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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-28194
DIGENE CORPORATION
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(Exact name of registrant as specified in its charter)
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DELAWARE 52-1536128
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State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization
9000 VIRGINIA MANOR ROAD
BELTSVILLE, MARYLAND 20705
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(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code (301) 470-6500
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NOT APPLICABLE
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
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Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
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Shares outstanding as of
Class October 28, 1996
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Common Stock, par value $.01 per share 11,310,041
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DIGENE CORPORATION
INDEX TO FORM 10-Q
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Page
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PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements -
Balance Sheets - September 30, 1996 and June 30, 1996 1
Statements of Operations - Three months ended September 30, 1996 and 1995 2
Statements of Cash Flows - Three months ended September 30, 1996 and 1995 3
Notes to Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 5
PART II. OTHER INFORMATION:
Item 4. Submission of Matters to a Vote of Security Holders 8
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURES 10
EXHIBIT INDEX 11
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PART I. FINANCIAL INFORMATION
DIGENE CORPORATION
BALANCE SHEETS
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SEPTEMBER 30, JUNE 30,
1996 1996
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(UNAUDITED) (NOTE)
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ASSETS
Current assets:
Cash and cash equivalents $ 14,846,529 $ 24,107,325
Short-term investments 11,993,614 4,467,978
Accounts receivable, less allowance of approximately $61,000 at
September 30, 1996 and June 30, 1996 1,921,410 1,626,046
Inventories 1,999,805 1,806,333
Prepaid expenses and other current assets 218,565 299,435
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Total current assets 30,979,923 32,307,117
Property and equipment, net 888,647 705,040
Intangible assets, net 35,707 49,008
Deposits 140,420 112,462
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Total assets $ 32,044,697 $ 33,173,627
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,704,889 $ 2,124,682
Accrued expenses 610,323 456,354
Current maturities of long-term debt 113,106 109,857
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Total current liabilities 2,428,318 2,690,893
Long-term debt, less current maturities 36,984 151,532
Accrued rent 133,772 149,907
Deferred rent 56,322 62,014
Stockholders' equity:
Common stock, $.01 par value, 50,000,000 shares authorized, 11,309,899
and 11,303,705 shares issued and outstanding at September 30, 1996
and June 30, 1996, respectively 113,099 113,037
Additional paid-in capital 49,341,700 49,339,001
Accumulated deficit (20,065,498) (19,332,757)
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Total stockholders' equity 29,389,301 30,119,281
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Total liabilities and stockholders' equity $ 32,044,697 $ 33,173,627
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</TABLE>
Note: The balance sheet at June 30, 1996 has been derived from the audited
financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles for audited financial statements.
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DIGENE CORPORATION
STATEMENTS OF OPERATIONS
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THREE MONTHS ENDED
SEPTEMBER 30,
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1996 1995
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(UNAUDITED)
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Revenues:
Product sales $ 1,856,496 $ 1,481,283
Research and development contracts 147,026 86,488
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Total revenues 2,003,522 1,567,771
Costs and expenses:
Cost of product sales 776,877 797,567
Research and development 750,233 515,440
Selling and marketing 796,297 379,982
General and administrative 822,235 281,802
Amortization of intangible assets 8,201 66,265
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Loss from operations (1,150,321) (473,286)
Other income (expense):
Other income (expense) 25,114 (18,474)
Interest income 394,494 9,922
Interest expense (2,028) (54,659)
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Net loss $ (732,741) $ (536,497)
============ ============
Net loss per share $ (0.06) $ (0.63)
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Weighted average shares outstanding 11,308,900 849,924
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</TABLE>
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DIGENE CORPORATION
STATEMENTS OF CASH FLOWS
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THREE MONTHS ENDED
