meeting of Shareholders, to be held at 11:00 a.m. on Friday, April 23, 1999,
at The Four Seasons Olympic Hotel, 411 University Street, Seattle, Washington
98101.
Information concerning the business to be conducted at the meeting is included
in the accompanying Notice of Annual Meeting of Shareholders and Proxy
Statement. At the meeting, we also will report on the operations of cti and
respond to any questions you may have.
A copy of the 1998 Annual Report to Shareholders is also enclosed.
YOUR VOTE IS VERY IMPORTANT. Whether or not you plan to attend the meeting, it
is important that your shares be represented. Therefore, we urge you to sign,
date and promptly return the enclosed proxy in the enclosed postage paid
envelope. If your shares are held in a bank or brokerage account, you may be
eligible to vote your proxy electronically or by telephone. Please refer to
the enclosed voting form for instructions. If you attend the meeting, you
will, of course, have the right to vote in person. Shareholders who plan to
attend the meeting in person are requested to promptly return the enclosed
postage paid attendance card to provide us with an estimate of the number of
persons to expect for the Annual Meeting.
I look forward to greeting you personally, and on behalf of the Board of
Directors and Management, I would like to express our appreciation for your
interest in cti.
Sincerely,
/s/ James A. Bianco
James A. Bianco, M.D.
President &
Chief Executive Officer
Cell Therapeutics, Inc. 201 Elliott Ave West Suite #400, Seattle, WA 98119
Shareholder
<PAGE>
CELL THERAPEUTICS, INC.
201 ELLIOTT AVENUE WEST, SUITE 400
SEATTLE, WA 98119
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
FRIDAY, APRIL 23, 1999
To Our Shareholders:
The Annual Meeting of Shareholders of Cell Therapeutics, Inc. ("cti" or the
"Company") will be held at 11:00 a.m. on Friday, April 23, 1999, at The Four
Seasons Olympic Hotel, 411 University Street, Seattle, Washington 98101 for
the following purposes:
(1) To elect three Class II Directors, each to serve until the 2002 Annual
Meeting;
(2) To ratify the selection of Ernst & Young LLP as the independent
auditors for the Company for the year ending December 31, 1999; and
(3) To transact such other business as may properly come before the
meeting, and all adjournments and postponements thereof.
All shareholders are invited to attend the meeting. Shareholders of record
at the close of business on February 26, 1999, the record date fixed by the
Board of Directors, are entitled to notice of, and to vote at, the meeting and
all adjournments and postponements thereof. A complete list of shareholders
entitled to notice of, and to vote at, the meeting will be open to examination
by the shareholders beginning ten days prior to the meeting for any purpose
germane to the meeting during normal business hours at the office of the
Secretary of the Company at 201 Elliott Avenue West, Suite 400, Seattle,
Washington 98119.
Whether or not you intend to be present at the meeting, please sign and date
the enclosed proxy and return it in the enclosed envelope. If your shares are
held in a bank or brokerage account, you may be eligible to vote your proxy
electronically or by telephone. Please refer to the enclosed voting form for
instructions.
By Order of the Board of Directors
/s/ Michael J. Kennedy
Michael J. Kennedy
Secretary
Seattle, Washington
March 30, 1999
YOUR VOTE IS IMPORTANT. ACCORDINGLY, YOU ARE URGED TO SIGN,
DATE AND RETURN PROMPTLY THE ACCOMPANYING PROXY IN THE
ENCLOSED ENVELOPE REGARDLESS OF WHETHER OR NOT
YOU PLAN TO ATTEND THE MEETING.
<PAGE>
CELL THERAPEUTICS, INC.
201 Elliott Avenue West, Suite 400
Seattle, WA 98119
----------------
PROXY STATEMENT
----------------
Information Regarding Proxies
General
This Proxy Statement and the accompanying form of proxy are furnished in
connection with the solicitation of proxies by the Board of Directors of Cell
Therapeutics, Inc. ("cti" or the "Company") for use at the Annual Meeting of
Shareholders (the "Annual Meeting"), to be held at 11:00 a.m. on Friday, April
23, 1999, at The Four Seasons Olympic Hotel, 411 University Street, Seattle,
Washington 98101, and at any adjournment or postponement thereof. Only
shareholders of record on the books of the Company at the close of business on
February 26, 1999 (the "Record Date"), will be entitled to notice of, and to
vote at, the Annual Meeting.
At the Annual Meeting, shareholders will be asked to elect three Class II
Directors, each to serve until the 2002 Annual Meeting. In addition,
shareholders will be asked to ratify the selection of Ernst & Young LLP as the
independent auditors for the Company for the year ending December 31, 1999.
It is anticipated that these proxy solicitation materials will be sent to
shareholders on or prior to March 30, 1999.
Solicitation of Proxies
This solicitation is made on behalf of the Board of Directors of the
Company. All expenses in connection with the solicitation of proxies will be
borne by the Company. In addition to solicitation by mail, officers, Directors
or other regular employees of the Company may solicit proxies by telephone,
facsimile or in person. No additional compensation will be paid to such
persons for such services.
Voting Rights and Outstanding Shares
Each share of common stock, without par value ("Common Stock"), of the
Company outstanding on the Record Date is entitled to one vote per share at
the Annual Meeting. The Company presently has no other class of capital stock
outstanding and entitled to be voted at the Annual Meeting. At the close of
business on the Record Date, there were issued and outstanding 15,534,359
shares of Common Stock. The presence at the Annual Meeting 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 all business
at the Annual Meeting.
All votes will be tabulated by the inspector of election appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and "broker non-votes" (i.e., shares held by a broker or nominee
which are represented at the meeting, but with respect to which such broker or
nominee is not empowered to vote on a particular proposal). Abstentions and
broker non-votes are counted as present for purposes of determining the
presence or absence of a quorum for the transaction of business. In an
uncontested election of directors, any action other than a vote for a nominee
will have no effect, assuming the presence of a quorum. Abstentions and broker
non-votes will have no effect on Proposal II as they will not represent votes
cast for the purpose of voting on this proposal.
<PAGE>
All shares of Common Stock represented by properly executed proxies which
are returned and not revoked will be voted in accordance with the
instructions, if any, given therein. If no instructions are provided in a
proxy, the shares of Common Stock represented by such proxy will be voted FOR
the Board's nominees for Director, and FOR the approval of Proposal II and in
accordance with the proxy-holder's best judgment as to any other matters
raised at the Annual Meeting.
Voting Electronically or by Telephone
If your shares are registered in the name of a bank or brokerage firm, you
may be eligible to vote your shares electronically over the Internet or by
telephone. A large number of banks and brokerage firms are participating in
the ADP Investor Communication Services online program. This program provides
eligible shareholders who receive a paper copy of the annual report and proxy
statement the opportunity to vote via the Internet or by telephone. If your
bank or brokerage firm is participating in ADP's program, your voting form
will provide instructions. If your voting form does not reference Internet or
telephone information, please complete and return the paper proxy card in the
self-addressed postage paid envelope provided.
Revocability of Proxies
Any shareholder of record executing a proxy has the power to revoke it at
any time prior to the voting thereof on any matter (without, however,
affecting any vote taken prior to such revocation) by delivering written
notice to Michael J. Kennedy, Secretary of the Company, at the Company's
principal executive offices, by executing and delivering another proxy dated
as of a later date or by voting in person at the meeting.
2
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of Common Stock, as of February 26, 1999, by (1) each shareholder
known by the Company to be the beneficial owner of more than 5% of its
outstanding shares of Common Stock, (2) each of the Company's Directors and
nominees for Director, (3) each executive officer of the Company named in the
Summary Compensation Table herein, and (4) all Directors and executive
officers as a group:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) OWNERSHIP(1)
- ------------------------------------ --------------------- ------------
<S> <C> <C>
The International Biotechnology Trust
plc(2).................................... 1,316,098 8.47%
c/o Rothschild Asset Management Limited
Five Arrows House
St. Swithin's Lane
London, England EC4N 8NR
Kummell Investments Limited(3)............. 1,287,456 8.29%
922 Europort
Gibraltar
Johnson & Johnson Development Corporation.. 868,262 5.59%
One Johnson & Johnson Plaza
New Brunswick, NJ 08933
The Phoenix Partners(4).................... 877,092 5.65%
James A. Bianco, M.D.**(5)................. 301,771 1.94%
Jack L. Bowman**(6)........................ -- *
Jeremy L. Curnock Cook**(7)................ 1,316,098 8.47%
Wilfred E. Jaeger, M.D.**(8)............... 1,905 *
Max E. Link, Ph.D.**(9).................... 52,857 *
Terrence M. Morris**(10)................... 1,289,361 8.30%
Mary O'Neil Mundinger, D.P.H.**(11)........ 1,650 *
Phillip M. Nudelman, Ph.D.**(12)........... 2,000 *
Jack W. Singer, M.D.**(13)................. 225,206 1.45%
Louis A. Bianco(14)........................ 118,325 *
Robert A. Lewis, M.D.(15).................. 23,600 *
Maurice J. Schwarz, Ph.D.(16).............. 20,675 *
All Directors and executive officers as a
group (14 persons)(17).................... 3,367,848 21.67%
</TABLE>
- --------
* Less than 1%
** Denotes Director of the Company
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission (the "Commission") and generally
includes voting or investment power with respect to securities. This
table is based upon information supplied by officers, directors, and
Schedules 13D and 13G filed with the Commission. Shares of Common Stock
subject to options or warrants currently exercisable or convertible, or
exercisable or convertible within 60 days of February 26, 1999, are
deemed outstanding for computing the percentage of the person holding
such option or warrant but are not deemed outstanding for computing the
percentage of any other person. Except as indicated in the footnotes to
this table and pursuant to applicable community property laws, the
persons named in the table have sole voting and investment power with
respect to all shares of Common Stock beneficially owned.
