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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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to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
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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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DIGENE CORPORATION
1201 CLOPPER ROAD
GAITHERSBURG, MARYLAND 20878
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON THURSDAY, OCTOBER 26, 2000
To the Stockholders of Digene Corporation:
The 2000 Annual Meeting of stockholders of Digene Corporation, a Delaware
corporation ("Digene"), will be held on Thursday, October 26, 2000, at 10:00
a.m. (local time), at Digene's offices at 1201 Clopper Road, Gaithersburg,
Maryland, 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 2003;
2. to amend the 1999 Incentive Plan to increase the number of shares of
common stock issuable under the plan from 1,000,000 shares to 2,000,000
shares;
3. to amend the Omnibus Plan to modify the change in control provisions in
the plan to eliminate the termination of stock options upon a change in
control or other fundamental transaction and to provide for the
treatment of stock options upon any such event; and
4. 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
8, 2000, 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 offices in Gaithersburg, 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
September 28, 2000
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DIGENE CORPORATION
PROXY STATEMENT
The accompanying proxy is being solicited by the Board of Directors of
Digene Corporation in connection with the Annual Meeting of stockholders of
Digene to be held on Thursday, October 26, 2000, at 10:00 a.m. (local time), at
Digene's offices at 1201 Clopper Road, Gaithersburg, Maryland, and at any
adjournment(s) or postponement(s) of the Annual Meeting. This proxy statement
and the accompanying proxy are being mailed on or after September 28, 2000 to
the holders of record of common stock on September 8, 2000.
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 2003;
- the approval of an amendment to the 1999 Incentive Plan to increase the
number of shares of common stock issuable under the plan from 1,000,000
shares to 2,000,000 shares;
- the approval of amendments to the Omnibus Plan to modify the change in
control provisions in the plan to eliminate the termination of stock
options upon a change in control or other fundamental transaction and
provide for the treatment of stock options upon any such event; 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 2000 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 8, 2000, 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 stockholder of record at the
meeting, you may deliver your completed proxy card in person or vote in person
at the Annual 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, 16,196,577 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, Evan Jones and Charles M. Fleischman, to vote on the proposals and any
other matters that may arise at the Annual Meeting.
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WHAT ARE THE BOARD'S RECOMMENDATIONS?
Unless you give other instructions on your proxy card, Evan Jones and
Charles M. Fleischman 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, John H. Landon
and John J. Whitehead;
- FOR approval of the amendment to the 1999 Incentive Plan; and
- FOR approval of the amendments to the Omnibus Plan.
With respect to any other matter that properly comes before the Annual Meeting,
the proxy holders will vote as recommended by the Board or, if no recommendation
is given, in their own discretion.
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 AMENDMENT. The approval of the amendment to the 1999
Incentive Plan to increase the number of shares of common stock available for
awards from 1,000,000 shares to 2,000,000 shares 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 amendment to 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.
OMNIBUS PLAN AMENDMENTS. The approval of the amendments to the Omnibus Plan
to modify the change in control provisions in the plan to eliminate the
termination of stock options upon a change in control or other fundamental
transaction and provide for the treatment of stock options upon any such event
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
amendments to the Omnibus 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 card, 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 card bearing a
date later than the date on the proxy card you submitted. The power of the proxy
holders to vote your proxy will be suspended if you give notice to the Secretary
of Digene revoking your proxy prior to its use, return a later dated proxy card
or attend the Annual Meeting and vote in person, although attendance at the
Annual Meeting will not by itself revoke a previously granted proxy.
WHO BEARS THE COST OF SOLICITATION OF PROXIES?
Digene bears the cost of preparing, printing, assembling and mailing this
proxy statement and other material furnished to stockholders in connection with
this 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.
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WHEN ARE STOCKHOLDER PROPOSALS DUE FOR THE YEAR 2001 ANNUAL MEETING?
To be included in next year's proxy statement, stockholder proposals must
be submitted in writing by June 3, 2001 to: President, Digene Corporation, and
mailed to 1201 Clopper Road, Gaithersburg, MD 20878. If any stockholder proposal
is submitted after August 15, 2001, the proxy holders will be allowed to use
their discretionary voting authority when the proposal is raised at the 2001
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 Mr. Landon and Mr. Whitehead to be
elected as Class I directors of Digene to hold office until the 2003 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.