SEPTEMBER 30,
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1996 1995
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(UNAUDITED)
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OPERATING ACTIVITIES
Net loss $ (732,741) $ (536,497)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization of property and equipment 99,621 86,133
Amortization of intangible assets 8,201 66,265
Changes in operating assets and liabilities:
Accounts receivable (295,364) (180,187)
Inventories (193,472) 14,014
Prepaid expenses and other current assets 80,870 12,818
Deposits (27,958) 1,800
Accounts payable (419,793) (52,202)
Accrued expenses 153,969 (40,367)
Accrued rent (16,135) (9,522)
Deferred rent (5,692) (3,578)
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Net cash used in operating activities (1,348,494) (641,323)
INVESTING ACTIVITIES
Purchases of short-term investments (7,525,636) -
Capital expenditures (283,228) (113,040)
Additions to intangible assets 5,100 (1,754)
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Net cash used in investing activities (7,803,764) (114,794)
FINANCING ACTIVITIES
Net proceeds from issuance of redeemable convertible
Perferred Stock - 350,000
Exercise of Common Stock options 2,761 -
Principal repayments on long-term debt (111,299) (138,239)
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Net cash (used in) provided by financing activities (108,538) 211,761
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Net (decrease) increase in cash and cash equivalents $ (9,260,796) $ (544,356)
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DIGENE CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The financial statements for the three month periods ended September 30, 1996
and 1995 are unaudited and include all adjustments which, in the opinion of
management, are necessary to present fairly the results of operations for the
periods then ended. All such adjustments are of a normal recurring nature.
These financial statements should be read in conjunction with the Digene
Corporation's (the "Company") Annual Report on Form 10-K for the year ended
June 30, 1996, which includes financial statements and notes thereto for the
years ended June 30, 1996, 1995, and 1994.
The results of the Company's operations for any interim period are not
necessarily indicative of the results of the Company's operations for any other
interim period or for a full fiscal year.
1. NET LOSS PER SHARE
The Company's net loss per share calculations are based on the weighted average
number of shares of Common Stock outstanding. Pursuant to the requirements of
the Securities and Exchange Commission staff accounting bulletin No. 83, the
Company included the effect of the convertible Preferred Stock, Common Stock,
and warrants and options to purchase Common Stock in the weighted average
shares outstanding for the quarter ended September 30, 1995. However, for the
quarter ended September 30, 1996, the Company is required to calculate the
weighted average shares outstanding pursuant to APB 15 and thus the net loss
per share for the two periods is not comparable. APB 15 requires that shares
of Common Stock issuable upon the exercise of stock options and warrants or
conversion of convertible Preferred Stock are included in the weighted average
shares outstanding only if the effect of their inclusion is dilutive. The
Company has not included such shares of Common Stock in its weighted average
shares outstanding since the effect is anti-dilutive. If the Company had
calculated the weighted average shares outstanding for the three months
September 30, 1995 in accordance with APB 15, the net loss per share and
weighted average shares outstanding would have been $1.46 per share and
368,356, respectively.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FORWARD LOOKING STATEMENTS
Statements regarding Digene Corporation's (the "Company") expectations as to
financial results and other aspects of its business set forth below or
otherwise made in writing or orally by the Company may constitute forward
looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Although the Company believes that its expectations are
based on reasonable assumptions within the bounds of its knowledge of its
business and operations, there can be no assurance that actual results will not
differ materially from its expectations. Factors which could cause actual
results to differ from expectations include, but are not limited to,
uncertainty of future profitability, uncertainty of market acceptance,
dependence on a single product (its Hybrid Capture human papillomavirus ("HPV")
test), limited sales and marketing experience, adequacy of third party
reimbursement, competition, extent of government regulations, and the
uncertainty regarding patents and proprietary rights and technological
obsolescence.
RESULTS OF OPERATIONS
Product sales increased to $1,856,000 for the three months ended September 30,
1996 from $1,481,000 for the same period in 1995. The increase was due,
primarily, to increased sales of the Company's Hybrid Capture products,
partially offset by declines in revenues related to the Company's radioactive
DNA test (which was discontinued in December 1995) and equipment sales.
