<PAGE> 1
272388.001(BF)
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] No fee required.
[ ] 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:
----------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
----------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------------
5) Total fee paid:
----------------------------------------------------------------------------
[ ] 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:
---------------------------------------------------
2) Form, Schedule or Registration Statement No.:
---------------------------------------------------
3) Filing Party:
---------------------------------------------------
4) Date Filed:
---------------------------------------------------
<PAGE> 2
DIGENE CORPORATION
9000 VIRGINIA MANOR ROAD
BELTSVILLE, MARYLAND 20705
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON TUESDAY, OCTOBER 28, 1997
To the Stockholders of Digene Corporation:
The 1997 Annual Meeting of Stockholders (the "Annual Meeting") of Digene
Corporation, a Delaware corporation (the "Company"), will be held on Tuesday,
October 28, 1997, at 10:00 a.m. (local time), at the Holiday Inn Calverton, 4095
Powder Mill Road, Beltsville, Maryland 20705, for the following purposes:
1. to elect two directors, each to serve for a three year term expiring at
the annual meeting of stockholders in 2000; and
2. 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
12, 1997, 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 for inspection, upon written request and for a proper purpose,
during normal business hours by any stockholder of the Company prior to the
Annual Meeting 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
October 15, 1997
<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 1997 Annual Meeting
of Stockholders to be held on Tuesday, October 28, 1997, at 10:00 a.m. (local
time), at the Holiday Inn Calverton, 4095 Powder Mill Road, Beltsville, Maryland
20705, 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 October 15, 1997.
PURPOSE OF ANNUAL MEETING
At the Annual Meeting, stockholders will be asked: (i) to elect two
directors of the Company each to serve for a three year term expiring at the
annual meeting of stockholders in 2000; and (ii) 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") the election of the two nominees for director of
the Company listed below.
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 12, 1997 (the "Record Date") will be entitled to notice of, and to
vote at, the Annual Meeting. As of the Record Date, there were 11,588,649 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") the election of the two nominees
for director of the Company listed below. 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 two nominees for director receiving the highest number of votes cast by
stockholders entitled to vote thereon will be elected to serve on the Board.
Votes withheld with respect to the election of directors 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. 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, telephone
or telegraph. These persons are to receive no special compensation for any
solicitation activities.
ELECTION OF DIRECTORS
NOMINEES FOR ELECTION AS DIRECTOR
The Board currently consists of six (6) members: Charles M. Fleischman,
Wayne T. Hockmeyer, Ph.D., Evan Jones, John H. Landon, Joseph M. Migliara and
John J. Whitehead. Mr. Landon was elected by the Board on April 18, 1997 to
serve as a director until the Annual Meeting. Additionally, Mr. Whitehead's
<PAGE> 4
current term will expire at the Annual Meeting. At the Annual Meeting, the Board
proposes that Messrs. Landon and Whitehead be elected as Class I directors of
the Company to hold office until the 2000 annual meeting of stockholders and
until their successors are duly elected and qualified. The nominees have
consented to serve if elected to the Board. If the nominees are unable to serve
as directors 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
nominees as may be designated by the Board, unless the Board reduces the number
of directors accordingly.
Set forth below is information about the nominees 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 24,
1997, see "Principal Stockholders."
<TABLE>
<CAPTION>
NAME AGE POSITION(S) WITH COMPANY DIRECTOR SINCE
- -------------------------- --- ---------------------------- --------------
<S> <C> <C> <C>
Nominees to be elected for
a term expiring in 2000:
John H. Landon............ 57 Director 1997
John J. Whitehead......... 52 Director 1992
Directors continuing for
a term expiring in 1999:
Wayne T. Hockmeyer, 52 Director 1996
Ph.D....................
Evan Jones................ 40 President, Chief Executive 1990
Officer and Chairman of the
Board
Directors continuing for
terms expiring in 1998:
Charles M. Fleischman..... 39 Executive Vice President, 1990
Chief Operating Officer,
Chief Financial Officer and
Director
Joseph M. Migliara........ 53 Director 1992
</TABLE>
Mr. Landon has been retired since October 1996. From March 1992 to
September 1996, Mr. Landon was Vice President and General Manager, Medical
Products with the DuPont Company. Prior to 1992 he held various general
management and marketing positions in DuPont's Diagnostics, Biotechnology and
Diagnostic Imaging businesses. Mr. Landon currently serves as a director of
Christiana Care Corporation, a diversified healthcare delivery company, and
Christiana Care Physicians Organization, an independent physicians organization.