The Board recommends that you vote FOR election of the director nominees.
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 by each director and all
directors and executive officers as a group as of September 8, 2000, see
"Principal Stockholders."
<TABLE>
<CAPTION>
NAME AGE POSITION(S) WITH COMPANY DIRECTOR SINCE
---- --- ------------------------ --------------
<S> <C> <C> <C>
Nominees to be elected for
terms expiring in 2003:
John H. Landon.............. 60 Director 1997
John J. Whitehead........... 55 Director 1992
Directors continuing for
terms expiring in 2001:
Charles M. Fleischman....... 42 President, Chief Operating Officer, 1990
Chief Financial Officer and Director
Joseph M. Migliara.......... 56 Director 1992
Directors continuing for
terms expiring in 2002:
Wayne T. Hockmeyer, 55 Director 1996
Ph.D. ....................
Evan Jones.................. 43 Chief Executive Officer and 1990
Chairman of the Board
</TABLE>
Mr. Landon has been retired since October 1996. From March 1992 to
September 1996, Mr. Landon was Vice President and General Manager, Medical
Products 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 chairman of the board of Cholestech Corporation, a medical device
company, 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.
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.
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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 stepbrother of Mr. Jones.
Mr. Fleischman has served as President of Digene since June 1999, Chief
Financial Officer since March 1996 and Chief Operating Officer since September
1995. He also served as Executive Vice President of Digene since Armonk Partners
acquired a controlling interest in Digene in July 1990 until June 1999. 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 in April 2000 merged with, and is now a
wholly owned subsidiary of, Interpublic Group. Interpublic Group 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.
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. As of October 1, 2000, Dr. Hockmeyer will no
longer be Chief Executive Officer of MedImmune, Inc. but will continue as the
Chairman of its Board of Directors. From 1986 to 1988, Dr. Hockmeyer served as
Vice President, Research and Development, of Praxis Biologics, Inc. From 1980 to
1986, he was Chairman of the Department of Immunology at the Walter Reed Army
Institute of Research. Dr. Hockmeyer is a member of the Maryland Economic
Development Commission, a member of the Board of the Maryland Technology
Development Corporation, a member of the Board of Directors of Aviron and
Intermune Pharmaceuticals, Inc. Dr. Hockmeyer is also a member of the Board of
Directors of the High Technology Council of Maryland, a member of the Board of
Visitors of the University of Maryland Biotechnology Institute and the Board of
Advisors of the Institute of Human Virology. Dr. Hockmeyer also serves on the
Children's Research Institute Board of Directors of the Children's National
Medical Center. Dr. Hockmeyer earned his bachelor's degree from Purdue
University and earned his Ph.D. from the University of Florida in 1972.
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 stepbrother of Mr. Whitehead.
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.
Landon and Whitehead are Class I directors whose terms expire at this Annual
Meeting of stockholders; Messrs. Fleischman and Migliara are Class II directors
whose terms expire at the 2001 Annual Meeting of stockholders; and Dr. Hockmeyer
and Mr. Jones are Class III directors whose terms expire at the 2002 Annual
Meeting of stockholders (in all cases subject to the election and qualification
of their successors or to their earlier death, resignation or removal). At each
Annual Meeting of stockholders, the successors to the directors whose terms
expire are to be elected to serve from the time of their election and
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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 2000?
The Board held eight 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
(Chairman) and Whitehead and Dr. Hockmeyer, met six times during the last fiscal
year. The Audit Committee reviews, oversees and reports to the Board with
respect to various accounting, auditing and reporting practices, including the
selection of our independent auditors, the scope of the annual audits, the
performance of our auditors and our accounting practices. The Board of Directors
approved a new Audit Committee charter on June 14, 2000.
COMPENSATION COMMITTEE. The Compensation Committee, consisting of Messrs.
Landon and Whitehead (Chairman) and Dr. Hockmeyer, met four times during the
last fiscal year. Neither Messrs. Landon and Whitehead nor Dr. Hockmeyer was an
officer or employee of Digene during fiscal 2000 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 Omnibus Plan and the 1999
Incentive Plan.
