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Filing
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Filed by a Party other than the Registrant o
Check the appropriate box:
o | Preliminary Proxy Statement | |
o | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
þ | Definitive Proxy Statement | |
o | Definitive Additional Materials | |
o | Soliciting Material Pursuant to §240.14a-12 |
ADVENTRX PHARMACEUTICALS, INC.
Payment of Filing Fee (Check the appropriate box):
þ | No fee required. | |
o | 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 Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): | ||
(4) | Proposed maximum aggregate value of transaction: | ||
(5) | Total fee paid: | ||
o | Fee paid previously with preliminary materials. | |
o | 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: | ||
(2) | Form, Schedule or Registration Statement No.: | ||
(3) | Filing Party: | ||
(4) | Date Filed: | ||
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ADVENTRX PHARMACEUTICALS, INC.
6725 Mesa Ridge Road, Suite 100
San Diego, CA 92121
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held June 3, 2009
6725 Mesa Ridge Road, Suite 100
San Diego, CA 92121
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held June 3, 2009
The Annual Meeting of Stockholders of ADVENTRX Pharmaceuticals, Inc. (the Company) will be
held on June 3, 2009 at 9:00 a.m. local time at the Companys offices, 6725 Mesa Ridge Road,
Suite 100, San Diego, California, USA 92121. The meeting is being held for the following purposes,
as more fully described in the accompanying Proxy Statement:
1. To elect six directors to hold office until the next Annual Meeting of Stockholders and
until their successors are elected and qualified.
2. To ratify the appointment of J.H. Cohn LLP as the Companys independent registered public
accounting firm for the fiscal year ending December 31, 2009.
3. To transact such other business as may properly come before the meeting or any
adjournments or postponements thereof.
Only stockholders of record at the close of business on April 20, 2009 will be entitled to
notice of, and to vote at, the meeting or any adjournments or postponements thereof. A list of
stockholders entitled to vote at the meeting will be available for
inspection by any stockholder for any purpose
relating to the meeting during ordinary business hours at the Companys corporate offices located
at 6725 Mesa Ridge Road, Suite 100, San Diego, California, USA 92121 for ten days prior to
the meeting, and will also be available for inspection at the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
![-s- Brian M. Culley](https://cdn.kscope.io/612f47825e45ba4586bf14c6c4b87959-c84088c8408801.gif)
Brian M. Culley
Chief Business Officer and Senior Vice President
Chief Business Officer and Senior Vice President
San Diego, CA
April 30, 2009
April 30, 2009
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDERS MEETING TO BE HELD ON JUNE 3, 2009
Our proxy statement is enclosed. Financial and other information concerning ADVENTRX
Pharmaceuticals, Inc. is contained in the enclosed annual report on Form 10-K for the fiscal year
ended December 31, 2008. This notice of annual meeting of stockholders, the accompanying proxy
statement, and our annual report for the fiscal year ended December 31, 2008 may also be viewed at
https://www.proxydocs.com/anx.
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YOUR VOTE IS IMPORTANT!
You are cordially invited to attend the 2009 Annual Meeting of Stockholders. However, to
ensure that your shares are represented at the meeting, please submit your proxy or voting
instructions by mail, using the return envelope provided. Please see the instructions on the proxy
and voting instruction card. Submitting a proxy or voting instructions will not prevent you from
attending the meeting and voting in person, if you so desire, but will help the Company secure a
quorum and reduce the expense of additional proxy solicitation.
ADVENTRX Pharmaceuticals, Inc.
6725 Mesa Ridge Road, Suite 100
San Diego, CA 92121
(858) 552-0866
6725 Mesa Ridge Road, Suite 100
San Diego, CA 92121
(858) 552-0866
PROXY STATEMENT
2009 ANNUAL MEETING OF STOCKHOLDERS
ADVENTRX Pharmaceuticals, Inc. (the Company) is furnishing this Proxy Statement and the
enclosed proxy card in connection with the solicitation of proxies by the Board of Directors of the
Company (the Board) for use at the Annual Meeting of Stockholders to be held on June 3, 2009, at
9:00 a.m. local time, at the Companys offices, 6725 Mesa Ridge Road, Suite 100, San Diego,
California, USA 92121, and at any adjournments or postponements thereof (the Annual Meeting).
These materials are being mailed to stockholders on or about April 30, 2009.
Only holders of record of the Companys common stock as of the close of business on April 20,
2009 (the Record Date) are entitled to vote at the Annual Meeting. Stockholders who hold shares
of the Company in street name may vote at the Annual Meeting only if they hold a valid proxy from
their broker. As of the Record Date, there were 90,252,572 shares of common stock outstanding.
A majority of the outstanding shares of common stock entitled to vote at the Annual Meeting
must be present in person or by proxy in order for there to be a quorum at the Annual Meeting.
Stockholders of record who are present at the Annual Meeting in person or by proxy and who abstain
from voting, including brokers holding customers shares of record who cause abstentions to be
recorded at the Annual Meeting, will be included in the number of stockholders present at the
Annual Meeting for purposes of determining whether a quorum is present.
Each stockholder of record is entitled to one vote at the Annual Meeting for each share of
common stock held by such stockholder on the Record Date. Stockholders do not have cumulative
voting rights. Stockholders may vote their shares by using the proxy card enclosed with this Proxy
Statement. All proxy cards received by the Company that are properly signed and have not been
revoked will be voted in accordance with the instructions contained in the proxy cards. If a signed
proxy card is received which does not specify a vote or an abstention, the shares represented by
that proxy card will be voted for the nominees to the Board listed on the proxy card and in this
Proxy Statement and for the ratification of the appointment of J.H. Cohn LLP as the Companys
independent registered public accounting firm for the fiscal year ending December 31, 2009. The
Company is not aware, as of the date hereof, of any matters to be voted upon at the Annual Meeting
other than those stated in this Proxy Statement and the accompanying Notice of Annual Meeting of
Stockholders. If any other matters are properly brought before the Annual Meeting, the enclosed
proxy card gives discretionary authority to the persons named as proxies to vote the shares
represented by the proxy card in their discretion.
Under the Companys bylaws, if a quorum exists at the Annual Meeting, the affirmative vote of
a majority of the votes cast at the Annual Meeting with respect to each director nominee is
required for the election of each director nominee. A properly executed proxy marked withhold
authority to vote with respect to the election of one or more directors will not be voted with
respect to the director or directors indicated, although it will be counted for purposes of
determining whether there is a quorum. The affirmative vote of the holders of a majority of the
shares represented in person or by proxy and entitled to vote at the Annual Meeting is required to
approve the ratification of the appointment of J.H. Cohn LLP. A properly executed proxy marked
Abstain with respect to such matter will not be voted, although it will be counted for purposes
of determining whether there is a quorum. Accordingly, a withhold of authority or an abstention
will have the effect of a negative vote.
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For shares held in street name through a broker or other nominee, the broker or nominee may
not be permitted to exercise voting discretion with respect to some of the matters to be acted
upon. Thus, if stockholders do not give their broker or other nominee specific instructions, their
shares may not be voted on those matters for which specific instructions are required and their
shares will not be counted in determining the number of shares necessary for approval. Shares
represented by such broker non-votes will, however, be counted in determining whether there is a
quorum.
A stockholder of record may revoke a proxy at any time before it is voted at the Annual
Meeting by (a) delivering a proxy revocation or another duly executed proxy bearing a later date to
ADVENTRX Pharmaceuticals, Attn: Secretary, 6725 Mesa Ridge Road, Suite 100, San Diego, CA 92121 or
(b) attending the Annual Meeting and voting in person. Attendance at the Annual Meeting will not
revoke a proxy unless the stockholder actually votes in person at the Annual Meeting.
The proxy card accompanying this Proxy Statement is solicited by the Board. The Company will
pay all of the costs of soliciting proxies. In addition to solicitation by mail, officers,
directors and employees of the Company may solicit proxies personally, or by telephone, without
receiving additional compensation. Although the Company has not yet done so, it may retain a firm
to assist in the solicitation of proxies in connection with the Annual Meeting. The Company would
pay such firm, if any, customary fees, expected to be no more than $15,000, plus expenses. The
Company, if requested, will also reimburse brokers, banks and other fiduciaries who hold shares for
beneficial owners for their reasonable out-of-pocket expenses incurred in connection with
forwarding these materials to the beneficial owners.
BOARD OF DIRECTORS
The name, age and year in which the term expires of each member of the Board is set forth
below:
Term Expires | ||||||
on the | ||||||
Annual Meeting | ||||||
Name | Age | Position(s) | Held in the Year | |||
Mark N.K. Bagnall | 52 | Director |
2009 | |||
Alexander J. Denner | 39 | Compensation Committee |
2009 | |||
Michael M. Goldberg | 50 | Audit Committee and Compensation Committee (chair) |
2009 | |||
Jack Lief | 63 | Chair of the Board, Audit Committee (chair) and Compensation Committee |
2009 | |||
Mark J. Pykett | 45 | Audit Committee and Nominating & Governance Committee (chair) |
2009 | |||
Eric K. Rowinsky | 52 | Nominating & Governance Committee and Research & Development Committee (chair) |
2009 |
At the Annual Meeting, the stockholders will vote on the election of six directors to serve
until the annual meeting of stockholders in 2010 and until their successors are elected and
qualified. The Companys bylaws allow the authorized number of directors to be not less than three
or more than nine; currently, the size of the Board is set at six. Proxies may not be voted for a
greater number of persons than the number of nominees named.
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NOMINEES FOR ELECTION TO THE BOARD
The following individuals have been nominated for re-election to the Board:
Mark N.K. Bagnall, C.P.A. Mr. Bagnall has served as a director since February 2004. Mr.
Bagnall currently serves as chief financial officer of ProGenTech Limited, a life science and
molecular diagnostics company committed to developing next generation instrumentation for nucleic
acid and protein purification and molecular diagnostic testing, a position he has held since March
2009. Mr. Bagnall has held senior management positions in the biotechnology industry for over 20
years. During his time in the industry, he has held positions in both finance and business
development and has managed equity and debt financings, corporate partnering and
licensing deals and mergers and acquisitions transactions. From April 2008 to December 2008,
Mr. Bagnall served as the Companys chief financial officer, executive vice president and
treasurer, and from November 2008 to December 2008, he served as interim principal executive
officer. Since December 2008, he has served as a consultant to the Company, and since February
2009, he has served as the Companys interim principal financial and accounting officer. From June
2000 to June 2007, Mr. Bagnall served as senior vice president and chief finance and operations
officer of Metabolex, Inc., a biotechnology company dedicated to the discovery and development of
novel therapeutics for diabetes and related metabolic disorders. Prior to joining Metabolex,
Mr. Bagnall held the top financial position at four life science companies: Metrika, Inc., a
privately held diagnostics company, and three publicly held biotechnology companies, Progenitor,
Inc., Somatix Therapy Corporation, and Hana Biologics, Inc. Mr. Bagnall is a director of VIA
Pharmaceuticals, Inc., a publicly held biotechnology company focused on the development of
compounds for the treatment of cardiovascular disease. In addition, he is a co-founder and director
of the Association of Bioscience Financial Officers, an international organization of life science
finance professionals. Mr. Bagnall received his B.S. in Business Administration from the
University of California at Berkeley, Haas School of Business and is a Certified Public Accountant.
Alexander J. Denner, Ph.D. Dr. Denner has served as a director since October 2006. Dr. Denner
currently serves as managing director of entities affiliated with Carl C. Icahn, including Icahn
Partners, Icahn Master, Icahn Master II and Icahn Master III. Icahn Partners, Icahn Master, Icahn
Master II and Icahn Master III are private investment funds. Dr. Denner has served in this position
since August 2006. From April 2005 to May 2006, Dr. Denner served as a portfolio manager
specializing in healthcare investments for Viking Global Investors. Previously, he served in a
variety of roles at Morgan Stanley, beginning in 1996, including as portfolio manager of healthcare
and biotechnology mutual funds. Dr. Denner was the chairman of the executive committee of ImClone
Systems Incorporated, a publicly held biopharmaceutical company, and a director from April 2006
until the company was purchased in November 2008. Dr. Denner received his S.B. degree from the
Massachusetts Institute of Technology and his M.S., M.Phil. and Ph.D. degrees from Yale University.
Dr. Denner was nominated by, among others, entities affiliated with Carl C. Icahn. Information
regarding the arrangement by which Dr. Denner was selected as a director is located below under
Director Nominations.
Michael M. Goldberg, M.D. Dr. Goldberg has served as a director since January 2004.
Dr. Goldberg currently is a managing partner of Montaur Capital Partners, an investment firm, a
position he has held since January 2007. From August 1990 to January 2007, Dr. Goldberg was
chairman and chief executive officer of Emisphere Technologies, Inc., a biopharmaceutical company.
Prior to this, Dr. Goldberg was a vice president for The First Boston Corporation, where he was a
founding member of the Healthcare Banking Group. He received a B.S. from Rensselaer Polytechnic
Institute, an M.D. from Albany Medical College of Union University and an M.B.A. from Columbia
University Graduate School of Business.
Jack Lief. Mr. Lief has served as a director since September 2006 and as chair of the Board
since May 2007. Mr. Lief is a co-founder and since April 1997 has served as president, chief
executive officer and a director of Arena Pharmaceuticals, Inc., a publicly held clinical-stage
biopharmaceutical company focused on the discovery, development and commercialization of small
molecule drugs targeting G protein-coupled receptors. From 1995 to April 1997, Mr. Lief served as
an advisor and consultant to numerous biopharmaceutical organizations. From 1989 to 1994, Mr. Lief
served as senior vice president, corporate development and secretary of Cephalon, Inc., a
biopharmaceutical company. From 1983 to 1989, Mr. Lief served as director of business development
and strategic planning for Alpha Therapeutic Corporation, a manufacturer of biological products.
Mr. Lief joined Abbott Laboratories, a pharmaceutical company, in 1972, where he served until 1983,
most recently as the head of international marketing research. Mr. Lief is a director of
Accumetrics, Inc., a developer and marketer of diagnostic tests, ReqMed Company, Ltd., a provider
of partnering opportunities, R&D strategies and bio-venture funding, and TaiGen Biotechnology Co.,
Ltd., a biotechnology company. Mr. Lief is also an executive board member of BIOCOM, a life science
industry association representing more than 450 member companies in San Diego and Southern
California, and he was the chairman of BIOCOM from March 2005 to March 2006. Mr. Lief holds a B.A.
from Rutgers University and an M.S. in Psychology (Experimental and Neurobiology) from Lehigh
University.
Mark J. Pykett, Ph.D., M.B.A., V.M.D. Dr. Pykett has served as a director since February
2004. Dr. Pykett currently is president and chief operating officer of Alseres Pharmaceuticals,
Inc. (formerly Boston Life Sciences, Inc.), positions he has held since November 2004. From May
1996 until April 2003, Dr. Pykett served as president and chief executive officer and a director of
Cytomatrix, LLC, a privately held biotechnology company focused on the research, development and
commercialization of novel cell-based therapies that Dr. Pykett co-founded. Cytomatrix was acquired
by Cordlife, Pte. Ltd., a subsidiary of CyGenics Ltd., a publicly held biotechnology company listed
on the Australian Stock Exchange. From April 2003 to February 2004, Dr. Pykett served as president
of Cordlife and then as president and director of CyGenics from February 2004 until November 2004.