Mr. Landon received a B.S. in Chemical Engineering from the University of
Arizona.
Mr. Whitehead has been a partner of Whitehead Partners, a private
investment company, since 1993. From 1986 to 1993, Mr. Whitehead was the Chief
Executive Officer of TDS Healthcare Systems Corporation, a hospital information
systems company. Mr. Whitehead received a B.S. in Biology and Chemistry from
Williams College and did graduate work in biochemistry at Case Western Reserve
University School of Medicine. He is a director emeritus of i-STAT Corporation,
a medical device company, and a director of the Whitehead Institute for
Biomedical Research at the Massachusetts Institute of Technology. Mr. Whitehead
is a step-brother of Mr. Jones.
Dr. Hockmeyer is the founder of MedImmune, Inc., a company that
manufactures vaccines, and has served as President, Chief Executive Officer and
a director of MedImmune, Inc. since 1988, and Chairman since May 1993. Dr.
Hockmeyer serves on the advisory board of the University of Maryland
Biotechnology Institute and is a member of the High Technology Council of
Maryland. Dr. Hockmeyer received a B.S. in biology from Purdue University and a
Ph.D. in Immunology/Parisitology from the University of Florida.
Mr. Jones has served as President and Chief Executive Officer of the
Company since Armonk Partners acquired a controlling interest in the Company in
July 1990, and Chairman of the Board since Septem-
2
<PAGE> 5
ber 1995. Mr. Jones received a B.A. in Biochemistry from the University of
Colorado and an M.B.A. from The Wharton School at the University of
Pennsylvania. Mr. Jones is a step-brother of Mr. Whitehead.
Mr. Fleischman has served as Executive Vice President of the Company since
Armonk Partners acquired a controlling interest in the Company in July 1990,
Chief Operating Officer since September 1995 and Chief Financial Officer since
March 1996. Mr. Fleischman received an A.B. in History from Harvard University
and an M.B.A. from The Wharton School at the University of Pennsylvania.
Mr. Migliara has been President of Migliara/Kaplan Associates, a marketing
research firm that conducts primary research in the biomedical, diagnostics and
pharmaceutical markets, since 1980. He is a past president of the Biomedical
Marketing Association. Mr. Migliara received a B.S. in Economics from The
Wharton School at the University of Pennsylvania and an M.B.A. from Fairleigh
Dickinson University.
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. Messrs.
Whitehead and Landon are Class I directors whose terms expire at the Annual
Meeting; Messrs. Fleischman and Migliara are Class II directors whose terms
expire at the 1998 annual meeting of stockholders; and Mr. Jones and Dr.
Hockmeyer are Class III directors whose terms expire 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, 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 that
portion of the year that he was a Board or committee member. 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 and Dr. Hockmeyer, met once during the last
fiscal year. The Audit Committee 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
Mr. Whitehead and Dr. Hockmeyer, met four times during the last fiscal year. The
Compensation Committee 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 Omnibus Stock Option Plan
(the Digene Corporation Directors' Stock Option Plan is administered by the
Board).
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 received 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 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 Stock Option Plan. At the discretion of the
Board, directors may be granted additional options pursuant to the Digene
Corporation Directors' Stock Option Plan.
3
<PAGE> 6
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, 1997 (collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-----------------------------
FISCAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
- ---------------------------------------------------- ------ -------- ------- ------------
<S> <C> <C> <C> <C>
Evan Jones.......................................... 1997 $186,463 $45,950 --
President and Chief Executive Officer 1996 167,824 35,498 --
Charles M. Fleischman............................... 1997 186,463 45,950 --
Executive Vice President, Chief Operating Officer 1996 168,534 35,675 --
and Chief Financial Officer
Attila D. Lorincz, Ph.D. ........................... 1997 168,418 16,000 --
Vice President, Research and Development, and 1996 151,583 12,000 --
Scientific Director
Deborah J. Oronzio.................................. 1997 105,868 8,500 --
Vice President, Sales and Marketing............... 1996 93,163 7,500 --
Donna Marie Seyfried................................ 1997 97,500 10,000 56,336(1)
Vice President, Development
</TABLE>
- ---------------
(1) Represents reimbursement for moving expenses.