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 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 meetings of the Board in any fiscal year, the
minimum annual Board meeting fee is $15,000, less $2,500 per Board meeting 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 our 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 AN AMENDMENT TO THE 1999 INCENTIVE PLAN
PROPOSED AMENDMENT TO THE 1999 INCENTIVE PLAN
At the Annual Meeting, we will present a proposal to the stockholders to
approve an amendment to our 1999 Incentive Plan to increase the number of shares
of common stock issuable under the plan from 1,000,000 to 2,000,000.
In September 2000, the Board adopted the amendment to the 1999 Incentive
Plan, subject to approval by our stockholders. As of September 8, 2000, 491,500
shares remained available for grant under the 1999
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Incentive Plan which represents fewer shares than the number of shares issuable
on exercise of options granted in fiscal 2000. Consequently, the Board believes
that it is necessary to increase the number of shares issuable under the 1999
Incentive Plan to enable the Board to continue to grant options and other stock
awards to employees under the plan for the same or a greater number of shares in
fiscal year 2001. The Board considers options and awards to be a valuable and
necessary compensation tool that aligns the long-term financial interests of
employees that are eligible for stock options and awards under the 1999
Incentive Plan with the financial interests of our stockholders. In addition, we
believe that the plan helps us to attract, retain and motivate plan
participants, and encourages these participants to devote their best efforts to
our business and financial success. Consequently, an increase in the number of
shares available for issuance under the 1999 Incentive Plan is necessary to
enable the Compensation Committee and the Board to grant additional options and
awards under the plan to meet the above objectives. The Board of Directors
believes that approval of this proposal is in the best interests of Digene and
its stockholders. The resolution to be presented to the stockholders approving
the proposed amendment to the 1999 Incentive Plan is attached as Appendix A to
this proxy statement and is incorporated herein by reference.
The material features of the 1999 Incentive Plan are described below.
The Board recommends that you vote FOR approval of the amendment to 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 Board of Directors approved
the 1999 Incentive Plan on September 14, 1999 and the stockholders approved the
1999 Incentive Plan on October 28, 1999.
WHO ADMINISTERS THE 1999 INCENTIVE PLAN?
The Compensation Committee of the Board administers the 1999 Incentive
Plan. The Committee has the authority, except as described below, to determine
and designate the employees to whom options, restricted shares or unrestricted
shares will 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). The authority to determine and designate the awards
granted to employees who are "reporting persons" under the federal securities
laws is vested in the Board.
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. The Committee
determines eligibility for the plan.
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.
HOW MANY SHARES HAVE BEEN ALLOCATED TO THE 1999 INCENTIVE PLAN?
The 1999 Incentive Plan currently provides for the issuance of up to
1,000,000 shares of our common stock; following approval of the proposed
amendment to the plan by the stockholders that number will increase
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to 2,000,000. 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 and payroll 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 or payroll tax in the event of a disqualifying disposition.
Different consequences will apply for an optionee subject to the
alternative minimum tax.
MAY THE 1999 INCENTIVE PLAN BE AMENDED OR TERMINATED?
The Committee may at any time amend, discontinue, or terminate all or any
part of the 1999 Incentive Plan. 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.
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The approval of the amendment to 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.
ITEM 3 -- APPROVAL OF AMENDMENTS TO THE OMNIBUS PLAN
PROPOSED AMENDMENTS TO THE OMNIBUS PLAN.
At the Annual Meeting, we will present a proposal to the stockholders to
approve amendments to the Omnibus Plan to modify the change in control
provisions to eliminate the termination of stock options upon a change in
control of, or other fundamental transaction involving, Digene and to provide
for the treatment of stock options upon any such event.
The Omnibus Plan currently provides that, in the event of a dissolution,
liquidation or consolidation or merger of Digene in which Digene is not the
surviving corporation, then each outstanding option terminates, provided that
just prior to any such event the holder of the option shall have the right to
exercise the entire option without regard to any vesting installment period.