In addition, Dr. Pykett served as a director of Cordlife from April 2003 through November 2005 and
a director of Oramax, LLC, a development stage dental implant company developing biomaterials for
dental prostheses, from 2000 through 2006. Dr. Pykett graduated Phi Beta Kappa, Summa Cum Laude
from Amherst College, holds a veterinary degree, Phi Zeta, Summa Cum Laude, a doctorate in
molecular biology from the University of Pennsylvania, and received an M.B.A., Beta Gamma Sigma,
from Northeastern University. He completed post-doctoral fellowships at the University of Pennsylvania and Harvard University. Dr. Pykett held
an adjunct faculty position at the Harvard School of Public Health from 1997 to 2004.
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Eric K. Rowinsky, M.D. Dr. Rowinsky has served as a director since February 2008.
Dr. Rowinsky currently is chief medical officer, a position he has held since February 2005, and
executive vice president, a position he has held since December 2007, of ImClone Systems
Incorporated, a wholly-owned subsidiary of Eli Lilly and Company. Dr. Rowinsky held the position of
director of the Institute of Drug Development (IDD) at the Cancer Therapy and Research Center
from 2002 to 2004 and was the director of clinical research at the IDD from 1996 to 2002. In
addition, he held the SBC Endowed Chair for Early Drug Development at the IDD. From 1996 to 2006,
Dr Rowinsky was also a clinical professor of medicine (division of medical oncology) at the
University of Texas Health Science Center, San Antonio, Texas. Dr. Rowinsky also served as an
associate professor of oncology at Johns Hopkins University from 1988 until 1996. He served on the
Board of Scientific Counselors of the National Cancer Institute from 2004 to 2007. Dr. Rowinsky
received a B.A. degree from New York University and an M.D. degree from the Vanderbilt University
School of Medicine. Following his residency in internal medicine, he completed fellowship training
in medical oncology at the Johns Hopkins University School of Medicine.
There are no family relationships among any of the Companys directors or executive officers.
CORPORATE GOVERNANCE
During 2008, the Board met seventeen times, the audit committee met seven times and action was
taken by unanimous written consent once, the compensation committee met seven times, the nominating
and governance committee met three times and action was taken by unanimous written consent once and
the research and development committee met three times. During 2008, each member of the Board
nominated for re-election attended 75% or more of the aggregate of (i) the total number of Board
meetings held during the period of such members service and (ii) the total number of meetings of
committees on which such member served, during the period of such members service, except that
Dr. Goldberg attended five, or approximately 71%, of the total number of audit committee meetings
held during 2008. The Company encourages all directors to attend its annual Stockholder meetings.
Messrs. Bagnall, Levine and Lief attended the Companys 2008 annual meeting of stockholders.
Director Independence
The Board has determined that Dr. Denner, Dr. Goldberg, Mr. Lief, Dr. Pykett and Dr. Rowinsky
are independent under the rules of the NYSE Amex (formerly, the American Stock Exchange). Before
his employment by the Company in April 2008, Mr. Bagnall was also independent under the rules of
the NYSE Amex. Under applicable rules of the NYSE Amex and the Securities and Exchange Commission
(the SEC), the existence of certain transactions above certain thresholds between a director and
the Company are required to be disclosed and preclude a finding by the Board that the director is
independent. In addition to transactions required to be disclosed under these NYSE Amex and SEC
rules, in making its independence determination with respect to Dr. Denner, the Board considered
Dr. Denners position with entities affiliated with Mr. Icahn and such entities (a) ownership
position in the Company and (b) rights under that certain Rights Agreement, dated July 27, 2005, as
amended (the Rights Agreement), pursuant to which such entities, along with others, are, among
other things, entitled to participate in future sales by the Company of additional securities and
cause the Board to nominate a Board nominee selected by them. After considering these relationships
and transactions, the Board concluded that they did not interfere with Dr. Denners ability to
exercise independent judgment in carrying out his responsibilities as a member of the Board.
Board Committees
The Board currently has standing audit, compensation and nominating and governance committees.
In February 2008, the Board created a research and development committee.
Audit Committee. The audit committee currently consists of Mr. Lief (chair), Dr. Goldberg and
Dr. Pykett. During 2008 until his employment by the Company in April 2008, Mr. Bagnall served as a
member and chair of the audit committee. The Board has determined that all members of the audit
committee are independent directors and meet the eligibility standards for audit committee service
under the rules of the NYSE Amex. The Board has determined that Mr. Lief qualifies as an audit
committee financial expert as defined by the rules of the SEC. The purpose of the audit committee
is to oversee the accounting and financial reporting processes of the Company and audits of its
financial statements. The responsibilities of the audit committee include appointing and providing
for the compensation of the independent accountants to conduct the annual audit of the Companys
accounts, reviewing the scope and results of the independent audits, reviewing and evaluating
internal accounting policies, and approving all professional services to be
provided to the Company by its independent accountants. The audit committee is governed by a
written charter approved by the Board.
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Compensation Committee. The compensation committee currently consists of Dr. Goldberg
(chair), Dr. Denner and Mr. Lief. During 2008 until May 2008, Dr. Pykett served as a member of the
compensation committee. The Board has determined that all members of the compensation committee are
independent directors under the rules of the NYSE Amex. The compensation committee administers the
Companys benefit plans, reviews, approves and administers all compensation arrangements for
executives, and establishes and reviews general policies relating to the compensation and benefits
of the Companys executives and other personnel. The compensation committee meets several times a
year and consults with independent compensation consultants, as it deems appropriate, to review,
analyze and set compensation packages for the Companys executives. The compensation committee is
governed by a written charter approved by the Board.
Under its charter, the compensation committee has authority to determine the amount and form
of compensation paid to the Companys chief executive officer, and to take such action, and to
direct the Company to take such action, as is necessary and advisable to compensate the Companys
chief executive officer in a manner consistent with its determinations, and shall deliberate and
vote on all such actions outside the presence of the Companys chief executive officer. In
accordance with its charter, the compensation committee will review at least annually the
performance of the Companys chief executive officer, including in light of any goals and
objectives established for such performance, and in light of such review determine his or her
compensation.
The compensation committee has authority to determine the amount and form of compensation paid
to the Companys executives, employees, consultants and advisors and to review the performance of
such persons in order to determine appropriate compensation. The compensation committee has
authority to take such action, and to direct the Company to take such action, as is necessary and
advisable to compensate such persons and to implement such policies and practices in a manner
consistent with its determinations. The Committee may delegate its authority on these matters with
regard to non-executive employees of the Company to officers and other appropriate supervisory
personnel of the Company, subject to applicable law and regulations.
Except with respect to its responsibilities regarding setting compensation for the Companys
chief executive officer and the Companys other executives, the compensation committee may delegate
its authority to individual members of the compensation committee or other members of the Board. In
addition, to the extent permitted by applicable law and regulations, the compensation committee may
delegate to one or more officers of the Company (or other appropriate supervisory personnel) the
authority to grant stock options, stock appreciation rights, restricted stock units and performance
units to employees (who are not officers or members of the Board) of the Company or of any
subsidiary of the Company; provided, however that (a) the number of shares of the Companys
common stock underlying such options, stock appreciation rights, restricted stock units and
performance units are consistent with guidelines previously approved by the compensation committee;
(b) the per-share exercise or purchase price of such awards equals the fair market value of the
Companys common stock on the date of grant; and (c) the vesting and other terms that apply to such
awards are the same terms as apply under the Companys standard form of agreement under the
applicable equity compensation plan, provided that such officer(s) may, in such officer(s)
discretion, grant awards that are fully vested on the date of grant of the award or grant awards
with more restrictive vesting requirements.
Historically, including in 2008, the Companys chief executive officer reviewed and assessed
the performance of the other executive officers for the preceding year in the first quarter of each
year and subsequently made recommendations to the compensation committee regarding the amount and
form of those officers compensation packages for the current year. The compensation committee
generally gives substantial deference to the chief executive officers recommendations because the
members of that committee generally believe the chief executive officer is in the best position to
evaluate the other executive officers past performance and anticipated contributions. From
September 2004 until the end of his employment relationship with the Company in October 2008, the
Companys chief executive was Mr. Levine. During the first quarter of 2008, Mr. Levine evaluated
the 2007 performance of the Companys other executive officers and, based on those officers
individual performance and anticipated contributions and the Companys 2007 performance and 2008
goals and projections, made recommendations as to 2008 compensation for those executive officers to
the compensation committee. The compensation committee took Mr. Levines recommendations into
consideration, according them substantial deference, in setting the executive officers 2008
compensation.
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In February 2007, the compensation committee retained Frederic W. Cook & Co., Inc., a
nationally-recognized compensation consulting firm, to provide an independent evaluation of the
Companys compensation practices. The compensation committee retained responsibility and authority
over the scope of services provided by F.W. Cook and F.W. Cook reported and was responsible to the
compensation committee. In connection with retaining F.W. Cook, the compensation committee charged
F.W. Cook with, among other things, conducting a competitive assessment of the Companys executive
compensation practices, in particular those
applicable to the chief executive officer, which included assisting the compensation committee
in identifying a peer group of companies against which to evaluate the competitiveness of the
Companys executive compensation packages. In February 2007, F.W. Cook completed its analysis of
the chief executive officers compensation and, in May 2007, completed its analysis of the other
executive officers compensation. Other than reviewing with the compensation committee the results
of its analysis and providing corresponding written reports, the compensation committee generally
did not involve F.W. Cook in its 2007 compensation determinations. In connection with determining
2008 executive compensation, the compensation committee reviewed and evaluated the information
previously provided by F.W. Cook and contacted F.W. Cook with certain specific questions, but
otherwise did not involve F.W. Cook in its 2008 compensation determinations.
Nominating and Governance Committee. The nominating and governance committee currently
consists of Dr. Pykett (chair) and Dr. Rowinsky, each of whom the Board has determined is an
independent director under the rules of the NYSE Amex. During 2008 and until May 2008, Dr. Goldberg
and Mr. Lief served on the nominating and governance committee. The nominating and governance
committees responsibilities include recommending to the Board nominees for possible election to
the Board and providing oversight with respect to corporate governance and succession planning
matters. The nominating and governance committee is governed by a written charter approved by the
Board.
Research and Development Committee. Currently, the sole member and chair of the research and
development committee is Dr. Rowinsky. The research and development committee assists the Board in
evaluating the Companys basic scientific and manufacturing research, clinical development and
regulatory affairs and the allocation of the Companys resources.
Charters for the Boards audit, compensation and nominating and governance committees, as well
as the Companys corporate governance guidelines, are posted on the Companys corporate website at:
www.adventrx.com.
DIRECTOR NOMINATIONS
Criteria for Board Membership. In selecting candidates for appointment or re-election to the
Board, the nominating and governance committee considers the appropriate balance of experience,
skills and characteristics required of the Board, and seeks to insure that at least a majority of
the directors are independent under the rules of the NYSE Amex, and that members of the audit
committee meet the financial literacy and sophistication requirements under the rules of the NYSE
Amex (including that at least one of them qualifies as an audit committee financial expert under
the rules of the SEC). Nominees for director are selected on the basis of their depth and breadth
of experience, wisdom, integrity, ability to make independent analytical inquiries, understanding
of the Companys business environment, willingness to devote adequate time to Board duties, the
interplay of the nominees experience and skills with those of other directors and the extent to
which the nominee would be a desirable addition to the Board and any committees of the Board.
Stockholder Nominees. Other than under the Rights Agreement, the Company has never received a
proposal from a stockholder of the Company to nominate a director. The nominating and governance
committee will consider qualified candidates for director suggested by stockholders applying the
criteria located above under the caption Criteria for Board Membership. Any such nominations must
be submitted to the nominating and governance committee c/o the secretary of the Company and must
include the following information: a statement that the writer is a stockholder of the Company and
is proposing a candidate for consideration by the nominating and governance committee; the name,
age, business address and residence address of the nominee; a statement of the nominees business
and educational experience; the principal occupation or employment of the nominee; the class and
number of shares of the Company that are beneficially owned by the nominee; a detailed description
of all relationships, arrangements or understandings between the proposing stockholder and the
nominee and any other person or persons (naming such person or persons) pursuant to which the
nominations are to be made by the stockholder; a detailed description of all relationships,
arrangements or understandings between the nominee and any service-provider, supplier or competitor
of the Company; information regarding each of the criteria located above under the caption
Criteria for Board Membership in sufficient detail to allow the nominating and governance
committee to evaluate the nominee; and a statement from the nominee that the nominee is willing to
be considered and willing to serve as a director if nominated and elected. The proposing
stockholder must also include the following information with respect to such stockholder: the name
and address, as they appear on the Companys books, and the class and number of shares of the
Company that are beneficially owned. In addition, the Companys bylaws contain provisions which
address the process by which a stockholder may nominate an individual to stand for election to the
Board at any annual meeting of stockholders. Such nominations may be made only if the stockholder
has given timely written notice to the secretary of the Company containing the information required
by the Companys bylaws. To be timely, such notice must be received at the Companys principal
executive offices not earlier than the 120th day, nor later than the close of business on the 90th
day, prior to the first anniversary of the date of the preceding years annual meeting as first
specified in the Companys notice of meeting (without regard to any postponements or adjournments
of such meeting after such notice was first sent), except that if no annual meeting was held in
the previous year or the date of the annual meeting is more than 30 days earlier or later than such
anniversary date, such notice must be received not earlier than the 120th day prior to the date of
such annual meeting and not later than the close of business on the later of the 90th day prior to
the date of such annual meeting or the 10th day following the date on which public announcement of
the date of such meeting is first made by the Company.
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Process for Identifying and Evaluating Nominees. The Board, with advice from the chair of the
nominating and governance committee, believes the Company is well-served by its current directors.
In the ordinary course, absent special circumstances or a material change in the criteria for Board
membership, the nominating and governance committee will re-nominate incumbent directors who
continue to be qualified for Board service and are willing to continue as directors. If an
incumbent director is not standing for re-election, or if a vacancy on the Board occurs between
annual stockholder meetings and the Board determines to fill such vacancy, the nominating and
governance committee will seek out potential candidates for Board appointment who meet the criteria
for selection as a nominee and have the specific qualities or skills being sought. Director
candidates will be selected based on input from members of the Board, senior management of the
Company and, if the nominating and governance committee deems appropriate, a third-party search
firm. The nominating and governance committee will evaluate each candidates qualifications and
check relevant references; in addition, such candidates will be interviewed by at least one member
of the nominating and governance committee. Based on this input, the nominating and governance
committee will evaluate which of the prospective candidates is qualified to serve as a director and
whether the nominating and governance committee should recommend to the Board that this candidate
be appointed to fill a current vacancy on the Board, or presented for the approval of the
stockholders, as appropriate.
Board Nominees for the 2009 Annual Meeting. Each of the nominees listed in this Proxy
Statement are current directors standing for re-election. Dr. Rowinsky, who was first appointed to
the Board in February 2008 and is standing for re-election at the Annual Meeting, was recommended
as a nominee by Dr. Denner.
