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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)
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(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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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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DIGENE CORPORATION
9000 VIRGINIA MANOR ROAD
SUITE 207
BELTSVILLE, MARYLAND 20705
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON THURSDAY, OCTOBER 28, 1999
To the Stockholders of Digene Corporation:
The 1999 annual meeting of stockholders of Digene Corporation, a Delaware
corporation ("Digene"), will be held on Thursday, October 28, 1999, 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 2002;
2. to approve Digene's 1999 Incentive Plan; and
3. to transact such other business as may properly come before the annual
meeting.
The Board of Directors has fixed the close of business on Friday, September
10, 1999, 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 of the annual meeting. Upon written request, you
are entitled to inspect a complete list of stockholders entitled to vote at the
annual meeting. Such inspection must be for a proper purpose and may take place
in the ten days prior to the annual meeting during normal business hours at
Digene's office in Beltsville, Maryland.
You 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 1, 1999
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DIGENE CORPORATION
PROXY STATEMENT
This proxy statement is being solicited by the Board of Directors of Digene
Corporation and contains information related to the annual meeting of
stockholders of Digene to be held on Thursday, October 28, 1999, 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) of the annual
meeting. This proxy statement and the accompanying proxy are being mailed to
stockholders on or after October 1, 1999.
ABOUT THE MEETING
WHAT IS THE PURPOSE OF THE ANNUAL MEETING?
At our annual meeting, stockholders will act upon the following matters:
the election of two directors of Digene each to serve for a three-year term
expiring at the annual meeting of stockholders in 2002; the approval of our 1999
Incentive Plan; and any other business that may properly be brought before the
annual meeting. In addition, our management will report on Digene's performance
during fiscal year 1999 and respond to questions from stockholders.
WHO IS ENTITLED TO VOTE?
Only stockholders of record on the record date, which was the close of
business on Friday, September 10, 1999, will be entitled to receive notice of,
and to vote at, the annual meeting. Each share of common stock is entitled to
one vote.
HOW DO I VOTE?
If you complete and properly sign the accompanying proxy card and return it
to us, it will be voted as you direct. If you are a registered stockholder and
attend the meeting, you may deliver your completed proxy card in person or vote
in person at the meeting.
WHAT CONSTITUTES A QUORUM?
The presence at the meeting, in person or by proxy, of the holders of a
majority of the shares of common stock outstanding on the record date will
constitute a quorum, permitting business to be conducted at the annual meeting.
As of the record date, 14,585,655 shares of our common stock were outstanding.
HOW DOES DISCRETIONARY VOTING AUTHORITY APPLY?
If you sign and return your proxy card, but do not make any selections, you
give discretionary authority to the persons named as proxy holders on the proxy
card, Charles M. Fleischman and Joseph P. Slattery, to vote on the proposals and
any other matters that may arise at the annual meeting.
WHAT ARE THE BOARD'S RECOMMENDATIONS?
Unless you give other instructions on your proxy card, Charles M.
Fleischman and Joseph P. Slattery will vote in accordance with the
recommendations of the Board of Directors. The Board recommends a vote:
- FOR election of the two nominees for director of Digene, Wayne T.
Hockmeyer, Ph.D. and Evan Jones; and
- FOR the approval of the 1999 Incentive Plan.
With respect to any other matter that properly comes before the meeting,
the proxy holders will vote as recommended by the Board or, if no recommendation
is given, in their own discretion.
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WHAT VOTE IS REQUIRED TO APPROVE EACH ITEM?
Election of Directors. The two nominees for director receiving the highest
number of votes cast by stockholders entitled to vote for directors will be
elected to serve on the Board. Votes withheld with respect to the election of
one or more directors will not be voted with respect to the director or
directors indicated, although they will be counted for purposes of determining
whether there is a quorum. Accordingly, votes withheld will have no effect on
the result of the vote.
1999 Incentive Plan. The approval of the 1999 Incentive Plan requires the
affirmative vote of the holders of a majority of the votes present in person or
represented by proxy and entitled to be cast at the annual meeting. A properly
executed proxy marked "ABSTAIN" with respect to the approval of the 1999
Incentive Plan will not be voted, although it will be counted for purposes of
determining whether there is a quorum. Accordingly, an abstention will have the
effect of a negative 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.
CAN I CHANGE MY VOTE AFTER I RETURN MY PROXY CARD?
Yes. Even after you have submitted your proxy, you may change your vote at
any time before the proxy is exercised by filing with the Secretary of Digene
either a notice of revocation or a duly executed proxy bearing a date later than
the date on the proxy you submitted. The powers of the proxy holders to vote
your proxy will be suspended if you attend the meeting in person and request to
change your vote or vote in person, although attendance at the meeting will not
by itself revoke a previously granted proxy.
WHO BEARS THE COST OF SOLICITATION OF PROXIES?
We bear the cost of preparing, printing, assembling and mailing this proxy
statement and other material furnished to stockholders in connection with the
solicitation of proxies for the annual meeting. In addition to the solicitation
of proxies by mail, our officers, directors and employees may use other written
communication, telephone and other means to solicit proxies. These persons
receive no special compensation for any solicitation activities.
WHEN ARE STOCKHOLDER PROPOSALS DUE FOR THE YEAR 2000 ANNUAL MEETING?
To be included in next year's proxy statement, stockholder proposals must
be submitted in writing by June 3, 2000 to: President, Digene Corporation, and
mailed, prior to December 31, 1999, to 9000 Virginia Manor Road, Suite 207,
Beltsville, MD 20705 and after January 1, 2000, to 1201 Clopper Road,
Gaithersburg, MD 20878. If any stockholder proposal is submitted after August
17, 2000, the Board will be allowed to use its discretionary voting authority
when the proposal is raised at the 2000 annual meeting, without any discussion
of the matter in the proxy statement for that meeting.
ITEM 1 -- 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 the annual meeting. At the
annual meeting, the Board will nominate Dr. Hockmeyer and Mr. Jones to be
elected as Class III directors of Digene to hold office until the 2002 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 Digene after the annual meeting. For information
concerning the number of shares of common stock owned
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by each director and all directors and executive officers as a group as of
September 10, 1999, see "Principal Stockholders."
<TABLE>
<CAPTION>
NAME AGE POSITION(S) WITH COMPANY DIRECTOR SINCE
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<S> <C> <C> <C>
Nominees to be elected for terms expiring in 2002:
Wayne T. Hockmeyer, Ph.D. .. 54 Director 1996
Evan Jones.................. 42 Chief Executive Officer and 1990
Chairman of the Board
Directors continuing for terms expiring in 2000:
John H. Landon.............. 59 Director 1997
John J. Whitehead........... 54 Director 1992
Directors continuing for terms expiring in 2001:
Charles M. Fleischman....... 41 President, Chief Operating Officer, 1990
Chief Financial Officer and
Director
Joseph M. Migliara.......... 55 Director 1992
</TABLE>
Dr. Hockmeyer founded MedImmune, Inc., a biotechnology company, and has
been its 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 1986 to
1989, 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 Chief Executive Officer of Digene since Armonk
Partners acquired a controlling interest in Digene in July 1990 and as Chairman
of the Board since September 1995. He also served as President of Digene from
July 1990 to June 1999. 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. 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 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.
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Mr. Fleischman has served as President of Digene since June 1999, Chief
Financial Officer since March 1996 and Chief Operating Officer since September
1995. Until June 1999, he also served as Executive Vice President of Digene
since Armonk Partners acquired a controlling interest in Digene in July 1990.
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, North American Operations, NFO Worldwide
since January 1999, and was President, Consumer and Healthcare, of NFO Worldwide
from September 1997 until January 1999. NFO Worldwide provides research
marketing and consulting services and is listed on the New York Stock Exchange.
Mr. Migliara is Chairman of the Board of Directors and was President of
Migliara/Kaplan Associates, a marketing research firm that conducts primary
research in the biomedical, diagnostics, and pharmaceutical markets from the
firm's founding until September 1997. 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 Digene'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 2001 annual meeting of stockholders; and Mr. Jones and
Dr. Hockmeyer are Class III directors whose terms expire at this annual meeting
(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.
HOW OFTEN DID THE BOARD MEET DURING FISCAL 1999?