This applies to any outstanding options which are incentive stock options to the
extent permitted by law, and any outstanding incentive stock options in excess
thereof would, immediately upon the occurrence of a merger, consolidation, sale,
transfer, acquisition, tender offer or exchange offer, be treated for all
purposes under the Omnibus Plan as nonqualified stock options and be immediately
exercisable as provided above. The Omnibus Plan further provides that if Digene
is the surviving corporation in any merger, then each outstanding option shall
pertain to and apply to the securities or other consideration that a holder of
the number of shares of common stock subject to the option would have been
entitled to receive in the merger.
Under the proposed amendments, the Omnibus Plan distinguishes between a
merger, consolidation, sale, transfer, acquisition, tender offer or exchange
offer in which Digene is the surviving corporation and which results in a change
of control and a merger, consolidation, sale, transfer, acquisition, tender
offer or exchange offer in which Digene is the surviving corporation but which
does not result in a change of control. The amendments provide that in the event
of such a transaction in which Digene survives but which does not result in a
change of control, the options shall pertain to and apply to the securities or
other consideration that a holder of the number of shares of common stock
subject to the option would have been entitled to receive in such transaction,
as is currently provided under the plan. The amendments also provide that in the
event of such a transaction in which Digene survives and which does result in a
change of control, each outstanding option will be fully exercisable immediately
prior to such transaction, unless the Board determines that such acceleration
would prevent pooling of interest accounting treatment for the transaction and
such treatment is desired. Any options which are not exercised prior to such
transaction shall pertain to and apply to the securities or other consideration
that a holder of the number of shares of common stock subject to the option
would have been entitled to receive in the transaction.
The proposed amendments further provide that in the event of a merger,
consolidation, sale, transfer, acquisition, tender offer or exchange offer in
which Digene is not the surviving corporation, each outstanding option will be
fully exercisable immediately prior to such transaction, but rather than
terminating, shall pertain to and apply to the securities or other consideration
that a holder of the number of shares of common stock subject to the option
would have been entitled to receive in such transaction. Finally, in the event
of a dissolution or liquidation of Digene, each outstanding option will
terminate, provided that each optionee may exercise his or her option
immediately prior to the dissolution or liquidation, as is currently provided in
the plan.
The Board of Directors of Digene approved the proposed amendments to the
Omnibus Plan in September 2000. The resolutions to be presented to the
stockholders approving the proposed amendments to the Omnibus
8
<PAGE> 11
Plan are attached as Appendix B to this proxy statement and are incorporated
herein by reference. We believe the amendments to the Omnibus Plan are advisable
for various reasons, including the following:
- the proposed amendments will conform the treatment of most of the
outstanding stock options under Digene's various plans in the event of a
merger, consolidation, sale, transfer, acquisition, tender offer or
exchange offer in which a change in control of Digene occurs, thereby
treating the option holders similarly regardless of the form of the
transaction and under which plan their options are granted; and
- the proposed amendments are consistent with the purpose of the Omnibus
Plan, which is to attract, retain and reward our employees and directors,
and strengthen the mutuality of interests between our option holders and
our stockholders.
The Board of Directors believes that the approval of this proposal is in
the best interests of Digene and its stockholders.
The Board recommends that you vote FOR approval of the amendments to the
Omnibus Plan.
The material features of the Omnibus Plan are described below.
WHAT IS THE OMNIBUS PLAN?
The Omnibus Plan is designed to enable Digene to offer employees of Digene
and its subsidiaries and directors of Digene equity interests in Digene in order
to afford such persons the opportunity to obtain or increase their proprietary
interest in Digene on a favorable basis and thereby have an opportunity to share
in its success. The Board of Directors and the stockholders approved the Omnibus
Plan on March 26, 1996.
WHO ADMINISTERS THE OMNIBUS PLAN?
The Compensation Committee of the Board administers the Omnibus Plan. The
Committee has the authority, except as described below, to determine and
designate the employees and directors to whom options, stock appreciation
rights, restricted shares or unrestricted shares will 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 OMNIBUS PLAN?
Employees of Digene and its subsidiaries and directors of Digene are
eligible to be granted options and other awards under the Omnibus Plan. The
Committee determines eligibility for the plan.
WHAT TYPES OF AWARDS ARE AVAILABLE UNDER THE OMNIBUS PLAN?
