<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities and Exchange Act
of 1934
Filed by the Registrant/X/
Filed by a Party other than the Registrant/ /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
DIGENE CORPORATION
- -------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- -------------------------------------------------------------------------------
(Name of Persons(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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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):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE> 2
DIGENE CORPORATION
9000 VIRGINIA MANOR ROAD
BELTSVILLE, MARYLAND 20705
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON TUESDAY, OCTOBER 29, 1996
To the Stockholders of Digene Corporation:
The 1996 Annual Meeting of Stockholders (the "Annual Meeting") of Digene
Corporation, a Delaware corporation (the "Company"), will be held on Tuesday,
October 29, 1996, at 10:00 a.m. (local time), at the offices of the Company
located at 2301-B Broadbirch Drive, Silver Spring, Maryland 20904, for the
following purposes:
1. to elect one new director of the Company to serve for a three year term
expiring at the Annual Meeting of Stockholders in 1999;
2. to approve the Digene Corporation Directors' Stock Option Plan; and
3. to transact such other business as may properly come before the Annual
Meeting.
The Board of Directors has fixed the close of business on Friday, September
20, 1996, as the record date for determining the stockholders entitled to notice
of, and to vote at, the Annual Meeting. Only stockholders of record at that time
are entitled to notice of, and to vote at, the Annual Meeting and any
adjournments or postponements thereof. A complete list of stockholders entitled
to vote at the Annual Meeting will be available at least ten days before the
Annual Meeting, upon written request, for inspection during normal business
hours by any stockholder of the Company prior to the Annual Meeting, for a
proper purpose, at the Company's Beltsville, Maryland office.
Stockholders are cordially invited to attend the Annual Meeting in person.
To assure your representation at the Annual Meeting, please complete, sign and
date the enclosed proxy and return it promptly. If you choose, you may still
vote in person at the Annual Meeting even though you previously submitted a
proxy.
Charles M. Fleischman,
Secretary
September 24, 1996
<PAGE> 3
DIGENE CORPORATION
PROXY STATEMENT
The accompanying proxy is solicited by the Board of Directors (the "Board")
of Digene Corporation (the "Company") in connection with its 1996 Annual Meeting
of Stockholders to be held on Tuesday, October 29, 1996, at 10:00 a.m. (local
time), at the offices of the Company located at 2301-B Broadbirch Drive, Silver
Spring, Maryland 20904, and at any adjournment(s) or postponement(s) thereof
(the "Annual Meeting"). This Proxy Statement and the accompanying proxy are
being mailed to stockholders on or after September 24, 1996.
PURPOSE OF ANNUAL MEETING
At the Annual Meeting, stockholders will be asked: (i) to elect one new
director of the Company to serve for a three year term expiring at the Annual
Meeting of Stockholders in 1999; (ii) to approve the Digene Corporation
Directors' Stock Option Plan; and (iii) to transact such other business as may
properly be brought before the Annual Meeting. The Board recommends a vote in
favor of (i.e., "FOR") (a) the election of the one nominee for director of the
Company listed below and (b) the approval of the Digene Corporation Directors'
Stock Option Plan.
QUORUM AND VOTING RIGHTS
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of Common Stock is necessary to constitute a quorum at the
Annual Meeting. Only stockholders of record at the close of business on Friday,
September 20, 1996 (the "Record Date") will be entitled to notice of, and to
vote at, the Annual Meeting. As of the Record Date, there were 11,306,684 shares
of Common Stock outstanding and entitled to vote. Holders of Common Stock as of
the Record Date are entitled to one vote for each share held.
All shares of Common Stock represented by properly executed proxies will,
unless the proxies have previously been revoked, be voted in accordance with the
instructions indicated in the proxies. If no instructions are indicated, the
shares will be voted in favor of (i.e., "FOR") (a) the election of the one
nominee for director of the Company listed under Proposal 1 and (b) the approval
of the Digene Corporation Directors' Stock Option Plan described under Proposal
2. With respect to all other matters, the persons named in the accompanying
proxy will vote as stated therein. Any stockholder executing a proxy has the
power to revoke the proxy at any time prior to its exercise. A proxy may be
revoked prior to exercise by (a) filing with the Company a written revocation of
the proxy, (b) appearing at the Annual Meeting and casting a vote contrary to
that indicated on the proxy or (c) submitting a duly executed proxy bearing a
later date.
The nominee for director receiving the highest number of votes cast by
stockholders entitled to vote thereon will be elected to serve on the Board. The
Directors' Stock Option Plan will be approved if it receives the affirmative
vote of the holders of a majority of the shares of Common Stock present, or
represented by proxy, and entitled to vote at the Meeting. Votes withheld with
respect to the election of the director will be counted for the purpose of
determining whether a quorum is present at the Annual Meeting but will not be
considered as votes cast and will have no effect on the result of the vote.
Abstentions with respect to the approval of the Directors' Stock Option Plan
will be counted for the purpose of determining whether a quorum is present at
the Annual Meeting and as votes cast, and will have the effect of a no vote.
Broker non-votes will not be counted in determining the presence of a quorum and
will not be considered as votes cast, and thus will have no effect on the result
of the votes.
The cost of preparing, printing, assembling and mailing this Proxy
Statement and other material furnished to stockholders in connection with the
solicitation of proxies will be borne by the Company. In addition to the
solicitation of proxies by use of the mails, officers, directors and regular
employees of the Company may solicit proxies by written communication, by
telephone, telegraph or personal call. These persons are to receive no special
compensation for any solicitation activities.
<PAGE> 4
PROPOSAL 1 -- ELECTION OF DIRECTOR
NOMINEE FOR ELECTION AS DIRECTOR
The Board currently consists of four (4) members, none of whose term has
expired: Evan Jones, Charles M. Fleischman, Joseph M. Migliara and John J.
Whitehead. The Board proposes that the individual, listed below as a nominee, be
elected as a Class III director of the Company to hold office until the 1999
annual meeting of stockholders and until his successor is duly elected and
qualified. The nominee has consented to serve if elected to the Board. If the
nominee is unable to serve as a director at the time of the Annual Meeting, an
event which the Board does not anticipate, the persons named in the proxy will
vote for such substitute nominee as may be designated by the Board unless the
Board reduces the number of directors accordingly.
Set forth below is information about the nominee and the other persons who
are to continue as directors of the Company after the Annual Meeting. For
information concerning the number of shares of Common Stock owned by each
director and all directors and executive officers as a group as of September 20,
1996, see "Principal Stockholders."
<TABLE>
<CAPTION>
NAME AGE POSITION(S) WITH COMPANY DIRECTOR SINCE
- -------------------------- --- --------------------------------------- --------------
<S> <C>
Nominee to be elected for a term expiring in 1999:
Wayne T. Hockmeyer, 52 None --
Ph.D....................
Director continuing for a term expiring in 1999:
Evan Jones................ 39 President, Chief Executive Officer and 1990
Chairman of the Board
Directors continuing for terms expiring in 1998:
Charles M. Fleischman..... 38 Executive Vice President, Chief 1990
Operating Officer, Chief Financial
Officer and Director
Joseph M. Migliara........ 52 Director 1992
Director continuing for a term expiring in 1997:
John J. Whitehead......... 51 Director 1992
</TABLE>
Dr. Hockmeyer founded MedImmune, Inc., a company that manufactures
vaccines, and has been President, Chief Executive Officer and a director thereof
since 1988 and Chairman since May 1993. Dr. Hockmeyer serves on the Advisory
Board of the University of Maryland Biotechnology Institute and was a Board
member of the Suburban Maryland/Montgomery County Technology Counsel from 1993
through 1996.
Mr. Jones has served as President, Chief Executive Officer and a director
since Armonk Partners acquired a controlling interest in the Company in July
1990, and has served as Chairman of the Board since September 1995. Mr. Jones is
a step-brother of Mr. Whitehead.
Mr. Fleischman has served as Executive Vice President and a director since
July 1990, Chief Operating Officer since September 1995 and Chief Financial
Officer since March 1996. Mr. Fleischman was named to the position of Executive
Vice President after Armonk Partners acquired a controlling interest in the
Company in July 1990.
Mr. Migliara has served as a director of the Company since October 1992.
For more than five years, he has been President of Migliara/Kaplan Associates
("Migliara/Kaplan"), a marketing research firm that conducts primary research in
the biomedical, diagnostics and pharmaceutical markets.
Mr. Whitehead has served as a director of the Company since February 1992.
Since 1993, Mr. Whitehead has been a partner of Whitehead Partners, a private
investment company. Prior to 1993, Mr. Whitehead was
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<PAGE> 5
the Chief Executive Officer of TDS Healthcare Systems Corporation, a hospital
information systems company. Mr. Whitehead is a step-brother of Mr. Jones.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
In accordance with the Company's Certificate of Incorporation, the Board is
divided into three classes, denominated Class I, Class II and Class III, with
members of each Class holding office for staggered three-year terms. Mr.