(2) Consists of 1,066,098 shares of Common Stock beneficially owned by The
International Biotechnology Trust plc, a company formed under the laws of
England ("IBT") and managed by Rothschild Asset Management Limited
("Rothschild"), and 250,000 shares that are beneficially held by Jeremy
Curnock Cook, a director of IBT and Rothschild. Rothschild has or shares
voting and investment power with respect to the shares held by IBT and
may be deemed to be the beneficial owner of such shares. As a director of
IBT and Rothschild, Mr. Curnock Cook may be deemed to be the beneficial
owner of any shares beneficially owned by each of IBT and Rothschild;
however, he disclaims beneficial ownership of these shares except to the
extent of his proportionate interest therein. Rothschild is advisor to
Biotechnology Investment Limited ("BIL") and to Rothschild Asset
Management (C.I.) Limited, which is the manager of BIL. See footnote (7)
below.
3
<PAGE>
(3) Mr. Morris is the Chief Executive Officer of Morningside Ventures, which
advises Kummell Investments Limited ("Kummell") on its private venture
capital portfolio. Mr. Morris does not have or share voting or investment
power with respect to the shares held by Kummell. See footnote (10)
below.
(4) The Phoenix Partners' holdings consist of 190,133 shares of Common Stock
held by The Phoenix Partners II Liquidating Trust ("PPII"), 361,959
shares of Common Stock held by The Phoenix Partners III Limited
Partnership ("PPIII") and 325,000 shares of Common Stock held by The
Phoenix Partners IV Limited Partnership ("PPIV"). Mr. Stuart C. Johnston
is the Sole Trustee of PPII. Mr. Stuart C. Johnston and Mr. David B.
Johnston are the Managing General Partner and Non-Managing General
Partner, respectively, of Phoenix Management Partners III ("PMPIII"),
which is the General Partner of PPIII, and the Managing Member and
Non-Managing Member, respectively, of Phoenix Management IV LLC ("PMIV"),
which is the General Partner of PPIV. As such, Mr. Stuart C. Johnston has
voting and investment power with respect to the shares held by PPII and
may be deemed to be the beneficial owner of such shares. Mr. Stuart C.
Johnston and Mr. David B. Johnston each have voting and investment power
with respect to the shares held by PPIII and PPIV, and may be deemed to
be the beneficial owners of such shares. Mr. Stuart C. Johnston and Mr.
David B. Johnston disclaim beneficial ownership of shares held by PPII,
PPIII and PPIV, except to the extent of their proportionate interest
therein. PPII disclaims beneficial ownership of the shares held by PPIII
and PPIV; PPIII and PMPIII disclaim beneficial ownership of the shares
held by PPII and PPIV; and PPIV and PMIV disclaim beneficial ownership of
the shares held by PPII and PPIII; in each case, except to the extent of
their proportionate partnership interest therein.
(5) Does not include 221,767 shares that are vested but not currently
exercisable or exercisable within 60 days of February 26, 1999, due to an
exercise blackout period for repriced options that expires on July 31,
1999.
(6) Does not include 28,573 vested shares not currently exercisable or
exercisable within 60 days of February 26, 1999, due to an exercise
blackout period for repriced options that expires on July 31, 1999.
(7) Includes 1,066,098 shares of Common Stock beneficially owned by IBT. IBT
is managed by Rothschild and Rothschild has or shares voting and
investment power with respect to the shares held by IBT and may be deemed
to be the beneficial owner of such shares. Mr. Curnock Cook is a director
of IBT and Rothschild and may be deemed to be the beneficial owner of any
shares beneficially owned by each of IBT and Rothschild. Mr. Curnock Cook
disclaims beneficial ownership of shares beneficially owned by IBT and
Rothschild except to the extent of his proportionate interest therein.
Mr. Curnock Cook is a shareholder, but is not an officer or director, of
BIL. See footnote (2) above. Does not include 22,858 vested shares not
currently exercisable or exercisable within 60 days of February 26, 1999,
due to an exercise blackout period for repriced options that expires on
July 31, 1999.
(8) Includes 1,905 shares issuable upon exercise of options that are
currently exercisable as of February 26, 1999. Does not include
35,525 vested shares not currently exercisable or exercisable within 60
days of February 26, 1999, due to an exercise blackout period for
repriced options that expires on July 31, 1999. Does not include 12,858
shares issuable upon exercise of options beneficially owned by affiliates
of Collinson Howe Venture Partners ("CHVP") pursuant to an agreement with
Dr. Jaeger. Dr. Jaeger, a director of the Company, is a former partner at
CHVP.
(9) Includes 1,905 shares issuable upon exercise of options that are
currently exercisable as of February 26, 1999.
(10) Includes 1,905 shares issuable upon exercise of options that are
currently exercisable as of February 26, 1999. Does not include
20,953 vested shares not currently exercisable or exercisable within 60
days of February 26, 1999, due to an exercise blackout period for
repriced options that expires on July 31, 1999. Mr. Morris is the Chief
Executive Officer of Morningside Ventures, which advises Kummell on its
private venture capital portfolio. Mr. Morris does not have or share
voting or investment power with respect to the shares held by Kummell.
See footnote (3) above.
(11) Does not include 4,113 vested shares not currently exercisable or
exercisable within 60 days of February 26, 1999, due to an exercise
blackout period for repriced options that expires on July 31, 1999.
(12) Does not include 28,001 vested shares not currently exercisable or
exercisable within 60 days of February 26, 1999, due to an exercise
blackout period for repriced options that expires on July 31, 1999.
(13) Does not include 49,174 vested shares not currently exercisable or
exercisable within 60 days of February 26, 1999, due to an exercise
blackout period for repriced options that expires on July 31, 1999.
(14) Does not include 74,388 vested shares not currently exercisable or
exercisable within 60 days of February 26, 1999, due to an exercise
blackout period for repriced options that expires on July 31, 1999.
(15) Does not include 66,669 vested shares not currently exercisable or
exercisable within 60 days of February 26, 1999, due to an exercise
blackout period for repriced options that expires on July 31, 1999.
(16) Does not include 52,620 vested shares not currently exercisable or
exercisable within 60 days of February 26, 1999, due to an exercise
blackout period for repriced options that expires on July 31, 1999.
(17) Does not include 662,667 vested shares not currently exercisable or
exercisable within 60 days of February 26, 1999, due to an exercise
blackout period for repriced options that expires on July 31, 1999. See
footnotes (5) through (16).
4
<PAGE>
PROPOSAL I
ELECTION OF DIRECTORS
The Amended and Restated Articles of Incorporation of the Company provide
for the Board of Directors to be divided into three approximately equal
classes of Directors serving staggered three-year terms and until their
successors are elected and qualified. As a result, approximately one-third of
the total number of Directors will be elected every year. Under cti's Bylaws,
the number of Directors constituting the entire Board of Directors may be
decreased or increased by majority action of either the Board of Directors or
the shareholders, but no decrease in the number of Directors may have the
effect of shortening the term of any incumbent Director. In the event of a
vacancy on the Board of Directors, the Company's Bylaws permit a majority of
the remaining Directors in office to fill such vacancy, and the Director so
chosen shall hold office until the next shareholders' meeting at which
Directors are elected and until his or her successor is elected and shall
qualify.
Currently, the Board of Directors has fixed the number of Directors at nine.
The current terms of office of the Class II Directors, Dr. Max E. Link, Mr.
Terrence M. Morris and Dr. Wilfred E. Jaeger, expire at the 1999 Annual
Meeting. The current terms of office of the Class III Directors, Dr. James A.
Bianco, Dr. Jack W. Singer and Dr. Mary O'Neil Mundinger, expire at the 2000
Annual Meeting. The current terms of office of the Class I Directors, Dr.
Phillip M. Nudelman, Mr. Jack L. Bowman and Mr. Jeremy L. Curnock Cook, expire
at the 2001 Annual Meeting.
