Exhibit 10.5
 
 
CYTOGEN CORPORATION
 
2004 NON-EMPLOYEE DIRECTOR STOCK INCENTIVE PLAN
 
1.           Purpose
 
The purpose of this 2004 Non-Employee Director Stock Incentive Plan (the “Plan”)
of Cytogen Corporation, a Delaware corporation (the “Company”), is to advance
the interests of the Company’s stockholders by enhancing the Company’s ability
to attract, retain and motivate persons who act as Non-Employee Directors of the
Company (as such term is defined in the Securities Exchange Act of 1934, as
amended), by providing such persons with equity ownership opportunities and
performance-based incentives and thereby better aligning the interests of such
persons with those of the Company’s stockholders.  Except where the context
otherwise requires, the term “Company” shall include any of the Company’s
present or future parent or subsidiary corporations as defined in
Sections 424(e) or (f) of the Internal Revenue Code of 1986, as amended, and any
regulations promulgated thereunder (the “Code”) and any other business venture
(including, without limitation, joint venture or limited liability company) in
which the Company has a controlling interest, as determined by the Board of
Directors of the Company (the “Board”).
 
2.           Eligibility
 
All of the Company’s Non-Employee Directors are eligible to be granted options
(each, an “Option”) and Compensation Shares, as defined in Section 5(a)(5)
hereof, under the Plan.  Each person who has been granted an Option or
Compensation Shares under the Plan shall be deemed a “Participant.”
 
3.           Administration and Delegation
 
(a)           Administration by Board.  The Plan will be administered by the
Board.  The Board shall have authority to adopt, amend and repeal such
administrative rules, guidelines and practices relating to the Plan as it shall
deem advisable.  The Board may correct any defect, supply any omission or
reconcile any inconsistency in the Plan or any award of options or issuance of
Compensation Shares in the manner and to the extent it shall deem expedient to
carry the Plan into effect and it shall be the sole and final judge of such
expediency.  All decisions by the Board shall be made in the Board’s sole
discretion and shall be final and binding on all persons having or claiming any
interest in the Plan or in any Option or Compensation Shares.  No Director or
person acting pursuant to the authority delegated by the Board shall be liable
for any action or determination relating to or under the Plan made in good
faith.
 
(b)           Appointment of Committees.  To the extent permitted by applicable
law, the Board may delegate any or all of its powers under the Plan to one or
more committees or subcommittees of the Board (a “Committee”).  All references
in the Plan to the “Board” shall mean the Board or a Committee of the Board to
the extent that the Board’s powers or authority under the Plan have been
delegated to such Committee.
 
 

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4.           Stock Available Under the Plan
 
Subject to adjustment under Section 6, Options and Compensation Shares may be
made under the Plan for up to seven hundred fifty thousand (750,000) shares of
common stock, $0.01 par value per share, of the Company (the “Common
Stock”).  If any Option expires or is terminated, surrendered or canceled
without having been fully exercised or is forfeited in whole or in part
(including as the result of shares of Common Stock subject to such Option being
repurchased by the Company at the original issuance price pursuant to a
contractual repurchase right) or results in any Common Stock not being issued,
the unused Common Stock covered by such Option shall again be available for the
grant of Options under the Plan.  Shares issued under the Plan may consist in
whole or in part of authorized but unissued shares or treasury shares.
 
5.           Stock Options
 
(a)           Option Grants.
 
(1)           Each person who is newly-elected a Director of the Company at an
annual meeting of the stockholders of the Company, such person not having
previously served as a Director of the Company and such person not being an
employee of the Company, shall, as of the date of such annual meeting, be
granted an Option to purchase ten thousand (10,000) shares of Common Stock;
provided, however, that the Board may, from time to time, by resolution of the
Board, increase or decrease the number of shares granted to such newly elected
Directors.
 