Whitehead is a Class I director whose term expires at the 1997 annual meeting of
stockholders, Messrs. Fleischman and Migliara are Class II directors whose terms
expire at the 1998 annual meeting of stockholders, and Mr. Jones is a Class III
director whose term expires at the 1999 annual meeting of stockholders (in all
cases subject to the election and qualification of their successors or to their
earlier death, resignation or removal). At each annual meeting of stockholders
commencing with the 1997 annual meeting, the successors to the directors whose
terms expire are to be elected to serve from the time of their election and
qualification until the third annual meeting of stockholders following their
election or until their respective successors have been duly elected and
qualified.
The Board held five meetings during the last fiscal year. Each of the
Company's directors attended at least 75% of the aggregate of all meetings of
the Board and of all committees of which he was a member held during the year.
The standing committees of the Board are the Audit Committee and the
Compensation Committee. The Board does not have a nominating committee. The
Audit Committee, consisting of Messrs. Migliara and Whitehead, met twice during
the last fiscal year. The Audit Committee was established in March 1996 and
reviews, acts on and reports to the Board with respect to various auditing and
accounting matters, including the selection of the Company's independent
auditors, the scope of the annual audits, fees to be paid to the auditors, the
performance of the Company's auditors and the accounting practices of the
Company. The Compensation Committee, consisting of Messrs. Migliara and
Whitehead, met twice during the last fiscal year. The Compensation Committee,
which was formed in March 1996, establishes compensation policy and determines
the salaries, bonuses and other compensation of the officers of the Company. The
Compensation Committee also administers the Company's various stock option
plans. The Digene Corporation Directors' Stock Option Plan, however, which is
described in Proposal 2 herein, will be administered by the Board.
Mr. Migliara serves on the Board of the Company pursuant to an agreement
with the Company. The Company has entered into an agreement with Armonk Partners
and International Murex Technologies Corporation (together with its affiliates,
"Murex") concerning the composition of the Board. Messrs. Jones, Fleischman and
Whitehead serve on the Board as the nominees of Armonk Partners under the
agreement. Murex has not designated a nominee under the agreement. See "Certain
Transactions."
DIRECTOR COMPENSATION
Directors are reimbursed for expenses incurred in connection with
performing their respective duties as directors of the Company. Prior to
September 6, 1996, directors received no compensation for serving on the Board.
Effective September 6, 1996, non-employee directors will receive an annual
retainer of $10,000 plus $2,500 for each of the first six scheduled Board
meetings attended and $2,000 for each additional Board meeting attended in each
fiscal year. In the event that there are fewer than six scheduled meetings of
the Board in any fiscal year, the minimum annual Board meeting fee shall be
$15,000 less $2,500 per Board meeting scheduled but not attended. Directors are
not compensated for committee meetings. Additionally, each year, immediately
following the Company's Annual Meeting of Stockholders each non-employee
director who will continue to serve as a director after the annual meeting, will
automatically be granted options to purchase 5,000 shares of Common Stock under
the Digene Corporation Omnibus Plan. The Board has also adopted and is proposing
in "Proposal 2 -- Approval of Digene Corporation Directors' Stock Option Plan"
that the stockholders approve an additional stock option plan for directors.
Subject to approval of this plan at the Annual Meeting and if Dr. Hockmeyer is
elected as a director at the Annual Meeting, he will receive an option to
purchase 20,000 shares of the Company's Common Stock on the date of the Annual
Meeting (the "Grant Date") and at an exercise price equal to the fair market
value of the Company's Common Stock on
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<PAGE> 6
the Grant Date. See "Proposal 2 -- Approval of Digene Corporation Directors'
Stock Option Plan" and "Executive Compensation and Other Information -- Stock
Option Plans."
PROPOSAL 2 -- APPROVAL OF DIGENE CORPORATION
DIRECTORS' STOCK OPTION PLAN
At the Annual Meeting, a proposal will be presented for the stockholders to
approve the Digene Corporation Directors' Stock Option Plan (the "Director
Plan"), under which options to purchase up to 500,000 shares of Common Stock of
the Company may be granted to directors. Options granted under the Director Plan
will be in addition to the options to purchase 5,000 shares of Common Stock of
the Company automatically granted to each non-employee director immediately
following each annual meeting of stockholders. See "Proposal 1 -- Election of
Director -- Director Compensation." The purpose of the Director Plan is to
enable the Company to attract and retain highly qualified directors and secure
for the Company and its stockholders the benefit of the incentive inherent in
common stock ownership by the directors of the Company and to afford such
persons the opportunity to obtain or increase their proprietary interest in the
Company on a favorable basis and thereby have an opportunity to share in its
success. The Director Plan is attached as Exhibit A to this Proxy Statement and
is incorporated herein by reference.
The Board adopted the Director Plan on September 6, 1996, and directed that
the Director Plan be submitted to the stockholders for approval.
The Board recommends that you vote FOR the approval of the Director Plan.
PRINCIPAL FEATURES OF THE PLAN
Administration
The Director Plan will be interpreted, construed and administered by the
Board. The Board, subject to the provisions of the Director Plan, has the
authority to (i) prescribe the form of option agreement, (ii) adopt, amend and
rescind such rules and regulations as it deems advisable, and (iii) make all
other determinations necessary or advisable for the administration of the
Director Plan. Any decision, interpretation or other action of the Board will be
conclusive and binding upon all persons in interest.
Eligible Participants
All members of the Board of the Company are eligible to be granted options
under the Director Plan.
Number of Shares Subject to the Director Plan
Up to 500,000 shares of Common Stock may be issued under the Director Plan.
Such shares may be either authorized and unissued shares or issued shares that
have been reacquired by the Company. In no event shall any director receive in
any calendar year options under the Director Plan involving more than 50,000
shares of Common Stock, subject to adjustment as described in the next sentence.
The aggregate number of shares of Common Stock issuable under the Director Plan
and the number of shares subject to grants made under the Director Plan are
subject to adjustment in the event of a merger, reorganization, consolidation,
recapitalization, dividend (other than a regular cash dividend), stock split, or
other change in corporate structure affecting the Common Stock. If any option
granted under the Director Plan expires, terminates or is cancelled for any
reason without having been exercised in full, the number of unpurchased shares
will again be available for the purposes of the Director Plan.
Granting of Options Under the Director Plan
If Wayne T. Hockmeyer, Ph.D. is elected a director at the Annual Meeting
and if the Director Plan is approved by the stockholders at the Annual Meeting,
Dr. Hockmeyer will receive an option to purchase 20,000 shares of Common Stock
pursuant to the Director Plan. The option will be exercisable as to
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<PAGE> 7
12,000 shares in 1999, 4,000 shares in 2000 and 4,000 shares in 2001 and will
expire in 2006. The exercise price will be equal to the fair market value of the
Company's Common Stock on the date of grant.
On September 3, 1996, the average of the high and low sales price of a
share of the Company's Common Stock as reported on the Nasdaq National Market
was $5 1/8.
Stock Options
Under the Director Plan, the Board has the authority to grant options to
eligible directors of the Company with such terms as the Board may consider
appropriate. Such terms shall include, without limitation, as applicable, the
number of shares, the term of each option, any vesting requirements and any
conditions on the exercisability of all or part of an option. The exercise price
of each option granted under the Director Plan shall be determined by the Board,
but may not be less than 85% of the fair market value of the Common Stock on the
date of grant. The term of each option will be designated by the Board, but may
not be longer than ten years from the date of grant. The price due upon exercise
of any option may be paid to the Company in full in cash or in shares of Common
Stock owned by the optionee, in options granted to the optionee under the
Director Plan which are then exercisable or in options granted to the optionee
under any of the Company's other stock option plans which are then exercisable,
or in a combination of cash, Common Stock and options.
If a participant ceases to be a member of the Board and the Board does not
determine that the participant was removed from the Board for conduct that in
the judgment of the Board involves dishonesty or action by the participant that
is detrimental to the best interest of the Company, the participant may at any
time within three months after ceasing to be a member of the Board exercise his
or her option but only to the extent the option was exercisable by him or her on
the date he or she ceased to be a member of the Board. If the participant ceases
to be a member of the Board on account of total and permanent disability, then
the participant may at any time within one year after ceasing to be a member of
the Board exercise his or her option but only to the extent that the option was
exercisable on the date he or she ceased to be a member of the Board. If the
participant dies while a member of the Board, or within the three or twelve
month period after ceasing to be a member of the Board as described in the
preceding two sentences, then his or her option may be exercised at any time
within twelve months following his or her death by the person or persons to whom
his or her rights under the option shall pass by will or by the laws of descent
and distribution, but only to the extent that such option was exercisable by him
or her on the date he or she ceased to be a member of the Board. The Board may,
in its discretion, provide in any option agreement or determine at any time
after the date of grant that the exercisability of an option will be
accelerated, in whole or in part, in the event of a participant's retirement,
death or disability. The Board may, in its discretion, extend the
post-termination exercise periods applicable to an option, but not beyond the
expiration date of the option.