The Board held ten meetings during the last fiscal year. Each of Digene's
directors attended at least 75% of the aggregate of all meetings of the Board
and of all committees of which he was a member held during the last fiscal year.
WHAT COMMITTEES HAS THE BOARD ESTABLISHED?
The Board of Directors has standing Audit and Compensation Committees. The
Board does not have a Nominating Committee.
Audit 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 our independent
auditors, the scope of the annual audits, fees to be paid to the auditors, the
performance of our auditors and our accounting practices.
Compensation Committee. The Compensation Committee, consisting of Messrs.
Landon and Whitehead and Dr. Hockmeyer met five times during the last fiscal
year. Neither Messrs. Landon and Whitehead nor Dr. Hockmeyer was an officer or
employee of Digene during fiscal 1999 or any prior year. Prior to March 1996,
the Board was responsible for issues concerning compensation. The Compensation
Committee establishes compensation policy and determines the salaries, bonuses
and other compensation of the officers of Digene. The Compensation Committee
also administers the Digene Corporation Omnibus Stock Option Plan and the Digene
Corporation 1997 Stock Option Plan and, if approved by the stockholders at the
annual meeting, will administer the 1999 Incentive Plan. The Digene Corporation
Directors' Stock Option Plan is administered by the Board.
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DIRECTOR COMPENSATION
HOW ARE DIRECTORS COMPENSATED?
Base Compensation. Directors are reimbursed for expenses incurred in
connection with performing their duties as directors of Digene. Prior to
September 6, 1996, directors received no compensation for serving on the Board.
Effective September 6, 1996, a non-employee director receives an annual retainer
of $10,000, plus $2,500 for each of the first six scheduled Board meetings he
attends, and $2,000 for each additional Board meeting he attends 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 is $15,000, less $2,500
per Board meeting scheduled but not attended. Directors are not compensated for
committee meetings.
Options. Each year, immediately following Digene'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 our common stock under one of Digene's stock option
plans. 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 to non-employee directors will be equal to the
fair market value of our common stock as of the date of the grant.
ITEM 2 -- APPROVAL OF THE 1999 INCENTIVE PLAN
The Board has adopted a new stock award plan, the 1999 Incentive Plan, and
is seeking its approval by the Digene stockholders. No options have been granted
under the 1999 Incentive Plan. As of June 30, 1999, Digene had an aggregate of
49,359 shares available for issuance upon exercise of stock options and other
stock awards which may be granted in the future under its Omnibus Stock Option
Plan, which is the only stock award plan that Digene intends to use for grants
to employees. Digene's other current stock option plans, the Directors' Stock
Option Plan and the 1997 Stock Option Plan, are not available for grants to
employees. The amount remaining under the Omnibus Stock Option Plan represents
fewer options than were granted to employees in fiscal 1999. Consequently, the
Board believes this new plan is necessary in order to enable Digene to continue
to attract and retain qualified employees and provide further incentive to
employees by increasing their equity interest in Digene.
The Board recommends that you vote FOR the approval of the 1999 Incentive
Plan.
WHAT IS THE 1999 INCENTIVE PLAN?
The 1999 Incentive Plan is designed to enable Digene to offer employees of
Digene and its subsidiaries equity interests in Digene in order to help attract,
retain and reward key employees and to strengthen the mutuality of interests
between key employees and Digene stockholders. The 1999 Incentive Plan was
approved by the Board of Directors on September 14, 1999.
WHO ADMINISTERS THE 1999 INCENTIVE PLAN?
The 1999 Incentive Plan will be administered by the Compensation Committee
of the Board. The Committee has the authority to determine and designate the
employees to whom options, restricted shares or unrestricted shares shall be
awarded and the terms, conditions and restrictions applicable to each option or
award (including, but not limited to, the option price, any restriction or
limitation, any vesting schedule or acceleration thereof and any forfeiture
restrictions).
WHO IS ELIGIBLE FOR AWARDS UNDER THE 1999 INCENTIVE PLAN?
Officers and other employees of Digene and its subsidiaries are eligible to
be granted options and other awards under the 1999 Incentive Plan. Eligibility
shall be determined by the Committee.
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WHAT TYPES OF AWARDS ARE AVAILABLE UNDER THE 1999 INCENTIVE PLAN?
The 1999 Incentive Plan contains provisions for granting various
stock-based awards, including non-qualified stock options, incentive stock
options as defined in Section 422 of the Internal Revenue Code, restricted stock
and unrestricted stock.
WHAT IS THE DURATION OF THE 1999 INCENTIVE PLAN?
The term of the 1999 Incentive Plan is ten years. No options may be granted
or awards made under the 1999 Incentive Plan on or after the tenth anniversary
of its approval by the Board of Directors.
WHAT IS A STOCK OPTION?
A "stock option" is a contractual right to purchase a designated number of
shares of common stock at a price determined at the date the option is granted.
The option price per share of Digene common stock purchasable upon exercise of a
stock option granted under the 1999 Incentive Plan and the time or times such
options shall be exercisable shall be determined by the Committee at the time of
grant. In the case of an incentive stock option, the option price shall not be
less than 100% of the fair market value of our common stock on the date of
grant. The option price may be paid in whole or in part in cash or check payable
to Digene. Alternatively, to the extent determined by the Committee on or after
the date of the grant, the option price may be paid in whole or in part:
- in the form of common stock already owned by the option holder, or
- (in the case of an option that is not an incentive stock option) by a
reduction in the number of shares issuable upon the exercise of the
option.
In either case the payment shall be based on the fair market value of our common
stock on the last trading date preceding the date of exercise. No shares shall
be issued upon exercise of an option until full payment of the option price has
been made.
The term of each stock option grant and certain events of forfeiture will
be determined by the Committee, but no stock option may be exercised after three
months after the date of termination of employment with Digene or any of its
subsidiaries for any reason other than death or disability. In the event of
death or disability, any option exercisable at the date of death, or the date on
which employment terminates because of the disability, may be exercised for a
period of one year from the date of death or the termination of employment
because of a disability or until the expiration of the stated term of the
option, whichever period is shorter.
WHAT IS RESTRICTED STOCK?
"Restricted stock" is shares of common stock granted to an eligible
employee for no or nominal consideration subject to the terms and conditions
that the Committee, in its sole discretion, shall determine at the time the
award is made. The restricted stock will be forfeited to Digene if the recipient
ceases to be an employee of Digene or any of its subsidiaries during a
restriction period (not to exceed five years) specified by the Committee. When
the restrictions applicable to a restricted stock award, or any portion thereof,
lapse, the employee will receive a stock certificate representing the number of
shares of common stock covered by such restricted stock award, or portion
thereof. In the event of death or disability, the restrictions will lapse with
respect to that percentage of restricted stock held by the holder that is equal
to the percentage of the restriction period that had elapsed as of the date of
death or termination of employment as a result of disability.
WHAT IS UNRESTRICTED STOCK?
"Unrestricted stock" is shares of common stock granted to an eligible
employee for no or nominal consideration subject to the terms and conditions
that the Committee, in its sole discretion, shall determine at the time the
award is made. Upon the issuance of unrestricted stock to an employee under the
1999 Incentive
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Plan, the employee shall have the entire beneficial ownership and all the rights
and privileges of a stockholder with respect to the unrestricted stock awarded
to him or her, including the right to receive dividends and the right to vote
such unrestricted stock.
HOW MANY SHARES HAVE BEEN ALLOCATED TO THE 1999 INCENTIVE PLAN?
The 1999 Incentive Plan provides for the issuance of up to 1,000,000 shares
of our common stock. These shares may be either authorized and unissued shares
or issued shares reacquired by Digene and held in the treasury. The aggregate
number of shares issuable under the 1999 Incentive Plan and the number of shares
subject to options and awards made under the 1999 Incentive Plan are subject to
adjustment in the event of a merger, reorganization, consolidation,
recapitalization, dividend (other than a regular cash dividend), stock split, or
other change in corporate structure affecting our common stock. Shares subject
to options that expire, terminate or are canceled unexercised, shares of
restricted stock that have been forfeited to Digene, and shares that are not
issued as a result of forfeiture or termination of an award may be reissued
under the 1999 Incentive Plan.
WHAT ARE THE FEDERAL TAX CONSEQUENCES OF OPTION GRANTS UNDER THE 1999 INCENTIVE
PLAN?