The Omnibus 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 and stock appreciation rights.
WHAT IS THE DURATION OF THE OMNIBUS PLAN?
The term of the Omnibus Plan is ten years, unless sooner terminated. No
options may be granted or awards made under the Omnibus Plan on or after March
26, 2006.
HOW MANY SHARES HAVE BEEN ALLOCATED TO THE OMNIBUS PLAN?
The Omnibus Plan provides for the issuance of up to 2,000,000 shares of our
common stock. As of September 8, 2000, 57,881 shares remained available for
grant under the Omnibus Plan. These shares may be either authorized and unissued
shares or issued shares reacquired by Digene and held in treasury. Shares
subject to options that expire, terminate or are surrendered without having been
exercised in full may be reissued under the Omnibus Plan.
9
<PAGE> 12
WHAT ARE THE FEDERAL TAX CONSEQUENCES OF OPTION GRANTS UNDER THE OMNIBUS PLAN?
The Federal income tax discussion set forth under Item 2 of this proxy
statement regarding the federal tax consequences of option grants under the 1999
Incentive Plan is applicable to the treatment of comparable stock options
granted under the Omnibus Plan.
MAY THE OMNIBUS PLAN BE AMENDED OR TERMINATED?
The Committee may at any time amend, suspend or terminate all or any part
of the Omnibus Plan. However, the rights of an optionee with respect to any
grant or award prior to the amendment, suspension or termination may not be
impaired without the consent of such optionee. Furthermore, under the Omnibus
Plan, the Committee may not materially increase the number of shares of common
stock authorized under the Omnibus Plan or materially modify the plan's
requirements as to eligibility for participation or materially increase the
benefits accruing to participants under the plan without the approval of our
stockholders.
The proposed amendments to the Omnibus Plan will become effective if they
receive 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 proposed amendments
to the Omnibus Plan.
10
<PAGE> 13
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, 2000
(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.............................. 2000 $238,917 $83,333 50,000 --
Chief Executive Officer 1999 212,088 75,000 50,000 --
1998 200,215 43,769 -- --
Charles M. Fleischman................... 2000 $244,691 $83,333 50,000 --
President, Chief Operating 1999 212,088 75,000 50,000 --
Officer and Chief Financial Officer 1998 200,215 43,769 -- --
Robert McG. Lilley...................... 2000 $211,792 75,000 24,000 $60,394(1)
Senior Vice President, Global Sales 1999 198,604 50,000 64,000 51,008(1)
and Marketing
Attila T. Lorincz, Ph.D................. 2000 $202,203 $50,000 24,000 --
Senior Vice President and 1999 190,885 30,000 34,000 --
Chief Scientific Officer 1998 181,514 20,000 -- --
William J. Payne, Jr., Ph.D............. 2000 $165,000 $40,000 24,000 --
Vice President, Research and 1999 152,575 30,000 49,000 14,195(2)
Development 1998 137,936 22,500 75,000 27,953(2)
</TABLE>
---------------
(1) Represents car allowance and retirement fund expenses paid by Digene.
(2) Represents reimbursement for moving expenses.
STOCK OPTION INFORMATION
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth, for each of the Named Executive Officers,
certain information concerning the grant of stock options in fiscal 2000.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------- POTENTIAL REALIZABLE
% OF VALUE AT ASSUMED
NUMBER OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERM
OPTIONS(1) EMPLOYEES IN BASE PRICE EXPIRATION ---------------------
NAME GRANTED(#) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
---- ---------- ------------ ----------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Evan Jones..................... 50,000 8.23% $13.125 10/28/2009 $412,712 $1,045,893
Charles M. Fleischman.......... 50,000 8.23% 13.125 10/28/2009 412,712 1,045,893
Robert McG. Lilley............. 24,000 3.95% 13.125 10/28/2009 198,102 502,029
Attila Lorincz, Ph.D........... 24,000 3.95% 13.125 10/28/2009 198,102 502,029
William J. Payne, Jr., Ph.D.... 24,000 3.95% 13.125 10/28/2009 198,102 502,029
</TABLE>
---------------
(1) Non-Qualified Stock Options
11
<PAGE> 14
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth certain information concerning stock options
exercised by each of the Named Executive Officers during fiscal 2000 and the
number of unexercised options held by such persons at June 30, 2000 and the
value thereof.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
FISCAL YEAR-END(#) AT FISCAL YEAR-END($)(2)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE(#) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Evan Jones.................... 101,918 $1,503,835 333,688 140,476 $10,990,361 $4,161,489
Charles M. Fleischman......... 190,368 4,117,590 245,238 140,476 7,593,891 4,161,489
Robert McG. Lilley............ 25,000 559,221 71,334 116,666 2,166,770 3,566,728
Attila D. Lorincz, Ph.D....... 99,399 2,132,514 106,262 64,523 3,475,015 1,926,991
William J. Payne, Jr.,
Ph.D........................ -0- -0- 16,334 131,666 528,273 3,763,603
</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 shares.