FEDERAL TAX CONSEQUENCES
The Federal income tax discussion set forth below is intended for general
information only. State and local income tax consequences are not discussed and
may vary from locality to locality.
Under present Treasury regulations, a director who is granted a
non-qualified option will not realize taxable income at the time the option is
granted. In general, an optionee will be subject to tax for the year of exercise
on an amount of ordinary income equal to the excess of the fair market value of
the shares on the date of exercise over the exercise price, and the Company will
receive a corresponding deduction. The director's basis in the shares so
acquired will be equal to the exercise price plus the amount of ordinary income
upon which he or she is taxed. Upon subsequent disposition of the shares, the
director will realize capital gain or loss, long-term or short-term, depending
upon the length of time the shares are held after the option is exercised.
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<PAGE> 8
EXECUTIVE COMPENSATION AND OTHER INFORMATION
EXECUTIVE COMPENSATION
The following table sets forth information with respect to all compensation
awarded to, earned by or paid for services rendered to the Company by (i) the
Company's Chief Executive Officer and (ii) each of the other executive officers
of the Company who received compensation in excess of $100,000 in the fiscal
year ended June 30, 1996 (collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-----------------------------
FISCAL
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS
- ------------------------------------------------------------------ ------ -------- -------
<S> <C> <C> <C>
Evan Jones........................................................ 1996 $167,824 $35,498
President and Chief Executive Officer
Charles M. Fleischman............................................. 1996 168,534 35,675
Executive Vice President, Chief Operating Officer and Chief
Financial Officer
Attila D. Lorincz, Ph.D........................................... 1996 151,583 --
Vice President, Research and Development, and Scientific
Director
</TABLE>
STOCK OPTION INFORMATION
The following table sets forth, for each of the Named Executive Officers,
certain information concerning the grant of options in fiscal 1996.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------ VALUE AT ASSUMED
% OF ANNUAL RATES OF
NUMBER OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERM(3)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ----------------------
NAME GRANTED FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- ------------------------------- --------- ------------ ----------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Evan Jones..................... 16,200(1) 1.6% $10.285 3/26/2001 $ 80,112 $ 226,257
269,514(2) 27.3 9.35 3/26/2006 696,217 1,538,458
Charles M. Fleischman.......... 16,200(1) 1.6 10.285 3/26/2001 80,112 226,257
269,514(2) 27.3 9.35 3/26/2006 696,217 1,538,458
Attila D. Lorincz, Ph.D. ...... 17,825(1) 1.8 9.35 3/26/2006 104,814 265,619
71,460(2) 7.2 9.35 3/26/2006 420,197 1,064,861
</TABLE>
- ---------------
(1) Incentive Stock Options
(2) Non-Qualified Stock Options
(3) These values have been calculated on the basis of $9.35 per share, which was
deemed by the Board to represent market value of the shares at the date of
grant, as the Company was not publicly traded at the time of grant.
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None of the Named Executive Officers exercised any options in fiscal 1996.
The following table sets forth, for each of the Named Executive Officers,
certain information concerning the value of unexercised options at June 30,
1996.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL YEAR END IN-THE-MONEY OPTIONS(1)
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Evan Jones.................................... 367,765 331,953 $ 2,736,610 $ 286,981
Charles M. Fleischman......................... 367,765 331,953 2,736,610 286,981
Attila D. Lorincz, Ph.D. ..................... 138,041 129,707 981,996 248,508
</TABLE>
- ---------------
(1) These values represent the difference between the closing price per share on
the Nasdaq National Market on June 28, 1996 ($8.00) and the exercise price
of the option.
STOCK OPTION PLANS
In March 1996, the Company adopted the Digene Corporation Omnibus Plan (the
"Omnibus Plan"). Pursuant to the Omnibus Plan, officers and other employees of
the Company may receive (i) options to purchase Common Stock, including
incentive stock options intended to qualify under Section 422 of the Internal
Revenue Code of 1986, as amended, and non-qualified stock options that do not so
qualify, (ii) restricted stock, (iii) unrestricted stock or (iv) stock
appreciation rights. The Omnibus Plan is administered by the Compensation
Committee, which has the discretion to determine the number and purchase price
of shares subject to each award, and other applicable terms and conditions,
including a grant's vesting schedule. The term of an option may not be more than
ten years from the grant date, or five years from the grant date in the case of
an incentive stock option granted to a 10% stockholder. Options granted under
the Omnibus Plan generally terminate three months after an optionee ceases to be
employed by the Company (twelve months in the case of death or disability),
unless otherwise provided in the related option agreement or extended by the
Compensation Committee. A total of 1,700,000 shares have been reserved for
issuance under the Omnibus Plan. On March 27, 1996, the Compensation Committee
granted incentive stock options to purchase an aggregate of 248,627 shares of
Common Stock and non-qualified stock options to purchase 103,858 shares of
Common Stock to various employees under the Omnibus Plan, in each case at an
exercise price of $9.35 per share. Additionally, on March 27, 1996, Messrs.
Jones and Fleischman were each granted non-qualified options to purchase 269,514
shares of Common Stock at an exercise price of $9.35 per share and incentive
stock options to purchase 16,200 shares of Common Stock at an exercise price of
$10.285 per share under the Omnibus Plan. On March 27, 1996, Dr. Lorincz was
also granted non-qualified options to purchase 71,460 shares of Common Stock and
incentive stock options to purchase 17,825 shares of Common Stock, all at an
exercise price of $9.35 per share under the Omnibus Plan. Options granted in
March 1996 are scheduled to vest as to 60%, 20% and 20% of the underlying shares
in February 1999, 2000 and 2001, respectively. Such options will expire ten
years from the grant date, except for options granted to Messrs. Jones and
Fleischman, which will expire five years from the grant date. An additional
776,087 shares were available for issuance under the Omnibus Plan at June 30,
1996.
The Omnibus Plan also provides that each year, immediately following the
Company's annual meeting of stockholders, each non-employee director who will
continue to serve as a director after the meeting will automatically be granted
options to purchase 5,000 shares of Common Stock. The exercise price of such
options will be equal to the fair market value of a share of Common Stock on the
grant date. All of such options will be immediately exercisable and will expire
ten years from the grant date.
Under prior stock option plans, the Company was authorized to grant both
incentive stock options and non-qualified stock options to key employees,
directors or consultants of the Company. At June 30, 1996, the Company had
outstanding under such plans and other prior grants, options to purchase an
aggregate of 2,660,582 shares. The Board has determined not to grant additional
options under any such plans. For a
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<PAGE> 10
description of a proposed new option plan to compensate directors of the
Company, see "Proposal 2 -- Approval of Digene Corporation Directors' Stock
Option Plan."
Employment Contracts
The Company has entered into employment agreements with each of Messrs.
Jones and Fleischman, which have substantially identical provisions (each
individual an "Executive" and collectively, "Executives"). Pursuant to the
agreements, Messrs. Jones and Fleischman are each entitled to receive minimum
base salaries of $170,500 per year, plus annual bonuses equal to 25% of base
salary. The agreements require the Executives to devote their full time,
attention and energies to the Company's business. The agreements contain
restrictive covenants pursuant to which the Executives have agreed not to
compete with the Company for a period of one year following termination of
employment. The agreements also prohibit disclosure of the Company's trade
secrets. There can be no assurance that any of these provisions, if violated,
would be enforceable by the Company. The agreements provide that, if an
Executive is terminated without "justifiable cause" (as defined), then such
Executive will be entitled to receive (i) the amount of the base salary for a
period of twelve months following termination as otherwise would be due if such
Executive was employed by the Company, which shall be immediately due and
payable upon termination; (ii) bonus accrued to the date of termination and
(iii) all other benefits accrued on or prior to the expiration date of the
agreement. In addition, any outstanding stock, incentive stock options or
equivalents will be accelerated and vested immediately upon termination. Messrs.
Jones' and Fleischman's employment agreements will expire on December 31, 1999.
The Company has entered into a similar employment agreement with Dr.
Lorincz, pursuant to which Dr. Lorincz is entitled to receive a minimum base
salary of $115,000 per year. The agreement provides that, if Dr. Lorincz is
terminated without "justifiable cause" (as defined), then he will be entitled to
receive (i) the amount of the base salary remaining due and payable from the
date of termination for a period of twelve months, payable as it otherwise would
be due if he were employed by the Company, such payments to cease if he accepts
employment at another company or ceases to work cooperatively with the Company;
and (ii) all of the compensation accruing on or prior to the expiration date of
the agreement. In addition, 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, will
be accelerated and vested immediately upon termination. Dr. Lorincz's employment
agreement will expire on December 31, 1996.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee consists of Messrs. Whitehead and
Migliara. The Compensation Committee determines the salaries, bonuses and other
compensation of the officers of the Company and administers the Company's
various stock option plans. Neither Messrs. Whitehead nor Migliara was an
officer or employee of the Company during fiscal 1996 or any prior year. Mr.