Research and development contract revenues increased to $147,000 for the three
months ended September 30, 1996 from $86,000 for the same period in 1995. The
increase was due primarily to new contracts.
Cost of product sales decreased to $777,000 for the three months ended
September 30, 1996 from $798,000 for the same period in 1995. Gross margin on
product sales increased to 58% for the three months ended September 30, 1996
from 46% same period in 1995. This increase was due primarily to increased
overhead absorption, increased sales of higher-margin Hybrid Capture HPV DNA
products, and decreased sales of lower-margin products such as equipment.
Research and development expenses increased to $750,000 for the three months
ended September 30, 1996 from $515,000 for the same period in 1995. The
increase was due primarily to the hiring of additional research and development
personnel and the related incidental expenses to support the Company's research
and development plans to develop additional tests using the Hybrid Capture
technology, and to improve the sensitivity and ease of use of that technology.
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Selling and marketing expenses increased to $796,000 for the three months ended
September 30, 1996 from $380,000 for the same period in 1995. The increase was
due primarily to the hiring of additional selling and marketing personnel and
related expenses to support the Company's revenue growth plans, as well as
increased commissions and other selling costs directly related to the growth in
product sales.
General and administrative expenses increased to $822,000 for the three months
ended September 30, 1996 from $282,000 for the same period in 1995. The
increase was due primarily to the hiring of additional administrative personnel
and the related expenses to support the Company's requirements as a publicly
traded company and to meet the revenue growth objectives of the Company. In
addition, general and administrative expenses have increased as a result of the
formation of Digene do Brasil, a majority owned subsidiary.
Amortization of intangible assets decreased to $8,000 for the three months
ended September 30, 1996 from $66,000 for the same period in 1995. The
decrease was due primarily to certain intangible assets becoming fully
amortized during the year.
Interest income increased to $394,000 for the three months ended September 30,
1996 from $10,000 for the same period in 1995. This increase was due primarily
to the investment of substantially all of the net proceeds from the Company's
initial public offering which occurred in May 1996.
Interest expense decreased to $2,000 for the three months ended September 30,
1996 from $55,000 for the same period in 1995. The decrease was due to the
repayment of the notes payable.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company's expenses have significantly exceeded its
revenues, resulting in accumulated deficit of approximately $20,065,000 at
September 30, 1996. The Company has funded its operations primarily through
the sale of equity securities. The Company has experienced negative cash flows
from operations of $1,348,000 and $641,000 for the three months ended September
30, 1996, and 1995, respectively.
Capital expenditures increased to $283,000 in the first quarter of fiscal 1997
from $113,000 in the first quarter of fiscal 1996, due primarily to the
acquisition of additional laboratory and computer equipment.
The Company does not have any bank financing arrangements. The Company's
indebtedness consists of notes payable to former stockholders of the Company of
$84,000 and notes related to leasehold improvements of $66,000.
The Company has incurred negative cash flows from operations since its
inception, and has
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expended, and expects to continue to expend in the future, substantial funds to
complete its planned product development efforts, expand its sales and
marketing activities and scale up its manufacturing. The Company expects that
its existing capital resources will be adequate to fund the Company's
operations through 1998. No assurances can be given that there will be no
changes in the Company that would consume a significant amount of its available
resources before that time. The Company's future capital requirements and the
adequacy of available funds will depend on numerous factors, including the
successful commercialization of its Hybrid Capture HPV test, progress in its
product development efforts, the magnitude and scope of such efforts, progress
with preclinical studies and clinical trials, the cost and timing of
manufacturing scale-up, the development of effective sales and marketing
activities, the cost of filing, prosecuting, defending and enforcing patent
claims and other intellectual property rights, competing technological and
market developments, and the development of strategic alliances for the
marketing of its products. To the extent that the Company's existing capital
resources and funds generated from the Company's operations are insufficient to
meet current or planned operating requirements, the Company will be required to
obtain additional funds through equity or debt financing, strategic alliances
with corporate partners and others, or through other sources. The Company does
not have any committed sources of additional financing, and there can be no
assurance that additional funding, if necessary, will be available on
acceptable terms, if at all. If adequate funds are not available, the Company
may be required to delay, scale-back or eliminate certain aspects of its
operations or attempt to obtain funds through arrangements with collaborative
partners or others that may require the Company to relinquish rights to certain
of its technologies, product candidates, products or potential markets. If
adequate funds are not available, the Company's business, financial condition
and results of operations will be materially and adversely effected.