(2) These values represent the difference between the closing price per share on
The Nasdaq National Market on June 30, 2000 ($40.375) 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. Messrs. Jones' and Fleischman's employment agreements
expired on December 31, 1999 and were not renewed. We are currently negotiating
new employment agreements with each of Messrs. Jones and Fleischman.
In July 1997 we entered into an 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 base salary remaining due
and payable at the date of termination, plus an amount equal to 12 months base
salary, 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 such a 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.
12
<PAGE> 15
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 to participate in
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 benefits deemed necessary by the Committee to retain them.
WHAT ARE THE COMPONENTS OF EXECUTIVE COMPENSATION?
BASE SALARY. In addition to complying with the requirements of applicable
employment agreements, compensation for each of the executive officers for
fiscal 2000 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 0% to
25.0% were effected on October 1, 1999.
BONUS. Executive officers received cash bonuses in fiscal 2000 for fiscal
1999 ranging from approximately 24.2% to 34.9% 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,
during fiscal year 1999 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).
13
<PAGE> 16
HOW IS DIGENE'S CHIEF EXECUTIVE OFFICER COMPENSATED?
At the beginning of fiscal 2000, Mr. Jones was receiving an annual base
salary of $212,000. On October 1, 1999, he received an 18% increase, raising his
annual base salary to $250,000. In deciding upon an 18% increase in Mr. Jones'
base 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, in
entering into agreements with strategic partners and in increasing public
awareness of Digene's HPV tests. In fiscal year 2000, Mr. Jones received a bonus
of $83,333, or approximately 33% of his base salary for fiscal year 1999. The
bonus was considered appropriate in view of the financial performance of Digene,
the degree of achievement of corporate goals and other positive developments
during fiscal year 1999 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
14
<PAGE> 17
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of our common stock as of September 8, 2000 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).......................................... 4,701,715 29.0%
Charles M. Fleischman(4).................................... 5,004,424 30.4%
Wayne T. Hockmeyer, Ph.D.(5)................................ 40,000 *
Evan Jones(6)............................................... 5,090,684 30.7%
John H. Landon(5)........................................... 35,000 *
Robert McG. Lilley(7)....................................... 103,334 *
Attila T. Lorincz, Ph.D.(8)................................. 139,687 *
Joseph M. Migliara(9)....................................... 105,899 *
William J. Payne, Jr., Ph.D.(5)............................. 77,334 *
John J. Whitehead(10)....................................... 37,849 *
All executive officers and directors as a group (12
persons)(11).............................................. 6,130,094 34.9%
</TABLE>
---------------
(1) Unless otherwise indicated, the address for each principal stockholder,
director and officer is 1201 Clopper Road, Gaithersburg, Maryland 20878.
(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 8,
2000 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 managing partners of Armonk Partners are Messrs. Jones and Fleischman.
(4) Includes (i) 4,701,715 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) 278,571 shares issuable upon exercise of stock options.
(5) Represents shares issuable upon exercise of stock options.
(6) Includes (i) 4,701,715 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) 367,021 shares issuable upon exercise of stock
options.
(7) Includes 87,334 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) 122,262
shares issuable upon exercise of stock options.
(9) Represents (i) 20,000 shares issuable upon exercise of stock options, and
(ii) 85,899 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 member of a limited liability company that is a 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 197,598 shares
issuable upon exercise of stock options.