The Federal income tax discussion set forth below is intended for general
information only. State and local income tax consequences are not discussed, and
may vary from locality to locality.
Non-Qualified Options. Under present United States Treasury regulations,
an employee or non-employee who is granted a non-qualified option will not
realize taxable income at the time the option is granted. In general, an
optionee will be subject to tax for the year of exercise on an amount of
ordinary income equal to the excess of the fair market value of the shares on
the date of exercise over the option price, and Digene (or its subsidiary) will
receive a corresponding deduction. Income tax withholding requirements apply
upon exercise. The optionee's basis in the shares so acquired will be equal to
the option price plus the amount of ordinary income upon which he or she is
taxed. Upon subsequent disposition of the shares, the optionee will realize
capital gain or loss, long-term or short-term, depending upon the length of time
the shares are held after the option is exercised.
Incentive Options. An optionee is not taxed at the time an incentive
option is granted. The tax consequences upon exercise and later disposition
generally depend upon whether the optionee was an employee of Digene or a
subsidiary at all times from the date of grant until three months preceding
exercise (one year in the case of disability) and on whether the optionee holds
the shares for more than one year after exercise and two years after the date of
grant of the option.
If the optionee satisfies both the employment rule and the holding rule,
for regular tax purposes the optionee will not realize income upon exercise of
the option and Digene will not be allowed an income tax deduction at any time.
The difference between the option price and the amount realized upon disposition
of the shares by the optionee will constitute a long-term capital gain or a
long-term capital loss, as the case may be.
If the optionee meets the employment rule but fails to observe the holding
rule (a "disqualifying disposition"), the optionee generally recognizes as
ordinary income, in the year of the disqualifying disposition, the excess of the
fair market value of the shares at the date of exercise over the option price.
Any excess of the sales price over the fair market value at the date of exercise
will be recognized by the optionee as capital gain (long-term or short-term
depending on the length of time the stock was held after the option was
exercised). If, however, the sales price is less than the fair market value at
the date of exercise, then the ordinary income recognized by the optionee is
generally limited to the excess of the sales price over the option price. In
both situations, the tax deduction allowable to the optionee's employer is
limited to the amount of ordinary income recognized by the optionee. Under
current Internal Revenue Service guidelines, Digene is not required to withhold
any Federal income tax in the event of a disqualifying disposition.
Different consequences will apply for an optionee subject to the
alternative minimum tax.
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MAY THE 1999 INCENTIVE PLAN BE AMENDED OR TERMINATED?
The Compensation Committee may at any time amend, discontinue, or terminate
the 1999 Incentive Plan or any part thereof. However, unless otherwise required
by law, the rights of an employee with respect to any grant or award prior to
the amendment, discontinuance or termination may not be impaired without the
consent of such participant. Digene will seek the approval of our stockholders
for any amendment if such approval is necessary to comply with applicable law.
The 1999 Incentive Plan will become effective if it receives the
affirmative vote of the holders of a majority of the votes present in person or
represented by proxy and entitled to be cast at the annual meeting.
The Board recommends that you vote FOR approval of the 1999 Incentive Plan.
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 Digene by (a) our Chief
Executive Officer and (b) each of the other four most highly compensated
executive officers of Digene in the fiscal year ended June 30, 1999
(collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------- ------------
SECURITIES
UNDERLYING
FISCAL OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (#) COMPENSATION
--------------------------- ------ -------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Evan Jones................................ 1999 $212,088 $75,000 50,000 --
Chief Executive Officer 1998 200,215 43,769 -- --
1997 186,463 45,950 -- --
Charles M. Fleischman..................... 1999 $212,088 $75,000 50,000 --
President, Chief Operating 1998 200,215 43,769 -- --
Officer and Chief Financial Officer 1997 186,463 45,950 -- --
Robert McG. Lilley........................ 1999 $198,604 $50,000 64,000 $51,008(1)
Senior Vice President, Global Sales and
Marketing
Attila T. Lorincz, Ph.D. ................. 1999 $190,885 $30,000 34,000 --
Vice President, Research and Scientific 1998 181,514 20,000 -- --
Director 1997 168,418 16,000 -- --
William J. Payne, Jr., Ph.D............... 1999 $152,575 $30,000 49,000 $14,195(2)
Vice President, Development 1998 137,936 22,500 75,000 27,953(2)
</TABLE>
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(1) Represents car allowance and retirement fund expenses paid by Digene.
(2) Represents reimbursement for moving expenses.
8
<PAGE> 11
STOCK OPTION INFORMATION
The following table sets forth, for each of the Named Executive Officers,
certain information concerning the grant of stock options in fiscal 1999.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------ VALUE AT ASSUMED
% OF ANNUAL RATES OF
NUMBER OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERM
OPTIONS(1) EMPLOYEES IN BASE PRICE EXPIRATION ---------------------
NAME GRANTED(#) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
---- ---------- ------------ ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Evan Jones...................... 50,000 5.36% $ 9.50 7/30/2008 $298,725 $757,028
Charles M. Fleischman........... 50,000 5.36% 9.50 7/30/2008 298,725 757,028
Robert McG. Lilley.............. 40,000 4.29% 6.625 3/17/2009 158,513 409,373
24,000 2.57% 9.50 7/30/2008 143,388 363,373
Attila Lorincz, Ph.D. .......... 10,000 1.07% 6.625 3/17/2009 39,628 102,343
24,000 2.57% 9.50 7/30/2008 143,388 363,373
William J. Payne, Jr., Ph.D..... 25,000 2.68% 6.625 3/17/2009 99,070 255,858
24,000 2.57% 9.50 7/30/2008 143,388 363,373
</TABLE>
- ---------------
(1) Non-Qualified Stock Options
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth certain information concerning stock options
exercised by each of the Named Executive Officers during fiscal 1999 and the
number of unexercised options held by such persons at June 30, 1999 and the
value thereof.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
FISCAL YEAR-END(#) AT FISCAL YEAR-END(2)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE(#) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Evan Jones..................... 48,750 $542,385 361,796 164,286 $2,101,654 $265,235
Charles M. Fleischman.......... 48,750 542,385 361,796 164,286 2,101,654 265,235
Robert McG. Lilley............. -0- -0- -0- 189,000 -0- 344,883
Attila D. Lorincz, Ph.D. ...... 30,000 295,410 176,470 69,714 1,252,604 141,955
William J. Payne, Jr., Ph.D. .. -0- -0- -0- 124,000 -0- 147,678
</TABLE>
- ---------------
(1) The value realized represents the difference between the fair market value
per share of our 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, 1999 ($11.05) and the per share
exercise price of the option.
EMPLOYMENT CONTRACTS
We entered into employment agreements in May 1996 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 Digene's business. The agreements
contain restrictive covenants pursuant to which the Executives have agreed not
to compete with Digene for a period of one year following termination of
employment. The agreements also prohibit disclosure of Digene's trade secrets.
There can be no assurance that any of these provisions, if violated, would be
enforceable by Digene. The agreements provide that, if either Executive is
terminated without "justifiable cause" (as defined in the agreement), then such
Executive will be entitled to receive: (a) the amount of his base salary for a
period of 12 months following termination as otherwise would be due if such
Executive was employed by
9
<PAGE> 12
Digene, which shall be immediately due and payable upon termination; (b) bonus
accrued to the date of termination; and (c) 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.
In July 1997 we entered into a similar employment agreement with Dr. Payne
pursuant to which Dr. Payne is entitled to receive a minimum base salary of
$145,000 per year, subject to adjustment. The agreement provides that if Dr.
Payne is terminated without "justifiable cause" (as defined in the agreement),
then he will be entitled to receive: (a) the amount of the base salary remaining
due and payable from the date of termination for a period of 12 months, which
amount shall be accelerated and immediately due upon such termination; (b) any
bonus accrued to the date of termination; and (c) 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. Dr.
Payne's employment agreement will expire on July 21, 2001.
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") has responsibility for matters
related to compensation, including compensation policy, approval of salaries,
bonuses and other compensation for Digene's officers and administration of
Digene's various stock option plans, except the Directors' Stock Option Plan.
WHAT IS DIGENE'S POLICY REGARDING EXECUTIVE OFFICER COMPENSATION?
Digene's executive compensation policy is designed to enable Digene to
attract, motivate and retain highly qualified executive officers. The key
components of Digene'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 Digene.
