<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
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(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:
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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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[ ] 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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<PAGE> 2
DIGENE CORPORATION
9000 VIRGINIA MANOR ROAD
BELTSVILLE, MARYLAND 20705
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON THURSDAY, OCTOBER 29, 1998
To the Stockholders of Digene Corporation:
The 1998 Annual Meeting of Stockholders (the "Annual Meeting") of Digene
Corporation, a Delaware corporation (the "Company"), will be held on Thursday,
October 29, 1998, 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 2001; 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
11, 1998, 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
October 9, 1998
<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 1998 Annual Meeting
of Stockholders to be held on Thursday, October 29, 1998, 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 9, 1998.
PURPOSE OF ANNUAL MEETING
At the Annual Meeting, stockholders will be asked: to elect two directors
of the Company each to serve for a three year term expiring at the annual
meeting of stockholders in 2001 and 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 11, 1998 (the "Record Date") will be entitled to notice of, and to
vote at, the Annual Meeting. As of the Record Date, there were 14,302,278 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 vote.
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. Two directors are to be elected at
<PAGE> 4
the Annual Meeting. At the Annual Meeting, the Board proposes that Messrs.
Fleischman and Migliara be elected as Class II directors of the Company to hold
office until the 2001 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 11,
1998, see "Principal Stockholders."
<TABLE>
<CAPTION>
NAME AGE POSITION(S) WITH COMPANY DIRECTOR SINCE
---- --- ------------------------ --------------
<S> <C> <C> <C>
Nominees to be elected for
terms expiring in 2001:
Charles M. Fleischman.... 40 Executive Vice President, 1990
Chief Operating Officer,
Chief Financial Officer, and
Director
Joseph M. Migliara....... 54 Director 1992
Directors continuing for
terms expiring in 2000:
John H. Landon........... 58 Director 1997
John J. Whitehead........ 53 Director 1992
Directors continuing for
terms expiring in 1999:
Wayne T. Hockmeyer, 53 Director 1996
Ph.D...................
Evan Jones............... 41 President, Chief Executive 1990
Officer, and Chairman of the
Board
</TABLE>
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, Healthcare and Consumer Packaged Goods, 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.
Mr. Landon has been retired since October 1996. From March 1992 to
September 1996, Mr. Landon was Vice President and General Manager, Medical
Products of E. I. du Pont de Nemours and 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 and member of the Executive Committee of Christiana Care Corporation,
a diversified healthcare delivery company, and a director of Christiana Care
Physicians Organization, an independent physicians organization, and Cholestech
Corporation, a medical device company. Previously, he served as a director of
the DuPont Merck Pharmaceutical Company and the Health Industry Manufacturers
Association. 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
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<PAGE> 5
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 founded MedImmune, Inc., a company that manufactures
vaccines, has been its President, Chief Executive Officer and a director since
1988, and Chairman of its Board of Directors since 1993. From 1986 to 1988 Dr.
Hockmeyer served as Vice President, Research and Development, of Praxis
Biologics, Inc. From 1980 to 1986, Dr. Hockmeyer served as Chairman, Department
of Immunology, Walter Reed Army Institute of Research. Dr. Hockmeyer is a member
of the Board of Visitors of the University of Maryland Biotechnology Institute.
He is also a member of the Board of Directors of the High Technology Council of
Maryland and Chairman of the Maryland BioScience Alliance. He was selected the
1993 Ernst & Young "Entrepreneur of The Year." Dr. Hockmeyer received a Bachelor
of Science degree from Purdue University and a doctorate 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 September 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.
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 2000 annual
meeting of stockholders; Messrs. Fleischman and Migliara are Class II directors
whose terms expire at the Annual Meeting; 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 twice 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
Messrs. Landon and Whitehead and Dr. Hockmeyer met six 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 Digene Corporation
Omnibus Stock Option Plan ("Omnibus Stock Option Plan") and the Digene
Corporation 1997 Stock Option Plan (the "1997 Stock Option Plan"). The Digene
Corporation Directors' Stock Option Plan ("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
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<PAGE> 6
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 Omnibus Stock Option Plan. Directors may be granted additional options
pursuant to the Directors' Stock Option Plan, which is administered by the Board
in its discretion. The exercise price of options granted is equal to the fair
market value of the Common Stock as of the date of the grant.
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 four most highly
compensated executive officers of the Company in the fiscal year ended June 30,
1998 (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........................................... 1998 $200,215 $37,769 --
President and Chief Executive Officer 1997 186,463 45,950 --
1996 167,824 35,498 --
Charles M. Fleischman................................ 1998 200,215 37,769 --
Executive Vice President, Chief Operating 1997 186,463 45,950 --
Officer, and Chief Financial Officer 1996 168,534 35,675 --
Attila T. Lorincz, Ph.D. ............................ 1998 181,514 20,000 --
Vice President, Research and 1997 168,418 16,000 --
Scientific Director 1996 151,583 12,000 --
William J. Payne, Jr., Ph.D. ........................ 1998 137,936 22,500 27,953(1)
Vice President, Development
Donna Marie Seyfried................................. 1998 135,525 20,000 16,828(1)
Vice President, Business Development 1997 97,500 10,000 56,336(1)
</TABLE>
- ---------------
(1) Represents reimbursement for moving expenses.