15
<PAGE> 18
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 of
the companies included in a Peer Group,(1) the American Stock Exchange
Biotechnology Index ("BTK") and the Nasdaq index 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, 2000. Digene has not paid cash dividends on its common stock.
Historic stock prices are not indicative of future stock price performance.
[Line Graph]
<TABLE>
<CAPTION>
DIGENE PEER GROUP BTK NASDAQ
------ ---------- --- ------
<S> <C> <C> <C> <C>
5/22/96 100.00 100.00 100.00 100.00
6/29/96 68.82 79.24 90.11 95.00
6/30/97 109.68 76.41 91.29 115.61
6/30/98 83.87 102.43 94.06 151.90
6/30/99 95.03 87.70 137.29 215.34
6/30/00 347.31 245.12 412.65 317.96
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
5/22/96 6/28/96 6/30/97 6/30/98 6/30/99 6/30/00
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Digene 100.00 68.82 109.68 83.87 95.03 347.31
Peer Group 100.00 79.24 76.41 102.43 87.70 245.12
BTK 100.00 90.11 91.29 94.06 137.29 412.65
NASDAQ 100.00 95.00 115.61 151.90 215.34 317.96
</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 Corporation, Igen, Inc. and Matritech, Inc. In
prior years, our Peer Group included Neopath, Inc. and Neuromedical Systems,
Inc., which have subsequently merged to form TriPath, and Oncor, Inc., which
is no longer in existence. Because of the variability inherent in such Peer
Group compilations, Digene has elected to stop using a Peer Group in its
stock performance graph.
16
<PAGE> 19
CERTAIN TRANSACTIONS
Digene is party to the following transactions with its executive officers,
directors and principal stockholders:
Digene entered into a Development Agreement on October 2, 1998 with
MedImmune, Inc. under which Digene conducted feasibility studies and received an
aggregate revenue of $281,885 in fiscal year 2000. Dr. Hockmeyer, a director of
Digene, is the Chairman of the Board of MedImmune, Inc.
For information regarding employment agreements with Named Executive
Officers, see "Executive Compensation and Other Information -- Employment
Contracts."
INDEPENDENT AUDITORS
Ernst & Young LLP, independent auditors, audited our financial statements
for the fiscal year ended June 30, 2000. 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, 2001.
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 2000 its
directors, officers, and 10% Holders complied with the filing requirements under
Section 16(a) of the Exchange Act.
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
September 28, 2000
17
<PAGE> 20
APPENDIX A
1999 INCENTIVE PLAN
RESOLVED, that the first sentence of Section 4.1 of the 1999 Incentive Plan
be, and hereby is, amended to read in full as follows:
"The maximum aggregate number of shares of Common Stock that may be issued
under the Plan is 2,000,000 (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."
A-1
<PAGE> 21
APPENDIX B
OMNIBUS PLAN
RESOLVED, that the second paragraph of Section 4.1(e) of the Omnibus Plan
be, and hereby is amended in full as follows:
"Subject to any action that may be required on the part of the stockholders
of the Company, if the Company is the surviving corporation in any merger,
consolidation, sale, transfer, acquisition, tender offer or exchange offer which
does not result in a Change of Control, then each outstanding Option and Stock
Appreciation Right shall pertain to and apply to the securities or other
consideration that a holder of the number of shares of Common Stock subject to
the Option or to which the Stock Appreciation Right relates would have been
entitled to receive in such transaction.
If the Company is the surviving corporation in any merger, consolidation,
sale, transfer, acquisition, tender offer or exchange offer which results in a
Change of Control, each optionee shall, in such event, have the right
immediately prior to such transaction to exercise his or her Option or Stock
Appreciation Right in whole or in part without regard to any installment
provision contained in his or her Agreement, but if a Stock Appreciation Right
has been granted in connection with an Option then neither the Option nor the
Stock Appreciation Right shall be exercisable within six months after their
grant except in the event of death or disability of the optionee; provided,
however, that the exercisability of any Option or Stock Appreciation Right 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. Any Option or Stock Appreciation Right not exercised immediately
prior to such transaction shall pertain to and apply to the securities or other
consideration that a holder of the number of shares of Common Stock subject to
the Option or to which the Stock Appreciation Right relates would have been
entitled to receive in the transaction. This paragraph shall apply to any
outstanding Options which are ISOs to the extent permitted by Code Section
422(d), and such outstanding ISOs in excess thereof shall, immediately upon the
occurrence of such a transaction, be treated for all purposes of the Plan as
NQSOs and shall be immediately exercisable as such as provided in such
paragraph.