Migliara is President of Migliara/ Kaplan, a consultant of the Company, and was
appointed to serve on the Board pursuant to an agreement between Migliara/Kaplan
and the Company. Prior to March 1996, the Board was responsible for issues
concerning compensation. See "Certain Transactions" for a further discussion of
the relationship between the Company and Migliara/Kaplan.
8
<PAGE> 11
REPORT ON EXECUTIVE COMPENSATION
INTRODUCTION
Prior to the formation of the Compensation Committee (the "Committee") in
March 1996, responsibility for matters related to compensation resided with the
Board. The Board established compensation policy, approved salaries, bonuses and
other compensation for the officers and administered the Company's various stock
option plans. Since March 1996, the Committee, consisting of Messrs. Whitehead
and Migliara, has been responsible for these functions.
EXECUTIVE COMPENSATION COMPONENTS
The Company's executive compensation policy is designed to enable the
Company to attract, motivate and retain highly qualified executive officers. The
key components of the Company's compensation program are base salary, annual
incentive bonus awards and equity participation in the form of stock options.
Since prior to its initial public offering in May 1996 the Company was generally
undercapitalized and endeavoring to conserve cash, the goal of the Board and the
Committee was to pay executive officers the minimum cash compensation as it felt
was necessary to attract and retain them and to retain and motivate them through
stock options. In arriving at specific levels of compensation for executive
officers, the Board and the Committee have relied on the recommendations of
management and their own experience and knowledge of compensation paid by other
companies in the biotechnology industry and/or in the same geographic area as
the Company. The Board also sought to ensure that an appropriate relationship
existed between executive pay and corporate performance. Executive officers are
also entitled to customary benefits generally available to all employees of the
Company, including group medical, dental and life insurance and 401(k) plans. In
1996, the Company entered into long-term employment agreements with certain of
the executive officers to provide them with the employment security and
severance deemed necessary by the Committee to retain them.
CASH
Annual Cash Compensation. Subject to the above policy and to the
requirements of applicable employment agreements, compensation for each of the
executive officers for fiscal 1996 was based on the executive's duties and
responsibilities, the performance of the Company, both financial and otherwise,
and the success of the executive in developing and executing the Company's
research and development, manufacturing, sales and marketing, financing and
strategic plans. All of the executive officers (except for the one who commenced
employment during fiscal 1996) received base salary increases of 10% on October
16, 1995. Cash bonuses, equal to 25% of salary received during the period
September 1, 1995 through June 30, 1996, were also earned by each of Messrs.
Jones and Fleischman pursuant to the terms of their employment agreements.
Stock Options. Equity participation is a key component of the Company's
executive compensation program. Stock options are granted to executive officers
primarily based on the officer's contribution to the Company's development.
Options are designed to retain executive officers and motivate them to enhance
stockholder value by aligning their financial interests with those of the
Company's stockholders. Stock options provide an effective incentive for
management to create stockholder value over the long term since the option value
depends on appreciation in the price of the Common Stock over a number of years.
Section 162(m) of the Code limits the deductibility of annual compensation
over $1 million to the Chief Executive Officer and the other executive officers
unless certain conditions are met. The Company's Chief Executive Officer and the
other executive officers have not received annual compensation over $1 million,
and the Company has not yet determined what measures, if any, it should take to
comply with Section 162.
CHIEF EXECUTIVE OFFICER COMPENSATION
At the beginning of fiscal 1996, Mr. Jones was receiving an annual base
salary of $155,000. On October 16, 1995, he received a 10% increase, raising his
annual base salary to $170,500. In May 1996, the Company and Mr. Jones executed
an employment agreement, with a term beginning on May 1, 1996 and ending on
December 31, 1999. Pursuant to this agreement, Mr. Jones is to receive,
effective as of May 1, 1996,
9
<PAGE> 12
a minimum annual base salary of $170,500, a bonus on September 1 of each year
equal to 25% of the salary he received during the previous twelve months, and
severance payments in the event of termination of his employment. In addition to
the compensation granted to Mr. Jones pursuant to his employment agreement, he
was granted non-qualified options to purchase 269,514 shares of Common Stock and
incentive stock options to purchase 16,200 shares of Common Stock. In deciding
upon a 10% increase in Mr. Jones' salary, the approval of a long term agreement
(including the 25% bonus) and the grant of options to purchase an aggregate of
285,714 shares, initially the Board, and then the Committee, focused on the
importance of Mr. Jones to the continued growth and development of the Company,
his expertise in the industry, his demonstrated management skills and ability to
implement the Company's strategic plans, his role in the Company's initial
public offering, and the Company's achievement of other milestones.
FUTURE EXECUTIVE OFFICER COMPENSATION
The Committee intends to engage the services of a compensation consultant
to assist the Committee in determining compensation policy and in establishing a
compensation program which will be responsive to the Company's future needs.
BOARD OF DIRECTORS
Evan Jones
Charles M. Fleischman
Joseph M. Migliara
John J. Whitehead
COMPENSATION COMMITTEE
Joseph M. Migliara
John J. Whitehead
10
<PAGE> 13
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of September 20, 1996 by: (i) each person known
by the Company to be the beneficial owner of more than 5% of the outstanding
shares of Common Stock, (ii) each director and Named Executive Officer, and
(iii) all executive officers and directors of the Company as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE
NAME OF BENEFICIAL OWNER(1) BENEFICIALLY OWNED(2) OWNERSHIP
- ---------------------------------------------------------------- --------------------- ---------
<S> <C> <C>
Armonk Partners(3).............................................. 4,987,115 44.1%
Murex Diagnostics Corporation(4)................................ 736,546 6.5
Evan Jones(5)................................................... 5,401,221 46.2
Charles M. Fleischman(6)........................................ 5,394,636 46.2
Attila D. Lorincz, Ph.D.(7)..................................... 168,551 1.5
John J. Whitehead(8)............................................ 17,849 *
Joseph M. Migliara(9)........................................... 178,499 1.6
All executive officers and directors as a group (7
persons)(10).................................................. 6,201,009 49.8
</TABLE>
- ---------------
* Less than one percent.
(1) Wayne T. Hockmeyer, Ph.D., the nominee proposed by the Board to be elected
as a director at the Annual Meeting, as described in Proposal 1 hereof,
does not currently own any shares of the Company's Common Stock. If
elected, he will receive options to purchase an aggregate of 25,000 shares
of Common Stock. See "Proposal 1 -- Election of Director -- Director
Compensation" and "Proposal 2 -- Approval of Digene Corporation Directors'
Stock Option Plan."
(2) Beneficial ownership is determined in accordance with rules of the
Securities and Exchange Commission. Shares of Common Stock subject to
options currently exercisable or exercisable within 60 days of the date of
this Proxy Statement are deemed outstanding for computing the percentage
beneficially owned by such holder but are not deemed outstanding for
purposes of computing the percentage beneficially owned by any other
person. Except as otherwise indicated, the Company believes that the
beneficial owners of the Common Stock listed above, based on information
furnished by such owners, have sole investment and voting power with
respect to such shares, subject to community property laws where
applicable, and that there are no other affiliations among the stockholders
listed in the table.
(3) The general partners of Armonk Partners are Messrs. Jones and Fleischman.
The address for Armonk Partners is 9000 Virginia Manor Road, Beltsville,
Maryland 20705.
(4) The address for Murex Diagnostics Corporation is 2nd Floor, Trident House,
Bridgetown, St. Michael, Barbados. Murex Diagnostics Corporation is an
affiliate of International Murex Technologies Corporation. See "Certain
Transactions."
(5) Includes (i) 4,987,115 shares owned by Armonk Partners, as to which Mr.
Jones shares voting and investment power as a general partner, (ii) 14,676
shares owned by Mr. Jones' wife, as to which shares Mr. Jones disclaims
beneficial ownership, and (iii) 382,758 shares issuable upon exercise of
stock options. The address for Mr. Jones is 9000 Virginia Manor Road,
Beltsville, Maryland 20705.
(6) Includes (i) 4,987,115 shares owned by Armonk Partners, as to which Mr.
Fleischman shares voting and investment power as a general partner, (ii)
16,672 shares held in trust for the benefit of Mr. Fleischman's minor
children, as to which Mr. Fleischman disclaims beneficial ownership, and
(iii) 382,758 shares issuable upon exercise of stock options. The address
for Mr. Fleischman is 9000 Virginia Manor Road, Beltsville, Maryland 20705.