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 Digene,
including group medical, dental, and life insurance and Digene's 401(k) plan.
Digene has long-term employment agreements with certain of its executive
officers to provide them with the employment security and severance deemed
necessary by the Committee to retain them.
WHAT ARE THE COMPONENTS OF EXECUTIVE COMPENSATION?
Base Salary. In addition to complying with the executive compensation
policy and to the requirements of applicable employment agreements, compensation
for each of the executive officers for fiscal 1999 was based on the executive's
duties and responsibilities, the performance of Digene, both financial and
otherwise, and the success of the executive in developing and executing Digene's
research and development, manufacturing, sales and marketing, financing, and
strategic plans, as appropriate. Base salary increases for executive officers
ranging from 6.0% to 17.6% were effected on October 1, 1998.
10
<PAGE> 13
Bonus. Executive officers received cash bonuses for fiscal 1999 ranging
from approximately 16.0% to 35.0% of base salary based on the degree of Digene'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 Digene's
executive compensation program. Stock options are granted to executive officers
primarily based on the officer's actual and expected contribution to Digene's
development. Options are designed to retain executive officers and motivate them
to enhance stockholder value by aligning their financial interests with those of
Digene'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 our common stock over a number of years.
HOW IS DIGENE ADDRESSING INTERNAL REVENUE CODE LIMITS ON DEDUCTIBILITY OF
COMPENSATION?
Section 162(m) of the Internal Revenue 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. Digene's Chief Executive
Officer and the other executive officers have not received annual compensation
over $1 million, and Digene has not yet determined what measures, if any, it
should take to comply with Section 162(m).
HOW IS DIGENE'S CHIEF EXECUTIVE OFFICER COMPENSATED?
Digene 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 a minimum annual base salary of $171,500, 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 1999, Mr. Jones was receiving an annual base salary of
$200,000. On October 1, 1998, he received a 6% increase, raising his annual base
salary to $212,000. In deciding upon a 6% 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 Digene, his expertise in the industry, his
demonstrated management skills and ability to implement Digene's strategic
plans, his efforts in assembling a highly qualified executive management team
for Digene and Digene's progress with FDA and other regulatory activities. For
fiscal year 1999 Mr. Jones received a bonus of $75,000, or approximately 35% of
his base salary and options to purchase 50,000 shares of Digene common stock.
The bonus was more than the bonus to which Mr. Jones was entitled under his
employment agreement and was considered appropriate in view of the financial
performance of Digene, the degree of achievement of corporate goals and other
positive developments 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
11
<PAGE> 14
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of our common stock as of September 10, 1999 by: (a) each person known
by Digene to be the beneficial owner of more than 5% of the outstanding shares
of common stock, (b) each director and Named Executive Officer, and (c) all
executive officers and directors of Digene as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE
NAME OF BENEFICIAL OWNER(1) BENEFICIALLY OWNED(2) OWNERSHIP
--------------------------- --------------------- ----------
<S> <C> <C>
Armonk Partners(3).......................................... 4,987,115 34.2%
Charles M. Fleischman(4).................................... 5,387,841 36.0
Wayne T. Hockmeyer, Ph.D.(5)................................ 35,000 *
Evan Jones(6)............................................... 5,388,926 36.0
John H. Landon(5)........................................... 30,000 *
Robert McG. Lilley(7)....................................... 24,000 *
Attila T. Lorincz, Ph.D.(8)................................. 201,895 1.4
Joseph M. Migliara(9)....................................... 188,499 1.3
William J. Payne, Jr., Ph.D.(5)............................. 8,000 *
John J. Whitehead (10)...................................... 32,849 *
All executive officers and directors as a group(12
persons)(11).............................................. 6,429,852 40.3
</TABLE>
- ---------------
* Less than one percent.
(1) Unless otherwise indicated, the address for each principal stockholder,
director and officer is 9000 Virginia Manor Road, Beltsville, Maryland
20705.
(2) Beneficial ownership is determined in accordance with rules of the
Securities and Exchange Commission. Shares of common stock subject to
options currently exercisable or exercisable within 60 days of September
10, 1999 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, Digene believes that the beneficial owners of the
common stock listed above, based on information furnished by such owners,
have sole investment and voting power with respect to such shares, subject
to community property laws where applicable, and that there are no other
affiliations among the stockholders listed in the table.
(3) The general partners of Armonk Partners are Messrs. Jones and Fleischman.
(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) 375,963 shares issuable upon exercise of stock options.
(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
ownership, and (iii) 375,963 shares issuable upon exercise of stock
options.
(7) Includes 8,000 shares issuable upon exercise of stock options.
(8) Includes (i) 16,672 shares owned jointly with Dr. Lorincz's wife, as to
which Dr. Lorincz shares voting and investment power, and (ii) 184,470
shares issuable upon exercise of stock options.
(9) Represents (i) 15,000 shares issuable upon exercise of stock options, and
(ii) 173,499 shares issuable upon exercise of stock options held by Valley
Partners, a partnership of which Mr. Migliara is a general partner.
(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.
(11) See Notes (4) through (10). Also includes an additional 119,957 shares
issuable upon exercise of stock options.
12
<PAGE> 15
STOCK PERFORMANCE GRAPH
The following graph compares the percentage change in cumulative total
stockholder return on our common stock since May 22, 1996, the date our 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, 1999. Digene has not paid cash dividends on
the common stock. Historic stock prices are not indicative of future stock price
performance.
[LINE GRAPH]
<TABLE>
<CAPTION>
DIGENE PEER GROUP AMEX BIOTECHNOLOGY INDEX
------ ---------- ------------------------
<S> <C> <C> <C>
5/22/96 100 100 100
6/29/96 69 85 90
6/30/97 110 61 91
6/30/98 84 53 94
6/30/99 95 42 137
</TABLE>
- ---------------
(1) The Peer Group consists of companies that provide products and/or services
that are related to those of Digene. 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.
13
<PAGE> 16
CERTAIN TRANSACTIONS
Digene 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."
Digene entered into a Development Agreement on October 2, 1998 with
MedImmune, Inc. under which Digene conducted feasibility studies and received
revenue of $76,125. Dr. Hockmeyer, a director of Digene, is the Chief Executive
Officer and Chairman of the Board of MedImmune.
INDEPENDENT AUDITORS
Ernst & Young LLP, independent auditors, audited our financial statements
for the fiscal year ended June 30, 1999. 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 our financial statements for the fiscal year
ending June 30, 2000.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires Digene's directors, officers
(including persons performing a principal policy-making function), and persons
who own more than 10% of a registered class of Digene's equity securities ("10%
Holders") to file with the Securities and Exchange Commission initial reports of
ownership and reports of changes in ownership of our common stock and other
equity securities of Digene. Directors, officers and 10% Holders are required by
the regulations under the Exchange Act to furnish Digene 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 Digene and the representations made by the
reporting persons to Digene, Digene believes that during fiscal 1999 its
directors, officers, and 10% Holders complied with the filing requirements under
Section 16(a) of the Exchange Act except Mr. Jones filed one form that reported
two transactions that were not reported on a timely basis.
OTHER MATTERS
The Board does not intend to present any business at the annual meeting
other than the matters described in this proxy statement. 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 least 45
days 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 1, 1999
14
<PAGE> 17
DIGENE CORPORATION
1999 INCENTIVE PLAN
ARTICLE I
PURPOSE
The purpose of the 1999 Incentive Plan (the "Plan") is to enable Digene
Corporation (the "Company") to offer Employees of the Company and its
Subsidiaries equity interests in the Company and options to acquire equity
interests in the Company, thereby helping to attract, retain and reward such
persons and strengthen the mutuality of interests between such persons and the
Company's stockholders.
ARTICLE II
DEFINITIONS
For purposes of the Plan, the following terms shall have the following
meanings:
2.1 "Award " shall mean an award under the Plan of a Stock Option,
Restricted Stock or Unrestricted Stock.
2.2 "Board " shall mean the Board of Directors of the Company.