A merger, consolidation, sale, transfer, acquisition, tender offer or
exchange offer in which the Company is not the surviving corporation, other than
such a transaction effected for the purpose of changing the Company's domicile,
shall cause each holder of an outstanding Option and Stock Appreciation Right to
have the right immediately prior to such transaction to exercise his or her
Option or Stock Appreciation Right in whole or in part without regard to any
installment provision contained in his or her Agreement, but if a Stock
Appreciation Right has been granted in connection with an Option then neither
the Option nor the Stock Appreciation Right shall be exercisable within six
months after their grant except in the event of death or disability of the
optionee. Any Option or Stock Appreciation Right not exercised immediately prior
to such transaction shall pertain to and apply to the securities or other
consideration that a holder of the number of shares of Common Stock subject to
the Option or to which the Stock Appreciation Right relates would have been
entitled to receive in the transaction. This paragraph shall apply to any
outstanding Options which are ISOs to the extent permitted by Code Section
422(d), and such outstanding ISOs in excess thereof shall, immediately upon the
occurrence of such a transaction, be treated for all purposes of the Plan as
NQSOs and shall be immediately exercisable as such as provided in such
paragraph.
A dissolution or liquidation of the Company shall cause each outstanding
Option and Stock Appreciation Right to terminate, provided that each holder
shall, in such event, have the right immediately prior to such dissolution or
liquidation to exercise his or her Option or Stock Appreciation Right in whole
or in part without regard to any installment provision contained in his or her
Agreement, but if a Stock Appreciation Right has been granted in connection with
an Option then neither the Option nor the Stock Appreciation Right shall be
exercisable within six months after their grant except in the event of death or
disability of the optionee.
Notwithstanding the foregoing, in no event shall any Option be exercisable
after the date of termination of the exercise period of such Option.
B-1
<PAGE> 22
In the case of a merger, consolidation, sale, transfer, acquisition, tender
offer or exchange offer effected for the purpose of changing the Company's
domicile, each outstanding Option and Stock Appreciation Right shall continue in
effect in accordance with its terms and shall apply or relate to the same number
of shares of common stock of such surviving corporation as the number of shares
of Common Stock to which it applied or related immediately prior to such
transaction, adjusted for any increase or decrease in the number of outstanding
shares of common stock of the surviving corporation effected without receipt of
consideration."
RESOLVED, that a new definition shall be added to Section 1.3 of the
Omnibus Plan to read as follows:
"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."
B-2
<PAGE> 23
DIGENE CORPORATION
PROXY
The undersigned stockholder of Digene Corporation (the "Company") hereby
appoints Charles M. Fleischman and Evan Jones, 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 Digene's offices at 1201 Clopper Road, Gaithersburg, Maryland 20878 at 10:00
am, on October 26, 2000 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.
John H. Landon _______ FOR _____VOTE WITHHELD
John J. Whitehead _______ FOR _____VOTE WITHHELD
2. Approval of the amendment to the 1999 Incentive Plan.
_______ FOR ______AGAINST ______ABSTAIN
3. Approval of the amendments to the Omnibus Plan.
_______ FOR ______AGAINST ______ABSTAIN
4. 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 BOTH THE AMENDMENT TO THE 1999
INCENTIVE PLAN AND THE AMENDMENTS TO THE OMNIBUS PLAN.
<PAGE> 24
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 BOTH THE AMENDMENT TO THE 1999 INCENTIVE
PLAN AND THE AMENDMENTS TO THE OMNIBUS 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_____________________ ,2000
PLEASE SIGN AND DATE THIS PROXY AND RETURN IT PROMPTLY
IN THE ENCLOSED PRE-ADDRESSED, STAMPED ENVELOPE