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<PAGE> 7
STOCK OPTION INFORMATION
The following table sets forth, for each of the Named Executive Officers,
certain information concerning the grant of options in fiscal 1998.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------ VALUE AT ASSUMED
% OF ANNUAL RATES OF
NUMBER OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERM
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ---------------------
NAME GRANTED(#) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
---- ---------- ------------ ----------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Evan Jones.................... -- -- -- -- -- --
Charles M. Fleischman......... -- -- -- -- -- --
Attila T. Lorincz, Ph.D. ..... -- -- -- -- -- --
William J. Payne, Jr.,
Ph.D. ...................... 75,000(1) 15.42% $13.00 7/17/2007 $613,172 $1,553,899
Donna Marie Seyfried.......... 50,000(1) 10.28% $10.00 10/27/2007 $314,447 $796,871
</TABLE>
- ---------------
(1) Non-Qualified Stock Options
The following table sets forth certain information concerning stock options
exercised by each of the Named Executive Officers during fiscal 1998 and the
number of unexercised options held by such persons at June 30, 1998 and the
value thereof.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL YEAR- IN-THE-MONEY OPTIONS
END(#) AT FISCAL YEAR-END(2)
SHARES ACQUIRED VALUE --------------------------- -----------------------------
NAME ON EXERCISE(#) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- -------------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Evan Jones................. 75,000 $632,587.50 239,118 285,714 $2,046,869.41 $107,805.60
Charles M. Fleischman...... 75,000 721,650.00 239,118 285,714 2,046,869.41 107,805.60
Attila T. Lorincz,
Ph.D. ................... 15,000 160,830.00 145,759 96,425 1,239,340.12 90,327.86
William J. Payne, Jr.
Ph.D. ................... -- -- -- 75,000 -- --
Donna Marie Seyfried....... -- -- -- 100,000 -- --
</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 options.
(2) These values represent the difference between the closing price per share on
the Nasdaq National Market on June 30, 1998 ($9.75) 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 $171,500 per year, subject to adjustment, 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 therein 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
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<PAGE> 8
accelerated and vested immediately upon termination. Messrs. Jones' and
Fleischman's employment agreements will expire on December 31, 1999.
The Company has entered into similar employment agreements with Ms.
Seyfried and Dr. Payne pursuant to which Ms. Seyfried and Dr. Payne are entitled
to receive minimum base salaries of $130,000, and $145,000, respectively, per
year, subject to adjustment. Each agreement provides that if the respective
employee is terminated without "justifiable cause" (as therein defined), then he
or 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
and Dr. Payne's employment agreement will expire on July 21, 2001.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee consists of Messrs. Landon and
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, which is administered by the Board. Neither Messrs. Landon and Whitehead
nor Dr. Hockmeyer was an officer or employee of the Company during fiscal 1998
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 Company's 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, 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 Company's 401(k)
plan. The Company has long-term employment agreements with certain of its
executive officers, including executive officers who commenced employment in
fiscal 1998, 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, compensation for each of the executive
officers for fiscal 1998 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
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<PAGE> 9
marketing, financing, and strategic plans, as appropriate. Base salary increases
for executive officers ranging from 4.0% to 9.5% were effected on October 16,
1997.
Bonus. Executive officers received cash bonuses for fiscal 1998 ranging
from approximately 15% to 36% of base salary based on the degree of the
Company's achievement of its financial and other 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.
Section 162(m) of the Internal Revenue Code of 1986, as amended, 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(m).
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 1998, Mr. Jones was
receiving an annual base salary of $187,550. On October 15, 1997, he received a
7% increase, raising his annual base salary to $200,000. In deciding upon a 7%
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 expertise in the industry, his demonstrated management skills and ability to
implement the Company's strategic plans, his efforts in assembling a highly
qualified executive management team for the Company and the Company's progress
with FDA and other regulatory activities. For fiscal year 1998 Mr. Jones
received a bonus of $37,769, or approximately 19% of his base salary. The bonus
was less than the bonus to which Mr. Jones was entitled under his employment
agreement, but was considered appropriate in view of the performance of the
Company during the year and the level of bonuses being paid to the other
executive officers and employees.
COMPENSATION COMMITTEE
John J. Whitehead, Chairman
Wayne T. Hockmeyer, Ph.D.
John H. Landon
7
<PAGE> 10
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of September 11, 1998 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 34.9%
Charles M. Fleischman(3).................................... 5,250,996 36.1
Wayne T. Hockmeyer, Ph.D.(4)................................ 30,000 *
Evan Jones(5)............................................... 5,257,581 36.2
John H. Landon(4)........................................... 18,332 *
Attila T. Lorincz, Ph.D(6).................................. 170,324 1.2
Joseph M. Migliara(7)....................................... 188,499 1.3
William J. Payne, Jr., Ph.D(8).............................. -- --
Donna Marie Seyfried(9)..................................... -- --
John J. Whitehead(10)....................................... 27,849 *
All executive officers and directors as a group(12
persons)(11).............................................. 5,992,235 39.3
</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 September
11, 1998 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) 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) 239,118 shares issuable upon exercise of stock options. The
address for Mr. Fleischman is 9000 Virginia Manor Road, Beltsville,
Maryland 20705.