Dr. Link, Mr. Morris and Dr. Jaeger have been nominated for re-election at
the Annual Meeting as Class II directors for three-year terms expiring at the
2002 Annual Meeting. The Board of Directors has approved all such nominees.
If elected, each nominee will hold office until his term expires and his
successor is elected and shall qualify. It is intended that the accompanying
proxy will be voted for the election as Directors of the three nominees named
herein, unless the proxy contains contrary instructions. Each nominee has
agreed to serve if elected, and the Company has no reason to believe that any
of the nominees will not be a candidate or will be unable to serve. However,
if any of the nominees should become unable or unwilling to serve as a
Director, the persons named in the proxy have advised the Company that they
will vote for the election of such person or persons as shall be designated by
the Board of Directors.
The candidates elected will be those receiving the largest numbers of votes
cast by the shares of Common Stock entitled to vote in the election, up to the
number of Directors of such class to be elected by such shares. Abstentions
and broker non-votes will not be counted in the election of Directors.
5
<PAGE>
Set forth below is biographical information for each nominee for Director
and each person whose term of office as a Director will continue after the
Annual Meeting:
<TABLE>
<CAPTION>
Director
Name Age Since Class
---- --- -------- -----
<S> <C> <C> <C>
Max E. Link, Ph.D.(1)(2)................................ 58 1995 II
James A. Bianco, M.D.(2)................................ 42 1991 III
Jack W. Singer, M.D. ................................... 56 1991 III
Jack L. Bowman(3)....................................... 66 1995 I
Jeremy L. Curnock Cook(2)(3)............................ 49 1995 I
Wilfred E. Jaeger, M.D.(3)(4)........................... 43 1992 II
Terrence M. Morris(3)(4)................................ 52 1995 II
Mary O'Neil Mundinger, D.P.H. .......................... 61 1997 III
Phillip M. Nudelman, Ph.D.(2)(4)........................ 63 1994 I
</TABLE>
--------
(1) Chairman of the Board of Directors.
(2) Member of the Executive Committee.
(3) Member of the Compensation Committee.
(4) Member of the Audit Committee.
Nomination for Election for a Three-Year Term Expiring at the 2002 Annual
Meeting--Class II Directors
Dr. Link joined the Board of Directors in July 1995 as its Vice Chairman and
has served as Chairman of the Board of Directors since January 1996. In
addition, Dr. Link has held a number of executive positions with
pharmaceutical and healthcare companies. Most recently, he served as Chief
Executive Officer of Corange, Limited ("Corange"), from May 1993 until June
1994. Prior to joining Corange, Dr. Link served in a number of positions
within Sandoz Pharma Ltd., including Chief Executive Officer from 1987 until
April 1992, and Chairman from April 1992 until May 1993. Dr. Link currently
serves on the boards of directors of Alexion Pharmaceutical, Inc., Human
Genome Sciences, Inc., Procept, Inc., Protein Design Labs, Inc., Sulzer Medica
Ltd. and CytRx Corporation. Dr. Link received his Ph.D. in Economics from the
University of St. Gallen.
Mr. Morris has been a Director of cti since July 1995. He is the Chief
Executive Officer of T. Morris & Company (d/b/a Morningside Ventures), which
advises Kummell Investments Limited, an international investment concern based
in Hong Kong, on its private venture capital portfolio. Mr. Morris has served
as Chief Executive Officer of Morningside Ventures since 1991. His previous
positions include product line manager at Baxter Healthcare Corporation and
strategy consultant with the Boston Consulting Group. Mr. Morris is a director
of several privately held companies. Mr. Morris received his Ph.D. in
Engineering from the California Institute of Technology in 1975. He received
an M.B.A. from Harvard University in 1977.
Dr. Jaeger has been a Director of cti since September 1992. Dr. Jaeger is a
founding general partner of Three Arch Partners, a venture capital firm which
focuses on health care investments and was previously the Secretary and Chief
Financial Officer of Radiant Medical, Inc., a medical device company. In
addition, Dr. Jaeger is a partner in LJ Partners, an investment partnership,
and serves as President of Myometrix, a privately held company. Prior to
joining Three Arch Partners in 1993, he was a partner at Schroder Venture
Advisers (presently named Collinson Howe Venture Partners) and The Phoenix
Partners. Dr. Jaeger is a director of several privately held companies. Dr.
Jaeger received his M.D. from the University of British Columbia in Vancouver,
B.C., Canada, in 1981. He practiced medicine for six years before earning an
M.B.A. from Stanford University.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF EACH NAMED NOMINEE.
6
<PAGE>
Directors Continuing in Office Until 2000 Annual Meeting--Class III Directors
Dr. Bianco is the principal founder of cti and has been cti's President and
Chief Executive Officer since February 1992 and a Director of cti since the
Company's inception in September 1991. Prior to joining cti, Dr. Bianco was an
Assistant Professor of Medicine at the University of Washington, Seattle, and
an Assistant Member in the clinical research division of the Fred Hutchinson
Cancer Research Center ("FHCRC"), the world's largest bone marrow transplant
("BMT") center. From 1990 to 1992, Dr. Bianco was the director of the BMT
Program at the Veterans Administration Medical Center in Seattle. Dr. Bianco
received his B.S. degree in Biology and Physics from New York University and
his M.D. from Mount Sinai School of Medicine.
Dr. Singer is a founder and Director of cti and currently serves as cti's
Executive Vice President, Research Program Chairman. Dr. Singer has been a
Director of cti since the Company's inception in September 1991. From April
1992 to July 1995, Dr. Singer was cti's Executive Vice President, Research and
Development. Prior to joining cti, Dr. Singer was Professor of Medicine at the
University of Washington and full Member of the FHCRC. From 1975 to 1992, Dr.
Singer was the Chief of Medical Oncology at the Veterans Administration
Medical Center in Seattle. In addition, from 1978 to 1992, he served as
director for the National Transplant Board for the Veterans Administration.
Dr. Singer has authored approximately 220 scientific publications in the areas
of cell biology, hematopoiesis and BMT. Prior to joining cti, he headed the
Growth Factor Research Program at the FHCRC. Dr. Singer received his B.A.
degree in Mathematics from Columbia College and his M.D. from State University
of New York, Downstate Medical College. His clinical training was performed at
the University of Chicago and at the University of Washington.
Dr. Mundinger has been a Director of cti since April 1997. Since 1986, she
has been a Dean and Professor at the School of Nursing, and an Associate Dean
on the Faculty of Medicine at Columbia University. Dr. Mundinger also serves
as a director of United Healthcare. Dr. Mundinger is a cum laude graduate of
the University of Michigan and received her Doctorate of Public Health from
Columbia's School of Public Health.
Directors Continuing in Office Until the 2001 Annual Meeting--Class I
Directors
Dr. Nudelman has been a Director of cti since March 1994. He is the
President and Chairman of the Board of Kaiser/Group Health. From 1991 to 1997,
Dr. Nudelman was the President and Chief Executive Officer of Group Health
Cooperative of Puget Sound, a health maintenance organization. Dr. Nudelman
serves on the boards of directors of the American Association of Health Plans,
ATL Ultrasound, SpaceLabs Medical, Inc., Cytran Ltd., the United Way and
Intensiva Healthcare Corporation. Dr. Nudelman received his B.S. degree in
Microbiology, Zoology and Pharmacy from the University of Washington, and
holds an M.B.A. and a Ph.D. in Health Systems Management from Pacific Western
University.
Mr. Bowman has been a Director of cti since April 1995. From 1987 until
January 1994, Mr. Bowman was a Company Group Chairman at Johnson & Johnson,
having primary responsibility for a group of companies in the diagnostic,
blood glucose monitoring and pharmaceutical businesses. From 1980 to 1987, Mr.
Bowman held various positions at American Cyanamid Company, most recently as
Executive Vice President. Mr. Bowman was a member of the Board of Trustees of
The Johns Hopkins University and serves on the boards of directors of NeoRx
Corporation, CytRx Corporation, Cellegy Pharmaceuticals, Inc., Targeted
Genetics Corp., Osiris Therapeutics, Inc., Vaxcel, Inc., and Celgene Corp.
Mr. Curnock Cook has been a Director of cti since March 1995. Mr. Curnock
Cook has been a director of the Bioscience Unit of Rothschild Asset Management
Limited since 1987. He is a director of several British companies, including
The International Biotechnology Trust, plc, Biocompatibles International, plc,
Vanguard Medica Group plc and Cantab Pharmaceuticals plc. He also serves on
the boards of directors of Creative Biomolecules, Inc., Targeted Genetics,
Corp., Sugen Inc. and Ribozyme Pharmaceuticals, Inc. in the United States,
Amrad Corporation in Australia, and Inflazyme Pharmaceuticals Inc. and
Angiotech Pharmaceuticals Inc. in Canada.