(7) Includes (i) 16,672 shares owned jointly with Dr. Lorincz's wife, pursuant
to which Dr. Lorincz shares voting and investment power, and (ii) 151,126
shares issuable upon exercise of stock options.
(8) Represents 17,849 shares issuable upon exercise of stock options. Mr.
Whitehead is a limited partner in Armonk Partners and he does not have
voting or investment power with respect to the shares held by Armonk
Partners.
(9) Represents 178,499 shares issuable upon exercise of stock options held by
Valley Partners. See "Certain Transactions."
(10) See Notes (5) through (9).
11
<PAGE> 14
STOCK PERFORMANCE GRAPH
The following graph compares the percentage change in cumulative total
stockholder return on the Common Stock since May 22, 1996, the date the
Company's shares began trading on the Nasdaq National Market, with the
cumulative total return on the American Stock Exchange Biotechnology Index and a
Peer Group(1) over the same period. The comparison assumes $100 was invested on
May 22, 1996 in the Common Stock and in each of the indices and assumes
reinvestment of dividends, if any, from that date to June 28, 1996. The Company
has not paid cash dividends on the Common Stock. Historic stock prices are not
indicative of future stock price performance.
COMPARISON OF CUMULATIVE TOTAL RETURNS
AMONG DIGENE, AMERICAN STOCK EXCHANGE
BIOTECHNOLOGY INDEX AND PEER GROUP
<TABLE>
<CAPTION>
BIOTECHNOL-
MEASUREMENT PERIOD OGY COMPANY
(FISCAL YEAR COVERED) PEER GROUP DIGENE INDEX
<S> <C> <C> <C>
5/22/96 100.000 100.000 100.000
6/28/96 84.608 68.817 90.110
</TABLE>
- ---------------
(1) The Peer Group consists of companies that provide products and/or services
that are related to those of the Company. The returns of each company have
been weighted according to their respective stock market capitalization for
purposes of arriving at the Peer Group average. The members of the Peer
Group are as follows: Cytyc Corp., Igen, Inc., Matritech, Inc., Neopath,
Inc., Neuromedical Systems, Inc. and Oncor, Inc.
This Stock Performance Graph shall not be deemed incorporated by reference
by any general statement incorporating by reference this Proxy Statement into
any filing under the Securities Act of 1933, as amended (the "Securities Act"),
or under the Securities Exchange Act of 1934 (the "Exchange Act"), except to the
extent that the Company specifically incorporates this information by reference,
and shall not otherwise be deemed filed under the Securities Act or the Exchange
Act and is not to be deemed to be soliciting material.
12
<PAGE> 15
CERTAIN TRANSACTIONS
In addition to transaction described in "Compensation Committee Interlocks
and Insider Participation," the Company is party to the following transactions
with its executive officers, directors and principal stockholders.
In February 1996, the Company and Murex entered into a Distribution
Agreement granting Murex the exclusive right to distribute certain of the
Company's products, including its Hybrid Capture human papillomavirus DNA test,
in most of Europe, Africa and certain countries in the Middle East. Pursuant to
the agreement, Murex has agreed to use its best efforts to distribute and
support the products, to maintain a qualified sales force, to provide technical
support for the products, to comply with the Company's packaging and delivery
requirements, and to assist the Company in protecting its proprietary rights in
the products. The Company is required to use reasonable efforts to deliver
products ordered by Murex, to provide current promotional materials and to
assist Murex in making sales presentations. The agreement has a five-year term,
subject to automatic renewal for successive one-year terms. One year after the
effective date of the agreement, however, the Company will have the right to
terminate the agreement with respect to particular countries, subject to Murex's
right to continue to distribute products within any such country on a
co-exclusive basis during a "wind-down" period of up to two years.
In May 1994, the Company sold 333,333 shares of Redeemable Convertible
Preferred Stock to Murex for an aggregate purchase price of $999,999. Murex also
received warrants to purchase up to 297,500 shares of Common Stock at an
exercise price per share escalating from $4.20 on June 1, 1994 to $6.65 on
February 1, 1996. The sale was subject to the execution of a Stock Purchase
Agreement and a 1994 Development and License Agreement between the Company and
Murex. Under the terms of the 1994 Stock Purchase Agreement, Murex placed
$2,000,000 in escrow to purchase 666,667 additional shares of Redeemable
Convertible Preferred Stock, with net proceeds to be used, generally, for
mutually approved research and development projects under the 1994 Development
and License Agreement. During fiscal 1995 and 1996, $1,215,000 and $785,000 was
released from escrow to fund the purchase by Murex of 405,000 and 261,667
shares, respectively, of Redeemable Convertible Preferred Stock. No amounts
remain in escrow. The 1,000,000 shares of Redeemable Convertible Preferred Stock
held by Murex were automatically converted into 714,000 shares of Common Stock
upon consummation of the Company's initial public offering on May 29, 1996 (the
"IPO"). On April 15, 1996, Murex exercised warrants to purchase 22,547 shares of
Common Stock for an aggregate purchase price of $150,000. The remainder of
Murex's warrants expired on such date.
Under the 1994 Development and License Agreement, Murex agreed to fund the
Company's DNA probe product development efforts for particular applications on a
cost-reimbursement basis, generally through May 2004. The Company and Murex will
hold co-exclusive distribution licenses to market any products developed
pursuant to the agreement. The Company is required to supply, and Murex is
required to purchase from the Company, all of Murex's requirements for any
products developed under the agreement. To date, no products have been developed
under the 1994 Development and Licensing Agreement.
In May 1994, in conjunction with Murex's purchase of the Redeemable
Convertible Preferred Stock, the Company, Murex and Armonk Partners entered into
a stockholders agreement (the "Stockholders Agreement"). Pursuant to the
Stockholders Agreement, so long as Murex owns at least 5% of the issued and
outstanding capital stock of the Company, subject to certain exceptions, upon
the completion of an initial public offering, the Company agrees to nominate,
and Armonk agrees to exercise its vote in favor of, the minimum number of
Murex's designees necessary to give Murex a proportionate representation on the
Board equal to its proportionate ownership of capital stock. Likewise, the
Company agrees to nominate, and Murex agrees to exercise its vote in favor of,
the minimum number of Armonk's designees necessary to give Armonk a
proportionate representation on the Board equal to its proportionate ownership
of capital stock. Murex has not designated a nominee under the agreement. See
"Proposal 1 -- Committees and Meetings of the Board of Directors." The
Stockholders Agreement terminates on the first anniversary of the effectiveness
of the IPO.
In April 1993, the Company and Murex entered into a Development and License
Agreement pursuant to which Murex agreed to fund the Company's DNA probe product
development programs for certain
13
<PAGE> 16
applications through April 2003, subject to extension. The Company and Murex
hold co-exclusive distribution licenses to market any products developed under
the agreement. Murex is required to provide certain minimum amounts of
development funding for the Company over the first five years of the agreement
in order to maintain exclusive rights to fund the development of specified
projects. The Company is required to supply, and Murex is required to purchase
from the Company, all of Murex's requirements for products developed pursuant to
the agreement. To date, the Company's Hybrid Capture cytomegalovirus DNA test is
the only product that has been developed under the agreement.
In May 1992, the Company and Murex entered into a Distribution Agreement,
whereby the Company granted to Murex the exclusive right to distribute the
Company's Hepatitus B virus ("HBV") DNA assays in specified countries in the
European Community and the co-exclusive right (meaning that the Company may also
distribute its products) to distribute the Company's HBV DNA test (for the
detection of the hepatitis B virus) in Africa. The agreement was amended in May
1993 to expand Murex's exclusive distribution right to also include certain
countries in Eastern Europe and in the Middle East.
During the fiscal years ended June 30, 1994, 1995 and 1996, product sales
to Murex were $1,023,000, $1,665,000 and $2,508,000, accounting for 21.5%, 30.8%
and 39.4% of product sales, respectively. In fiscal 1994, 1995 and 1996, Murex
paid $485,000, $606,000 and $397,000, respectively, to the Company under
agreements relating to research and development.
In May 1992, the Company entered into a five-year agreement with Joseph
Migliara, Harris Kaplan, Migliara/Kaplan and Valley Partners (a partnership
organized by Messrs. Migliara and Kaplan). Pursuant to the agreement, Mr.
Migliara agreed to join the Board and Migliara/Kaplan agreed to serve as a
strategic advisor to the Company. The Company agreed to grant to Migliara/Kaplan
options to purchase an aggregate of 178,499 shares of Common Stock. The
agreement also contains non-compete and confidentiality provisions.