2.3 "Change of Control " shall mean (a) the reorganization, consolidation
or merger of the Company or any of its Subsidiaries holding or controlling a
majority of the assets relating to the business of the Company, with or into any
third party (other than a Subsidiary); (b) the assignment, sale, transfer, lease
or other disposition of all or substantially all of the assets of the Company
and its Subsidiaries taken as a whole; or (c) the acquisition by any third party
or group of third parties acting in concert, of beneficial ownership (within the
meaning of Rule 13d-3 of the Securities and Exchange Commission ("SEC") under
the Securities Exchange Act of 1934, as amended) of shares of voting stock of
the Company, the result of which in the case of any transaction described in
clauses (a), (b) and (c) above is that immediately after the transaction the
stockholders of the Company immediately before the transaction, other than the
acquiror, own less than fifty percent (50%) of the outstanding shares of the
surviving or resulting corporation in a transaction specified in clause (a)
above, the acquiror in a transaction specified in clause (b) above, or the
Company or the acquiror in a transaction specified in clause (c) above.
2.4 "Code" shall mean the Internal Revenue Code of 1986, as amended.
2.5 "Committee" shall mean the Compensation Committee of the Board, or any
other committee of the Board designated by the Board to administer this Plan,
with any such Committee consisting of two or more members of the Board.
2.6 "Common Stock" shall mean the Common Stock, par value $0.01 per share,
of the Company.
2.7 "Disability" shall mean a disability that results in a Participant's
Termination of Employment with the Company or a Subsidiary, as determined
pursuant to standard Company procedures.
2.8 "Effective Date" shall mean the date on which the Plan is adopted by
the Board.
2.9 "Employee" shall mean any person engaged or proposed to be engaged as
an officer or employee of the Company or one of its Subsidiaries; provided,
however, that in the case of an Incentive Stock Option, the term "Employee"
shall mean any employee of the Company or of a "subsidiary corporation" (within
the meaning of Section 424(f) of the Code) of the Company.
2.10 "Fair Market Value" for purposes of the Plan, unless otherwise
required by any applicable provision of the Code or any regulations issued
thereunder, shall mean with respect to the Common Stock on any day, (i) the
closing sales price (or other exchange-designated daily sales price) on the
immediately preceding business day of a share of Common Stock as reported on the
principal securities exchange on which shares of Common Stock are then listed or
admitted to trading, or (ii) if not so reported, the closing sales
<PAGE> 18
price (or other Nasdaq-designated daily sales price) on the immediately
preceding business day of a share of Common Stock as published in the Nasdaq
National Market Issues report in the Eastern Edition of The Wall Street Journal,
or (iii) if not so reported, the average of the closing (or other designated)
bid and asked prices on the immediately preceding business day as reported on
the Nasdaq National Market System, or (iv) if not so reported, as furnished by
any member of the National Association of Securities Dealers, Inc. selected by
the Committee. In the event that the price of a share of Common Stock shall not
be so reported or furnished, the Fair Market Value of a share of Common Stock
shall be determined by the Committee in good faith. A "business day" is any day,
other than Saturday or Sunday, on which the relevant market is open for trading.
2.11 "Incentive Stock Option" shall mean any Stock Option awarded under
the Plan to an Employee that is intended to be and designated as an "Incentive
Stock Option" within the meaning of Section 422 of the Code.
2.12 "Non-Qualified Stock Option" shall mean any Stock Option granted
under the Plan that is not an Incentive Stock Option.
2.13 "Participant" shall mean an Employee to whom an Award has been
granted.
2.14 "Reporting Person" shall mean a Participant who is subject to the
reporting requirements of Section 16 of the Securities Exchange Act of 1934, as
amended and the regulations promulgated thereunder.
2.15 "Restricted Stock" shall mean an Award granted pursuant to Section
7.1 hereof, subject to such restrictions as the Committee may determine, as
evidenced in a Restricted Stock Agreement. Shares of Common Stock shall cease to
be Restricted Stock when, in accordance with the terms of the Restricted Stock
Agreement, they become transferable and free of risk of forfeiture.
2.16 "Restricted Stock Agreement" shall mean the agreement evidencing the
grant of Restricted Stock to an Employee pursuant to this Plan.
2.17 "Restriction Period " shall have the meaning set forth in Section
7.2(c).
2.18 "Stock Option" or "Option" shall mean any option to purchase shares
of Common Stock granted pursuant to Article VI hereof
2.19 "Subsidiary" shall mean any subsidiary of the Company, 50% or more of
the voting stock of which is owned, directly or indirectly, by the Company, that
is currently existing as of the Effective Date or formed or acquired by the
Company while any Award is outstanding under the Plan.
2.20 "Termination of Employment" shall mean a termination of employment
with the Company and all of its Subsidiaries for reasons other than a military
or personal leave of absence granted by the Company or any Subsidiary.
2.21 "Unrestricted Stock" shall mean Common Stock granted under Section
7.3 hereof.
2.22 "Unrestricted Stock Agreement" shall mean the agreement evidencing
the grant of Unrestricted Stock to an Employee pursuant to this Plan.
ARTICLE III
ADMINISTRATION
3.1 The Committee. The Plan shall be administered and interpreted by the
Committee.
3.2 Awards. Except as set forth in Section 3.3, the Committee shall have
full authority to grant, pursuant to the terms of the Plan, Stock Options,
Restricted Stock and Unrestricted Stock to persons eligible under Article V. In
particular, the Committee shall have the authority:
(a) to select the persons to whom Stock Options, Restricted Stock and
Unrestricted Stock may from time to time be granted;
2
<PAGE> 19
(b) to determine whether and to what extent Incentive Stock Options,
Non-Qualified Stock Options, Restricted Stock and Unrestricted Stock, or any
combination thereof, are to be granted to one or more persons eligible to
receive Awards under Article V;
(c) to determine the number of shares of Common Stock to be covered by
each Award granted hereunder; and
(d) to determine the terms and conditions, not inconsistent with the
terms of the Plan, of any Award granted hereunder (including, but not limited
to, the option price, the option term, and provisions relating to any
restriction or limitation, any vesting schedule or acceleration, or any
forfeiture restrictions or waiver provisions of the Award), and any conditions
(in addition to those contained in this Plan) on the exercisability of all or
any part of an Option or on the transferability or forfeitability of Restricted
Stock. Notwithstanding any such conditions, the Committee may, in its discretion
at any time, accelerate the time at which any Option may be exercised or the
time at which Restricted Stock may become transferable or nonforfeitable.
3.3 Awards to Reporting Persons. In the case of Reporting Persons, the
Board shall have full authority to grant, pursuant to the terms of the Plan,
Stock Options, Restricted Stock and Unrestricted Stock Awards to Reporting
Persons eligible under Article V. The Board shall have all rights and powers of
the Committee set forth in this Plan with respect to the granting of such
Awards.
3.4 Guidelines. Subject to Article VIII hereof, the Committee shall have
the authority to adopt, alter and repeal such administrative rules, guidelines
and practices governing the Plan as it shall, from time to time, deem advisable;
to interpret the terms and provisions of the Plan and any Award granted under
the Plan (and any agreements relating thereto); and to otherwise supervise the
administration of the Plan. The express grant in the Plan of any specific power
to the Committee shall not be construed as limiting any other power or authority
of the Committee. The Committee may correct any defect, supply any omission or
reconcile any inconsistency in the Plan or in any Award in the manner and to the
extent it shall deem necessary or advisable to carry out the purposes of the
Plan. Notwithstanding the foregoing, no action of the Committee under this
Section 3.4 shall impair the rights of any Participant without the Participant's
consent, unless otherwise required by law.
A majority of the entire Committee shall constitute a quorum, and the
action of a majority of the members present at any meeting at which a quorum is
present shall be deemed the action of the Committee. In addition, any decision
or determination reduced to writing and signed by all of the members of the
Committee shall be fully as effective as if it had been made by a majority vote
at a meeting duly called and held. Subject to the provisions of this Plan and
the Company's Bylaws, and to any terms and conditions prescribed by the Board,
the Committee may make such additional rules and regulations for the conduct of
its business as it shall deem advisable. The Committee shall hold meetings at
such times and places as it may determine.
3.5 Decisions Final. Any decision, interpretation or other action made or
taken in good faith by the Committee arising out of or in connection with the
Plan shall be final, binding and conclusive on the Company, all Participants and
their respective heirs, executors, administrators, successors and assigns.