7
<PAGE>
Board and Committee Meetings
The Board of Directors of the Company held eight meetings during the year
ended December 31, 1998. Each of the Directors attended at least 75% of the
total number of meetings of the Board of Directors and the total number of
meetings held by all committees of the Board of Directors on which they
served. The Board of Directors has three standing committees: an Executive
Committee, a Compensation Committee, and an Audit Committee. There is no
standing nominating committee.
The Executive Committee exercises the full power and authority of the Board
of Directors, except as limited by applicable law and except as specific
authority is otherwise delegated by the Board of Directors to its other
committees. No meetings of the Executive Committee were held during the year
ended December 31, 1998. The Executive Committee currently consists of Drs.
Bianco, Link and Nudelman and Mr. Curnock Cook.
The Compensation Committee has broad responsibility for assuring that the
officers and key management personnel of the Company are effectively
compensated in terms of salaries, supplemental compensation and benefits which
are internally equitable and externally competitive. The Compensation
Committee also administers the Company's 1994 Equity Incentive Plan and the
Company's 1996 Employee Stock Purchase Plan. Two meetings of the Compensation
Committee were held during the year ended December 31, 1998. The Compensation
Committee currently consists of four non-employee Directors, Dr. Jaeger and
Messrs. Bowman, Curnock Cook and Morris.
The Audit Committee, which was established in January 1994, has
responsibility for assisting the Board of Directors in fulfilling their
responsibilities related to the corporate accounting and reporting practices
of the Company and the quality and integrity of the Company's financial
reporting. Four meetings of the Audit Committee were held during the year
ended December 31, 1998. The Audit Committee currently consists of three non-
employee Directors, Drs. Jaeger and Nudelman and Mr. Morris.
Director Compensation
Directors who are also employees of the Company are not paid an annual
retainer nor are they compensated for serving on the Board. Non-employee
Directors are paid $2,000 per meeting of the Board or Board committee, up to a
maximum of $10,000 per Director each calendar year. All Directors are
reimbursed for their expenses incurred in attending Board meetings. In 1998,
pursuant to the Automatic Option Grant Program in effect for the Directors
under the Company's 1994 Stock Option Plan, each non-employee Director also
received a fully-vested option grant for 1,905 shares on the anniversary date
of the commencement of such Director's service as a Director. Each such option
has an exercise price equal to 100% of the fair market value on the grant date
in 1998 and a term of ten years measured from such grant date, subject to
early termination following the optionee's cessation of service as a Director.
In addition, six of the seven non-employee Directors also participated in
the Company's stock option repricing program in July 1998 as follows: (1) Mr.
Bowman held options for 28,573 shares at a weighted average exercise price of
$11.01 per share, which were repriced at $2.91 per share; (2) Mr. Curnock Cook
held options for 22,858 shares at a weighted average exercise price of $11.56
per share, which were repriced at an exercise price of $2.91 per share; (3)
Dr. Jaeger held options for 35,525 shares at a weighted average exercise price
of $11.83 per share, which were repriced at $2.91 per share; (4) Mr. Morris
held options for 20,953 shares at a weighted average exercise price of $11.65
per share, which were repriced at $2.91 per share; (5) Dr. Mundinger held
options for 4,113 shares at a weighted average exercise price of $7.17 per
share, which were repriced at $2.91 per share; and (6) Dr. Nudelman held
options for 28,001 shares at a weighted average exercise price of $10.98 per
share, which were repriced at $2.91 per share.
8
<PAGE>
PROPOSAL II
RATIFICATION OF THE SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP as the Company's
independent auditors for the year ending December 31, 1999, and has further
directed that management submit the selection of independent auditors for
ratification by the shareholders at the Annual Meeting. Ernst & Young LLP has
audited the Company's financial statements since 1992. Representatives of
Ernst & Young LLP are expected to be present at the Annual Meeting, will have
an opportunity to make a statement if they so desire and will be available to
respond to appropriate questions.
In the event the shareholders fail to ratify the selection, the Board will
reconsider whether or not to retain that firm. Even if the selection is
ratified, the Board in its discretion may direct the appointment of a
different independent accounting firm at any time during the year if the Board
feels that such a change would be in the best interests of the Company and its
shareholders. The affirmative vote of the holders of a majority of the shares
present in person or represented by proxy and entitled to vote at the Annual
Meeting will be required to ratify the selection of Ernst & Young LLP.
Abstentions and broker non-votes will not be counted toward the total.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
SELECTION OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS.
9
<PAGE>
Executive Officers
The following table sets forth certain information with respect to the
executive officers of cti:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
James A. Bianco, M.D.... 42 President, Chief Executive Officer
Jack W. Singer, M.D. ... 56 Executive Vice President, Research Program Chairman
Louis A. Bianco......... 46 Executive Vice President, Finance and Administration
Maurice J. Schwarz,
Ph.D. ................. 59 Executive Vice President, Product Development
Robert A. Lewis, M.D. .. 54 Executive Vice President, Chief Scientific Officer
Susan O. Moore.......... 50 Executive Vice President, Corporate Resource Development
Edward F. Kenney........ 54 Executive Vice President, Chief Operating Officer
</TABLE>
See Proposal I for biographical information concerning Drs. Bianco and
Singer.
Mr. Bianco is a founder of cti and has been cti's Executive Vice President,
Finance and Administration since February 1, 1992, and was a Director of cti
from the Company's inception in September 1991 to April 1992 and from April
1993 to April 1995. From January 1989 through January 1992, Mr. Bianco was a
Vice President at Deutsche Bank Capital Corporation in charge of risk
management. Mr. Bianco is a Certified Public Accountant and received his
M.B.A. from New York University. Mr. Bianco and Dr. Bianco are brothers.
Dr. Schwarz has been cti's Executive Vice President, Product Development
since May 1994. Dr. Schwarz held a variety of product development positions at
Ciba-Geigy for 26 years prior to joining cti, most recently as Vice President
of Pharmaceutical and Analytical Development and Chairman of the Development
Operations Board at Ciba-Geigy Pharmaceuticals Division. Dr. Schwarz received
his B.A. and Ph.D. degrees in chemistry from the University of Oregon.
Dr. Lewis has been cti's Executive Vice President, Chief Scientific Officer
since April 1996. From September 1994 to May 1995, Dr. Lewis was Senior Vice
President and Director, Preclinical Research and Development at Syntex-Roche
("Syntex"). From February 1992 to September 1994, he was President, Discovery
Research at Syntex. From February 1986 to February 1992, he held various
Senior and Executive Vice Presidential offices at Syntex. While at Syntex, he
held associate professorships at Stanford University and at the University of
California, San Francisco, where he also held an adjunct professorship from
1992 to 1994. Prior to joining Syntex, Dr. Lewis was an Associate Professor of
Medicine at Harvard Medical School. Dr. Lewis received his M.D. from the
University of Rochester and B.S. degree in chemistry from Yale University.
Ms. Moore has been cti's Executive Vice President, Corporate Resource
Development since October 1997. From August 1995 to September 1997, Ms. Moore
was cti's Executive Vice President, Human Resource Development and from March
1993 to July 1995, she was cti's Vice President of Human Resources. From
December 1992 to March 1993, Ms. Moore was the sole proprietor of a
compensation consulting firm. Prior to this sole proprietorship, Ms. Moore was
the Director of Human Resources of ICOS Corporation, a biotechnology company,
and a member of senior management at Digital Equipment Corporation.
Mr. Kenney has been cti's Executive Vice President, Chief Operating Officer
since January 1999. From February 1997 to September 1998 he was Vice President
of Marketing and Sales at CellPro Incorporated. From 1987 to 1996 he served in
various sales, marketing and business development positions at Cetus
Corporation and Chiron Corporation (these two companies merged in 1991). From
1991 to 1996, Mr. Kenney was Vice President, Marketing and Sales for Chiron
Therapeutics, and in 1995 and 1996, he served as general manager of that
division's North American business. In 1986 and 1987, Mr. Kenney was a
marketing manager in the cardiovascular therapy area at Boehringer Ingelheim,
and from 1978 to 1986, he served in various sales, marketing and business
development capacities at Bristol-Myer Corporation. Mr. Kenney earned a B.S.
degree in Zoology and a M.S. degree in Natural Resources both from Ohio State
University.
10
<PAGE>
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's executive officers and Directors, and persons who own more than
ten percent of a registered class of the Company's equity securities, to file
with the Securities and Exchange Commission (the "SEC") reports of ownership
and changes in ownership of Common Stock and other equity securities of the
Company. Executive officers, Directors and greater than ten percent
shareholders are required by SEC regulations to furnish the Company with
copies of all Section 16(a) forms they file. The Company prepares Section
16(a) forms on behalf of its executive officers and Directors based on the
information provided by them.
Based solely on review of this information, or written representations from
reporting persons that no other reports were required, the Company believes
that, during the 1998 fiscal year, all Section 16(a) filing requirements
applicable to its executive officers, Directors and greater than ten percent
beneficial owners were complied with.