(2)           Each person who is appointed a Director of the Company after the
date of the most recent annual meeting of the stockholders of the Company, and
who is not an employee of the Company as of such date of appointment, shall be
granted on such date an Option to purchase a pro rata portion of ten thousand
(10,000) shares of Common Stock, based upon the number of full calendar months
remaining after the date of appointment until but not including the one year
anniversary month of such preceding annual meeting; provided, however, the Board
may, from time to time, by resolution of the Board, increase or decrease such
number of shares of Common Stock.
 
(3)           Effective upon approval of the Plan by the stockholders, each
person who, upon the conclusion of such meeting of stockholders, is a Director
and not an employee of the Company (an “Eligible Director”), shall be granted an
option to purchase ten thousand (10,000) shares of Common Stock.
 
(4)           On the day following each annual meeting of the stockholders of
the Company, commencing with the 2004 annual meeting, each person who is on that
date an Eligible Director and who was re-elected at that meeting shall be
granted an Option to purchase ten thousand (10,000) shares of Common Stock;
provided, however, that the Board may, from time to time, by resolution of the
Board, increase or decrease the number of shares granted to such re-elected
Directors.  In addition, on each such date, the then Chairman of the Board shall
receive an Option to purchase an additional seven thousand five hundred (7,500)
shares of Common Stock; provided, however, that the Board may, from time to
time, by resolution of the Board, increase or decrease the number of shares so
granted to the Chairman of the Board.
 
 
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(5)           Eligible Directors shall receive, at the sole discretion of and
after formal action by the Board, Compensation Shares, as defined below, in such
number of shares of Common Stock that is equal to each respective Eligible
Director’s Cash Component, as defined below, compensation divided by the Fair
Market Value of the Company’s Common Stock as of the date of issuance of such
Compensation Shares, which shall be no earlier than the date on which the
applicable Cash Component compensation becomes due and payable by the Company,
subject to the terms and conditions set forth herein.  Compensation Shares shall
not be issued for services not yet rendered by an Eligible Director to the
Company.  As used herein:  (i) Compensation Shares means any shares of Common
Stock issued to Eligible Directors hereunder in payment of such Eligible
Director’s Cash Component of compensation; and (ii) Cash Component means
Director cash compensation, including but not limited to annual services fees,
fees payable for board and committee meetings attended and fees for committees
chaired.
 
(6)           Subject to Section 5(a)(5) hereof, and subject to adjustment under
Section 6, Eligible Directors shall receive Compensation Shares in lieu of the
Cash Component of such Eligible Director’s compensation until at least such time
as:  (i) such Eligible Director owns two thousand (2,000) shares of the
Company’s Common Stock, excluding options or other rights to acquire shares of
the Company’s Common Stock, whether exercisable or unexercisable; or (ii) if
fewer than 2,000 shares are so owned, such smaller number of shares having a
Fair Market Value, as defined below, of in excess of one hundred thousand
dollars ($100,000), excluding the value, if any, of options to purchase Common
Stock, whether exercisable or unexercisable, or other rights to acquire Common
Stock of the Company.
 
(7)           Upon achieving either of the milestones (i) or (ii) set forth in
Section 5(a)(6) hereof, each such Eligible Director may, at his or her option,
elect to cease receiving his or her Cash Component to which he or she is
entitled in shares of Common Stock under the Plan; provided, however, that such
Eligible Director must make such election by providing notice of such election
to the Company.  Additionally, any Director who has reached either of the
milestones (i) or (ii) set forth in Section 5(a)(6) hereof may thereafter choose
to receive subsequent compensation in cash or Compensation Shares upon written
election made from time to time and to the Company in advance of the provision
of all services provided therefor.
 
(8)           Each Option and Compensation Shares provided for in this Section 5
shall be granted automatically and without further action by the Board or the
Company’s stockholders.  Promptly after the date of grant of each Option
provided for in this Section 5, the Company shall cause an Option Agreement to
be executed and delivered to the holder of the Option.  No other Options may be
granted at any time under this Plan.  All Compensation Shares required to be
issued pursuant to the terms of this Section 5 shall be valued at, and issued
on, the next business day immediately following the date upon which the Cash
Component becomes due and payable to such Eligible Director.
 