STOCK OPTION INFORMATION
The following table sets forth, for each of the Named Executive Officers,
certain information concerning the grant of options in fiscal 1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------ VALUE AT ASSUMED
% OF ANNUAL RATES OF
NUMBER OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERM
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION --------------------
NAME GRANTED(#) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- -------------------------------- --------- ------------ ----------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Evan Jones...................... -- -- -- -- -- --
Charles M. Fleischman........... -- -- -- -- -- --
Attila D. Lorincz, Ph.D......... -- -- -- -- -- --
Deborah J. Oronzio.............. -- -- -- -- -- --
Donna Marie Seyfried............ 50,000(1) 17.86% $6.75 10/21/2006 $212,252 $537,888
</TABLE>
- ---------------
(1) Non-Qualified Stock Options
4
<PAGE> 7
The following table sets forth certain information concerning stock options
exercised by each of the Named Executive Officers during fiscal 1997 and the
number of unexercised options held by each such person at June 30, 1997 and the
value thereof.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL YEAR- IN-THE-MONEY OPTIONS
END(#) AT FISCAL YEAR-END(2)
SHARES ACQUIRED VALUE --------------------------- -----------------------------
NAME ON EXERCISE(#) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------- --------------- -------------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Evan Jones..................... 100,000 $1,093,500 299,124 300,708 $3,558,971 $1,115,886
Charles M. Fleischman.......... 100,000 1,093,500 299,124 300,708 3,558,971 1,115,886
Attila D. Lorincz, Ph.D. ...... 10,600 128,153 147,667 109,517 1,723,198 523,980
Deborah J. Oronzio............. -- -- 30,939 29,762 340,364 110,814
Donna Marie Seyfried........... -- -- -- 50,000 -- 300,000
</TABLE>
- ---------------
(1) The value realized represents the difference between the fair market value
per share of the Company's Common Stock on the date of exercise and the per
share exercise price, multiplied by the applicable number of shares.
(2) These values represent the difference between the closing price per share on
the Nasdaq National Market on June 30, 1997 ($12.75) and the per share
exercise price of the option.
EMPLOYMENT CONTRACTS
The Company has entered into employment agreements with each of Messrs.
Jones and Fleischman (each individual an "Executive" and collectively,
"Executives"), which have substantially identical provisions. 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 awards, 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 Ms.
Seyfried, pursuant to which Ms. Seyfried is entitled to receive a minimum base
salary of $130,000 per year. The agreement provides that if Ms. Seyfried is
terminated without "justifiable cause" (as defined), then she 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, which amount shall be
accelerated and immediately due upon such termination; (ii) any bonus accrued to
the date of termination; and (iii) all of the other benefits accruing on or
prior to the expiration date of the agreement. In addition, any outstanding
stock awards, incentive stock options or equivalents that would have vested in
the ordinary course of events until three months after the date of termination
will be accelerated and vested immediately upon termination. Ms. Seyfried's
employment agreement will expire on October 1, 2000.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee consists of Mr. Whitehead and Dr.
Hockmeyer. 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 except the Directors' Stock Option Plan,
5
<PAGE> 8
which is administered by the Board. Neither Mr. Whitehead nor Dr. Hockmeyer was
an officer or employee of the Company during fiscal 1997 or any prior year.
Prior to March 1996, the Board was responsible for issues concerning
compensation.
REPORT ON EXECUTIVE COMPENSATION
INTRODUCTION
The Compensation Committee (the "Committee") has responsibility for matters
related to compensation, including compensation policy, approval of salaries,
bonuses and other compensation for the officers and administration of the
Company's various stock option plans, except the Directors' Stock Option Plan.
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. In
arriving at specific levels of compensation for executive officers, the
Committee has relied on the recommendations of management, benchmarks provided
by generally available compensation surveys, consultation with an outside
consultant and the experience of Committee members and their knowledge of
compensation paid by other companies in the biotechnology industry and/or in the
same geographic area as the Company. The Committee also seeks to ensure that an
appropriate relationship exists 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 the 401(k) plan. The Company has long-term employment agreements
with certain of its executive officers, including executive officers who
commenced employment in fiscal 1997, to provide them with the employment
security and severance deemed necessary by the Committee to retain them.
CASH
Base Salary. Subject to the above policy and to the requirements of
applicable employment agreements, base salary for each of the executive officers
for fiscal 1997 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. Messrs. Jones
and Fleischman and Dr. Lorincz received base salary increases of 10% and Ms.
Oronzio received a base salary increase of 15% on October 16, 1996.