Pursuant to the Rights Agreement, the Company is required to cause the Board to nominate a
Board nominee (the Purchaser Designee) selected by the Purchasers who at the time own a
majority of the Purchased Shares. Dr. Denner is the current Purchaser Designee. Purchasers, as
defined in the Rights Agreement, refers to those entities that purchased common stock and warrants
of the Company in a private transaction in July 2005. Purchased Shares, as defined in the Rights
Agreement, refers to those shares of common stock outstanding and issuable upon exercise of
warrants issued to the Purchasers in connection with July 2005 transaction. The Purchasers right
to select a Purchaser Designee for nomination to the Board shall terminate upon the earlier of
(i) July 27, 2012, (ii) the date that the Purchasers aggregate holdings of Purchased Shares
(either of record or beneficially) is, as a result of sales or other dispositions thereof, equal to
less than 50% of the aggregate number of shares purchased by the Purchasers in connection with the
July 2005 transaction, and (iii) at the time of a change of control of the Company.
Pursuant to that certain Second Amendment to Rights Agreement, dated February 25, 2008 (the
Second Amendment), the Rights Agreement was amended to allow the Board to increase the authorized
number of directors from six to seven if the vacancy created by such action was filled by a
majority of the Board directors then in office, which majority must include the Purchaser Designee
(as defined in the Rights Agreement), if any; provided that, if at any time there are seven members
of the Board and one of such members is removed, resigns, retires or dies and the Purchaser
Designee, if any, does not approve a successor, the Company will do those things reasonably
necessary and within its control to, as soon as reasonably practicable after the effective date of
such removal, resignation, retirement or death, set the authorized number of Board directors at
six. The Second Amendment confirmed that Dr. Denner, and not Dr. Rowinsky, is the Purchaser
Designee. Following the resignation of Evan M. Levine as a member of the Board in December 2008,
the Board set the authorized number of directors constituting the Board at six.
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COMMUNICATIONS WITH DIRECTORS
Stockholders who wish to communicate with the Companys directors to report complaints or
concerns related to accounting, internal accounting controls or auditing may do so using the audit
committees procedures for the receipt of such communications. These procedures allow submitting
the complaint or concern telephonically as set forth in the Companys Code of Business Conduct and
Ethics, which is available on the Companys website at www.adventrx.com.
If any stockholder of the Company wishes to address questions regarding the business affairs
of the Company directly to the Board, or any individual director, the stockholder must submit the
inquiry in writing to: ADVENTRX Pharmaceuticals, Inc., Attn: Investor Relations, 6725 Mesa Ridge
Road, Suite 100, San Diego, CA 92121. Stockholders of the Company should indicate they are a
stockholder of the Company. Depending on the subject matter, investor relations will (alone or in
concert with other personnel of the Company, as appropriate): forward the inquiry to the chair of
the Board, who may forward the inquiry to a particular director if the
inquiry is directed towards a particular director; forward the inquiry to the appropriate
personnel within the Company (for instance, if it is primarily commercial in nature); attempt to
handle the inquiry directly (for instance, if it is a request for information about the Company or
a stock-related matter); or not forward the inquiry, if it relates to an improper or inappropriate
topic or is otherwise irrelevant.
The Company encourages all directors to attend annual stockholder meetings. Messrs. Bagnall,
Levine and Lief attended the Companys 2008 annual meeting of stockholders.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding beneficial ownership of the Companys
common stock as of April 6, 2009 (the Evaluation Date), or an earlier date for information based
on filings with the SEC, by (a) each person known to the Company to beneficially own more than 5%
of the outstanding shares of the Companys common stock, (b) each director and nominee for director
of the Company, (c) each of the named executive officers listed in the compensation tables
appearing later in this Proxy Statement and (d) all directors and executive officers of the Company
as a group. The information in this table is based solely on statements in filings with the SEC or
other reliable information. As of the Evaluation Date, there were 90,252,572 shares of the
Companys common stock outstanding.
Amount and | ||||||||
Nature of | ||||||||
Name and Address of | Beneficial | Percent of | ||||||
Beneficial Owner(1) | Ownership(2) | Class | ||||||
Principal Stockholders |
||||||||
Funds affiliated with Carl C. Icahn(3) c/o Icahn Associates Corp. 767 Fifth Avenue New York, NY 10153 |
8,648,648 | 9.1 | % | |||||
Directors and Named Executive Officers |
||||||||
Mark N.K. Bagnall(4) |
350,000 | * | ||||||
Alexander J. Denner(5) |
8,798,648 | 9.3 | % | |||||
Michael M. Goldberg(6) |
226,000 | * | ||||||
Jack Lief(7) |
150,000 | * | ||||||
Mark J. Pykett(8) |
208,000 | * | ||||||
Eric K. Rowinsky(9) |
100,000 | * | ||||||
Brian M. Culley(10) |
298,958 | * | ||||||
Patrick L. Keran(11) |
138,958 | * | ||||||
Evan M. Levine(12) |
4,395,000 | 4.9 | % | |||||
Greg Hanson |
0 | * | ||||||
Joan M. Robbins(13) |
156,500 | * | ||||||
All directors and executive officers as a group (10 persons)(14) |
10,366,970 | 10.8 | % |
* | Less than 1%. |
|
(1) | Unless otherwise indicated, the address of each of the listed persons
is c/o ADVENTRX Pharmaceuticals, Inc., 6725 Mesa Ridge Road,
Suite 100, San Diego, CA 92121. |
|
(2) | Beneficial ownership of shares is determined in accordance with the
rules of the SEC and generally includes any shares over which a
person exercises sole or shared voting or investment power, or of
which a person has the right to acquire ownership within 60 days
after the Evaluation Date. Except as otherwise noted, each person or
entity has sole voting and investment power with respect to the
shares shown. Unless otherwise noted, none of the shares shown as
beneficially owned on this table are subject to pledge. |
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(3) | Consists of (a) 864,865 shares of common stock held by High River
Limited Partnership (High River); (b) 1,660,540 shares of common
stock held by Icahn Partners LP (Icahn Partners);
(c) 1,798,919 shares of common stock held by Icahn Partners Master
Fund LP (Icahn Master); (d) 864,865 shares of common stock issuable
upon exercise of warrants held by High River; (e) 1,660,540 shares of
common stock issuable upon exercise of warrants held by Icahn
Partners and (f) 1,798,919 shares of common stock issuable upon
exercise of warrants held by Icahn Master. Based on the Companys
review of a Schedule 13D filed with the SEC on August 5, 2005 (the
Icahn 13D) by High River, Hopper Investments, LLC (Hopper),
Barberry Corp. (Barberry), Icahn Master, Icahn Offshore LP (Icahn
Offshore), CCI Offshore Corp. (CCI Offshore), Icahn Partners,
Icahn Onshore LP (Icahn Onshore), CCI Onshore Corp. (CCI Onshore)
and Mr. Carl C. Icahn, the Company believes that (i) Barberry, Hopper
and Mr. Icahn may be deemed to beneficially own (as that term is
defined in Rule 13d-3 under the Securities Exchange Act of 1934, as
amended) the shares (including warrant shares) held by High River;
(ii) CCI Onshore, Icahn Onshore and Mr. Icahn may be deemed to
beneficially own (as that term is defined in Rule 13d-3 under the
Securities Exchange Act of 1934, as amended) the shares (including
warrant shares) directly held by Icahn Partners; and (iii) CCI
Offshore, Icahn Offshore and Mr. Icahn may be deemed to beneficially
own (as that term is defined in Rule 13d-3 under the Securities
Exchange Act of 1934, as amended) the shares (including warrant
shares) directly held by Icahn Master because, in each of the
foregoing cases, such referenced persons are in a position to
directly or indirectly determine the investment and voting decisions
of the holder referenced. Barberry, Hopper, CCI Onshore, Icahn
Onshore, CCI Offshore, Icahn Offshore and Mr. Icahn each disclaim
beneficial ownership of such shares they may be deemed the beneficial
owner of for all other purposes. |
|
(4) | Consists of 350,000 shares of common stock subject to options
currently exercisable or exercisable within 60 days of the Evaluation
Date. |
|
(5) | Consists of (a) 150,000 shares of common stock subject to options
currently exercisable or exercisable within 60 days of the Evaluation
Date, (b) 864,865 shares of common stock held by High River,
(c) 1,660,540 shares of common stock held by Icahn Partners,
(d) 1,798,919 shares of common stock held by Icahn Master,
(e) 864,865 shares of common stock issuable upon exercise of warrants
held by High River, (f) 1,660,540 shares of common stock issuable
upon exercise of warrants held by Icahn Partners and
(g) 1,798,919 shares of common stock issuable upon exercise of
warrants held by Icahn Master. Dr. Denner is a Managing Director of
entities affiliated with Mr. Icahn, including Icahn Partners and
Icahn Master. Dr. Denner disclaims beneficial ownership of the shares
owned by High River, Icahn Partners and Icahn Master except to the
extent of his pecuniary interest therein. |
|
(6) | Includes 200,000 shares of common stock subject to options currently
exercisable or exercisable within 60 days of the Evaluation Date. |
|
(7) | Consists of 150,000 shares of common stock subject to an option
currently exercisable or exercisable within 60 days of the Evaluation
Date. |
|
(8) | Consists of (a) 200,000 shares of common stock subject to options
currently exercisable or exercisable within 60 days of the Evaluation
Date and (b) 8,000 shares of common stock held by Dr. Pykett and his
spouse, as joint tenants. |
|
(9) | Consists of 100,000 shares of common stock subject to an option
currently exercisable or exercisable within 60 days of the Evaluation
Date. |
|
(10) | Consists of 298,958 shares of common stock subject to an option
currently exercisable or exercisable within 60 days of the Evaluation
Date. |
|
(11) | Consists of 138,958 shares of common stock subject to an option
currently exercisable or exercisable within 60 days of the Evaluation
Date. |
|
(12) | Consists of (a) 4,320,000 shares of common stock held by Mark Capital
LLC, (b) 60,000 shares of common stock held by Mr. Levine in an
individual retirement account and (c) 15,000 shares of common stock
held by Mr. Levine and his father, as joint tenants with right of
survivorship. Mr. Levine is the managing member of Mark Capital LLC. |
|
(13) | Consists of 146,500 shares of common stock held by Dr. Robbins
husband and 10,000 shares of common stock held by Dr. Robbins and her
spouse, as joint tenants. |
|
(14) | Includes 6,008,646 shares of common stock subject to options and
warrants currently exercisable or exercisable within 60 days of the
Evaluation Date. Includes shares deemed beneficially owned by
Dr. Denner but as to which he disclaims beneficial ownership. |
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CURRENT EXECUTIVE OFFICERS
Set forth below is the name, age, position and a brief account of the business experience of
each of the Companys executive officers as of April 6, 2009:
Name | Age | Position | ||
Brian M. Culley | 37 | Interim Principal Executive officer, Chief Business Officer and Senior Vice President |
||
Mark N.K. Bagnall | 52 | Interim Principal Financial and Accounting Officer |
||
Patrick L. Keran | 37 | General Counsel, Secretary and Vice President, Legal |
||
Mark E. Erwin | 44 | Senior Vice President, Operations |
||
Michele L. Yelmene | 45 | Vice President, Regulatory Affairs and Quality |
Biographical information regarding Mr. Bagnall is provided above under Nominees for Election
to the Board.
Brian M. Culley, M.S., M.B.A. Mr. Culley currently is the Companys interim principal
executive officer, a position he has held since February 2009, and chief business officer and a
senior vice president, positions he has held since January 2007. Mr. Culley served as vice
president, business development since joining the Company in December 2004, and was appointed
senior vice president, business development in February 2006. From 2002 until 2004, Mr. Culley
managed all strategic collaborations and licensing agreements for Immusol, Inc. in San Diego, where
his most recent title was director of business development and marketing. From 1999 until 2000, he
was a licensing and marketing associate at the University of California, San Diego, department of
technology transfer & intellectual property services and from 1996 to 1999, he was a research
associate for Neurocrine Biosciences, Inc., where he performed drug discovery research. Mr. Culley
has over 15 years of experience in the biotechnology industry, including deal structure and
negotiation, licensing, due diligence, market and competitive research, and venture funding. He
received a B.S. in biology from Boston College, an M.S. in biochemistry from the University of
California, Santa Barbara and an M.B.A. from The Johnson School of Business at Cornell University
with an emphasis on private equity and entrepreneurship.
Patrick L. Keran, J.D. Mr. Keran currently is the Companys general counsel, a position he
has held since August 2006, secretary, a position he has held since September 2006, and vice
president, legal, a position he has held since January 2007. From April 2004 to August 2006,
Mr. Keran was associate general counsel at Isis Pharmaceuticals, a publicly held drug discovery and
development company. From February 2003 to April 2004, Mr. Keran practiced corporate law at the law
firm of Heller Ehrman LLP, specializing in public and private financings, licensing arrangements,
mergers and acquisitions and corporate governance matters. From September 1999 to February 2003,
Mr. Keran practiced law at the law firm of Brobeck Phleger & Harrison LLP where he had a similar
corporate practice. Mr. Keran is licensed to practice law in the State of California. Mr. Keran
received a B.A. from the University of California at San Diego and a J.D. from the University of
California at Berkeley, Boalt Hall School of Law.
Mark E. Erwin. Mr. Erwin currently is the Companys senior vice president, operations, a
position he has held since October 2008. From October 2007 to October 2008, Mr. Erwin was the
Companys vice president, commercialization. From September 2005 to October 2007, Mr. Erwin was
senior director, program development for Centric Health Finance, LLC, a centralized service
provider to healthcare providers, pharmaceutical manufacturers, distributors, payors and patients.
From October 2003 to June 2005, Mr. Erwin was director, oncology marketing for Ligand
Pharmaceuticals Corp., an oncology-focused biopharmaceutical company, and, from August 1999 to
October 2003, was head of government affairs and reimbursement for IDEC Pharmaceuticals, Inc.
Mr. Erwin began his career in a variety of sales and marketing roles with Eli Lilly & Co.,
including product manager for the launch of Lillys oncology business in the U.S. Mr. Erwin holds a
B.S. in chemistry from Purdue University.