(b)           Exercise Price.  The exercise price of each Option will be 100% of
the Fair Market Value of the Common Stock on the date of grant of the Option
(the “Exercise Price”).  Fair Market value shall mean: (i) if the Common Stock
is traded in a market in which actual transactions are reported, the average of
the high and low prices at which the Common Stock is reported to have traded on
the relevant date in all markets on which trading in the Common Stock is
reported, or if there is no reported sale of the Common Stock on the relevant
date, the
 
 
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mean of the highest reported bid price and lowest reported asked price for the
Common Stock on the relevant date, (ii) if the Common Stock is publicly traded
but only in markets in which there is no reporting of actual transactions, the
mean of the highest reported bid price and the lowest reported asked price for
the Common Stock on the relevant date, or (iii) if the Common Stock is not
publicly traded, the value of a share of Common Stock as determined by the
Board.
 
(c)           Duration of Options.
 
(1)           No Option granted under this Plan may be exercised more than 10
years after the date of grant of the option.
 
(2)           Except as provided in Sections 5(f) and 5(g), Options shall become
exercisable in full on the first anniversary of the date of grant.
 
(d)           Exercise of Option.  Options may be exercised, in whole or in
part, at any time, by delivery to the Company of a written notice of exercise
signed by the proper person or by any other form of notice (including electronic
notice) approved by the Board together with payment in full as specified in
Section 5(e) for the number of shares for which the Option is exercised.
 
(e)           Payment Upon Exercise.  Common Stock purchased upon the exercise
of an Option granted under the Plan shall be paid for in cash, which may be
satisfied by a check, in an amount equal to Exercise Price of the Option.
 
(f)           Termination of Service of Director Holding an Option Other Than
Because of Death, Disability Retirement or Certain Voluntary
Resignations.  Subject to the provisions of Section 5(c), if there is a
termination of service of a Director to whom an Option has been granted, other
than by reason of the Director’s death or disability or retirement or voluntary
resignation, after three years’ service as an Eligible Director, upon or after
turning age 55, each Option held by the Director may be exercised until the
earlier of (x) the end of the three-month period immediately following the date
of termination of service, or (y) the expiration of the term of the option.
 
(g)           Death or Disability of Director Holding an
Option.  Notwithstanding the provisions of Section 5(c), if there is a
termination of service of a Director to whom an option has been granted by
reason of the Director’s death or disability, or a former Director dies within
three months following the date of his or her termination of service, each
option held by the Director on the date of the Director’s termination of service
may be exercised in full (i.e., in respect of up to 100% of the Option shares,
regardless of the time elapsed since the date of grant) until the earlier of (x)
the end of the one-year period immediately following the date of termination of
service or (y) the expiration of the term of the Option.  In the event of an
Eligible Director’s death, all of such person’s outstanding Options will
transfer to the maximum extent permitted by law to such person’s designated
beneficiary.  Each Eligible Director may name, from time to time, any
beneficiary or beneficiaries (which may be named contingently or successively)
as his or her beneficiary for purposes of this Plan.  Each designation shall be
on a form prescribed by the Company, will be effective only when delivered to
the Company, when effective will revoke all prior designations by the Eligible
Director and will be allowed only to the extent permitted by applicable law.  If
an Eligible Director dies with no such beneficiary designation in effect, such
 
 
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person’s Options will be transferable by will or pursuant to the laws of descent
and distribution applicable to such person.
 
(h)           Retirement or Certain Voluntary Resignations.  If there is a
termination of service of a Director by reason of the Director’s retirement or
voluntary resignation at any time after the Director has reached age 55 and, in
each such case, such Director has provided a minimum of three years’ service as
an Eligible Director, each Option held by the Director on the date of the
Director's termination of service may be exercised in full (i.e., in respect of
up to 100% of the option shares, regardless of the time elapsed since the date
of grant) until the earlier of (x) the end of the five year period immediately
following the date of termination of service or (y) the expiration of the term
of the option.
 