Bonus. Cash bonuses, equal to 25% of salary received during the period
July 1, 1996 through June 30, 1997, were earned by each of Messrs. Jones and
Fleischman pursuant to the terms of their employment agreements. Other executive
officers received bonuses ranging from approximately 5% to 10% of base salary
based on the Company's achievement of its revenue and earnings per share
objectives and the degree of achievement by each such officer of his or her
individual objectives, as approved by the Committee.
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 actual and expected 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. During fiscal 1997 stock options were granted to two executive
officers.
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.
6
<PAGE> 9
CHIEF EXECUTIVE OFFICER COMPENSATION
The Company and Mr. Jones are parties to an employment agreement, with a
term ending on December 31, 1999. Pursuant to this agreement, Mr. Jones is
entitled to receive, effective as of May 1, 1996, 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. At the beginning of fiscal 1997, Mr. Jones was
receiving an annual base salary of $170,500. On October 16, 1996, he received a
10% increase, raising his annual base salary to $187,550. In deciding upon a 10%
increase in Mr. Jones' salary, the Committee recognized that Mr. Jones'
compensation was low relative to appropriate benchmarks and focused on the
importance of Mr. Jones to the continued growth and development of the Company,
his increased responsibility as the chief executive of a publicly-held company,
his expertise in the industry, his demonstrated management skills and ability to
implement the Company's strategic plans, his efforts in beginning to assemble a
highly qualified executive management team for the Company and the Company's
achievement of various milestones.
COMPENSATION COMMITTEE
Wayne T. Hockmeyer
John J. Whitehead
7
<PAGE> 10
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of September 24, 1997 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 BENEFICIALLY OWNED(1) OWNERSHIP
- ---------------------------------------------------------------- --------------------- ----------
<S> <C> <C>
Armonk Partners(2).............................................. 4,987,115 43.0%
Murex Diagnostics Corporation(3)................................ 714,002 6.2
Charles M. Fleischman(4)........................................ 5,325,996 44.7
Wayne T. Hockmeyer, Ph.D.(5).................................... 18,332 *
Evan Jones(6)................................................... 5,332,581 44.8
John H. Landon(5)............................................... 6,666 *
Attila D. Lorincz, Ph.D.(7)..................................... 178,184 1.5
Joseph M. Migliara(8)........................................... 183,499 1.6
Deborah J. Oronzio(5)........................................... 32,130 *
Donna Marie Seyfried............................................ -- *
John J. Whitehead(9)............................................ 22,849 *
All executive officers and directors as a group (12
persons)(10).................................................. 6,113,192 48.4
</TABLE>
- ---------------
* Less than one percent.
(1) 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.
(2) The general partners of Armonk Partners are Messrs. Jones and Fleischman.
The address for Armonk Partners is 9000 Virginia Manor Road, Beltsville,
Maryland 20705.
(3) 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 (together with
its affiliates "Murex"). See "Certain Transactions."
(4) 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 shares Mr. Fleischman disclaims beneficial ownership,
and (iii) 314,118 shares issuable upon exercise of stock options. The
address for Mr. Fleischman is 9000 Virginia Manor Road, Beltsville,
Maryland 20705.
(5) Represents shares issuable upon exercise of stock options.
(6) 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) 314,118 shares issuable upon exercise of
stock options. The address for Mr. Jones is 9000 Virginia Manor Road,
Beltsville, Maryland 20705.
(7) Includes (i) 16,672 shares owned jointly with Dr. Lorincz's wife, as to
which Dr. Lorincz shares voting and investment power, and (ii) 160,759
shares issuable upon exercise of stock options.
(8) Represents shares issuable upon exercise of stock options, 178,499 of which
are held by Valley Partners.
See "Certain Transactions."
(9) Represents shares issuable upon exercise of stock options. Mr. Whitehead is
a partner in Armonk Partners, but he does not have voting or investment
power with respect to the shares held by Armonk Partners.
(10) See Notes (4) through (9). Also includes 70 shares issuable upon exercise
of stock options.
8
<PAGE> 11
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 30, 1997. 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>
AMEX
MEASUREMENT PERIOD BIOTECHNOLOGY
(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 68.617 90.110
6/30/97 81.559 109.677 91.299
</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, as amended (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.
9
<PAGE> 12
CERTAIN TRANSACTIONS
The Company is party to the following transactions with its executive
officers, directors and principal stockholders.