The Company has entered into a registration rights agreement with Armonk
Partners, Murex, Messrs. Jones and Fleischman, Dr. Lorincz and certain other
stockholders who hold in the aggregate approximately 11,764,801 shares of Common
Stock. Pursuant to the terms of this agreement, except for registration
statements relating to employee benefit plans, mergers, acquisitions or similar
transactions, or registration statements that do not permit secondary sales, the
Company is required to notify each holder of each decision by the Company to
file a registration statement with the Securities and Exchange Commission. Upon
receipt of such notice, a holder may request to include certain of such holder's
shares of Common Stock in the Company's registration statement, subject to the
determination of the managing underwriters that such inclusion will not
interfere with the offering. The Company has granted similar registration
rights, covering a total of 250,087 shares of Common Stock, to a certain
institutional investor.
In addition to the above rights, under certain circumstances and subject to
certain limitations, the holders of 51% of the Common Stock benefitting from
registration rights can require the Company to use its best efforts to prepare
and file a registration statement covering such shares. If the Company is
entitled to register shares on Form S-3, under certain circumstances and subject
to certain limitations, such holders can require the Company to use its best
efforts to cause such holders' shares of Common Stock to be registered on Form
S-3 (or any successor form). The right of such holders to request the Company to
file a registration statement on Form S-3 is available to such holders no more
than twice during any consecutive twelve-month period.
The Company generally is required to bear the expenses relating to the sale
of shares under registration statements contemplated by the registration rights
agreements, except for underwriting fees and discounts. The Company also is
obligated to indemnify the stockholders whose shares are included in any of the
Company's registration statements against certain losses and liabilities,
including certain liabilities under the Securities Act and state securities
laws.
For information regarding employment agreements with Named Executive
Officers, see "Executive Compensation and Other Information -- Employment
Contracts." For information regarding compensation of directors, see "Proposal
1 -- Election of Director -- Director Compensation." For information regarding
14
<PAGE> 17
options granted to certain executive officers, see "Executive Compensation and
Other Information -- Stock Option Information" and "Executive Compensation and
Other Information -- Stock Option Plans."
INDEPENDENT AUDITORS
Ernst & Young LLP, independent auditors, audited the financial statements
of the Company for the fiscal year ended June 30, 1996. Representatives of Ernst
& Young LLP are expected to attend the Annual Meeting, will have the opportunity
to make a statement if they desire to do so and are expected to be available to
respond to appropriate questions. The Board has selected Ernst & Young LLP as
the independent auditors to audit the Company's financial statements for the
fiscal year ending June 30, 1997.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's directors,
officers (including a person performing a principal policy-making function) and
persons who own more than 10% of a registered class of the Company's equity
securities ("10% Holders") to file with the Securities and Exchange Commission
("SEC") initial reports of ownership and reports of changes in ownership of
Common Stock and other equity securities of the Company. Directors, officers and
10% Holders are required by SEC regulations to furnish the Company with copies
of all of the Section 16(a) reports they file. Based solely upon a review of the
copies of the forms furnished to the Company and the representations made by the
reporting persons to the Company, the Company believes that during fiscal 1996
its directors, officers and 10% Holders complied with all filing requirements
under Section 16(a) of the Exchange Act.
STOCKHOLDER PROPOSALS
Stockholders may submit proposals on matters appropriate for stockholder
action at the Company's annual meetings consistent with regulations adopted by
the SEC. For stockholder proposals to be considered by the Board for inclusion
in the proxy statement and form of proxy relating to the 1997 annual meeting of
stockholders, they must be received by the Company not later than May 27, 1997.
Such proposals should be addressed to the Company at 9000 Virginia Manor Road,
Beltsville, Maryland 20705, Attention: Executive Vice President.
OTHER MATTERS
The Board does not intend to present any business at the Annual Meeting
other than the election of a director and the approval of the Director Plan.
However, if other matters requiring the vote of the stockholders properly come
before the Annual Meeting, which under applicable proxy regulations need not be
included in this Proxy Statement, or which the Board did not know would be
presented at a reasonable time before this solicitation, the persons named in
the enclosed proxy will have discretionary authority to vote the proxies held by
them with respect to such matters in accordance with their best judgment on such
matters.
By Order of the Board of Directors
Charles M. Fleischman,
Secretary
September 24, 1996
15
<PAGE> 18
EXHIBIT A
DIGENE CORPORATION DIRECTORS' STOCK OPTION PLAN
ARTICLE 1
PURPOSE; EFFECTIVE DATE; DEFINITIONS
1.1 PURPOSE. This Digene Corporation Directors' Stock Option Plan (the
"Plan") is intended to secure for Digene Corporation (the "Company") and its
stockholders the benefits of the incentive inherent in common stock ownership by
the directors of the Company and to afford such persons the opportunity to
obtain or increase their proprietary interest in the Company on a favorable
basis and thereby have an opportunity to share in its success.
1.2 EFFECTIVE DATE. This Plan shall be effective on and after September 6,
1996.
1.3 DEFINITIONS. Throughout this Plan, the following terms shall have the
meanings indicated:
(a) "BOARD" shall mean the Board of Directors of the Company.
(b) "CODE" shall mean the Internal Revenue Code of 1986, as amended,
any successor revenue laws of the United States, and the rules and
regulations promulgated thereunder.
(c) "COMMON STOCK" shall mean the common stock, par value $.01 per
share, of the Company.
(d) "COMPANY" shall mean Digene Corporation, a Delaware corporation.
(e) "DIRECTOR" shall mean any person who is a member of the Board.
(f) "FAIR MARKET VALUE" shall mean with respect to the Common Stock on
any day, (i) the closing sales price on the immediately preceding business
day of a share of Common Stock as reported on the principal securities
exchange on which shares of Common Stock are then listed or admitted to
trading, or (ii) if not so reported, the closing sales price on the
immediately preceding business day of a share of Common Stock as published
in the NASDAQ National Market Issues report in the Eastern Edition of The
Wall Street Journal, or (iii) if not so reported, the average of the
closing bid and asked prices on the immediately preceding business day as
reported on the NASDAQ National Market System, or (iv) if not so reported,
as furnished by any member of the National Association of Securities
Dealers, Inc. selected by the Board. In the event that the price of a share
of Common Stock shall not be so reported or furnished, the Fair Market
Value of a share of Common Stock shall be determined by the Board in good
faith. The market value of an Option granted under the Plan on any day
shall be the market value of the underlying Common Stock, determined as
aforesaid, less the exercise price of the Option. A "business day" is any
day, other than Saturday or Sunday, on which the relevant market is open
for trading.
(g) "OPTION" shall mean an option to purchase shares of Common Stock
granted by the Board pursuant to this Plan.
(h) "OPTION AGREEMENT" shall mean the certificate evidencing an Option
grant.
(i) "OPTION SHARES" shall mean the shares of Common Stock purchased
upon exercise of an Option.
(j) "PLAN" shall mean this Digene Corporation Directors' Stock Option
Plan, as the same may be amended from time to time.
ARTICLE II
ADMINISTRATION
2.1 ADMINISTRATION. This Plan and the Options granted hereunder shall be
interpreted, construed and administered by the Board in its sole discretion. A
Director eligible under the Plan may appeal to the Board in writing any decision
or action of the Board with respect to the Plan that adversely affects the
Director. Upon
<PAGE> 19
review of such appeal and in any other case where the Board has acted with
respect to the Plan, the interpretation and construction by the Board of any
provisions of this Plan or of any Option shall be conclusive and binding on all
parties.
2.2 BOARD ACTION. A majority of the entire Board shall constitute a
quorum, and the action of a majority of the members present at any meeting at
which a quorum is present shall be deemed the action of the Board. In addition,
any decision or determination reduced to writing and signed by all of the
members of the Board shall be fully as effective as if it had been made by a
majority vote at a meeting duly called and held. Subject to the provisions of
this Plan and the Company's bylaws, the Board may make such additional rules and
regulations for the conduct of its business as it shall deem advisable.
2.3 BOARD POWERS. The Board shall have authority to grant Options with
such terms (not inconsistent with the provisions of this Plan) as the Board may
consider appropriate. Such terms shall include, without limitation, as
applicable, the number of shares, the Option price, the medium and time of
payment, the term of each Option and any vesting requirements and may include
conditions (in addition to those contained in this Plan) on the exercisability
of all or any part of an Option. Notwithstanding any such conditions, the Board
may, in its discretion, accelerate the time at which any Option may be
exercised. In addition, the Board shall have complete discretionary authority to
prescribe the form of Option Agreement; to adopt, amend and rescind rules and
regulations pertaining to the administration of the Plan; and to make all other
determinations necessary or advisable for the administration of this Plan. The
express grant in the Plan of any specific power to the Board shall not be
construed as limiting any power or authority of the Board. All expenses of
administering this Plan shall be borne by the Company.
2.4 GOOD FAITH DETERMINATIONS. No member of the Board shall be liable for
any action or determination made in good faith with respect to this Plan or any
Option granted hereunder.