ARTICLE IV
SHARE LIMITATION
4.1 Shares. The maximum aggregate number of shares of Common Stock that
may be issued under the Plan is 1,000,000 (subject to increase or decrease
pursuant to Section 4.3), which may be either authorized and unissued shares of
Common Stock or authorized and issued shares of Common Stock reacquired by the
Company. If any Option granted under the Plan shall expire, terminate or be
canceled for any reason without having been exercised in full, the number of
shares of Common Stock not purchased under such Option shall again be available
for the purposes of the Plan. Further, if any shares of Restricted Stock are
forfeited, the shares subject to such Award, to the extent of such forfeiture,
shall again be available under the Plan.
3
<PAGE> 20
4.2 Individual Limit. No Employee may be granted Awards covering more
than 500,000 shares of Common Stock (subject to increase or decrease pursuant to
Section 4.3) during any calendar year.
4.3 Changes. In the event of any merger, reorganization, consolidation,
recapitalization, dividend (other than a regular cash dividend), stock split, or
other change in corporate structure affecting the Common Stock, such
substitution or adjustment shall be made in the maximum aggregate number of
shares which may be issued under the Plan, the maximum number of shares with
respect to which Awards may be granted to any individual during any year, the
number and option price of shares subject to outstanding Options, and the number
of shares subject to other outstanding Awards, as may be determined to be
appropriate by the Committee, in its sole discretion, provided that the number
of shares subject to any Award shall always be a whole number.
ARTICLE V
ELIGIBILITY
5.1 Awards to Employees. All officers and other Employees of the Company
and its Subsidiaries are eligible to be granted Incentive Stock Options,
Non-Qualified Stock Options, Restricted Stock and Unrestricted Stock under the
Plan. A Director who is an Employee of the Company or a Subsidiary shall be
eligible to receive Awards pursuant to this Article V.
ARTICLE VI
STOCK OPTIONS
6.1 Options. Each Stock Option granted under the Plan shall be either an
Incentive Stock Option or a Non-Qualified Stock Option.
6.2 Grants. Except as set forth in Section 3.3, the Committee shall have
the authority to grant to any person eligible under Section 5.1 one or more
Incentive Stock Options, Non-Qualified Stock Options, or both types of Stock
Options. To the extent that any Stock Option does not qualify as an Incentive
Stock Option (whether because of its provisions or the time or manner of its
exercise or otherwise), such Stock Option or the portion thereof which does not
qualify as an Incentive Stock Option shall constitute a separate Non-Qualified
Stock Option.
6.3 Incentive Stock Options. Anything in the Plan to the contrary
notwithstanding, no term of the Plan relating to Incentive Stock Options shall
be interpreted, amended or altered, nor shall any discretion or authority
granted under the Plan be exercised, so as to disqualify the Plan under Section
422 of the Code, or, without the consent of the Participants affected, to
disqualify any Incentive Stock Option under such Section 422 of the Code.
6.4 Terms of Options. Options granted under the Plan shall be subject to
the following terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the terms of the Plan, as the Committee shall
deem desirable:
(a) Stock Option Certificate. Each Stock Option shall be evidenced by,
and subject to the terms of, a Stock Option Certificate evidencing the Stock
Option grant. The Stock Option Certificate shall specify whether the Option is
an Incentive Stock Option or a Non-Qualified Stock Option, the number of shares
of Common Stock subject to the Stock Option, the option price, the option term,
and the other terms and conditions applicable to the Stock Option.
(b) Option Price. Subject to subsection (m) below, the option price per
share of Common Stock purchasable upon exercise of a Stock Option shall be
determined by the Committee at the time of grant, but, if the Stock Option is
intended to be an Incentive Stock Option, shall be not less than 100% of the
Fair Market Value of the Common Stock on the date of grant.
(c) Option Term. Subject to subsection (m) below, the term of each
Stock Option shall be fixed by the Committee at the time of grant, but no Stock
Option shall be exercisable more than ten years after the date it is granted.
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<PAGE> 21
(d) Exercisability. Stock Options shall be exercisable at such time or
times and subject to such terms and conditions as shall be determined by the
Committee at the time of grant; provided, however, that the Committee may waive
any installment exercise or waiting period provisions, in whole or in part, at
any time after the date of grant, based on such factors as the Committee shall
deem appropriate in its sole discretion.
(e) Method of Exercise. Subject to such installment exercise and
waiting period provisions as may be imposed by the Committee, Stock Options may
be exercised in whole or in part at any time during the option term by
delivering to the Company written notice of exercise specifying the number of
shares of Common Stock to be purchased and the option price therefor. The notice
of exercise shall be accompanied by payment in full of the option price and, if
requested, by the representation described in Section 10.2. Payment of the
option price may be made (i) in cash or by check payable to the Company, (ii)
unless otherwise determined by the Committee on or after the date of grant, in
shares of Common Stock duly owned by the Participant (and for which the
Participant has good title free and clear of any liens and encumbrances) or
(iii) in the case of an Option that is not an Incentive Stock Option, unless
otherwise determined by the Committee on or after the date of grant, by
reduction in the number of shares of Common Stock issuable upon such exercise,
based, in each case, on the Fair Market Value of the Common Stock on the date of
exercise. Upon satisfaction of the conditions provided herein, a stock
certificate representing the number of shares of Common Stock to which the
Participant is entitled shall be issued and delivered to the Participant,
subject to Section 10.3. For the purpose of assisting a Participant to exercise
an Option, the Company may, in the discretion of the Board, make loans to the
Participant or guarantee loans made by third parties to the Participant, in
either case on such terms and conditions as the Board may authorize. Nothing
contained in this Plan shall prevent or prohibit a Participant from exercising
his or her Options under a broker-facilitated cashless exercise transaction.
(f) Death. Unless otherwise determined by the Committee on or after the
date of grant, in the event of a Participant's Termination of Employment by
reason of death, any Stock Option held by such Participant which was exercisable
on the date of death may thereafter be exercised by the legal representative of
the Participant's estate until the earlier of one year after the date of death
or the expiration of the stated term of such Stock Option, and any Stock Option
not exercisable on the date of death shall be forfeited.
(g) Disability. Unless otherwise determined by the Committee on or
after the date of grant, in the event of a Participant's Termination of
Employment by reason of Disability, any Stock Option held by such Participant
which was exercisable on the date of such Termination of Employment may
thereafter be exercised by the Participant until the earlier of one year after
such date or the expiration of the stated term of such Stock Option, and any
Stock Option not exercisable on the date of such Termination of Employment shall
be forfeited. If the Participant dies during such one-year period, any
unexercised Stock Options held by the Participant at the time of death may
thereafter be exercised by the legal representative of the Participant's estate
until the earlier of one year after the date of the Participant's death or the
expiration of the stated term of such Stock Option. If an Incentive Stock Option
is exercised after the expiration of the exercise period that applies for
purposes of Section 422 of the Code, such Stock Option will thereafter be
treated as a Non-Qualified Stock Option.
(h) Termination of Employment. Subject to Section 10.4, in the event of
a Participant's Termination of Employment by reason of retirement or for any
reason other than death or Disability, all Stock Options held by such
Participant that were exercisable on the date of such Termination of Employment
may be exercised by the Participant at any time within three (3) months after
his or her Termination of Employment; provided, however, that if the Committee
shall determine that the Employee's employment was terminated for conduct that
in the judgment of the Committee involves dishonesty or action by the Employee
that is detrimental to the best interest of the Company, all Stock Options held
by the Employee on the date of such Termination of Employment shall be
forfeited.
(i) Change of Control. Notwithstanding the provisions of Section 4.3,
in the event of a Change of Control, all outstanding Stock Options shall
immediately become fully exercisable, and upon payment by the Participant of the
option price (and, if requested, delivery of the representation described in
Section 10.2), a
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<PAGE> 22
stock certificate representing the Common Stock covered thereby shall be issued
and delivered to the Participant; provided, however, that the exercisability of
the Stock Options shall not be accelerated if, in the opinion of the Board, such
acceleration would prevent pooling of interests accounting treatment for the
Change of Control transaction and such accounting treatment is desired by the
parties to such transaction. This Section 6.4(i) shall apply to any outstanding
Stock Options which are Incentive Stock Options to the extent permitted by Code
Section 422(d), and any outstanding Incentive Stock Options in excess thereof
shall, immediately upon the occurrence of such a Change of Control be treated
for all purposes of the Plan as Non-Qualified Stock Options and shall be
immediately exercisable as set forth in this Section 6.4(i).