Michele L. Yelmene. Ms. Yelmene currently is the Companys vice president, regulatory affairs
and quality, a position she has held since May 2008. From March 2007 to May 2008, Ms. Yelmene was
the Companys vice president, regulatory affairs. From October 2006 to March 2007, she consulted
for the Company regarding various regulatory matters. From April 2002 through March 2006,
Ms. Yelmene was executive director, clinical and regulatory affairs and corporate secretary for
Perlan Therapeutics, a privately held company focused on development of recombinant protein-based
drugs. From 1998 until 2002, Ms. Yelmene was director in biomedical operations for Genzyme
Corporation, a leading biotechnology company focused on rare inherited disorders, kidney disease,
orthopaedics, cancer, transplant and immune diseases, and diagnostic testing, and from 1996 through
1998 she was manager of medical and regulatory affairs for Mallinckrodt, a publicly held
pharmaceutical company acquired by Tyco Healthcare. Ms. Yelmene brings over 25 years of operational
and project management, clinical and scientific research and regulatory affairs experience in the
biotechnology and pharmaceutical industries. During her career, Ms. Yelmene was responsible for
clinical development, preparation, and presentation of 14 FDA-approved products and over 25
investigational new drug applications (INDs) for both pharmaceutical and biologics-based therapies
in the areas of viral infections, respiratory, CNS, metabolic and endocrine diseases, and lysosomal
storage disorders. She has participated in meetings with the FDA at all phases (pre-IND through
advisory committee) of clinical development. Ms. Yelmene is a member of the Regulatory Affairs
Professional Society, Drug Information
Association and Co-Chair of the FDA Committee at BIOCOM in San Diego. She received a B.S. in
biology and B.A. in English writing, both from Rider University.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has incorporated into its written review and approval policies certain procedures
designed to ensure that any proposed transaction in which the Company would be a participant and in
which any of the Companys directors, executive officers, holders of more than 5% of its common
stock, or any member of the immediate family of any of the foregoing would have a direct or
indirect material interest is reviewed by individuals within the Company (including its general
counsel) familiar with the requirements of Item 404 of Regulation S-K promulgated by the SEC. If
any such proposed transaction would require disclosure pursuant to Item 404(a), it will be
presented to the audit committee for review and, if appropriate, approval.
Since January 1, 2007, there has not been, nor currently are there proposed, any transactions
or series of similar transactions in which the Company was or is to be a participant and the amount
involved exceeds or will exceed the lesser of $120,000 or 1% of the average of the Companys total
assets at December 31, 2007 and 2008, and in which any director, executive officer, holder of more
than 5% of the Companys common stock or any member of the immediate family of any of the foregoing
persons had or will have a direct or indirect material interest, other than the transactions
described below.
Separation Arrangements with Former President and Chief Medical Officer
Dr. James Merritt was employed by the Company from September 2006 to January 2008 as its
President and Chief Medical Officer. Dr. Merritt was a named executive officer of the Company for
fiscal year 2007. In February 2008, the Company entered into a letter agreement regarding terms of
separation with Dr. Merritt. The terms of Dr. Merritts employment separation, as provided in the
letter agreement, are substantially identical to those set forth in his offer letter, dated
September 7, 2006, and in the stock option agreement relating to the stock option to purchase up to
300,000 shares of the Companys common stock granted to him in September 2006 in connection with
the commencement of his employment, both of which have been previously filed with the SEC, except
that the Company agreed to extend the exercise period of that option from June 29, 2008 to December
31, 2008.
As set forth in the letter agreement regarding terms of separation, in exchange for a mutual
release, beginning in February 2008, the Company paid Dr. Merritt an aggregate of $181,250, which
was equal to six months of Dr. Merritts base salary in effect at the time of termination, less
applicable state and federal payroll deductions, in substantially equal installments in accordance
with the Companys standard payroll practices over 13 pay periods. In addition, the Company paid
Dr. Merritt $16,038, less applicable state and federal payroll deductions, which the Company and
Dr. Merritt agreed satisfied in full the Companys obligation to pay all costs that the Company
would otherwise have incurred to maintain Dr. Merritts health, welfare and retirement benefits if
Dr. Merritt had continued for six continuous months after Dr. Merritts termination date. The
Company paid the $16,038 amount in substantially equal installments commencing on and continuing in
accordance with the same schedule described above with respect to payment of Dr. Merritts base
salary. Furthermore, the Company accelerated the vesting and extended the time to exercise vested
shares under the stock option granted to Dr. Merritt in September 2006 in connection with the
commencement of his employment. Under this option, Dr. Merritt was granted the right to purchase up
to 300,000 shares of the Companys common stock at a price of $2.86 per share, which right was
subject to a vesting schedule. As of Dr. Merritts termination date, this option was vested as to
100,000 shares and unvested as to 200,000 shares. Pursuant to the letter agreement regarding terms
of separation, the Company accelerated vesting as to 31,249 of the unvested shares, which resulted
in this option being vested as to a total of 131,249 shares, and extended the time for Dr. Merritt
to exercise the vested shares under this option to Noon (Pacific time) on December 31, 2008. Dr.
Merritt did not exercise the option by December 31, 2008 and, accordingly, it terminated. The
closing market price of the Companys common stock on December 31, 2008 was $0.08 per share, while
the exercise price of the option was $2.86 per share. In addition, at the time of his separation
from the Company, Dr. Merritt held another option that was vested as to 8,334 shares. Pursuant to
its terms, this option expired, unexercised, on April 28, 2008. The closing market price of the
Companys common stock on April 28, 2008 was $0.52 per share, while the exercise price of this
option was $2.75 per share.
Under the letter agreement regarding terms of separation, Dr. Merritt represented that he had
returned to the Company all of its property and data that had been in his possession or control and
acknowledged that he is bound by an agreement with the Company regarding the use and
confidentiality of the Companys confidential information.
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Indemnification of Officers and Directors
The Companys amended and restated certificate of incorporation and its bylaws provide that
the Company will indemnify each of its directors and officers to the fullest extent permitted by
the Delaware General Corporation Law. Further, the Company has entered into indemnification
agreements with each of its directors and officers, and has purchased a policy of directors and
officers liability insurance that insures its directors and officers against the cost of defense,
settlement or payment of a judgment under certain circumstances. On February 25, 2008, the Company
entered into an indemnification agreement with Dr. Rowinsky in connection with his appointment to
the Board. This agreement is in the same form as the indemnification agreements entered into
previously with current directors.
Other Transactions
In February 2008, the Company entered into a Second Amendment to Rights Agreement with certain
entities affiliated with Mr. Icahn. The amendment amended certain terms of the Rights Agreement to
permit the appointment of Dr. Rowinsky to the Board.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the Exchange Act) and SEC
rules require the Companys directors, executive officers and beneficial owners of more than 10% of
any class of equity security to file with the SEC initial reports of their ownership and reports of
changes in ownership of the common stock and other equity securities of the Company. These
reporting persons are required by SEC rules to furnish the Company with copies of all Section 16(a)
reports they file. Based solely on the Companys review of copies of the Forms 3, 4 and 5 (and any
amendments thereto) submitted to the Company during and with respect to 2008 and written
representations from the Companys directors and executive officers, such Section 16(a) filing
requirements were complied with during 2008, except that Dr. Robbins, the Companys former Chief
Scientific Officer and Senior Vice President, inadvertently filed a late Form 4 on May 16, 2008
with respect to one transaction and Dr. Denner, a member of the Board, inadvertently filed a late
Form 4 on July 8, 2008 with respect to one transaction.
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EQUITY COMPENSATION PLAN INFORMATION
The following table provides information as of December 31, 2008 regarding equity compensation
plans previously approved by the Companys stockholders. The Company does not have any equity
compensation plans that have not been approved by its stockholders.
Number of | ||||||||||||
Securities | ||||||||||||
Available for | ||||||||||||
Number of | Future Issuance | |||||||||||
Securities to be | Under Equity | |||||||||||
Issued Upon | Weighted-Average | Compensation Plans | ||||||||||
Exercise of | Exercise Price of | (Excluding | ||||||||||
Outstanding | Outstanding | Securities | ||||||||||
Options, Warrants | Options, Warrants | Reflected in Second | ||||||||||
Plan | and Rights | and Rights | Column) | |||||||||
2008 Omnibus Incentive Plan |
578,000 | $ | .30 | 12,519,500 | (1) | |||||||
2005 Equity Incentive Plan |
3,786,833 | (1) | $ | 1.99 | 0 | (1) | ||||||
2005 Employee Stock Purchase Plan |
0 | $ | 0 | 3,173,634 | (2) |
(1) | In May 2008, the Companys stockholders approved the Companys 2008
Omnibus Incentive Plan, following which no awards have been or will be
granted under the 2005 Equity Incentive Plan and no automatic increase
will occur to the maximum number of shares that may be issued pursuant
to the 2005 Equity Incentive Plan. However, the 2005 Equity Incentive
Plan will continue to govern any outstanding awards previously granted
under the 2005 Equity Incentive Plan. In addition, if, after December
31, 2007, any shares of the Companys common stock subject to an award
under the 2005 Equity Incentive Plan are forfeited, expire or are
settled for cash pursuant to the terms of an award, the shares subject
to the award may be used again for awards under the 2008 Omnibus
Incentive Plan to the extent of the forfeiture, expiration or
settlement. The shares of common stock will be added back as 1 share
for every share of common stock if the shares were subject to options
or stock appreciation rights granted under the 2005 Equity Incentive
Plan and as 1.2 shares for every share of common stock if the shares
were subject to awards other than options or stock appreciation rights
granted under the 2005 Equity Incentive Plan. |
|
(2) | The 2005 Employee Stock Purchase Plan contains a provision for an
automatic increase in the number of shares available for grant on the
first day of each fiscal year beginning in 2006 and on each
anniversary of that date thereafter equal to the lesser of (i) one
percent of the number of outstanding shares of the Companys common
stock on such day, (ii) 750,000 and (iii) such other amount as the
Board may specify prior to the date such annual increase is to take
effect. |
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EXECUTIVE OFFICER AND DIRECTOR COMPENSATION
Summary Compensation Table
The following table sets forth information concerning compensation earned for services
rendered to the Company during the years ended December 31, 2008 and December 31, 2007 by (i) each
individual serving as principal executive officer during 2008, (ii) the two most highly compensated
executive officers, other than the individuals serving as the principal executive officer, who were
serving as executive officers of the Company as of December 31, 2008, and (iii) the individuals who
would have qualified under the foregoing clause (ii) but for the fact that such individuals were
not serving as executive officers of the Company as of December 31, 2008. Collectively, these
individuals are referred to as the Named Executive Officers.
Nonqualified | ||||||||||||||||||||||||||||||||||||
Non-Equity | Deferred | |||||||||||||||||||||||||||||||||||
Name and Principal | Stock | Option | Incentive Plan | Compensation | All Other | |||||||||||||||||||||||||||||||
Position(1) | Year | Salary | Bonus | Awards | Awards(2) | Compensation | Earnings | Compensation(3) | Total | |||||||||||||||||||||||||||
Brian M. Culley |
2008 | $ | 262,500 | | | $ | 183,493 | | | $ | 13,989 | $ | 459,982 | |||||||||||||||||||||||
Chief Business Officer |
2007 | $ | 250,000 | | | $ | 235,852 | | | $ | 9,162 | $ | 495,014 | |||||||||||||||||||||||
Patrick Keran |
2008 | $ | 231,000 | | | $ | 121,708 | | | $ | 13,758 | $ | 366,466 | |||||||||||||||||||||||
General Counsel |
||||||||||||||||||||||||||||||||||||
Evan M. Levine |
2008 | $ | 381,635 | | | | | | $ | 493,685 | (4) | $ | 875,320 | |||||||||||||||||||||||
Former Chief Executive Officer |
2007 | $ | 450,000 | $ | 200,000 | | | | | $ | 9,180 | $ | 659,180 | |||||||||||||||||||||||
Mark N.K. Bagnall(5) |
2008 | $ | 258,462 | | | $ | 37,599 | (6) | | | $ | 97,791 | (7) | $ | 393,852 | |||||||||||||||||||||
Former Chief Financial Officer |
||||||||||||||||||||||||||||||||||||
Gregory P. Hanson |
2008 | $ | 67,308 | | | $ | 38,194 | | | $ | 341,498 | (8) | $ | 447,000 | ||||||||||||||||||||||
Former Chief Financial Officer |
2007 | $ | 250,000 | | | $ | 149,498 | | | $ | 10,188 | $ | 409,686 | |||||||||||||||||||||||
Joan M. Robbins |
2008 | $ | 224,740 | | | $ | 181,994 | | $ | 86,110 | (9) | $ | 492,844 | |||||||||||||||||||||||
Former Chief Scientific Officer |
2007 | $ | 265,000 | | | $ | 192,095 | | | $ | 9,270 | $ | 466,365 |
(1) | Mr. Culley and Mr. Keran held the positions listed in the table
through December 31, 2008. On April 2, 2008, Mr. Hansons employment
with the Company ended. On October 14, 2008, Dr. Robbins employment
with the Company ended. On October 17, 2008, Mr. Levines employment
with the Company ended and, on December 22, 2008, Mr. Levine resigned
from the Board. On December 26, 2008, Mr. Bagnalls employment with
the Company ended, though he remains on the Board. Compensation
information for Mr. Keran and Mr. Bagnall for 2007 is not included
because they were not 2007 named executive officers. |
|
(2) | The value of the option awards has been computed in accordance with
the provisions of FAS 123R, which requires that the Company recognizes
as compensation expense the value (excluding the effect of assumed
forfeiture rates) of all stock-based awards, including stock options,
granted to employees in exchange for services over the requisite
service period, which is typically the vesting period. For more
information, including the assumptions made in calculating the
FAS 123R value of the option awards, see Note 8 of the Notes to
Consolidated Financial Statements contained in the Companys Annual
Report on Form 10-K filed with the SEC on March 27, 2009 and Note 9 of
the Consolidated Financial Statemetns contained in the Companys
Annual Report on Form 10-K filed with the SEC on March 17, 2008. |
|
(3) | Except as otherwise indicated, consists of (a) matching contributions
made pursuant to the Companys tax-qualified 401(k) plan and (b)
premiums paid for term life insurance policies for the benefit of the
Companys executives. |
|
(4) | Consists of (a) matching contributions pursuant the Companys 401(k)
plan of $12,519, (b) life insurance premiums of $145, (c) severance
payments of $365,000, (d) a severance-related health benefit allowance
of $19,870, and (e) accrued vacation benefits paid in connection with
termination of employment of $90,865. See Narrative Disclosure to
Summary Compensation Table below for additional information regarding
termination-related payments. |
|
(5) | Mr. Bagnall served as the Companys Chief Financial Officer, Executive
Vice President and Treasurer from April 3, 2008 to December 26, 2008.