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PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Stockholders of the Registrant held on October 29,
1996, the holders of Common Stock approved the adoption of the Digene
Corporation Directors' Stock Option Plan. There were 8,212,836 votes for, and
456,882 votes against, the adoption, 26,800 broker non-votes and 9,273
abstentions.
Also at the Annual Meeting of Stockholders, the holders of Common Stock elected
the following uncontested nominee for the office of director for a term
expiring on the date of the 1999 annual meeting or until his successor is duly
elected and shall qualify:
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Votes Votes
Nominee For Withheld
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Wayne T. Hockmeyer 8,691,333 14,458
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There were no abstentions or broker non-votes in the election of directors.
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Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10 Employment Agreement dated as of September 30, 1996 between the Company
and Donna Marie Seyfried
11 Statement Re: Computation of Per Share Loss
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the quarter ended
September 30, 1996.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
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DIGENE CORPORATION
Date: November 7, 1996 By: /s/ Charles M. Fleischman
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Charles M. Fleischman
Executive Vice President,
Chief Operating Officer,
Chief Financial Officer
(Principal Financial Officer)
Date: November 7, 1996 By: /s/ Joseph P. Slattery
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Joseph P. Slattery
Controller
(Principal Accounting Officer)
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EXHIBIT INDEX
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Exhibit No. Description Page
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10 Employment Agreement dated as of September 3,
1996 between the Company and Donna Marie
Seyfried
11 Statement Re: Computation of Per Share Loss
27 Financial Data Schedule
</TABLE>
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EXHIBIT 10
DIGENE CORPORATION
EMPLOYMENT AGREEMENT DATED AS OF SEPTEMBER 3, 1996
BETWEEN THE COMPANY AND DONNA MARIE SEYFRIED
EMPLOYMENT AGREEMENT
AGREEMENT dated as of September 3, 1996 between Digene Corporation, a
Delaware corporation, 9000 Virginia Manor Road, Suite 206, Beltsville,
Maryland, 20705 (the "Company"), and Donna Marie Seyfried, 109 Flanders Road,
Woodbury, Connecticut, 06798 (the "Executive").
WITNESSETH
WHEREAS, the Company desires to employ Executive on the terms and conditions
herein contained; and
WHEREAS, Executive is willing to enter into this Agreement for employment with
the duties outlined herein on a full-time basis;
NOW, THEREFORE, in consideration of the premises, representations and mutual
covenants and agreements herein contained, the parties agree as follows:
1. Employment. The Company hereby employs the Executive and
Executive hereby accepts employment with the Company for the period beginning
October 1, 1996 and ending October 1, 2000 (the "Term"), subject to the terms
and conditions hereinafter contained. Such employment may be renewed upon the
mutual agreement of, and in consideration of such compensation as shall be
established by, the Company and the Executive.
2. Duties. Executive shall perform such duties and functions as
the Board of Directors of the Company (the "Board") may from time to time
determine which are consistent with the position of Vice President, Business
Development, shall comply with the policies and reasonable directions of the
Board, and shall discharge her responsibilities in a competent and faithful
manner, consistent with sound business practices.