6.           Adjustments for Changes in Common Stock and Certain Other Events.
 
(a)           Changes in Capitalization.  In the event of any stock split,
reverse stock split, stock dividend, recapitalization, combination of shares,
reclassification of shares, spin-off or other similar change in capitalization
or event, or any distribution to holders of Common Stock other than an ordinary
cash dividend, (i) the number and class of securities available under this Plan,
(ii) the number of shares received under Section 5(a)(6) and (iii) the number
and class of securities and exercise price per share subject to each outstanding
Option shall be appropriately adjusted by the Company (or substituted Options
may be made, if applicable).  If this Section 6(a) applies and Section 6(d) also
applies to any event, Section 6(d) shall be applicable to such event, and this
Section 6(a) shall not be applicable.
 
(b)           Company Discretion.  The existence of outstanding Options or
Compensation Shares shall not affect in any way the right or power of the
Company or its stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Company's capital
structure or its business, or any merger or consolidation of the Company, or any
issue of bonds, debentures, preferred or prior preference stock ahead of or
affecting the Common Stock or the rights thereof, or the dissolution or
liquidation of the Company, or any sale or transfer of all or any part of its
assets or business or any other corporate act or proceeding, whether of a
similar character or otherwise.  Except as expressly provided herein, the
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, for cash or property, or for
labor or services either upon direct sale or upon the exercise of rights or
warrants to subscribe therefor, or on conversion of shares or obligations of the
Company convertible into such shares or other securities, shall not affect, and
no adjustment by reason thereof shall be made with respect to, the number, class
or price of shares of Common Stock then subject to outstanding options.
 
(c)           Liquidation or Dissolution.  In the event of a proposed
liquidation or dissolution of the Company, the Board shall upon written notice
to the Participants provide that all then unexercised Options will (i) become
exercisable in full as of a specified time at least 10 business days prior to
the effective date of such liquidation or dissolution and (ii) terminate
effective upon such liquidation or dissolution, except to the extent exercised
before the effective date.
 
 
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(d)           Corporate Transactions; Major Events.
 
(1)           If as a result of any (i) reorganization, (ii) merger or
consolidation of the Company with or into another entity as a result of which
all of the Common Stock of the Company is converted into or exchanged for the
right to receive cash, securities or other property, or (iii) any exchange of
all of the Common Stock of the Company for cash, securities or other property
pursuant to a share exchange transaction (each of (i), (ii) and (iii) being a
“Corporate Transaction”) while an Option is outstanding, or the execution by the
Company of any agreement with respect to a Corporate Transaction, then
(regardless of whether the transaction will also constitute a Major Event (as
defined below)) the Board shall provide that all outstanding Options shall be
assumed, or equivalent options shall be substituted, by the acquiring or
succeeding corporation (or an affiliate thereof).  For purposes hereof, an
Option shall be considered to be assumed if, following consummation of the
Corporate Transaction, the Option confers the right to purchase, for each share
of Common Stock subject to the Option immediately prior to the consummation of
the Corporate Transaction, the consideration (whether cash, securities or other
property) received as a result of the Corporate Transaction by holders of Common
Stock for each share of Common Stock held immediately prior to the consummation
of the Corporate Transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding shares of Common Stock); provided, however, that if the
consideration received as a result of the Corporate Transaction is not solely
common stock of the acquiring or succeeding corporation (or an affiliate
thereof), the Company may, with the consent of the acquiring or succeeding
corporation, provide for the consideration to be received upon the exercise of
Options to consist solely of common stock of the acquiring or succeeding
corporation (or an affiliate thereof) equivalent in fair market value to the per
share consideration received by holders of outstanding shares of Common Stock as
a result of the Corporate Transaction.
 