From November 3, 2008 to December 26, 2008, Mr. Bagnall additionally
served as the Companys principal executive officer. Both prior to and
after his service as an employee of the Company, he served as a member
of the Board and, after his service as an employee of the Company, he
served as a consultant to the Company. |
|
(6) | Consists of the value of an
option award to Mr. Bagnall in 2007 as a member of the Board. |
|
(7) | Consists of (a) matching contributions pursuant the Companys 401(k)
plan of $13,800, (b) life insurance premiums of $345, (c) accrued
vacation benefits paid in connection with termination of employment of
$19,683, (d) the value of the partial acceleration of an option award
triggered by termination of employment of $49,863, and (e)
non-employee director fees for service on the Board during the periods
in 2008 in which Mr. Bagnall was not employed by the Company of
$14,100. Mr. Bagnall received severance and a health benefit
allowance in connection with the termination of his employment, but
these payments were not paid or accrued to Mr. Bagnall in 2008 because
the Company did not enter into a separation agreement with Mr. Bagnall
until January 2009. See Narrative Disclosure to Summary Compensation
Table below for additional information regarding termination-related
payments. |
|
(8) | Consists of (a) matching contributions pursuant the Companys 401(k)
plan of $4,038, (b) life insurance premiums of $320, (c) severance
payments of $125,000, (d) a severance-related health benefit allowance
of $20,997, (e) the value of the partial acceleration of an option
award triggered by termination of employment of $174,272, (f) accrued
vacation benefits paid in connection with termination of employment of
$16,496, and (g) consulting fees of $375. See Narrative Disclosure
to Summary Compensation Table below for additional information
regarding termination-related payments. |
|
(9) | Consists of (a) matching contributions pursuant the Companys 401(k)
plan of $12,519, (b) life insurance premiums of $218, (c) severance
payments of $22,475, (d) a severance-related health benefit allowance
of $1,511, and (e) accrued vacation benefits paid in connection with
termination of employment of $49,387. See Narrative Disclosure to
Summary Compensation Table below for additional information regarding
termination-related payments. |
15
Table of Contents
Narrative Disclosure to Summary Compensation Table
Employment and Severance Arrangements with Currently Employed Named Executive Officers
Each of Mr. Culleys and Mr. Kerans employment with the Company is at-will and, as of
December 31, 2008, the Company had no obligation to pay such officer any severance or other
benefits, other than as may be required by law, in connection with a termination of employment. In
January 2009, the Company entered into Retention and Incentive Agreements with each of Mr. Culley
and Mr. Keran, the provisions of which require severance payments to Mr. Culley and Mr. Keran in
the event of an involuntary termination of employment before September 30, 2009. In addition, at
the same time, the Company granted, under its 2008 Omnibus Incentive Plan, to each of Mr. Culley
and Mr. Keran an award of restricted stock units that represents the right to receive 1,200,000 and
850,000 shares, respectively, of the Companys common stock. These units will vest immediately
prior to a strategic transaction. The Employment Agreements and restricted stock units awards are
primarily intended to reinforce and encourage these officers continued employment with and
dedication to the Company without distraction from the possibility of involuntary termination or a
change in control and related events and circumstances.
Pursuant to the Retention and Incentive Agreements, if, as applicable, Mr. Culleys or Mr.
Kerans employment with the Company terminates as a result of an involuntary termination and he
delivers (and does not revoke) a general release of claims, he will receive a lump-sum cash
severance payment, less applicable withholdings, equal to nine months of his then-current annual
base salary multiplied by a fraction, the numerator of which is the number of days between his
termination date and September 30, 2009 and the denominator of which is 365. These agreements are
intended to be binding upon any successor to the Company or to all or substantially all of the
Companys business and/or assets. For purposes of these agreements, involuntary termination
means, without Mr. Culleys or Mr. Kerans, as applicable, express written consent, a significant
reduction of or removal from his current duties, position or responsibilities, a material reduction
of his base salary or in the kind or level of employee benefits (including cash and stock bonus
plans) to which he is entitled which results in a material adverse change to his employment
relationship or a relocation to a facility or location that increases his one-way commute by more
than 50 miles, any termination of employment which is not for cause or any material breach of the
agreements by the Company, including the failure of a successor to assume the Companys obligations
thereunder. For purposes of these agreements, cause means any act of personal dishonesty taken
by the employee in connection with his responsibilities as an employee which is intended to result
in substantial personal enrichment, the employees conviction of a felony that the board of
directors reasonably believes has had or will have a material detrimental effect on the Companys
reputation or business, a willful act by the employee that constitutes misconduct and is injurious
to the Company, or continued willful violations by the employee of his obligations to the Company
after delivery to him of a written demand for performance that describes the basis for the
Companys belief that he has not substantially performed his duties.
Pursuant to a notice of grant of restricted stock units and the related restricted stock units
agreement, the Company issued under its 2008 Omnibus Incentive Plan to Mr. Culley and Mr. Keran
1,200,000 and 850,000, respectively, restricted stock units. Each restricted stock unit represents
the right to receive one share of the Companys common stock upon vesting and settlement of the
restricted stock unit. Provided Mr. Culleys and Mr. Kerans services to the Company have not
terminated beforehand, 100% of the restricted stock units shall vest immediately prior to the
consummation of a strategic transaction. Settlement of the vested restricted stock units will
occur at the same time as vesting unless a sale by Mr. Culley or Mr. Keran of the shares issuable
upon settlement of the restricted stock units would violate any insider trading policy of the
Company, any federal, state or foreign law or any contractual obligation to which Mr. Culley or Mr.
Keran is subject (such as a lock-up or market stand-off agreement), in which case settlement of the
restricted
stock units shall be deferred until the first to occur of (a) the next business day on which a
sale of the shares by Mr. Culley or Mr. Keran would not violate such insider trading policy or
contractual obligation and (b) the latest date possible that such settlement can be deferred
without becoming subject to Section 409A of the Internal Revenue Code. If the Company does not
consummate a strategic transaction, none of the restricted stock units shall vest and the Company
shall automatically reacquire all of the restricted stock units upon termination of Mr. Culleys or
Mr. Kerans services to the Company without any payment therefor. For purposes of the restricted
stock units, strategic transaction generally means a transaction or series of related
transactions constituting a change of control of the Company or a subsidiary of the Company or a
sale or other disposition of all or substantially all of its assets or the grant of an exclusive
license of the Companys intellectual property related to ANX-514 to make, use or sell products in
the United States for the treatment of cancer by intravenous administration of formulations
consisting of emulsified products.
16
Table of Contents
In addition, as of December 31, 2008, the Company had accrued vacation benefits liability for
Mr. Culley in the amount of $48,461 and for Mr. Keran in the amount of $30,166. If their
employment with the Company had ended on December 31, 2008, they would have been entitled to
payment of those amounts.
It is the Companys policy that, at the beginning of their employment, all employees sign the
Companys standard confidential information, non-solicitation and invention assignment agreement
for employees. Under the current version of this agreement, employees agree that, during the period
of the employees service to the Company and for one year thereafter, the employee will not
(a) solicit any employee or consultant of the Company to leave the employ of or terminate any
relationship with the Company or (b) solicit the business of any client or customer of the Company
using its confidential information. Each of Mr. Culley and Mr. Keran executed such an agreement in
connection with the commencement of his employment with the Company.
2008 Stock Option Grants
On March 31, 2008, the compensation committee granted stock option awards to certain non-CEO
executives, including a stock option to purchase 200,000 shares to each of Messrs. Culley and Keran
and Dr. Robbins. The compensation committee did not grant any stock option awards to Mr. Levine
(the reasons for which are described under Compensation Programs and Process Elements of
Compensation in the Companys proxy statement filed with the SEC on April 16, 2008) or Mr.
Bagnall, who was then a non-employee director of the Company (see -Employment and Separation
Arrangements with Mr. Bagnall below regarding an option granted to him in April 2008 in connection
with commencement of his employment). The March 2008 stock options were granted under the Companys
2005 Equity Incentive Plan, have a term of 10 years, and vest and become exercisable as to
one-fifth of the shares subject to the option on each of January 1, 2009, January 1, 2010,
January 1, 2011, January 1, 2012 and January 1, 2013. The vesting schedule was recommended by Mr.
Levine, then the Companys chief executive officer, and, after substantial discussion, approved by
the compensation committee. The per share exercise price of these options is $0.54, which was the
closing price, as reported by the NYSE Amex, of the Companys common stock on March 31, 2008. None
of these options currently are in-the-money.
The Company structured the number of shares underlying and the vesting schedule of the March
2008 stock options primarily to retain and incentivize the Companys executives, and not primarily
as a form of compensation or to recognize individual or corporate performance in 2007. In
particular, the Company did not view these awards as typical annual option grants. The compensation
committees goal in determining the size of these stock option awards was to emphasize unity and
cohesion within the Companys executive ranks. The compensation committee intended for the
Companys non-CEO executives to share equally in the Companys future success and, accordingly,
granted similarly situated executives comparably sized stock option awards.
The compensation committee granted these awards to retain and properly incentive the
individuals capable of maximizing the potential of the Companys assets. Without a substantial
opportunity to participate in the Companys future success, the Company was concerned that it would
be unable to retain key executives. In addition, the 5-year, cliff-based vesting schedule of the
March 2008 stock options was structured to provide substantial retentive value.
2007 Bonus to Mr. Levine
In March 2008, the Company evaluated its executives 2007 compensation and performance and,
consistent with past practice, no cash bonuses for any of the Companys non-CEO executives were
approved by the compensation committee. However, the compensation committee awarded Mr. Levine a
discretionary cash bonus of $200,000.
17
Table of Contents
Mr. Levines 2007 bonus was not based on achievement of the corporate objectives previously
established by the compensation committee. Following the Companys announcement in October 2007
regarding the results of the Companys phase 2b clinical trial of ANX-510, several of corporate
objectives previously established by the compensation committee became irrelevant or undesirable
and the compensation committee did not subsequently revise those objectives. Mr. Levines 2007
bonus was awarded in part in recognition of his 2007 performance, but also to compensate him in
lieu of the Company not granting him any stock option awards (the reasons for which are more fully
described under Compensation Programs and Process Elements of Compensation in the Companys
proxy statement filed with the SEC on April 16, 2008). Despite the Companys October 2007
announcement regarding the results of its phase 2b clinical trial of ANX-510 and the resulting
decline in its stock price, 2007 was marked with several positive achievements for the Company.
Furthermore, the compensation committee determined that Mr. Levines performance in 2007 was
exceptional in light of prevailing conditions and that he displayed the leadership and perseverance
in the face of adversity that the Company seeks in its executives and wishes to reward.
In approving Mr. Levines 2007 bonus, the compensation committee was sensitive to the
perception that it was rewarding Mr. Levine when the Companys stockholders and stock price have
suffered. To rebuild value, however, the compensation committee believed it was critical that it
retain and properly incentivize Mr. Levine because of the unique qualities that he possesses, as
well as to provide continuity to its operations. Based on the Companys successes in 2007 and Mr.
Levines leadership following the Companys October 2007 clinical trial results announcement, as
well as the Company not granting Mr. Levine any equity awards since 2003, the compensation
committee determined that a cash bonus reflecting 80% of Mr. Levines target award was appropriate.
Separation Arrangements with Mr. Levine
In October 2008, Mr. Levines employment relationship with the Company ended and, in December
2008, Mr. Levine resigned from the Board. Mr. Levine formerly served as the Companys Chief
Executive Officer and President. In December 2008, the Company entered into a Confidential
Separation Agreement and General Release of All Claims regarding terms of separation with Mr.
Levine (the Levine Separation Agreement).
As set forth in the Levine Separation Agreement, in exchange for a mutual release of claims
and Mr. Levines agreement and representations (as more fully described below), the Company agreed
to provide a severance payment of $225,000 to Mr. Levine. In addition, the Company agreed to
provide a health benefit allowance of $19,870, which Mr. Levine may use, at his discretion, to pay
the premiums required to continue his group health care coverage under COBRA or any other health
care related expenses. The severance payment and the health benefit allowance were paid in one
lump sum, less applicable payroll deductions and required withholdings, in January 2009. In
addition, pursuant to the Levine Separation Agreement, the Company agreed to issue 1,000,000
fully-vested shares of its common stock to Mr. Levine, subject to the satisfaction of certain
conditions by January 30, 2009, or, if those conditions were not so satisfied, pay Mr. Levine an
additional $100,000 in one lump sum, less applicable payroll deductions and required withholdings.
In February 2009, because the conditions to the Companys obligation to issue the shares had not
been timely satisfied, the Company paid Mr. Levine an additional $100,000 in one lump sum, less
applicable payroll deductions and required withholdings. In November 2008, prior to entering into
the Levine Separation Agreement, the Company paid Mr. Levine a total of $40,000 in four weekly
installments ending in December 2008 in exchange for Mr. Levines agreement not to sign a
Confidential Separation Agreement and General Release of All Claims that was presented to Mr.
Levine on October 19, 2008 to allow time for discussions related to the terms of Mr. Levines
separation from the Company and release of claims to continue.
Under the Levine Separation Agreement, Mr. Levine represented that he had returned to the
Company all property, data and information belonging to the Company and agreed not to use or
disclose to others any confidential or proprietary information of the Company and agreed to comply
with his continuing obligations under various agreements and other documents as previously executed
by him. In addition, the Company and Mr. Levine each agreed that neither will make any voluntary
statements, written or oral, or cause or encourage others to make any such statements, that defame,
disparage or in any way criticize the personal and/or business reputation, practices or conduct of,
respectively, Mr. Levine, on the one hand, or the Company or its employees, officers and directors,
among others, on the other hand. Each of the Company and Mr. Levine also represented that neither
had filed any lawsuits, complaints or other accusatory pleadings against the other. Mr. Levine
also certified that all transactions in the Companys securities prior to his separation date and
reportable under Section 16 of the Securities Exchange Act of 1934 had been reported on Form 4 and
agreed to execute and deliver promptly after December 31, 2008 a document certifying that he is not
required to file a Form 5 for the fiscal year ended December 31, 2008.
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Table of Contents
Employment and Separation Arrangements with Mr. Bagnall
In connection with Mr. Bagnalls employment as the Companys Chief Financial Officer,
Executive Vice President and Treasurer, effective as of April 3, 2008, the Company entered into an
offer letter agreement with Mr. Bagnall. Pursuant to the terms of the offer letter, Mr. Bagnalls
base salary was $350,000 per year and he was entitled to participate in the Companys health and
welfare benefits, 401(k) plan and other benefits on the same terms as the Companys other executive
officers. In addition, Mr. Bagnall was
eligible to participate in the Companys 2008 Incentive Plan, which is discussed under
Executive Officer and Director Compensation Compensation Discussion and Analysis in the
Companys proxy statement filed with the SEC on April 16, 2008, on the same basis as the Companys
other executive officers. In the event of Mr. Bagnalls involuntary termination, the Company agreed
to (a) continue to pay Mr. Bagnalls base salary in effect immediately prior to the effective date
of such involuntary termination for the number of months equal to the number of full 30-day periods
he was a full-time employee of the Company, provided that in no event would such number of months
exceed 12 (the Severance Period), (b) pay Mr. Bagnall all costs that the Company would otherwise
have incurred to maintain his health and similar benefits during the Severance Period, and (c) pay
Mr. Bagnall the amount of the matching 401(k) contribution that would have been contributed by the
Company based on the amount contributed by Mr. Bagnall in the pay-period immediately prior to the
effective date of the involuntary termination. The Companys obligation to make such payments was
conditioned upon Mr. Bagnalls execution and delivery of a general release of claims and submission
of his resignation as a member of the Board. If Mr. Bagnall failed to execute and deliver the
release of claims or subsequently revoked the release, he would not have been entitled to any of
the severance payment. If Mr. Bagnall failed to submit his resignation from the Board, he would not
have received any severance payment until after the Companys next annual meeting of stockholders
for which he was not nominated for election to the Board in the proxy materials related to such
meeting. On December 11, 2008, the compensation committee of the Board approved amendments to the
offer letter intended to make severance benefits payable to Mr. Bagnall exempt from potential
deferred compensation tax penalties.