During the Term of this Agreement, the Executive shall devote her
entire business time, attention and energies to the performance of her duties
for the business of the Company except to the extent that the Board may
specifically approve any outside interests. The Executive shall not, directly
or indirectly, without the consent of a majority of the Board, as owner,
partner, joint venturer, shareholder, employee, corporate officer or director,
engage or become financially interested in, be employed by, or render
consulting services to any business in competition with any business engaged in
during the Term by the Company or its subsidiaries; provided however, that (i)
the Executive may own securities of any corporation which is engaged in any
such business and which is publicly owned and traded, but in an amount not to
exceed at any one time two percent (2.0%) of any class of stock or securities
of such company and (ii) the foregoing shall not be deemed to prohibit the
Executive from conducting and continuing to conduct any business with respect
to which the Executive is engaged as of the date hereof (which businesses are
listed in Exhibit I attached hereto), whether said business is conducted
individually or through an entity in which the Executive has a legal or
beneficial interest.
It is intended, that as an initial project, Executive shall work with the
senior management of the Company to create a new company or limited partnership
("NEWCO") in the human genetics area.
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3. Compensation.
a. Salary. During the Term, Executive shall receive a
base salary for services rendered hereunder of $130,000 per year, subject to
such increases as may be approved by the Board, payable not less frequently
than monthly consistent with the regular practices of the Company.
b. Bonus. The Executive shall be entitled to receive,
as additional compensation, on September 1 of each year, an annual cash bonus
as set forth in the Company's Executive Bonus Plan and approved by the Board of
Directors of the Company.
c. Additional compensation. Executive shall receive,
subject to the approval of the Compensation Committee of the Board of Directors
of the Company at the next regularly scheduled Compensation Committee meeting,
or as promptly thereafter as practicable, options to purchase 50,000 shares of
common stock of the Company which will vest in three annual installments of
30,000, 10,000, and 10,000 shares on the third, fourth and fifth anniversaries,
respectively. The exercise price for such options will be the fair market
value of a share of common stock of the Company on the grant date. If
Executive successfully forms NEWCO and is employed at least 75% of the time by
NEWCO as President, or an equivalent position, of NEWCO, then the Company shall
make reasonable efforts to cause NEWCO to grant to Executive options to
purchase approximately five percent (5%) of the common stock equity in NEWCO
based on NEWCO's initial target capitalization. Executive shall be entitled to
such other compensation as the Board of NEWCO deems appropriate. Any
compensation payable to Executive hereunder shall be reduced by the amount of
compensation paid by NEWCO to Executive.
d. It is contemplated that Executive, in the performance
of her duties will be required to relocate to the Silver Spring, Maryland,
metropolitan area. For any such required relocation, the Company agrees to
reimburse Executive for up to an aggregate of $60,000 of bona fide moving
expenses, travel expenses en route, two pre-moving house trips, temporary
quarters (up to 30 days) and closing costs associated with the sale of
Executive's current home and/or purchase of a new home. Amounts reimbursed by
the Company are subject to immediate repayment by the Executive as follows: if
Executive resigns or is terminated for justifiable cause (as hereinafter
defined) within six months of moving, $45,000 will be repaid to the Company;
between six and twelve months, $30,000 will be repaid to the Company; and
between twelve and eighteen months, $15,000 will be repaid to the Company. If
Executive is terminated without justifiable cause, Executive will not be
required to repay the Company any of the above amounts.
e. Reimbursement for expenses. The Company agrees to
reimburse Executive for any and all reasonable business expenses incurred by
Executive in connection with the performance of her duties, upon presentation
of proper vouchers by Executive to support said expenses. This shall include,
but not be limited to, all items of travel, entertainment, business expenses,
and other items of expense while away on business from the principal office of
the Company or engaged in other business activity.
f. Vacation. Executive shall be entitled to four (4)
weeks' paid vacation in each calendar year in addition to the regularly
scheduled Company holidays. No more than four (4) weeks' vacation can be
accumulated and carried forward from year to year.
g. Other benefits. The Executive shall, in addition, be
entitled to participate in and receive any other fringe benefits customarily
provided by the Company to its employees of comparable standing with the
Executive (including, but not limited to, any profit-sharing, pension,
hospital, major medical insurance and group life insurance plans in accordance
with the terms of such plans), all as determined from time to time by the
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Board. To the extent available at reasonable cost, the Company will use its
best efforts to promptly obtain and maintain appropriate directors and officers
liability insurance ("D&O"); if the Company cannot obtain appropriate D&O, it
will notify the Executive in writing within sixty (60) days of the signing of
this Agreement.