(j) Merger and Other Fundamental Transactions. In the event the Company
is succeeded by another company in a reorganization, merger, consolidation,
acquisition of property or stock, separation or liquidation, the successor
company shall assume all of the outstanding Options granted under this Plan or
shall substitute new options for them, which shall provide that each
Participant, at the same cost, shall be entitled upon the exercise of each such
option to receive such securities as the Board of Directors (or equivalent
governing body) of the succeeding, resulting or other company shall determine to
be equivalent, as nearly as practicable, to the nearest whole number and class
of shares of stock or other securities to which the Participant would have been
entitled under the terms of the agreement governing the reorganization, merger,
consolidation, acquisition of property or stock, separation or liquidation as
if, immediately prior to such event, the Participant had been the holder of
record of the number of shares of Common Stock which were then subject to the
outstanding Option granted under this Plan.
(k) Non-Transferability of Options. No Stock Option shall be
transferrable by the Participant otherwise than by will or by the laws of
descent and distribution, to the extent consistent with the terms of the Plan
and the Option, and all Stock Options shall be exercisable, during the
Participant's lifetime, only by the Participant.
(l) Incentive Stock Option Limitations. To the extent that the
aggregate Fair Market Value (determined as of the date of grant) of the Common
Stock with respect to which Incentive Stock Options are exercisable for the
first time by the Participant during any calendar year under the Plan and/or any
other stock option plan of the Company or any subsidiary or parent corporation
(each within the meaning of Section 424 of the Code) exceeds $100,000, such
Options shall be treated as Options which are not Incentive Stock Options.
(m) Ten-Percent Stockholder Rule. Notwithstanding any other provision
of the Plan to the contrary, no Incentive Stock Option shall be granted to any
person who, immediately prior to the grant, owns stock possessing more than ten
percent of the total combined voting power of all classes of stock of the
Company or any subsidiary or parent corporation (each within the meaning of
Section 424 of the Code), unless the option price is at least 110% of the Fair
Market Value of the Common Stock on the date of grant and the Option, by its
terms, expires no later than five years after the date of grant.
Should the foregoing provisions not be necessary in order for the Stock
Options to qualify as Incentive Stock Options, or should any additional
provisions be required, the Committee may amend the Plan accordingly, without
the necessity of obtaining the approval of the stockholders of the Company.
6.5 Rights as Stockholder. A Participant shall not be deemed to be the
holder of Common Stock, or to have any of the rights of a holder of Common
Stock, with respect to shares subject to the Option, unless and until the Option
is exercised and a stock certificate representing such shares of Common Stock is
issued to the Participant.
ARTICLE VII
RESTRICTED AND UNRESTRICTED STOCK
7.1 Awards of Restricted Stock. Except as set forth in Section 3.3, the
Committee shall have the authority to grant to any person eligible under Section
5.1 one or more Restricted Stock Awards. The Committee shall determine the
eligible Employees to whom, and the time or times at which, grants of Restricted
Stock will be made, the number of shares to be awarded, the time or times within
which such
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<PAGE> 23
Awards may be subject to forfeiture, the vesting schedule and rights to
acceleration thereof, and the other terms and conditions of the Awards in
addition to those set forth in Section 7.2.
7.2 Terms and Conditions. Restricted Stock shall be subject to the
following terms and conditions and such other terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem desirable:
(a) Restricted Stock Agreement. Each Restricted Stock Award shall be
evidenced by, and subject to the terms of, a Restricted Stock Agreement executed
by the Company and the Participant. The Restricted Stock Agreement shall specify
the number of shares of Common Stock subject to the Award, the time or times
within which such Restricted Stock is subject to forfeiture and the other terms,
conditions and restrictions applicable to such Award.
(b) Stock Certificate. Subject to Section 10.3, when the restrictions
applicable to a Restricted Stock Award, or any portion thereof, lapse, a stock
certificate representing the number of shares of Common Stock covered by such
Restricted Stock Award, or portion thereof, shall be issued and delivered to the
Participant. A Participant shall not be deemed to be the holder of Common Stock,
or to have any of the rights of a holder of Common Stock, with respect to shares
of Restricted Stock subject to the Award, unless and until the forfeiture
restrictions lapse and a stock certificate representing such shares of Common
Stock is issued to the Participant.
(c) Restriction Period. Subject to the provisions of the Plan and the
Restricted Stock Agreement, shares of Restricted Stock will be forfeited to the
Company in the event of a Participant's Termination of Employment during a
period (not to exceed five years) set by the Committee commencing with the date
of such Award (the "Restriction Period"). Subject to the provisions of the Plan,
the Committee, in its sole discretion, may provide for the lapse of such
restrictions in installments and may waive such restrictions, in whole or in
part, at any time, based on such factors as the Committee shall deem appropriate
in its sole discretion.
(d) Termination of Employment. Subject to Section 10.4, in the event of
a Participant's Termination of Employment prior to the expiration of the
Restriction Period, then he or she shall forfeit all of his or her Restricted
Stock with respect to which the Restriction Period has not yet expired;
provided, however, that the terms of the Restricted Stock Agreement, in the
discretion of the Committee and pursuant to such terms and conditions as it may
impose, may provide: (i) that, if such Employee's employment is terminated for
any reason other than conduct that in the judgment of the Committee involves
dishonesty or action by the Employee that is detrimental to the best interests
of the Company, then the Restricted Stock or any related compensation deferral
or a portion thereof shall not be forfeited; (ii) that, if such Employee's
employment is terminated on account of Disability, then the Employee shall not
forfeit his or her Restricted Stock or any related compensation deferral or a
portion thereof; and (iii) that, if such Employee dies while employed by the
Company or any of its Subsidiaries, then his or her Restricted Stock or any
related compensation deferral or a portion thereof is not forfeited.
(e) Changes. If any change is made in the Common Stock by reason of any
merger, consolidation, reorganization, recapitalization, stock dividend, split
up, combination of shares, exchange of shares, change in corporate structure, or
otherwise, then any shares or other securities of the Company or succeeding,
resulting or other company to be received by the Employee under the Restricted
Stock Agreement shall be subject to the same restrictions applicable to the
Restricted Stock.
7.3 Unrestricted Stock. Except as set forth in Section 3.3, the Committee
shall have the authority to grant to any person eligible under Section 5.1 one
or more Unrestricted Stock Awards. Each Employee who is awarded Unrestricted
Stock shall receive an Unrestricted Stock Agreement from the Company in a form
specified by the Committee and containing the terms and conditions of the award
and such other matters, consistent with this Plan, as the Committee, in its sole
discretion, shall determine at the time the Award is made. Such conditions may
include, but shall not be limited to, the deferral of a percentage of the
Employee's annual cash compensation, not including dividends paid on the
Unrestricted Stock, if any, to be applied toward the purchase of Unrestricted
Stock upon such terms and conditions, including such discounts, as may be set
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<PAGE> 24
forth in the Unrestricted Stock Agreement. Upon the issuance of Unrestricted
Stock to an Employee hereunder, the Employee shall have the entire beneficial
ownership and all the rights and privileges of a stockholder with respect to the
Unrestricted Stock awarded to him or her, including the right to receive
dividends and the right to vote such Unrestricted Stock. Subject to Section
10.3, each Employee who is awarded Unrestricted Stock may, but need not, be
issued a stock certificate in respect of such shares of Unrestricted Stock.
ARTICLE VIII
TERMINATION OR AMENDMENT
8.1 Termination or Amendment of Plan. The Committee may at any time
amend, discontinue or terminate the Plan or any part thereof (including any
amendment deemed necessary to ensure that the Company may comply with any
regulatory requirement referred to in Article X) or amend any Award previously
granted, prospectively or retroactively (subject to Article IV); provided,
however, that, unless otherwise required by law, the rights of a Participant
with respect to Awards granted prior to such amendment, discontinuance or
termination may not be impaired without the consent of such Participant and,
provided further that, the Company will seek the approval of the Company's
stockholders for any amendment if such approval is necessary to comply with the
Code, Federal or state securities laws or any other applicable laws or
regulations.