ARTICLE III
ELIGIBILITY; TYPES OF BENEFITS; SHARES SUBJECT TO PLAN
3.1 ELIGIBILITY. The Board shall from time to time determine and designate
the Directors to receive Options under this Plan and the number of Options to be
awarded to each such Director or the formula or other basis on which such
Options shall be awarded to Directors. In making any such award, the Board may
take into account such factors as it considers relevant.
3.2 TYPE OF OPTIONS. All Options granted under the Plan will be
non-qualified options and are not intended to be incentive stock options (as
defined in Section 422 of the Code).
3.3 SHARES SUBJECT TO THIS PLAN. Subject to the provisions of Section
4.1(e) (relating to adjustment for changes in Common Stock), the maximum number
of shares that may be issued under this Plan shall not exceed in the aggregate
500,000 shares of Common Stock. Such shares may be authorized and unissued
shares or authorized and issued shares that have been reacquired by the Company.
If any Options granted under this Plan shall for any reason terminate or expire
or be surrendered without having been exercised in full, then the shares not
purchased under such Options shall be available again for grant hereunder.
Anything in this Plan to the contrary notwithstanding, in no event shall any
Director receive in any calendar year Options under this Plan involving more
than 50,000 shares of Common Stock (subject to adjustment as provided in Section
4.1(e)).
ARTICLE IV
STOCK OPTIONS
4.1 GRANT; TERMS AND CONDITIONS. The Board, in its discretion, may from
time to time grant Options to any Director eligible to receive Options under
this Plan. Each Director who is granted an Option shall receive
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an Option Agreement from the Company in a form specified by the Board and
containing such provisions, consistent with this Plan, as the Board, in its sole
discretion, shall determine at the time the Option is granted.
(a) NUMBER OF SHARES. Each Option Agreement shall state the number of
shares of Common Stock to which it pertains.
(b) OPTION PRICE. Each Option Agreement shall state the Option exercise
price, which shall not be less than 85% of the Fair Market Value per share of
Common Stock on the date of grant of the Option. The date of the grant of an
Option shall be the date specified by the Board in its grant of the Option.
(c) MEDIUM AND TIME OF PAYMENT. Upon the exercise of an Option, the Option
exercise price shall be payable in United States dollars, in cash (including by
check) or (unless the Board otherwise prescribes) in shares of Common Stock
owned by the optionee, in Options granted to the optionee under the Plan which
are then exercisable or options granted to the optionee under any of the
Company's other stock option plans which are then exercisable, or in a
combination of cash, Common Stock and options. If all or any portion of the
Option exercise price is paid in Common Stock owned by the optionee, then that
stock shall be valued at its Fair Market Value as of the date the Option is
exercised. If all or any portion of the Option exercise price is paid in Options
or in options granted to the optionee under any of the Company's other stock
option plans, then such options shall be valued at their Fair Market Value as of
the date the Option is exercised. For the purpose of assisting an optionee to
exercise an Option, the Company may, in the discretion of the Board, make loans
to the optionee or guarantee loans made by third parties to the optionee, in
either case on such terms and conditions as the Board may authorize.
(d) TERM AND EXERCISE OF OPTIONS. The term of each Option shall be
determined by the Board at the time the Option is granted; provided that the
term of an Option shall in no event be more than ten years from the date of
grant. Not less than one hundred shares may be purchased at any one time unless
the number purchased is the total number at the time purchasable under the
Option.
(e) RECAPITALIZATION; REORGANIZATION. Subject to any required action by
the stockholders of the Company, the maximum number of shares of Common Stock
that may be issued under this Plan pursuant to Section 3.3 above, the maximum
number of shares of Common Stock with respect to which Options may be granted to
any individual in any calendar year pursuant to Section 3.3 above, the number of
shares of Common Stock covered by each outstanding Option, the kind of shares
subject to outstanding Options and the per share exercise price under each
outstanding Option shall be adjusted, in each case, to the extent and in the
manner the Board deems appropriate for any increase or decrease in the number of
issued shares of Common Stock resulting from a reorganization, recapitalization,
stock split, stock dividend, combination of shares, merger, consolidation,
rights offering, subdivision or consolidation of shares or the payment of a
stock dividend (but only on the Common Stock) or any other change in the
corporate structure or state of the Company.
Subject to any action that may be required on the part of the stockholders
of the Company, if the Company is the surviving corporation in any merger, then
each outstanding Option shall pertain to and apply to the securities or other
consideration that a holder of the number of shares of Common Stock subject to
the Option would have been entitled to receive in the merger. A dissolution,
liquidation or consolidation of the Company or a merger in which the Company is
not the surviving corporation, other than a merger effected for the purpose of
changing the Company's domicile, shall cause each outstanding Option to
terminate, provided that each holder shall, in such event, have the right
immediately prior to such dissolution, liquidation, merger or consolidation to
exercise his or her Option in whole or in part without regard to any installment
provision contained in his or her Option Agreement. Notwithstanding the
foregoing, in no event shall any Option be exercisable after the date of
termination of the exercise period of such Option. In the case of a merger
effected for the purpose of changing the Company's domicile, each outstanding
Option shall continue in effect in accordance with its terms and shall apply or
relate to the same number of shares of common stock of such surviving
corporation as the number of shares of Common Stock to which it applied
immediately prior to such merger, adjusted for any increase or decrease in the
number of outstanding shares of common stock of the surviving corporation
effected without receipt of consideration.
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In the event of a change in the Common Stock as presently constituted,
which change is limited to a change of all of the authorized shares with par
value into the same number of shares with a different par value or without par
value, the shares resulting from any such change shall be deemed to be the
Common Stock within the meaning of this Plan.
The foregoing adjustments shall be made by the Board, whose determination
shall be final, binding and conclusive.
Except as expressly provided in this subsection, the holder of an Option
shall have no rights by reason of (i) any subdivision or consolidation of shares
of any class, (ii) any stock dividend, (iii) any other increase or decrease in
the number of shares of stock of any class, (iv) any dissolution, liquidation,
merger or consolidation or spin-off, split-off or split-up of assets of the
Company or stock of another corporation or (v) any issuance by the Company of
shares of stock of any class or securities convertible into shares of stock of
any class. Moreover, except as expressly provided in this subsection, the
occurrence of one or more of such events shall not affect, and no adjustment by
reason thereof shall be made with respect to, the number or price of shares of
Common Stock subject to the Option.
The grant of an Option pursuant to this Plan shall not affect in any way
the right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to merge or
to consolidate or to dissolve, liquidate, sell or otherwise transfer all or any
part of its business or assets.
(f) RIGHTS AS A STOCKHOLDER. Subject to Section 5.9 of this Plan regarding
uncertificated shares, an optionee or a transferee of an Option shall have no
rights as a stockholder with respect to any shares covered by his or her Option
until the date of the issuance of a stock certificate to him or her for those
shares upon payment of the exercise price. No adjustments shall be made for
dividends (ordinary or extraordinary, whether in cash, securities or other
property) or distributions or other rights for which the record date is prior to
the date such stock certificate is issued, except as provided in subsection
4.1(e).
(g) MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. Subject to the terms
and conditions and within the limitations of this Plan, the Board may modify,
extend or renew outstanding Options granted under this Plan or accept the
surrender of outstanding Options (to the extent not theretofore exercised) and
authorize the granting of new Options in substitution therefor (to the extent
not theretofore exercised). No modification of an Option shall, without the
consent of the optionee, alter or impair any rights or obligations under any
Option theretofore granted under this Plan.
(h) EXERCISABILITY AND TERM OF OPTIONS. Unless earlier terminated, Options
granted pursuant to this Plan shall be exercisable at any time on or after the
dates of exercisability and before the expiration date set forth in the Option
Agreement. Notwithstanding the foregoing, an Option shall terminate and may not
be exercised if the Director to whom it is granted ceases to be a member of the
Board, except that: (1) unless the Board shall determine that the Director was
removed from the Board for conduct that in the judgment of the Board involves
dishonesty or action by the Director that is detrimental to the best interest of
the Company, the Director may at any time within three months after ceasing to
be a member of the Board exercise his or her Option but only to the extent the
Option was exercisable by him or her on the date he or she ceased to be a member
of the Board; (2) if such Director ceases to be a member of the Board on account
of total and permanent disability, then the Director may at any time within one
year after ceasing to be a member of the Board exercise his or her Option but
only to the extent that the Option was exercisable on the date he or she ceased
to be a member of the Board; and (3) if such Director dies while a member of the
Board, or within the three or twelve month period after ceasing to be a member
of the Board as described in clause (1) or (2) above, then his or her Option may
be exercised at any time within twelve months following his or her death by the
person or persons to whom his or her rights under the Option shall pass by will
or by the laws of descent and distribution, but only to the extent that such
Option was exercisable by him or her on the date he or she ceased to be a member
of the Board. The Board may, in its discretion, provide in any Option Agreement
or determine at any time after the date of grant that the exercisability of an
Option will be accelerated, in whole or in part, in the event of a Director's
retirement, death or disability. The Board may, in its discretion, extend the
post-termination exercise periods set forth in this subsection, but not beyond
the expiration date of
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<PAGE> 22
the Option. Notwithstanding anything to the contrary in this subsection, an
Option may not be exercised by anyone after the expiration of its term.