4. Termination. Executive's employment by the Company hereunder
shall terminate on the occurrence of:
a. Disability or Death. In the event of Executive's
disability or death during the Term of the Executive's employment, Executive,
or her estate, shall receive one (1) year's base salary. For the purpose
hereof, the term "disability" shall mean Executive's physical or mental
inability to perform her essential duties and responsibilities hereunder, with
reasonable accommodation, for a period of six (6) consecutive months during the
term of this Agreement, it being understood that notwithstanding any such
inability to perform her duties, Executive shall be entitled to receive her
compensation as provided herein until the termination of her employment
hereunder.
b. Justifiable cause. The obligations and liabilities
of the Company to the Executive shall cease as of the date of termination for
"justifiable cause," and Executive shall not be entitled to any further
compensation except for compensation accrued through the date of the
termination and except as otherwise provided herein. Executive will be
entitled to all stock, incentive stock options or equivalents vested as of the
date of the Board's termination action. For the purposes hereof, the term
"justifiable cause" shall mean and be limited to any termination by action of a
majority of the Board because of: Executive's conviction of a felony (which,
through lapse of time or otherwise, is not subject to appeal) or willful
refusal without proper cause to perform her obligations under this Agreement;
except in the normal course of business in the performance of her duties, any
material disclosure by Executive to any person, firm or corporation other than
the Company, its subsidiaries and its and their directors, officers and
employees, of any confidential information or trade secret of the Company or
any of its subsidiaries; Executive's pursuit of activities inimical, or
contrary, to the best interests of the Company; or the engaging by Executive in
any business other than the business of the Company and its subsidiaries which
interferes with the performance of her duties hereunder.
c. Without justifiable cause. In the event the Company
terminates this Agreement without justifiable cause (as defined in Section 4.b.
hereof), the parties hereto agree that damages to the Executive shall be
difficult to ascertain in any such event, but in order to limit the liability
of the Company the Executive shall be entitled to receive as liquidated damages
and not as penalty in any such event the following: (i) the amount of the base
salary (excluding bonus) of the Executive remaining due and payable from any
such date of termination for a period of twelve (12) months, which amount shall
be accelerated and immediately due upon any such termination; (ii) subject to
limitations imposed under the applicable option and incentive plans and grants
thereunder, any outstanding stock, incentive stock options or equivalents that
would have vested in the ordinary course of events until termination plus an
additional three months after the date of termination shall be accelerated and
vest immediately upon such termination; (iii) any bonus accrued to date pro
rata over the course of the year; (iv) all other benefits accruing to the
Executive on or prior to the expiration date of this Agreement as provided
hereunder.
d. Resignation. In the event the Executive resigns
during the term of this Agreement, she shall be entitled to: (i) the pro rata
amount of the annual bonus accrued to the date of resignation: (ii) all stock,
incentive stock options or equivalents vested as of the date of the
resignation, subject to the terms of the appropriate stock purchase agreement
(s); (iii) all other benefits accruing to the Executive on or prior to the
expiration date of this Agreement as provided hereunder.