Notwithstanding the foregoing, if the acquiring or succeeding corporation (or an
affiliate thereof) does not agree to assume, or substitute for, such Options, or
in the event of a liquidation or dissolution of the Company, the Board shall,
upon written notice to the Participants, provide that all then unexercised
Options will become exercisable in full as of a specified time prior to the
Corporate Transaction and will terminate immediately prior to the consummation
of such Corporate Transaction, except to the extent exercised by the
Participants before the consummation of such Corporate Transaction; provided,
however, that in the event of a Corporate Transaction under the terms of which
holders of Common Stock will receive upon consummation thereof a cash payment
for each share of Common Stock surrendered pursuant to such Corporate
Transaction (the “Acquisition Price”), then the Board may instead provide that
all outstanding Options shall terminate upon consummation of such Corporate
Transaction and that each Participant shall receive, in exchange therefor, a
cash payment equal to the amount (if any) by which (A) the Acquisition Price
multiplied by the number of shares of Common Stock subject to such outstanding
Options (whether or not then exercisable) exceeds (B) the aggregate exercise
price of such Options.
 
In the event of a Corporate Transaction, Compensation Shares shall be adjusted
in the same manner as the Company’s Common Stock.
 
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(2)           Upon the occurrence of a Major Event (regardless of whether such
event also constitutes a Corporate Transaction), all of the Option Shares
covered by an Option shall become immediately available for purchase upon
exercise of the option, without regard to the vesting provisions of Section
5(c)(2).  “Major Event” shall mean when (i) the Company enters into one or more
definitive agreements to merge or consolidate the Company with or into another
corporation, or to sell or otherwise dispose of all or substantially all of the
Company’s assets, or to effect any other transaction, share exchange
consolidation or reorganization having similar results or effect; (ii) any
person other than the Company makes a tender or exchange offer for more than 50%
of Common Stock pursuant to which purchases of any amount of Common Stock are
made; (iii) stock representing more than 50% of the voting power of the Company
is acquired by any person other than the Company in any one or more transactions
occurring in any 24 month period.
 
7.           General Provisions Applicable to Options and Compensation Shares.
 
(a)           (i)           Transferability of Options.  Except as the Board may
otherwise determine or provide in an Option, Options shall not be sold,
assigned, transferred, pledged or otherwise encumbered by the person to whom
they are granted, either voluntarily or by operation of law, except by will or
the laws of descent and distribution, and, during the life of the Participant,
shall be exercisable only by the Participant.  References to a Participant, to
the extent relevant in the context, shall include references to authorized
transferees.
 
       (ii)          Transferability of Compensation Shares.  For one year after
the date of issuance of Compensation Shares to any Eligible Director, such
Compensation Shares shall not be transferable by such Eligible Director.  During
this one year period, Compensation Shares may not be assigned, pledged or
hypothecated in any way, and will not be transferable otherwise than by will or
the laws of descent and distribution.  The Company will not recognize any
attempt to assign, transfer, pledge, hypothecate or otherwise dispose of
Compensation Shares contrary to the provisions of this Plan, or any levy of any
attachment or similar process upon any Compensation Shares, and, except as
expressly stated in this Plan, the Company will not be required to, and will
not, remove any related restrictive legend from the Compensation Shares until
such one year period has expired.  The Compensation Shares shall bear a
restrictive legend evidencing such lock-up (the “Lock-up Legend”).  Upon the
expiration of such one year lock-up period, Compensation Shares shall become
fully transferable by the holder, subject to the terms of the Securities Act of
1933, as amended and state securities laws.  The Company shall take reasonable
steps to remove the Lock-up Legend from the Compensation Shares within a
reasonable time after the expiration of such period upon the request of an
Eligible Director.  Notwithstanding such lock-up provision, upon the occurrence
of a Corporate Transaction, all of the Compensation Shares issued hereunder to
Eligible Directors shall be treated in a like manner as are the outstanding
shares of the Company’s Common Stock upon the occurrence of such Corporate
Transaction.
 