In addition, on March 31, 2008, the compensation committee of the Board approved a stock
option to Mr. Bagnall under the Companys 2005 Equity Incentive Plan to purchase up to
500,000 shares of the Companys common stock, contingent upon the commencement of Mr. Bagnalls
employment with the Company. Accordingly, this option was granted on April 3, 2008 with an exercise
price of $0.52 per share, which was the closing price of the Companys common stock on April 3,
2008, as reported by the NYSE Amex. The terms of the option provide that it would vest and become
exercisable with respect to 100,000 of the underlying shares on each of January 1, 2009, January 1,
2010, January 1, 2011, January 1, 2012 and January 1, 2013, subject to Mr. Bagnalls continuous
service (as defined in the Companys 2005 Equity Incentive Plan). However, in the event of
Mr. Bagnalls involuntary termination, the options vesting schedule would accelerate such that
(a) an additional 50,000 shares will vest and become exercisable if the effective date of such
involuntary termination occurs between January 1 and June 30 of a given calendar year and (b) an
additional 100,000 shares will vest and become exercisable if the effective date of such
involuntary termination occurs between July 1 and December 31 of a given calendar year, subject to
Mr. Bagnalls execution and delivery to the Company of a release of claims and his not revoking
such release. In the event of Mr. Bagnalls death, disability or other termination, the option
would be exercisable for 90 days following such event, except that in the event of an involuntary
termination, the option would be exercisable for 180 days following such termination, subject to
Mr. Bagnalls execution and delivery to the Company of a release of claims and his not revoking
such release. In addition, in the event of a change of control (as defined in the Companys 2005
Equity Incentive Plan) where Mr. Bagnall was employed by the Company or one of its affiliates as of
the closing date of the change of control and the option was not assumed or replaced, the option
would accelerate in full. In the event of Mr. Bagnalls involuntary termination before and in
connection with a change of control, the option would accelerate in full upon the change of
control. Finally, in the event of a change of control where the option is assumed or replaced,
(i) 50% of any unvested portion of the option would vest immediately prior to the closing date of
the change of control, (ii) the remaining unvested portion of the option would vest ratably by
month over the 12-month period beginning on the closing date of the change of control, subject to
Mr. Bagnalls continuous service, and (iii) 100% of any remaining unvested portion of the option
would vest upon an involuntary termination of Mr. Bagnall that occurs within 12 months of the
change of control. Unless terminated earlier pursuant to its terms, the option would expire on
April 2, 2018.
For purposes of the offer letter and the stock option granted to Mr. Bagnall, an involuntary
termination is one that occurs by reason of involuntary dismissal by the Company for any reason
other than misconduct (as defined below) or by Mr. Bagnalls voluntary resignation for good
reason, which means the occurrence of one of the following events or circumstances without his
written consent: (i) a change in position that materially reduces the level of his responsibility,
(ii) a material reduction in his base salary, or (iii) relocation by more than 50 miles from his
then-primary work location; provided that his resignation shall not be for good reason unless
(x) he provides the Company with written notice within 30 days after he first has knowledge of the
occurrence or existence of such event or circumstance, (y) the Company fails to correct the
circumstance or event so identified within 30 days after receipt of such written notice, and (z) he
resigns within 90 days after the date of delivery of the notice. Misconduct means the commission
of any act of fraud, embezzlement or dishonesty by Mr. Bagnall, any unauthorized use or disclosure
by him of confidential information or trade secrets of the Company (or any parent or subsidiary),
or any other intentional misconduct by him adversely affecting the business affairs of the Company
(or any parent or subsidiary) in a material manner.
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Table of Contents
In December 2008, Mr. Bagnalls employment relationship with the Company ended. In January
2009, the Company entered into a Confidential Separation Agreement and General Release of All
Claims regarding terms of separation with Mr. Bagnall (the Bagnall Separation Agreement).
As set forth in the Bagnall Separation Agreement, in exchange for a release of claims and Mr.
Bagnalls agreement and representations (as more fully described below), the Company agreed to
provide a severance payment of $165,500 to Mr. Bagnall and each of the Company and Mr. Bagnall
agreed to enter into a consulting relationship. In addition, the Company agreed to provide a
health benefit allowance of $18,352, which Mr. Bagnall may use, at his discretion, to pay the
premiums required to continue his group health care coverage under COBRA or any other health care
related expenses. The severance payment and the health benefit allowance were paid in one lump
sum, less applicable payroll deductions and required withholdings, in January 2009. The severance
provisions set forth in the Bagnall Separation Agreement supersede and replace the severance
provisions set forth in Mr. Bagnalls offer letter from the Company, which was effective as of
April 3, 2008 and amended as of December 11, 2008. Pursuant to the terms of the stock option
granted to Mr. Bagnall in April 2008 in connection with the commencement of his employment (as more
fully described above), 100,000 shares underlying this option vested and became exercisable
immediately prior to Mr. Bagnalls involuntary termination in December 2008. As a result of Mr.
Bagnalls remaining on the Board, Mr. Bagnall remained in continuous service and this option will
continue to vest until such time as Mr. Bagnall is no longer in continuous service. Stock options
held by Mr. Bagnall granted to him as a member of the Board were unaffected by Mr. Bagnalls
involuntary termination.
Under the Bagnall Separation Agreement, Mr. Bagnall represented that he returned to the
Company all property, data and information belonging to the Company other than is reasonably
required by Mr. Bagnall to perform services as a member of the Board or is reasonably related to
such services or is needed by Mr. Bagnall to provide services as a consultant to the Company. Mr.
Bagnall agreed not to use or disclose to others any confidential or proprietary information of the
Company, except, as applicable, in connection with Mr. Bagnalls position as a member of the Board
or as a consultant to the Company, in which case such use and disclosure will be governed by such
documents, agreements and duties as apply to such positions. Mr. Bagnall further agreed to comply
with his continuing obligations under various agreements and other documents as previously executed
by him. In addition, Mr. Bagnall agreed that he will not make any voluntary statements, written or
oral, or cause or encourage others to make any such statements, that defame, disparage or in any
way criticize the personal and/or business reputation, practices or conduct of the Company or its
employees, officers and directors, among others. Mr. Bagnall also represented that he had not filed
any lawsuits, complaints or other accusatory pleadings against the Company and certified that all
transactions in the Companys securities prior to his separation date and reportable under Section
16 of the Securities Exchange Act of 1934 had been reported on Form 4 and agreed to execute and
deliver promptly after December 31, 2008 a document certifying that he is not required to file a
Form 5 for the fiscal year ended December 31, 2008. Finally, Mr. Bagnall agreed, at the end of the
consulting period, to extend and reaffirm the promises made by Mr. Bagnall in the Bagnall
Separation Agreement, including the release of claims.
In December 2008, the Company and Mr. Bagnall entered into a consulting agreement. Under the
consulting agreement, Mr. Bagnall agreed to provide consulting services on an as-needed basis to
assist the Company in identifying and evaluating strategic options and to respond to inquiries
regarding finance and other matters, and the Company agreed to pay Mr. Bagnall $100 per hour. In
February 2009, the Company and Mr. Bagnall amended the consulting agreement to include services
related to Mr. Bagnall acting as the Companys interim principal financial and accounting officer,
and agreed to pay Mr. Bagnall $250 per hour for services provided after such amendment. Either
party may terminate the consulting agreement upon written notice. In 2008, the Company did not pay
or accrue any amount with respect to Mr. Bagnalls consulting services. The Company does not
expect to pay Mr. Bagnall more than $120,000 under the consulting agreement.
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Table of Contents
Employment and Separation Arrangements with Mr. Hanson
In connection with the commencement of Mr. Hansons employment in December 2006 as the
Companys Chief Financial Officer and a Senior Vice President, the Company entered into an offer
letter agreement with Mr. Hanson which provided that in the event of Mr. Hansons involuntary
termination, subject to Mr. Hansons execution of a mutual release (which included a
nondisparagement provision and a covenant not to sue the Company), Mr. Hanson would receive an
amount equal to his base salary for the six-month period immediately prior to the effective date of
such involuntary termination, payable in six substantially equal installments over the six-month
period following such effective date, and the Company would pay in cash all costs the Company would
otherwise have incurred to maintain Mr. Hansons health, welfare and retirement benefits if Mr.
Hanson had continued to render services to the Company for six months after such effective date. In
addition, the Company granted to Mr. Hanson a stock option to purchase up to 250,000 shares of the
Companys common stock, which option would vest and become exercisable monthly over 48 months from
the vesting start date except that no shares would vest or become exercisable for the first 12
months and, on the 12-month anniversary of
the vesting start date, which was December 20, 2007, 25% of the shares vest and become
exercisable. Pursuant to the terms of Mr. Hansons December 2006 stock option, in the event of Mr.
Hansons involuntary termination, and subject to Mr. Hansons execution of a general release of
claims (which included a nondisparagement provision and a covenant not to sue the Company), that
number of shares underlying the stock option would vest and become exercisable, effective
immediately prior to the effective date of such involuntary termination, as would have vested and
become exercisable had Mr. Hanson remained in continuous service (i.e., the absence of any
interruption or termination of services as an employee, director or consultant of the Company, or
any subsidiary) for six months following such effective date, and Mr. Hanson would have 180 days
following the effective date of such involuntary termination to exercise this stock option. For
purposes of this agreement, an involuntary termination meant one that occurred by reason of
dismissal for any reason other than misconduct or of voluntary resignation following: (i) a change
in position that materially reduced the level of Mr. Hansons responsibility, (ii) a material
reduction in Mr. Hansons base salary, or (iii) relocation by more than 50 miles; provided that
(ii) and (iii) will apply only if Mr. Hanson did not consented to the change or relocation.
Misconduct meant the commission of any act of fraud, embezzlement or dishonesty by Mr. Hanson,
any unauthorized use or disclosure by Mr. Hanson of confidential information or trade secrets of
the Company (or any parent or subsidiary), or any other intentional misconduct by Mr. Hanson
adversely affecting the business affairs of the Company (or any parent or subsidiary) in a material
manner.
In April 2008, Mr. Hansons employment relationship with the Company ended. In April 2008, the
Company entered into a letter agreement regarding terms of separation with Mr. Hanson. The terms of
Mr. Hanson employment separation, as provided in the letter agreement, were substantially identical
to those set forth in his offer letter, dated December 13, 2006, and in the stock option agreement
relating to the stock option granted to him in December 2006 in connection with the commencement of
his employment, both of which are described above and have been previously filed with the SEC.
As set forth in the letter agreement regarding terms of separation, in exchange for a mutual
release, beginning in April 2008, the Company paid Mr. Hanson an aggregate of $125,000, which was
equal to six months of Mr. Hanson base salary in effect at the time of termination, less applicable
payroll deductions and required withholdings, in substantially equal installments in accordance
with the Companys standard payroll practices over 13 pay periods. In addition, the Company paid
Mr. Hanson $20,997, less applicable payroll deductions and required withholdings, which the Company
and Mr. Hanson agreed satisfied in full the Companys obligation to pay all costs that the Company
would otherwise have incurred to maintain Mr. Hansons health, welfare and retirement benefits if
Mr. Hanson had continued for six continuous months after Mr. Hansons termination date. The Company
paid the $20,997 amount in substantially equal installments commencing on and continuing in
accordance with the same schedule described above with respect to payment of Mr. Hansons base
salary. Furthermore, the Company accelerated the vesting and extended the time to exercise vested
shares under the stock option granted to Mr. Hanson in December 2006 in connection with the
commencement of his employment. Under this option, Mr. Hanson was granted the right to purchase up
to 250,000 shares of the Companys common stock at a price of $2.57 per share, which right was
subject to a vesting schedule. As of Mr. Hansons termination date, this option was vested as to
78,125 shares and unvested as to 171,875 shares. Pursuant to the letter agreement regarding terms
of separation, the Company accelerated vesting as to 31,250 of the unvested shares, which resulted
in this option being vested as to a total of 109,375 shares, and extended the time for Mr. Hanson
to exercise the vested shares under this option through September 29, 2008. Mr. Hanson did not
exercise the option by September 29, 2008 and, accordingly, it terminated on that date. The
closing market price of the Companys common stock on September 29, 2008 was $0.18 per share, while
the exercise price of the option was $2.57 per share.
Under the letter agreement regarding terms of separation, Mr. Hanson represented that he had
returned to the Company all of its property and data that had been in his possession or control and
acknowledged that he will continue to be bound an agreement with the Company regarding the use and
confidentiality of the Companys confidential information and, in particular, that he will hold all
of the Companys confidential information in confidence and not directly or indirectly use any
aspect of such confidential information. Mr. Hanson also agreed not to make any voluntary
statements, written or oral, or cause or encourage others to make any such statements that defame
or disparage the Company and, among others, its officers and directors.
In addition, in April 2008, the Company and Mr. Hanson entered into a consulting agreement and
related confidential information and invention assignment agreement. Under the consulting
agreement, Mr. Hanson agreed to provide consulting services on an as-needed basis and the Company
agreed to pay Mr. Hanson (a) for the first ten hours in a particular calendar month, $250 per hour
and (b) for any time beyond ten hours in a particular calendar month, $150 per hour. Either party
may terminate the consulting agreement upon written notice, except that Mr. Hanson could not
terminate the consulting agreement, other than for the Companys failure to pay Mr. Hanson as set
forth in the consulting agreement, prior to December 31, 2008. The Company does not expect to
require Mr. Hansons consulting services during 2009.
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Employment and Separation Arrangements with Dr. Robbins
Under the terms of an offer letter, dated March 5, 2003, the Company agreed to pay Dr. Robbins
a bonus, payable in stock options, equal to 5% of all government grants received by the Company. In
addition, the Company agreed to pay Dr. Robbins a bonus, payable in stock options, equal to 5% of
capital received by the Company that is a direct result of Dr. Robbins introduction. The Company
never issued any stock options to Dr. Robbins as a result of these provisions. In October 2008,
Dr. Robbins employment relationship with the Company ended. Dr. Robbins formerly served as the
Companys Chief Scientific Officer and a Senior Vice President. In December 2008, the Company
entered into a Confidential Separation Agreement and General Release of All Claims regarding terms
of separation with Dr. Robbins (the Robbins Separation Agreement).
As set forth in the Robbins Separation Agreement, in exchange for a release of claims and Dr.
Robbins agreement to provide certain transition assistance and Dr. Robbins other agreements and
representations (as more fully described below), the Company agreed to provide a severance payment
of $123,615 to Dr. Robbins. In addition, the Company agreed to provide a health benefit allowance
of $8,309, which Dr. Robbins may use, at her discretion, to pay the premiums required to continue
her group health care coverage under COBRA or any other health care related expenses. The Company
agreed to pay the severance payment and the health benefit allowance in eleven substantially equal
installments over a period of five and one-half months, less applicable payroll deductions and
required withholdings, beginning in December 2008, conditioned upon Dr. Robbins making herself
available as needed during that period to answer business-related questions by telephone or in
person as deemed reasonably necessary by the Company. At the time of her separation from the
Company, Dr. Robbins held vested options to purchase up to 495,312 shares. Pursuant to their terms,
these options expired, unexercised, on December 30, 2008 and January 12, 2009. The closing market
price of the Companys common stock on December 30, 2008 was $0.07 per share, while the exercise
price of the option that expired on December 30, 2008 was $0.50 per share. The closing market
price of the Companys common stock on January 12, 2009 was $0.12 per share, while the exercise
prices of the options that expired on January 12, 2009 were $2.30 per share, $2.75 per share and
$4.75 per share.