ARTICLE IX
UNFUNDED PLAN
9.1 Unfunded Plan. The Plan is intended to constitute an "unfunded" plan
for incentive compensation. With respect to any payment not yet made to a
Participant by the Company, nothing contained herein shall give any such
Participant any rights that are greater than those of a general creditor of the
Company.
ARTICLE X
GENERAL PROVISIONS
10.1 Nonassignment. Except as otherwise provided in the Plan, any Award
granted hereunder and the rights and privileges conferred thereby shall not be
sold, transferred, assigned, pledged or hypothecated in any way (whether by
operation of law or otherwise), and shall not be subject to execution,
attachment or similar process. Upon any attempt to transfer, assign, pledge,
hypothecate or otherwise dispose of an Award, right or privilege contrary to the
provisions hereof, or upon the levy of any attachment or similar process
thereon, such Award and the rights and privileges conferred hereby shall
immediately terminate and the Award shall immediately be forfeited to the
Company.
10.2 Legend. The Committee may require each person acquiring shares
pursuant to an Award to represent to the Company in writing that the Participant
is acquiring the shares without a view to distribution thereof. The stock
certificates representing such shares may include any legend which the Committee
deems appropriate to reflect any restrictions on transfer.
All certificates representing shares of Common Stock delivered under the
Plan shall be subject to such stock transfer orders and other restrictions as
the Committee may deem advisable under the rules, regulations and other
requirements of the Securities and Exchange Commission, any stock exchange or
stock market upon which the Common Stock is then listed or traded, any
applicable Federal or state securities law, and any applicable corporate law,
and the Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.
10.3 Uncertificated Shares. Each Employee who exercises an Option to
acquire Common Stock or is awarded Restricted Stock or Unrestricted Stock may,
but need not, be issued a stock certificate in respect of the Common Stock so
acquired. A "book entry" (i.e., a computerized or manual entry) shall be made in
the records of the Company to evidence the issuance of shares of Common Stock to
an Employee where no certificate is issued in the name of the Employee. Such
Company records, absent manifest error, shall be binding on Employees. In all
instances where the date of issuance of shares may be deemed significant but no
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<PAGE> 25
certificate is issued in accordance with this Section 10.3, the date of the book
entry shall be the relevant date for such purposes.
10.4 Forfeiture for Competition. If a Participant in this Plan provides
services to a competitor of the Company or any of its subsidiaries, whether as
an employee, officer, director, independent contractor, consultant, agent or
otherwise, such services being of a nature that can reasonably be expected to
involve the skills and experience used or developed by the Participant while an
Employee, and the Committee determines, in its sole discretion, that the
provision of such services constitutes a breach of the Participant's non-compete
agreement with the Company, then that Participant's rights to any Awards
hereunder shall automatically be forfeited.
10.5 Other Plans. Nothing contained in the Plan shall prevent the Board
from adopting other or additional compensation arrangements, subject to
stockholder approval if such approval is required; and such arrangements may be
either generally applicable or applicable only in specific cases.
10.6 No Right to Employment. Neither the Plan nor the grant of any Award
hereunder shall give any Participant or other Employee any right with respect to
continuance of employment by the Company or any Subsidiary, nor shall the Plan
impose any limitation on the right of the Company or any Subsidiary by which a
Participant is employed to terminate such Participant's employment at any time.
10.7 Withholding of Taxes. The Company shall have the right to reduce the
number of shares of Common Stock otherwise deliverable pursuant to the Plan by
an amount that would have a Fair Market Value equal to the amount of all
Federal, state and local taxes required to be withheld, or to deduct the amount
of such taxes from any cash payment otherwise to be made to the Participant. In
connection with such withholding, the Committee may make such arrangements as
are consistent with the Plan as it may deem appropriate.
10.8 Listing and Other Conditions.
(a) If the Common Stock is listed on a national securities exchange or
The Nasdaq Stock Market, the issuance of any shares of Common Stock pursuant to
an Award shall be conditioned upon such shares being listed on such exchange or
The Nasdaq Stock Market. The Company shall have no obligation to issue any
shares of Common Stock unless and until such shares are so listed, and the right
to exercise any Option or vest in any Restricted Stock shall be suspended until
such listing has been effected.
(b) If at any time counsel to the Company shall be of the opinion that
any sale or delivery of shares of Common Stock pursuant to an Award is or may in
the circumstances be unlawful or result in the imposition of excise taxes under
the statutes, rules or regulations of any applicable jurisdiction, the Company
shall have no obligation to make such sale or delivery, or to make any
application or to effect or to maintain any qualification or registration under
the Securities Act of 1933, as amended, or otherwise with respect to shares of
Common Stock or Awards, and the right to exercise any Option or vest in any
Restricted Stock shall be suspended until, in the opinion of such counsel, such
sale or delivery shall be lawful or shall not result in the imposition of excise
taxes.
(c) Upon termination of any period of suspension under this Section
10.8, any Award affected by such suspension which shall not then have expired or
terminated shall be reinstated as to all shares available before such suspension
and as to shares which would otherwise have become available during the period
of such suspension, but no such suspension shall extend the term of any Option.
10.9 Governing Law. The Plan and actions taken in connection herewith
shall be governed and construed in accordance with the laws of the State of
Delaware, without regard to the conflict of laws principles thereof.
10.10 Construction. Wherever any words are used in the Plan in the
masculine gender they shall be construed as though they were also used in the
feminine gender in all cases where they would so apply, and wherever any words
are used herein in the singular form they shall be construed as though they were
also used in the plural form in all cases where they would so apply.
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10.11 Liability of the Board and the Committee. No member of the Board or
the Committee nor any Employee of the Company or any of its subsidiaries shall
be liable for any act or action hereunder, whether of omission or commission, by
any other member or Employee or by any agent to whom duties in connection with
the administration of the Plan have been delegated or, except in circumstances
involving bad faith, gross negligence or fraud, for anything done or omitted to
be done by himself.
10.12 Other Benefits. No payment pursuant to an Award shall be deemed
compensation for purposes of computing benefits under any retirement plan of the
Company or any Subsidiary nor affect any benefits under any other benefit plan
now or hereafter in effect under which the availability or amount of benefits is
related to the level of compensation.
10.13 Costs. The Company shall bear all expenses incurred in
administering the Plan, including expenses related to the issuance of Common
Stock pursuant to Awards.
10.14 Severability. If any part of the Plan shall be determined to be
invalid or void in any respect, such determination shall not affect, impair,
invalidate or nullify the remaining provisions of the Plan which shall continue
in full force and effect.
10.15 Successors. The Plan shall be binding upon and inure to the benefit
of any successor or successors of the Company.
10.16 Headings. Article and section headings contained in the Plan are
included for convenience only and are not to be used in construing or
interpreting the Plan.
ARTICLE XI
TERM OF PLAN
11.1 Effective Date. The Plan shall be effective as of the Effective
Date, but the grant of any Award hereunder is subject to the express condition
that the Plan be approved by the stockholders of the Company within 12 months
after the Effective Date.
11.2 Termination Date. Unless sooner terminated, the Plan shall terminate
ten years after the Effective Date and no Awards may be granted thereafter.
Termination of the Plan shall not affect Awards granted before such date.
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DIGENE CORPORATION
PROXY
The undersigned stockholder of Digene Corporation (the "Company") hereby
appoints Charles M. Fleischman 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 28, 1999 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>
Wayne T. Hockmeyer, Ph.D.
------ FOR ------ VOTE WITHHELD
Evan Jones
------ FOR ------ VOTE WITHHELD
</TABLE>
2. Approval of the 1999 Incentive Plan.
<TABLE>
<S> <C> <C>
- ------ FOR ------ AGAINST ------ ABSTAIN
</TABLE>
3. To transact such other business as may properly come before the meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS,
WHICH RECOMMENDS A VOTE "FOR" EACH OF THE ABOVE NOMINEES FOR DIRECTOR
AND "FOR" APPROVAL OF THE 1999 INCENTIVE PLAN.
<PAGE> 28
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 AND "FOR" APPROVAL OF THE 1999 INCENTIVE PLAN.
IMPORTANT: Please date this proxy and sign exactly as your name(s) 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
--------------------, 1999
PLEASE SIGN AND DATE THIS PROXY AND RETURN IT PROMPTLY
IN THE ENCLOSED PRE-ADDRESSED, STAMPED ENVELOPE.