(4) Represents shares issuable upon exercise of stock options. The address for
Dr. Hockmeyer and Mr. Landon is 9000 Virginia Manor Road, Beltsville,
Maryland 20705.
(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) 239,118 shares issuable upon exercise of
stock options. The address for Mr. Jones is 9000 Virginia Manor Road,
Beltsville, Maryland 20705.
(6) Includes (i) 16,672 shares owned jointly with Dr. Lorincz's wife, as to
which Dr. Lorincz shares voting and investment power, and (ii) 152,899
shares issuable upon exercise of stock options. The address for Dr. Lorincz
is 9000 Virginia Manor Road, Beltsville, Maryland 20705.
(7) Represents (i) 10,000 shares issuable upon exercise of stock options, and
(ii) 178,499 shares issuable upon exercise of stock options held by Valley
Partners. See "Certain Transactions." The address for Mr. Migliara is 9000
Virginia Manor Road, Beltsville, Maryland 20705.
(8) The address for Dr. Payne is 9000 Virginia Manor Road, Beltsville, Maryland
20705.
(9) The address for Ms. Seyfried is 9000 Virginia Manor Road, Beltsville,
Maryland 20705.
(10) Represents shares issuable upon exercise of stock options. Mr. Whitehead is
a limited partner in Armonk Partners, but he does not have voting or
investment power with respect to the shares held by Armonk Partners. The
address for Mr. Whitehead is 9000 Virginia Manor Road, Beltsville, Maryland
20705.
(11) See Notes (3) through (10). Also includes an additional 35,769 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, 1998. The Company
has not paid cash dividends on the Common Stock. Historic stock prices are not
indicative of future stock price performance.
[GRAPH]
<TABLE>
<CAPTION>
5/22/96 6/28/96 6/30/97 6/30/98
<S> <C> <C> <C> <C>
Digene 100 69 110 84
Peer Group 100 85 61 53
AMEX Biotechnology Index 100 90 91 94
</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.
9
<PAGE> 12
CERTAIN TRANSACTIONS
The Company is party to the following transactions with its executive
officers, directors, and principal stockholders.
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."
INDEPENDENT AUDITORS
Ernst & Young LLP, independent auditors, audited the financial statements
of the Company for the fiscal year ended June 30, 1998. 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, 1999.
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 Securities and Exchange Commission
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 the regulations under the Exchange Act to furnish the Company
with copies of all of the Section 16(a) reports which 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 1998 its directors, officers, and 10% Holders
complied with the filing requirements under Section 16(a) of the Exchange Act,
with the following exceptions: Mr. Fleischman filed one late form that reported
ten transactions that were not reported on a timely basis; Mr. Jones filed one
late form that reported eight transactions that were not reported on a timely
basis; Drs. Hockmeyer and Lorincz and Messrs. Landon, Migliara, and Whitehead
each filed one late form that reported one transaction that was not reported on
a timely basis.
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 1999 annual meeting of
stockholders, they must be received by the Company not later than June 11, 1999.
If any stockholder wishes to present a proposal to the 1999 annual meeting of
stockholders that is not included in the Board's Proxy Statement relating to
such meeting and fails to submit such proposal to the Executive Vice President
of the Company on or before August 25, 1999, then the Board will be allowed to
use its discretionary voting authority when the proposal is raised at the Annual
Meeting, without any discussion of the matter in its proxy statement. All
proposals should be addressed to the Company at 9000 Virginia Manor Road,
Beltsville, Maryland 20705, Attention: Executive Vice President. Nothing in this
paragraph shall be deemed to require the Company to include in its proxy
materials relating to such annual meeting of stockholders any stockholder
proposal which does not meet all of the requirements for inclusion established
by the SEC and the Company's By-laws at that time in effect.
10
<PAGE> 13
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 9, 1998
11
<PAGE> 14
DIGENE CORPORATION
PROXY
The undersigned stockholder of Digene Corporation (the "Company") hereby
appoints Evan Jones and Joseph P. Slattery, 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 the Stockholders to be held
at the Holiday Inn Calverton, 4095 Powder Mill Road, Beltsville, Maryland 20705
at 10:00 a.m. on October 29, 1998 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.
Charles M. Fleischman _______ FOR _______ VOTE WITHHELD
Joseph M. Migliara _______ FOR _______ VOTE WITHHELD
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS,
WHICH RECOMMENDS A VOTE "FOR" EACH OF THE ABOVE NOMINEES FOR DIRECTOR.
<PAGE> 15
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 __________________, 1998
PLEASE SIGN AND DATE THIS PROXY AND RETURN IT PROMPTLY
IN THE ENCLOSED PRE-ADDRESSED, STAMPED ENVELOPE.