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5. Non-Competition. Executive agrees that for a period of twelve
(12) months after termination of her employment (the "Non-Competitive Period"),
Executive shall not, directly or indirectly, as owner, partner, joint venturer,
stockholder, employee, broker, agent, principal, trustee, corporate officer,
director, licensor, or in any capacity whatsoever engage in, become financially
interested in, be employed by, render any consultation or business advice with
respect to, or have any connection with, any business engaged in the research,
development, testing, design, manufacture, sale, lease, marketing, utilization
or exploitation of any products or services which are designed for the same
purpose as, are generically the same as, or are otherwise competitive with,
products or services of the Company, in existence or under development, in any
geographic area where, at the time of termination of her employment hereunder,
the business of the Company was being conducted in any manner whatsoever;
provided, however, that Executive may own any securities of any corporation
which is engaged in such business and is publicly owned and traded but in an
amount not to exceed at any one time two percent (2.0%) of any class of stock
or securities of such corporation. In addition, Executive shall not, during
the Non-Competitive Period, request or cause any customers of the Company to
cancel or terminate any business relationship with the Company. The Executive
further agrees that, during the Non-Competitive Period, the Executive and any
individual or entity controlled by or under common control with Executive,
shall not, without the Company's prior written consent, solicit, directly or
indirectly, for herself, themselves, or for any other person or entity, any
employee or consultant of the Company or any of its affiliates, or request or
cause any employee or consultant of the Company or any of its affiliates to
terminate her employment or services with the Company or any of its affiliates.
If any portion of the restrictions set forth in this Section 5 should,
for any reason whatsoever, be declared invalid by a court of competent
jurisdiction, the validity or enforceability of the remainder of such
restrictions shall not thereby be adversely affected.
Executive declares that the territorial, time limitations and scope of
activities restricted as set forth in this Section 5 are reasonable and
properly required for the adequate protection of the business of the Company.
In the event that any such territorial, time limitation and scope of activities
restricted is deemed to be unreasonable by a court of competent jurisdiction,
Executive agrees to the reduction of the territorial, time limitation or scope
to the area or period which such court shall have deemed reasonable.
The existence of any claim or cause of action by Executive against the
Company shall not constitute a defense to the enforcement by the Company of the
foregoing restrictive covenants, but such claim or cause of action shall be
litigated separately.
6. Confidentiality. Except in the normal course of business in
the performance of her duties, Executive shall not, during the Term of this
Agreement, or at any time following the end of the Term of this Agreement,
directly or indirectly, disclose or permit to be known, to any person, firm or
corporation, any confidential information acquired by her during the course of
, or as an incident to, her employment hereunder, relating to the Company, the
directors of the Company, or any client of the Company, including, but not
limited to, the business affairs of each of the foregoing. Such confidential
information shall include, but shall not be limited to, proprietary technology,
trade secrets, patented processes, research and development data, know-how,
formulae, pricing policies, the substance of agreements with customers and
others, and arrangements, customers lists and any other documents embodying
such confidential information.
All information and documents relating to the Company shall be the
exclusive property of the Company, and Executive shall use her best efforts to
prevent any publication or disclosure thereof. Upon termination of
4
<PAGE> 5
Executive's employment with the Company, all documents, records, reports,
writings and other similar documents containing confidential information then
in Executive's possession or control shall be returned and left with the
Company.
7. Representations and Agreements of Executive. Executive
represents and warrants that she is free to enter into this Agreement and to
perform the duties required hereunder, and that there are no employment
contracts or understandings, restrictive covenants or other restrictions,
whether written or oral, preventing the performance of her duties hereunder.
Executive agrees to submit to a medical examination (if job related and
consistent with business necessity) and to cooperate and supply such other
information and documents as may be required by any insurance company in
connection with the Company's obtaining life insurance on the life of the
Executive, and any other type of insurance or fringe benefit as the Company
shall determine from time to time to obtain.
8. Notices. Any notices required or permitted to be given
hereunder shall be sufficient if in writing, and if delivered by hand, or sent
by registered or certified mail, return receipt requested, to the Company of
the address set forth above and to Executive at the address set forth in the
personnel records of the Company, or such other address as either party may
from time to time designate in writing to the other, and shall be deemed given
as of the date of the delivery or mailing.
9. Severability. If any of the covenants contained in this
Agreement, any part of any such covenant, are hereafter construed to be invalid
or unenforceable, the same shall not affect the remainder of the covenant or
covenants, or the remainder of the Agreement, which shall be given full effect,
without regard to the invalid portions.