Compensation of Executive Officers
The following table sets forth all compensation earned in the years ended
December 31, 1996, 1997 and 1998 by the Company's Chief Executive Officer and
the four other most highly compensated executive officers who were serving as
executive officers at December 31, 1998 (collectively, the "Named Executive
Officers"):
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
------------------------------ ------------
Other
Annual Securities
Compensa- Underlying
Name and Principal tion Options All Other
Position Year Salary ($) Bonus ($) ($)(1) (#)(2) Compensation ($)
------------------ ---- ---------- --------- --------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
James A. Bianco, M.D. . 1998 433,224 30,000 89,096(3) 403,672(4) 139,917(5)
President and Chief 1997 393,840 120,000 88,426(6) 80,000 294,319(7)
Executive 1996 358,032 50,000 -- 85,714 72,223(8)
Officer
Jack W. Singer, M.D. .. 1998 260,016 -- 3,725(9) 122,031(4) 11,655(10)
Executive Vice 1997 251,898 60,000 3,821(9) 27,500 11,655(10)
President, 1996 248,976 15,000 -- 28,571 10,524(10)
Research Program
Chairman
Louis A. Bianco........ 1998 300,120 -- 4,150(9) 126,531(4) 72,517(11)
Executive Vice 1997 300,120 -- 3,639(12) 15,000 96,109(13)
President, 1996 263,088 -- -- 21,428 55,367(8)
Finance and
Administration
Maurice J. Schwarz,
Ph.D. ................ 1998 193,000 25,000 3,296(9) 107,144(4) --
Executive Vice 1997 187,500 35,000 3,221(9) 15,000 49,429(14)
President, 1996 187,500 58,993 -- 28,571 65,619(14)
Product Development
Robert A. Lewis, M.D. . 1998 272,040 -- 3,476(9) 142,145(4) --
Executive Vice 1997 262,032 40,000 2,741(15) 20,000 --
President, 1996 181,512 -- -- 67,142(16) 26,144(17)
Chief Scientific
Officer
</TABLE>
- --------
(1) Other annual compensation in the form of perquisites and other personal
benefits has been omitted where the aggregate amount of such perquisites
and other personal benefits constituted the lesser of $50,000 or 10% of
the total annual salary and bonus for the Named Executive Officer for the
applicable year.
(2) None of the Named Executive Officers held any Stock Appreciation Rights.
(3) Other annual compensation for Dr. Bianco includes payments totaling
$89,096 to cover Dr. Bianco's estimated tax liabilities with respect to
(i) certain perquisites, and (ii) the life insurance premium payment and
loan forgiveness described in Note 5.
(4) In July 1998, the Board of Directors approved the repricing of
outstanding options to $2.906 per share by exchanging such outstanding
options for new ten-year options. The terms of the exchange also included
a one-year blackout period on the exercise of the repriced options that
expires on July 31, 1999. All other terms and conditions of the options
remained unchanged. Grants for the year ended December 31, 1998, include
options that were initially granted in prior years and have been repriced
and exchanged for new options in 1998 as follows: Dr. Bianco, 303,672
options were repriced and exchanged; Dr. Singer, 77,031 options were
repriced and exchanged; Mr. Bianco, 91,531 options were repriced and
exchanged; Dr. Schwarz, 72,144 options were repriced and exchanged; and
Dr. Lewis, 87,145 options were repriced and exchanged.
11
<PAGE>
(5) All other compensation for Dr. Bianco includes the following: (i)
reimbursement of long-term disability insurance premiums of $8,736, (ii)
a premium payment of $40,000 for life insurance required by the terms of
Dr. Bianco's employment, (iii) loan forgiveness of $84,309 pursuant to
the terms of Dr. Bianco's employment agreement, and (iv) travel and
expense reimbursements totaling $6,872.
(6) Other annual compensation for Dr. Bianco includes payments totaling
$86,366 to cover Dr. Bianco's estimated tax liabilities with respect to
(i) certain perquisites, and (ii) the life insurance premium payment and
loan forgiveness described in Note 7.
(7) All other compensation for Dr. Bianco includes the following: (i)
payments aggregating $164,636 for unused sick and vacation leave accrued
by Dr. Bianco between 1992 and 1996, pursuant to the terms of his
employment agreement then in effect, (ii) reimbursement of long-term
disability insurance premiums of $8,737, (iii) a premium payment of
$40,000 for life insurance required by the terms of Dr. Bianco's
employment agreement, and (iv) loan forgiveness of $80,946 pursuant to
the terms of Dr. Bianco's current employment agreement. See "--Employment
Agreements".
(8) All other compensation for Dr. Bianco and Mr. Bianco includes payment of
unused sick leave accrued during 1992, 1993 and 1994, pursuant to the
terms of their employment agreements then in effect, aggregating $64,526
and $47,415, respectively, and reimbursement for long-term disability
insurance premiums of $7,697 and $7,952, respectively.
(9) Other annual compensation includes payments to cover estimated tax
liabilities with respect to certain perquisites.
(10) All other compensation for Dr. Singer includes reimbursement for long-
term disability insurance premiums of $10,524, $11,655 and $11,655 in
1996, 1997 and 1998, respectively.
(11) All other compensation for Mr. Bianco includes the following: (i)
reimbursement for long-term disability insurance premiums of $8,442, (ii)
a premium payment of $1,674 for life insurance, and (iii) payments
aggregating $62,401 for unused sick and vacation leave accrued by Mr.
Bianco during 1997, pursuant to the terms of his employment agreement
then in effect.
(12) Other annual compensation for Mr. Bianco includes payments to cover
estimated tax liabilities with respect to (i) certain perquisites, and
(ii) the life insurance premium payment and loan forgiveness described in
Note 13.
(13) All other compensation for Mr. Bianco includes the following: (i)
payments aggregating $86,210 for unused vacation leave accrued by Mr.
Bianco between 1992 and 1996, pursuant to the terms of his employment
agreement then in effect, (ii) reimbursement for long-term disability
insurance premiums of $8,474, and (iii) a premium payment of $1,425 for
life insurance.
(14) All other compensation for Dr. Schwarz includes loan forgiveness of
$60,789 and $49,429 in 1996 and 1997, respectively, and $4,830 for
relocation expenses in 1996, all in connection with Dr. Schwarz's
relocation to the Seattle area in 1996.
(15) Other annual compensation for Dr. Lewis includes payments to cover
estimated tax liabilities with respect to the relocation expense
reimbursements described in Note 17.
(16) Includes 45,716 options granted at the time Dr. Lewis was recruited.
(17) Includes reimbursement of Dr. Lewis' relocation expenses.
12
<PAGE>
The following table sets forth for each of the Named Executive Officers the
number of options granted during the year ended December 31, 1998 and the
potential realizable value of such grants. No stock appreciation rights were
granted to such individuals for the 1998 fiscal year.
Options Granted in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants
--------------------------------------------
Potential
Realizable
Value at Assumed
Annual Rates of
% of Total Stock
Number of Options Price Appreciation
Securities Granted to for
Underlying Employees Exercise Option Term(4)
Options in Fiscal Price Expiration -------------------
Name Granted(1) Year (%) ($/Sh)(3) Date 5% ($) 10% ($)
- ---- ---------- ---------- --------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
James A. Bianco, M.D.... 100,000 4.8% $2.97 12/10/08 $186,719 $ 473,182
303,672(2) 14.4 2.91 7/31/08 554,981 1,406,431
Jack W. Singer, M.D. ... 45,000 2.1 2.97 12/10/08 84,023 212,932
77,031(2) 3.7 2.91 7/31/08 140,779 356,763
Louis A. Bianco......... 35,000 1.7 2.97 12/10/08 65,352 165,614
91,531(2) 4.4 2.91 7/31/08 167,279 423,918
Maurice J. Schwarz,
Ph.D. ................. 35,000 1.7 2.97 12/10/08 65,352 165,614
72,144(2) 3.4 2.91 7/31/08 131,848 334,129
Robert A. Lewis, M.D. .. 55,000 2.6 2.97 12/10/08 102,695 260,250
87,145(2) 4.1 2.91 7/31/08 159,263 403,605
</TABLE>
- --------
(1) Options were granted under the 1994 Equity Incentive Plan (the "1994
Plan").
(2) In July 1998, the Board of Directors approved the repricing of outstanding
options to $2.906 per share by exchanging such outstanding options for new
ten-year options. The terms of the exchange also included a one-year
blackout period on the exercise of the repriced options that expires on
July 31, 1999. All other terms and conditions of the options remained
unchanged. Grants for the year ended December 31, 1998 include options
which were initially granted in prior years and have been repriced and
exchanged for new options in 1998 as follows: Dr. Bianco, 303,672 options
were repriced and exchanged; Dr. Singer, 77,031 options were repriced and
exchanged; Mr. Bianco, 91,531 options were repriced and exchanged; Dr.