Under the Robbins Separation Agreement, Dr. Robbins represented that she had returned to the
Company all property, data and information belonging to the Company and agreed not to use or
disclose to others any confidential or proprietary information of the Company and agreed to comply
with her continuing obligations under various agreements and other documents as previously executed
by her. In addition, she agreed to make herself available, as needed, without any additional
compensation, to answer business-related questions by telephone or in person as deemed reasonably
necessary by the Company and that she will not make any voluntary statements, written or oral, or
cause or encourage others to make any such statements, that defame, disparage or in any way
criticize the personal and/or business reputation, practices or conduct of the Company or its
employees, officers and directors, among others. Dr. Robbins also represented that she had not
filed any lawsuits, complaints or other accusatory pleadings against the Company and certified that
all transactions in the Companys securities prior to her separation date and reportable under
Section 16 of the Securities Exchange Act of 1934 had been reported on Form 4 and agreed to execute
and deliver promptly after December 31, 2008 a document certifying that she is not required to file
a Form 5 for the fiscal year ended December 31, 2008.
Acceleration of Vesting of Outstanding Stock Options
Stock options granted under the Companys 2005 Equity Incentive Plan typically are evidenced
by the Companys standard stock option agreement. The Company may elect to incorporate into its
standard stock option agreement one or more alternatives regarding the effect of a change in
control on the underlying option, including its vesting and exercisability. The Company has not
granted any stock options to any of the Named Executive Officers currently employed by the Company
under its 2008 Omnibus Incentive Plan.
The Company generally provides in stock option agreements (actually entered into with
recipients of stock option awards) that the option will accelerate in full in the event of an
acquisition constituting a change of control (as such terms are defined in the Companys
standard form of stock option agreement) if the recipient remains employed by the Company as of the
closing date of such acquisition and the option is not assumed or replaced by the successor or
acquiring entity or the entity in control of such successor or acquiring entity. Otherwise, the
option will not accelerate in the event of such an acquisition. All of the stock option agreements
governing the outstanding, unvested options held by the Named Executive Officers contain this
acceleration provision.
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In addition, the Company has incorporated into certain stock option agreements for options
granted in and after August 2006 a provision providing that, if following a change of control in
which an option is assumed as described above, in the event of the recipients involuntary
termination within a period of time, not to exceed 24 months, after the closing date of such
change of control, the vesting of the assumed option will be accelerated such that the option will
vest as of the effective date of such involuntary termination with respect to all shares that would
have vested during such period. For purposes of the stock option agreements, an
involuntary termination is a termination of employment that occurs by reason of dismissal
for any reason other than misconduct or of voluntary resignation following: (i) a change in
position that materially reduces the level of the employees responsibility, (ii) a material
reduction in the employees base salary, or (iii) relocation by more than 50 miles; provided that
(ii) and (iii) will apply only if the employee has not consented to the change or relocation.
Misconduct means the commission of any act of fraud, embezzlement or dishonesty by the
employee, any unauthorized use or disclosure by the employee of confidential information or trade
secrets of the Company (or any parent or subsidiary), or any other intentional misconduct by the
employee adversely affecting the business affairs of the Company (or any parent or subsidiary) in a
material manner. All of the stock option agreements governing the options granted to the Named
Executive Officers in January 2007 contain this double trigger acceleration provision. The Company
anticipates continuing to include this or a similar double trigger acceleration provision in most
stock option awards made in the future.
As of December 31, 2008, none of the Named Executive Officers had any in-the-money unvested
stock options. The value at December 31, 2008 of the acceleration provisions described above is
based on the spread between the exercise price of option shares that would accelerate under the
acceleration scenarios described above and the market value of these shares as of December 31,
2008. The market value of these shares is based on the closing market price of the Companys common
stock on December 31, 2008, which was $0.08 per share. None of the outstanding, unvested options
held by the Named Executive Officers has an exercise price of less than $0.08 per share.
Accordingly, none of the Named Executive Officers would have realized any value as a result of the
acceleration provisions described above had any of the acceleration scenarios occurred on
December 31, 2008.
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Table of Contents
Outstanding Equity Awards at Fiscal Year-End 2008
The following table sets forth information regarding outstanding equity awards held by the
Named Executive Officers at the end of fiscal 2008:
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||
Equity Incentive | ||||||||||||||||||||||||||||||||||||
Plan Awards: | ||||||||||||||||||||||||||||||||||||
Market | ||||||||||||||||||||||||||||||||||||
Equity Incentive | Equity Incentive | or Payout | ||||||||||||||||||||||||||||||||||
Plan Awards: | Market Value | Plan Awards: | Value of | |||||||||||||||||||||||||||||||||
Number of | Number of | Number | Number of | of | Number of | Unearned | ||||||||||||||||||||||||||||||
Securities | Securities | of Securities | Shares or | Shares or | Unearned Shares, | Shares, Units | ||||||||||||||||||||||||||||||
Underlying | Underlying | Underlying | Units of | Units of | Units or Other | or Other | ||||||||||||||||||||||||||||||
Unexercised | Unexercised | Unexercised | Stock That | Stock That | Rights That | Rights That | ||||||||||||||||||||||||||||||
Options | Options | Unearned | Option Exercise | Option | Have Not | Have Not | Have Not | Have Not | ||||||||||||||||||||||||||||
(#) | (#) | Options | Price | Expiration | Vested | Vested | Vested | Vested | ||||||||||||||||||||||||||||
Name | Exercisable | Unexercisable | (#) | ($) | Date | (#) | ($) | (#) | ($) | |||||||||||||||||||||||||||
Brian M. Culley |
100,000 | | | $ | 2.30 | 7/13/2015 | | | | | ||||||||||||||||||||||||||
58,333 | (1) | 21,667 | (1) | | $ | 4.75 | 1/30/2016 | | | | | |||||||||||||||||||||||||
71,875 | (2) | 78,125 | (2) | | $ | 2.75 | 1/11/2017 | | | | | |||||||||||||||||||||||||
| 200,000 | (3) | | $ | 0.54 | 3/30/2018 | | | | | ||||||||||||||||||||||||||
Patrick L. Keran |
58,333 | (4) | 41,667 | (4) | | $ | 2.99 | 8/17/2016 | | | | | ||||||||||||||||||||||||
23,958 | (2) | 26,042 | (2) | | $ | 2.75 | 1/11/2017 | | | | | |||||||||||||||||||||||||
| 200,000 | (3) | | $ | 0.54 | 3/30/2018 | | | | | ||||||||||||||||||||||||||
Evan M. Levine |
| | | | | | | | | |||||||||||||||||||||||||||
Mark N.K. Bagnall |
50,000 | | | $ | 2.42 | 7/13/2015 | | | | | ||||||||||||||||||||||||||
50,000 | | | $ | 4.62 | 6/01/2016 | | | | | |||||||||||||||||||||||||||
50,000 | | | $ | 2.57 | 5/22/2017 | | | | | |||||||||||||||||||||||||||
100,000 | (5) | 400,000 | (5) | | $ | 0.52 | 4/02/2018 | | | | | |||||||||||||||||||||||||
Gregory P. Hanson |
| | | | | | | | | |||||||||||||||||||||||||||
Joan M. Robbins |
93,750 | (6) | 6,250 | (6) | | $ | 2.30 | 1/12/2009 | | | | | ||||||||||||||||||||||||
68,750 | (6) | 31,250 | (6) | | $ | 4.75 | 1/12/2009 | | | | | |||||||||||||||||||||||||
32,812 | (6) | 42,188 | (6) | | $ | 2.75 | 1/12/2009 | | | | | |||||||||||||||||||||||||
| 200,000 | (7) | | $ | 0.54 | 1/12/2009 | | | | |
(1) | Subject to accelerated vesting in the event of a change in control, as
described above under Narrative Disclosure to Summary Compensation
Table Acceleration of Vesting of Outstanding Stock Options, this
option vested and became exercisable with respect to 1/4 of the total
underlying shares on January 1, 2007 and vests and becomes exercisable
with respect to 1/48 of the total underlying shares at the end of each
successive calendar month thereafter. |
|
(2) | Subject to accelerated vesting in the event of a change in control or
an involuntary termination within 24 months of a change in control, as
described above under Narrative Disclosure to Summary Compensation
Table Acceleration of Vesting of Outstanding Stock Options, this
option vested and became exercisable with respect to 1/4 of the total
underlying shares subject to the option on January 1, 2008 and vests
and becomes exercisable with respect to 1/48 of the total underlying
shares at the end of each successive month thereafter. |
|
(3) | Subject to accelerated vesting in the event of a change in control or
an involuntary termination within 24 months of a change in control, as
described above under Narrative Disclosure to Summary Compensation
Table Acceleration of Vesting of Outstanding Stock Options, this
option will vest and became exercisable with respect to 1/5 of the
total underlying shares on each of January 1, 2009, January 1, 2010,
January 1, 2011, January 1, 2012 and January 1, 2013. |
|
(4) | Subject to accelerated vesting in the event of a change in control or
an involuntary termination within 24 months of a change in control, as
described above under Narrative Disclosure to Summary Compensation
Table Acceleration of Vesting of Outstanding Stock Options, this
option vested and became exercisable with respect to 1/4 of the total
underlying shares subject to the option on August 7, 2007 and vests
and becomes exercisable with respect to 1/48 of the total underlying
shares at the end of each successive month thereafter. |
|
(5) | Subject to accelerated vesting in the event of a change in control or
an involuntary termination within 12 months of a change in control, as
described above under Narrative Disclosure to Summary Compensation
Table Employment and Separation Arrangements with Mr. Bagnall, this
option vested and became exercisable with respect to 100,000 shares
immediately prior to Mr. Bagnalls involuntary termination in December
2008 and will vest and became exercisable with respect to 1/5 of the
total underlying shares on each of January 1, 2009,
January 1, 2010,
January 1, 2011 and January 1, 2012. |
|
(6) | Dr. Robbins employment with the Company ended on October 14, 2008
and, as a result, this option stopped vesting as of such date.
Pursuant to the terms of the option grant, this option expired and was
no longer exercisable as of January 12, 2009. |
|
(7) | Dr. Robbins employment with the Company ended on October 14, 2008
and, as a result, this option stopped vesting as of such date. On
October 14, 2008, none of the shares underlying this option were
vested or exercisable. |
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Table of Contents
Tax-Qualified Defined Contribution Plan
The Company has a defined contribution savings plan pursuant to Section 401(k) of the IRC. The
plan is for the benefit of all full-time employees and permits voluntary contributions by
qualifying employees of up to 100% of eligible compensation, subject to Internal Revenue
Service-imposed maximum limits. Until January 1, 2008, the Company was required to make matching
contributions in the amount of 100% of employee contributions up to 3% of eligible compensation and
50% of employee contributions between 3% and 5% of eligible compensation. Effective January 1,
2008, the plan was amended to require the Company to make matching contributions equal to 100% of
employee contributions up to 6% of eligible compensation, limited by the IRS-imposed maximum. The
Company incurred total expenses of approximately $218,150 and $118,000 in employer matching
contributions in 2008 and 2007, respectively.
Compensation of Directors
Directors who are employees of the Company do not receive any additional compensation for
their services as directors. The Companys non-employee directors are compensated as described
below.
Retainer and Meeting Fees
During 2008, the Company paid its non-employee directors quarterly cash retainers and Board
and committee meeting fees. The amounts of the quarterly retainers vary depending on the
non-employee directors role on the Board and its committees, as set forth in the table below:
Quarterly Retainers | Chairperson | Member | ||||||
Board of Directors |
$ | 6,250 | $ | 2,500 | ||||
Audit Committee |
$ | 5,000 | $ | 2,500 | ||||
Compensation Committee |
$ | 2,500 | $ | 1,250 | ||||
Nominating and Governance Committee |
$ | 2,500 | $ | 1,250 | ||||
Research and Development Committee |
$ | 2,500 | $ | 1,250 |
In addition to the quarterly retainers, the Company pays the following per meeting fees with
respect to each meeting of the Board or any committee of the Board with a duration of more than 15
minutes, other than (i) the first four meetings of the Board held during each calendar year,
(ii) the first four meetings of the audit committee held during each calendar year, (iii) the first
two meetings of the compensation committee held during each calendar year and (iv) the first
meeting of the nominating and governance committee held during each calendar year:
| $1,000 to each director for each such meeting attended in person; and |
||
| $500 to each director for each such meeting attended via telephone conference call. |
In addition to the quarterly retainer and meeting fees, the Company reimburses its
non-employee directors for travel and other reasonable out-of-pocket expenses related to attendance
at Board and committee meetings.
Equity Compensation
Pursuant to the terms of the Companys 2005 Equity Incentive Plan, each non-employee director
was automatically granted a nonstatutory option to purchase 50,000 shares of the Companys common
stock at the first meeting of the Board following each annual meeting of stockholders, provided
that such non-employee director had served on the Board for at least the preceding six months. The
exercise price per share of each automatically granted option was equal to 105% of the per-share
fair market value of the Companys common stock on the grant date. Each such option became
exercisable as to 1/12th of the shares underlying the option at the end of each calendar month
after its date of grant, provided that the director remains in continuous service. The options
expire no later than ten years after the date of grant. In May 2008, the Companys stockholders
approved the Companys 2008 Omnibus Incentive Plan. Following adoption of the Companys 2008
Omnibus Incentive Plan, no additional awards (including the automatic
options to the Companys non-employee directors described above) have been or will be made
under the Companys 2005 Equity Incentive Plan; however, the 2005 Equity Incentive Plan will
continue to govern any outstanding awards (including the automatic options to the Companys
non-employee directors described above) previously granted under the 2005 Equity Incentive Plan.
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Table of Contents
Awards under the Companys 2008 Omnibus Incentive Plan are at the discretion of the Board or
the compensation committee of the Board. Unlike the 2005 Equity Incentive Plan, the 2008 Omnibus
Incentive Plan does not provide for automatic awards to the Companys directors. However, the
Company currently intends to grant annual nonstatutory options to its non-employee directors on
terms substantially similar to the terms of the automatic annual options granted to the
non-employee directors under the 2005 Equity Incentive Plan, except that the exercise price per
share of these options would be equal to 100% of the per-share fair market value of the Companys
common stock on the date of grant.
In February 2008, the Board approved an option to purchase up to of 50,000 shares of the
Companys common stock to each of Drs. Rowinsky and Denner. The Board granted an option to
Dr. Rowinsky in connection with his appointment to the Board in February 2008 and granted an option
to Dr. Denner in acknowledgment that it had not granted Dr. Denner an option in connection with his
appointment to the Board in October 2006. Each option will vest and become exercisable in 12 equal
monthly installments beginning on, for Dr. Rowinsky, February 25, 2008, and, for Dr. Denner,
February 28, 2008, and will expire on March 23, 2018. The grants of these options were contingent
upon the Companys receipt of a waiver under the Rights Agreement of restrictions relating to
equity awards to directors and employees of the Company. The Company received the waiver on
March 24, 2008 and, accordingly, the options were granted with an exercise price of $0.48 per
share, which was the closing price of the Companys common stock on March 24, 2008, as reported by
the NYSE Amex. If Dr. Rowinskys or Dr. Denners service to the Company terminates for any reason,
the options will be exercisable, to the extent then vested, during the three-year period after the
date of such termination, but in no event after March 23, 2018.