(b)           Documentation.  Each Option shall be evidenced in such form
(written, electronic or otherwise) as the Board shall determine.  Each Option
may contain terms and conditions in addition to those set forth in the Plan.
 
 
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(c)           Amendment of Option.  Subject to the provisions of the Company’s
Bylaws, the Board may amend, modify or terminate any outstanding Option,
including but not limited to, substituting therefor another Option of the same
or a different type, provided that the Participant’s consent to such action
shall be required unless the Board determines that the action, taking into
account any related action, would not materially and adversely affect the
Participant.
 
(d)           Conditions on Delivery of Stock.  The Company will not be
obligated to deliver any shares of Common Stock pursuant to the Plan or to
remove restrictions from shares previously delivered under the Plan until (i)
all conditions of the Option have been met or removed to the satisfaction of the
Company, (ii) in the opinion of the Company’s counsel, all other legal matters
in connection with the issuance and delivery of such shares have been satisfied,
including any applicable securities laws and any applicable stock exchange or
stock market rules and regulations, and (iii) the Participant has executed and
delivered to the Company such representations or agreements as the Company may
consider appropriate to satisfy the requirements of any applicable laws, rules
or regulations.
 
(e)           Deferred Delivery of Shares Issuable Pursuant to an Option.  The
Board may, at the time any Option is granted, provide that, at the time Common
Stock would otherwise be delivered pursuant to the Option, the Participant shall
instead receive an instrument evidencing the right to future delivery of Common
Stock at such time or times, and on such conditions, as the Board shall
specify.  The Board may at any time accelerate the time at which delivery of all
or any part of the Common Stock shall take place.
 
(f)           Acceleration.  The Board may at any time provide that any Award
shall become immediately exercisable in full or in part, free of some or all
restrictions or conditions, or otherwise realizable in full or in part, as the
case may be.
 
8.           Miscellaneous
 
(a)           No Rights As Stockholder.  Subject to the provisions of the
applicable Option, no Participant or designated beneficiary shall have any
rights as a stockholder with respect to any shares of Common Stock to be
distributed with respect to an Option until becoming the record holder of such
shares.  Notwithstanding the foregoing, in the event the Company effects a split
of the Common Stock by means of a stock dividend and the exercise price of and
the number of shares subject to such Option are adjusted as of the date of the
distribution of the dividend (rather than as of the record date for such
dividend), then an optionee who exercises an Option between the record date and
the distribution date for such stock dividend shall be entitled to receive, on
the distribution date, the stock dividend with respect to the shares of Common
Stock acquired upon such Option exercise, notwithstanding the fact that such
shares were not outstanding as of the close of business on the record date for
such stock dividend.
 
(b)           Effective Date and Term of Plan.  The Plan shall become effective
on the date on which it is adopted by the Board, but no Option granted to a
Participant that is intended to comply with Section 162(m) shall become
exercisable, vested or realizable, as applicable to such Option, unless and
until the Plan has been approved by the Company’s stockholders to the extent
stockholder approval is required by Section 162(m) in the manner required under
Section 162(m) (including the vote required under Section 162(m)).  No Options
shall be granted under the Plan
 
 
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after the completion of ten years from the earlier of (i) the date on which the
Plan was adopted by the Board or (ii) the date the Plan was approved by the
Company’s stockholders, but Options previously granted may extend beyond that
date.
 
(c)           Amendment of Plan.  Subject to the provisions of the Company’s
Bylaws, the Board may amend, suspend or terminate the Plan or any portion
thereof at any time, provided that to the extent required by Section 162(m), no
Option granted to a Participant that is intended to comply with Section 162(m)
after the date of such amendment shall become exercisable, realizable or vested,
as applicable to such Option, unless and until such amendment shall have been
approved by the Company’s stockholders if required by Section 162(m) (including
the vote required under Section 162(m)).
 
(d)           Governing Law.  The provisions of the Plan and all Options made
hereunder shall be governed by and interpreted in accordance with the laws of
the State of Delaware, without regard to any applicable conflicts of law.
 
 
 
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