Schwarz, 72,144 options were repriced and exchanged; and Dr. Lewis, 87,145
options were repriced and exchanged.
(3) Stock options were granted at an exercise price equal to 100% of the
estimated fair value of the Common Stock, as determined by the Board of
Directors on the date of grant, pursuant to the terms of the 1994 Plan.
(4) Potential realizable value is based on the assumption that the Common
Stock appreciates at the annual rates shown (compounded annually) from the
date of grant until the expiration of the option term. These assumed rates
of appreciation are mandated by the rules of the Securities and Exchange
Commission and do not represent the Company's estimate or projection of
the future Common Stock price. There can be no assurance that any of the
values reflected in this table will be achieved.
13
<PAGE>
The following table sets forth for each of the Named Executive Officers, the
fiscal year-end number and value of unexercised options. No options or stock
appreciation rights were exercised by any of the Named Executive Officers
during 1998, and none of the Named Executive offices held any stock
appreciation rights at the end of the 1998 fiscal year.
Aggregated Option Exercises in Latest Fiscal Year and Fiscal Year-End Option
Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Options at Fiscal Year-End (#) Fiscal Year-End 1998 ($)(1)
------------------------------- -------------------------------
Name Exercisable(2) Unexercisable(2) Exercisable(2) Unexercisable(2)
- ---- -------------- ---------------- -------------- ----------------
<S> <C> <C> <C> <C>
James A. Bianco, M.D. .. 0 403,672 $ 0 $31,645
Jack W. Singer, M.D. ... 0 122,031 0 8,636
Louis A. Bianco......... 0 126,531 0 9,689
Maurice J. Schwarz,
Ph.D. ................. 0 107,144 0 7,867
Robert A. Lewis, M.D. .. 0 142,145 0 9,897
</TABLE>
- --------
(1) This amount is the aggregate number of in-the-money options multiplied by
the difference between the last reported sale price of the Common Stock on
the Nasdaq National Market on December 31, 1998 and the exercise price for
that option.
(2) In July 1998, the Board of Directors approved a repricing program for
outstanding stock options under which option holders exchanged outstanding
options for new ten-year options granted at a lower price. The terms of
the exchange also included a one-year blackout period on the exercise of
the repriced options that expires on July 31, 1999. As of December 31,
1998, therefore, no options were exercisable.
Ten-Year Option Repricings
As discussed in the Report of the Compensation Committee below, in 1998 the
Company implemented a special option repricing program for all of its
employees, including executive officers and Directors, holding stock options
with an exercise price per share in excess of the fair market value of the
Company's Common Stock on the repricing date. The repricing occurred on July
31, 1998, and a number of outstanding options with an exercise price in excess
of $2.906 per share were exchanged for new options exercisable for the same
aggregate number of shares at an exercise price of $2.906 per share.
14
<PAGE>
The following table sets forth information with respect to all repricings of
options held by each Named Executive Officer since the Company became a
reporting company pursuant to Section 13(a) of the Securities Exchange Act of
1934, as amended. None of the Named Executive Officers hold any SARs.
Ten-Year Option Repricings
<TABLE>
<CAPTION>
Length of
Number of Market Original Option
Securities Price Of Exercise Term Remaining
Underlying Stock At Price At New At Date Of
Date Of Options Time Of Time Of Exercise Repricing
Name and Position Repricing Repriced Repricing Repricing Price (Yrs.)
----------------- --------- ---------- --------- --------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C>
James A. Bianco, M.D... 7/31/98 57,858 $2.906 $11.725 $2.906 4.15
President, Chief 7/31/98 1,527 2.906 11.725 2.906 6.72
Executive 7/31/98 78,572 2.906 11.725 2.906 7.35
Officer and Director 7/31/98 85,715 2.906 11.725 2.906 8.30
7/31/98 80,000 2.906 16.063 2.906 9.36
Jack W. Singer, M.D.... 7/31/98 12,858 2.906 11.725 2.906 4.15
Executive Vice 7/31/98 958 2.906 11.725 2.906 6.72
President, 7/31/98 7,143 2.906 11.725 2.906 7.35
Research Program 7/31/98 28,572 2.906 11.725 2.906 8.27
Chairman 7/31/98 27,500 2.906 16.063 2.906 9.36
and Director
Louis A. Bianco........ 7/31/98 19,287 2.906 11.725 2.906 4.15
Executive Vice 7/31/98 17,145 2.906 11.725 2.906 5.39
President, 7/31/98 1,527 2.906 11.725 2.906 6.72
Finance and 7/31/98 17,143 2.906 11.725 2.906 7.35
Administration 7/31/98 21,429 2.906 11.725 2.906 8.27
7/31/98 15,000 2.906 16.063 2.906 9.36
Maurice J. Schwarz,
Ph.D.................. 7/31/98 17,143 2.906 11.725 2.906 5.57
Executive Vice 7/31/98 11,429 2.906 11.725 2.906 7.35
President, 7/31/98 28,572 2.906 11.725 2.906 8.27
Product Development 7/31/98 15,000 2.906 16.063 2.906 9.36
Robert A. Lewis, M.D... 7/31/98 45,716 2.906 11.725 2.906 7.66
Executive Vice 7/31/98 21,429 2.906 11.725 2.906 8.27
President, 7/31/98 20,000 2.906 16.063 2.906 9.36
Chief Scientific
Officer
</TABLE>
Employment Agreements
Dr. Bianco, President and Chief Executive Officer, entered into an
employment agreement with cti effective December 17, 1996. The agreement,
which will expire on December 31, 1999, provides that, in the event that cti
terminates Dr. Bianco's employment without cause or Dr. Bianco terminates his
employment for cause: (1) cti at such time shall pay Dr. Bianco an amount
equal to twenty-four months' base salary, (2) all of Dr. Bianco's stock
options in cti shall immediately become vested, and (3) cti shall continue to
provide certain benefits through the term of the agreement. The agreement also
provides for the forgiveness of certain indebtedness of Dr. Bianco to cti over
the term of the agreement. See "--Certain Relationships and Related
Transactions". In addition, the agreement provides that Dr. Bianco is entitled
to four weeks of paid vacation per year and that any unused vacation time
shall be paid in cash upon the termination of Dr. Bianco's employment for any
reason or at such earlier time as required to avoid forfeiture of accrued but
unused vacation time. The employment agreement restricts Dr. Bianco from
competing with cti for the term of the agreement and for two years after
termination of his employment with cti, unless cti shall have terminated Dr.
Bianco's employment without cause or Dr. Bianco shall have terminated his
employment for cause. The agreement also provides that, in the event a Change
in Ownership (as defined in the employment agreement) occurs, then all of
Dr. Bianco's stock options shall immediately become vested.
15
<PAGE>
Each of Jack W. Singer, Louis A. Bianco, Maurice J. Schwarz, and Robert A.
Lewis has entered into a severance agreement with cti effective November 21,
1997, February 1, 1998, May 2, 1997, and January 7, 1998, respectively. The
agreements provide that, in the event any of the foregoing Named Executive
Officers is terminated by cti without cause or resigns for good reason: (1)
cti shall pay his base salary for one year from the severance date (2) cti
shall pay his accrued but unused vacation through the severance date, (3) cti
shall continue to pay his benefits for one year from the severance date, and
(4) all of his stock options shall become immediately vested. Inventions and
proprietary information agreements restrict each of Drs. Singer, Schwarz and
Lewis from competing with cti for two years after the termination of his
employment with cti.
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors (the "Committee") is
composed of Directors who are not employees of the Company. The Committee is
responsible for establishing and administering the Company's executive
compensation arrangements, including the compensation of the Chief Executive
Officer and the other executive officers and key employees of the Company,
subject to ratification by the Board. The Committee also administers the 1994
Equity Incentive Plan (the "1994 Plan") and the 1996 Employee Stock Purchase
Plan and makes all stock option grants under the 1994 Plan to the Company's
executive officers.
General Compensation Policy
The Company operates in the extremely competitive and rapidly changing
biotechnology industry. The Committee believes that the compensation programs
for executive officers of the Company should be designed to attract, retain
and motivate talented executives responsible for the success of the Company
and should be determined within a competitive framework and based on the
achievement of strategic corporate objectives and individual performance and
teamwork. Within this overall philosophy, the Committee's objectives are to:
. Offer a total compensation program that takes into consideration the
compensation practices of a specifically identified peer group of
companies with which the Company competes for executive talent.
. Integrate each executive officer's compensation package with annual and
long-term corporate objectives and focus the officer's attention on the
attainment of those objectives.
. Encourage the creation of shareholder value through the achievement of
strategic corporate objectives.
. Provide annual variable incentive awards that take into account the
Company's performance relative to corporate objectives and the individual
executive officer's contributions.