10. Non-Waiver. The waiver or breach of any term or condition of
this Agreement shall not be deemed to constitute a waiver or breach of any
other term or condition.
11. Entire Agreement. This Agreement constitutes the entire
agreement of the parties with respect to its subject matter, and no
modification or waiver of any provision hereof shall be valid unless it be in
writing and signed by all of the parties hereto.
12. Assignment. This Agreement and the rights and obligations of
the parties hereto shall bind and inure to the benefit of any successor or
successors by reorganization, merger or consolidation and any assignee of all
or substantially all of its business and properties, but, except as to any such
successor or assignee of the Company, neither this Agreement nor any rights or
benefits hereunder may be assigned or transferred by either party without the
prior written consent of the other party.
13. Binding Effect. This Agreement and all of the provisions
hereof shall be binding upon the legal representatives, heirs, distributees,
successors and assigns of the parties hereto.
14. Choice of Law . This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to
agreements made and to be performed therein.
15. Headings. The Section headings appearing in this Agreement
are for purposes of easy reference and shall not be considered a part of this
Agreement or in any way modify, amend, or affect its provisions.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
By: /s/ Donna Marie Seyfried
--------------------------
Donna Marie Seyfried
EXECUTIVE
DIGENE CORPORATION
By: /s/ Evan Jones
--------------------------
Evan Jones
President & CEO
6
<PAGE> 1
EXHIBIT 11
DIGENE CORPORATION
STATEMENT RE: COMPUTATION OF PER SHARE LOSS
<TABLE>
<CAPTION>
Three months ended September 30,
--------------------------------
1996 1995
---- ----
<S> <C> <C>
Earnings per share:
Weighted average shares of Common
Stock outstanding . . . . . . . . . . . . 11,308,900 368,356
Shares of 1994 Series Preferred Stock
issued during the twelve month period
prior to March 29, 1996, the date of the
initial filing of the Company's Registration
Statement on Form S-1 (using
the treasury stock method) . . . . . . . - 192,607
Shares of Common Stock issued
during the twelve month period
prior to March 29, 1996, the date of the
initial filing of the Company's Registration
Statement on Form S-1 (using
the treasury stock method) . . . . . . . - 5,295
Common equivalent shares
from options and warrants issued
during the twelve month period
prior to March 29, 1996, the date of the
initial filing of the Company's Registration
Statement on Form S-1 (using
the treasury stock method) . . . . . . . . - 283,666
------------- -------------
Total . . . . . . . . . . . . . . . . . . . . 11,308,900 849,924
============= =============
Loss for the period . . . . . . . . . . . . . $ (732,741) $ (536,497)
============ ============
Net loss per share . . . . . . . . . . . . . . $(0.06) $(0.63)
============= =============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM DIGENE
CORPORATION'S FORM 10-Q FOR THE 3 MONTHS ENDED 9/30/96 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 14,846,529
<SECURITIES> 11,993,614
<RECEIVABLES> 1,982,410
<ALLOWANCES> 61,000
<INVENTORY> 1,999,805
<CURRENT-ASSETS> 30,979,923
<PP&E> 2,999,312
<DEPRECIATION> 2,110,665
<TOTAL-ASSETS> 32,044,697
<CURRENT-LIABILITIES> 2,428,318
<BONDS> 0
0
0
<COMMON> 113,099
<OTHER-SE> 29,276,202
<TOTAL-LIABILITY-AND-EQUITY> 32,044,697
<SALES> 1,856,496
<TOTAL-REVENUES> 2,003,522
<CGS> 776,877
<TOTAL-COSTS> 1,527,110
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,028
<INCOME-PRETAX> (732,741)
<INCOME-TAX> 0
<INCOME-CONTINUING> (732,741)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (732,741)
<EPS-PRIMARY> (0.06)
<EPS-DILUTED> (0.06)
</TABLE>