In August 1997, the Company and Murex entered into a distribution agreement
(the "1997 Distribution Agreement") granting Murex the exclusive right to
distribute the Company's human immunodeficiency virus, cytomegalovirus and
hepatitis B virus Hybrid Capture II tests in most of Europe, Eastern Europe,
Africa, the Middle East and Singapore. Pursuant to the 1997 Distribution
Agreement, Murex has agreed to use its reasonable 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 1997 Distribution Agreement has
an initial term of four years and seven months, subject to automatic renewal for
successive one-year terms. Two years after the effective date of the 1997
Distribution Agreement, however, the Company will have the right to terminate
the 1997 Distribution Agreement with respect to particular countries, subject to
Murex's right to continue to distribute such products within any such country on
a co-exclusive basis during a "wind-down" period of six months.
In February 1997, the Company entered into two agreements (the "Agency
Agreement" and the "Customer Transfer Agreement," collectively the "1997
Agreements") with Murex to create a Digene-direct European sales operation for
the Company's women's health business. Under the 1997 Agreements, the Company
has begun marketing its human papillomavirus ("HPV") tests directly in Europe
using Murex's distribution infrastructure. The 1997 Agreements provide for a
transition period during which the administrative infrastructure will be agreed
to and established. During this transition period, the Company is recording its
transactions consistent with a prior distribution agreement, which is described
more fully in the next succeeding paragraph (the "1996 Distribution Agreement"),
with Murex. Prior to February 1, 1997, pursuant to the 1996 Distribution
Agreement, Murex had been acting as the exclusive European distributor in
designated non-U.S. territories for the Company's HPV test and other of the
Company's products. Under the 1997 Agreements, Murex will act as the exclusive
agent for the Company in designated European and Eastern European countries for
a period of five years during which Murex will receive selling service fees and
a percentage of the Company's HPV revenues in the designated territory. No other
Digene products (except the Company's HPV products) exclusively distributed by
Murex in Europe and Eastern Europe will be affected by the 1997 Agreements.
In February 1996, the Company and Murex entered into the 1996 Distribution
Agreement granting Murex the exclusive right to distribute certain of the
Company's products, including its HPV test, in most of Europe, Africa and
certain countries in the Middle East. Pursuant to the 1996 Distribution
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 1996 Distribution Agreement has
a five-year term, subject to automatic renewal for successive one-year terms.
One year after the effective date of the 1996 Distribution Agreement, however,
the Company will have the right to terminate the 1996 Distribution 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.
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.
10
<PAGE> 13
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 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.
During the fiscal years ended June 30, 1995, 1996 and 1997, product sales
to Murex were $1,665,000, $2,508,000 and $3,978,000, accounting for 30.8%, 39.4%
and 42.2% of product sales, respectively. In fiscal 1995, 1996 and 1997, Murex
paid $606,000, $397,000 and $125,907, 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 257,390 shares of Common
Stock. Pursuant to the terms of this agreement, until each holder has held the
shares of Common Stock subject to registration rights for a period of two years
(or such other period of time set forth in Rule 144(k) under the Securities Act
of 1933, as amended), 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 ("SEC"). 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 and options
granted to Named Executive Officers and directors, see "Election of Directors --
Director Compensation" and "Executive Compensation and Other
Information -- Stock Option Information."
11
<PAGE> 14
INDEPENDENT AUDITORS
Ernst & Young LLP, independent auditors, audited the financial statements
of the Company for the fiscal year ended June 30, 1997. 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, 1998.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors,
officers (including persons 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 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 1997 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 1998 annual meeting of
stockholders, they must be received by the Company not later than June 17, 1998.
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 two directors. 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
October 15, 1997
12
<PAGE> 15
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 28, 1997 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 the following persons as directors of the Company.
<TABLE>
<S> <C> <C>
John J. Whitehead FOR VOTE WITHHELD
------- -------
John H. Landon FOR VOTE WITHHELD
------- -------
</TABLE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS,
WHICH RECOMMENDS A VOTE "FOR" EACH OF THE ABOVE NOMINEES FOR DIRECTOR.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS DIRECTED HEREIN.
IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED "FOR"
EACH OF THE ABOVE NOMINEES FOR DIRECTOR.
IMPORTANT: Please date this proxy and sign exactly as your name or names is
printed below. 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 , 1997
------------------
PLEASE SIGN AND DATE THIS PROXY AND RETURN IT PROMPTLY
IN THE ENCLOSED PRE-ADDRESSED, STAMPED ENVELOPE.