. Align the financial interests of executive officers with those of
shareholders by providing significant equity-based, long-term incentives.
Compensation Components and Process
The Committee has developed a compensation policy which is designed to
attract and retain qualified key executive officers critical to the Company's
success. In developing this policy, the Committee has concluded that it is not
appropriate to base a significant percentage of the compensation payable to
the executive officers upon traditional financial targets, such as profit
levels and return on equity. This is primarily because the Company's products
are still in either development or clinical testing phases, and the Company
has not yet realized any significant revenues or product sales. In addition,
the Company's stock price performance often may reflect larger market forces
than the Company's actual performance. For these reasons, it is difficult to
tie the Company's compensation programs to financial performance. Instead, the
Committee makes its decisions based upon the attainment of corporate-wide,
team and individual performances. Such performances are evaluated in terms of
the achievement of strategic and business plan goals, including long-term
goals tied to the expansion of the Company's core technology and innovative
product development, the discovery of new drug candidates and the development
of the Company's organizational infrastructure.
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In establishing the compensation package of the Company's executive
officers, the Committee has adopted a "total pay" philosophy which includes
three major components: (1) base salary set at levels which are commensurate
with those of comparable positions at other biotechnology companies; (2)
annual bonuses and stock option grants tied to the achievement of strategic
corporate and team objectives and individual performance; and (3) long-term,
stock-based incentive awards intended to strengthen the mutuality of interests
between the executive officers and the Company's shareholders.
The Committee determines the compensation levels for the executive officers
with the assistance of an independent consulting firm that furnishes the
Committee with executive compensation data drawn from several nationally
recognized surveys of companies within the biotechnology and pharmaceutical
industries. On the basis of those surveys, the Committee has identified a peer
group of companies with which the Company competes for executive talent and
which have a total capitalization and head count similar to the Company's and
are at approximately the same development stage (the "Peer Companies").
The positions of the Company's Chief Executive Officer and the other
executive officers were compared with those of their counterparts at the Peer
Companies, and the market compensation levels for comparable positions were
examined to determine base salary, target incentives, and total cash
compensation. In addition, the practices of the Peer Companies concerning
stock option grants were also reviewed and compared.
Base Salary. The base salary for each executive officer is set at a level
considered appropriate for comparable positions at the Peer Companies. The
Committee's policy is to target base salary levels at the market average level
of base salary in effect for comparable positions at the Peer Companies.
Executive officers who attain the core competencies required of their
positions are paid at that level. The Committee makes its base salary
determinations in accordance with the market average level in effect for
comparable positions at the Peer Companies, competitive market forces and the
evaluation of performance and core competency provided for each executive
officer by the Chief Executive Officer.
Variable Incentive Awards. To reinforce the attainment of Company goals, the
Committee believes that a substantial portion of the annual compensation of
each executive officer should be in the form of variable incentive pay. The
annual incentive payment for each executive officer is determined on the basis
of the achievement of the corporate objectives established for the fiscal year
and the Committee's evaluation of the officer's performance both on an
individual and team basis. For the 1998 fiscal year, the corporate performance
objectives were tied to the following measures of success: (1) building a
vertically integrated portfolio of oncology products; (2) advancing cti's
products and technology; and (3) developing and strengthening the Company's
relationships with its partners, investors and analysts.
Based on the surveys of the short-term incentive programs of the Peer
Companies, the bonuses awarded to the executive officers for the 1998 fiscal
year were below the mid-range of the bonus levels in effect for comparable
positions at the Peer Companies and were on average equal to 4.6% of base
salary for the year.
Long-Term, Equity-Based Incentive Awards. The goal of the Company's long-
term equity-based incentive awards is to align the interests of executive
officers with the shareholders and to provide each executive officer with a
significant incentive to manage the Company from the perspective of an owner
with an equity stake in the business. Such incentive is provided through stock
option grants made under the 1994 Plan. The size of the option grant to each
executive officer is set at a level which the Committee feels is appropriate
to create a meaningful opportunity for stock ownership based upon the
executive officer's current position with the Company, internal comparability
with stock option grants made to other Company executives, the executive
officer's current level of performance and his or her potential for future
responsibility and promotion over the option term. The Committee also takes
into account comparable equity incentives provided to individuals in similar
positions in the biotechnology and pharmaceutical industries, as reflected in
external surveys, and the number of unvested options held by the executive
officer at the time of the new grant. The Committee has established certain
general guidelines by which it seeks to target a fixed number of unvested
option shares for each executive officer based upon his or her current
position with the Company and his or her potential for growth within the
Company (i.e., future
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responsibilities and possible promotions over the option term). However, the
Committee does not strictly adhere to these guidelines in making stock option
grants, and the relative weight which is given to the various factors varies
from individual to individual, as the circumstances warrant.
During fiscal 1998, the Committee awarded the executive officers new stock
options for an aggregate of 305,000 shares of Common Stock. Each grant allows
the officer to acquire the shares underlying the stock option at a fixed price
per share (the market price on the grant date) over a ten-year period of time.
Specifically, the options vest in periodic installments over a three-year
period, contingent upon the executive officer's continued employment with the
Company. Accordingly, the option will provide a return only if the officer
remains with the Company and then only if the market price appreciates over
the option term.
During 1998, the Committee also reviewed the exercise prices of outstanding
stock options in light of the lower stock trading price of the Company's
Common Stock. The Committee believed that in order to retain and motivate
employees during this critical period that it would be in the best interest of
the Company to provide a repricing program for stock options. Accordingly, on
July 31, 1998, all of the Company's employees, including executive officers,
were given the opportunity to exchange their outstanding options under the
1994 Plan with exercise prices in excess of $2.906 per share in exchange for a
new option grant exercisable for the same number of shares with a lower
exercise price of $2.906 per share, the fair market value per share of the
Company's Common Stock on the new grant date. Each employee eligible for a new
option grant was given the choice of accepting that option with a one-year
exercise blackout period in cancellation of his or her higher-priced option or
rejecting the new grant and retaining the higher-priced option with its
original exercise schedule.
The Compensation Committee determined that this option repricing program was
necessary because equity incentives are a significant component of the total
compensation package of each key Company employee and play a substantial role
in the Company's ability to retain the services of individuals essential to
the Company's long-term financial success. The Compensation Committee felt
that the Company's ability to retain key employees would be significantly
impaired, unless value were restored to their options in the form of regranted
options at the current market price of the Company's Common Stock. However, in
order for the regranted options to serve their primary purpose of assuring the
continued service of each optionee, each regranted option will not become
exercisable for a year measured from the repricing date, July 31, 1998.
Accordingly, on July 31, 1999, each of the repriced options will become
exercisable for the number of shares for which the cancelled option was vested
on the repricing date, plus the number of shares which would have vested under
the cancelled option during that one-year period under the original vesting
schedule for that option. Thereafter, the repriced option will continue to
vest in accordance with the same vesting schedule in effect for the cancelled
higher-priced option. Accordingly, each optionee will have the opportunity to
exercise his or her option and acquire the option shares at the lower exercise
price only if he or she remains in the Company's employ until July 31, 1999.
As a result of the one-year blackout period for which the repriced options
are not exercisable, the Compensation Committee believes that the program
strikes an appropriate balance between the interests of the option holders and
those of the Company's shareholders. The lower exercise prices in effect under
the regranted options make those options valuable once again to the executive
officers and key employees critical to the Company's financial performance.
However, those individuals will enjoy the benefits of the regranted options
only if they in fact remain in the Company's employ and contribute to the
Company's financial success.
Compensation of the Chief Executive Officer
The base salary of the Company's Chief Executive Officer, James A. Bianco,
M.D., is reviewed annually by the Committee and was set at $433,224 for the
1998 fiscal year. Such salary level was established on the basis of the base
salary levels in effect for chief executive officers at the other
biotechnology and pharmaceutical companies comprising the Peer Companies. The
1998 salary level for Dr. Bianco brought him to 20% above the average of the
salary levels then in effect for the chief executive officers of the Peer
Companies.
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The incentive compensation awarded to Dr. Bianco for the 1998 fiscal year
was equal to 7% of his base salary for the year as compared to a target
percentage of 40% for his peer groups. This was based on the achievement of
the following corporate developments: (1) building a vertically integrated
portfolio of oncology products; (2) advancing cti's products and technology;
and (3) developing and strengthening the Company's relationships with its
partners, investors and analysts. These objectives resulted in the development
and implementation of a successful strategy of targeted portfolio development
exemplified by the in-licensing of PG-TXL and SC-7. This strategy ultimately
has yielded a vertically integrated portfolio which spans the range of
development from preclinical work to Phase III clinical trials. See Note 11 of
Notes to Financial Statements. Dr. Bianco was also awarded stock options for
100,000 shares of Common Stock at an exercise price of $2.969 per share. The
grant reflected the Committee's continuing policy to maintain his option
holdings at a level consistent with that for other chief executive officers of
comparable development-stage companies in the pharmaceutical industry and to
subject a portion of his overall compensation each year to the market
performance of the Company's Common Stock. Accordingly, the stock option
grants will be of no value to Dr. Bianco unless there is appreciation in the
value of the Company's Common Stock over the option term. In addition,
outstanding options which Dr. Bianco held for 303,672 shares were repriced as
part of the Company's July 1998 repricing program.