In May 2008, the Board approved an option to purchase up to 50,000 shares of the Companys
common stock to each non-employee member of the Board. Each option will vest and become exercisable
in 12 equal monthly installments beginning on May 28, 2008 and will expire on June 29, 2018. To
comply with the requirements of the NYSE Amex regarding the listing of additional securities and
applicable securities laws, the Board authorized these options to be granted as of a date that
would give the Company a reasonable time to apply for and receive approval to list the additional
shares with the NYSE Amex and to prepare and file a registration statement on Form S-8 covering
awards under the Companys 2008 Omnibus Incentive Plan. Accordingly, the Board approved a grant
date of June 30, 2008 for these options and the options were granted with an exercise price of
$0.37 per share, which was the closing price of the Companys common stock on June 30, 2008. If any
of the non-employee directors service to the Company terminates for any reason, the options will
be exercisable, to the extent then vested, during the three-year period after the date of such
termination, but in no event after June 29, 2018.
Director Compensation in 2008
The following table shows compensation information for the individuals who served as
non-employee directors of the Company during the year ended December 31, 2008:
Nonqualified | ||||||||||||||||||||||||||||
Fees Earned or | Non-Equity | Deferred | ||||||||||||||||||||||||||
Paid in | Stock | Option | Incentive Plan | Compensation | All Other | |||||||||||||||||||||||
Name(1) | Cash | Awards | Awards(2) | Compensation | Earnings | Compensation | Total | |||||||||||||||||||||
Alexander J. Denner |
$ | 44,772 | (3) | | $ | 65,890 | (4) | | | | $ | 110,662 | ||||||||||||||||
Michael M. Goldberg |
$ | 42,056 | | $ | 47,002 | (5) | | | | $ | 89,058 | |||||||||||||||||
Jack Lief |
$ | 59,944 | | $ | 47,002 | (6) | | | | $ | 106,947 | |||||||||||||||||
Mark J. Pykett |
$ | 41,556 | | $ | 47,002 | (7) | | | | $ | 88,558 | |||||||||||||||||
Eric K. Rowinsky |
$ | 29,723 | | $ | 28,291 | (8) | | | | $ | 58,014 |
(1) | Mark N.K. Bagnall served as a non-employee director of the Company for part of 2008, but from April 3, 2008 to
December 26, 2008, he served as the Companys Executive Vice President, Chief Financial Officer and Treasurer.
Accordingly, all of Mr. Bagnalls 2008 compensation is set forth above in the Summary Compensation Table and under
Narrative Disclosure to the Summary Compensation Table. |
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Table of Contents
(2) | Values for option awards have been computed in accordance with FAS 123R, which requires that the Company recognizes
as compensation expense the value (excluding the effect of assumed forfeiture rates) of the options granted to the
directors over the requisite service period, which is typically the vesting period. For the assumptions made in
calculating the FAS 123R value of the option awards, see Note 8 of the Notes to Consolidated Financial Statements
contained in the Companys Annual Report on Form 10-K filed with the SEC on March 27, 2009. The amounts in this
column include the ratable compensation expense recognized in 2008 for options granted in 2007. |
|
(3) | Since October 2006, when Dr. Denner joined the Board, through February 2008, based on its past practice regarding
cash compensation with respect to Mr. Meister, the Purchaser Designee under the Rights Agreement prior to
Dr. Denner, the Company did not pay Dr. Denner any fees associated with his participation on the Board or its
committees. For information regarding the Rights Agreement, see Director Nominations Board Nominees for the 2009
Annual Meeting, above. In March 2008, after discussions with Dr. Denner, the Company paid Dr. Denner $18,500 and
$2,772, which represented fees earned by Dr. Denner in 2007 and 2006, respectively, for participation on the Board
and its compensation committee. |
|
(4) | The aggregate number of shares underlying Dr. Denners outstanding options at December 31, 2008 was 150,000 shares. |
|
(5) | The aggregate number of shares underlying Dr. Goldbergs outstanding options at December 31, 2008 was 250,000 shares. |
|
(6) | The aggregate number of shares underlying Mr. Liefs outstanding options at December 31, 2008 was 150,000 shares. |
|
(7) | The aggregate number of shares underlying Dr. Pyketts outstanding options at December 31, 2008 was 250,000 shares. |
|
(8) | The aggregate number of shares underlying Dr. Rowinskys outstanding options at December 31, 2008 was 100,000 shares. |
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AUDIT COMMITTEE REPORT
Under the guidance of a written charter adopted by the Board, the purpose of the audit
committee is to oversee the accounting and financial reporting processes of the Company and audits
of its financial statements and the effectiveness of the Companys internal control over financial
reporting, if applicable. The responsibilities of the audit committee include appointing and
providing for the compensation of the Companys independent registered public accounting firm. Each
of the members of the audit committee meets the independence and qualification requirements of the
NYSE Amex.
Management has primary responsibility for the system of internal controls and the financial
reporting process. The independent registered public accounting firm has the responsibility to
express an opinion on the financial statements based on an audit conducted in accordance with
generally accepted auditing standards.
In this context and in connection with the audited financial statements contained in the
Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2008, the audit
committee:
| reviewed and discussed the audited financial statements as of and for the fiscal year
ended December 31, 2008 with the Companys management; |
||
| discussed with J.H. Cohn, LLP, the Companys independent registered public accounting
firm, the matters required to be discussed by Statement of Auditing Standards No. 61, as
amended, as adopted by the Public Company Accounting Oversight Board in Rule 3200T; |
||
| reviewed the written disclosures and the letter from J.H. Cohn, LLP required by
applicable requirements of the Public Company Accounting Oversight Board regarding the
independent accountants communications with the audit committee concerning independence,
and has discussed with J.H. Cohn, LLP their independence; and |
||
| based on the foregoing reviews and discussions, recommended to the Board that the audited
financial statements be included in the Companys Annual Report on Form 10-K for the fiscal
year ended December 31, 2008 filed with the Securities and Exchange Commission. |
AUDIT COMMITTEE
Jack Lief
Michael M. Goldberg
Mark J. Pykett
Michael M. Goldberg
Mark J. Pykett
The preceding Audit Committee Report shall not be deemed soliciting material or filed with
the Securities and Exchange Commission, nor shall any information in this report be incorporated by
reference into any of past or future filing under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, except to the extent the Company specifically
incorporates it by reference into such filing.
Policy Regarding Pre-Approval of Audit and Non-Audit Services by the Companys Independent
Registered Public Accounting Firm
The Company has established a policy that all audit and permissible non-audit services
provided by the Companys independent registered public accounting firm will be pre-approved by the
audit committee. These services may include audit services, audit-related services, tax services
and other services. The audit committee considers whether the provision of each non-audit service
is compatible with maintaining the independence of our auditors.
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Principal Accountant Fees and Services
The audit committee has appointed J.H. Cohn LLP as the Companys independent registered public
accounting firm for the fiscal year ending December 31, 2009. The Company is asking the
stockholders to ratify this appointment.
The following table shows the fees paid or accrued by the Company for the audit and other
services provided by J.H. Cohn LLP for fiscal 2007 and 2008.
2007 | 2008 | |||||||
Audit Fees(1) |
$ | 256,392 | $ | 188,779 | ||||
Audit-Related Fees(2) |
10,000 | 14,500 | ||||||
Tax Fees |
| | ||||||
All Other Fees(3) |
1,042 | | ||||||
Total |
$ | 267,434 | $ | 203,279 | ||||
(1) | Audit Fees represent fees for professional services provided in connection with the
audit of the Companys financial statements (including the audit of internal controls
over financial reporting under Section 404 of the Sarbanes Oxley Act, if conducted) and
review of the Companys quarterly financial statements and services normally provided in
connection with statutory and regulatory filings and engagements. |
|
(2) | Audit-Related Fees consist primarily of assurance and related services related to the
performance of the annual audit or review of the Companys financial statements. |
|
(3) | All Other Fees for 2007 consist of fees to access an accounting research software tool. |
29
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PROPOSAL 1 ELECTION OF DIRECTORS
At the Annual Meeting, the stockholders will vote on the election of six directors to serve
for one-year terms until the next annual meeting of stockholders in and until their successors are
elected and qualified, or until their earlier death, retirement, resignation or removal. The Board
has unanimously nominated Mark N.K. Bagnall, Alexander J. Denner, Michael M. Goldberg, Jack Lief,
Mark J. Pykett and Eric K. Rowinsky for election to the Board as directors. The nominees have
indicated that they are willing and able to serve as directors. If any of the nominees becomes
unable or unwilling to serve, the accompanying proxy may be voted for the election of such other
person as shall be designated by the Board. The proxies being solicited will be voted for no more
than six nominees at the Annual Meeting. The directors will be elected by the affirmative vote of a
majority of the votes cast with respect to each director nominee, in person or by proxy, at the
Annual Meeting, assuming a quorum is present. Stockholders do not have cumulative voting rights in
the election of directors.
The Board recommends a vote FOR the election of Mark N.K. Bagnall, Alexander J. Denner,
Michael M. Goldberg, Jack Lief, Mark J. Pykett and Eric K. Rowinsky as directors.
Unless otherwise instructed, it is the intention of the persons named in the accompanying
proxy card to vote shares represented by properly executed proxy cards for the election of Mark
N.K. Bagnall, Alexander J. Denner, Michael M. Goldberg, Jack Lief, Mark J. Pykett and Eric K.
Rowinsky.
30
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PROPOSAL 2 RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
At the Annual Meeting, the stockholders will be asked to ratify the appointment of J.H. Cohn
LLP as the Companys independent registered public accounting firm for the fiscal year ending
December 31, 2009. If the stockholders do not ratify the appointment of J.H. Cohn LLP, the audit
committee will reconsider this appointment. Approval of this proposal requires the affirmative vote
of the holders of a majority of the shares represented in person or by proxy and entitled to vote
at the Annual Meeting. Broker non-votes will not have any effect on the outcome of this proposal.
Even if the appointment is ratified, the audit committee, in its discretion, may appoint a
different independent registered public accounting firm at any time during the year if the audit
committee determines that such a change would be in the best interests of the Company and its
stockholders.
The Company expects representatives of J.H. Cohn LLP to be present at the Annual Meeting and
they will have the opportunity to make statements if they desire to do so. The Company also expects
such representatives to be available to respond to appropriate questions.
The Board recommends a vote FOR the ratification of the appointment of J.H. Cohn LLP as the
Companys independent registered public accounting firm for the fiscal year ending December 31,
2009.
OTHER MATTERS
As of the time of preparation of this Proxy Statement, neither the Board nor management of the
Company intends to bring before the Annual Meeting any business other than the matters referred to
in the Notice of Annual Meeting and this Proxy Statement. If any other business should properly
come before the Annual Meeting, or any adjournment thereof, the persons named in the proxy will
vote on such matters according to their best judgment.
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STOCKHOLDER PROPOSALS FOR 2010 ANNUAL MEETING
Stockholder proposals may be included in the Companys proxy materials for the 2010 Annual
Meeting of Stockholders if they are provided to the Company on a timely basis and satisfy the other
conditions set forth in applicable SEC rules. For a stockholder proposal to be included in the
Companys proxy materials for the 2010 Annual Meeting of Stockholders, the proposal must be
received at the Companys principal executive offices, addressed to the secretary of the Company,
not later than December 30, 2009. Stockholder business that is not intended for inclusion in the
Companys proxy materials may be brought before the annual meeting so long as the Company receives
notice of the proposal as specified by the Companys bylaws, addressed to the secretary of the
Company at the Companys principal executive offices, not earlier than February 2, 2010 nor later
than the close of business on March 4, 2010. Stockholders may make nominations of persons for
election to the Board at the 2010 Annual Meeting of Stockholders so long as the Company receives
notice of the proposal as specified by the Companys bylaws, addressed to the secretary of the
Company at the Companys principal executive offices, not earlier than February 2, 2010 nor later
than the close of business on March 4, 2010. Stockholders are advised to review the Companys
bylaws, which contain additional advance notice requirements, including requirements with respect
to advance notice of stockholder proposals and director nominations. A copy of the Companys bylaws
is available to stockholders from the secretary of the Company upon written request.
By Order of the Board of Directors
![-s- Brian M. Culley](https://cdn.kscope.io/612f47825e45ba4586bf14c6c4b87959-c84088c8408801.gif)
Chief Business Officer and Senior Vice President
San Diego, California
April 30, 2009
April 30, 2009
YOUR VOTE IS IMPORTANT!
You are cordially invited to attend the Annual Meeting. However, to ensure that your shares
are represented at the meeting, please submit your proxy or voting instructions by mail, using the
return envelope provided. Please see the instructions on the proxy and voting instruction card.
Submitting a proxy or voting instructions will not prevent you from attending the Annual Meeting
and voting in person, if you so desire, but will help the Company secure a quorum and reduce the
expense of additional proxy solicitation.
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IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDERS MEETING TO BE
HELD ON JUNE 3, 2009: Our notice of annual meeting of stockholders, proxy statement and annual
report on Form 10-K for the fiscal year ended December 31, 2008 may be viewed at
https://www.proxydocs.com/anx.
ADVENTRX PHARMACEUTICALS, INC.
Proxy Solicited on behalf of the Board of Directors
for the Annual Meeting of Stockholders
to be Held June 3, 2009
for the Annual Meeting of Stockholders
to be Held June 3, 2009
The undersigned stockholder of ADVENTRX Pharmaceuticals, Inc. (the Company) hereby appoints
Brian M. Culley and Mark N.K. Bagnall, or any one of them with full power of substitution, as
proxies of the undersigned to attend the Annual Meeting of Stockholders of the Company to be held
on June 3, 2009 at 9:00 a.m., Pacific time, and any adjournment thereof, hereby revoking any
proxies heretofore given, and to vote all shares of common stock of the Company held or owned by
the undersigned as directed on the reverse side of this proxy card, and in their discretion upon
such other matters as may come before the meeting.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
Table of Contents
The Board recommends that you vote FOR the following proposals. The shares represented by this
proxy, when properly executed, will be voted in the manner directed below. IF NO CHOICE IS
INDICATED, THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED FOR ALL OF THE FOLLOWING PROPOSALS.
This proxy may be revoked by the undersigned at any time, prior to the time it is voted by any of
the means described in the accompanying Proxy Statement.
1. To elect as directors, to hold office until the 2010 Annual Meeting of Stockholders and
until their successors are elected and qualified, the nominees listed below:
Mark N.K. Bagnall
Alexander J. Denner
Michael M. Goldberg
Jack Lief
Mark J. Pykett
Eric K. Rowinsky
FOR | WITHHOLD AUTHORITY TO VOTE | |||||
all nominees listed | (as to all nominees) | |||||
(except as indicated below) |
To withhold authority to vote for any individual nominee, write the nominees name on the line
provided below.
2. To ratify the appointment of J.H. Cohn LLP as the Companys independent registered public
accounting firm for the fiscal year ending December 31, 2009.
For | Against | Abstain |
Please sign here. Date
and sign exactly as
name(s) appear(s) on this
proxy. If signing for
estates, trusts,
corporations or other
entities, full title or
capacity should be stated.
If shares are held
jointly, each holder
should sign.
|
Signature(s) of Stockholder(s): | |
Date: , |
PLEASE COMPLETE, DATE AND SIGN THIS PROXY
AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.