4.2 OTHER TERMS AND CONDITIONS. Through the Option Agreements authorized
under this Plan, the Committee may impose such other terms and conditions, not
inconsistent with the terms hereof, on the grant or exercise of Options, as it
deems advisable.
ARTICLE V
MISCELLANEOUS
5.1 WITHHOLDING TAXES. A Director granted Options under this Plan shall be
conclusively deemed to have authorized the Company to withhold from the
compensation of such Director funds in amounts or property (including Common
Stock) in value equal to any federal, state and local income, employment or
other withholding taxes applicable to the income recognized by such Director and
attributable to the Options as, when and to the extent, if any, required by law;
provided, however, that, in lieu of the withholding of federal, state and local
taxes as herein provided, the Company may require that the Director (or other
person exercising such Option) pay the Company an amount equal to the federal,
state and local withholding taxes on such income at the time such withholding is
required or such other time as shall be satisfactory to the Company.
5.2 AMENDMENT, SUSPENSION, DISCONTINUANCE OR TERMINATION OF PLAN. The
Board may from time to time amend, suspend or discontinue this Plan or revise it
in any respect whatsoever for the purpose of maintaining or improving the
effectiveness of this Plan as an incentive device, for the purpose of conforming
this Plan to applicable governmental regulations or to any change in applicable
law or regulations or for any other purpose permitted by law; provided, however,
that no such action by the Board shall adversely affect any Option theretofore
granted under this Plan without the consent of the holder so affected. Unless
sooner terminated by the Committee, this Plan will terminate on September 6,
2006.
5.3 GOVERNING LAW. This Plan shall be governed by, and construed in
accordance with, the laws of the State of Maryland (without giving effect to
principles of conflict of laws).
5.4 DESIGNATION. This Plan may be referred to in other documents and
instruments as the "Digene Corporation Directors' Stock Option Plan."
5.5 INDEMNIFICATION. In addition to such other rights of indemnification
as they may have as members of the Board, Directors shall be indemnified by the
Company against the reasonable expenses, including attorneys' fees, actually and
necessarily incurred in connection with the defense of any investigation,
action, suit or proceeding, or in connection with any appeal therefrom, to which
they or any of them may be a party by reason of any action taken or failure to
act under or in connection with this Plan or any Option, and against all amounts
paid by them in settlement thereof (provided such settlement is approved by
independent legal counsel selected by the Company) or paid by them in
satisfaction of a judgment in or dismissal or other discontinuance of any such
investigation, action, suit or proceeding, except in relation to matters as to
which it shall be adjudged in such investigation, action, suit or proceeding
that such Director is liable for negligence or misconduct in the performance of
his or her duties; provided that, within 60 days after institution of any such
investigation, action, suit or proceeding, a Director shall in writing offer the
Company the opportunity, at its own expense, to handle and defend the same.
5.6 RESERVATION OF SHARES. The Company shall at all times during the term
of this Plan, and so long as any Option shall be outstanding, reserve and keep
available (and will seek or obtain from any regulatory body having jurisdiction
any requisite authority in order to issue) such number of shares of its Common
Stock as shall be sufficient to satisfy the requirements of this Plan. Inability
of the Company to obtain from any regulatory body of appropriate jurisdiction
authority considered by the Company to be necessary or desirable to the lawful
issuance of any shares of its Common Stock hereunder shall relieve the Company
of any liability in respect of the nonissuance or sale of such Common Stock as
to which such requisite authority shall not have been obtained.
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<PAGE> 23
5.7 APPLICATION OF FUNDS. The proceeds received by the Company from the
sale of Common Stock pursuant to the exercise of Options will be used for
general corporate purposes.
5.8 NO OBLIGATION TO EXERCISE. The granting of an Option shall impose no
obligation upon the holder to exercise or otherwise realize the value of that
Option.
5.9 UNCERTIFICATED SHARES. Each Director who exercises an Option to
acquire Common Stock may, but need not, be issued a stock certificate in respect
of the Common Stock so acquired. A "book entry" (i.e., a computerized or manual
entry) shall be made in the records of the Company to evidence the issuance of
shares of Common Stock to a Director where no certificate is issued in the name
of the Director. Such Company records, absent manifest error, shall be binding
on Directors. In all instances where the date of issuance of shares may be
deemed significant but no certificate is issued in accordance with this Section
5.10, the date of the book entry shall be the relevant date for such purposes.
5.10 FORFEITURE FOR COMPETITION. If a participant in this Plan provides
services to a competitor of the Company or any of its subsidiaries, whether as
an employee, officer, director, independent contractor, consultant, agent or
otherwise, such services being of a nature that can reasonably be expected to
involve the skills and experience used or developed by the participant while a
Director, then that participant's rights to any Options hereunder shall
automatically be forfeited, subject to a determination to the contrary by the
Board.
5.11 SUCCESSORS. This Plan shall be binding upon any and all successors of
the Company.
5.12 BOARD SERVICE. Nothing in this Plan or in any Option Agreement shall
confer on any Director any right to continue to serve as a member of the Board,
nor is there any implied agreement or understanding that such Director will be
nominated for reelection to the Board.
5.13 OTHER ACTIONS. Nothing contained in the Plan shall be construed to
limit the authority of the Company to exercise its corporate rights and powers,
including, but not by way of limitation, the right of the Company to grant
options for proper corporate purposes other than under the Plan with respect to
any employee or other person, firm, corporation or association.
5.14 TAX TREATMENT AND CHARACTERIZATION. Neither the Company nor any other
person represents or warrants to any Plan participant that favorable or
desirable tax treatment or characterization will be applicable in respect of any
Option.
5.15 LEGEND. The Board may require each person exercising an Option to
represent to and agree with the Company in writing that he or she is acquiring
the Option Shares without a view to distribution thereof. In addition to any
legend required by this Plan, the stock certificates representing such Option
Shares may include any legend which the Board deems appropriate to reflect any
restrictions on transfer.
All certificates for Option Shares shall be subject to such stock transfer
orders and other restrictions as the Board may deem advisable under the rules,
regulations and other requirements of the Securities and Exchange Commission,
any stock exchange upon which the Common Stock is then listed, any applicable
federal or state securities law, and any applicable corporate law, and the Board
may cause a legend or legends to be put on any such certificates to make
appropriate reference to such restrictions.
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<PAGE> 24
DIGENE CORPORATION
PROXY
The undersigned stockholder of Digene Corporation (the "Company") hereby
appoints Evan Jones and Charles M. Fleischman, and each of them, attorneys and
proxies, with power of substitution in each of them, to vote and act for and on
behalf of the undersigned at the Annual Meeting of Stockholders to be held on
October 29, 1996 and at all postponements and adjournments thereof, according to
the number of shares which the undersigned would be entitled to vote if then
personally present upon the matters described below, hereby revoking any proxy
heretofore executed by the undersigned (i) as specified by the undersigned below
and (ii) in the discretion of any proxy upon such other business as may properly
come before the meeting, all as set forth in the notice of the meeting and in
the proxy statement furnished herewith, copies of which have been received by
the undersigned; and hereby ratifies and confirms all that said attorneys and
proxies may do or cause to be done by virtue hereof.
The proxies are directed to vote as follows:
1. Election of Wayne T. Hockmeyer, Ph.D. as a director of the Company.
- ---- FOR ------ VOTE WITHHELD
2. Approval of the Digene Corporation Directors' Stock Option Plan.
- ---- FOR ------ AGAINST ------ ABSTAIN
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS,
WHICH RECOMMENDS A VOTE "FOR" EACH OF THE ABOVE MATTERS.
<PAGE> 25
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS DIRECTED HEREIN.
IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED "FOR" THE ABOVE MATTERS.
IMPORTANT: Please date this proxy and sign exactly as your name or names appear
on the certificate(s) representing your shares of Common Stock of the Company.
If shares are registered in more than one name, all owners should sign. When
signing as an executor, administrator, trustee, guardian or in another
representative capacity, please give your full title(s). If this proxy is
submitted by a corporation or partnership, it should be executed in the full
corporate or partnership name by a duly authorized person.
-------------------------------
(Signature)
-------------------------------
(Signature)
Dated____________________, 1996
PLEASE SIGN AND DATE THIS PROXY AND RETURN IT PROMPTLY
IN THE ENCLOSED PRE-ADDRESSED, STAMPED ENVELOPE.