Compliance with Internal Revenue Code Section 162(m)
As a result of Section 162(m) of the Internal Revenue Code, which was
enacted into law in 1993, the Company will not be allowed a Federal income tax
deduction for compensation paid to certain officers, to the extent that
compensation exceeds one (1) million dollars per officer in any one year. This
limitation will apply to all compensation which is not considered to be
performance based. Compensation which does qualify as performance-based
compensation will not have to be taken into account for purposes of this
limitation. The Company's 1994 Plan has been structured so any compensation
deemed paid in connection with the exercise of stock options granted under
that plan with an exercise price equal to the market price of the option
shares on the grant date will qualify as performance-based compensation.
The cash compensation paid to the Company's executive officers during fiscal
1998 did not exceed the one (1) million dollar limit per officer, nor is the
cash compensation to be paid to the Company's executive officers for the 1999
fiscal year expected to reach that level. Because it is unlikely that the cash
compensation payable to any of the Company's executive officers in the
foreseeable future will approach the one (1) million dollar limitation, the
Committee has decided not to take any action at this time to limit or
restructure the elements of cash compensation payable to the Company's
executive officers. The Committee will reconsider this decision should the
individual compensation of any executive officer ever approach the one (1)
million dollar level.
COMPENSATION COMMITTEE
Jack L. Bowman
Jeremy L. Curnock Cook
Wilfred E. Jaeger, M.D.
Terrence M. Morris
Compensation Committee Interlocks and Insider Participation
During the last completed fiscal year, the Compensation Committee consisted
of Dr. Jaeger and Messrs. Curnock Cook, Bowman and Morris. None of these
individuals was at any time during the last completed fiscal year, or at any
other time, an officer or employee of the Company. At the 1997 Annual Meeting
of Shareholders, Dr. Jaeger and Mr. Curnock Cook were elected as Directors by
the holders of the outstanding shares of Common Stock. In March 1997,
Biotechnology Investments Limited, which is an affiliate of Mr. Curnock Cook,
purchased 250,000 shares of Common Stock in the Company's initial public
offering for an aggregate purchase price of $2.5 million. See "--Certain
Relationships and Related Transactions".
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Stock Performance Graph
<TABLE>
<CAPTION>
3/21/97 3/31/97 6/30/97 9/30/97 12/31/97
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Cell Therapeutics, Inc................. $100.00 $ 97.56 $108.54 $145.12 $165.85
Nasdaq Stock Index (U.S.).............. $100.00 $ 97.51 $115.39 $134.90 $126.49
Nasdaq Pharmaceutical Index............ $100.00 $ 93.51 $100.95 $113.24 $101.67
<CAPTION>
3/31/98 6/30/98 9/30/98 12/31/98
------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Cell Therapeutics, Inc................. $ 40.24 $ 26.22 $ 20.73 $ 29.27
Nasdaq Stock Index (U.S.).............. $148.00 $ 79.48 $137.87 $177.82
Nasdaq Pharmaceutical Index............ $111.76 $103.58 $ 98.02 $130.14
</TABLE>
The stock performance graph depicts the cumulative total return on the
Company's Common Stock compared to the current total return for the Nasdaq
Stock Index (U.S.) and the Nasdaq Pharmaceutical Index. The graph assumes an
investment of $100 on March 21, 1997, when the Company's stock was first
traded in a public market. Reinvestment of dividends, if any, is assumed in
all cases.
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Certain Relationships and Related Transactions
In December 1993, cti loaned Dr. Bianco $200,000 at 5.35% annual interest.
The promissory note originally provided for a single payment of principal and
interest on the earlier of July 1, 1997, and the third anniversary of the
effective date of the initial underwritten public offering of cti's Common
Stock. In December 1996, Dr. Bianco entered into an employment agreement with
the Company which amended the note to provide for the forgiveness of one-third
of the loan on each anniversary of the agreement. The unpaid portion of the
loan will accelerate and become due and payable in the event that cti
terminates Dr. Bianco's employment for cause or Dr. Bianco terminates his
employment without cause. The unpaid portion of the loan will be forgiven in
the event that cti terminates Dr. Bianco's employment without cause, Dr.
Bianco terminates his employment for cause, dies or becomes disabled, a Change
in Ownership (as defined in Dr. Bianco's employment agreement) occurs or cti's
public market capitalization equals or exceeds $500 million. See "--Employment
Agreements". The largest balance outstanding on the loan during 1998 was
$168,617. The amount outstanding at December 31, 1998 was $84,766. The loan is
secured by a pledge of 5,714 shares of Common Stock owned by Dr. Bianco.
On December 16, 1998, in lieu of cash bonuses, cti extended loans at 4.97%
annual interest to the following executive officers: Dr. Bianco, $100,000; Dr.
Singer, $75,000; and Dr. Lewis, $75,000. The promissory notes provide for a
single payment of principal and interest on December 16, 2002. The largest
balances outstanding on the loans during 1998 were $100,204, $75,153 and
$75,153, respectively. The amounts outstanding at February 28, 1999 were
$101,007, $75,755 and $75,755, respectively.
Other Business
As of the date of this Proxy Statement, management knows of no other
business that will be presented for action at the meeting. Management has not
received any advance notice of business to be brought before the meeting by
any shareholder. If other business requiring a vote of the shareholders should
come before the meeting, the person designated as your proxy will vote or
refrain from voting in accordance with his best judgment.
Other Information
The Company's Annual Report to Shareholders for the year ended December 31,
1998 (the "Annual Report") is being mailed concurrently with the mailing of
the Notice of Annual Meeting and Proxy Statement to all shareholders entitled
to notice of and to vote at the Annual Meeting. The Annual Report is not
considered proxy soliciting material nor is it incorporated into this Proxy
Statement.
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SHAREHOLDER PROPOSALS
A shareholder who intends to nominate a candidate for election to the Board
of Directors or to present a proposal of business at the 2000 Annual Meeting
and desires that information regarding the proposal be included in the 2000
proxy statement and proxy materials must ensure that such information is
received in writing by the Secretary of the Company at the Company's principal
executive offices not later than November 30, 1999. In addition, the proxy
solicited by the Board of Directors for the 2000 Annual Meeting will confer
discretionary authority to vote on any shareholder proposal presented at that
meeting, unless the Company receives notice of such proposal not later than
February 12, 2000.
By Order of the Board of Directors
/s/ Michael J. Kennedy
Michael J. Kennedy
Secretary
Seattle, Washington
March 30, 1999
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The Board of Directors Recommends a vote FOR the proposals regarding:
(1) ELECTION OF DIRECTORS: Class II: Dr. Max E. Link, Mr. Terrence M. Morris and
Dr. Wilfred E. Jaeger
<TABLE>
<CAPTION>
FOR WITHHOLD
<S> <C> <C>
all nominees listed above [_] Authority to vote for all [_] (INSTRUCTIONS: To withhold authority to vote for any
(except as marked to the nominees above individual nominee, write that nominee's name on the
contrary to the right) line provided below.)
____________________________________________________
(2) Ratification of the selection of FOR AGAINST ABSTAIN
Ernst & Young LLP as independent
auditors of the Company for the [_] [_] [_]
fiscal year ending December 31, 1999.
I/We plan to attend the Annual Meeting. [_] I/We will not be attending the Annual Meeting. [_]
Number of Attendees [_]
________________ ________________ PLEASE MARK ALL [X]
ACCOUNT NUMBER SHARES CHOICES LIKE THIS
SIGNATURE __________________________________ DATE ___________________
</TABLE>
Cell Therapeutics, Inc.
Annual Meeting of the Shareholders
April 23, 1999
This Proxy is Solicited on Behalf of the Board of Directors
The shareholder(s) hereby appoints James A. Bianco, M.D. and Alan Krubiner, and
each of them, as proxies, with full power of substitution, to represent and vote
for and on behalf of the shareholder(s) the number of shares of Common Stock of
Cell Therapeutics, Inc. that the shareholder(s) would be entitled to vote if
personally present at the Annual Meeting of Shareholders to be held on April 23,
1999, or at any adjournment or postponement thereof. The shareholder(s) directs
that this proxy be voted as follows:
In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the meeting. This proxy, when properly executed,
will be voted in the manner directed herein by the shareholder(s). IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED "FOR ALL NOMINEES" IN ITEM 1 AND
"FOR" ITEM 2.
Please sign exactly as your name(s) appears on your stock certificate(s). When
shares are held jointly, each person must 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.
